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Contracts
Rutgers University, Newark School of Law
Safrin, Sabrina

 
1.      Topic: What is a Contract
a.       Five Keys to Making a K
i.      Offer and Acceptance
ii.      Consideration
iii.      Intent to Create Legal Relations
iv.      Legal Capacity
v.      Formalities
b.      Enforceable Promises
i.      Contract- a promise or set of promises which if breached the law gives a remedy or the performance of which the law recognizes as a duty
ii.      Do not have to be written unless required by the Statute of Frauds
iii.      Hawkins v. McGee: Dr promises a boy with a burned hand that he will “make the hand 100% perfect”… it ends up hairy. Dr argues no reasonable person would assume perfection argues surgery. Boy argues that the Dr wanted him to take the words at face value to solicit him to get the surgery.
1.      Held: Dr’s promise binding? Later Statutes say Dr’s promises only binding if written
c.       Remedying a Breach
i.      K Law is not concerned with punitive damages, only compensatory
ii.      Four types of Remedy
1.      Expectation Interest: $ = to what would have received if the K was performed
2.      Reliance Damages: $ = to where parties were before a K was attempted
3.      Restitution Damages: $ for any benefit conferred on the breaching party
4.      Specific Performance: Must perform the K
iii.      US Naval v. Charter: P gives D the exclusive right to sell paperback. D ships it early and sellers then put it out earlier than should causing the P to lose profits on the hard cover. P sue for damages, D argue that it was the custom. Below: P awarded lost profits + the profits that D made in the month when it was not supposed to be selling the book
1.      Held: Reverse the award of the profits made by D. Court does not award punitive damages. P gets Expectation Damages [ Projected Sept. Hardcover sales + Profits of D that were from ppl who would have bought hardcover but for paperback being available] iv.      Sullivan v. O’Connor: P is a performer who K’s with Dr to have 2 surgeries for nose. Has a 3rd to try and finish job but P is disfigured. P gave $622 to Dr. Dr argue only Restitution. P argues for Expectation Damages
1.      Held: Reliance Damages (original nose-now + loss of wages + pain and suffer] v.      K and Economics:
1.      Efficient Breach Hypothesis: if it is efficient to breach, promisor may extend this option when breaching costs are less than amount of damages for breach, and promisee is left no worse off





2.      Topic: Consideration
i.      Consideration
1.      Act other than a promise
2.      Forbearance
3.      creation or modification of a legal relation (not sue)
4.      Return Promises
ii.      No Consideration
1.      Past Consideration
2.      Moral Obligation
3.      Accepting a Gift
iii.      Consideration
1.      Must be bargained for and have detriment… not enough that it induces the other… need both
a.      Promisee must suffer a “legal detriment” (must do/promise to do something not legally obligated to do OR must refrain/promise to refrain from something legally privileged to do
b.      “Detriment must induce the promise” (part of promisors motive is that he wants to exchange his promise for promisee’s detriment)
c.       “Promise must induce the detriment” (promisee must suffer the detriment at least in part because of the promise)
b.      Restatement § 71 :Requirement of Exchange; Types of Exchanges
i.      to constitute consideration, a performance or a return promise must be bargained for
ii.      A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
iii.       The performance may consist of
1.      an act other than a promise,
2.      a forbearance, or
3.      the creation, modification, or destruction of a legal relation
iv.       The performance or return promise may be given to the promisor or some other person. It may be given by the promisee or by some other person
c.       GENERAL RULE: Ct will not enforce a promise unless the promisee has given consideration, exceptions including K under a seal, promises with substantial reliance, and promises to pay for benefits received
d.      Functions of Consideration: 1) evidence function 2) cautionary function
e.       Sufficiency of Consideration- people make crazy K’s… law not consider how detrimental/beneficial it is
f.        Peppercorn-consideration is generally trivial, only meant to give the pretense of a K instead of a gift, OR when you are not promising what is really sought, Ct. not generally find unless it is an obvious sham (not really want), if found unenforceable
g.      Unilateral K (promise for performance) OR Bilateral K (promise for promise)
h.      EXCEPTIONS TO TRADITIONAL CONSIDERATION REQUIREMENT
i.      Family Contracts (generally oral/informal/lack details)
1.      Traditionally not enforceable— goods from one family member to another was seen as a gift
2.      Hamer v. Sidway- uncle promises $5K if nephew will refrain from drugs/booze until 21, six yrs later the nephew writes that fulfill promise, uncle recognizes finish in letter but not give at the time b/c want nephew to establish self, then uncle dies before giving it
a.      D(estate) argues that uncle not benefit so no consideration, CT disagrees.
b.      Hold: Forbearance of the nephew of legal right was consideration for K
c.       Detriment: giving up a legal right (i.e. allow to drink)
d.      RULE:”A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party OR forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other.”
ii.      Gratuitous Promises
1.      Fiege v. Boehm- man gets a woman prego, she promises not to sue for bastardy as long as he pays medical expenses/child support,
a.      Detriment: She gives up legal right to sue (in exchange for kid expenses)
b.      He argue: that since he is not the father she never gave anything up… not matter cause at the time K made honest belief (he should have said at the time made I will pay unless not my kid)
c.       HOLD: K was valid, at time made with detriment (it was w/ honest belief— different is she had said this to 2 guys)
d.      Restatement 2nd made it easier for cases like this (Cts. will look for consideration in K’s)
iii.      Requirement of Exchange: Action in the Past
1.      Past Consideration- Promise is made in return for detriment previously suffered by the promisee (it is a misnomer- since there is no bargain there is no consideration)
2.      Promises to pay for past services received- also generally not
3.      Feinberg v. Pfeiffer Co.- Co. make a retirement plan for lady, they told her after make decision, she work for yr then retire, when co. go into another’s hand, accountant say these are gifts and can stop pay
a.      Hold: No bargain for exchange when something happens in the past
4.      Cases are split on payment for past services— early cases say not enforceable, now trend toward enforceable
a.      Mills v. Wyman-MORAL OBLIGATION- 25 yr old was ill, P took care of him for 2 wks, Kid dad say he will pay P back then decide not to, P sue
i.      This was past consideration
ii.      HOLD/RULE: Moral Obligation is not accepted universally as sufficient consideration (modern trend is to enforce… even though this case did not)
b.      Webb v. McGowin-Exception to Past Consideration- workman saves other man from being crushed, he is permanently disabled, man promises to pay for life, he dies and kids say not going to pay him anymore
i.      RULE: Where the benefit conferred is substantial the Ct. may hold that it is enforceable 
ii.      In most cases this would be past consideration, but for substantial nature
iii.      Also McGowin had recognized the material benefit of being saved by Webb
c.       Mills contrasted to Webb— In Webb it was a direct benefit… in Mills it was an adult son


i.        Requirement of Bargain
i.      Conditional Gift v. Bargain for Exchange
ii.      Kirksey v. Kirksey- Bro in law sends letter to widow of brother “I should like to come and see you… I would advise you to… sell the land and quit the country… If you will come down and see me, I will let you have a place to raise your family”, She sold her land, moved 60mi, she lived there for 2 yrs then she was kicked out
1.      HOLD: Js were spilt… Majority: It was mere gift, gratuitous promise,(conditional promise) and not bargain for exchange
2.      COMPARE WITH RICKETTS: HERE NOT AWARD DESPITE HER RELIANCE/INDUCEMENT
j.        Rewards
i.      Is an offer and can only be accepted by one who knows of the offer
1.      If you say I will give you $50 to find cat, they do, you can’t say no
2.      If someone finds your cat, gives it to you, then later see a sign, you don’t have to give them reward
k.      Promises as Consideration
i.      Bilateral-both promise
ii.      Unilateral- one promise/one performs
iii.      Conditional Promise
iv.      Strong v. Sheffield- Husband owes man $, man comes to wife and says sign paper and I will forebear from asking for payment for $ H owes, two years later he comes for $ (H had signed earlier, W added later)
1.      She argue he breached, he say no, there was no specific time
2.      RULE: NO PROMISE/K- This is illusory… Uncle forebears “until I feel like it”— She has to pay
v.      Mattei v. Hopper-ILLUSORY PROMISES P is buyer, wants to purchase as long as “satisfactory leases” [an out essentially for Mattei, golden parachute], seller wants to rescind, buyer then says that he has the leases, seller argues that “satisfactory leases” was illusory so no consideration
1.      CT HOLD: Not illusory- “satisfaction” clauses has Mattei’s good faith worked into it… it can be determined… the satisfactory leases would be dependent on him getting financing for the shopping center
2.      Only okay if it can be determined by a reasonable man, not if it is undeterminable (apt that meets my standards)
l.        Contracts for the Sale of Goods
i.      UCC
ii.      East Airlines v. Gulf Oil- Eastern uses Gulf to fuel its plane in certain cities, the price of gas increases, Gulf wants Eastern to pay new value of gas, Eastern not pay, Gulf stop giving gas, Eastern Sues
1.      This was a requirement K, Gulf had to give as much as East needed
2.      HOLD: K upheld- only if Eastern had

car for $5000
4.      Price Quotes: May/Not be an Offer
a.       Look to
i.      Quantity: need to be clear $/unit to be an offer
ii.      Addressee: needs to be to specific person or co. not a price list
iii.      Use of word “Quote” vs. “Offer”
b.      Fairmont Glass v. Crunden Martin
i.      CM “please advise the lowest price for 10 car loads” (Request info)
ii.      F “we quote $ for immediate accept; ship not later than x/x; not responsible for beyond control” (price quote)
iii.      CM “enter 10 car loads per quote”
iv.      F “not able to fill”
v.      Held: it was an offer; the fact that it said for immediate acceptance was an indication of offer that was able to accepted
5.      Ads: Not an offer unless definite
a.       Lefkowitz v. Surplus Store: store ad with a certain quantity, time to buy scarves. P goes to buy scarf and store says ad was for woman only.
i.      Held: It was an offer; it was definite and did not restrict to women
c.       Acceptance
i.      Voluntary act by the offeree to exercise power given by offeror
ii.      Can be dictated by the offeror
iii.      Once accepted a K is created
iv.      Methods of Accept
1.      When not specified “reasonable medium under circumstances (UCC and Restatement)
2.      Acceptance of Unilateral K
a.       Option K: Once performance begins revocation is suspended
b.      Intent to accept is implied when performed
c.       Notice:
i.      C/L not need to give notice of beginning performance
ii.      UCC/Restate: must give notice unless the offeror would reasonably know of the start of performance
3.      Acceptance of a Bilateral K
a.       Must at least attempt to inform of accept
b.      In a reasonable amount of time
c.       Once in the mail it is accepted
4.      When performance OR promise is okay for acceptance
a.       Either is acceptable
b.      Ship of goods (UCC 2-206)
i.      Either is acceptable and non conforming goods are also acceptable
1.      Non conforming goods are seen as a counter offer (it is up to the buyer to rescind or keep the goods (but cannot hold seller in breach)
5.      Acceptance by Silence
a.       C/L: Not allowed
b.      Restate: Silence can be acceptance
i.      If reason to assume silence is consent
ii.      If one accepts services/receives benefit should assume accepted
iii.      Prior conduct makes it reasonable
6.      UCC: unless expressly stated any reasonable medium of acceptance is okay
v.      International Filter v. Conroe Gin:
1.      IF: propose to sell an H2O filter to Gin, “K when accepted and approved by an officer at home office” (NOT offer, merely solicitation/prelim negotiation [proposition + home office])
2.      Gin: accepts the specifics, ship by x/x. (this is the offer… need officer to make the acceptance)
3.      IF: Engel approves (K) in an internal memo and they ask for specifications
4.      Gin then rescinds its offer
5.      G then rescinds the offer and IF sues.