Theories of Obligation Theoretical Framework v5.0
Theory and Elements
Defenses & Counter Defenses
Remedies
Agreement w/ Consideration
1) Elements:
a) Competent parties
b) Bargain
c) Consideration
2) Agreement may be (1) express, (2) implied-in-fact, or (3) oral.
3) Competent parties are free to make their own bargains and fix the value of their consideration (private autonomy). Absent fraud, breach of warranty, or mistake, agreement will be enforced.
4) Bargain means a negotiation resulting in the voluntary assumption of an obligation by one party upon condition of an act or forbearance by the other
5) Consideration for a promise is either (1) an act; (2) forbearance; (3) creation, modification or destruction of legal relation, or (4) a return promise; bargained for & given in exchange (Restatement 2nd § 75)
6) Consideration mustn’t be accidental, casual, or gratuitous, but must be uttered intentionally as the result of deliberation, manifested by reciprocal bargaining or negotiations.
7) If the requirement of consideration is met, there is no additional requirement of:
a) A gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promise; or
b) Equivalence in the values exchanged; or
c) “mutuality of obligation” (Rest. 2nd §79)
8) Fuller’s 3 interrelated functions of consideration: evidentiary, cautionary, channeling
9) Implied-in-fact contract (i.e., a true contract but not committed to writing or stated orally in express terms, but rather is inferred from the conduct of the parties):
a) The services were carried out under such circumstances as to give the recipient reason to understand (a) that they were performed for him and not for some other person, and (b) that they were not rendered gratuitously, but with the expectation of compensation from the recipient; AND
b) Services were beneficial to the recipient; AND
c) Implication must arise when service is rendered
d) *Recovery is the reasonable value for services
1) Missing theory & essential elements.
2) It was an unbargained for benefit . . . gift! (Only promisee benefits.)
a) It was a conditional gift! (Only promisee benefits, but prior, promisee must do something that doesn’t benefit promisor.)
3) Forbearance to assert either a legal or an equitable claim is sufficient consideration. But if the claim be not even doubtful, or colorable, or plausible, in that there is no reason for an honest belief that it has some foundation in law or in equity, then forbearance applied to it is not good consideration. I.e., forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless . . .
a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law; or
b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. [See §74 in the Restatement (2nd) of Contracts]
4) Illusory contract! (Mutuality of obligation is absent when 1 only of the contracting parties is bound to perform, and the rights of the parties exist at the option of 1 only. Without this mutuality of obligation, the agreement lacks consideration and no enforceable contract has been created.)
· See mutuality in requirements and output contracts under UCC §2-306
a) If subject to good faith, reasonableness, or exclusive dealing than not illusory and enforceable
b) There was a satisfaction clause! (i.e., there were conditions of satisfaction. A promise conditional upon the promisor’s satisfaction isn’t illusory.)
i) Dissatisfaction must be genuine and measured by reasonable person standard by jury.
ii) The dissatisfaction cannot be arbitrary, unreasonable, or capricious.
5) The statute of frauds requires that certain contracts be in writing to be enforceable! (i.e. land) Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which (a) reasonably identifies the subject matter of the contract, (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, AND (c) states with reasonable certainty the essential terms of the unperformed promises in the contract. [See §131 in the Restatement (2nd) of Contracts]
a) Statute of Frauds
i) Sale of lands, tenements, or heritable property, or any interest in or concerning them.
ii) Any agreement that is not to be performed within one year from the making thereof.
iii) Sale of goods >$500
iv) Sale of securities or Sale of personal property other than goods with value >$5000
v) To answer for another’s debts or default (col
omise.
Scenario: Loss to promisee while no change to promisor.
Limited as justice requires (1 – prevent injustice or 2 – replace actual loss as a result of the change in position).
Reliance≤Expectancy
Unjust Enrichment
1) Also called quasi-contract, or implied-in-law
2) Occurs when (ie. Agreement too uncertain to enforce):
a) A benefit conferred on D by P
b) Knowledge & appreciation by D of the benefit
c) Acceptance or retention of the benefit
d) Under circumstances making it inequitable for the D to retain the benefits
3) Elements
a) Recipient of a benefit
b) Knowledge that compensation is expected
c) Implied intent to keep benefit
d) “Direct” benefit to recipient
4) Promisee’s detriment does benefit Promisor.
1) One party receives and accepts a benefit
2) Under circumstances where it would be unjust to allow that party to retain the benefit
3) Missing theory & essential elements.
4) Defenses:
a) Keeping the benefit is not unjust
i) Gratuitous benefit – no communication of expectation or remuneration (volunteer) (objective whether P meant to charge for it)
(1) Presumption is that services rendered between siblings are gratuitous
ii) The question of payment was left to the unfettered discretion of the recipient
iii) The services were rendered simply in order to gain a business advantage
iv) P did not contemplate a personal fee or D could not have reasonably supposed he had
v) Conferred benefit on another without giving the other the opportunity to reject the benefit (officious intermeddler)
(1) Exception: D has ability to reject it and return the benefit but instead accepts it
(2) Exception:: Emergency has arisen:
(a) Immediate action is required
(b)
