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Contracts
South Texas College of Law Houston
Page, Phillip E.

Professor Page – Contracts I – Spring 2011
I. Consideration
1)      Bargained for mutual cross inducement
a.       Consideration – a performance or return promise bargained for
                                                               i.      Promise must induce action; action must induce promise
                                                             ii.      Must be benefit to Promisor or detriment to Promisee
b.      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
c.       The performance may consist of
                                                               i.      An act other than a promise
                                                             ii.      Or a forbearance
                                                            iii.      Or the creation, modification, or destruction of a legal right
d.      Performance or promise may be given to promisor or to someone else, and by promise or someone else
2)      Past Performance ¹ Consideration (behavior not prompted by promise)
3)      Incentive Mixture of Bargain and Gift
a.       Fact that what is bargained for does not itself induce the making of a promise doesn’t prevent it from being consideration for the promise
b.      As long as the promise is partially induced by a bargaining motive, some gift-giving or friendship doesn’t negate consideration
                                                               i.      But must be some inducement
4)      Nominal Consideration
a.       Must be something that both parties want; cant be indifferent
b.      Must be an inducement for person to make the offer (no fuzzy cough drop)
c.       $1 is not consideration b/c its too nominal to allow reas. person to conclude that it prompted the behavior
5)      Subj./Obj. Claim Validity
a.       Promise for performance based on condition of satisfaction is enforceable
                                                               i.      If it can be viewed in good faith and considered satisfied by RPP.
                                                             ii.      Eg. Land report as condition for buying land: 1) read it; 2) respond to it honestly; 3) behavior must reflect honest behavior
b.      Obj. Std – Would RPP find it is satisfied
c.       Subj. Std. – (G.Ma. Painting Example)  RPP would say it looks good, but I can still walk away cause there is no RPP std. to determine my art taste
6)      Invalid Claims as Consideration
a.       May not qualify as consideration unless:
                                                               i.      Maker of the claim believed it was valid (appies to potential claims and the surrendering of existing claims)
b.      Good Faith
                                                               i.      Forbearance of an invalid claim by one who doesn’t have honest and reas. belief in its possible validity is not sufficient consideration for K
c.       Use Subj. test
                                                               i.      Only need a genuine belief, even if it is misguided or wrong
7)      Adequacy of Consideration Irrelevant
a.       Requirement of consideration is met, there is no additional requirement of:
                                                               i.      Gain, advantage, or benefit to the promisor, or a loss, disadvantage, or detriment to the promisee.
                                                             ii.      Equivalence in the values exchanged
                                                            iii.      Mutuality of Obligation
8)      Gratuitous Transfer of Property Promises (no consideration)
a.       The law will do nothing about a transfer of property based on consideration.  If the gratuitous transfer has already taken place, then consideration is not needed.
b.      With gratuitous promises we will do nothing to enforce them, and with gratuitous transfers we will do nothing to reverse them.
I (A). Remedies/Illusory/Promissory/Quasi
I. Remedies
9)      Expectation – Damages are measured in terms of what non-breaching party should have gotten from the contract had it been performed as promises.  p will get the difference between the harm and the completed result
10)   Restitution – Provides damages to the non-breaching party by returning from the breaching party what ever benefit the breaching party received from the K – Move D back to where he was (Gives back money but no money for damages)
11)   Reliance – damages are measured according to what it would take to return the non-breaching party from where they are as a result of the breach to where they were before there was a K; p back to where he was. (Gets his money back and the damages from the start position to the harm.
12)   Specific Performance – court orders parties to perform K
a.       Only used in circum. where benefit from K is unique and cannot be obtained on open market
b.      Court wont grant if it’s a pointless act or if its something it cant monitor.
II. PRE-EXISTING LEGAL DUTY RULE
1)      Performance already legitimately agreed to, and not in dispute, is not consideration for a new agreement unless new consideration is added that differs from what was already required
b.      The pre-existing legal duty rule does not apply when the promise to do the duty is made to some third person, and not to the person to whom the duty was owed
c.       An agreement to lower rent is not binding if K already specifies price
a.       Voluntary Offer to not go into bankruptcy=Consideration
b.      Debtor’s fear they may go into bankruptcy-Not Consideration
2)      Ways around pre-existing legal duty rule
a.       Provide Consideration – Do some little thing more that the boss wants done.
b.      Perform The Slightest Additional / Different Duty – Do that thing and get paid for it on the spot.  Consideration is not required for a transfer that has already occurred
c.       Make a new contract  –  3 contracts
                                                

    ii.      If oven blew up, cost of production went way up (bankruptcy looming), possible COURT acceptance of good faith
2.      Limits of Output/Requirement K’s
a.       Quantity sold or demanded cannot be unreasonably disproportionate to:
                                                              i.      Any stated estimate OR
                                                            ii.      If not stated: to the normal amount sold or demanded
b.      One not need perform if performance would cost them perilous loss
c.       UCC 2-306
                                                              i.      Quantity must be good faith requirement/output
                                                            ii.      requirement/output cannot be unreasonably disproportionate
                                                          iii.      Amount not stated – use previous amounts
1.      Ordered 900 units in past, all the sudden order 6000 = seller only obligated to provide 900.
2.      Note:  Unreasonably disproportionate clause provides a ceiling but not a floor, meaning that while the seller is not obligated to sell you an unreasonably large amount, he is obligated to sell you what he might consider an unreasonably small amount.
VI. Illusory promises
Illusory Contract
Based On Illusory Promise – An illusory contract is based on a statement that appears to be promising something, but does not commit the promisor to do anything at all.
If the promisor’s promise is conditional on his own actions or actions he exclusively controls, the promise is illusory and does not constitute consideration
Escape Clauses
An offer may contain an escape clause as long as the condition is not within the offeror’s exclusive control.
VII. Quasi K’s (Implied in Law – Unjust enrichment and Implied in Fact
1.   Unjust Enrichment (implied in law)
a.        A contract implied in law (not implied in fact).  Not a legal contract, but looks like one, so that the court rewards recovery.
2.   Unjust enrichment arises when
a.       D Receives a Benefit.
b.      Must be of Value to D – An appreciation or knowledge by the defendant of the benefit.
c.       Must be Retained by D- D must keep it.
d.      D must be Unjustly Enriched – It would be unjust / inequitable for the defendant to retain the benefit without paying for it.
e.      Value of benefit conferred is measure by D NOT by the loss incurred by P