Contract – “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” Restatement 2nd of Contracts, § 1
Methods of Enforcement: Specific performance, money damages
I. Bases for Enforcement
A. Historical Bases
1. Covenant- used to enforce contracts made under seal. (Wax seal, “Seal,” or “L.S.”) – “erosion of solemnity” – too common, seal no longer enforceable.
a. Evidentiary function – providing trustworthy evidence of the existence and terms of the contract in the event of a controversy.
b. Cautionary function – bringing home to the parties the significance of their acts.
2. Debt – used to enforce some types of unsealed promises to pay a definite sum of money. Promisor (debtor); Promisee (creditor)
3. Assumpsit – promisee seeks to recover damages for physical injury to person or property on the basis of a consensual undertaking. Misfeasance – having done something incorrectly; Nonfeasance – not having done anything. Only enforced when promisee incurs a detriment in reliance on the promise.
B. Modern Bases
1. Consideration – a promise or performance given in exchange for a promise
a. Promise or Performance
(1) No benefit/detriment – irrelevant if there is an exchange – Hamer v. Sidway – nephew’s performance in refraining from certain legal activities is sufficient consideration for uncle’s promise to pay him $5,000. Since the perfomance is consideration, no benefit/detriment needed. Restatement 2nd § 79(a) – “If the requirement of consideration is met, there is no additional requirement of … a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee.”
(2) Promise not to bring claim (good faith) – can be considered if made in good faith – Fiege v. Boehm – Fiege’s promise to support Boehm’s child in return for Boehm not filing bastardy proceedings against Fiege is valid because Boehm’s claim was made in good faith. Restatement 2nd § 74(1)(b) – “Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless . . . the forebearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
(3) Illusory Promise – no real commitment/no consideration – Strong v, Sheffield – D promised to pay her husband’s debt to P (promissory note). P’s promise to forbear collection “until such time as he wants it” is not consideration because there is no fixed time period. Restatement 2nd § 2(1) – “A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.” Illusory promises cannot be enforced unless:
(A) satisfaction clause – implied-in-law (public policy) – Mattei v. Hopper – P’s promise to buy D’s land if satisfied is consideration because P’s satisfaction is to be made in good faith – P will back out only if truly dissatisfied. Satisfaction – duty of good faith. Restatement 2nd § 205 – “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”
(B) implied-in-fact – implied term (parties’ expectations) – no technical, real commitment – Wood v. Lucy – D gave P “exclusive right” to market P’s fashion label in return for ½ profits. D argues that P gave no consideration for the exclusive right, but Ct said that P implicitly promised to make “reasonable efforts” in marketing D’s label. Reasonable effort is the implied term. Restatement 2nd § 202(1) – “Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight.”
b. Given in Exchange
(1) promise not sought – no exchange, not bargained for nor sought for in exchange for promise. Whitten v. Greeley-Shaw – Greeley-Shaw drafted an agreement in which she would leave Whitten alone given that he provided her
d not recognize P’s reliance on D’s promise – no consideration, therefore no enforceable promise.
b. Stage 2 – There was no precedence for changing the rules. Cts used/stretched existing doctrines to cover certain situations to enforce promises. Not explicitly recognized as reliance.
(1) Ricketts v. Scothorn – D told P he would pay her $2,000 plus 6% interest per annum so that she wouldn’t have to work. D w/o paying off the promissory note, and his executor refused to pay P. Ct agreed that there was no promise or performance given in exchange, but enforce the promise using equitable estoppel – if P relies on a mistake or statement of facts by D, the ct “estopps” the D from asserting the mistake or facts. However, in this case, equitable estoppel is used for a promise, to estop D from saying there was no consideration. Equitable estoppel usually is reliance on a factual representation.
Allegheny College v. National Chautauqua County Bank of Jamestown – Johnson promised to donate money to Allegheny College, gave them a $1,000 initial donation and required the school to set up a memorial fund in her name. She later changed her mind and stopped paying the college. After her death, the college sued Johnson’s executor for the remainder of Johnson’s promised donation. Ct (Cardozo) found consideration for Johnson’s promise in the memorial fund she required the school to establish. Cardozo also mentioned that promissory estoppel was being recognized by other states. The dissent said that Johnson’s promise was a conditional promise to make a gift. Cardozo stretched the facts to find consideration