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Contracts
South Texas College of Law Houston
Ricks, Val D.

Contracts
Ricks
Fall 2015
 
 
Introduction
Does anyone have a natural right to contract?
Ogden v. Saunders
There is no natural right to a contract. Contract right is a civil obligation that is surrendered to the state because they enforce the promises.
If the positive law of the State declares the contract shall have no obligation it can have no obligation, whatever may be the principles of natural law in relation to such a contract.
Ferguson v. Skrupa
Court will not weigh wisdom of legislation. Courts can only validate legislation as to its constitutionality not its actual wisdom.
States have the power to legislate against what are injurious practices as long as the laws don’t run against federal law
Autonomy
Exercise of human will, contracts provide vehicle for self determination
Reflective of inherent dignity
Constitutionally protected liberty to contract
Can be limited in some cases, illegal activity, and anti-trust. Contract of adhesion
Facilitate rather than regulate
Welfare
The promotion of self-interest may actually benefit society as a whole more so than the promotion of society’s interests over the individual’s
Net efficiency of the transaction. Not always beneficial for each party when it could still bet a net benefit.
Efficient reliance- specific moment of time. Best way to insure reliability of the parties
Justice/Morality
Society and courts see a moral obligation to fulfill requirements you agreed to
Classical
More concerned with the set of rules that would govern law. (restatements)
Legal Realism (neoclassicism)
Promissory theory
Morality of keeping promises
Consent theory
Assent of the parties is a value to be preserved
Relational theory
Criticizes traditional theory for not taking into account the ongoing relationships that affect contract decision behavior
Economic
See laws as beneficial for establishing economic efficiency as their main goal
Consideration: Contract and Bargain
Intro:
Medieval law of promise enforcement (agreement, enforcement, religion)
Changes in renaissance
Assumpsit: consideration, promise, broken promise
Consideration Theory and Policy
Consideration exists if the evidence shows that the promise induced a return promise or performance and that the return promise or performance induced the consideration
Elements of consideration
Bargain/fresh cause/new action where;
The promise will induce the performance and the performance will induce the promise.
Promise will plausibly induce the consideration and the consideration will plausibly induce the promise
Must take the form of
1. Detriment to promisee  
2. Benefit to promisor
3. Mutual promise
In order to bring an action in this situation one side must perform (newer idea)
Material Benefit – attempt to codify moral obligation
Adopted by second restatement §86
The promisor has been unjustly enriched by a benefit previously received from the promisee
The benefit was not given as a gift.
The promisor subsequently makes a promise in recognition of the benefit
The promise is not binding if the value is disproportionate to the benefit
If these requirements are satisfied the promise is binding to the extent necessary to prevent injustice.
Doctor & Student
If nothing is assigned for the other party to pay for/exchange the goods or services being offered, there is no consideration – No action lies in a naked promise
Sharington v. Strotton
Consideration is valid only if it causes a fresh cause (no naked promises)
Fresh cause arising from each sides – Must be fresh cause on both sides
Hunt v. Bate
In order for consideration the act must be done of his own head. Past actions are not valid consideration
“There is no consideration wherefore the defendant [Employer] should be charged for the debt of [Employee], unless [Employer] had first promised to discharge the plaintiff [Pledge] before the enlargement”
Consideration exists only when there is recompense between two parties.
PAST consideration is not valid
Quality of doing something on basis of guilt is not as good as the basis of trade
Policy: to prevent veiled sense of guilt/duty/obligation.
Ex: Volunteer as tribute, car-washing man on street, mobster giving Cadillac to a person with veiled intent to get a favor from him later on.
Bargain
A reasonable person must believe that one of the promisor’s motives was to extract consideration from the promise, must also believe that the promise actually induces the promise to deliver that consideration
Must bargain for return promise or performance
Vian v. Carey
Rule;
The promise and consideration must purport to be motive each for the other, in whole or at least in part; it is not enough that the promise induces the detriment or that the detriment induces the promise if the other half is wanting
Love and affection are not consideration. The bargain and consideration must be motive for the other’s action
Financial and emotional support CANNOT be considerat

r to some other person
it may be given by the promisee or by some other person
Comment B states that they are looking at the external manifestation… both elements (promise inducing the conduct of the promisee or that the conduct of the promisee induces the making of the promise) must be present or there is no bargain
Proper Form
Benefit
Stone v. Withepoole (1588)
Consideration is ground of every action, and must be benefit to promisor or detriment to promise
Game v. Harvie
Courts have found promises have been fairly implied within these contracts after performance.
A lender lent money to a borrower, which borrower promised to pay back on demand. Is this for a consideration? Yes. It is a benefit to the promisor (the borrower) because the borrower had actual use of the money.
Benefit can be implied by party’s willingness to make the deal – contradicts an illusory promise when the party actually received the money and can use it.
Riches v. Bridges
P promises to deliver barley to JS. P never did, D sued P. Possession of the barley a benefit to P, who is the promisor.
Implied benefit/inducement of the contract even where the benefit is not clear
Reynolds v. Pinhowe
MINORITY benefit rule: from a judgment from the court of a preexisting duty by the debtor, the court infers a benefit to the promisor because he didn’t have to sue to get the full judgment he was entitled (talk about this after Borelli)
This is overruled by Foakes
The benefit of avoiding court can be consideration
Receiving some money ahead of time can be considered a benefit (liquidated debt) (minority) (judgment for 5 pounds, gave the guy 4 before the deadline).
Associated Builders, Inc. V. Coggins
Accord is only enforceable if it has consideration
Settlement of a disputed claim is consideration for an accord and satisfaction
Accord
A contract takes substitutive payment satisfied with the execution of payment
Satisfaction
Acceptance of payment is the satisfaction of accord
U.C.C §3-311