Select Page

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

Contracts Page Fall 2015

Unilateral – signifies that although both parties have given consideration, only one of them has made a promise as consideration. The other has furnished consideration by rendering the required exchange performance at the very point of contract formation.

Simple: Only one party has a promise outstanding at the point of contracting

Consideration (Mutual Cross-Inducement)

Questions to ask:

Was the promise made to prompt someone else to do something?
Was that something doing it to get the goodie out of the promisor?
If yes to BOTH, then there is consideration!

If/Then Test
Reciprocal Inducement
Mutuality of Obligation
Explicit/Implicit promises

Definition (Restatement 71)

To constitute consideration, a performance, or return promise must be bargained for.
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
Perceived benefits qualify even if they never actually existed – we don’t really care if what was perceived to be a detriment was really a benefit or vice-versa

The performance may consist of (Restatement 71)

An act other than a promise
A forbearance – a legal opportunity forgone is enough to be forbearance

Hamer v. Sidway – The court found that Willie’s absentation from the stated activities (refraining from drinking, smoking, playing cards for money, or using tobacco all until age 21) pursuant to the promise was sufficient detriment, because it was the abandonment of his legal right to engage in them.
Langer v. Superior Steel: what would be a gratuitous promise was consideration because the promisor benefited from non-competition clause (forbearance).

The creation, modification, or destruction of a legal relation

Promise may be from a 3rd party OR to a 3rd party

Ex. Benefit goes to the buyer of the house, detriment goes to ex-wife

No Consideration for Past Events/Performance

Because exchange is the basis of consideration, each party’s detriment must induce and be induced by the other’s. May be important to the promisor but as far as consideration goes a promise cannot be based on past benefit because it cannot be inducing the party to receive something in the future. Although the detriment may have induced the promise, it was not itself induced by the promise which had not yet been made. It was suffered prior to the promise and not in exchange for it. Past consideration is not consideration at all.

Ex. If Paul saves Joe’s life in the war and this induces Joe to make a promise to Paul, Joe’s promise is not what induced Paul to save his life so there is no consideration.

Mixed Motives – Adequacy of consideration

The consideration doctrine does not require that the performances or promises exchanged by of equal value. As long as legal detriment has been suffered in exchange for the promise, consideration is present.
There does not have to be an equivalence in the number of promises or performances provided by each party. So, one party can exchange a single promise or performance for multiple promises and performances by the other.
As long as consideration has been found to exist, the court should not second-guess the value places on the exchange by the parties at the time of contracting, even if one of the parties subsequently seeks to overturn the transaction bc the other received a great bargain at his expense.

Nominal Consideration

The rule that a court will not inquire into adequacy of consideration may not apply where it is clear that the purported consideration is so inadequate that it cannot be said that it really amount to consideration at all. The promise needs to be something that each party actually wants and cannot be indifferent to either party. There has to be some inducement

Fuzzy cough drop is not enough to bind a contract for the sale of Grandpa’s house but baking him cookies is.
In re green – A $1 nominal payment is not consideration for D paying P’s rent and being her sugar daddy.

Gratuitous Promise

A gratuitous promise is on its face not supported by consideration because there is not cross-inducement. It can be canceled at any time before it is performed.
Once a gratuitous promise has been performed the performing party can’t get their money back (gratuitous transfer)
The fact that you may have had to do something to take advantage of the gratuitous promise doesn’t make the promise a K

Kirksey v. Kirksey: I didn’t let you live at my place to get some perverse joy out of watching you struggle through a move.

Pre-Existing Legal Duty Rule

Definition: Where there is a pre-existing legal duty to perform (an earlier K between the parties), a party’s promise to pay more money for the same performance is unenforceable. Basically, you cannot promise to do something you are already bound to do by a past promise.

Levine v. Blumenthal: Verbally agreeing to lower rent when you had a K to pay full rent means I can make you pay full rent.
Exists to stop Hold’em-up tactics

Alaska Packers- can’t demand more money for the job you already agreed to do for less.

Third party involvement does not apply! So there is consideration for the promise!
No modification if K has already been agreed to – 5 ways to circumvent:

New consideration – Must have New consideration not involving the pre-existing duty
Gratuitous Transfers – transfer exchange of money, then cannot be give back (bonus $)
Modification of services K (RS 89) – 4 elements

Both parties must agree
Performance must not be completed by either party
The even triggering modification must be unanticipated
The modification must be fair and equitable

Modification of Goods K (UCC 2-209)

No new consideration required
ONLY that its done in Good Faith and Fair dealing

Contract rescission + new K

Existing K
Both agree to rescind
New contract formed after rescission

Requirements:

Services: (RS 89) – requires consideration

A services K may be modified if:

Both parties voluntarily agree

s unenforceable b/c it had provision allowing P to purchase under specified levels if wanted to.

Ex. – From hornbook

Buster promises to buy Al’s skis for $100, and Al promises to sell them to Buster unless Al changes his mind. This qualification reserves such unlimited discretion to Al that he has really promised nothing. His apparent promise is said to be illusory and hence cannot be consideration.

UCC 2-306: There is a ceiling but no floor in mutual obligations involving goods

You can contract to “sell all the goods the buyer needs” as long as it is made in good faith. The buyer can buy less than usual (even zero if in good faith), but cannot buy a disproportionate amount more than usual.

Illusory and Alternative Promises

Exclusive Control

If the promisor’s promise is based on conditions that he exclusively controls, the promise is illusory and is not supported by consideration.

Omni: even though the real estate company got to decide to buy based on the results of a feasibility report they were still obligated to analyze it in good faith.
Ex. Blockbuster – unlimited discretion to perform – could change terms at any time w/o notifying its subscribers, which would be deemed assented to if the subscriber continued to use the service following the modification.

Escape clauses for the buyer, you usually do. An offer may contain an escape clause as long as the condition is not within the offeror’s exclusive control. If it is fairly bargained for. Pg. 213 Ex. Buyer gives seller provision of notice.

Cancellation Clauses

A clause that allows cancellation at any time is not illusory if it has restrictions on how that cancellation is carried out (i.e. Only stop performing after 60 days notice).

Impossible Condition Promise

A conditional promise that the promisor knows cannot be satisfied is not consideration.

Ex. Al gives his skis to Buster in return for Buster’s promise to pay $100 for them if, by the end of the week, Elvis is returned to earth

Choice Between Alternative Performances (RS 77)

A form of discretionary promise one involving alternative performances.
A promise that allows the promisor to choose (discretionary) between alternative performances is not consideration unless each performance would have qualified as consideration alone.

Ex. I offer to pay $500 for one of the things Page has in his garage, but Page gets to pick. The things in the garage are: