CONTRACTS I OUTLINE
K = promise or set of promises for the breach of which the law provides a remedy, or the performance of which the law recognizes a duty.
Promise = manifestation of intention to act or refrain from acting in a specific way. (Restatement 2nd § 2-1)
Bargain = a formation of a K requires a manifestation of mutual assent as to the exchange and consid.
Exchange =a performance or a return promise is bargained for if it is sought by P/or in exchange for his promise & is given by P/ee in exchange for that promise.
Promissory Estoppel (Restatement § 90)
· May induce action/forbearance
· Did induce action/forbearance
· Injustice if not enforced
Unilateral K = promise for performance.
Bilateral K = promise for promise.
CONSIDERATION = collective term for all the various elements that make a promise legally enforceable.
· Benefit to the P/or.
· Detriment to the P/ee.
· Act, forbearance to act, or a promise to act.
A. Why is a consideration necessary?
· Evidence of promise
· Essential element of K since the Middle Ages
· Reason for promising
· Public good
B. What counts as a consideration?
1. Reciprocity or Recompense
· Fresh cause
· No naked promises
· Each side acts
a. Promise for nothing in return = naked pact >not an enforceable K.
b. Oral K needs consid.; written Ks carry more weight then oral.
c. Promise given w/ past consid. >not enforceable.
d. Mutual inducement is required for fresh cause;
e. Love and affection doesn’t count as consid.
f. Performance of a prior legal duty is not consid.
g. A promise to reward a past kindness (w/o mutual inducement) is gratuitous >not valid consid.; not enforceable.
h. Restatement § 71(1): To constitute consid., a performance or a return promise must be bargained for.
a. Benefit to P/or is consid.
b. Implied benefit is consid.
c. A loan is a benefit (b/c it can be used) > valid consid.
3. Detriment = performance/forbearance of an act not already legally obligated to do.
a. Detriment to P/ee is consid. (Don’t have to have benefit to P/or.)
b. Work done is a detriment > consid.
4. Mutual Promises
a. A promise for a promise is good consid.
b. Promise & consid. must occur together in time >otherwise, naked promise.
5. Love and Affection
a. Not consid.
I. ATTEMPTS TO REDUCE CONSID. TO A FORMALITY
A. Assent as an Alternate Ground for Enforcement
· Assent = agreement, approval, or permission.
· (Offer + Acceptance = Agreement)
B. A Seal or Writing
a. Historically, a K in writing needed no consid.; TODAY, writing or not, you must have consid.
b. No seal is needed for consid.
c. Oral K, p must prove consid.
d. Written K, D must prove no consid.
e. Written K implies consid.
f. “No Consid.” is a defense of K.
g. Written release of K: (1) signed (2) in writing (3) signer intends to be legally bound.
C. Nominal and Recited Consid.
a. Nominal consid. is not good consid. (i.e. 1 cent doesn’t induce anything.)
· Option = the promise (1) to sell at a future date & (2) to hold open #1.
· Guaranty = 3rd party cosigner.
b. Promissory Estoppel deals w/ promises.
c. Equitable Estoppel deals w/ facts.
D. Implied Inducement
· If the tendency of the promise is to induce the person to persevere, reliance and detriment may be inferred from the mere fact of performance.
· Must be in writing.
· Signed by the person to perform the promise.
· Used as a defense.
g. Moral obligation is sufficient to support subsequent promise to pay where P/or has received a material benefit.
h. Natural Obligation
· Duty owed to a particular person.
· Duty owed is strongly felt.
· Duty fulfilled through performance of pecuniary value.
· Recognition of the obligation by obligor either by performing or promising to perform.
· Fulfillment of duty must not impair the public order.
D. Exceptions in Modification Cases
1. Modification of Judgments
a. Original K that is modified must have new consid.
b. K is a fraudulent misrepresentation > voidable.
c. Fraud = (1) false representation (2) of an existing material fact (3) made knowingly or recklessly for the purpose of inducing reliance thereon upon which plaintiff reasonably relies to his detriment.
d. If a debtor agrees to & does incur additional debt to pay a creditor, an agreement to settle the debt is consid.
2. Modifications of Contracts
a. Modification requires good faith (= honesty in fact and the observance of reasonable commercial stds. Of fair dealing in the trade.)
b. Judicial admissions exception to SOF >testimony provides a writing.
c. (At-Will Employment) A handbook modification is agreed to if employee continues to work.
d. At-will employment does not negate handbook.
e. (In TX, handbook modification is not enforceable.)
E. Waiver = intentional relinquishment of a known right.
· Waiver of K >doesn’t need new consid.
Modification of K >does need n