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

CONTRACTS I OUTLINE
Ricks
 
Definitions
 
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)
·         Promise
·         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
·         Deliberation
·         Public good
·         Efficiency
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.
2.                  Benefit
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.)
EXCEPTIONS: 
·         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.
E.                 SOF
·         Must be in writing.
·         Signed by the person to perform the promise.
·         Used as a defense.
a.          

enough.
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