Contracts Outline
Basanta – Fall
I. Overview
A. Sources of Contract Law
1. Judicial Opinions
2. Statutory Law
a. The U.C.C.
3. The Restatements
B. Promise and Contract
Restatement Definitions
Contract
: A contract is a promise or a set of promises which if breached, the law gives a remedy, or the performance of which the law in some way recognizes as a duty. ::
Promise mai
: 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. ::
*Intent of future action is not a promise.
Agreement, mma makes agreements
: manifestation of mutual assent on the part of two or more persons ::
Bargain
: an agreement to exchange promises or to exchange a promise for a performance or to exchange performances ::
Offer MOW enters the Bar again
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Note: Pre-Acceptance reliance is reliance on an offer. Promissory estoppel is reliance on a promise. Equitable estoppel is reliance on a mistated fact.
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Other Definitions
Exchange
Consideration
: something (as an act or forbearance or the promise thereof) done or given by one party for the act or promise of another ::
Failure of Consideration
: the neglect, refusal, or failure of a party in a contract to perform as promised or furnish the consideration promised ::
i. Monge v. Beebe Rubber Co.: π got sick, was deemed a voluntary quit rather than fired. She sues for breach of employment K.
1. RULE – Damage award is preferentially economic, not specific performance…………………?????????…
2. RULE – Damages for mental suffering are generally not awarded for BOK.
II. Enforcing Promises
A. Objective Theory of Contract
i. Ray v. Willima G. Eurice & Bros., Inc.: π and Δ both made edits to the K. Eurice brothers claimed they thought they were signing their own 3 page contract.
1. RULE – Objective theory of Contracts. If there is a unilateral misunderstanding, the court will enforce the K as a reasonable person would have understood it.
2. RULE – If there is a bilateral misunderstanding then there is no meeting of the minds, and the court will not enforce the K.
3. RULE – The goal of contract enforcement is to put the person in the position they would have been in had the contract not been breached.
ii. Park 100 Investors, Inc. v. Kartes: KVC attorney approved lease. Park 100 employee visited KVC’s CEO, asked him to sign “lease papers”.
1. RULE – Fraud will void a contract. Elements of Fraud are:
(1) Material misrepresentation of past or present fact; which
(2) was false; and
(3) was made with knowledge or in reckless ignorance of the falsity; and
(4) was relied upon by the complaining party; and
(5) proximately caused the complaining party injury
My MotherFucker falsely knew Id Rely and cause injury
Material misrepresentation
False
Knowledge reckless ignorance
Relied upon
Caused injury
2. RULE – K may also be void for Duress,Undue Influence, or Mistake
B. Consideration
Consideration is needed to enforce an Exchange Transaction.
1. Consideration as a Benefit or Detriment
-A party may pledge to provide a benefit or alternatively to accept a legal detriment as consideration for a promise. This refers to a legal benefit/detriment as compared to an actual benefit/detriment.
-Accepting legal detriment = consideration
i. Hamer v. Sidway: Uncle promises his nephew to pay him if he refrains from alcohol/tobacco/gambling until age 21.
1. RULE – A legal detriment is undergone if a person limits their legal freedom of action.
2. RULE – A legal benefit is gained by the power to limit another’s legal freedom of action.
2. Consideration as Bargained for Exchange oop ducafbo
ii. Baehr v. Penn-O-Tex Oil Corp.: Δ leased gas pumps, couldn’t pay the rent. Oil Company he was buying took over the account, π tried to get oil Co. to pay.
1. RULE – Doctrine of Consideration: For a contract to be legally enforceable, there must be an obligation by one party that is dependent upon condition of an act or forbearance by the other.
2. RULE – If there is no consideration, a promise is not legally enforeceable.
3. Adequecy of Consideration
iii. Dougherty v. Salt: At her death Aunt promised to pay nephew $3,000 for being a good nephew. Executrix decided not to pay it.
1. RULE – “Gratuitous promise” Promises to make gifts are not enforceable where there is no consideration.
2. RULE – Generally, nominal consideration is not consideration and does not create a binding contract. Nominal consideration is that given as a pretense; must look to the party’s intent.
iv. Batsakis v. Demotsis: Wartime. π gave Δ $25 in exchange for signing an agreement to pay back $2,000.
1. RULE – Freedom of Contract. In general, Courts will not inquire into the fairness of the exchange.
4. Past Consideration
v. Plowman v. Indian Refining Co.: Δ’s were forced to retire, they were paid ½ their salary as long as they came to pick up the che
ion or forbearance; is binding if
(3) the reliance was reasonable; and
(4) injustice can only be avoided by enforcement
2. RULE – Courts have discretion under promissory estoppel to limit the extent of the damage award. Partial awards are common.
3. RULE – Promises made under mistaken belief are generally not enforceable
2. Charitable Subscriptions
Normally, gifts are distinguished from exchanges. A promise for a gift is normally not enforceable w/out consideration. Promissory estoppel may make such a promise enforceable. Generally this is only when the “detriment” element has been satisfied, however, some states are moving towards making all promises for gifts enforceable.
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iv. Allegheny College v. National Chautauqua County Bank:Δ made a promise for a gift in writing of $5k to π, payable 30 days after her death. Δ paid $1K while alive, then formally repudiated the promise.
1. RULE – Gift Doctrine vs. Exchange doctrine re: charitable subscriptions. Cardozo says there’s consideration here, there’s really not.
v. King v. Trustees of Boston University: Dr. MLK made written agreement with BU to give them his papers after he died as long as they kept them safe/preserved them while he was alive. Coretta Scott King claims no promise, no K, not enforceable.
1. RULE – A written promise to make a charitable contribution will generally be binding without consideration, under the P.E. doctrine. An oral promise may be as well.
a. Subsection 2 of § 90 says that the charity does not need to show detrimental reliance.
–>Majority has not adopted subsection 2.
2. RULE – You can make a promise to be effective at a future date and it is not a will.
3. Commercial Transactions
Modern rule is that promissory estoppel may be invoked in the commercial context. Do not need to go to the U.C.C.; the elements are the same.
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vi. Katz v. Danny Dare, Inc.: Δ decided π had become incompetent, offered lifetime pension to retire. π accepted. Δ eventually stopped making payments on the pension.
1. RULE – P.E. may be used in the commercial context.
