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Contracts
St. Johns University School of Law
Movsesian, Mark L.

[Movessian contracts I Fall 2009]
Contracts: a legally binding promise or set of promises
1.     Formalism (rules, black and white) v. Pragmatism (what’s practical, makes sense under the circumstances)
a.     Today we have a combination of both
2.     Contract: The law of promises
a.     A Contract is a promise or set of promises for a breach of which the law gives remedy or the performance of which the law in some way recognizes a duty
b.     Promise-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.
c.      May be written or oral, Need WORDS
3.     Reasons to have K:
a.     Economic function: so that it will be predictable so can plan business, it facilitates business
b.     Moral values: do as you promised, be a virtuous person
c.      Reputation: people will trust you for future business dealings
4.     Types of Contracts:
a.     Expressed: 2 expressed promises
b.    Implied      
i.      Implied –In-fact: Intentions are not expressed verbally but through conduct (auction example)
1.     Objective Theory of Contract: It’s not what you mean, it’s what you manifest and what people understand you to mean. (Reasonable person)
2.     Normative (what the law should be) v. Positive (what the law is)
ii.      Implied –in-law: (quasi-contract, Constructive, Restitution)
1.     No manifestation of intent so not really a contract
2.     3 elements  
a.     Plaintiff confers a benefit on Defendant
b.    Defendant appreciates it
i.      Defendant knew about the benefit and didn’t decline it
c.      Circumstances are such that it would be unjust for Defendant to retain the benefit without reimbursing plaintiff
3.     Policy behind implied-in-law contracts: we want society to help each other out
4.     BAILEY V. WEST: since West didn’t own the horse, he didn’t get a benefit and no satisfaction of the 3rd element.
c.      Objective Theory of Ks: Reasonable person would believe K to mean, see what the intention was
5.     Changed Circumstances:
a.     Traditional rule: no excuse, K must be kept (eg: Bolin Farms: price of cotton went up but they couldn’t change the K)
b.     If there’s a Force majeure clause:then you can change if circumstances change
6.     Terms:
a.     Pacta Sunt Servanda: Agreements must be kept this is why they are hard to get into and hard to get out of
b.     Force Majeure Clause “irresistible force”: It’s a term that can be added to a contract that if the circumstances change, seller needs not perform (Cotton case: if they had put this in, the would be able to get out of contract)
c.      Normative theory: What promises should the courts enforce
d.     Positive theory: What promises the courts do enforce
e.      Freedom of contract theory: courts should enforce contracts that are products of bargains; consideration is important
f.       Substantive fairness theory: courts should enforce “fair bargains,” not necessary to have a formal bargain
g.     Unilateral contracts: A promise for an act or forbearance of an act, enforceable when the act is done.
i.      Ex: I promise to give you my book if you give me $50.00, “I’m not interested n promises; no deal until you give me the cash.”***-K exists when you give me the cash, not before. Until you give me the cash, I have no obligation to give you the book- my failure to give you the book is not a breach!
h.     Bilateral Contract: A promise for a promise, the contract is enforceable the moment the promises are exchanged
i.      Ex: “I promise to give you my book tomorrow if you promise to give me $50.00 the following day” (and you promise) ***-K exists the moment we exchange promises- today -If I fail to give you my book tomorrow, that’s a breach, even though you haven’t given men anything yet!
i.       Why don’t we enforce gifts? Because people say things on a whim
i.      Cautionary rationale: so people don’t incur liability accidentally or impulsively
ii.      The Stipulatio of Roman Law: make sure no one is being hasty so do it in front of many people (like marriage ceremony)
iii.      Evidentiary: need to have bargain/consideration to prove intent to contract
iv.      Channeling: allow some cases and not others into the court system- can’t enforce all promises
v.      Economic: Enforce bargains so people are encouraged to do business
7.     Remedies: the legal consequences of a breach of a contract- usually $$
a.     Expectation measure

will still hold you accountable for the contract. If you sell your house for a peppercorn, it doesn’t matter that it’s not fair; you are in the contract and can’t get out.
i.      Rationale
1.     Court allows you to make choices and wont get involved
2.     Wont let people get out of Ks easily (it’s bad economically)
3.     Skepticism about the relative value of things
b.     Exception 1:However, if the price is way too low for what you are buying it may be considered a sham and the courts won’t allow that either, this is nominal consideration
c.      Exception 2: Unconscionability:
i.      Must show:
1.     Absence of meaningful choice of one of the parties (procedural) AND
2.     The terms are really unreasonable to one party (substantial)
ii.      Jones v. Star Credit Corp.- Rule:
Unconscionable contract – grossly unfair contract, usually someone preys upon uneducated, ignorant, poor individuals & taking advantage, which constitutes fraud in that the defrauded party is a victim.
10.                        Legal Detriment: forbearing to bring a lawsuit
a.     Not bringing a valid lawsuit (detriment because you have a right to bring the claim)
b.     Not bringing an invalid lawsuit- when you think you are going to win
i.      Views:
1.     Bringing an invalid claim that you are not going to win (NOT a LEGAL DETRIMENT)
(In re Greene: adulterous relationship- he promises her stuff but not K b/c illegal aka no legal detriment)
2.     It will be considered consideration if you HONESTLY and REASONABLY believe you have a claim.
(Fiege v. Boehm: P believes that D is the father and doesn’t bring a lawsuit against him. That is legal detriment aka consideration= K.)
3.     It will be considered consideration when you only HONESTLY believe you have a valid claim.
Pre-existing Rule: when you promise to do something