Contract Law Colombo Fall 2017
Introduction
Implied Contract
Howard E Baily v. Richard E. West 105 R.I. 61 (Supreme Court of Rhode Island, 1969)
Defendant intended to buy horse and found the horse was lamb when the horse is delivered. He refused to accept the delivery and authorised the driver to deal with the horse in within driver’s own discretion (“whatever the driver wants”) . plaintiff accepted the horse and boarded the horse with the knowledge that there is a controversial issue between the seller and defendantà the plaintiff send the defendant bills asking for compensation à the defendant then reached the plaintiff declaring the house is not his.
Implied-in-fact contract has the same legal effect as an express contract. The only difference between them is the means by which the parties manifest their agreement. In an express contract, the parties manifest their agreement by their words, whether written or spoken. In an implied-in-fact contract, the parties’ agreement is inferred, in whole or in part, from their conduct. [nevertheless] an implied contract must still have discernible terms… for such a situation to exist, the parties must exhibit mutual expressions of assent. (essential elements of contracts implied in fact are mutual agreement, and intent to promise, but the agreement and the promise have not been made in words and are implied from the fact
Quasi contract: (1) benefit is conferred by plaintiff upon the defendant; (2) defendant appreciates such benefit; (3) acceptance and retention by defendant of such benefit under such circumstance that it would be inequitable to retain the benefit without payment of the value thereof.
Court does not prefer implied-in-fact contract if an express contract can be created.
Damage based on quasi-contract are awarded only when no contract has been formed.
Result of this case: no mutual agreement and intend to promise was found à no implied in fact contract; from the conversation between Kelly and plaintiff and the defendant’s notation that indicate the horse was consigned by defendant’s trainers to Dr. Straiss’s trainer at Belmont Park, the P should have known that he could not reasonably expect remuneration from defendant. à no quasi contract
Changed Circumstance
Bolin Farms v. American Cotton Shippers Association, 370 F.Supp.1353 (U.S. District Court, Western District of Louisiana 1974)
Plaintiffs entered a forward contract with the defendant selling cotton to the defendant on agreed-on price à price goes up à the plaintiffs asked the court invalidate the contract à denied
Result: the change in price of the cotton does not make the contract unenforceable
Endorsement of freedom to contract: a valid formed contract will be enforceable even if it turns badly for one party
Changed circumstance don’t ordinarily make a contract void. Two exceptions (haven’t addressed by the professor Dec 21 2017)
The validity of a contract should be assessed at the time when contract formed.
Consideration
Introduction
Restatement (2d) § 71
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) 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.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
“consideration” is often used merely to express the legal conclusion that a promise is enforceable.
b. “Bargained for.” In the typical bargain, the consideration and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of the consideration. Here, as in the matter of mutual assent, the law is concerned with the external manifestation rather than the undisclosed mental state: it is enough that one party manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement. See § 81; compare §§ 19, 20. But it is not enough that the promise induces the conduct of the promisee or that the conduct of the promisee induces the making of the promise; both elements must be present, or there is no bargain. Moreover, a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration and the promise is enforced, if at all, as a promise binding without consideration under §§ 82- 94. See Comments b and c to § 87.
Gratuitous Promises
Isaac Kirksey v. Angleico Kirksey, 8 Ala. 131 (Supreme Court of Alabama 1845)
no bargaining in this case à no consideration
Bargain means: the purpose of making a promise is to induce the promissee to suffer this particular detriment.
Nothing indicates that Kirksey’s promise was intended to be anything more than gratuitous àit cannot be enforceable.
Louisa Hamer v. Franklin Sidway, 124 N.Y. 538 (Court of Appeals of New York 1891)
$5,000 in exchange for the plaintiff’s abstaining from drinking, using tobaccos, swearing, and playing cards or billiards for money. The plaintiff did it and sue for money.
A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. @ p. 67 of casebook.
Giving up a legal right could be considered as a detriment, even if the giving up such right de facto benefits the party.
Forbearance of a legal right. It is a detrimental even if the forbearance benefits the party.
Distinguished from Kirksey, a truly gratuitous, nonreciprocal promise to confer a benefit is not a part of the process by which resources are moved, through a series of exchanges, into successively more valuable uses. Posner
Compared with Talbott v. Stemmons
The right to use and enjoy the use of tobacco was a right that belonged to the plaintiff, and not forbidden by law. The abandonment of its use
ation being adequate.
Whether or not consideration is valuable in the eye of the law is decided at the time when two parties enter the contract.
A Robert C. Apfel v. Prudential-Bache Securities, Inc., 81 N.Y.2d 470 (Court of Appeals of New York 1993) (selling computerized system for issuing municipal securities to Prudential Securities)
Rest (2d) § 74 (settlement of claims) (1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless
(a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or
(b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
The defendant argued that the idea is not novel, so contract lacks consideration à unenforceable
Court emphasised that the adequacy of consideration is not a proper subject for judicial scrutiny. It is enough that sth of real value in the eye of the law was exchanged.
Significance:
Consideration might appear objectively nominal can but can still be consideration if it has subjective value to a party
Consideration that subsequently become valueless does not undermine a contract validity
Clifton Jones v. Star Credit Corp, 59 Misc.2d 189 (Supreme Court of New York 1969)
Defendant paid 1439.69 dollar for a fridge which is valued at 300 dollars.
Grossly inadequacy can be evidence of unconscionability. (as to the determination of consideration, sufficient consideration is the standard; consideration does not necessary require to be adequate.) it can signal other aspects of a contract. P.s. adequate means one party’s promise = another party’s promise.
Unconscionability usually requires both substantive and procedural components.
The unconscionability is characterised as “unequal bargaining power” and “unreasonable favourable terms”.
Pre-existing Legal Duty Rule
Levine v. Blumenthal, 117 N.J.L. 23 (Supreme Court of New Jersey 1936)
Facts: Defendant cannot afford second-year rent and negotiated with the plaintiff. the plaintiff let defendant keep the rent as the first year unril business improve. The defendant paid for 11 months at the original price and vacate the building without paying the second year. P sued the D to recover $200 in rent for the final month and $ 25 per month for the 11 other months in the second year of the lease.
Result: the subsequent modification of the contract lacks consideration.
Significance
[1] Equitable Estoppel – promise is made in present
