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St. Johns University School of Law
Kniffen, Margaret N.

Contracts I
Fall 2005
Professor Kniffin
Megha R. Thakkar
I. Introduction
A. Contract is a bargained-for exchange in which each party receives something that is a benefit to itself OR a detriment to the other party (consideration) and mutual assent usually manifested by an offer and acceptance
B. Requirements of a contract
1. Consideration
2. Mutual Assent
a. Offer
b. Acceptance
c. Both parties must assent to a contract in order for it to be valid
d. Assent judged by looking through the eyes of a reasonable observer
C. Types of contracts
1. Bilateral: Offeror seeks promise
a. Bilateral contracts are the most common types of contracts
2. Unilateral: Offeror seeks performance
3. If unclear whether performance or promise is sought, court will tend to say promise
II. Consideration
A. Bargained for exchange in which each party receives something that is either a benefit to itself or a detriment to the other party
1. Detriment could be giving up a legal right (even if at a later time it was realized to be invalid (Fiege v. Boehm)
2. Courts do not look at the relative values of consideration except:
a. Token consideration
i. Symbolic consideration
ii. i.e. really a gift set up to look like a contract (sell house for $1)
iii. Some courts do not recognize this as valid consideration
b. Unconscionability
i. Extreme unfairness
(a) If something is so unfair as to shock the conscience of the court, the court will not uphold the contract
(b) If there is a huge disparity between the values of consideration on each party, a court may uphold the contract
c. Exchange of identical items
i. No difference à no consideration
3. Restatements
a. Consideration is valid if based on the fact that parties entering into the contract honestly thought at the time that there was a bona fide question between them
i. 1st restatement:
(a) According to the 1st restatement, you must have a “honest and reasonable” belief that you possible have the right to bring this suit
ii. 2nd Restatement
(a) Only “honest” belief,
(b) The 2nd restatement made the standard more relaxed
B. Bargaining
1. Consideration must be bargained for.
a. Must look separately at each party
b. Assume people won’t bargain

l recognize it
c. Employee Contracts
i. Employees generally hired at will
(a) Non-Covenant Clauses
(i) If an employee signs a non-covenant contract after being hired most courts would not find consideration for it
(ii) However some courts would find a binding unilateral contract forged out of a former invalid bilateral contract (legal fiction)
(iii) i.e. They would say that promotions, later benefits, etc. would be seen as bargaining
2. Conditional Gratuitous Promise
a. A promise that doesn’t really bargain for something in exchange
b. Attaches a condition to the giving of a gift
i. Tell a bum that you will buy him a winter coat if he shows up a Macy’s tomorrow.
ii. You don’t actually want anything form the bum, you are simply attaching a condition to the giving of a gift.
c. Not trying to induce the person to undergo detriment
d. Can still try for promissory estoppel