Select Page

Contracts
St. Louis University School of Law
Cherry, Miriam A.

 
Cherry_Contracts_Fall_2014
 
Contract-  A promise or set of promises, which is part of a voluntary exchange, and which the law will enforce
1)      Promise to be fulfilled
a)      Bargain- Consideration
b)      Reliance- Promissory estoppel
2)      Negotiation leading up to the deal- Offer and acceptance
 
Origins/Policy
·         Sir Henry Main, Ancient Law:  The movement of “progressive societies” has been uniform in one respect: the gradual dissolution of family dependency and the growth of individual obligation in its place.
·         Farnsworth:  No legal system has ever been reckless enough to make all promises enforceable.  Some freedom to change one’s mind is essential for free intercourse
·         Contract is revolutionary in that it serves as an equalizer among the social classes.
Elements:
(1)    Bargain- Exchange relationship
(2)    Agreement- oral/written/inferred by conduct – A manifestation of mutual assent on the part of 2 or more parties.
(3)    Promise- Contains at least one promise
(4)    Enforceable- Recognized in law as enforceable
·         Not Promises:
­   Expressions of opinion and predictions (Dr. making hand better)
­   Statements of intention, hopes, desires, estimates
­   Inquiry or invitation to make an offer (E.g. will you buy this land for $1000?).
­   Ads, catalogs, circular letters
 
Goods? Yes? Territory of Uniform Commercial Code (UCC)
UCC 2-105(1): Goods
Goods mean “all thing (incl specially manufactured good), which are movable at the time of id to the contract for sale other than the money in which the price is to be paid, investment securities and things in action*.  Goods also includes the unborn young of animals and growing crops and other identified things attached to really as described in the section on goods to be severed from realty.”
Specifically includes: future goods, specially manufactured goods, unborn animal young, growing crops.
Specifically excludes: land, stocks, money, services, construction projects, electronic transfer of info not incorporated into a tangible product.
UCC 2-104: Merchant
“Person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.”
 
Hybrid Transaction- Mixture of goods/services
·         Predominant purpose test: what is the major part of what is sold?  (Focuses on the cost and economics of the transaction.)  If sale of goods is the more significant aspect of the transaction, and the non-sale component is incidental- UCC applies. Looks at transaction as a whole, weighs several factors: language of contract, nature of supplier’s business, reason for entering into contract, respective amounts charged for goods/services.
·         Gravamen of the Complaint Test- Which part of the transaction gave rise to the problem? If what created the problem is a good, then it’s UCC, but if not, then look to other areas of common law.
 
Assumpsit is a form of action at common law for the recovery of damages caused by the breach or non-performance of a simple contract, either express or implied, whether made orally or in writing not as a deed.
·         a contract  If a duty was performed in a way to cause harm to the obligee the obligee could sue on “trespass on the case” (a case of misfeasance)
·         General assumpsit- If the builder repudiated the bargain before the owner had done anything in reliance on the builder’s promise, the owner had a claim for breach of contract.
·         An action in assumpsit could be brought against a defendant who, being already indebted, expressly undertook to pay a particular sum
·         Assumpsit becamea a general basis for enforcing promises, incl. purely executor exchanges of promises.
 
RULE:  Objective theory of assent:  K is based on expressed communication between the parties.  Mental assent is not required.
RULE:  Subjective mental assent is not required for a contract. 
REST 2nd §19- Conduct as Manifestation of Assent- “The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.”
Lucy v Zehmer:  Zehmer jokingly offers to sell Lucy his farm.  Lucy thinks Zehmer is serious and accepts.  They both signed an agreement. Zehmer’s outward behavior seemed serious to any reasonable person. 
·         HOLDING- If words or actions have one reasonable interpretation, undisclosed intent is immaterial.
·         BAR- If the undisclosed intent is known to the other party
CONSIDERATION
Bargain Theory- Bargain is a requirement for K- aka Consideration
·         Policy-  Presence of a bargain shows the parties have thought it through.  If everyone bene

consideration
However, extremely lopsided situations might give rise to a defense, also fraud or duress.
Garth Brooks promised $500k for naming branch of hospital.  Garth’s money wouldn’t cover the whole cost.   Jury decided to rule in favor of Garth.  Perhaps because it was his home state and he is a celebrity.
WITHIN FAMILY
Hamer v Sidway (NY 1891) (Yes)-  Uncle promises nephew that he would pay him $5,000 if he refrained from drinking, tobacco, swearing, and playing cards or billiards for money until he was 21 years old. 
·         Consideration- Nephew getting money and good health + Uncle gets the benefit of receiving his nephew’s freedom.  No proof that Uncle did not benefit- subjective value of exchange
·         Reliance:  Nephew restricted his lawful freedom of action
 
RULE:  Reasonable reliance on a gift to the person’s detriment may provide redemption.
                Ricketts v Scothorn- Grandfather gave his grandchild $2k saying she shouldn’t have to work.  Reasonable consequence of the gift that she would rely on it. 
                                HOLDING:  Damages via promisory estoppel granted.
Contract law v PROMISORY ESTOPPEL
No basis of a contract? Go for promissory estoppel
Remedy is limited to just placing the person back to where he started. 
REST 2nd §90 – Promise reasonably Inducing Action or Forbearance
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise or a third person and which DOES induce such action or forbearance is binding if injustice can be avoid only by enforcement of the promise.  The remedy granted for breach may be limited as justice requires.
ELEMENTS of §90
·         Must identify a promise
·         Promisor should reasonably expect to have to follow through
·         Induces detrimental action or forbearance
·         Injustice  
·         Remedy is limited as justice requires
·         Signing with witnesses does not create a contract.  All in the exchange.