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Contracts
St. Louis University School of Law
Baxter, Teri Dobbins

1. Bases for Enforcing a Contract
1. The Meaning of Enforce
· United States Naval Institute v. Charter Communications, Inc (P. 2)
· D and P had a licensing agreement for publishing a book for which D would be the sole distributor of the paperback edition to commence on a specific date; D shipped early; P sought injunction to stop D but court refused; D’s early release was realized; P sued: P can recover damages due to breach of contract and loss of sales in its hardback edition due to D’s early release.
· Damages for breach of contract are appropriate when used to compensate the injured party for the loss caused by the breach; such damages are generally measured by the plaintiff’s actual loss. The focus in determining the recovery should be P’s loss, not D’s gain.
· The Economics of Remedies
· Sullivan v. O’Connor (P. 8)
· D promised to perform a nose job on P that would enhance her appearance in 2 surgeries; P was a professional entertainer and her appearance enhanced her value; P underwent 3 surgeries during which her appearance was worsened and could not be improved through further surgery; P can recover damages.
· Since P relied on D’s for a promised result, P should be awarded damages based on a reliance interest. P suffered an unfixable detriment in reliance upon D’s promise.
· The promise was an opinion not a statement of fact so it was enforced on reliance.
· Reliance Damages – Gives P what P had before the contract was made. (Under Promissory Estoppel) P can recover for her loss in value because of the Surgeries.
· Restitution Damages – Gives P back what P gave D. (Usually under unjust enrichment and quasi contracts) Not enough compensation for what P lost.
· Expectancy Damages – Gives P the value of what P expected to receive from the contract. (Presumptive award were an actual contract was breached)
· See Pg 16 Problem found in August class notes
· Specific Performance for Breach of Contract
· Generally only an option when the damage cannot be fixed by money
· Cases involving real estate of land are most common
C. Punitive Damages for Breach of Contract
· Punitive Damages are never awarded in Contracts unless there was also a tort involved, in which case the punitive damages are for the tort.
D. Arbitration
· Arbitration MUST be agreed upon by all parties
· Once agreed upon a court will most likely enforce arbitration
E.Contract Remedies in Practice, pp. 21-22
2. Consideration as a Basis for Enforcement
· Restatement, 2nd, § 71
(1) To Constitute Consideration, a performance or a return promise must be bargained for.
(2) A performance or a 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 right
(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
· Restatement, 2nd, § 74
(1) Forbearance of the ability to assert a right, surrender of a claim or defense, which proves
to be invalid is not consideration unless
(a) the claim or defense is doubtful due to the uncertainty of the facts or the law, or
(b) the forbearing or surrendering party believes the claim or defense may be fairly
deemed valid.
(2) The execution of a written instrument surrendering a claim or a defense by one who is under no duty to execute it is consideration if the execution thereof is bargained for even though he is not asserting the claim or defense and believes that no claim or defense exists.
· See Restatement, 2nd, 76-81
1.Fundamentals of Consideration
· Hamer v. Sidway (P. 27)
· Uncle promised to pay P, his nephew $5000 if he promised to refrain from smoking, drinking, and gambling until P turned 21. P Complied. Uncle offered to hold the money an allow it to acquire interest. P agreed. Uncle died. D, Estate, refused to pay. D breached and P could recover. (There was a bargained for exchange.)
· Any suspension or forbearance of a legal right at the request of another is sufficient consideration to sustain a promise
· Consideration means not so much that one party is benefiting as that the other abandons some legal right in the future as inducement for the promise of the first.
· Since P gave up his legal rights to do certain things on the belief that D would pay, D’s promise will be enforced as a binding contract.
· Although consideration does not have to be adequate, it must be sufficient
A. Promise or Performance
· Promise for promise obligates promisor as soon as the return promise is made
· Promise for promise obligates both parties
· Promise for performance obligates promisor only if the promisee performs.
B.Gratuitous Promises
· A court will not inquire into sufficiency of consideration as long as it is not a pretense.
· Peppercorn Theory – No pretense to a promise will satisfy the consideration element or make an unenforceable promise enforceable
· Gratuitous Promise – such as a promise to make a gift, generally not enforceable if there is no consideration.
· Fiege v. Boehm (P. 32-33)
· P agreed not to bring bastardy proceedings against D in exchange for the promise that D would pay a medical expenses, loss of salary, and child support until the child turned 18; D made payments until he got a blood test revealing that the child was not his; D brought bastardy proceedings and sued for breach: P can recover even though the child was not D’s.
· Forbearance to sue for a lawful claim or demand is sufficient consideration for a promise to pay for the forbearance if the party forbearing had an honest intention to prosecute litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well founded.
· Sufficient consideration because P did not exercise P’s right to prosecute for bastardy. P made the claim in good faith.
· It is possible for P to have claims against other men also as long as made in good faith.
· Forbearance of a criminal suit is not sufficient. Bastardy suit was civil in nature.
2.The Requirement of Exchange: Action in the Past
· Restatement, 2nd, §86. Promise for Benefit Received
(1) A promise made in recognition of a benefit previously received by the promisor
from the promisee is binding to the extent necessary to prevent injustice
(2) A Promise is not binding under subsection (1)
(a) if the promisee conferred the benefit as a gift or for other reasons the promisor
has not been unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit.
· Feinberg v. Pfeiffer Co. (P. 34)
· D promised P that because of her many years of faithful service, upon her retirement (which could begin at any time she wanted), she would be paid $200 a month for the re

promise. A right and a duty on both sides. More common and economically significant. Both parties are bound as soon as the promise is made.
· What constitutes a Promise?
· Restatement, 2d, §77 (Illusory and Alternative Promise)
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance unless
(a) each of the alternative performances would have been consideration if it
alone had been bargained for; or
(b) one of the alternative performances would have been consideration and
there is or appears to the parties to be a substantial possibility that before
the promisor exercises his choice events may eliminate the alternatives
which would not have been consideration.
· Strong v Sheffield (Illusory) (P. 69)
· D’s husband owed P money. D’s husband sent P a note endorsed by D as security for the debt he already owed P. The agreement made between D and P was that if she would become liable for her husband’s debt, P would forbear the collection of the debt until he wanted to collect. D allowed forbearance for two years after the note was given.
· There is no consideration where the promisor is not bound.
· There was no agreement to forbear for a fixed or reasonable time but only for such a time as Mr. Strong should elect. He reserved the right to do whatever he wanted.
· Consideration is to be tested by the agreement and not by what was done under it.
· D’s promise to pay is not enforceable because P’s promise was illusory. The promise is illusory because P could have collected at any time. D’s promise to pay was given in exchange for nothing. It was not a case of request to forbear, followed by forbearance in pursuance of the request, because there was no promise on the part of D at the time.
· Contracts for the Sale of Real Estate
· Mattei v. Hopper (Mutuality) (P. 72)
· P and D reached an agreement for the sale of land belonging to D. The agreement gave P 120 days to “examine the title and consummate the purchase” before paying the full amount. It also provided, “Subject to Coldwell Banker and obtaining leases satisfactory to the purchaser.” P had already paid $1000, in accordance with the agreement, but before the 120 were up, D changed her mind. P sued for damages. D argued that the clause allowing P to exercise judgment made the contract conditional and thus lacking in mutuality. Court disagreed. P can recover.
· Where the request is one of judgment, the promisor’s duty to exercise his judgment in good faith is an adequate consideration to support the contract.
· Unless each party has assumed some legal obligation to the other, the contract is wanting in consideration for lack of mutuality.
· Contracts for the Sale of Goods