I. Contract and Promise Defined
§ 1 Contract Defined
“A contract is a promise or a set of promises for the breach of which the law give a remedy, or the performance of which the law in some way recognizes as a duty.”
§ 2 Promise, Promisor, Promisee, Beneficiary
1. A promise is 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
2. The person manifesting the intention is the promisor
3. The person to whom the manifestation is addressed is the promisee
4. Where performance will benefit a person other than the promisee, that person is a beneficiary.
Book claims the distinction and use of these two terms is confusing and not very credible.
Unilateral Contract – contract where one party is not obligated to act. Ex – reward for missing dog. One option of a unilateral contract is that more than one reward for an action can be given for one promise
Bilateral Contract – contract in which both parties have obligations to perform
Legally Enforceable Promises
Intentions of the parties involved are looked at by the courts. If it is reasonable that the parties intending to have a “meeting of the minds” and to be bound by contract then the courts will view that the promises made are most likely legally enforceable promises.
Objective manifestations cannot be overruled by secret intentions. One who verbally makes a promise to another in a serious “meeting of the minds” cannot later claim the promise wasn’t real because he didn’t mean it. If this were allowed then no one would believe in contract law.
Embry v. McKittrick
· D employer was held to have made a verbal promise to his employee when his employee demanded to speak about renewing a contract and the D said “go organize your men so they can get on the road.” D claimed he didn’t mean to offer a new contract, but court said a reasonable person would understand it that way, and therefore his hidden intention was not valid and he made a valid promise.
Promises That Lack Commitment
1. Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
2. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
3. The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
Wood v. Lucy, Lady Duff-Gordon
· Cardozo ruled that although P Wood didn’t promise to do actual work for Lucy, it was implied b/w both parties that he would do work, and give 50% of earning to D. Lucy wouldn’t have signed the contract if she didn’t believe she wasn’t receiving consideration.
· Basically, terms don’t need to be specific if they can be implied and it’s obvious both parties are aware and have accepted the implied terms/promises.
· a promise to represent the interests of a party constituted sufficient consideration to require enforcement of a contract based on that promise.
Court must find that the parties intend to be bound by the contract in order to deem a contract valid. This is important because at times the courts can deem that parties are not at the point of agreement, that maybe they are still in negotiation and therefore don’t have a valid contract.
Keller v. Holderman
· A promise must have intent to be valid, a joke promise will not be validated. The only way a joke promise will be upheld is if the promisor gives the promise in a way that the promisee truly believes the joke promise to be real (has a serious tone and face, secret intentions won’t stand)
· D jokingly offered $300 check for P’s $15 dollar watch. Court ruled it was a joke and therefore there wasn’t a real promise so the check wasn’t valid and D wasn’t liable.
Brown v. Finney
· Court found in favor of D b/c parties weren’t in a formal business meeting & D didn’t intend to be bound & not all terms were agreed upon. P&D met randomly at a restaurant and the next day agreed to meet to attempt to finalize a deal in D office & agreement was never made.
Interpretation of Vague and Indefinite Promises
When language of contracts is ambiguous, Judges will use extrinsic evidence (outside the writing). Extrinsic evidence helps to determine ambiguous terms and promises.
If there are two possible interpretations of the contract, the court will follow the interpretation that is most efficient to both parties rather than beneficial to one and harmful to another, because a mutually beneficial contract would be agreed by both parties while the other would not.
Contracts that cover large periods of time will require a court to review the contract to determine the interpretations of the parties to settle a dispute (Berg)
Relationships That Limit and Give Meaning to Promises
Woods v. Fifth-Third Union Trust Co.
· P lost his case against his mother’s will executor. He did work for his mother and she said she would “pay” him. Court felt his help wasn’t contracted/bargained for b/c of the relationship w/ his mother (close famil
requirements of the buyer means that such actual output or requirements should be done in good faith
· 2 states: exclusive dealings requires an obligation by the seller to use best efforts to supply the goods and for the buyer to use best efforts to promote their sale
Feld v. Henry
· D agreed to sell P “all” breadcrumbs they produced. No quantity stated so this was an output contract covered by §2-306. Parties had a one year contract that was renewable, and there needed to be 6 months notice to dissolve the contract.
· Parties couldn’t agree on new price, D wanted more $, so D quit making crumbs.
· D argued no consideration since they could have quit producing crumbs since contract didn’t require to produce them. §2-306 required sellers’ best efforts to supply goods.
· Only way D could quit producing crumbs was for a good faith reason, such as continuing to produce crumbs would put the D out of business. Jury to decide if that was true.
TAI v. US
· Buyer can reduce their requirements in a requirement contract as long as they do so in good faith. (US bought new vehicles and needed less service which was done in good faith)
· Court said §2-306 doesn’t apply to the government. P was trying to use §2-306.
Past Consideration and Moral Obligation
· Promises to pay for services in the past that were not bargained for lack consideration, and if the promisor decides to not keep to his promise the promisee can’t enforce the promise since it is lacking consideration. Such promises are not binding to the promisor.
Mills v. Wyman
· D promised to pay P for taking care of his 25 yr. old son before he died. D’s son didn’t live w/ him. D then decided not to pay P, and P sued D for breaching his promise.
· Court agreed there was no consideration, P’s services weren’t bargained for. P cared for D’s son out of good nature and did so expected no monetary reward. (Promise not binding)
Exceptionsà: debts barred by the statute of limitations, debts incurred by infants, and debts of bankruptcy. Any promise after these situations are barred is a valid promise that will