v Contract I outline
è Definition of a contract: An agreement between two or more parties creating obligations that enforceable or otherwise recognizable at law. When entered into a contract it is recognized by law that it is a duty and if the duty is breached the law gives a remedy. “ A legally enforceable promise”.
è Elements of a contract: Offer + Acceptance + Consideration.
è Types of contract:
· Quasi contracts: contracts implied by law to avoid unjust enrichment.
è Contracts formed by mutual assent:
· Expressed contract: an agreement expressed orally or in writing.
· Implied in fact contract:
§ Assent is inferred based on the situation (conduct, language, context, etc.)
è Contracts formed by mutual assent can be either:
· Bilateral contract: Promise for promise. OR
· Unilateral contract: Promise for performance.
Chapter 1: Introduction to Contract Law:
· Two key assumptions in contract Law:
1. Promises are a voluntary choice: The idea is that people can and should make their own choices. Freedom of contract vs. Freedom from contract (we don’t want people to enter a contract involuntarily).
2. Market Exchange: Contract law can be seen as setting out the rules of game for the market economy.
è Three principles of a contract: Bargain, reliance and restitution.
§ The bargain principle includes the central belief that an agreement to exchange one thing for another gives rise to mutual obligations. A deal is a deal.
§ Unlike a gift, it is more of a selfish action, because there is an expectation that there will be something in return. It includes the central belief that an agreement to exchange one thing for another gives rise to mutual obligations
· Rationale for why deals are obligatory:
I. Both sides are committed. When you get something you should have to give something in return
II. The other person will count on the deal and spend money or make commitments because he or she believes the deal will be fulfilled
III. Deal making is the way people make a living – and so the promises made in this context are particularly serious and therefore obligatory
IV. Commercial exchange is crucial to our economy, and if people do not live up to their deals, business people will be unable to plan for the future, people won’t be willing to make deals, businesses will shut down, people will be unemployed, etc…
Deals and the fulfillment of deals are crucial to a free market system and a free market is essential to individual freedom.
è Kirksey v. Kirksey: (Widow’s relocation)
§ Facts: The widow who was offered by her brother in law to move to his land because he had more than enough.
§ Rule: To qualify as consideration there must be a bargain for exchange, otherwise it is a gift promise, and not legally enforceable.
§ General Rule: a contract will not be enforceable unless it is supported by consideration.
· Mutuality of obligation = valid consideration.
o What is a gift? The act of given something over motivated by generosity and with no expectation of return.
o Consideration-Something of value received by a promisor from a promisee
Bargain & injury:
ë If one party breaches the contract they should put the other contract member in as good position as they normally would have been in.
è Redgrave v. BSO: (Cancelled performance)
§ Facts: Redgrave claims that her performance was cancelled due to her political views.
§ Rule: Damages are awarded to an aggrieved party when there is a breach of contract. For instance, compensatory damages put the plaintiff in the same position they would have been had the contract been performed.
2. RELIANCE: Trust, responsibility, and injury
· Reliance: Confidence or belief, which causes a person to act to his detriment on the promises, acts, or representations of another.
· Values trust and seeks to protect those who rely on others, it focuses that one who causes harm should be accountable for it.
· Flows from an indication of trust.
· In order to determine if there is reliance look at the nature of the relationship between the parties.
· Central principle – People do rely upon each other in many situations and that such reliance often is morally and politically valuable.
The doctrine of promissory estoppel is set forth in 1 restatement contracts:
The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment.
Objectively viewed, the jury must find that these were not merely words of assurance or statements of belief, but of a promise of future action.
Elements of Promissory estoppel:
Promisor reasonably expects the promise will induce action.
There is reliance.
Injustice can be avoided only by enforcing the promise.
è Ricketts v. Scothorn: (Grandpa’s gift)
§ Facts: Grandfather did not want his granddaughter to work anymore, and grandfather gave a note to his granddaughter promising her that he would take care of her, therefore she quit her job.
§ Rule: If the parties have not established a contract (lack of consideration), but there is reliance on the promise made, the courts will generally implement the doctrine of promissory estoppel.
§ Leading case for the doctrine of promissory estoppels. This case shows us were the concept came from.
§ This case is not a contract because the grandfather is not asking for anything in return. The grandfather is not getting anything out of the contract. (Not anything tangible at least, but its hard to argue that love is a consideration- the grandfather is doing it because he loves her, not as part of a contract).
§ The court is saying that he gave the note as a gratuity to put her in a better position. The court is stuck because there is a tradition that ordinarily such promises are not enforceable (the promise was a gift), however the court states that there was a promise, which resulted in an injury because the person relied on it. The court uses charitable cases in reaching its decision, because they are cases in which the church or like institution have made an assumption and plans with the promised money. In cases like this it can be consideration.
è Standish v. Curry: (Dairy farmer loan)
· Facts: For over 10 years, a family of dairy farmers received loans from a bank for spring planting. Farmers did not participate in a government buy out program because they relied on the bank’s promise to support them for the upcoming loan.
· Rule: If a promise is made but the parties did not form a contract, the court will
The objective theory of interpretation:
o Reasonable person standard. Words and conduct should be interpreted as a reasonable person. General rule is that the presence of intent to contract takes the form of outward manifestation and behavior.
o Assumes that a standard of shared meaning already exists or that it ought to exist.
o If its so ambiguous than the judge will enter no Kontract
o Goods- includes movable things other than money and other intangible items
Three variations of the Objective Test:
i. The “reasonable man” is a “universal observer” who is positioned outside of the history and circumstances of the parties. Sees and hears the words and conduct apart from the context they were uttered and performed.
1. Not generally followed today.
ii. The reasonable person interprets the meaning of words and conduct according to the understanding of a universal observer who is placed in the position of the recipient of the communication
“Positioned Reasonableness” – This is most common
Intent is determined by words and actions not secret intentions:
è Embry v. McKittrick: (Traveling salesman)
§ Facts: P contends that eight days after his contract had expired he went to see D, the president of the company who told him that his contract had expired and that he only had a couple of days to look for another job if the company would not renew his contract. P told D that he needed an answer or he was going to quit. D told P to go and send his men out (sales). The employee took this to mean that he was re-employed based on the terms of the previous contract. P was fired and he sued for breach of contract.
§ Rule: The court said, that interpretation of the language used by the D would have been understood by a reasonable person as a contract for re-employment, and P so understood it, therefore it constituted a valid contract of employment. Inner intention of a party cannot create or abrogate contract formation if words used were sufficient to constitute a contract.
A company may not be held liable for unilateral statements that it makes to workers:
è United Steel workers v. U.S. Steel: (Promise not to close steel plant)
§ Facts: The employees thought that management told them that as long as they were profitable, the plant would not be closed.
§ Rule: A reasonable person would not conclude that a hotline message would rise to the level of contract and become legally enforceable. Unilateral comments from a company may not become a binding contract.
Informal contracts may be implied through words, conduct, and circumstances.
è Brooks v. Steffes: (Adulterous Caretaker)
Facts: P and D Soon after they met, Mrs. Brooks moved in together. They had an adulterous affair. P cleaned, cooked, and took care of the deceased. She