1. OTHER CONTRACT THEORIES
i. PROMISSORY ESTOPPEL
§ Generally: sometimes protects a promise who has relied to his detriment on the promise (even though consideration or other elements are lacking)
§ If consideration is present, generally no need to resort to promissory estoppel
· PE is strongest where there is no consideration and threat to make promise unenforceable
§ General idea that a promisor could be held accountable for a promise when the promisee justifiably relied on it, came to be known as promissory estoppel
§ R2d §90 Promise Reasonably Inducing Action or Forbearance
· A promise which the promisor should reasonably expect to induce action and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
· PROMISSORY ESTOPPEL AND NON-COMMERCIAL PROMISES
§ Ricketts v. Scothorn
· Grandfather gave promissory note to granddaughter.
· She goes back to work w/ his permission
· He dies, executor won’t pay
· Court says:
· Even though it is a mere gratuity, should be enforced because she relied on the money to her detriment
§ Norton v. McOsker
· Promissory estoppel claims:
· Based on alleged promises during and right after affair
· Norton’s PE claim fails as a matter of law BECAUSE >> she had failed to satisfy at least 2 of 3 conditions that must be met to estab. PE.
· Conditions of PE:
· 1) a clear and unambiguous promise
· 2) reasonable and justifiable reliance upon the promise
· 3) detriment to the promisee, caused by this reliance
§ One of the reasons for consideration doctrine – to protect from a fickle donor (wanting to retract a gift)
· If the executor is the one trying to revoke the promise > different case
§ In Re Morton Shoe Company
· 2 rationales cts use to justify enforcement of charitable subscriptions:
· Legal consideration found in charity’s agreement to appropriate funds in accordance w/ terms of subscription
· Enforce pledge because of charity’s reliance on the promise such as its expenditure of money labor and time in furtherance of obtaining subscript.
ii. AGREEMENTS TO BARGAIN IN GOOD FAITH
· The obligation of good faith in performance of a contract is DISTINGUISHED from the obligation (if any) to bargain in good faith.
§ Obligation to continue negotiations? (good faith obligation)
· Some situations – parties did intend to assume the duty to keep bargaining in good faith
§ If not expressly said, implied understanding?
· Jenkins v. County of Schuylkill
§ interpreted to see if there was intent to be bound to keep negotiating from letter
· Intent can be inferred where letter records terms
· HOWEVER, if parties agree to exclusive negotiation for a period of time it imposes NO DUTY to make a good faith effort to reach an agreement.
· In the absence of a clear commitment to bargain in good faith, the usual rule of the free market prevails: each party is free to pursue its own self-interest in trying to make the deal most favorable to itself and the other party has no recourse other than terminating negotiations.
· “It is evident that the facts in this case DON’T give rise to a cause of action”
· THE TORT OF INTERFERENCE W/ CONTRACT RELATIONS:
§ liability for enticing a party to breach a contract or a preliminary agreement.
iii. PROMISSORY ESTOPPEL IN THE COMMERCIAL CONTEXT
· Early cases refused to apply promissory estoppel in commercial contexts
§ Promisees who want legal protection should enter into contracts supported by consideration.
· Under this line of analysis, little room for promissory estoppel
· Not all jdx have adopted r2d§90 in its entirety in all circumstances.
§ Most have possibility of using PE to some degree in com contexts
· PE plays its largest role when a K would otherwise not exist.
· East Providence Credit Union v. Geremia
§ Elements of PE
§ PL made more than a mere gratuitous promise
· Promise by PL was made in exchange for valid consideration
· Mortgage K provided
· PL reply to DF = PL intended to compute interest on any money it expended
· The interest due on any sums paid by PL on behalf of DF for insurance represents valid consideration and converts promise into binding K
· If PL claims it would not have got interest off payments it would be PROMISSORY ESTOPPEL
iv. PROMISSORY ESTOPPEL IN COMMERCIAL NEGOTIATIONS
· Garwood packaging inc v. Allen & company inc.
§ The problem is not that Martin’s promises were indefinite, but that they could not have been reasonably understood by the persons to whom they were addressed to BE promises rather than an expression of optimism.
· GPI and its principals relied, and may have reasonably, but they didn’t rely on Martin’s promises because those were not promises reasonably understood as such.
· The essence of the doctrine of PE is not that the PL have reasonably relied on the DF promise, but that he have reasonably relied on its being a promise in the sense of legal commitment.
· R2d K:
§ §344 Purpose of Remedies
· Judicial remedies…serve to protect one or more of the following interests of a promisee:
· (a) his “expectation interest,” which is his interest in having the benefit of the bargain by being put in as good a position as he would have been had the contract been performed,
· (b) his “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made,
· (c) his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party.
§ §349 Damages Based on Reliance Interest
· As an alternative to the measure of damages stated in §347 [the expectation measure], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance less any loss that the party in breach can prove with reasonable certain
· Hand thoery:
· R2d §87 Option Contract
§ (1) An offer is binding as an option contract if it:
· is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time.
§ (2) An offer which the offeror should reasonable expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice
· R2d §45. Option Contract Created by Part Performance…
§ (1) Where an offer invites an offeree to accept by rendering a performance and does not invite promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance
· FIRM OFFERS
· Firm offers:
§ Created by Statute
§ No Consideration Requirement
§ No Reliance Requirement
· FIRM OFFERS UNDER THE UCC
§ Short-term offers:
· Drafters of UCC provide clear method to make offers irrevocable
· Rules believed to facilitate commerce
· No common law requirements of consideration or reliance
· UCC 2-205 firm offers:
§ An offer by a merchant to buy or sell goods in a signed writing which gives assurance that it will be held open for lack of consideration, during the time stated or for a reasonable time but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror
§ Offer by merchants to buy/sell goods in signed record (can be b/w merchant and NON-merchant)
· That by terms gives assurance it will be held open is NOT revocable
· For lack of consideration, during time stated
· Or if no time states >> a reasonable time
· But in NO event may time exceed 3 mos
· Any such term of assurance in a form supplied by offeree MUST be separately signed by offeror.
· PROBLEM 11.2
§ WEEK 4
· PROVISIONS IN THE UNIDROIT PRINCIPLES AND CISG ON REVOCABILITY OF OFFERS
§ Both UNIDROIT and CISG allow offers to be irrevocable under certain circumstances
· Generally can make offer irrevocable by saying so
· Reliance can make offer irrevocable
· Cannot be revoked if
· It states so
·Whether with stated time frame or not
Cannot be revoked if it was reasonable for offer to be relied