Contracts
Prof. Halpern – Fall 2006
Introductory Notes
Contracts is the study of enforcing promises. A contract serves the purpose of negotiating and documenting an agreement between parties, a dispute means there was a failure in the agreement.
2 fundamental assumptions:
1. Should be relief for promise, NOT punishment for promisor.
2. Relief granted should protect the promisee’s expectation.
Damages should be measured by the plaintiff’s loss, not by defendant’s profits.
Compensation, NOT punishment. The relief granted should attempt to put the promisee in the position in which it would have been had the promise been performed.
Historical bases
Covenant – enforcement of contract made under seal (replaced by UCC) – provides evidence and awareness of contract.
Debt – debtor (promisor) has something belonging to the creditor (promisee) that the former ought to surrender – QUID PRO QUO
Assumpsit – draws on theme of misfeasance in which the promisee sought to recover damages for injury to person or property on the basis of a consensual undertaking. Eventually, the idea of nonfeasance evolved where the promisor did NOTHING and the promisee incurred a DETRIMENT in RELIANCE on the promise.
CONSIDERATION – sum of the conditions necessary for enforcement of a contract, where the action of assumpsit lies.
From QUID PRO QUO, comes the idea that there must have been an exchange arrived at by way of bargain – there must be a BENEFIT to the promisor and a DETRIMENT to the promisee.
BASES FOR ENFORCING PROMISES
Consideration, Reliance, Restitution, Implied Consideration, Moral Obligation
PROMISE OR PERFORMANCE BARGAINED FOR IN EXCHANGE Consideration in a Unilateral Contract
Hamer v. Sidway
The assigner is suing the executor.
Uncle promises to pay nephew 5K on his 21st birthday if he stops drinking, smoking, etc. Nephew writes to uncle to collect when he turns 21, uncles writes back saying he’ll establish a trust (now nephew owns the money as beneficiary). Uncle dies. Nephew goes bankrupt and tries to shift his assets by assigning the trust to his wife. Executor doesn’t pay him.
Gratuitous promise or unilate
ucement – don’t confuse consideration with motive. Man may promise to paint a picture for $500, but his motive could be fame. Consideration is given and accepted solely for the purpose of making a promise binding. But the essence of the consideration is that it is given or accepted as the motive or inducement of the promise. Conversely, the promise must be made and accepted as the inducement for furnishing the consideration. Promise and consideration must purport to be the motive each for the other.
Hypo – I’ll give you a casebook if you come up to my office to get it – not enforceable, promisor isn’t getting anything out of it – no bargain rule. Compare to Kirksey and Williston’s tramp.
Gratuitous Promises
Peppercorns – used to deride consideration that is of trifling value. A token payment made in order to make a gratuitous promise enforceable.
