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Contracts
SUNY Buffalo Law School
Halpern, Phillip

I. BASES FOR ENFORCING PROMISES
 
A. HISTORICAL BASES
 
1. What promises should the law enforce?
– Common law looks to covenant, debt and assumpsit
Covenant: used to enforce contracts made under seal.
Debt: used to enforce some types of unsealed promises to pay a definite sum of money
“quid pro quo” – what the promise had given the promissory
Assumpsit: An express or implied promise, not under seal, by which one person undertakes to do some act or pay something to another
most important common law action
misfeasance – the promisor had done the undertaking (assumpsit) in a manner different than how they said they would do it, to the detriment of the promisee
nonfeasance – if promisor had done nothing in pursuance of the undertaking
Consideration: A promise is enforceable only when there is consideration/ where the action of assumpsit would lie.
 
B. CONSIDERATION AS A BASIS FOR ENFORCEMENT
 
1. Promise or Performance Bargained for in Exchange
Consideration: something (i.e. – an act, forbearance, a return promise) bargained for and received by a promissory from a promisee; that which motivates a person to do something, esp. to engage in a legal act.
1.      That thing which makes a promise enforceable
2.      Must be a benefit to the promisor
3.      Must be a detriment to the promisee
4.      Bargain between parties
5.      Mutually inducement
Forbearance = to not do something, a detriment (such as giving up a legal right)
There are two main kinds of promises that constitute consideration:
1.      Contract = a promise that the law will enforce; an enforceable promise
a.       Unilateral contract: one party makes the promise and the other party fulfills their end of the contract by performing. One side makes the offer and the other accepts the offer by virtue of performance.
b.      Bilateral contract: promises on both sides. Each person is the promisor and the promisee at the same time.
1)      (ie- a house builder who builds a house badly, won’t get paid and the person who doesn’t have a house can sue, for liability on the builder’s performance. Or if the owner doesn’t pay, the builder can sue the owner).
2)      Executory promise: A type of bilateral contract in which the promises are made today but the performance is made in the future.
2.      Elements of a contract: (both unilateral and bilateral)
a.       A promise
b.      A bargain for exchange
c.       Support of the promise by consideration
d.      Or, a substitute for consideration by reliance under the doctrine of Promissory Estoppel
Hamer v. Sidway (pp. 27-31)
1.      Unilateral contract because the uncle promised to give $5,000 if his nephew refrained from drinking, using tobacco, swearing and playing cards or billiards for money until he became 21. There was no promise by the nephew. The uncle’s offer invited performance, not a promise.
2.      Consideration of nephew = the forbearance of a legal right
a.       Enough to count for consideration of the contract, thus making it binding.
3.      Consideration of uncle = wanted his nephew to abstain, cared about him.
a.       Look at motivation of promisor.
4.      Holding: Does not matter that the forbearance could be seen as a benefit to the nephew. The important fact was that the nephew refrained from exercising a legal right. Legal detriment is enough to satisfy the doctrine of consideration.
Fiege v. Boehm (pp. 34-38) [Bastardy case] 1.      Bilateral contract.
2.      Thought child was his and agreed to pay expenses. Found out child was not his so stopped payment.
3.      Holding: Still has to pay. 
4.      Rule: Valid contract BECAUSE at the time a promise is made, it was made in
a.       Good faith and there was a
b.      Reasonable belief that the claim was valid, (what a reasonable person would believe given the facts). It did not matter if the claim turned out to be false. The promise is still a basis for consideration.
 
2. Distinguishing Bargains from Non-Bargains
A.    It is important to distinguish bargains from non-bargains because if there is no bargain then there is no consideration – meaning there is no contract.
1.      Bargain: an agreement between 2 or more parties for mutual promises or performances. However, a bargain is not necessarily a contract because the consideration may be insufficient.
B.     Feinberg v. Pfeiffer Co.
1.      Feinberg, an old woman, was promised a pension by Pfeiffer Co.
2.      Holding: There is no bargain BECAUSE past performance, before the promise is made, does not constitute consideration and therefore is not a basis for a binding contract. There is no mutuality/reciprocity of consideration; she is giving nothing. In order for there to be consideration, Feinberg would need to promise to work for some future period of time.
3.      Wins for reliance under the doctrine of Promissory Estoppel (see outline pg. 5)
C.     Mills v. Wyman, 1825
1.      Wyman’s son became sick at sea. Mills cares for him. Wyman writes that he will pay expenses incurred by Mills. He never pays.
2.      Holding: Past performance does not constitute consideration for a promise. Moral obligations are not enforceable. No bargain here (father did not ask Mills to care for his son).
D.    Kirksey v. Kirksey
1.      Woman abandoned her possessions and moved in with her brother-in law because he promised to house her (via letter). After 2 yrs he asked her to leave.
2.      Holding: No bargain and no mutual exchange so no enforceable contract or binding promise. She didn’t promise anything in return and she didn’t give up anything
a.       Not bilateral b/c need promise on each side (an

t, but not ok for landowner to back out.
Rule: Two standards apply when promises are conditioned on satisfaction:
a.       If we can judge satisfaction by an objective standard, then the promise is not illusory
b.      If the claim for dissatisfaction was made in good faith
1)      Parties must KNOW the rules
Wood v. Lucy, Lady Duff-Gordon (Cardozo)
Lucy agreed to give Wood exclusive right to market her endorsements. Lucy then left Wood and began working with Sears, selling them her endorsements. Wood claimed that due to the contract he should have exclusive rights to her endorsements. Lucy argued that she was not bound by the contract because there was no clause that obligated Wood to market her endorsements vigorously. 
Holding: Examined from a business standpoint. There were implied obligations in the contract because both parties would profit from the arrangement. They both expected to make $ from the deal, meaning Wood would have to market vigorously, and both would have to use their best efforts.
An implied promise.
 
C. RELIANCE AS A BASIS FOR ENFORCEMENT (“PROMISSORY ESTOPPEL”)
 
1. Development of Reliance as a Basis for Enforcement
If consideration cannot be shown, can look towards reliance as a basis for enforcement. (Separate from the doctrine of consideration.)
1.      If somebody relies on a promise, this reliance might be enough to create a valid contract as long as the following requirements are met (this is known as the doctrine of promissory estoppel)
Different types of Promissory Estoppel:
Family Promises
Promises to Convey Land. Promissee incurred the detriment of moving, and the promisor unjustly benefits from this
Promises Coupled With Gratuitous Bailments.
Charitable Subscriptions. Law wants to encourage charitable giving, ie- giving money to a school/church is an enforceable gift promise. [Allegheny College v. Nat’l Ch. C. Bank] Requirements to make Promissory Estoppel applicable:
Restatement § 90
A promise
Promisor must have had a reason to expect reliance from the promisee – reasonable expectation (this is an objective test)
Promise must have induced the reliance
Promise of a certain type in binding IF injustice can ONLY be avoided by enforcement of the promise
Remedy