BARGAIN THEORY & CONSIDERATION
(Subjective theory, rather than objective theory like Lucy v. Zehmer)
· What kinds of promises should legal system enforce?
o Formal contract (ie: contract under seal)
o Bargain Theory contracts
· Consideration is subjective valuation (The deal doesn’t have to be balanced as seen valued by the “reasonable person”)
· Consideration = A makes a promise to B in return for some performance or return promise. *B’s return promise or performance can go to a third party (B can promise something/do something for C).
· Restatement 2d §71 3(a-c) Consideration
o Must bargain for a performance or return promise
o Bargained for = something sought by the promisor from the promisee, in exchange for the promisor’s initial offer/promise.
o Performance can be an act, forbearance (abstaining from using a right), or the creation, modification or destruction of legal relation.
o The promisee may perform or promise to a 3rd party and consideration is still upheld.
· What is difference between bargain and benefit/detriment?
o Bargain doesn’t require any valuation of whether the deal is good or bad
HAMER V. SIDWAY
· The deal: Will Story promised Will Story 2nd $5,000 for him to refrain, until 21, from drinking, using tobacco, swearing or gambling on pool/cards.
· Issue: Was there consideration even though Will Story did not himself benefit from the deal?
· Holding: Yes
· Analysis: Will Story 2nd satisfied forbearance b/c he had legal right to drink, use tobacco & gamble. “It is enough that something is promised, forborne, or suffered by the party whom the promise is made.”
o The deal doesn’t have to be balanced, the “obligation to keep a promise is grounded not in arguments of utility but in respect of individual autonomy” subjective value (you decide what something is worth)
· D’s argument: Will Story didn’t get any benefit & the abstinence of Will Story 2nd was for his own benefit
· Unilateral contract = promise given in exchange for future act (Accepting the offer doesn’t fulfill the contract)
· Bilateral contract = promise given in exchange for another promise
· Why not just have one way transfer, why require consideration?
o Discourage theft/larceny
Lakeland V. Columber
· At will employment case
· Facts: Columber is ex-employee who signed a non-competition agreement while already being employed by Lakeland for some period.
· Proced: Lakeland is suing Columber for breach of non-comp. contract, Columber won summary judgment
· Issue: Was there consideration in the non-competition agreement? What was the return promise to Columber?
· Holding: Yes
o Non-competition was a renegotiation for Columber’s employment
o Lakeland provided continued employment in return for Columber signing the agreement or Lakeland forbore their right to fire Columber in return for his signing the agreement
o The employee-employer relationship just continued, Columber didn’t get any new consideration via the non-competition agreement
Petro v. Kendrick p.48 Consideration via forbearance
· Petro met consideration via forbearance by ceasing to make a certain type of oil if it was no longer being sold to Kendrick
CONSIDERATION & RELIANCE
Bd. Control Michigan Uinv. v. Burgess 1973
· Some jurisdictions require that the dollar for consideration is paid, others say acknowledgment of receipt is enough
· Nominal consideration – when money is exchanged for money it can’t be very unequal in order to satisfy consideration. 2d Restatement 71
o How far can you take this? Do things really have to be of equal value?
o Bargain theory subjective value vs. Nominal consideration objective value
o Use the nominal consideration idea when it seems like a unilateral transfer & there wasn’t really a bargain in the contract. Use it to stop future gifts and larceny/theft.
p.58 UCC “Firm offer” – polices offer by merchant to buy or sell goods.
Fisher v. Jackson SC Conn 1955
· Another at will employment case
· In order to have forbearance be consideration, that forbearance must be bargained for by the promisor in exchange for the promise/offer.
o In this case the Newspaper Co. wasn’t trading the employment in exchange for Fisher/the baker quitting his job at the bakery.
Ricketts v. Scothorn 1898 SC Neb p.61
· Grandpa promises granddaughter $2k so she wouldn’t have to work, she quits
· Issue: Contract void for lack of consideration?
· Holding: NO
o It is a reasonable consequence of the grandfather’s promise that the granddaughter would quit & doing so was a detriment to her
o Promissory estoppel – intentional influence to put in a detrimental position based on a promise
§ Court calls it equitable estoppel which is actually a misrepresentation of a fact
§ Restatement § 90
· The finding of reliance or estoppel is not necessarily a finding that there was a contract
o Get the damages for the injury you suffered but that doesn’t mean there is really a contract
· “The promissory estoppel principle has in effect, swallowed up the bargain principle as part of the larger process in which “contract” is being reabsorbed into the mainstream of tort.” Grant Gillmore p.65.
Cohen v. Cowles Media 1992 SC Minn p.66
· Does promissory estoppel work for enforcing a promise of confidentiality?
o Promissory estoppel is binding if injustice can be avoided only by enforcing the promise
o The promise must be clear and definite
o Promisor must have intended to induce reliance & that reliance must be detrimental to promise
· Does freedom of press stop use of estoppel? No
Midwest Energy v. Orion Food p.71
· Rest stop & fast food franchise case
o Midwest interested in Orion franchise
o Orion sent info about franchising but warned that it’s not a contract
l didn’t have good enough credit to qualify, signs contract for 13% APR
o Russell defaults and gets car repossessed
· Issue: Was there an offer by Ford to sell the car at the advertised price?
· Holding: NO
o Restatement 2d §26 – generally ads are not an offer
§ Performance must be promised in positive terms in return for something requested
§ Whether a reasonable person would believe there was an offer made
o Restatement 2d § 24 offer made when the offeree understands the bargain to conclude if he assents/agrees
o Price quotations are not offers Restatement 2d §26
2/19 class CONTINUTING OFFER & ACCEPTANCE
DAVIS v. SATROM P.96 counter-offers
o Davis wants to buy trailer park from Satrom
o P sends “letter of intent” to purchase
o D modifies the letter and returns
o P submits commercial purchase agreement
o D again responds making acceptance conditional, including approval by his attorney
o Was there acceptance by Davis?
o Counter offers are a revocation of an offer and voids the contract
o Modifications create a counter offer, it is not an acceptance
o Calling the offers “letter of intent” or “commercial purchase agreements” doesn’t require the court to find them binding
MERCED CTY SHERIFF’S v. CTY OF MERCED 1984 CA reasonable understanding of the deal
o Sheriff’s dept. and fire dept. looking to have their contracts for salary increase upheld
o Both based on a survey of salaries in surrounding area
o Sheriff’s say their contract is for an addition to their current salary based on the survey
o County says the contract is to give them a new salary completely based on the survey
o Do both parties subjectively need to understand the terms to mean the same thing?
· Holding: NO
o The Sheriff’s dept. had no reason to believe that the County would attach a different meaning to the terms & if the county had been reasonable they would have understood it the same way as the Sheriff’s dept.
§ Restatement 2d §2 (2)(b)
§ The county’s subjective misunderstanding of the terms does not void the contract
o The terms of the fire dept.’s contract is so ambiguous that no mutual assent could objectively be made by reasonable parties.
o Restatement 2d § 20 p.103
CHICKEN CASE P.111