Contracts LLM JENNIFER LEVY-TATUM FALL 2017
The Restatement begins by describing a contract as “a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty,” thus establishing the centrality of promises to the law of contract . Rest. (2d) Contracts § I.
Rest. defines a contract as a legally enforceable promise. Rest. (2d) Contracts §1.
CHAPTER 1. THE CONCEPT OF PROMISE (Chapter 12 of Glannon)
Hawkins v. McGee 10
Facts: “hairy hand case”: P gave a %100 guarantee with the intention that D should accept it. (Contractual promise).
General Rule: b) Damages in a breach of contract case may be measured by the difference between the value of the contract as carried out and the value of the contract as broken, following the rules of expectation damages.
As a general rule, the measure of the vendee's damages is the difference between the value of the goods as they would have been if the warranty as to quality had been true, and the actual value at the time of the sale, including gains prevented and losses sustained, and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor's failure to keep his agreement, and could not by reasonable care on the part of the vendee have been avoided.
CHAPTER 2. CONTRACT FORMATION: CONSIDERATION AND MUTUAL ASSENT 15 (Chapter 2 of Glannon)
INTRODUCTION TO CONSIDERATION 15
Bargained-for Exchange and Gratuitous Promises 16
Consideration: Restatement: consideration for a promise requires both (a) a performance (or a promise of a future performance) and (b) that the performance be “bargained for” by the promisor. Rest. (2d) Contracts §71.
Bargained-for Exchange and Gratuitous Promises: Consideration for a promise requires:
(a) a performance (or a promise of a future performance)
(b) that the performance be “bargained for” by the promisor
A promise based on a moral obligation but made without legal consideration does not constitute an enforceable contract unless it is tied to a preexisting legal obligation.
Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first. What we need to learn from this is: What is a detriment: Limit to a legal right.
Clue to consideration = There must be detriment in both sides (Today, there is always detriment and benefit for both parties)
Hamer v. Sidway 16 THIS CASE IS ABOUT DETRIMENT.
Facts: Unilateral (detriment/benefit), Bilateral (bargain for exchange).
Refraining from Drinking & Gambling: Uncle promise to give 5k to nephew to refrain from vices. Performance can serve as consideration even if it was of questionable value to the promisor, as long as it’s bargained for.
General Rule: A promise to give up something that the promisor has a legal right to do is supported by consideration.
The benefit for the promisor is not the important factor to determinate the consideration element as valid in a unilateral contract. The performing of the promise shall be enough as consideration.
Nephew’s absence to performing his legal rights upon the faith of his uncle’s promise was a valuable consideration.
Mills v. Wyman 19 THIS CASE IS ABOUT PAST CONSIDER.
Facts: Helped his son, D promises to pay P the expenses spent on his son after he got sick & died under the care of P. (Gratuitous Promise = Gifts not complete until delivered) (Moral Obligation is Only between Family Members). Wyman promised to pay Mills for the expenses he incurred while taking care of son Levi. However, Wyman later refused to pay and Mills brought suit to enforce Wyman’s promise. This is not about moral obligation, is about past consideration. Gratuitous promise.
General Rule: A promise based on a moral obligation but made without legal consideration does not constitute an enforceable contract unless it is tied to a preexisting legal obligation. Reaffirmation of preexisting obligation: Expressed promises on preexisting obligations are good consideration, they are not a promise to pay something for nothing (naked promises: gift).
(1) This was a gratuitous promise / Unenforceable. The correct term is past consideration. Moral consideration is not good consideration = this goes to the familiarity. But, the moral consideration can be good consideration in some cases:
(a) Debts barred by the statute of limitations. A new promise is made / reaffirmation of the contract founded upon a prior debt (antecedent) is a valuable consideration = enforceable
(b) Debts incurred by infants.
(c) Debts of bankrupts = bankruptcy release me from my debts / my debts are gone / you are not in the legal obligation to pay your debts / later you can reaffirm your debts.
Langer v. Superior Steel Corp. 21
Facts: $100 per month in exchange for Langer agreeing not to seek employment with any of Superior’s competitors Refraining from Seeking Employment in Exchange of not working for a competitive co. Retirement Compensation. Text pg. 21.
General Rule: Sufficient consideration for an enforceable contract exists when one party agrees to do something or refrains from doing anything that he has a right to do, regardless of whether doing so causes any actual detriment to him or confers any actual benefit upon the other party.
The act of refraining from doing something which the party has a legal right to do is itself a detriment to him, and is thus sufficient consideration for an enforceable contract.
“A test of good consideration is whether the promisee, at the instance of the promisor, has done, forborne, or undertaken to do anything real, or whether he has suffered any detriment, or whether, in return for the promise, he has done something that he was not bound to do, or has promised to do some act, or has abstained from doing something”.
In re Greene 23 ABOUT EXCECUTORY PROMISE FOR $1
Facts: The married man written agreement to pay his lover’s expenses.
Whether the mere presence of a seal on a written instrument makes good consideration?
General Rule: The release of a valid claim may be a good consideration. It is said that the release of claims furnishes the necessary consideration. So, it would if the claimant had had any claims to release. In re Green A man may promise to make a gift to another, and may put the promise in the most solemn and formal document possible; but, barring exceptional cases, such,
orbearance: There is no doubt that an agreement by the creditor to forbear the collection of a debt presently due is a good consideration for an absolute or conditional promise of a third person to pay the debt, or for any obligation he may assume in respect thereto
Forbearance means you owe me and it’s due now, but I won’t collect it within one year or some period of time. Illusory promise does not make good consideration. This was an illusory promise because the promise of the uncle was to refrain from collecting the debt, but that was an illusion because he could collect the payment at any time.
Wood v. Lucy, Lady Duff-Gordon 35 IMPLIED CONSIDERATION
Facts: Marketer & Designer, P promise to pay %50 of profits and render accounts monthly was a promise to use reasonable efforts to bring profits. (Implied consideration). Because she promised him, he would use reasonable effort to make markets for her. (Wood’s efforts to sell merchandise were implied: it is implied that the agent will make diligent efforts to comply the contract).
1. A promise, exchanged as consideration, may be implied and enforceable, even though it is not provided in the explicit terms of the contract.
2. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. Once successfully implied, that promise may constitute sufficient consideration to create a valid and enforceable contract, (exclusive right to place endorsement on others’ clothing designs, later entered into contract with another company). In every exclusive dealing contract, the beneficiary will do any reasonable effort to sell the product.
Mattei v. Hopper 40 SALE AND PURCHASE OF REAL ESTATE
Facts: a real estate developer planning to build a shopping center. Needs to meet contingencies.
General Rule: Mutuality of Obligations (essential to find consideration): When the parties attempt, as here, to make a contract where promises are exchanged as the consideration, the promises must be mutual in obligation. In other words, for the contract to bind either party, both must have assumed some legal obligations. Without this mutuality of obligation, the agreement lacks consideration and no enforceable contract has been created … Or, if one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration… Whether these problems are couched in terms of mutuality of obligation or the illusory nature of a promise, the underlying issue is the same consideration. (RULE OF CONSIDERATION).