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Contracts
Temple University School of Law
Mehra, Salil K.

 
Mehra – Fall 2015 – Contracts Outline
Contract
Promise or set of promises for the breach of which, law provides a remedy or performance of which, law in some way recognizes as duty. (Restatement)
I.            THE BASIS FOR ENFORCING PROMISES
Consideration
·         Element of exchange which satisfies the legal requirement. Used to express the enforceability of a contract.
·         Consideration for promise.
A performance (act other than promise/forbearance/creation, modification, or destruction of a legal relation) or return promise must be bargained for (sought by promisor in exchange 4 his promise & given by the promisee in exchange of same promise) to constitute it. (Restatement)
·         Performance or return promise may be given 2 promisor or some other person. It may be given by promisee or some other person. (Restatement)
·         Merely accepting promise is not consideration.
·         Consideration can be part performance and part promise. 

Gratuitous Promise
·         Pretense of bargain, false recitals, are not consideration.
·         No consideration when promisee knows promisor’s promise is pretense. Consideration when he doesn’t (or when he knows part of promise is a gift).
Peppercorn – Consideration of trifling value. Follows form. As long as it isn’t mere pretense, then it’s fine.

Bargain – Consideration is integral to the bargain.  It is not enough that two promises exist; one must be given in consideration of the other and vice versa (or performance).   Follows form
–          It can be over & under inclusive (over inclusive ie peppercorns. Underinclusive ie Kirksey)
–          There must be causal nexus
–          It creates certainty & isn’t difficult to enforce
–          However, it can be too rigid. Form-based
Old but still valid CONSIDERATION RULE (benefit-detriment rule) – for consideration 2 be present, an exchange must have been arrived by way of bargain. There must be a benefit to promisor and detriment to promisee.

Hamer v. Sidway, N.Y., 1891 (MONEY FOR ABSTAINING, p. 27).  Promise for performance.  Uncle promises his nephew $5000 to refrain from smoking, drinking, gambling and swearing until he’s 21.  Defense argued that uncle got nothing and the nephew developed good habits.  Court said this irrelevant so long as there was a bargained for exchange – uncle promises money, nephew performs forbearance.  These are done in consideration of each other.  Uncle didn’t need to get an economic benefit; he got the forbearance he requested. 
NEW CONSIDERATION RULE (Hamer v Sidway) – A waiver of any legal right at the request of another party is sufficient consideration for a promise.
·         Worth of item is unimportant
·         Pure form rules lead to loopholes like peppercorns

Dyer v. National By-Products, Inc.
The employee was injured in a work-related accident and after returning to work was laid off. The employee filed an action against the employer alleging a breach of an oral contract. The employee claimed that his forbearance in litigating a personal injury claim that he in good faith believed he had was made in exchange for a promise from the employer that he would have lifetime employment. The employer filed a motion for summary judgment claiming that there was no genuine factual issue and the trial court granted the motion. On appeal, the court reversed the decision and held that forbearance of a claim that proved to be invalid was sufficient consideration if the forbearing party believed in good faith that the claim was valid. The court held that summary judgment was improper because a question of material fact existed as to whether the employee's forbearance was made in good faith. The court remanded the case for determination of that issue.
RULE (Dyer v. National By-Products, Inc.) – Forbearance of a claim that proves to be invalid is consideration if the forbearing party believed in good faith that the claim was valid.
·         Gives credence to waiver of a legal right suit. Those who don’t know contract law can still prevail

Fiege v. Boehm, Md., 1956 (NO BASTARDY PROCEEDINGS, p. 34).  Promise for promise.  Man agreed to pay medical and other expenses related to the birth of a child plus $10 weekly until the child reached 21 in exchange for the woman’s promise not to proceed with bastardy proceedings.  Shortly after the birth, he found out he was not the father and stopped payments.  Court said this is irrelevant so long as the woman’s promise was made in good faith, with an honest and reasonable (not absurd) belief at the time.  Don’t look at the results, just look at the state at the time the exchange was made.

Feinberg v. Pfeiffer Co., Mo., 1959 (GIFT FOR LOYAL EMPLOYMENT, p. 39).  Gratuitous promise.  The board of direct

omise doesn’t always have to be at the request of another.  Improving property done without request can be consideration if after the fact, one promises to pay for the services. Injury to Webb was also consideration.
RULE: Substantial Benefit – Moral obligation becomes a legal obligation when the promisor received a substantial material benefit and the promise is made in consideration of this.
RULE: When promisee cares for, improves, and preserves property of promisor, though without his request, it is consideration for promisor’s subsequent agreement to pay for the service because of the material benefit (it should be measurable) received.
·         There is an objective value for life as a material benefit (physicians charge for it / life insurance / it is subject to the economy & markets).
Important differences btw webb & wyman
·         In webb, man didn’t die. In wyman, man died.
·         No material benefit in wyman.

Harrington v. Taylor
P saved defendant from serious injury or death by interposing herself btw defendant and his wife in a fight. D promised to reimburse her but only paid small sum and stopped.
RULE: Moral obligation becomes a legal obligation when the promisor received a substantial material benefit and the promise is made in consideration of this, however there are exceptions ie when there are other sources of recovery, when person aided was immoral, when act was voluntary, etc
Reliance
Change of position by promisee that can serve as a basis for enforcement of promise even in the absence of consideration
–          Births the possibility people can make promises with implied quid pro quo that don’t follow bargained for exchange
–          Neither incidental or bargained for
–          Without limits, it would swallow up bargained-for exchange model. The second rst sets limits to it.
–          Reliance tries not to undermine BFM. Just fixes BFM’s problem