Offer → a manifestation of assent so made as to lead a reasonable party to understand that a power to close the deal has been created.
Manifestation of assent → expression of commitment made by one party to another
Contract law generally found in the common law
Rules
Help resolve a dispute
Guidelines = predictability
Control Judges → requires consistent rulings
i. Precedent
ii. Statutes
Private v. Public
State has authority over the public sphere (Criminal, Tort)
Contract governs private sphere (allows ownership rights → transferred, excluded other, improve or use, possession = “expression of individual freedom and autonomy”)
Can judges blur the distinction → YES
Can control Judges with precedent and statutes
Pre-Existing duty rule v. termination of existing contract doctrine
Contract law protects expectations formed by parties in a transaction
Different theories about contract law
Classical → assume process of finding precedent is free from duty to keep public/private separate
Post Classical → says rules do what they say they are intended to prevent
Realist (Ferguson) → lets be upfront about our decisions (don’t delude one another)
Doctrine of Unconscionability (Burch v. Second Judicial District Court of Nevada)
§ Procedural Unconscionability = no meaningful assent (Burches were never allowed to view the terms until after they were registered)
§ Substantive Unconscionability = one-sided, presence of oppressive terms (grants Double Diamond the ability to control arbitration and to pick the arbiter)
§ Adhesion Contract = a standardized contract form offered to customers…on a take it or leave it basis, without affording the consumer a realistic opportunity to bargain
§ When either Procedural or Substantial is glaringly obvious, less proof of the other is needed to prove the doctrine
Lack of Meaningful Choice
1. Timing
§ 4 months after close
§ After the property was enrolled in the progam
2. Did they understand the terms of the contract (language of the contract)
§ 31 page agreement w/ no opportunity to read terms
§ Lack of disclosure (regarding arbitration)
§ Hidden – lodged in fine print
Society CANNOT enforce all promises so we have to distinguish which promises to enforce by developing tools and doctrines
§ Bargained for Theory of Consideration
§ Reliance Theory
§ Restitution – something of benefit has been conferred on another party leaving the other party in limbo
§ Expectancy
Promise – commitment to make a future event occur on your part (Illusory ≠ promise § 77)
If performance is lacking then a remedy is provided…
1. force participation
2. get an alternative to performance as compensation
Principle:
1. Reliance → liability occurs when one party does something in response to the reliance, the promise is not the basic for recovery but the benefit conferred on the other party
Why enforce a promise?
1. Moral Justification (party trusts the other)
2. Legal Justification – reflects an exercise of individual autonomy
Manifestation of Mutual Assent is Essential §19
…act by which assent is manifested must be done with the intent to do those acts
* The only intent that is relevant is to do the act which constitutes assent
Objective Standard = examines what an ordinary person or reasonable person would understand it mean (PUBLIC)
Subjective Standard = takes into account more factors and is based on what the actual individuals involved in the dispute intended (PRIAVTE)
Ray v. Eurice & Bros Inc. – 1952 = contract in dispute over an agreement to build a house for about 16K and whether the plans were the 7 pages of the P or the 3 pages of the D. D helped P apply for loan and signed each page of the 7 page specifications. D eventually told P that constructions could not occur to 7 page terms without a huge increase in costs – P sued
“the only intent of the parties to a contract which is essential is to say the words and do the acts which constitute their manifestation of assent” p. 33
absent fraud, duress, or mutual mistake, one having the capacity to understand a written document who reads and signs it, with ot without having read it, is bound by his signature of law
* The only intend which is relevant is the intent to do the act which constitutes assent (the intent to sign the agreement, not the intent to sign an agreement that says what I want it to say)
HYPO → What if they shook hands instead of signing the document, does that qualify as an expression of assent?
Park 100 Investors v. Kartes – 1995 = a lease between the two parties was worked out that did not include a personal guaranty of the lease (was never mentioned). Plans were made to move into building. Leasing party was stopped while in a hurry and told that they had to sign the lease papers immediately to move in, a document titled “Lease Agreement” was produced and the leasing party called their lawyer to make sure it was okay to sign – a personal guaranty was actually signed…years later the lessor tried to enforce the guaranty.
Manifestation of Mutual assent was to enter into a lease, not to sign a personal guaranty
Reasonable person standard applied here
A person who uses misrepresentation or fraud to induce a party to enter into a contract CANNOT bind that party to an agreement
DOCTIINE OF CONSIDERATION
Must have a way to determine whether the process was serious, whether each party contemplated the impact, and whether the parties deliberately altered their legal relationship.
Obligation to Repair
Duty or Obligation to Pay
A (promise) B (promise)
Hamer v. Sidway – 1891 = uncles agrees to pay his nephew $5,000 if he refrained from drinking, smoking, swearing, and playing cards or billiards until he was 21 years old
A contract was formed because on party agreed to abandon an activity he would otherwise have been free to engage in for some performance (this generally is sufficient consideration)
UNDUCEMENT IS THE KEY – the promise must induce the forebearance (a relinquishing of a legal right)
Abandonment of a legal right is a detriment
Detriment was induced by the promise to pay 5,000
HYPO → If uncle had promised to may after he was 21 years old and the nephew had refrained on his own accord, we have a executory gift = unenforceable
Benefit to Promisor
Detriment to Promisee
Benefit and the Detriment have to be related (one must
induce the other.
Baehr v. Penn-O-Tex Oil Corp – 1960 = P leased gasoline stations to Kemp who was buying Web Oil Co. from Penn-O-Tex Oil Corp. (D). Kemp became unable to make payments and signed over accounts receivable to D. D installed an agent in Kemp’s office to run the business. P called about not getting his payments and was told Kemp’s affairs were mixed up. P called again and D’s agent said that Penn-O-Tex would see to it that P was paid by working with the head office. Rent was still not paid to P and when P got back from Florida, got a lawyer as fast as he could get moving to draft a letter indicating P was re-entering stations.
A promise was given (an assurance that a thing will or will not be done)
Consideration requires that a contractual promise be the product of a bargain=a negotiation resulting the voluntary assumption of a legal obligation by one party upon condition of an act or forebearance by the other
Penn-O-Tex did not seek any forebearance from P or think is was securing a forbearance
P’s delay in bringing suit was not induced by the assurance that he would be paid
No evidence that either party took D’s assurances seriously or acted on them in any way
§ 71, § 77
HYPO – What if P forebear his right to sue Penn-O-Tex in exchange for the assurance?
Dougherty v. Salt – 1919 = An 8 year olf boy received a promissory note for $3,000 from his aunt payable at her death. Boy was visiting aunt, she said he was a good boy. So she made and signed a note saying: “you have always done for me, and I have signed this note for you”
This is an Executory Gift b/c nothing was sought and nothing was given in exchange
Emotional gifts are not consideration nor is love and affection
§ 71, §71 (4) → 3rd party beneficiary is allowed IF consideration exists
Batsakis v. Demotsis – 1949 = D through a letter agreed to borrow $2,000 in US money during a period of unrest in Greece. The letter acknowledged that D had received money and that she promised to repay the amount in US money at an interest rate of 8%. Allegedly the money that was actually sent was only worth $25.
Inadequacy of consideration DOES NOT void a contract
Even though consideration was inadequate, the D got exactly what she bargained for
§ 79 (B)
A peppercorn will do approach, Except…
Oppressive, underhanded bargaining, or justifiable mistake
If consideration given has so small a value compared to the promise that is is obviously nominal it might not satisfy § 71. (Illustration – 5)
Sham Consideration – “totality of the circumstances”; such an approach encroaches on the private sphere and freedom to contract.
Plowman v. Indian Refining Co. – 1937 = The VP of a company called employees who had rendered long service to the company to his office and allegedly made a contract with each one to pay a sum of ½ their current wages for the rest of their lives. Employees remained on payroll but were not to render any additional work or service, the only obligation was to pick up their checks. Payments were made for over a year were they were cut off and terminated.
Condition v. Consideration (don’t confuse with conditional promise § 76
Past Consideration is NOT consideration (can bargain for things you don’t have)
Nothing was sought from the employees so no consideration existed
Illusory Promise = a promise in form but not a promise in substance (§ 77(a)), UCC-306
Mutuality of Obligation – when consideration consists of the exchange of mutual promises, the undertakings on both sides must be real and meaningful § 79
Example of where promissory estoppel doesn’t apply b/c
Promissory Estoppel
Substitute for consideration that can be used to enforce a contract (§90)
Elements (§90)
1. A promise
2. On which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person
3. Which does induce such action or forbearance
4. If injustice can be avoided only by enforcement of the promise.
* Proof that the promise induced action or forebearance is not needed for charitable subscriptions and marriage settlements
§ Limitation is the reasonable expectation can only be based on what one party was seeking w/ the promise
tter to P.
§ Case shows reliance by not taking action in reliance on a promise
§ Ct. found the elements of promissory estoppel because Bank made a promise, Bank should have expected reliance on promise, the P’s actually relied by not getting insurance, and that the reasonableness of the reliance (goes to the injustice part)
§ § 90 comment e
RESTITUTION
Restitution: act of restoring something to its value (normally no promise involved)
Unjust Enrichment: The cause of action that gives rise to the remedy. There is no legal justification for the retention of the benefit without paying for it
Elements:
1. the P has conferred a benefit on D
2. the D has knowledge of the benefit
3. the D has accepted or retained the benefit conferred, and
4. the circumstances are such that it would be inequitable for the defendant to retain the benefit without paying fair value
Must intend to be compensated before you perform
Implied-in-fact Contract:
An actual contract inferred from the parties conduct rather than express words
Where a person performs at another’s request or where services are rendered to a person without his expressed request, but with his knowledge.
Implied-in-law/Quasi Contract:
NOT a real contract
An obligation imposed by the courts (law) b/c of the conduct of the parties or some special relationship between the parties or because one party would otherwise be unjustly enriched
A remedy that allows P to recover a benefit conferred
A contract implied in law is a legal fiction, an obligation created by the law without regard to the parties’ expression of assent by their words or conduct.
Quantum Meruit – reasonable value of services rendered
Quantum Valebat – reasonable value of goods delivered
Quasi-contractual liability founded on unjust enrichment became widespread
Restatement changed name from Quasi-contract to Restitution because not based on contract but unjust enrichment
Restitution in the absence of a promise:
Credit Bureau Enterprises v. Pelo (Iowa) 2000 = D left wife in a marital dispute and called wife and threatened to hurt himself. Police took him to the hospital and an order was issued that D be placed in psychiatric unit for 48 hours. D would not sign form accepting responsibility for the costs of care. D eventually signed form after being woken up at 5:00am and told his personal items couldn’t be guaranteed to return w/o signature. D refused to pay the costs of the services rendered
§ Where a person acts to confer benefits on another in a setting in which the actor is not acting officiously, the benefited party may be required to make restitution to the actor.
§ § 116 Restatement of Restitution – A person who has supplied things or services to another, although acting without the other’s knowledge or consent, is entitled to restitution therefore from the other if
o he acted unofficiously and with the intend to charge therefore, and
o the things or services were necessary to prevent the other from suffering serious bodily harm or pain, and
o the person supplying them had no reason to know that the other would not consent to receiving them, if mentally competent; and
o it was impossible for the other to give consent or, because of extreme youth or mental impairment, the other’s consent would have been immaterial.
§ Court found that the hospitalization was a benefit to Pelo and that he would have to pay for the benefit he received even though he didn’t consent because he couldn’t consent under the circumstances (Unjust Enrichment made consent irrelevant)
§ But for the circumstances he would have consented
Commerce Partnership and Equity Contracting Co., Inc. (FL) 1997 = P testified that Equity
had contracted with the general contractor to perform stucco work for $17,100. Equity’s
president indicated that he expected payment from the general contractor and not Commerce.
Upon completing the work Equity was given a remedial punch list of work. When demanding
some payment from Commerce, Commerce said it couldn’t do it, so Equity didn’t complete the
work list. Equity brought suit against the general contractor who shortly thereafter filed for
bankruptcy.
Established the elements of an action in quasi contract where:
1. the P conferred a benefit on the D
