Contract Outline
I. Promissory Liability
a. Bargain Contract—Promise + Consideration
i. Promise: Manifestation of intent to act or refrain from acting to justify PE to understand that commitment has been made
1. This is an objective test—what the PE reasonably believes
ii. Consideration Requirements
1. Consideration is determined by using an objective test
a. The true subjective intent of the Promisor/Promisee need not be looked at to determine if there is consideration
2. Calamari Test
a. Legal detriment (doing something one is not otherwise obligated to do)
i. Describe the bargain (arrow diagram)
ii. Identify the PE (which promise is in question
iii. Is there a legal detriment: Is a party doing something they are not obligated to do; refrain from doing something they have a right to do.
iv. A Pre-existing duty is not a LD (if a party does or promises to do what he is already legally obligated to do, or if he forbears or promises to forbear from doing something which he is not legally entitled to do, he has not incurred a legal detriment for purposes of consideration)
v. Did PE incur a LD?
b. Detriment induces promises (The PE’s LD induces the promise made by the PR)
i. Nominal Consideration: Something given to make a gift look like an exchange
1. This is not a bargained for exchange and there is no consideration
2. Does not refer to the size or the value of the give but refers to the purpose for which it was given (I.E. to disguise a gift).
ii. Peppercorn Theory: If consideration is bargained for, court do not judge adequacy of the consideration
1. The court do not police the adequacy of consideration
2. It does not matter how small the consideration is—it is still consideration
iii. Three prongs of Calamari
1. Did the PE incur a LD
2. Did the PE’s LD induce PR’s promise?
a. Bargained for prong
b. Did PR give promise to get detriment
c. Did PR receive a benefit?
3. Did PR’s promise induce
iii. Unanticipated circumstances (reason for modification)
iv. Modification is fair
c. UCC 2-209—Modification cannot be made after one party has fully performed
i. Modification K does not need consideration, but must be in good faith
ii. 2-103(b)—Good Faith—honesty in fact + observance of reasonable commercial standards of fair dealing
iii. Unenforceable Modification: modification without legitimate commercial reason; modification in bad faith
c. Mutuality of Obligation
i. Unilateral K- Mutuality of obligation is not required in a unilateral contract (one in which A promises to sell and B makes a payment of money)
