Contracts Outline Marsh Fall 2010
Blue: Cases
Red: Rules of Law/Definitions
Yellow Highlighting: Marsh’s words
Green: Other important cases/information
Purple: Dissent
Cyan Highlighting: Hypotheticals
I. Contracts Generally
1) “A contract is 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.” –Restatement Second
2) “Contract means the total legal obligation which results from the parties’ agreement as affected by this Act and any other applicable rules of law.” –UCC
3) A contract is a promise for which the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.
4) Five elements of a contract:
a. Offer
b. Acceptance
c. Consideration
i. The hardest to understand
d. Capacity
e. Legality
5) Result of a contract is the creation of a legal relationship involving the rights and duties of persons.
6) All parties must act in good faith.
a. One immutable rule of contracts.
7) Implied-in-fact Contract (IIF K)
a. Look at the facts and it looks like they were intended to be bound.
8) Implied-in-law Contract (Quasi-K)
a. “Quasi-Contract”
b. Theory imposed by law that because someone has conferred a benefit upon you, you must pay for it.
II. What is a promise?
a.
Bailey v. West: D, after newly purchasing a race horse (that turned out to be lame), sent his trainer to return it. Seller refused delivery and driver called D. Later that day, the horse was brought to P’s farm. P sent bills to D for horse feed and board. D stated that he received bills two or three months after the horse was placed and that D immediately returned the bills to P, stating he was not the owner of the horse nor was the horse sent to P's farm as a result of D's request. P later sold the horse five years later.
RULES:
1) There must be an intent to contract. (In good faith!)
2) A party must be under legal obligation paramount to his will to perform some duty.
a) He’s not under legal obligation unless there is a demand in equity and good conscience that he should perform the duty.
3) In quasi-contracts, the obligation arises from the law of natural immutable justice and equity. If a case shows that it is the duty of the D to pay, the law imputes to him a promise to fulfill that obligation. The duty is frequently based on the doctrine of unjust enrichment.
4) “A person who officiously confers a benefit upon another is not entitled to restitution therefor.”
A promise is “a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.”
b. HYPO: What if Bailey found horse collapsed alongside the highway, took him in and cared for him, and then sought out West. Would West be responsible for the care given to the horse?
i.
Bolin Farms v. American Cotton Shippers: P and D enter into a contract to sell and deliver all the cotton raised and harvested in a certain acreage. D would pay on delivery. Prices soar and P brings suit for the validity and enforcement of the contract.
RULES: Once you enter a valid and enforceable contract, you are bound by that contract. (There are exceptions. [Jones v. Star Credit])
“Making a bad deal does not allow you to get out of the deal.”
It depends on the D. If D declines the benefit, then P does not enrich. If D refuses to receive the benefit, then he is not required to make restitution unless it is P’s duty to perform that duty. If that’s the case, then P will gain restitution.
1) Theories of Promissory Liability
a. Formalism v. Realism
i. Both theories start with the requirement of consent to an agreed exchange but diverge on the importance of consent.
ii. Formalism
1. Formalism held sway and is now making a comeback
2. Formalism involves a “style of legal thought and reasoning that emphasizes definitions, categories, and syllogistic logic.”
3. Essentially, formalism favors rules over standards, certainty over flexibility, questions of law over questions of fact, and individualism over community.
4. APPLYING FORMALISM TO BOLIN FARMS–>CONTRACT IS VALID.
iii. Realism
1. Realism has been the underpinning of modern contract law.
2. Realism is the principles of contract law found in Article 2 of the UCC.
3. Realism favors flexible standards to be applied in context and gave the courts discretion in cases where the rigid application of rules appeared to cause injustice.
4. APPLYING REALISM TO BOLIN FARMS–> COURT MIGHT ANALYZE THE IMPACT OF THE CHANGED CIRCUMSTANCES AND SEE HOW THAT AFFECTED THE CONTRACT.
b. What Promises Ought to Be Legally Binding
i. Contract = Promise (If there is a contract, there was a promise.)
ii. Promise ≠ Contract (If there is a promise, a contract is not necessarily present.)
iii. The test for determining a promise is the doctrine of consideration.
1. Consideration requires that a contractual promise be the product of a bargain.
a. Bargain means a negotiation resulting in the voluntary assumption of an obligation by one party upon condition of an act or forbearance by the other.
III. The Bases of Contract Liability
a. Four types of enforceable contracts:
i. Promise + Consideration
ii. Promise + Recognition of an antecedent benefit
iii. Promise + Unbargained-for reliance (Promissory estoppel)
1. A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
iv. Promise + Form
1) The Consideration Requirement
a. A Historical and Definitional Note
i. Consideration evolved from assumpsit.
1.Action for the recovery of damages caused by the breach/non-performance of a simple contract.
ii. Consideration became a term of art encompassing:
1.Benefit to the promisor
2.The equivalent of the former quid pro quo
3.Detriment to the promisee
4.The equivalent of the former requirement of injury in actions sounding in assumpsit.
iii. Consideration as either a benefit to the promisor or a detriment to the promisee has persisted to the present day and has become an integral part.
iv. “A valuable consideration may consist of some right, interest,
has to be legally sufficient. The “consideration” cannot be a pretense for the contract. (Can’t be a legal dodge)
c.
Browning v. Johnson: Doctors contract for sale of practice and equipment. P reneges and wants to pay $40,000 to D for relinquishment of the original contract. P sues.
RULES: A consideration sufficient to support a promise need not always have an actual value.
Adequacy of consideration is to be distinguished from the legal sufficiency of any consideration. The relative values of a promise and the consideration for it, do not affect the sufficiency of consideration.
Limits of the Consideration Doctrine
Apfel v. Prudential-Bache Securities: P contracts with D to sell a new computer system for six years. After a couple years, D refuses to pay arguing that what P sold was not novel and not theirs to sell.
RULES: A showing of novelty is not required for validation of a contract. It is enough that the item had real “value in the eye of the law”.
Fiege v. Boehm: P and D think they have a child out of wedlock. Enter into agreement that he has to pay money to her and she won’t proceed with bastardy charges. He later finds out the child isn’t his.
RULES: Forbearance to sue for a lawful claim or demand is sufficient consideration for a promise to pay for the forbearance if the party forbearing had an honest intention to pursue litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well founded.
In re Greene: Girl on the side wants to recover off the guy’s bankruptcy claim. She has a written agreement for stuff when they break up. The consideration is “$1 plus other good and valuable consideration”. She already has millions in 2010 money.
RULES: It is not sufficient consideration when you do not have a legal claim to it in the first place.
That consideration is enforceable, she lost because it wasn’t made in good faith and she hasn’t given up anything. “Money for sex is illegal.”
Jones v. Star Credit: Welfare recipient purchases an in-home freezer for $900 from a door-to-door salesman. With everything, the unit cost $1,234.80. Freezer’s maximum retail value is $300.
RULES: Courts can refuse a contract if it is “unconscionable at the time it was made”. (very very rare)
No fraud, just a bad deal. Compared with Bolin—because Jones is poor?
c. Pre-Existing Duty Rule
i. If a party does or promises to do what she is already legally obligated to do, or if she forbears or promises to forbear from doing something which she is not legally entitled to do, she has not incurred the kind of “detriment” necessary for her performance or forbearance to constitute consideration.
