Contracts Outline

Contracts

Marsh

Fall 2012

Elements: mutual agreement and intent to promise (Bailey v. West)

Bailey v. West: Issue of whether a quasi-contract (contract implied in law) was made. The court decided that the plaintiff was acting as a volunteer; no “intent to promise” so no implied-in-fact contract. This was the case about the horse that the plaintiff took in and cared for and wanted the “owner” to pay him for the services. Mixed up communications and such.

Wrench, LLC. V. Taco Bell Corporation: Where evidence shows that the parties understood that compensation would be paid for services rendered, a promise to pay fair value may be implied even if no agreement was reached as to price, duration, or other terms of the contract

UCC 2-04(1): A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

Quasi Contract

Elements (from Bailey v. West):

Benefit conferred on defendant by plaintiff

Appreciation of such benefit

Acceptance and retention by defendant of such benefit under circumstances that it would by inequitable to retain the benefit without payment

Bailey v. West: If performance is rendered by 1 person with no request by another, they are acting as a volunteer and it is unlikely that person will be under a legal duty to pay compensation under a quasi-contract.

Taco Bell: argued implied in fact but could have argue quasi

McGowin: A moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor

Consideration—bargained for and given in exchange

Pennsy v. American Ash: If a party benefits from another’s detriment, there is consideration. The bargain theory of consideration does not require that the parties bargain over the contract terms.

Kirksey v. Kirksey: Consideration issue. The loss and inconvenience that plaintiff suffered could be sufficient consideration to support the promise (plaintiff relied on promise to her detriment), but the court decided that the D’s actions were a mere gratuity. Important to remember that sometimes damages are difficult to figure out, such as in this case, which was probably ruled in favor of defendant because there wasn’t really a way to figure out damages.

Hamer v.Sidway: Uncle promises to give nephew 5,000 dollars in exchange for him giving up his legal right to drink, smoke, and gamble. Hard to measure benefit to uncle, but he wants to see his nephew healthy, he also probably wants to protect the family name. Uncle dies, issue is whether his testator became indebted to nephew as a result of the contract. Because nephew gave up legal right, there is sufficient consideration to form a contract.

Langer v. Superior Steel Corp: Plaintiff worked in Steel company, retired, D sent him a letter promising to pay him $100 a month if he did not ever work for anyone else. D stopped payments, issue is whether the letter was a gratuitous promise or an enforceable contract. Because there was benefit conferred on D by not having P work for anyone else, and P gave up his legal right to work elsewhere, there is an enforceable contract. Contract also enforceable on promissory estoppels (section 90 of restatement p.45)

Restatement Section § 71

To constitute consideration, a performance or a return promise must be bargained for.

A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise AND is given by the promisee in exchange for that promise.

The performance may consist of

An act other than a promise, or

a forbearance, or

the creation, modification, or destruction of a legal relation.

The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

Mixed Motives and Nominal Consideration

Thomas v. Thomas: Widow Π was provided a home by her husband, but it wasn’t included in the will – however, his executors agree to it, set rent at one pound/year and keeping the house in good repair – then later turn her out – they said the contract had no consideration. There was consideration because she had the duty of keeping the house in good repair—that was the consideration, not the dollar yearly rent.

Restatement § 71: A mere pretense of bargain does not suffice, as where there is a false recital of consideration or where purported consideration is merely nominal

Restatement 2nd § 81: (1) mixed motives—the fact that what is bargained for does not induce the making of a promise does not prevent it from being consideration for the promise

(2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise

Limits on Consideration: Adequacy of value exchanged

Apfel v. Prudential-Bache Securities: Case where Π sold software idea to D, D used it in its business, but then began refusing to pay for it when other started using it. Court said the idea was sufficient consideration.. IDEA does NOT have to be NOVEL to be consideration – just must have real value in the eyes of the law. . this idea was contracted and sold and D made money from using it – whether or not it was novel. . courts do not inquire into the inadequacy of a long term contract, especially in a corporation contract – just because a contract is unprofitable doesn’t release you from it.

Jones v. Star Credit Corp.: Example of a contract that is unconscionable but not fraudulent. Look at UCC 2-302 (p.68 in text). Company sells lady fridge for three times its maximum retail value, lady has already paid them enough (600 for a $300 fridge). Courts usually do not inquire into the adequacy of consideration, but they will step in during cases like this to protect victims of predatory schemes. Here there is an inequality in bargaining power.

In re Greene: Release of imaginary claims not valuable consideration for a promise. Here plaintiff had an affair with defendant, and he agreed to pay her in return for her releasing him from claims. However, she had no legit claims so there was no consideration. Keep in mind the equities in cases like this.

Fiege v. Boehm: Forgoing a legal right is consideration. As long as at the time the parties made the agreement, in good faith she thought she had right to charge him. He obviously believed he was the father.

Pre-existing duty

Levine v. Blumenthal: Pre-existing contract and new contract: new contract has to have new consideration. Store renters ask for new contract that modifies original. Landlord gives them a break, but then they left without paying last month’s rent. Then they sue them for all the original obligations because there is no new consideration. UCC 2-209: An agreement modifying a contract within this article needs no consideration to be binding. UCC doesn’t follow pre-existing duty rule. b. This court upheld preexisting duty rule because it is property in dispute and not goods.

Alaska Packers Ass’n. v. Domenico: Agreed to do ship duty and any other work required by captain. They were going to be paid 50-60 dollars and two cents for every salmon. After a month and a half, workers refused to continue their jobs unless they were paid 100 dollars instead. If they were not paid this amount, then they would stop work and go back to San Fran. a. Classic hold up situation in which contracted laborers refused to work without a pay raise higher than agreed upon in contract – after completion of fishing season, company would not give them raise. Court said consent to demands under coerced and difficult circumstances is without consideration. RULE: To promise to pay more for something a person is already under contract to do is without consideration. UCC defines good faith: “honesty in fact in the conduct or transaction concerned.”

Angel v. Murray: P sued D, who was contracted to provide the city a service. Due to unforeseen population increase, D had to ask the city to modify the contract to pay him more. Was this contract enforceable even with no new consideration? Court here applies UCC §2-209 – “An agreement modifying a contract for the sale of good