Contracts I Outline
Fall 2007
Joyner
Contract = Promise + Consideration
I. Introduction: The Importance of Promise
Course Overview
We inherited the common law from England as part of our colonial birthright. It is quite different from the civil law system. Common law uses the principle of stare decisis (case law) and statutes. There’s a difference between law and equitable remedy. Equitable remedy can become legal remedy, though. Quasi-contracts are not theories of law; they are theories of equity. Specific performance is also an equitable remedy. The Court almost never makes them adhere to the terms of the original contract if they don’t want to. Usually the remedy is in monetary form. If a monetary value cannot be placed on the agreement, specific performance is sometimes required. The passage of the Uniform Commercial Code – the UCC covers common law. With the exception of the UCC statutes, most contract law is state common law; thus, the importance of studying cases. Restatements of Law are efforts of writing down the law already made. Summaries of existing law – not making law – simply writing it down. The 1st Restatement was written by Williston in 1932, and also by Corbin.
What is a contract? It is an agreement between parties (the UCC). Early on, there was a focus on them as promises, legally enforceable promises. Within every contract, there is an undertaking on the part of the promisor to either do something or to refrain from doing something. The objective theory of contracts: look to the person to whom a promise was directed to determine whether or not it’s legally enforceable. We don’t go to the intent of the promisor. The doctrine of consideration is unique to the common law. Consideration is an evidentiary element of mutual assent. You find promises being made legally enforceable because of reliance. Why does the law care about enforcing promises? economic stability, the interaction of morality and law, and protection of people’s reasonable expectation of others. If the law doesn’t protect that, then we have a self- help system where the powerful prevail and the weak perish.
A. Theories of Promissory Liability
Bailey v. West: Supreme Court of RI. There was confusion in the mind of Bailey with who, if anyone, he made a contract with. He kept the horse for four years, at which time he sold it. The plaintiff is entitled to relief for those first 5 months because there is a contract implied in fact. They established that it was a contract implied in fact because there was no conversation about a meeting of the minds. Through people’s actions, they may communicate their mutual assent. Bailey runs a horse farm, and the defendant’s trainer bringing the horse there looks a lot like a contract on the part of the trainer to engage Bailey’s services. There are 2 issues that the court considered: was the trial court correct in finding a contract implied in fact between the plaintiff and the defendant? Was there a quasi-contract between the plaintiff and the defendant? Using various bits of evidence, they determined he did not know who the owner was. So, this undermines the contract implied in fact. There is also a question of intent to contract on the part of one of the parties (the defendant). This also undermines the contract implied in fact. Subjective intent is not what the court will look to (the intent on the part of the promisor), but what the promisor reasonably understood. A quasi-contract is not a contract, and it’s traditionally not a matter of contract law. It’s not based on contract theory. It is a theory based on equity. Even though the law may be followed, it may not have a result that is just, and that’s where the idea of equity comes in. A quasi-contract does not depend on mutual assent to be bound. A quasi-contract entails that a benefit is conferred upon someone, and the benefit is kept and appreciated, and so, the keeping and appreciation of the benefit means it would be inequitable for them to retain the benefit without payment of the value thereof. What does the court think about the idea of a quasi-contractual remedy? There was not a moral duty on the part of the plaintiff to take the horse. The court determined the owner of the horse farm should be more clear in ownership before taking the horse. It looks irresponsible that he assumed responsibility of the horse not knowing who the owner was.
Bolin Farms v. American Cotton Shippers Association: Some kinds of contracts need a writing. For example: real estate. Something in a promise can turn it into a contract. This something can be “consideration.” Consideration = bargained-for exchange. Promisor needs to be bargaining for it or seeking it. Look to bottom of p.37 and top of p.38. Why does the law care about consideration? Consideration is a category of enforceable promises or contracts. What is at the heart of contract is a mutual assent to be bound, a meeting of the minds. Looking to “consideration” as an objective determiner of what is going on subjectively, to show us that there was a meeting of the minds going on. Consideration is evidence of what is at the heart of contracts. What is going on subjectively (whether there was a meeting of the minds) is what we really want to know but cannot know. The objective element (what we see as evidence of the subjective element) can trump the subjective element (what we really want to know).
II. The Basis of Contractual Liability
A. The Consideration Requirement
Kirksey v. Kirksey (AL 1845): the plaintiff doesn’t own the land outright but has some right to reside on it and to make it a more secure habitation for herself (the land she is originally on). Therefore, she gave up something of value to her. She moved 65 miles with a number of children. That shows reliance on his promise, and she suffered some detriment as a result of promise and action. She has performed action because of his promise. It looks like the color of consideration but is not. Why not? The court says there is no mutuality of obligation here. There is no reciprocal nature of the benefit flowing. Instead, he was making a gratuitous gift out of the goodness of his heart. It was not bargained-for exchange but a conditional gift. There was no remedy if she did not come. The lack of detail in the letter undermines that it was meant to be legally binding. It was not a contractual offer but a conditional gift. The ends up against the plaintiff.
Ham
is valid. The reasonableness is more of an objective thing (both subjective and objective (Note (3)) – p.79- does away with the reasonableness part and leaves only good faith. Knowing there were potentially other fathers, could she really have entered into a contract with one of the potential fathers reasonably and in good faith? But, then again, he entered into this agreement because he wanted it to go away. Juxtapose this case with Greene. In both cases, there was some mistake of fact on the part of the plaintiff. Both had a belief that was presumably in good faith and thought to be reasonable and turned out to be wrong. Yet, they turned out differently. So, are they inconsistent? In the past, adultery has been a criminal charge, but not any civil component to it. These probably come down to the courts wanting certain and different outcomes. Public policy comes in as the underlying motivator for the difference. In this case, there are certain public policy reasons for having somebody provide for the child, that very well could have been the father. In the Greene case, there are certain reasons (public policy) not to promote adultery, etc.
P. 60 – Problem: Mixed Motives and Agreed Exchange – at first, the book is offered as a gratuity (a gift), so there’s no enforceability. The middle step from it being a gift to a contract seems to be missing. You only get into reliance if she has suffered something because of that promise.
Pre-Existing Duty Rule
Either doing or promising to do something you are already bound to do cannot serve as consideration for a new promise. It often comes up when someone tries to modify an already existing contract. Why should the law care, though, if the parties agree to it? As long as someone gives the gift, the deal is done. The law won’t interfere. It’s just that the law won’t enforce gift promises. We think when there’s something to be gained for the promise, that’s mutual assent to be bound. Bargain as evidence of consideration, consideration as mutual assent to be bound. Human behavior is why we care about consideration. Reasons for making 2nd deal- blackmail, duress, etc.- what the law does not want to condone by enforcement. The law wants to avoid doing things for the wrong reason. Anytime you want to enforce a promise, there must be mutual assent to be bound (meeting of the minds). For evidence of mutual assent to be bound, we look for some sort of bargain. For evidence of the bargain, we look to consideration. Generally, contract law wants to protect the original agreement b/c there was assumption of risk by
