Contracts Outline

Contracts Outline

What is an enforceable K? What kinds of Ks do courts refuse to enforce? POLICY
▪ K = promise or set of promises, the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. (Rest. § 1)
o Bilateral executory agreement: exchange of promises deliberately carried out via offer and acceptance w/ intention of creating a binding deal.
o Unilateral K: A promise in exchange for an act. Reward cases are prototypes.
§ From ASP: Characterized by an offer that can only be accepted via performance, and is often made to the general public (reweards, newspaper ads sometimes)
▪ Not all moral obligations constitute legally binding Ks. (Mills v. Wyman, Schnell v. Nell)
▪ Promises made w/o legal consideration cannot be enforceable.
▪ Services given not asked for (gift/officious intermeddler) cannot bind the receiver.
▪ Must have mutual inducement to enforce promises
▪ Mills v. Wyman: Mills was the only person motivating him to act, i.e. moral principles; Wyman Sr. wasn’t motivated to act before his son received tx from Mills – time space continuum problem, was not a minor so dad not responsible for necessities.
o Past consideration problem, doesn’t fall into one of the three exceptions where past consideration is binding. (promise for benefit received)
o Rest § 86: (1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. (2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit. (Mills v. Wyman is Illustration 1 for this §, Rest says not enforceable)
▪ Deeply personal/intimate decisions are not for the courts to decide, unenforceable Ks.
o Whether to bear children/be biological parent (In re Marriage of Witten, T.F. v. BIL. – won’t even enforce § 90 implied K by reliance in these cases, even though they said there was a K for T.F. & B.I., they wouldn’t enforce it based on MA public policy of not enforcing “parenthood by contract”)
o Surrogacy Ks not usually enforceable. States either say they are unenforceable, only enforceable if surrogate is uncompensated, and allowed in others. Adoption legislation requires that both biological parents consent to giving up the child after it is born, and any K before then, like a surrogacy K, is void.
o Rationale for not enforcing is the intimacy factor and the impossibility of having informed intent about this kind of future decision. Attitude might change.
▪ Courts only step in for custody battles b/c they’re in the best position to decide what’s best for the child – parents too caught up emotionally.
▪ Can’t contract to sell organs or babies. Morally reprehensible to commodify certain stuff.
▪ Rest § 21: K might not be enforceable if parties had no intention to be legally bound. This is why cts won’t enforce promises btw husband and wife. Schnell v. Nell, e.g.
o (Formal) Prenuptial agreements don’t count – there is an obvious intent to be bound legally by them.

Consideration (or lack thereof – Donative Promises)
▪ Gifts do not involve mutual consideration, therefore they are not enforceable Ks. Gifts should not be txed as a transaction, however it may be labeled.
▪ Dougherty v. Salt – auntie promised boy’s father to give boy 3K, signed a note saying so, then died before giving it to him. K not enforceable.
o Traditional theorist looks at the note and finds a K, but this op is by Cardozo.
▪ Schnell v. Nell: Nominal consideration cannot be considered enough consideration to enforce a promise. $0.01 for $600 is not consideration. Exchange of fungible goods like this is nonsensical. Would be ok if the penny was an heirloom or special in some way. Wife had nothing to give anyway, hubbie not bound to pay, even if he did promise before her death that he would. If Schnells had been able to argue under § 90 it would have been ok – see § 71 cmt b.
o Court normally doesn’t care how adequate consideration is, unless it deals with the exchange of money/fungible goods. Then they will step in.
▪ Rest § 71 (Requirement of Consideration, Requirement of Exchange, Types of exchange) – (1) To constitute consideration, a performance or a return promise must be bargained for (bargain principle). (2) 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. (3) The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation.
▪ Cmt. b: “a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration and the promise is enforced, if at all, as a promise binding without consideration under §§ 82-94.”
▪ Kirksey v. Kirksey (“Dear Sister Antillico” case – OLD): Promise was a “mere gratuity” so the K wasn’t enforceable. Writing judge didn’t agree though, refers to P’s reliance on D’s promise as being sufficient to enforce the promise, but he doesn’t have the legal device for helping her out yet, so he goes w/ the common law. Puts a stake in the ground, distinguishing between gift and contractual obligation.
▪ The forbearance of a legal right is valid consideration, even if the party who forbears is benefited thereby – from Hamer v. Sidway (Eagle scout case)

Reliance/Promissory Estoppel
▪ Rest § 90: A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of a promisee, and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
o Good tool for the courts.
o Can find an implied K where there isn’t a true K, seeks to rectify injustice.
o 3 elements: (1) promisor should reasonably expect her promise to induce action or forbearance on the part of the promisee (2) promise does induce such action/forbearance (relied to her detriment), AND (3) injustice can only be avoided by enforcement of the promise.
▪ Ricketts case: uncle promised niece to give her $ so she doesn’t have to work in a shop. Uncle dies and doesn’t leave her $ in his will.
o PE evolved out of cases like this. It’s all about locking in a promise – must fulfill parts of § 90.
▪ Feinberg v. Pfeiffer: D offered/promised P a pension, P accepted, D paid for many years after she retired. D changed presidents, new pres stopped payments, after she got sick. Her reliance on the pension and decision to retire based on that reliance made the promise binding. Adopted § 90: P relied on D’s promise to her detriment; lack of consideration irrelevant, promise still enforceable (even though it seems like a gift in some ways).
▪ Hayes: D company offered to pay P pension so long as A was president. A paid pension for years, then new pres wouldn’t pay. Distinguished from Feinberg: Here, pension was viewed as a gift by all parties, no specific amount, more of an at-will relationship. P lost.
o And anyway, the new pres wasn’t under obligation to pay based on the original promise.
▪ 3 kinds of consideration: theory of act for a promise (induced action or forbearance is a promise), theory of promissory estoppel (§ 90), theory of bilateral K (when induced action is a bargain, a promise to complete is implied, implied promise is the consideration for the original promise)
▪ D & G Stout v. Bacardi: General relied on Bacardi’s promise to maintain their acct w/ General; forewent opportunity to sell to National based on that promise. Bacardi later withdrew, leaving General w/ little bargaining power in renewed negot