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Contracts
University of California, Davis School of Law
Joo, Thomas W.

Consideration

(1) Benefit to Pr or Detriment to Pe
(2) Bargained for in exchange for the Promise in Question

Benefit to Pr or Detriment to Pe

Ex’s
1. An act other than a promise-giving up legal right to smoke:
a. Hammer v. Sidway: There is consideration because the nephew gave up a legal right, making the promise to pay $5k enforceable.
2. A forbearance of legal right
a. Fiege v. Boehm: Defendant compensates plaintiff during/after pregnancy in exchange for Plaintiff not filing “bastardy” claim against him- even though the child turns out not to be his.
3. The creation, modification, or destruction of a legal relation.

Requirement for bargain

Mutual Assent: Subjective and objective intent to be bound. (look at reasonableness)

i. Subjective Intent to be bound
1. Look inside parties head/ what did they really mean
ii. Objective approach:
1. Outward manifestations
2. How would a reasonable person interpret them?
3. What is reasonable
4. The “reasonable person standard” is objective
a. Lucy v. Zehmer- didn’t matter he was joking, reasonable person would have seen him as serious.
i. Lucy relied on promise to sell. Reliance leaks into assent.
b. Leonard v. PepsiCo- clearly a joke: ideas of who is reasonable person: target market?…
iii. Context is Important
1. Usually mix of subjective/objective arguments
2. Includes parties past relationship/dealing
B. Offer & Acceptance:
C. Definiteness
D. Statute of Frauds
E. Bargains that won’t be enforced

Types of Promises (What constitutes a promise)

Executory Contracts

The point at which a contract is comprised of promises from both sides to perform later.

i. Wholly executory contracts-
1. Neither party has performed as yet, but have made promises to do so.
ii. Partially executory contracts
1. One party has executed the performance and the other has not. The contract is partially executory because one party has performed and the other has not

Unilateral Contract-Only one party makes the promise. K becomes enforceable upon performance. Right on side of promisee, duty on side of promisor, one promise. “I promise to do your lawn if you wash my car”à
Bilateral Contract –Both parties make a promise, one promise is exchanged for another. There is mutuality.
Illusory Promises-No Cº: Promise that in fact do not give up anythingàNO consideration!

i. Ex: Strong v. Sheffield: Promised not to collect debt until he felt like it:
1. doesn’t matter that he actually didn’t collect the debt right away, what matters is the actual deal.
ii. If a K involves a lot of promises and only one is illusory the K is still valid but the illusory promise is not. As long as there is consideration for the other promises, the K will survive.

Exceptions-some K’s may seem illusory, but they are not illusory, as long as certain conditions are meet. I.e. (good faith implied)

i. Satisfaction clauses in contracts- Performance of one party is not due unless the party is satisfied with something.
1. Not illusory as long as the “satisfaction” can be subject to a good faith standard.
2. Two types of satisfaction clauses:
a. The condition calls for satisfaction as to commercial value or quality, operative fitness or mechanically utility
i. Dissatisfaction cannot be claimed arbitrarily, or unreasonably
ii. Reasonable person standard used in determining whether satisfaction has been received.
b. The considiton calls for satisfaction involving fancy, taste or judgment. (Mattei v. Hopper) NFL Player Contract.
i. All need is good faith, dissatisfaction does not have to be reasonable
ii. Dissatisfaction must be genuine.
iii. Ex: Mattei v. Hopper: Shopping center lease case: must have satisfactory leases:
c. Reasoning: not illusory because you are required to act in good faith: you areactually promising something.
d. Here they are commercial contracts: context:
ii. Requirement/Outputs Contracts-One party promises to attain all their requirements of a certain good from the other or one party promises to sell all their output to the other:
1. U.C.C. 2-306 Output requirements and Exclusive dealings: Not illusory if
a. “good faith”- In Eastern v. Gulf: Flying though Detroit all the time do you can fill up fuel their cheaper might not be good faith.
b. Demand is not unreasonably disproportionate to estimate in K or past quantities (when no quantity is given). Say 1,000 gallons a week, then you say you need 10,000 gallons:
2. Reasoning: when you promise to buy requirements you are actually promising to buy something so =consideration.
iii. Exclusive Dealings Contracts -One party agrees to work for another in exchange for the exclusive right to do so.
1. Reasoning: Not illusionary because the working party must use best efforts
2. Wood v. Lucy-Even if a requirement of “best efforts” or “good faith” is not explicit a court may find it is Implied. Court implied promise to use best efforts to market: why?
a. 1. Wood adapted business to that purposeàimplication business will be used for its purpose:
b. 2. Terms of compensation: unless he gave efforts, neither of them would profit:,
c. 3. Business persons=rational actors; assume they wanted to make a binding business arrangement:
d. More applicable to commercial contract because can assume rational actors and people want to make profits:
3. Real Estate Brokers Agreement- Use “Best efforts” : real estate agent can’t promise they will sell your house can just promise to use “best efforts:
4. UCC 2-306 (2)
iv. Termination Clauses
1. Not illusionary as long as the clause is limited in some way (such as reasonable notice). If the termination clause allows someone to get fire at any time then the K is illus

us the property? Telegraph lowest cash price – answer paid.” Facey replied with “Lowest price, £900.” Harvey responded, “We agree to buy [the property] for the sum of £900 asked by you.” When Facey did not comply, Harvey sued for specific performance of the agreement and for an injunction to restrain the town of Kingston from taking conveyance of the property. The appellate court reinstated the trial court’s dismissal ruling that a mere statement of the lowest price at which a vendor would sell contains no implied contract to sell at that price to the persons making the inquiry.]

o Does it include all the relevant terms? (specificity, do you know exactly what the offer is for)
§ If so, it’s enforceable: Specificity show serious
§ Fairmont Glass v. Crunden-Martin­ – : Crunden sent a letter asking “Please advise us [of] the lowest price you can make us on our order for ten carloads of Mason green jars. State terms and cash discount.” Fairmont replied “Replying to your favor, we quote you Mason fruit jars: Pints, $4.50, quarts, $5.00, half-gallons, $6.50 per gross, for immediate acceptance, and shipment not later than May 15th.” Upon receipt, Crunden sent “Enter order ten carloads as per your quotation. Specifications mailed.” In response, Fairmont answered “ Impossible to book your order. Output all sold.” Crunden sued for breach of contract. The court found that Fairmont’s quote was an offer.] · Reasoningà “replying” means incorporating terms of 1st communication which included quantity and shit. “for immediate acceptance” implies offers=
· Specificity;? If no quantity: argue not offer because would subject self to limitless shit: Couternargument- quantity subject to reasonable standard.
· Advertisements are not normally offers: considered invitations to make offers.
· Leonard v. PepsiCo
o Unless, there are really specific details and it induces some action on the part of the consumer (Oe)
· Lefkowitz v. Minneapolis Surplus Stores- 2 Lapin for $1: first come first serve
o Advertisement did constitute an offer
· Car ad w/ vin number:
o Clear what they are committing themselves to, the car w/ that vin
o Nothing more to negotiate
o Only 1 implies first come first serve. (no risk of selling out) if no 1st come 1st serve idea, then would be subject to liability of selling out, not reasonable to the think they would do this.