TOPIC 1: BASIS FOR RECOGNIZING AN ENFORCEABLE OBLIGATION
● 1. What is a Contract (K)?
○ Restatement 2nd §1: Contract Defined:
○ 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
● 2. What is the UCC?
○ The UCC is a uniform law that governs commercial transactions, including the sale of goods (Article 2 of UCC).
○ “goods” means all things (including specially manufactured goods) which are movable…
○ also includes unborn young animals/growing crops/ other identified things attached to realty
○ Services, real estate, intangible things like money are NOT goods
○ A merchant is a person who
■ deals in goods of the kind or
■ otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or
■ to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
CONSIDERATION AS A BASIS
● 1. What is consideration?
○ General Rule: Promise is enforceable only if it supported by consideration
○ Restatement 2nd § 71: Consideration as basis for enforcement:
○ A promise is supported by consideration if there is:
○ 1. A benefit to the promisor OR a detriment to the promisee
○ 2. That is bargained for in exchange for THE promise whose enforceability is in question
○ Consideration can either be a return promise or performance
● 2. When is there a benefit to the promisor or a detriment to the promisee?
○ Forbearing a legal right is sufficient detriment to promisee
■ Hamer v Sidway:
● Facts: Does nephew’s abstention from smoking, drinking, and gambling in exchange for $5k constitute a benefit to Uncle OR a detriment to Nephew?
● Holding: Both. In general, a waiver of any legal right at the request of another party is sufficient consideration for a promise
● Does not matter that this also happened to benefit the promisee (nephew)
○ Forbearance to assert an invalid claim may serve as consideration for a return promise if the parties at the time of the settlement reasonably believed in good faith that the claim was valid
● 3. When is something bargained for in exchange?
○ Past services are not a valid consideration for a promise
■ Feinberg v Pfeiffer:
● Facts: Does Feinberg’s 37 years of service prior to the promise; or her 2 years of service after the promise constitute consideration for Pfeiffer’s promise to pay Feinberg a pension?
● Holding: No. There is no bargained for in exchange because the pension did not induce Feinberg to work for two years nor did the previous work induce the pension.
● i.e. to have a bargained for in exchange, what is being exchanged must have been done in accordance with the agreement
○ Continued employment in an at-will relationship may be consideration for signing a non-compete agreement (depending on whether the agreement is reasonable)
■ Lake Land Employment v Columber:
● Facts: Is Lake Land’s promise to not fire Columber after signing the non compete agreement consideration for Columber’s promise to not compete if he stops working for Lake Land? i.e. did Lake Land really give anything up since Lake Land and Columber were in an at-will employment situation?
● Holding: The court said it COULD be consideration but did not decide in this case.
● Dissent: The relationship between Lake Land and Columber stayed the SAME after Columber signed the agreement and so there really was no consideration for Columber’s signing the agreement, i.e. Lake Land did not forbear the right to fire Columber
○ A gratuitous promise is a promise in exchange for nothing and hence is NOT supported by consideration
■ Kirksey v Kirksey:
● Facts: Bro-in-law tells plaintiff that he would provide her with a place to live if she would come see him. After a few years, he tells her to leave.
● Holding: This was a conditional gift and so not enforceable b/c lacks consideration. Saying “if you come to see me” was simply just the means of receiving the gift.
● NOTE: Given that the plaintiff sold her land and moved 60 miles to live with her bro-in-law, a court today may enforce the promise on the basis of promissory estoppel. See Next Section.
○ Rewards: Promise of reward for an act:
■ The act = consideration for promise of reward
● Act must be induced by the promise of reward
● E.g. Broadnax v Ledbetter: Was notice or knowledge to Broadnax of existing reward when capture made essential t
to try in good faith to market L’s name and so W’s detriment = restricted in what he can do – he must act reasonably and in good faith.
● 5. Past Consideration and Moral Obligation
○ Restatement 2nd § 86: Promise for Benefits Received:
○ (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 an injustice.
○ (2) A promise is not binding under Subsection (1)
■ (a) if the promisee conferred to 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.
○ Generally Moral Obligation is not enforce to enforce a promise
■ Mills v Wyman:
● Facts: Does Mill’s assistance to Wyman’s son constitute consideration for Wyman’s promise to pay Mill’s expenses?
● Holding: No there is not bargain and hence no consideration.
● Wyman promised to pay Mill after he helped his son and so Mill’s actions were not done in pursuance of getting reimbursed by Wyman.
○ However in exceptional circumstances, Moral Obligation is sufficient
■ Webb v McGowin:
● Facts: Is McGowin’s promise to pay Webb constitute consideration for Webb saving McGowin’s life?
● Holding: Yes; moral obligation is sufficient consideration to support a subsequent promise to pay where promisor has received a material benefit, altho there was no original duty or liability resting on the promisor.
○ Why the discrepancy between Mills and Webb?
● Mills: promisee did not directly help promisor (son, not dad) and promisor was never paid at all
● Webb: promisee directly helped promisor and had been paying for a while before he stopped; injuries that promisee suffered in saving promisor are life-changing for the worse – i.e. crippled for life and unable to do physical labor