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Contracts
University of California, Davis School of Law
Hunt, John Patrick

Contracts Outline
Prof. John P. Hunt
Fall 2009

I. Chapter 1: Bases for Enforcing Promises
a. Is there a contract? To have a contract, must have:
i. An exchange or bargain – i.e., consideration or a substitute (Ch. 1)
ii. An agreement – offer and acceptance (Ch. 2)
iii. May have to be in writing – statute of frauds (Ch. 3)
iv. No abuse of bargaining process (e.g., fraud) (Ch. 4)
v. No substantive infirmities (contract to commit crime, unconscionable contract) (Ch. 6)
b. What are the parties supposed to do under the contract?
i. Interpretation and supplementation of the agreement (Ch. 5)
c. What if they don’t do what they are supposed to?
i. Judicial remedies (Ch. 7)
ii. Self-help: The other party may be able to stop performing its end (Ch. 8)
d. Hawkins v. Mcgee
i. Whether something is a promise depends on how a reasonable person would understand it
ii. “guarantee” meaning if it is seen in context (given in solicitation for business here)
e. Bayliner Marine v. Crow
i. Is a opinion enforceable?
1. No, usually considered fluff to entice a buyer
f. Bottom Line:
i. A promise generally has to be part of a bargain to be enforceable
ii. Whether something is a promise is based on objective manifestations
1. Reasonableness of interpreting it as a promise
g. Remedying Breach
i. Enforceable = legal remedy for breach
1. Overwhelmingly monetary damages (very little specific performance)
ii. Expectation Damages
1. Put them back in the position they would have been in if the contract was performed correctly
2. Most common
iii. Reliance Damages
1. Put the parties in the position they would have been in if they had never entered into a contract
iv. Restitution
1. Return of benefits plaintiff conferred on defendant under the contract
a. Return to zero benefits
v. Naval Institute
1. Hunt for Red October books sold early
2. Expectation damages provided because Naval would have made more money from paperback sales, but didn’t
vi. Sullivan v. O’Connor
1. Nose operation on star and it looks worse than it did before
2. Reliance damages: restoring the detriment caused by the contract (disfigurement)
a. Worsening of appearance recoverable
vii. Efficient Breach
1. Breach should be available for those who breach when it is in their best interest to do so
2. The parties are no worse off than they would be before, and they are sometimes better off not doing contract
viii. CONTRACTS DAMAGES ARE NOT DESIGNED TO PUNISH FOR MORAL REASONS
ix. White v. Benkowski
1. Shutdown of water supply agreement because of feud
2. Damages?: no punitive damages because of court, but allowed to recover for inconvenience
3. Breaching a contract can give rise to tort liability
h. Consideration
i. Most common basis for contract enforcement
1. “promisor”: one who makes a promise
2. “promisee”: one to whom a promise is made
ii. A promise is enforceable if supported by consideration if three elements:
1. Promise or performance by the promisee
2. Given in exchange for the promise
3. Sought in exchange for the promise
4. Idea of Bargained For
iii. Functions of consideration
1. Evidentiary: proof of contract
2. Cautionary: lets parties know they are entering into a contract
iv. Hamer v. Sidway
1. Uncle promises nephew money if he refrains from bad habits
a. He does and money is refused. Consideration?
b. YES, forbearance from activities that one has a legal right to do may be basis for enforcement
v. Fiege v. Boehm
1. Child support payments for bastard
2. Forbearing from litigation that is legal, and not frivolous is consideration that will support a promise
3. Good faith belief that defendant was the father
vi. Feinberg v. Pfeiffer
1. Long time employee told she will get a pension for past work with the company
2. Rule: past action cannot be a basis for consideration
3. But allowed to recover on a reliance basis
a. Detrimental reliance development
vii. Adequacy of Consideration
1. Courts normally don’t look into adequacy
2. Exception for fictitious consideration (gift in exchange for a peppercorn)
3. Mills v. Wyman
a. Sailor falls sick and dies under the care of a guy. Father writes guy and tells him he will pay for the care
b. Performance not sought in exchange for promise = no consideration (past performance)
4. Webb v. McGowin
a. Worker sacrifices his body to save boss, told he would be taken care of
b. Past consideration CAN support a promise if the promisor received a material benefit (life saved)
5. Emergency
a. In an emergency, an unbargained for benefit (medical care) can be recovered on an unjust enrichment/restitution/moral obligation benefit
b. Not time to bargain
6. Kirksey v. Kirskey
a. Widow move up here
· She does and doesn’t get the support that was promised, he didn’t seek her moving for the promise
· Weird and inconsistent case
7. Lakeland v. Columber
a. Worker signs noncompetition agreement and violates after signing
· Forbearance from firing can count as consideration
· Employment at will
8. Pine River
a. Employee signs employee handbook and messes up and is fired
b. Is continuing to work consideration for promise to follow rules?
c. Yes it is
9. There is generally a hostility against covenants not to compete
a. Illegal in California
10. Strong v. Sheffield
a. Business sold on

i. “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” – Restatement, § 24.
ii. Owen v. Tunison
1. Was the communication an offer?
2. No, it was letting the other party know on which conditions he would be WILLING to sell
iii. Harvey v. Facey
1. Communication to sell property. Offer?
2. No offer because it is unclear what the answer was directed at
iv. Factors relevant to whether an offer exists:
1. Specificity/completeness of deal terms (e.g., if only price is specified, less likely to have an offer; if a price range is specified, still less)
2. Degree of certainty about whether the alleged offeror is actually willing to deal with the alleged offeree.
a. E.g., “lowest price I could accept is X” does not show that “offeror” will accept that price from “offeree.” (Owen, Harvey)
3. Do other circumstances point toward/away from willingness to be bound?
a. E.g., simultaneous communication to multiple people to sell one item on same terms – less likely to be an offer b/c not likely “offeror” intended to expose self to breach liability in event of multiple acceptances (Oregon ranch sale problem).
v. Fairmount Glass
1. Rule: Although a price quotation usually is not an offer, a communication called a price quotation can be an offer depending on context.
2. Look at correspondence as a whole
vi. Advertisements
1. Not generally considered offers
a. Invitations to make offers for the represented goods
b. May be held against if demonstrated bad faith
2. A clear, definite, and explicit ad that leaves nothing open to negotiation and promises a performance in return for something requested is an offer.
vii. Mistake
1. Elsinore School Dist. V. Kastorff
a. Mistake in bidding calculation causes an underbid, contractor can’t fix bc they already accepted bid
b. Rule: A contractor can avoid being bound by such a bid when:
· Mistake is material
· Mistake is not the result of neglect of legal duty
· Enforcement would be unconscionable
Other party can be placed back where it was