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

Consideration
 
C°: (1) a benefit to Pr (2) or detriment to Pe, (3) which is bargained for to induce the exchange of the promises.
·         Examples of Consideration
1.      Forgoing right—Forgoing a lawful right, is ample consideration.
2.      Mistaken Fact—Consideration exists when a party forgoes a right that they [honestly and reasonably believed] they had at the time the contract was made.
1.      F promised to support the child as long as B did not bring paternity suit. B did not sue. F was not the father of the child.
·         Limitation of Consideration
1.      Past performance—Past performance is not sufficient Consideration because it was not bargained for to induce the exchange of promises- Feinberg v. Pfeiffer
 
Illusory promises: A promise which gives the Pr an alternative to not change his position is an illusory promise and is not sufficient consideration. (Promise to not cash your check until I need the money)
·         Exception
1.      Satisfaction Clauses: A satisfaction clause is not an unrestricted clause to rescind, Pr is held to a good faith standard to uphold purpose of the K. -Mattei v. Hopper
2.      Requirement Contracts: UCC 2-306(1): A requirement contract is supported by consideration when seller’s output or buyer’s requirement is made by a good faith estimate, or absent an estimate, any normal or otherwise comparable prior output. -Eastern v. Gulf
1.      Express Limitation: no quantity unreasonably disproportionate will be considered
3.      Implied agreement: UCC 2-306(2): Contracts for exclusive dealing in the kind of goods impose, [unless otherwise agreed] an obligation by the seller to use “best efforts” to promote their sales.-Wood v. Lucy
 
Requirement of Bargain: Benefit to the Pr or detriment to the Pe must be done to induce the exchange for the promise.
·         Examples of benefit/detriment limited:
1.      Rewards: a Pe is not entitled to a reward if the Pe performed the terms of the agreement, but did not know about the offer when he completed performance.
2.      Gratuitous promises: “If you come and see me… I will give you a home.” –Kirksey v. Kirksey
3.      Non-Competition @ At-Will Employment: The presentation of a non-competition agreement by an employer to an at-will employee is a proposal to renegotiate the terms of the parties at-will employment.-Lake Land v. Columber
1.      Note
1.      Handbook can be a unilateral agreement to save drafting new K’s
2.      At-will non-competition agreements are much better taken if it is presented before the employment starts, or if there is something else given… i.e. a raise, or promotion.
 
 
RDR/M.O./Restitution/Pre-contractual Liability
 
Reliance in lieu of Consideration- Restatement §90
 
Reasonable Detrimental Reliance: Promisee (1) relied on the promise to his detriment, (2) the promisor should have reasonable expected Pe to rely on the promise, (3) remedy is limited to what justice requires.
·         Examples
1.      Employment: Employee relies on employer who promises to take care of her when she retires.-Feinberg v. Pfeifer
2.      Journalism: Cowles relied on newspaper to keep confidential his name. Fired as a result-Cohen v. Cowles
3.      Family: None of my grandchildren need to work, neither will you.-Ricketts v. Scothorn
4.      Business: Buyer promises to stay with you, Seller does not sell company.-D&G v. Bacardi
1.      Limits to this reliance: indefinite (how long do I have to stay), business (not reasonable to rely)
5.      Reliance on Bargain: When there has been reliance on the bargaining process to ones detriment, that person can claim a reliance interest
6.      Construction Contracts: a general contractor, relying on the bid of a sub-contractor, has (1) an option to use that subcontractor and (2) has a reliance interest that the subcontractor cannot back out of the bid.
 
Moral Obligation in lieu of Consideration- Restatement §86
 
Moral Obligation: generally moral o

ation for negotiation. –Owen v. Tunison
2.      Words must give complete power to bind: “will you sell us Bumper Hall? Telegraph lowest cash price”… “Lowest price for Bumper hall 900”- Harvey v. Facey
3.      Multiple offers for 1 item: if the Oe knows that there are others in contention (invitation to negotiate), if the Oe believes there is no one else (it could be an offer)- Southworth
4.      Advertisements unless “First Come First Serve”: Generally advertisements do not give the power to close the deal unless it gives a quantity, time… “First Come First Serve” –Lefkowitz v. Gen. Spls.
 
Definiteness
 
Definiteness: Always a viable reason to object to an offer such as (1) price, (2) terms, (3) place/time of delivery, (4) time of taking possession of property, (5) time of commencement.
            Natural response will be: Gap fillers and reasonableness will suffice to fill indefinite terms.
EXCEPTION: FOR QUANTITY.
 
Option Contracts
 
Option Contract: Offer which is irrevocable for a specified amount of time.
·         Examples
1.      Option must be supported by C°: a promise to keep an option open requires support by C°. –Dickenson v. Dodd
2.      Performance of Unilateral K: An Option Contract is created when partial performance of a unilateral contract is performed. –Reward & Bridge example
 
Firm Offer- UCC 2-205
 
Firm Offer: An offer by a merchant to buy or sell goods in a (1) signed writing which by its terms (2) gives assurance that it will be held open for the time stated, (3) not to exceed 3 months; if no time is stated, a reasonable time.