Contracts Outline

Determine whether the broken promise was given as part of a bargain –

o If the promise WAS apparently given as part of a bargain, then find out –

· Was the bargain nominal, meaning a bargain in form but not in substance?

§ -> If so it may be unenforceable as a donative promise

· Was the bargain based on a promise to surrender or forbear from asserting legal claim?

§ -> If so it is usually enforceable if the claim was reasonable or held in good faith

· Did the bargain involve illusory promise, one that appeared to be a real one but did not commit the promisor to anything or gave him a way out?

§ -> If so then the promise may be unenforceable for lack of mutuality

· Did the bargain involve a pre-existing duty?

§ -> If so the bargain may be unenforceable

o If the promise WAS NOT given as part of a bargain, it is unenforceable unless there is some other factor involved including:

· Reliance, did the promisee rely on the promise to his detriment?

· Past or moral consideration, was the promise given in recognition of material benefit?

§ -> If these factors are present, the promise may be enforceable even though there was no bargain

A contract is a promise or a 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

A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made

Unilateral vs bilateral contract –

o Unilateral – offer that calls for performance

o Bilateral – offer that calls for return promise

· Second Restatement doesn’t make this distinction and talks broadly about contracts and offers can be accepted by either performance or return promise, and offeror can choose which type of acceptance he will accept

Void contracts – no contract has been formed so there is no duty to perform under it

o A contract lacking consideration is void

Voidable contacts – one or more parties have the power to either ratify OR avoid the contract

o If a contract was made under duress, the person who was forced into the contract has the choice to enforce it or avoid it, so it is voidable on their option

Unenforceable contracts – contracts that have some legal consequences, but aren’t enforceable in an action for damages or specific performance, due to a defense

o If a contract was violated under Statute of Frauds, it is unenforceable

Executory contracts – one that is not fully performed

o Once there is performance on both sides, contract is no longer executory

o Matters for remedies available

Gratuitous promise –

o naked promise

· I promise to give you X

o Unenforceable

Illusory promise –

o promise has unrestricted right to renege on the promise

· I promise to give you X unless I decide not to

o Unenforceable

Conditional promise –

o Promisor’s commitment is triggered by event that is OUTSIDE of their discretion

· I promise to give you X if it rains

o Enforceable

Was a contract made between the parties? Formation problems

o Formation of a contract elements:

· Mutual assent

· Consideration – required to make a promise or contract enforceable

CONSIDERATION

· Consideration needs to have –

o Legal Value – detriment to promisee or benefit to promisor

· Promisee does something he’s not obligated to do

· Promisee refrains from something he is entitled to do – forebearance

§ Hamer v Sidway (didn’t drink or smoke if uncle gave him $)

§ Langer v Superior Steel Corp (would get pension for his life if he didn’t work), if promisee refrains and there is no reason except for the fact that he had impliedly accepted the conditions imposed, then this is consideration

§ Promise not to assert valid legal claim is sufficient consideration

§ Promise to assert invalid legal claim is sufficient consideration if:

· Reasonable person could believe it is well founded and

· The claimant would be pursuing the claim in good faith

§ Former Rule – honest AND reasonable belief required

§ Modern Rule – honest OR reasonable belief suffices

· Feige v Boehm, although she was wrong that defendant was the father, she made the promise of forbearance in good faith, believing he very well might be the father

§ Bargained for exchange

· That the detriment induced the promise and the promise induced the detriment

§ Difference between bargained for legal detriment and condition on a gift –

· Depends on what the defendant was bargaining for

§ Come over to my garage and I’ll give you my hedge clipper –

· This is conditional gift, not enforceable because he doesn’t benefit from coming to the garage, it’s a necessary condition for getting the hedge clipper

§ Come over and trim my hedges and then I’ll give you my hedge clipper

· This is consideration, bargained for legal detriment

§ Equal value not required – adequacy of consideration is not reviewed

· Gross disparity will be looked at as evidence to support defenses

· Under modern doctrine of unconscionability, courts examine disparity to determine whether disparity is so great as to be unconscionable

§ Refuse enforcement where the outcome of the exchange shocks the conscience

· Jones v Star Credit Corp

§ Exceptions – cases where bargains do not constitute consideration and are not enforceable

· Nominal