Contracts Outline – Prof. Strasser – Fall 2012
· Ch 1: Promises
o Hawkins v. McGee: Purpose of awarding damages for breach of contract is to put the plaintiff in as good a position as he would have been in had the defendant kept his contract.
· Ch 2: The Justification Principal
o Bargain for Exchange
§ No sufficient consideration à No bargain for exchange à No enforceability
· Congregation v Deleo: Not an enforceable promise because there is no bargain. Deleo received nothing for his promise to donate money. No promise for a promise OR promise for performance. No bargain so no consideration.
· Schnell v Nell: 1 cent is not consideration. No consideration so no bargain. The 1 cent is only nominal and intended to be so. Of no value.
§ Bad bargain is still a bargain
· Hamer v Sidway: Forbearance is consideration. Uncle got satisfaction is knowing nephew was doing the right thing, and nephew would get 5k
· Batsakis v Demotsis: A lousy bargain is still a bargain. (mere inadequacy of consideration will not void a contract – here the devalued currency had some value, so the contract cannot be voided)
§ Bit of an exception à Widows and Orphans? à Bad bargain? à Emotions?
· Newman v Hunter: Really bad bargain, so court said no bargain. In order for a contract to be valid, valuable consideration must be exchanged between the two parties.
o All bank did was give up was worthless note.
o Court maybe did not enforce it because of special consideration to orphans/widows.
o When the P surrendered the something of no value to the D, it parted with nothing of value, and D received nothing of value, the P suffered no loss and the D received no benefit; the weight of authority is behind D, but it is clear that the transaction was without consideration
§ Claim settlement rule
· Dwyer v National By-Products: When a claim is forebear in good faith, then sufficient consideration, even if claim is actually worthless.
o Section 74 of Restatement
§ Employment and noncompeting agreements
· Lake Land v Columber – Forbearance on the part of an at-will employer from discharging an at-will employee serves as consideration to support a noncompetition agreement.
o When accompanied by raises, or other tangible benefits, and for a significant amount of time
§ Illusory Contract
· Wood v Lucy – An implied promise. Promise to use reasonable efforts was not expressly stated, but it was implied so the transaction would work as intended.
o A contract can be valid if the promise is implied.
§ How law changed over time: Modification of pre-existing duty rule & how it’s changed
· Levine v Blumenthal: A pre existing duty to do something is not consideration.
o Cannot change the terms of the contract without sufficient consideration. Must end original contract and make new contract.
o “Hold up” game à not raised in the case, but present.
· Gross Valentino v Clarke
o Falls under the UCC for sales of goods.
o Proof of consideration not necessary to modify a contract.
o UCC Rule: You don’t need consideration to modify a contract if it meets good faith.
o Justifiable reason for raising cost so looks less like hold up game.
· Angel v Murray à not under UCC because not for the sale of goods.
o Purpose of PEDR is to avoid hold up game
§ Here, no coercion or duress, so there can be an exception
· Must have change in circumstances AND fair and equitable
o UCC 2209 and Restatement 89
o Reliance on a Promise / Promissory Estoppel à use as backup for b/ex. Can have b/ex of reliance. à Restatement 90
§ Garwood Packaging v Allen à investment bankers working for a company relied on the promise of another company to create a business. Investment bankers knew the ways of business well and shouldn’t have relied on the promise.
· If something that shouldn’t have been seen as promise or not reasonably a promise, then no promise.
· Promissory estoppel doesn’t protect all reliance.
§ Feinberg v Pfeiffer – company gifted employee $200/month for life then tried to take it back when a new President came.
· No valid consideration for the promise because past performance is not consideration
· But there was reliance on the promise
o Because it would be unjust, promissory estoppel says enforce the promise even though no b/ex.
· Reliance on the promise created enforceable contract.
§ Drennan v Star Pavingà subcontract bid was revoked and contractor sued for lost money.
· Reliance on the bid by the contractor makes this an enforceable promise. (Restatement 90)
· For promissory estoppel to apply, there must be:
o Clear and definite offer
o Reasonable expectation that the offer will induce reliance
o Actual and reasonable reliance by the offeree
o Detriment which can only be avoided by enforcement of the offer.
§ First National Bank v Logan Mfg. àBank manager promised to close a loan for P that would allow them to buy business. Loan was never closed by the bank.
· Bank is required to prevent injustice by paying “reliance damages”
· Has all the elements of promissory estoppel. P relied on the promise of the bank, so they should get reliance damages.
· Different from Garwood because in Garwood they had explicit business knowledge, but not here.
fer to sell.
o Part performance by the offeree of an offer of a unilateral contract results in a contract with a condition. OPTION CONTRACT – Restatement 45
§ Condition is full performance by offeree
· Davis v Jacoby à Court must decide if bilateral or unilateral contract and if bilateral, then when was acceptance?
o Promise makes sense here, so bilateral contract.
o Contract obligations survive death..
· Auto Glass v Hanover à P did not accept the offer of D set forth in the pricing letters, therefore they did not enter into a unilateral contract.
o To accept, they would have to submit invoices that were the correct price, but they did not do this, therefore, no acceptance.
· Cole-McIntyre v Holloway à rare exception to general rule that silence is not acceptance.
o Not informing the store of rejection constituted acceptance because of the ample opportunities to notify them, time elapsed, and the perishable nature of the goods.
Is it acceptance?
Promisee makes a promise
Performance begins and the promisor breaches
Performance begins and then the promisee stops performing
Contract – bilateral
No contract – Asking for one thing, offering something different. Offeror decides what is done as acceptance
Option Contract – Restatement S45
Option Contract – No performance owed. Offeror doesn't have to do anything until full performance
Doesn't say I want a promise or performance
Contract – Restatement S32
Contract – Restatement S32 and S62
Contract – Restatement S32 and S62
§ Formation under the UCC – UCC 2-207
· Pro CD v Zeidenberg à Shrink-wrap contract
o Enforceable contract. D had to agree to terms and could have returned it if he didn’t agree.
· Empire Machinery v Litton à
o Conduct can sometimes constitute acceptance, it becomes a jury question.
o Did D actions lead a reasonable business man to believe the contract had been accepted?