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Contracts
University of Connecticut School of Law
Strasser, Kurt A.

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.
§  Re

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
§  Acceptance       
·         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?
Responses
Promisee makes a promise
Performance begins and the promisor breaches
 
Performance begins and then the promisee stops performing
 
Offer Requires
 
 
 
Promise
 
Contract – bilateral
 
No contract
No contract
Performance
 
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?