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

Contracts-Strasser-Fall 2012
 
I. Promises
·         K=offer & acceptance + consideration + S/F
                                 á (manifestation of assent)
·         3 Theory of Consideration: bargain for exchange, promissory estoppel, unjust enrichment
·         Promise (traditionally called a contract): creates a new legal obligation for the promisor
·         Hawkins v. McGee: man undergoes surgery to repair hand after Dr. gives him 100% guarantee of a “good hand”, gets hairy handàdamages=expectation-current state of hand
 
II. The Justification Principle
 
A.      Bargained-For Exchange
 
·         Legal Reasons for enforcing a promise:
1.       There is a promise
2.       Sufficient legal reason to enforce the promise
3.       No justice reason to defeat enforcement
 
·         Bargained for exchange: must be a reciprocal agreement of a promise for a promiseàconsideration is shown through the exchange’s delivery of mutual benefits or detriments to each party
                                            I.            Benefits bargained for generally must be received in present or future
a.       Dead people cannot make promises or give benefits
                                          II.            Benefits need not be monetarily valuable: legal value is in eyes of beholder
a.       Benefits to the parties do not need to be objectively equivalentàpersonal satisfaction/gratification can show consideration
b.       Moral obligation cannot create consideration
 
·         Adequacy of consideration:ৠ79
1.       Cannot be nominal and/or insignificant; must be an exchange of some value
2.       Forbearance of a right can constitute consideration if a benefit to promisee
3.       Gifts (charitable) do not constitute consideration
 
·         Illusory promise:
o    Looks like a promise but isn’t really.  “I’ll do it if I want to”
§  Promisor has the option whether or not to execute a condition
o    An agreement to do something that is so indefinite one cannot tell what is to be done or the performance is really optional
o    There must be some measurable consideration/commitment from each party to form mutual obligation
 
1.       Congregation v. DeLeo: (Gifts lack consideration) Guy promises to donate $ to congregation, witnesses, but never in writing. Congregation sets aside $ in budget, but guy dies intestateàCongregation did not act or rely on promiseàyou don’t have consideration without bargain for exchange
 
2.       Schnell v. Nell: (Consideration must not be nominal) Wife dies leaving will to husband, ordering him to pay $200 to 3ppl over 3 years for consideration of 1 centà Court holds contract unconscionableà1 cent is merely nominalà(1) wife’s love is past consideration (past consideration=no consideration) (2) no consideration for his promise to pay moneyৠ79: Adequacy of considerationৠ17: must have bargain for exchangeৠ71:  types of exchange; exchange could be a promise or performance
 
3.       Hamer v. Sidway: (Value not monetary) Uncle promises to pay nephew 5k if he doesn’t drink, smoke, gambleànephew does so but uncle dies before paymentàForbearance of legal right is sufficient consideration to enforce a K
 
4.       Batsakis v. Demotsis: (Value need not be equal) During WWII, woman K for extremely uneven exchange rateàMere inadequacy of consideration will not void a K
 
5.       Newman & Snell’s State Bank v. Hunter: (Consideration must have value, moral consideration does not) Woman offers note to pay husband’s debt in exchange for a worthless note and insolvent stock – court says NO considerationà RULE: There must be valuable consideration in order for contract to be enforceable
 
6.       Dyer v. National By-Products Inc.: (Forbearance of a right) Man loses foot in work-related injury, doesn’t file suit b/c employer allegedly promised lifetime employment; he gets firedà“Good faith” settlement of an unfounded claim constitutes valuable considerationà R.2d § 74 – forbearance to assert a claim, which proves to be invalid, isn’t consideration unless (1)claim or defense is doubtful b/c of uncertainty as to facts of law (2) forbearing party believes claim is valid
 
7.       Lake Land v. Columber: non-compete clause; employee admits to reading and signing it – he worked for 10+ years after signingà Subsequent employment is sufficient consideration to support a non-compete agreement with an at-will employee after employment has already begun
 
8.       Wood v. Lucy, Lady Duff Gordon: (Exclusivity Deal) Agent sues fashionista, when she breaches exclusive listingà Implied promise can constitute an enforceable Kà R.2d § 77 – Illusory promises are not considerationà UCC 2-306 (2) – with exclusive agreements to sell goods, K imposes “best efforts”
 
9.       Levine v. Blumenthal: (Already owed obligation (pre-existing duty) ≠ Consideration) Owner allows retailer to pay less rent for time being on pre-existing duty, retailer defaults and owner claims all monies owedà R.2d § 73 – performance of pre-existing legal duty is NOT consideration
 
10.    Gross Valentino Printing Co. v. Clarke: Printer and publisher set K for magazine. Printer calls and says costs more – completes job and publisher refuses to pay, K is for a “good” not a printing service, subject to UCCàUCC § 2-209 states modification binding with unforeseen circumstances and good faith agreement on both sides, even without consideration
 
11.    Angel v. Murray: (Modification by consent) garbage-man wants more money because job gets harder with extra housesà R.2d § 89à parties can modify K even if no additional consideration, if modification is fair and equitable due to unanticipated circumstances or conditionsàException to Levine pre-existing duty under Restatement § 73 (because service) but still valid because doesn’t contradict purpose of § 73 to prevent coercion
 
B.      Reliance on a Promise
 
·         Promissory Estoppel (3 elements)(exception to consideration)
o    Promissory estoppel/reliance: R.2d § 90 – promise that someone relied on is binding if injustice can be avoided only by enforcement
1.       Right kind of promise which would induce promisee’s action or forbearance
2.       Right kind of reliance where promisee would reasonably rely
3.       Injustice can be avoided in no other way
o    Promissory estoppel is an exception when bargain for exchange failed (isn’t there)—bargain for exchange is a better route to take when availableà A plaintiff may recover on a theory of promissory estoppel even in the absence of a contractà The doctrine of promissory estoppel can act as a substitute for lack of consideration or lack of mutualityà Bargain for exchange and promissory estoppel both can be used to argue
 
1.       Garwood Packaging Co. v. Allen & Co., Inc.: GPI created food packaging system, but failed and were in debt of $3 million and was broke, Martin told Garwood and McNamara (GPI’s principals) that he would see deal through “come hell or high water”àCourt is saying they didn’t rely on an actual promise, there was reliance but it wasn’t on the necessary elements of promissory estoppelàPromissory estoppel doesn’t protect all kinds of reliance
 
2.       Feinberg v

n coins, ½ order not filledà Generally – ad is not an offer, just an invitation to bargainàR.2d § 24 – offer is manifestation of willingness to enter into bargain; R.2d § 26 – manifestation of willingness to enter bargain is not an offer if offeree knows offeror doesn’t mean it until further manifestation of assent; R.2d § 35 offeree has power of acceptance EXCEPT 1) rejection or counter-offer, 2) lapse of time, 3) revocation by the offeror, 4) death or incapacity of the offeror or offeree
 
2.       Academy Chicago Publishers v. Cheever: widow enters K to produce anthology of husband’s short stories, K didn’t specific terms/requirementsàRule: A contract will be enforced if there is some ambiguity, but if the essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contractàneeds to be sufficiently definite
 
c.        Powers of Acceptance
 
·         Unilateral contract: promise for performanceàpartial performance is consideration and acceptanceàpreparation may be partial performance (prob. rare)àonce performance begins, promisor cannot revokeà
·         Bilateral Contract: promise for promise
 
1.       Akers v. J.B. Sedberry, Inc.: 2 guys offer to resign, boss rejects but later acceptsàRejected offer is not valid after conversation endsàR.2d § 41 – offeree’s power of acceptance terminated at specified time or a reasonable time
 
2.       Ardente v. Horan: D offers to sell P a home for $X. P accepts the offer for $X but asks that D include furniture. P’s acceptance was conditional and therefore constituted a counter-offerà Acceptance with amendment is a counteroffer – acceptance must be definite and unequivocal
 
3.       Petterson v. Pattberg: P goes to pay off mortgage; D revokes before P pays himàOfferor can revoke before the offeree accepts (tries to perform), in unilateral contractsàWilliston on contracts: Any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed, thus, D's offer withdrawn before its acceptance had been tendered
 
4.       Marchiondo v. Scheck: D employed P as real estate agent through option contract, in which D was obligated to find buyer for D’s home. D found his own buyer and withdrew the offer to contract. P contends she had already begun performance and accepted the contract, so D does not have power to revoke the contractàPartial performance can make unilateral K enforceableàR.2d § 45 – Option contract created when offeree begins invited performanceà R.2d § 25 – Options contract limits offeror’s power to revokeà occur only through performance, and not through promise (i.e. the offer is for a unilateral contract), the beginning of a performance by the offerree creates an option contract. That is, once the offerree starts to perform, the offer becomes temporarily irrevocable. R.2d § 45(1)