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Contracts
University of Connecticut School of Law
Siegelman, Peter

CONTRACTS FINAL – PROFESSOR SIEGELMAN (FALL 2017)

BASIC PRINCIPLES OF CONTRACT LAW

Definition of Contract: Rest. § 1
Uniform Commercial Code (UCC) Article 2 – rules governing contracts for the sale of goods

PROMISE

Hawkins v. McGee (“hairy hand”)

Question whether a contract exists submitted to jury
Holding: Default Remedy Rule – Expectation Damages

No pain & suffering à courts assume all pain he felt is what he would have felt
Was part of the consideration for letting doctor practice experiment

Promises only enforceable if bargain for

Unilateral Contract: only one party promises to perform some action/performance in the future
Bilateral Contract: both parties promise to perform some action in the future

CONSIDERATION & BARGAINS

Rest. § 17: Bargain à formation of a K requires a bargain in which there is a manifestation of mutual assent and a consideration

Rest. § 71-81: Consideration à promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for the promise

Consideration = essential distinction between promises that are & aren’t worthy of court protection
Requires:

A performance (or promise of future performance) AND
Performance be bargained for – (essentially buying something with your promise)

Can be future promise or money

Rest. § 74: Promise to Forbear

Involves surrendering a claim or defense which proves to be invalid – not good consideration unless:

Claim/defense is doubtful because of uncertainty as to facts or laws (or)
Believes the claim/defense may be fairly determined to be valid

Execution of written instruments must be bargained for if it results in surrendering a claim

Hamer v. Sidway (promise to not do things for money)

Facts: Uncle allegedly promising nephew money à cestui que trust
Executory Promise = a promise to be executed in the future
Defendant’s argument – no consideration and promise benefitted
Holding: Benefitting doesn’t matter à promise restricted his freedom so consideration = valid

Both parties gave up something to get other to fulfill bargain

Langer v. Superior Steel Corp. (monthly payments to ex-employer)

Facts: pension (monthly payments) granted upon satisfaction of competition clause
Issue: whether letter created a gratuitous promise (with condition) or enforceable contract
Holding: Accepting the money – defendant implicitly accepted the imposed conditions

Restrained from doing something which one had a right to do (find employment elsewhere)

In Re Green (adultery- promised to pay girl)

Woman part of an affair wants $$ from married man she had affair with – claims that man promised to marry her when he got divorced and other things ($1,000/month, $100,000 life ins. Policy, and rent for 4 months)
When the intimacy stopped they executed a written instrument under seal (alleged to be binding) à foundation of the claim for consideration (man gave her $1 to show consideration of the agreement)
Issue: whether past illicit intercourse is consideration
Holding: man intended the agreement but lacked consideration

Seal is now today evidence of consideration – not valid substitute for consideration
$1 consideration is too nominal to support $100,000 executory promise
Public policy issue: promise was to divorce wife at the time

Mills v. Wyman (sick seaman taken care by nurse)

Wyman sick at sea and taken care of by nurse – defendant wrote a letter promising to pay for expenses
Verbal promise (without consideration) cannot be enforced by action – only a “thank you”
Issue: Is moral obligation a sufficient consideration to support a promise?
Holding: No – promise did not have a legal consideration (ruled for defendant)

No inducement – services already happened
Moral obligation ≠ consideration

Nudum Pactum: promise to give gift (not enforceable by law)
Ways to make gift binding à (1) give gift now, (2) put in will, (3) rely on social norms (public promise)

Levin v. Blumenthal (financial crises à can’t pay rent)

Lease retail store for 2-year contract with option to renew for additional years
Parties agreed to lower rent to $175 for both years instead of $200 for the second year
Defendant did not renew and did not pay last month’s rent
Holding: promise to do what the promisor already bound to do = unreal consideration (responsibilities same)

Fear of falling into bankruptcy ≠ consideration
New agreement to reduce rent = no valid consideration (no legal obligation)

Preexisting Duty Rule: being bound to do what originally obligated to do
Also related to DURESS

Alaska Packers’ Assoc. v. Domenico (K to work on ship à terms changed)

Facts: original K to pay $50 for services but sailors refused to original terms & demanded increase

Company agreed to new contract due to circumstances – duress
No consideration for a modified contract that arises from coerced promise while performing what one is already obligated to perform = preexisting duty rule

Holding: No consideration – new K based on services already contracted to do in 1st agreement

Company gained nothing from new K à did not bargain for exchange
Unjustifiable advantage à responsibilities did not change

GIFTS & CONDITIONAL PROMISES

Conditional nature of promise does not guarantee consideration à promisee’s satisfaction of condition might not induce promisor’s promise
Three ways a condition does not create consideration:

1.) condition might establish timing for gift
2.) condition might indicate manner by which promise may obtain a promise gift
3.) condition might restrict scope of a gift promise without inducing promise

GIFTS – Conditions v. Bargains

Context of why a person needs condition fulfilled = important
Mere presence of condition ≠ existence of consideration

Kirksey v. Kirksey (wanted family to move) – BAD LAW!

Facts: widow invited down to Alabama by brother in law to live on his land
Issue: is a gratuitous promise enforceable where party has relied on it and led to loss & inconvenience?

Plaintiff must argue defendant is trying to buy their presence (inducement)
Defendant saying that land use = gift

Holding: No – loss & inconvenience of moving to defendant’s land ≠ sufficient consideration

Promise was a mere gratuity

BAD LAW à would be enforce because of promissory estoppel (consideration substitute)

Allegheny College v. Nat. Chautauqua Cty. Bank of Jamestown ($$ given to college)

Bargain à college must not be able to do something it could have done before gift was made

Restriction = must be detriment upon receiving gift
Defendant placed condition on gift – must be used for Christian fellowship

Holding: Was a bargain à naming fund after defendant = sufficient consideration

Acceptance of money leads to duty to perform conditions of gift
Quid Quo Pro: “something for something” (quality does not matter)
Consideration – naming of the fellowship in her honor

Notes:

College has obligation to promote & maintain scholarship
Consider if condition will be a benefit to the promisor
Dissent: offeror termed it as a gift (school should not receive $$)
Reliance – did the college’s reliance on the promise hurt the institution

ILLUSORY PROMISES

Rest. § 77: Illusory Promise – not consideration if promisor has choice of alternative performance unless:

Each alternative performance would have been consideration if it alone had been bargained for
One of the alternative performances would have been consideration and appears to

reements to expressions of commitment

§26: willingness to enter into a bargain is not an offer if – offeree knows or has reason to know offeror does not intend to make it a bargain until he has made a further show of assent
§27: intent to adopt a written memorial of manifestations of assent sufficient for K do not prevent K to be formed by unsigned/oral, but circumstances may indicate agreements are merely preliminary

Rest. § 33-34: Certainty – concerns when, even though both parties express a clear desire to form K, the terms of agreement are too indefinite or uncertain for courts to identify a contractual obligation

Note: U.C.C. § 2-305: Open Price Term

Sometimes U.C.C. and Restatement generate different outcomes
If parties agreed to K and no price settled – default rule is a reasonable price at the time
K can be cancelled by party if other party was supposed to fix a good-faith price, or they can themselves fix a reasonable price

Embro v. Ball-Co (letter of intent and price quote)

Facts: appellant sent appellee a letter of intent to buy assets – “Empro’s purchase subject to formal agreement and satisfaction of other conditions”

Appellant tried and failed to get a restraining order obliging Ball-Co to only sell to it à Rest. § 27

Rule of Preliminary Negotiations – enforceable if full agreement showed that the formal K was to be nothing but a memorial of an agreement already reach
Holding: neither the text nor structure of the letter suggests that it was to be a one-sided commitment à option only bound Ball-Co
Factors that indicate deal wasn’t final:

Two instances of “subject to” language
General Terms & Conditions language – not everything figured out
Empro gave itself multiple ways out of agreement (illusory in nature)
$5,000 refundable à potential ability to renegotiate

International Casings Group v. Premium Standard Farms (pork producer)

Facts: ICG (buyer) wants to enforce a preliminary injunction – force seller to sell at current price
Holding: ICG’s motion granted à K = valid

Absence of postponing language (“subject to”)
Presence of important & agreed-upon details (emails show details figured out – signature only thing left)

Court found: (1) ICG is more likely to succeed on merits of claims and (2) ICG will suffer greater harm if injunction not granted à public interest factor

Joseph Martin Delicatessen v. Schumacher (rental K – improvements made)

Lease agreement contained agreement to agree provision over future price
Tenant wants specific performance to compel landlord to extend lease at market rate or another reasonable rate
Holding: agreements to agree without specifics = unenforceable (too vague)

Improvements made by tenant = free to landlord
U.C.C. = more tolerant on agreements to agree – court could determine price
Agreement to Agree = unenforceable à “will agree upon”

Dissent: if tenant can establish its entitled to renewal under lease then presence of provision of renewal “at rentals to be agreed upon” would not prevent judicial intervention to fix rent at reasonable rate