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Contracts
University of Connecticut School of Law
Siegelman, Peter

Formation

Two elements (RST 17):
1. Manifestation of mutual assent
2. Consideration (RST 71)
a. Performance is sought be promisor in exchange for the promise AND
b. Given by promisee in exchange for the promise bargained for

Peppercorn will do, provided it is not nominal, but made at least in part to induce K.
Valid consideration must give rise to some legal detriment. (e.g. forebearance, Hamer v. Sidway, Uncle Willy). No detriment where there is a pre-existing duty (Policeman solves crime, is not entitled to reward).

In absence of consideration, the promise is illusory. Rarely found by courts, since the idea of Contract Law is to facilitate K formation, not throw a K out on a technicality. Lake Land v. Columber (pg. 39, dodgy non-compete agreement binding).

Key question is whether or not there was a bargain. Hence past consideration is no good, nor is consideration of which Party B was not aware (e.g. reward for finding wallet).

BUT, in Board v. Burgess (pg. 54, option to buy land), Court held that $1 in consideration is binding only if actually paid (or at least tendered). This is the old view. On the modern view, a signed statement that recites the payment of consideration will form an option K (RST § 87). For any other K, consideration must in fact be paid.

Courts may read in an implied promise as consideration if justice requires (Wood v. Lady Duff Gordon – exclusivity agreement is a binding contract because agent implicitly promised to use reasonable efforts to market the designs).

Infancy, mental incompetence or intoxication can come into play (em. pg 133-34)

Mutual mistake

on a “basic assumption” with a “material effect” will invalidate the K. (e.g. two ships Peerless), unless the risk of mistake can be allocated to the injured party. Unilateral mistake will also void a K if the beneficiary is at fault for not correcting the loser.

Modification without consideration (RST 89) is binding if:
1. Unforeseen circumstances AND
2. Fair and equitable

Modification without consideration (UCC 2-209) – more complex, must conform to Statute of Frauds (e.g. Good Faith, legitimate commercial reason, etc.)

No Oral Modifications clause under UCC is enforceable by a merchant against a consumer only if separately signed

Partial payment:
Where debt is reasonably disputed, negotiated settlement is binding because each side gives up their legal claim as consideration
Under UCC §3-311, a creditor cashing a check offered “in full payment” is bound, even if it is cashed “under protest.”

Reliance and Promissory Estoppel

Even in the admitted absence of consideration:
1. A promisee may incur reliance damages
2. The promise may be enforceable to prevent injustice if the promisee would be harmed by its withdrawal. Promissory estoppel can kick in if:
a. The promisor should reasonably expect to induce action or forbearance, AND
b. The promisee has reasonably relied on the promise, though not necessarily to their detriment (yet). Cohen v. Cowles (pg. 66, anonymous source revealed).
RST 90; Ricketts v. Scothorn (pg 61, Granddaughter quits job)
3.

eement – OK if not fraudulent).

Note that Mirror Image Rule can create free options – Party A can choose to treat an unwelcome acceptance as an acceptance, or try to argue that it is a counter-offer.

Offer expires (RST 36):
1. Upon receipt by offeror of rejection or counteroffer (RST 40)
2. At time specified in the offer
3. After a reasonable time
4. On receipt by offeree of notice of revocation (RST 42)
5. On death or incapacitation of offeror or offeree
6. If a condition of acceptance is not met

Mailbox Rule: Acceptance by default takes effect when mailed (RST 63) – not when received – except for options contracts. Discussion pp 116-118.

Acceptance is by performance in unilateral contracts. Offer is temporarily irrevocable when performance begins. Upon full performance, the contract is formed and Party A is bound. Party B must inform A in reasonable time that performance has taken place.

Misunderstanding (RST 20)

If Party A and Party B have the same interpretation, no problem
If Party A has reason to know Party B’s interpretation, B controls
If neither party knows the other’s interpretation is materially different, no K (no manifestation of mutual assent – a nod to the older subjective model of formation)