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Contracts
University of Dayton School of Law
Hallinan, Charles G.

Contracts
Hallinan
Fall 2011
 
 
 
Contracts of a minor are voidable at the option of the minor. However, a minor is always liable for reasonable value of necessities. This liability is quasi-contract, and is therefore not a defense.
 
Halbman v. Lemke
            Issue: Must a minor who disaffirms a contracts for the purchase of an item that is not a necessity make restitution to a vendor for damage prior to the disaffirmance? No.
            • The minor may recover all consideration he has paid and must restore as much of the consideration as remains in his possession. The minor may disaffirm even if he cannot return the property.
 
Mental incapacity – restatement finds incapacity whenever a party is unable to act in a reasonable manner, and the other party has reason to know of the condition. A contract made by a person with a mental incapacity is voidable by him or his guardian.
 
Duress – Contracts are voidable bhy those who make a contract under duress.
Unlike fraud, the party who suffers duress is not mislead; she knows what she is doing, but has no choice, as her will is overcome. Duress is subjective. The coercion must originate with, and be applied by, the person receiving the benefit. Those who do not benefit as a result of duress are not liable.
 
Ecomonic duress – This only brings liability to A is A is for some reason the reason why B is in economic plight. Economic duress defense Requiresments:
(1)  the “wrong” was committed by one party
(2)  Their act placed the other in seriouse financial hardship
(3)  Other means to avoid the threatened loss were available
(4)  Party under duress was acting as a reasonable person is yielding to the coercion.
 
Undue Influence: One party is under the domination of the other & “unfair persuasion” is exercised by the dominant person. “The wrongful taking advantage of another’s weakness of mind, or in taking grossly unfair advantage of another necessities or distress.”
 
Odorizzi v. Bloomfield LL 116 – Susceptibility to undue influence
Facts: A was a teach who was allegedly a homosexual. His boss went to his house and stated that h must resign or he would tell everyone that he was a homosexual.
            Issue: When a party pleads weakened mental condition and overpersuasion that outcomes the will without convincing the judgment, has tht party created a prima facie case of duress, fraud, or undue influence? Yes (undue influence).
• No duress because the threat was not illegal. No fraud because a fiduciary relationship is not enough for fraud in this case.
• Yes, undue influence. Use of excessive pressure on someone who is unduely susceptible so that the judgment of one party is substituted for the judgment of the other. This is a modern version of undue influence.
 
In re baby M – LL 117 – Public policy and surrogacy contracts
Facts: P could not have kids so she hired D to have be a surrogate mother. D agreed to be paid $10,000 and give up the baby at birth. She gave birth, but was depressed about not having the baby. P gave the child back for a week, but then D refused to return the child.
Issue: Is the surrogacy contract valid? No. But custody to P under “the best interests of the child” theory.
• Baby selling has many potential consequences.
 
Duress and coercive renegotiation –
Batsakis v. Demotsis – LL 119 – Equal consideration not required for valid contract
Facts: P loaned D 50,000 dramache (worth $25) to move to the United States, but required repayment of $2,000.
            Issue: Will a court inqure into the sufficiency of consideration to determine whether the parties received equal value? No.
            • The trial court erred in giving judgment to P for less that the full amount of the note. The contract was valid at the time of the agreement (even though a large discrepancy).
            • Judgement is for P in the full amount. The courts will not examine the contract between the parties to determine whether the consideration received by each side was equivalent. Comment: The inqury of the court is narrow. Situations with a large discrepancy of consideration may be relevant where there are issues of capacity, fraud, duress, ect..
 
Adjustment to conracts
At common law, an adjustment to contract is not valid unless there is consideration. When there is a legal duty to pay, payment of a lesser some is not enough for the creditor to discharge the balance of the debt. The exception is when promise to discharge is made with intent to induce reliance, and it fact the promise relies on t hat promise. The such case, promisor may be estopped from enforcing the original contract.
 
Levin v. Blumenthal – LL 120 – Agreement to alter lease
Facts: P leased property to D for $2,100 for 1st year and $2,400 second year. After 1st year D couldn’t pay rent. D accepted the original per-month price, and didn’t pay the 12th month. P sued for the month of unpaid rent and the difference in price for the second year.
Issue: Is an agreement to alter terms of a lease enforceable if there is no additional consideration. No.
• In this case, there was no additional consideration given from P to D in return for promise by P to accept lower rent.
• Payment of a part cannot be recognized as satisfaction of the whole unless there is an agreement supported by consideration.
This general rule has been modified in certain states under the U.C.C. where “an agreement modifying a contract within the U.C.C. needs no consideration to be binding. This is subject to the good faiith requirement.
 
Performance of a preexisting Legal Duty as Consideration for Revised Performance.
            General rule – Performance of a preexisting legal duty is not sufficient consideration and therefore renders any contract modification base don such consideration unenforceable.
 
Alaska Packers’ Association v. Domenico – LL 121 – Threat of nonperformance of a contractual duty
Seamen (P) refused to perform unless paid more. D promised to pay more after the trip. Then didn’t pay. Judgment for D.
Issue: Does a promise to pay an increased wage in return for performance of an established contractural duty fail for lack of additional consideration? Yes.
• The party who refuses to perform, and thereby coerces the other party to promi

ebt is uncertain or in bona fide dispute)
 
Backley v. Headley – LL 125 – Alleged duress in accepting a lesser sum
Facts: Parties were in dispute of how much D owned to P. P claimed that he accepted $4000 for worked performed instead of $6000, since D knew that P would be ruined financially if P did not get some money immediately.
Issue: Can the issue of duress be solely dependent on the financial situation of the aggrieved party? No.
• Duress will not be found exclusively in D’s failure to promptly meet its pecuniary obligations.
• The alleged compromise could be invalidated because of lack of consideration.
• The Supreme Court heard the case and determined that “when one party knows when one party acts unfairly or oppressively in the attempt of getting more favorable terms, the terms may be rendered void.
 
Discharge by order and satisfaction –
And “accord” is an executor contract to discharge a contractual duty or a duty to make compensation.
            An accord only suspends the promisee’s right to enforce that duty
(i)                Check rendered as “payment in full”
A owes B $1000. B send check for $500 marked as “payment in full.” What happens when B chashes the check?
• If the debt is liquidated, there is no accord and satisfaction. Hence, D can recover the additional $500.
• If the debt is in dispute, the cashing of a check is considered good consideration. (Crossing out the words “payment in full” does NOT do the creditor any good)
• Exception – U.C.C. Under the U.C.C., the creditor can notify the party that the monies are “still in dispute”
 
Marton v. Jenson – LL 127 – Discharge of disputed debt
Issue May a payee avoid a “pay in full” condition on the check tendered as “final payment” of a disputed debt by adding the words “not full payment” to the check before cashing it? No.
• When there is unliquiadated claim or a bona fide dispute over the amount due, such a check will constitute accord and satisfaction if cashed by the creditor.
• Adding the words “not payment in full” does nothing eliminate the legal effect of the “payment in full” condition.
 
Rewards Earned in Performance of an Official Duty
If A says “$100 reward to find my cat” and a piloce officer finds the cat, he cannot recover the $100 reward if the recovery was made when he was working in his official duty. Restatement says its not sufficient consideration.
            • This would not be the case if the act required the officer to do something outside of his official duty.