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Contracts
University of Florida School of Law
Dawson, George L.

Contracts Outline
Dawson-Spring 2011
 
ENFORCEABILITY OF PROMISES
 
Statute of Frauds & Parol Evidence Rule
            Statute of Frauds
                        The following contracts must be in writing: land, sureties, big money,
outside of a year’s time.  Contract to do a big project that might take more than a year needn’t be written.
            Parol Evidence Rule
                        Once you put a contract in writing, you can’t contradict it. Once it’s
complete enough, you can’t change it.
 
Consideration           
Def = Bargain: each party gives up a legal right in order to obtain the one which
the other party gave up; contract must have consideration to be enforceable (only requirement, according to classical theory, else the “contract” is mere gratuity, donation – new rule requires more).  But if there is no consideration and the contract is completed, then it is enforceable (e.g. aunt in Dougherty gives nephew the money).
Dougherty v. Salt (aunt promises nephew $ though he didn’t promise
anything in return: court says not enforceable – 6)
Hamer v. Sidway (nephew gives up drinking, swearing: court says
he gave up a legal right –  enforceable – 46)
Completed contract is completed, whether the parties like it or not.
            Phillips v. Moor (parties contract to sell hay, hay burns down, buyer
repudiates contract: court says too bad, enforceable – 486)
Philosophy of classical contract theory (consideration is all you need), accepted
by First Restatement, rejected by Second:
                        Positivism – logic to law; there are natural axioms from which all legal
rules can be derived (future results can be obtained by looking at past decisions).  Opposite, modern view: law is organic, stemming from a sense of justice
                        Conceptualism – legal rules are basic concepts, abstract and mechanical. 
Opposite, modern view: rules should forward the cause of justice even if they are more complicated or mushy.
Mutuality       same as consideration
Conditions placed upon the acquisition of a good are only consideration if they
are the price of the good (put hand out for money ≠ contract)
Contract may be conditioned upon an event, but it is still a contract to perform
something if that event should occur.  Contract from date of pact.
Scott v. Moragues (deal to ship goods is on if the one party buys boat:
legal right give up = right to buy boat and not ship goods – 87)
Right to sue: giving it up is not consideration if one had no good case anyway
Illusory promises are unenforceable and occur when one party does not
actually promise to give up a legal right (e.g. one party can cancel anytime or will buy as much as it “wants”).  The latter are unenforceable because “as much as the party wants” may be zero (no consideration), or infinite (unconscionable).  This encourages speculation and is no good. But, such contracts can be made enforceable if buyer agrees to buy all it needs (can reasonably be measured from experience), or all it can sell (similar to “needs”), or only from seller (can’t buy from others when price lowers), or can only cancel by giving set number of days’ notice.
Wickham & Burton Coal Co. v. Farmers’ Lumber Co. (seller promised
to sell buyer all the coal it “would want to purchase” at a set price: not enforceable – 90)
Miami Coca-Cola Bottling Co. v. Orange Crush Co. (Miami was able
to terminate contract at any time: not enforceable – 93)
Hancock Bank & Trust Co. v. Shell Oil Co. (Shell could terminate on 90
days’ notice and had option to renew lease for 15 years: okay – 49)
Lindner v. Mid-Continent Petroleum Corp. (Petroleum could terminate on
10 days’ notice and had option to renew for 2 years: okay – 97)
Gurfein v. Werbelovsky (contract to ship plate-glass within 3 months &
buyer had option to cancel before shipment: shipper had
opportunity to bind buyer by shipping immediately, thus there was consideration, even though little – enforceable – 97)
Laclede Gas Co. v. Amoco Oil Co. (Laclede could only terminate 30 days
prior to an anniversary of contract signing and Laclede could physically only get oil from Amoco: locked in – okay – 102)
            At-will jobs: contested point whether promise to hire someone at a terminable-at-
will job has consideration (worker could be fired at any time).
Grouse v. Group Health Plan, Inc. (enforceable: promise of an at-will job
entails promise of opportunity to prove oneself, thus consideration:
also, estoppel trumps at-will nature of job: guy was hired, quit his other job, was fired at new job before he started work – 106)
                        White v. Roche Biomedical Laboratories, Inc. (unenforceable: at-will
nature of job trumps estoppel claim – 109)
Nominal consideration is not okay, under new rule as stated in Second
Restatement, except for options and loan guarantees (courts
split on whether it’s even required then).  It was okay under old rule, stated in First Restatement, except in transfers only of $ (nominal consideration fine – e.g. $1 for a car).
Harris v. Time, Inc. (guy opens envelope: okay consideration as his
opening the envelope mattered a lot to Time – 99)
 
Form
            Seals are not necessary today – contracts can be oral
            To deed a gift (without consideration), complete an inter vivos document of
transfer (donor, donee, gift, nature of interest, manifested intention to use document as means/instrument of gift)
            Or, establish a trust and make donor trustee and donee beneficiary
            Contracts should be read in realistic, not literal manner
Contracts have different types of terms:
                        Performance – price, object
                        Auxiliary – relate to performance (e.g. indemnity clause)
Reliance
Def:  A’s actions are different from those A would have taken had there been no
promise, and A gives up a legal right
            Old rule rejects reliance as consideration or substitute thereof.
Kirksey v. Kirksey (wife move’s to brother-in-law’s after he promises her
land and home, but she doesn’t promise anything: not enforceable as no consideration, despite reliance – 23)
Second Restatement calls contracts enforceable if there is reliance
            Promissory estoppel – promise w/ reasonable & foreseeable reliance, injustice
Feinberg v. Pfeiffer Co. (old lady retires after being promised monthly
payments for life, payments stop, she gets sick: enforceable – but
what if she’d gotten sick before payments stopped as she’d’ve quit by then anyway and not in reliance on payments? – 28)
Davies v. Martel Laboratory Services, Inc. (Co. promises woman top job
and $ if she gets MBA, then fires her: enforceable, reliance needn’t be “detrimental” in ordinary sense, but giving up legal right – 48)
Grouse v. Group Health Plan, Inc. (contested point: promise of an at-will
job entails promise of opportunity to prove oneself, thus consideration: also, estoppel trumps at-will nature of job in this case: guy hi

– 946)
                        Mattei v. Hopper (lease is subjective and consideration as good faith – 97)
            Factors to determine objective or subjective:
(1)   Language of contract
(2)   Ease of determining objective (market) standard
(3)   Forfeiture on behalf of one party, degree (yes = objective)
(4)   Unjust enrichment of one party, degree (yes = objective)
Pre-existing Legal Duty Rule
No legal right is given up when one promises to do what one was already obliged
to do – thus no consideration.  Doctrine meant to discourage parties from using coercion and duress to change pre-existing contracts, not to prevent them from ever changing them at all.
Duty required by law or scope of official’s authority (i.e. police)
            Gray v. Martino (police officer: might lead to better protection for rich as
cops try to get their rewards – 110)
Denny v. Reppert (bank employees: Restatement Second says employees
can claim reward – 112)
Duty required by contract
Lingenfelder v. Wainwright Brewery Co. (Lingenfelder contracted to build
a brewery for Wainright, but stopped when Wainright awarded another contract to another builder: Lingenfelder was bound to build brewery because he had contracted to do it – 113)
Duty to pay debt
Foakes v. Beer (old rule: courts would not allow creditors to accept
immediate partial payment of a debt and cancel the rest, as all of the debt was already owed – 116)
Modifications (performance terms) don’t require consideration under UCC (mere
good faith is required) or Restatement (when changed circumstances or reliance, so long as no duress).  But a modification that distorts the promisee’s incentives under their pre-existing legal duty might not be enforceable – see Jordan below.  Old rule required consideration for them.
Schwarzreich v. Bauman-Basch, Inc. (two parties destroy first contract
and write new one that is the same except that Schwarzreich now makes more money: enforceable modification – 128)
Angel v. Murray (Angel signed contract with city to do garbage at set
price for five years: city unexpectedly grew in size: Angel asked for more money: city refused: held, for Angel due to changed circumstances – 137)
Sugarhouse Finance Co. v. Anderson (Anderson owed Sugarhouse money,
agreed to pay less now to clear up debt, and got another loan from a third party:  had consideration when he took on new debt as he had legal right not to do so – 140)
                       
 
Michael Jorden Hypo (promising entire Bulls team more money if they
win NBA Champ doesn’t distort incentives for team to win, so okay; but promising only MJ more money for each point he scores would distort his incentives to win under his pre-existing legal duty to the Bulls as a team because now he’d want more points and not necessarily the team win)