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

CONTRACTS

DAWSON

FALL 2013

PROMISE (p.1-25, 59-73)

Restatement 1, 17, 71, 79

§ 1 Contract Defined

§ 17 Requirement of Bargain (manifestation of mutual assent)

§ 71 Requirement of Exchange; Types of Exchange

(1) To constitute consideration, a performance or a return promise must be bargained for.

(2) A performance or return 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 that promise.

(3) The performance may consist of

(a) an act other than a promise, or

(b) a forbearance, or

(c) the creation, modification, or destruction of a legal relation.

(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

· There is no bargain so there is no consideration.

· “Value received”- phrase used to show some consideration (value) has been given without stating exactly what it was

· You can’t bargain for something that already happened.

· A promise that is given in recognition of some act in the past is not enforceable for lack of consideration.

Dougherty v. Salt

· Facts: Aunt gives boy note “you have always done for me and I sign this note for you for $2,000” She dies. Executor refuses to provide the money.

· Rule: A promise with no consideration is an executory promise and it is unenforceable.

· A promise that is given in recognition of some act in the past is not enforceable for lack of consideration

· Court of appeals is the highest court in NY.

· Bargain is find to exchange of promises.

Schnell v. Nell

· Wife made inoperative will giving 200 to each of 3 people, Schnell promised to pay in exchange for a penny, then refused to pay; held one cent not supportive of consideration, only morally needed to fulfill wife’s wishes.

· Rule: Nominal Consideration is consideration in form rather than substance à will not create an enforceable K

· Contract stated that in consideration for the husband’s promise to pay, the heirs would give him one penny. The husband did not pay as stated in the contract and the heirs filed suit. The court reversed and found that the consideration of one cent would not support the husband’s promise because it was a mere exchange of money and it rendered the contract unconscionable. The court found that while the husband may have had a moral obligation to pay because he loved his wife and wanted her wishes fulfilled, his moral obligation was not consideration.

§71- in order to have a consideration, a performance must be bargained for. Performance is bargained for if it is sought by the promisor in exchange for his performance.

moral consideration= Because he loved his wife and wanted her wishes fulfilled, his moral obligation was not consideration. The love and affection of his deceased wife is not a consideration.

Donative Promises – promises made for AFFECTIVE reasons (love/friendship)

· Promises to make gifts are NOT enforceable b/c there is NO consideration

o Both parties must be seeking something

o Contract law intended to protect flow of business, gifts not a part of commercial aspect of business

CONSIDERATION

Definition: §71, “Bargain Theory”

To constitute consideration, a performance or a return promise must be bargained for.

To be bargained for, promise or performance must be sought by promisor in exchange for promise and given by promisee in exchange for that promise. (or third parties)

Performance may consist of:

An act other than a promise

A forbearance

The creation, modification, or destruction of a legal relation

Hamer v. Sidway

· Facts: Uncle promised to pay nephew 5,000 to not smoke, swear, or gamble until he was 21, nephew presented claim to executor and was denied; Held: Nephew is entitled to the money)

· Rule: A waiver of any legal right at the request of another party is a sufficient consideration for a promise

· There is consideration here b/c the nephew gave up the right of committing vices, which is what the uncle was seeking; the uncle benefitted b/c he got what he wanted.

· forbearance of rights is a valid consideration

· The mere abstention (imtina) from a permissible legal conduct is sufficient consideration to make a promise based on that forbearance (bir hakki kullanmaktan vazgeçme) a valid contract

· consideration b/c regardless of health/personal benefit the nephew suffered a legal detriment through his forbearance.

o §79(a) does not require benefit to promisor or detriment to promisee to make a bargain.

Ø §79 – a bargain does not necessarily have to include a loss and a gain

o “If the adequacy of consideration is met, there is no additional requirement of a gain, advantage, or benefit to the promisor or a loss,

Ø The promisee does not have to promise; rather he can forebear to act, among other things

(§71-3)

Ø §17 – a contract requires a bargain and mutual assent

Ø §71 – there must be a performance or return promise (consideration) for a bargain to exist; the main phrase to look for in this section is “if it is sought”

Ø §73 – Performance of a legal duty to a promisor is not consideration

Hamer would probably not come out the same way today since those vices are now illegal for minors. Even though he might drink and smoke, he is not supposed to in today’s society; therefore, the nephew is already obligated to abstain, so he can’t offer that as consideration (forbearance)

Willness of promisor to perform promise that has been sufficient promise to legally enforceable? mere intent is not enough.

Batsakis v. Demotsis

· Facts: Man loaned $25 to a woman having financial difficulties and made her sign a promissory note to repay him 2,000 plus interest; Plaintiff agreed to pay the equivalent of what she received but did not want to pay what she agreed to pay. Held: Contract was enforceable and Demotsis is responsible to pay full amount) (There is no requirement of an equivalent in value of consideration, and the inequality will not void a contract.)

· Rule: Mere inadequacy of consideration will not void a contract.

· §79 says that there is no additional requirement of gain, advantage or loss; or equivalence in the values exchanged

· Parties are generally held to the resulting agreement, even though one has taken advantage of the others adversity, as long as the contract has been dictated by general economic forces

· Without evidence of fraud, duress, or misrepresentation, the Court is unwilling to void the contract merely because there may be insufficient consideration.

Void: there is no agreement was

Voidable: there is an agreement but option to be avoidable.

§175 – Duress – if a party’s assent is induced by an improper threat where the victim has no reasonable alternative, the contract is voidable.

· There is an improper threat and no reasonable alternative the victim can walk away from it.

· Gun pointed to the victim no contract is formed

§176 – defines when a threat is improper

· In Batsakis, an unequal exchange is not likely to be improper under the terms of §176(1)

· It might be argued that it is improper under section 176-2, but the law would probably not characterize the details of this contract to be under duress as defined in §176.

· If there is no reasonable alternative and he has power

RELIANCE (p. 25-43)

· Moral obligation to keep a promise is not sufficient ground for concluding that there is a legal obligation to keep

s not a bargain.

· Rule:

o To be legally enforceable an executory promise must be supported by sufficient bargained for consideration.

o Reliance does not impose contractual obligation in the absence of a bargained-for exchange.

· it covers under §90?

Feinberg v. Pfeiffer

· Facts: 100 years later than Kirksey. Company decides to offer 50% pay for life upon retirement to current employee with no strings attached (i.e. no consideration). They paid for 7 years then discontinue.

· Plaintiff sought monetary damages, arguing that defendant was contractually obligated to pay monthly pension benefits upon her retirement.

· Defendant argued that it was not obligated, because there had been no consideration for its promise to pay plaintiff monthly pension benefits, and that as such, the promise to do so was nothing more than a promise to make a gift.

· The court found that plaintiff relied on defendant’s promise to pay monthly retirement benefits for her life in making her decision to give up her gainful employment, and noted that as such, defendant was contractually liable for the payments under the doctrine of promissory estoppel.

· She didn’t forbearance from anything. She is an at will employee. She could have fired tomorrow. She did not have to continue work.

o Employment at will doctrine – if you do not have a contract to work for a fixed period of time – employer can fire you or you may quit at any time without cause

· Rule: A promise that the maker knows is likely to be relied upon by the promisee and is so relied upon is enforceable under a theory of promissory estoppel

o Even though there was no bargain or consideration, the plaintiff recovered b/c of reliance. Her past services are not relevant b/c past services are not a valid consideration. Therefore, the court applies the alternate theory of promissory estoppel to reach the desired outcome.

· This doctrine has been described as that of “promissory estoppel,” [13] as distinguished from that of equitable estoppel or estoppel in pais, the reason for the differentiation being stated as follows; In other words, he relies on a promise and not on a misstatement of fact (equitable estoppel); and the term ‘promissory’ estoppel or something equivalent should be used to make the distinction.

· The court in Missouri based three grounds, but these grounds (pg 35) are non-sense.

Restatement § 90. Promise Reasonably Inducing Action or Forbearance:

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

ü Elements:

§ Promisor made promise expected to be relied upon (reasonably expect forbearance)

§ Reliance

§ Enforcement

§ Remedy

· money

· expectation damages

· reliance damages

ü § 90 teaches that reliance may make a donative promise enforceable.