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Contracts
University of Florida School of Law
Harrison, Jeffrey L.

Contracts – Fall 2014 – Professor Harrison

1. Introduction

a. Contract law = law of enforceable contracts

b. Gratuitous Promise – “free promise” I’ll give you my book, not a contract because of no consideration

c. Rescind a contract – “undo” the contract or cancel it

d. Types of law

i. Restatement (RS) – 3 volume book that has summarized the rules of contracts *not the law, only persuasive to CTs*

ii. Uniform Commercial Code (UCC) – Contract law as it relates to only the sale of goods; if issue not handled by UCC à go to Restatement

iii. CISG – sale of goods between parties in different countries

e. Offer à Acceptance à Consideration à Contract Formed à Interpretation à Parties Perform à If no performance à either one party gets a remedy or there is a valid excuse for non-performance

2. Types of Contracts

a. Unilateral

i. Promise for performance

ii. Finishing is considered acceptance of the offer

iii. There is no obligation to finish

b. Bilateral

i. Promise for promise

ii. Beginning performance (or promise) is acceptance

3. Remedies

a. Non-monetary remedy

i. Specific Performance – CT orders party to do what was promised

1. Usually ordered by CT if money cannot replace it

a. Painting, mother’s necklace (family heirloom)

b. Unless it requires supervision, CTs don’t have resources to supervise a specific performance

b. 3 Types of Monetary Remedies

i. Expectancy – Put P in position they would have been if K was not breached

1. Being put in as good a position as one would have been in had the contract been performed

2. Ex.: I would have spent $100 for a TV worth $200; so owed $100 ($200-$100)

ii. Reliance – Put P in position they were before K was made

1. Being reimbursed for loss caused by reliance on the contract

2. Being put in as good a position as one would have been had the contract not been performed

3. Ex.: Planning on buying a car, bought $100 on a car cover that can only be used for that car – owed $100

iii. Restitution – Give back what P actually gave to the other party

1. Being restored any benefit that the other party conferred

2. Ex.: made payment towards car, other party breached and did not sell, so owed back that payment

3. US Naval Institute v. Charter Communications (1991) US 2nd Cir. App.

a. Facts: P & D – licensing agreement; D violated agreement

b. Held: Reversed part of damages; P not owed punitive damages, only compensatory

4. Consideration

a. Both parties to give up something to be enforceable; what one party gives up and another is getting (mutual reciprocal inducement)

i. Does not need to be even; peppercorn theory; CTs don’t look at the adequacy of consideration

ii. Needs to be bargained for; not two unrelated promises

1. If not bargained for, may be seen as a gift = no consideration

iii. Consideration can be:

1. An act other than a promise

2. A forbearance

3. The creation, modification, or destruction of a legal relation

b. Still consideration if one party is quitting something bad for them (alcohol, tobacco, gambling); party had a legal right to do these things & gave them up for the K

i. Hamer v. Sidway (1891) CA NY

1. Consideration bc even though quitting was good for him, he had a legal right to do those things; consideration does not mean that one party’s deal is hurting them

c. Invalid claim can still be consideration, if made in good faith

i. RS §74 – Settlement of Claims

1. Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless:

a. The claim or defense is in fact doubtful bc of uncertainty as to the facts of the law; OR

b. The forbearance or surrendering party believes that the claim or defense may be fairly determined to be valid

ii. Dyer v. National By-Products, Inc. (1986) SC Iowa

1. P’s forbearance (would not sue) claim is consideration, if P acted in good faith and truly believed he had a claim, even though he did not have an actual claim

iii. Claim of good faith needs to be decided by jury

d. Not consideration

i. If you don’t have a legal right

ii. Already contractually obligated to do it

iii. Past services – usually not considered valid for consideration; can’t bargain for someone to do something that has already been done

1. Feinberg v. Pfeiffer Co. (1959) CT Appeal Missouri

a. $$ was a gift, and D could stop payment at any time, her past work was not consideration for a contract

e. Consideration Substitutes (Exceptions):

i. The Material Benefit Rule (Promise v. Prior Benefit Conferred)

1. CL recognizes 3 exceptions to rule about past consideration

a. A debt barred by a statute of limitations

b. A debt discharged in bankruptcy

c. A promise to perform a previously voidable obligation

2. Material Benefit Rule – Re. § 86

a. A promise made in recognition of a prior benefit may be enforced “to the extent necessary to prevent injustice”

b. Material benefit + promise to pay = consideration

3. K Implied by law = quasi-contract created under law of restitution to prevent unjust enrichment

a. No real promise or voluntary consent, just a duty imposed by law to pay for the value of a benefit conferred on the D by the P so as to avoid an inequity (good Dr)

b. Create K and obligation to pay based on benefits conferred = that you should pay for

c. ONLY remedy is restitution

4. K Implied in Fact = based on conduct (barber)

a. Don’t actually say anything, but there is still a K

5. Express K = evidenced by words (writing/oral)

ii. Promissory Estoppel – Re. § 90

1. Defined: a promise that foreseeably induces reliance on the part of the promise, may be enforced despite the absence of consideration.

2. Elements

a. A promise

b. Justifiable and detrimental reliance on such promise by the promisee that

c. The promisor should have expected to cause the promise to change her position by taking some action or forbearing some act

d. Enforcement is necessary to prevent injustice

i. Distinguished from Equitable Estoppel

e. Equitable estoppel is a defense that exi

at a person or persons

iv. Invite acceptance

v. Create a reasonable understanding that upon acceptance a contract will arise

e. Why is it an offer?

i. Reasonable person in offeree’s position would believe, based on the language used and all of the surrounding circumstances, that the offeror intends to be bound

ii. Contract formation occurs upon an apparent “meeting of the minds” à Mutual assent

iii. If Offeree knows or has reason to know that offeror is not serious – through personal knowledge or inference from other circumstances – then offeree does not have power of acceptance bc there is no offer

f. Not Offers

i. Price quotes

ii. General public advertisements

1. Exception: $50 reward for lost turtle; only one person can return the turtle, so owner is bargaining for the act of having turtle returned [“first come, first serve”]

iii. Communication containing the terms “subject to” or “condition”

iv. Letters of intent: generally no more than set the stages for negotiations and therefore the letter should not be thought of as binding

v. Unsolicited goods: recipient may keep the goods w/o obligation to pay

g. Termination of the Offer

i. Rejection

1. Saying “No thanks”; once it’s gone, it’s gone forever

ii. Revocation

1. Offeror retains control over the offer until acceptance; can revoke or withdraw at any time

a. Direct revocation: Hear it from offeror

b. Indirect revocation: Hear reliable info from other that offer is gone (Dickinson v. Dodds)

iii. Lapse

1. An offer lasts as long as the offeror says it will, assuming it was not already terminated by rejection or revocation

2. Offer stays open for reasonable time [no longer than 3 months]

3. BUT offer can be revoked anytime until acceptance, regardless of what offeror says (e.g. “open until 9am”)

iv. Death (or incapacity)

1. If offeror dies (or is adjudicated incompetent), then then offer terminates automatically

v. Counter-offer

1. Once counter-offer is said, the original offer is gone

vi. Revocation by Publication – revoked when published (if the offer was made to multiple persons in some publication then a revocation published in the same way is effective, regardless of whether or not a particular offeree read it or not)

vii. General rule is that the offer must be revoked in the same way that it was offered, ex: teacher offers students reward for turning in cheaters, must then announce to students that the reward was revoked