CONTRACTS DAVIS FALL 2016
Basis for Enforcing Promises
What is a contract? – a promise that the law will enforce
Restatement of Contracts (2nd) § 1- Contract Defined
A promise or set of promises for the breach of which the law gives a remedy or performance of which the law in some way recognizes as a duty
Promise— an undertaking of an obligation to do something in the future
Express Warranty—an affirmation of fact or description of the goods
Hawkins v. McGhee-
(Ru) Does not matter that the word promise is not used; just that one manifests the intent as perceived by the other person (Promises made by doctors not binding unless in writing)
Bayliner Marine Corp v. Crow—
(Ru) Statements made in the “prop matrixes” did not constitute an express warranty or enforceable as a contract
UCC 2-313(2) Express Warranties by Affirmation, Promise, Description, Sample.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.
What’s a good?
Anything you can fit on the back of a truck (Davis words)
All things movable at the time they are identified as the goods to sold under the contract.
Three Protected Interests
Expectation Interest – “undo breach” an award, just enough, to make the promisee as well off as actual performance would have made her
Reliance Interest – reliance damages put the promisee “in as good as position as he would have been in had the contract not been made”
Restitution Interest – promsee’s “interest in having restored to him any benefit that he has conferred on the other party.”
Consideration as a Basis for Enforcement
Fundamentals of Consideration
Basis for enforcing a contract – something (of value) (such as an act, forbearance or a return promise) bargained for and received by a promisor from a promisee; that which motivates a person to do something especially to engage in a legal act
***Consideration is a GOOD ENOUGH THING that is BARGAINED FOR***
Forbearance (refraining from a right/obligation)
Change in legal relationship
Anything else not on list of N.G.E.T.
Illusory promise or gratuitous promise
Bad faith forbearance
Hamer v. Sidway—
(Ru) In order for a contract to be enforceable, do not look at the relative value of the things exchanged in determining if it is a good enough thing, motive is more looked at than the actual value.
(Ru) Giving up a legal right is considered consideration; do not look at the value of the thing, it is enough that something was bargained for and performed fully in good faith
Restatement § 79 –Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of
a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or
equivalence in the values of exchanged; or
“mutuality of obligation”
The Requirements of Exchange: Action in the Past
Feinberg v. Pfeiffer –P told that she would get $200 a month for the rest of life when she decided to retire, worked 2 more years, retired, D paid P for 4 years, new president won’t pay because payments were a present not a contract.
General (Ru) – A pure token exchange has to be something sought in exchange not a mere formality; can seek in exchange for something you have already received –past work is not consideration.
Mills v. Wyman – Father of deceased son, promises to pay expenses incurred by Mills for caring of his ill son for 2 weeks.
General (Ru) – Moral obligation is N.G.E.T.
Restatement § 86 –Promise for Benefit Received
A promise made in recognition of a benefit previously received by the promisor from the promisee is binding extent necessary to prevent injustice.
A promise is not binding under Subsection (1)
If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or
To the extent that its value is disproportionate to the benefit.
Moral Obligations Exceptions: (promises enforceable without consideration)
Initial agreement was entered into voluntarily
Arises out of prior bargained for exchange
Material and substantial benefit
The Requirement of Bargain
Kirksey v. Kirksey—D brother died, sent letter to video (P) to come live with him, P did after 2 years removed her from property.
General (Ru) – Gratuitous promises are not enforceable; motives decides whether it is gratitutious promise or not, there has to be a bargain. (Ru) A bargained for exchange is required for all contracts, and merely changing a position in reliance on a statement is insufficient to impose contractual liability in absence of any bargain. Today this 1845 case would probably be decided differently because of reliance and promissory estoppel.
Lake Land Employment Group of Akron, LLC v. Columber—D at will employee for P for 13 years, D signed non-complete clause in 3rd year of work, after D left company violated clause.
General (Ru) Modification of contract is enforceable if there is consideration for modifying the contract. (Ru) Continued employment is sufficient consideration for a non-compete agreement.
Employee handbooks – usually enforceable, treated like part of contract, modification to handbooks usually enforceable if given enough notice and not too radical a change.
Rewards – may be accepted by anyone who performs the service called for when the acceptor knows it has been made and acts in performance of it.
Employment at Will and Good Faith Termination
Let person operate long enough to get initial investment bank
Give enough time for person to rearrange affairs.
Promises As Consideration
Bilateral Contracts – contracts in which both parties make promises
Restatement § 75 Exchange of Promise for Promise
A promise, which is bargained for, is consideration, if, but only if, he promised performance would be consideration.
The executory exchange – “the promise is enforced by virtue of the fact of the bargain witho
Wright v. Newman – P seeking to recover child support for her children, despite the fact that D is not the father of her son. D knew he was not the natural father, but he undertook the commitment for 10 years. General (Ru) – Where a gratuitous promise of parental support is made, and it is detrimentally relied upon it is enforced under equitable estoppel.
Doctrine of Promissory Estoppel – principle that promise made without consideration becomes promising (1) promisor attends or can reasonably expect reliance (2) party actually relies on promise, and (3) nonenforcement can cause injury or detriment.
Factors for Promissory Estoppel:
Promisee did rely on promise
It was reasonable under circumstances
Promisee suffered a substantial economic detriment as a result of reliance
Injustice can only be avoided by enforcement of promise
**Appropriate remedy is reliance loss and not expectation loss
Restitution As An Alternative Basis for Recovery
Does not cover officious intermeddler: services volunteered and performed or relationship at all.
Rationale: If he could have contracted for it if he wanted it.
Callano v. Oakwood Park Homes Corp – Person bought a house and contracted with Gardner for shrub, person died before services were paid for. Gardner (P) sues home developer for recovery.
(Ru) P cannot use quasi-contract or theory of unjust enrichment to substitute a known promisor or debtor for another. Quasi contract will only be applied where no other remedy exists.
Contracts implied by law, or constructive contracts are a class of obligations which are imposed or created by law without regard to the assent of the party bound, on the ground that they are dictated by reason and justice.
No consent or mutuality
Intent of the parties are totally disregarded.
Actual- the agreement defines the duty
Quasi- the duty defines the contract
Duty is based on theory of unjust enrichment.
Normally done where D from P and under such circumstances has received a benefit, P should be compensated.
Cotnam v. Wisdom – P seeking recovery of payment from estate for performing a difficult surgery in an attempt to save the person’s life, surgery was not successful.
General (Ru) Courts find implied contracts to pay for medical services rendered to persons who are not capable of contracting. Fundamental public policy at foot here, we want professionals to use their expertise to help others, the possibility of efforts being successful is the benefit.