Chapter 1- Simple Donative Promises, Form, Reliance, And Past Benefit Conferred
Section 1. Simple Donative Promises
Donative promises are made for affective reasons
Dougherty v. Salt
The guardian of a little boy sued to recover $3,000 from a promissory note given to the boy by his Aunt before her death.
A promise with no consideration is an executory promise and is unenforceable.
Restatement §1- Definition of a Contract
Restatement §17: Requirement of Bargain
Restatement §71- Requirement of Exchange; Types of Exchange
Nominal consideration: when a transaction has the FORM of a bargain, but not the substance of a true bargain because the values of what is exchanged or promised are not equal. (a sham bargain) (p 17)
Nominal consideration is not enforced except for option contracts and guarantees
N.C. just added for form of consideration, but has no substance of consideration
Restatement § 79 Adequacy of Consideration; Mutuality of Obligation
Section 2. The Element of Form
Schnell v. Nell
After Schnell’s wife made an inoperative will giving $200 to each of three recipients, Schnell entered into an agreement with the three to pay each the $200 promised by his wife in her will. After he refused payment, one of the recipients brought suit to enforce the agreement.
Nominal consideration is consideration in form rather than in substance and will not create a legally enforceable contract.
RULE: A voluntary gift is NOT a binding agreement unless there is consideration—nominal consideration is to be taken into account by the court to determine if it is just a pretense of a bargain or actual consideration.
Section 3. The Element of Reliance
Estoppel en pais or Equitable Estoppel
A makes statement of fact to B. If B relies on statement, then A cannot later deny the truth of the statement.
Requires a statement of FACT
Not used in section 90 cases (reliance – requires a promise)
Defendant is prevented from denying something
§90: Promise reasonably inducing action or forbearance
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisor or 3rd person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of promise. The remedy granted for breach may be limited as justice requires.
Requires a promise
D is not prevented (estopped) from denying lack of consideration (promise can be enforced even if there is lack of consideration)
Reliance is treated as consideration itself, or at least a substitute for consideration (but reliance does not equal consideration)
Kirksey v. Kirksey
A widow attempts to impose contractual liability for a promise made by her brother-in-law which induced her to leave her residence and move to his estate.
A bargained-for exchange is required for all contracts, and merely changing position in reliance on a statement is insufficient to impose contractual liability in absence of any bargain.
*Contracts w/o Consideration* Restatements 90:
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or third party 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.
Estoppel in pais: restraint that comes out of a person’s statement of facts. If party B relies on a statement, party A is estopped (prevented) from denying that statement.
Promissory estoppel: Based on a promise. If party B relied on A’s promise, party A is estopped from pleading lack of consideration.
Induced action is consideration
Induced action works as estoppel
Feinberg v. Pfieffer Co.
After promising that the company would pay a retirement benefit of $200 per month for the rest of a former employee’s life, and actually paying the money for several years, the company decided to cease making payments and the former employee sued.
A gratuitous (and thus unenforceable) promise is nevertheless transformed into a binding and enforceable contract if the promisee reasonably and detrimentally relies on the promise.
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.
Section 4. Promises Based on a Past Benefit Conferred
R §82- Promise to Pay Indebtedness; Effect on the statute of limitations
R §83- Promise to Pay Indebtedness Discharged in Bankruptcy
Mills v. Wyman
A young man’s estranged father made a promise to pay a nurse who cared for his son when he was very ill.
A mere promise, without any consideration, cannot be enforced by action
Webb v. McGowin
Joe Webb (P) saved Greeley McGowin (D) from death or serious bodily harm during Webb’s (P) course of employment, for which McGowin (D) agreed to pay Webb (P) $15 every two weeks for the remainder of Webb’s (P) life.
When a promisor receives a material benefit from a promisee, the promisor is morally bound to compensate the promisee for services rendered. If the promisor subsequently promises to may payment on the basis of that moral obligation, that promise is valid and enforceable.
Past act of saving a party from
k is seeking to void the loan contract on the grounds that it was unconscionable.
The doctrine of novation may not preclude an action to void a preexisting contract on grounds of unconscionability.
Even if contract provisions are consistent with the reasonable expectations of the party they are unenforceable if they are oppressive or unconscionable.
2 types of unconscionability- Procedural unconscionability and substantive unconscionability
Procedural- unfair surprise, fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should- you look at the age, education, intelligence, bargaining power, whether terms were explained to a weaker party, whether they had alt. services
Substantive unconscionability concerns the actual terms of the contract and examines the relative fairness of the obligations assumed
Unconscionability can be established with a showing of only substantive U
Section 3. The Problem of Mutuality
Principle of mutuality- both parties must be bound, or neither are bound
Bilateral promise- promise for a promise
Unilateral- promise for performance
Office Pavilion S. Florida, Inc. v. Asal Prods. Inc.
The plaintiff and defendant companies entered into a contract for computer keyboards and later sought to extend the contract to include office chairs, but when the plaintiff ordered a large quantity of chairs the defendant refused to provide them, and the plaintiff sued for breach of contract.
An illusory promise does not constitute consideration for the other promise, and thus the contract is unenforceable against either party
A promise that says “I will if I want to”- illusory
Words of “promise” that by their terms make the putative promisor’s performance optional do not constitute a promise at all and are not consideration for the return promise.
R §71- Requirement of Exchange; Types of Exchange
Contract isn’t enforced when one makes a promise to make a performance
Performer isn’t bound, has a choice
Performer has a choice to either perform for the promise, thus binding the contract, or not performing, keeping the contract as unbinding