Contracts Zheng Fall 2016
What is a Contract?
What is a contract?
Legally enforceable promise
Why enforce a contract?
People won’t trust each other without enforceability of promise (moral obligation)
People make meaningless promises all the time, can’t enforce them all
Morality alone isn’t enough to make a promise enforceable
Utilitarian Reason- Society will break down
If you don’t know whether or not your expectations will be enforced then there’s no incentive to fulfill your end
Example- a buyer of a house will keep looking for a house until they actually get the money to buy the house and the seller will keep looking for a buyer until they receive the money
Without enforceable promises, transaction efficiency will go down
Not every enforceable contract is enforced because of economic cost
A simple transaction like going to Starbucks counts as a contract. Money for the coffee is the consideration and the receipt is the proof
You have to give up something to gain something else, an exchange
Both parties have to contribute
Basing contract enforceability on consideration is both a moral and economic reason
As long as there is an exchange, the law assumes there has been a bargain
If you promise to give your nephew money for free without an exchange then it’s not enforceable
The Hamer case is enforceable because the nephew had to fulfill a requirement before receiving the money, an exchange was made. There was a bargain.
Court in this case considered detriment to be reframing from what you are legally entitled to, it doesn’t have to be something you were previously partaking in
Hamer was the assignee of the contract and Sidway was the executor of the uncle’s will
The uncle wasn’t the one trying to deny the nephew money, the executor was and the assignee was the one suing Sidway
Court might have ruled this way because they wanted to fulfill the uncle’s intent, might have different outcome if it was the uncle in the court not wanting to enforce the contract
Enforcing contract through court and through the parties themselves are two different matters
The court might not enforce a contract because it contradicts public policies
Line between enforceable contracts and unenforceable contracts
Consideration is bargain for exchange
Both promisor and promise
Example: Hamer case. Both parties are making promises to each other. Both are giving up something and receiving something.
As long as the party is giving up something they’re legally entitled to, doesn’t require the party to be giving up something they were already engaging in
Restatement 2nd of Contracts
Section 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’s 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 the promisor’s or to some other person
The restatement doesn’t require a detriment unlike the Hamer case that emphasize it
Section 79. Adequacy of consideration; mutuality of obligation
If the requirement of consideration is met, there is no additional requirement of
a) a gain, advantage, or benefit to the promisor’s or a loss, disadvantage, or detriment to the promisee; or
b) equivalence in the values exchanged; or
c) “mutuality of obligation”
Bargain is the heart of the contract, as long as we can presume a bargain is made then we can assume a mutual obligation
Bargaining chip has to be something that hasn’t already happened
A bargain is to induce someone to do something in exchange for something else
Hamer v. Sidway
Forbearance (even detrimental) is sufficient consideration.
Nephew gave away the right to smoke, drink, etc. until he was 21 in exchange for $5000.
Uncle clearly sought acceptance by performance.
Feinberg v. Pfeiffer Co.
“Resolved, that the salary of Anna Sacks Feinberg be increased from $350 to $400 per month and that she be afforded the privilege of retiring from active duty in the corporation at any time she may elect to see fit so to do upon retirement pay of $200 per month, for the remainder of her life”
There was no bargain through consideration because you can’t use past action for consideration
Feinberg has to be required to do something in order for the contract to be enforceable
Illustration 5 to Section 71
A desire to make a binding promise to give $1000 to his son B. Being advised that a gratuitous promise is not binding, A offers to buy from B for $1000 a book worth less than $1. B accepts the offer knowing that the purchase of the book is a
id a small amount to Harrington, but refused to pay more. Harrington brought suit against Taylor in North Carolina state court seeking to enforce the promise to pay for the remainder of her damages. Taylor’s demurrer to the complaint was sustained, and Harrington appealed.
Ruling is different than in Webb because in that one the original promisor did want to pay
There was more of a reliance in Webb because of the longevity of the payments unlike the one time payment in Harrington
In Webb case, why was the president even there? Was he being negligent by being there?
Moral obligation alone doesn’t constitute an obligation
Kirksey v. Kirksey
Antillico Kirksey (Antillico) (plaintiff) was the wife of Henry Kirksey, the brother of Kirksey (defendant). Antillico and Kirksey lived approximately sixty miles apart. In 1840, Henry died, and Kirksey wrote a letter to Antillico. He stated that he felt bad for the situation of Antillico and her children, and promised that if she would come see him, he would provide her with a place to raise her family on his land. A month after receiving the letter, Antillico moved her family to Kirksey’s land. Kirksey provided them with a comfortable house on his land for two years. However, for the third year, he provided them with an uncomfortable house in the woods. After that year, he asked them to leave. Antillico brought suit seeking performance of Kirksey’s promise. At trial, the jury found for Antillico and awarded her $200 in damages. Kirksey appealed
Court ruled the brother in law’s offer was merely a gratuity rather than a bargain
NY General Obligation Law § 5-1105
A promise in writing and signed by the promisor or by his agent shall not be denied effect as a valid contractual obligation on the ground that consideration for the promise is past or executed, if the consideration is expressed in the writing and is proved to have been given or performed and would be valid consideration but for the time when it was given or performed.