Tuesday, October 28, 2008
Bargain for exchange
· In a bargain for exchange, a promise is said to be supported by consideration because the promisor gets something in exchange for his promise
· A BFG is legally enforceable where a gift is not.
· In a BFG the promisor requires something from the promisee in return for the promise.
· If a gift is delivered, the donor cannot take it back.
· I promise to pay for past consideration is normally unenforceable.
· The promisor’s motive is measure objectively by the reasonable person standard.
· If it appears that the promisee had a completely had a completely different motive for promising or performing what seems to be consideration for a promise the promise is unenforceable.
· To constitute consideration, the promisor must bargain for either a return promise or a performance.
· Consideration can be a benefit for the promisor or a determinant to the promisee.
· Consideration in, Hammer v. Sidway ( uncle promises nephew 5000 for not drinking/smoking) means not so much that one party is profiting as the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first.
· When making a deal, the example of the trees and the property line, if you believe in good faith that the deal you are making is factual, and are not trying to deceive the other person, even if the facts of the situation are not correct, but you believe they are, the court is likely to still enforce the contract, because in order for a contract of this nature to be considered valid it must be reasonable Or valid.
· Pg 23
· The reason gift promises are not enforced as contracts is because, in opinion, that the gift would lose their meaning
· Courts are not most to consider that adequacy of consideration.
o Restatement 79 states that if the requirement of consideration is met, there is no additional requirement of equivalence in the values exchanged.
o However there are many exceptions to his rule such as unconscionability, duress, and misrepresentation.
· Bilateral exchanges are promises by both sides that the parties have not yet performed.
· Illusory promise- not a promise at all and is unenforceable due to lack of mutuality of obligation. Simply
You have not promised anything in return because you still withhold the right not to fulfill your end of the bargain.
o The Illusory contract is not enforceable by either party
o Wood v. Lucy not illusory because the P. used “reasonable efforts” to perform his part of the contract.
o Satisfaction clauses require good faith, and this means that your decision about whether you are satisfied with the picture must be reasonable or honest.
o Generally, if the satisfaction clause deals with commercial value or quality, operative fitness, or mechanical utility, courts will usually use the reasonability test.
o The satisfaction test involves fancy, taste, or judgment.
· Preexisting Duty Doctrine
o When you make a contract to do something for let’s say 100.00 and later the other find out that a fair price for you to do the same work would be 150.00, but to split the difference and pay 125. You agree, but later you refuse payment. The original contract of 100.00 will be held, because the amended contract was for something you where already required to do, thus there is no consideration for the amended contract.
o In order to get around the Preexisting duty rule, both parties could mutually cancel the original contract and make a completely new one
o Article 2 of UCC states that an agreement modifying a contract within this article needs no consideration to be binding. A test of good faith is required for the party benefiting from the modification.
o The more generally followed rule is a promise modifying a duty under a contract not fully performed on either side is binding if the modification is fair in view of circumstance not anticipated by the parties when the contract was made. This approach removes the focus of consideration.
· Promise for benefit received
o A promise made after the benefit is received is very unlikely to be enforceable.
o However restatement states that a promise made in recognition of a benefit previously received by the promisor from the promisee is biding to the extent necessary to prevent injustice. Promises are not binding if the promisee intended to make a gift of the benefit or the promisor has not been unjustly enriched. Also if the value of the promise is disproportionate to the benefit the promise is enforceable only up to the value of the benefit.
· The Requirement agreement
· The Objective test of assent
o Under this test contract law generally enforces the apparent, not necessarily real intention of the promisor
o Lucy v. Zehmer
· The court must lo
ered a gift promise.
o Courts really don’t regulate the amount of consideration necessary to make an option contract enforceable.
o Offers that are in writing and are signed by the offeror are considered valid option contracts if they propose a fare exchange within a reasonable time and adequate consideration.
o Open contracts are enforceable if made irrevocable by statute.
o UCC 2-205 enforces promises to leave offers open when made by a merchant in writing and signed by the offeror (make sure to look this up because it is not the complete UCC and might be missing essential information)
· Under this section of the UCC the duration, unless specified, of an offer is left open for a 3 month period.
· However, if A where a merchant and were to offer B a widget under a signed agreement, but B did not except until six months later, only the first three months would the contract be held open without any consideration.
o Pg 55
· Bars to Revocation- beginning performance of unilateral contract
o Restatement binds the offeror on condition that the offeree complete or at least tender full performance
· A tender is an offer of performance accompanied with manifested present ability to make it good.
o An offeree who has begun performance of a unilateral contract must exercise reasonable diligence to notify the offeror if the offeror otherwise reasonably would not learn of the performance.
When must notification be given? The offeree does not have to notify the offeree at all unless the offeror asks for notification or the offeree has reason to know that the offeror will not otherwise learn of the performance with reasonable promptness and certainty.
· Bars to Revocation-Offers for bilateral contracts
o Drennan v. Star Paving
Restatement 90 which enforces promises when the promisor should reasonably expect the promisee to rely on the promise. However section 90 applies only when a promisor should reasonably