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Contracts
University of Illinois School of Law
Kar, Robin B.

Professor: Kar

Class: Contracts

Fall 2011

Intro (Promises and Mutual Assent)

v A contract is an agreement b/w two persons as to something that will be done in the future. We enforce promises because we 1)want to empower people to induce actions with promises, 2) want to allow for specialization, 3)want info on people’s preferences. Contracts require mutual assent and consideration.

Ø Mutual Assent – parties must agree to what they are assenting to

§ Subjective Test: what parties THOUGHT they were assenting to

§ Objective Test: What a reasonable person would believe parties were assenting to. This is the preferred test because it is easier to prove. Also, objective intent usually corresponds to subjective intent.

Ø Consideration – reciprocal induction.

o Promise A supported by consideration iff:

1. There is a return performance/promise

2. That has been “bargained for”

1.sought by promisor in exchange for promise

2.given by promisee in exchange for promise

v Basic Approach to Offer/Acceptance

Ø 1. Was there an offer?

§ offer–(x)manifestation of willingness to enter into a bargain, so made as to (x)justify the other party in thinking assent is invited and (x)will conclude the bargain.

§ Objective test

§ Price quotes/Advertisements are usually solicitations for offers, not offers. However, language such as “first 500 customers” or “while supplies last” may tend toward offer. “Bait and switch” techniques are penalized by being held as offers (Izadi-truck case).

§ In deciding if an offer was made, courts will examine

· Language

· History

· Directedness (who it’s directed at, diary v. newspaper)

· Definiteness (how concrete are terms? Gravel as land example)

· Type of K

Ø 2. Was there acceptance?

§ acceptance–manifestation of willingness to enter into bargain on terms proposed in offer

§ mailbox rule: acceptance effective upon dispatch, offer effective upon receipt

Ø 3. Did acceptance occur prior to termination of power to accept?

§ Revocation – manifestation of intent NOT to enter into bargain

· Must be communicated

¨ Definite action inconsistent with keeping the offer open

¨ Reliable information

§ Rejection

§ Lapse of Time

§ Death of Offeror

Consideration/Breach of Contract

v Can have no breach without consideration, because no K without consideration!

v Consideration empowers people to use promises as tools, but does not enforce promises that don’t induce action

v Does not have to be spelled out completely. Think Pennsy v. AggRite, where they said they were offering free aggregate, but really AggRite was inducing Pennsy to take on the disposal of material so as that AggRite wouldn’t have to dispose of it

v Claiming that something is consideration does not make it so (illusory consideration is no consideration, nor is nominal consideration. Must actually INDUCE the Pro/Perf! HOWEVER, an unfair bargain does not negate consideration, if it still passes test (Batsakis))

v Past consideration is no consideration (because it did not induce the pro/perf!)

v No such thing as “Moral consideration” (we promised to do it because it made us feel better—NOPE! (Plowman v. Indian Refining))

v Charitable promises: not supported by consideration, so not enforceable, but courts will work hard to deduce consideration in charitable subscriptions, which are promises to give things to charity or for a charitable purpose (King v. Board of Trustees). ALSO, under Restatement §90, charitable subscriptions are binding as PE without proof that they have induced action or forebearance.

v Breach gives Expectation damages: amount if both parties fully performed

Promissory Estoppel

v [1]promise

b must prove that it has exhausted all remedies toward Gen

· Sub must prove that owner has not already given consideration for work done by sub (think Commerce v. Equity, where Comm. had already paid out much money for building, even though Equity didn’t get paid.)

§ Promissory Restitution (2 types):

· when benefit is conferred under presumptively valid K for which there exist defenses, and then benefitted person promises to pay. (moral obligation)

· when there is a subsequent promise to pay for material benefit (subsequent promise serves to evince that conferral was not officious, think log pushing case)

§ when there is knowledge and acceptance of benefit (Quasi Contract, Quantum Meruit for services, Quantum Valebut for Goods) (think eating salad example)

· Common law marriage can fall under this (Watts v. Watts)

v Not expectation damages. If enforcement of promise would be disproportionate to performance, will not be enforced, but rather reasonable value of service rendered (think millionaire promising millions to cleaning lady, will only get portion)

v Restatement:

Ø (1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.

§ 2) A promise is not binding under Subsection (1)

· (a) if the promisee conferred the benefit as a gift or for the other reasons the promisor has not been unjustly enriched; or

· (b) to the extent that its value is disproportionate to the benefit.