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Contracts
University of Illinois School of Law
Brubaker, Ralph

Contracts
Brubaker
Fall 2011
 
1.       Consideration (BFE= essence of consideration)
a.       Definitions
                                                             1.      Promisor= person making promise
                                                             2.      Assumpsit= undertake a duty and in the process hurt somebody, you are liable for harm caused because of breach of duty
                                                             3.      Covenant= sealed w/ a personal seal, evidence that promisor actually made promise that he intended to be bound by (cautionary evidence—know by doing this you are stuck to this promise)
                                                             4.      Promise: A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made (Rst.2.1)
b.      Need consideration for legal enforcement to be a remedy (issue when outstanding promise to be enforced)
                                                             1.      Rst 71.1 What constitutes consideration
1.       Performance or return promise made or bargained for… bargained for if sought by promisor in exchange for his promise and given by promisee in exchange for promise.
2.       ONLY CONSIDERATION IF BARGAINED FOR…look for conditioned promise
3.       If promise is conditioned on promisee doing something bargained for than probably conditioned. If not expressly then implicitly conditioned
4.       Only if promisor makes promise to “get that thing”
a.       Rst 81.1 What is bargained for does not itself induce making of a promise does not prevent it from being consideration for the promise…just has to be one of reasons made promise. Conditional promises assume one of reasons for promise is to get what condition the promise on (uncertain future event within realm of possibility and outside complete and discretionary control of promisor- then conditional pormise is commitment)
b.      Rst 81.2 as long as promisee does whatever condition promisor is placing on promise law will not second guess promisee’s motives (Shadwell v. Shadwell, nephew got married even if $ not main reason, may have had small role like reinforcing idea that getting married is a good idea)
                                                             2.      If consideration meant no need for benefit, detriment, e             quivalent values exchanged or mutual obligations Rst. 79
                                                             3.      Burden of Proof for promise is preponderance of evidence, not beyond a reasonable doubt… just more likely than not
c.       Gratuitous promise= promise without consideration; GIFT NEED DELIVERY
                                                             1.      If actually deliver or follow through than it becomes an irrevocable gift.
1.       Delivering gift= evidentiary, actually part with the gift so meant to do it; cautionary because actually handing over gift shows donor doing something significant that cannot be undone once they give the gift
2.       Often found in family promises
3.       Do NOT enforce gratuitous promise, must be real bargain… all get from not following through on gratuitous promise is disappointed expectations
d.      Conditional gift promise
                                                             1.      Not being bargained for IF is just in addition to the gift, use objective test, conduct from perspective of reasonable person in promisee’s position
                                                             2.      Ex. Will give you $1000 when you retire; not bargaining to retire… condition is just determining when gift will be made
                                                             3.      Kirksey v. Kirksey:  you can have land if you move here.. didn’t want her to move to him, just wanted to give her the gift of land and only place he could do it was by him, so conditioned on moving to him.
                                                             4.      Ex. if you walk to my car, I will give you the skis I have on my rack;  put out your hand and I will put $10 in it—hard to argue that extending hand bargain for as exchange for $
 
e.      Sham promise; nominal consideration
                                                             1.      Not really sought be promisor in exchange for promise… needs to be such an obvious sham that promisee sees consideration is not bargained for. ($1000 if you give me your tv guide)
                                                             2.      Benefit to promisor or detriment to promisee is so nominal it may be presented as bargain, but really no consideration. Just trying to make promise enforceable.
                                                             3.      Non-enforcement of gratuitous promises
2.       Past consideration= no consideration
                                                             1.      Ex. After 40 years of work get offered retirement pension.  Your 40 years of work is not what you are exchanging for the pension because already did that work. And they did not make promise to get the 40 years of work.  Say get money if you work for another year… but she already said she would have worked another year without money, then still promise because ONE of reasons she continues to work is get $
                                                             2.      Prior detriment cannot be consideration for promise, promise is gratuitous and non0binding – justified by vautionary function of ocnsideration
Promisor: only consideration if sought by promisor in exchange for promise
-look for conditional promise–if bargaining for anything, will be conditioned on getting that thing
-not sham, pretense, nominal “consideration” obvious even to Pee
-not past “consideration”
-not conditional gift promise
Promisee: consideration if given by Promisee in exchange for promise. 
 
3.       Consideration as Bargain
a.       Blindsided is worst but clearest case for consideration
                                                             1.      if you do not sign this you get fired, you obviously signed it not to get fired
                                                             2.      non-compete signed so not fired, not mean no consideration
                                                             3.      if no one says sign or fired and not in papers, would have to imply one of reasons signed is so continue having that job
b.      Consideration can be performance or return promise (71.1)  (bargain is agreement to exchange promises, performances or promise for performance)
                                                             1.      If performance and otherside does not fulfill then you do not have to perform
                                                             2.      If promise and breach it then sue for breach of contract, so better to have promise
                                                             3.      Presumption in work situations no promise, employment is at will…bargaining for performance of continued employment, not promise.  Implied that employment must continue for REASONABLE period of time
1.       Implied in fact term is based on circumstances at the time, condition was implicit in what they did say.
                                                             4.      Employee handbook
1.       Employer can only fire if follows these procedures.  Does this so get continued employement by employee.  If fire without following procedure employee can say broke promise.  If employee never read handbook cannot say that because not giving benefit of continued employment to get benefit of only fired if following handbook rules, cant say that because did not know.  PROMISEE MUST KNOW OF CONTRACT IN ORDER TO SUPPLY CONSIDERATION. Courts will still often uphold even if did not read employee handbook, because it is good policy reason.
c.       Rewards
                                                             1.      If promisee does not know reward is offered did not do promise for reward so their side of bargain for exchange not upheld
                                                             2.      If promisee did not know of reward, caught prisoner then found of reward and then brought him in get reward because promisor is only concerned with completed action. Restatement 51:Unless contrary assume promisor is most interested in completed performance
                                                             3.      Turn prisoner in because his friend and does not want him to get mobbed, still get reward, only has to be one of reasons he turns prisoner in.
4.       Bilateral Contracts
a.       Before focusing on performance… return promise much more common
b.       Unilateral contract= all promisor is bargaining for is performance (only enforce promise if do performance 79c-no mutuality obligation)
c.       Figure out what it is promisor is bargaining for…
                                                             1.      Performance then promise will not fulfill consideration
                                                             2.      If only promise then performance will not fulfill consideration
d.      Bilateral contract= exchange promise for promis

onsideration. Bargaining for return promise of forbearance not performance of it.
e.      Rst. 30 (2): Unless otherwise indicated by language or circumstance, offer invites acceptance in any manner and medium reasonable in the circumstances
                                                             3.      Look at language of promise, is there express language?
                                                             4.      Look @ express circumstances of the promise, any special circumstances to show if prefer promise or performance?
1.       Ex. Bargaining for just performance: 1 year deal and will pay on commission.
2.       Ex: Bargaining for promise: Exclusivity for a year in return for selling best he can.  Nature of promise as being exclusive for a year shows relying on promise because wouldn't give someone exclusive agency on mere hope that they  might or might not get around to selling your stuff.  Committing to exclusivity would want a return promise to protect yourself from the party doing nothing.
5.       Illusory Promises- Not really a promise, so not really bargained for by promisor, promisee is trying to use trickery to make promisee’s promise enforceable.  ON PROMISEE’S SIDE
a.       Rst. 77: promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves choice of alternative performances unless: (a) each alternative performance would have been consideration if bargained for on its own.
                                                             1.      Definition of promise Rst 2: manifestation of intention to act or refrain from acting in certain way so justify promisee in understanding commitment has been undertaken.
1.       Illusory if back out @ will, not undertaking a commitment at all. Has promisor undertaken commitment to do or not do something?
b.      Rest 32: In case of doubt offer interpreted as inviting offeree to accept by promise or performance as offeree chooses. If language does not help see what promisor was bargaining for assume indifferent bargaining for either. (ex. if wrote to tree remover and said I need tries removed by end of Oct and will pay 500, if want to please accept by Oct. 24th, remover comes Oct. 22nd and removes dead trees- creates unilateral contract, where owner has promised to pay for removal. ) differnet if for future performance by offeree, not reasonable to believe offeror wanted offer to remain open for that long
                                                             1.      Illusory promise is just like peppercorn that promisee props up… sham bargain= promisor involved in peppercorn trickery; ILLUSORY PROMISE= promisee engaged in trickery or sham to try and make promisor’s promise enforceable.
c.       Ex of illusory promise: F will give B $1000 for your contracts  notes.  F promises B.  F indifferent if return promise or performance .  If B immediately makes a promise to give them then enforceable because exchange of promise for promise.  If want to make promise binding only on F’s part B say: deal I promise when I feel like it I will give them to you.  F finds out B did not do well in class and wants to back out, B tries to sue, is F’s promise enforceable?  No because B’s promise was illusory, had discretion to bring notes whenever he wanted if he even wanted to
d.      Only illusory promise if so lacking in substance that no bargain ever made and no promise exists. Ex. Not illusory if promise to will land to son, but say reserve right to sell IF economic situation is hard, not giving himself complete discretion  (reserves such unlimited discretion that he ahs really promised nothing)-not given or promised anything, ex. have unlimited discretion as to when to perform, condition it on something not possible