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Contracts
University of Illinois School of Law
Brubaker, Ralph

CONTRACTS

BRUBAKER

FALL 2013

1. Consideration (BFE= essence of consideration)

1. Definitions

1. 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)

2. Need consideration for legal enforcement to be a remedy

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 if promisor makes promise to “get that thing”

1. 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.

2. Rst 81.2 as long as promisee does condition promisor is placing on promise law will not second guess promisee’s motives

3. Gratuitous promise= promise without consideration; GIFT NEED DELIVERY

1. If actually deliver or follow through than it becomes an irrevocable gift.

1. Often found in family promises

2. Do NOT enforce, only have disappointed expectations

4. 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. condition is just determining when gift will be made

3. Ex. put out hand and I will put $10—hard to argue that extending hand BFE for $

5. Sham promise; nominal consideration

1. Not really sought be promisor in exchange for promise…needs to be obvi.

2. Benefit to promisor or detriment to promisee is so nominal- no consid.

2. Past consideration= no consideration

1. Prior detriment cannot be consideration for promise, promise is gratuitous

3. Consideration as Bargain

1. 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

2. Consideration can be performance or return promise (71.1)

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

3. Presumption in work situations no promise…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. PROMISEE (employee) 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.

3. Rewards

1. If promisee does not know offered did not do promise for reward-no BFE

2. If promisee did not know of reward, caught prisoner, then found of reward and 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 & only has to be 1 reason for action

4. Bilateral Contracts

1. Unilateral contract= enforce promise if do performance 79c-no mutuality obligation

2. 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

3. Bilateral contract= exchange promise for promise (need BFE). Need exchange of promise to have enforceable bilateral contract. So people can rely on promises

4. Actual-Reliance Rule not feasible b/c promises hard to enforce & enforcement too widespread so will discourage reliance. Enforce if determine there was sufficient reliance, the more you rely better likelihood we can prove reliance

1. Enforce exchange of promise to encourage reliance

2. Each party promise to perform conditioned on the others promise to perform. Event has to occur before promisor’s obligation arises

1. Terms may be expressed or implied

1. Implied in fact= gather from facts & circumstances of bargain that specific term or condition is implied in the deal.

i. Implied promise to use reasonable efforts. Court implies terms parties themselves do not specify. BELIEVE OBJECT STANDARD IS APPROPRIATE. Exclusive dealing= imply obligation of best efforts (for goods-UCC) In exclusive promisor bargaining for promise in return.

ii. don’t express in words, apparent form reasonable interpretion of their conduct ,see if intended for a K

iii. expect promise but failed to explicitly, assume implied

iv. Buy subject to ability to raise finances IMPLY they will use good faith effort to riase.. if don’t breach K

v. merchants good faith= commercial standards

vi. nonmerchants good faith=honesty

2. Implied in law= constructive terms; supplied by court & not based on apparent intention of parties. constructively conditioned= if do not expressly condition on other parties performance imply them- not real contract, created for remedial purpose

i. Simultaneous performance is a possibility; not exchange @ exact same moment… offer (tender) of performance satisfiesand then other party becomes obliged

ii. If simultaneous is not possible longer performance has to go first and shorter performance conditioned on longer

iii. UCC 2-309(3) places implied in law restrictions on ability to back out at will/terminate. Illusory If termination would be unfair—need to give some notice

3. If bargaining for promise, performance not= consideration

4. Rst. 30 (2): Unless otherwise indicated by language or circumstance, offer invites acceptance in any manner and medium reasonable in the circumstances

3. Look @ express circumstances/language of the promise 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. return promise to protect yourself from the party doing nothing.

5. Illusory Promises- Promisee is trying to use trickery to make promise enforceable.

1. Rst. 77: promise or apparent promise is not consideration if by it

as relief for disappointment; Rst. 344 Usually give expectation damages because does better job of encouraging reliance on promise because larger recovery then reliance damages. Expectation > reliance> restitution

1. Expectation damages: put promisee where would have been in if promisor performed as promised. enforce as if consideration did exist

2. Reliance damages= put promisee in position they would have been in if the promise had never been made (detriment to the promisee, without this promise I would have avoid reliance in the following detrimental ways). Give this if not trying to encourage reliance

3. Restitution Damages (“quasi contract”)=benefit conferred, put breaching promisor back in position they would have been in if no promise had been made

4. Go with easiest to calculate; expectation if strong case or evil intent

7. “but for” take away promise and would they have done …

1. Same thing= no inducement

2. Something different = inducement

7. Restitution

1. Allows one party to recover from another party to prevent unjust enrichment

2. DIFFERENT THEN RESTITUTION DAMAGES FOR BARGAIN FOR EXCHANGE (PE)

3. restitutionary recovery of damages

1. Recover when: person is conferred a benefit that they did not request, under what circumstances would it be unfair for them to keep the benefit without compensating the party that conferred the benefit onto them.

1. Need an opportunity to decline the benefit UNLESS reasonable excuse not to give them this opportunity, maybe made a mistake.

2. Does party conferring benefit have good excuse for not offering the service through contract?

1. If does not have good excuse then officious intermeddler

4. for emergency situations where victim is unconscious and cannot enter into contract, assume they would have entered into contract if they were capable. (implied in law)

1. If unconscious patient can’t imply fact contract.. Fact= real thing

2. Imply in law= not real K. Impose obligation as if real K, seems acceptable..

1. Only imply contract for professionals… Unless extremely extensive

5. Recovery is measured by benefit conferred to party= restitution damages (Rst. 371)

1. Net enrichment approach= increase in wealth for benefited party

2. Cost-avoided= cost to hire someone else

3. Choosing between the 2….

1. Pick the easier one to calculate

2. Limit recovery to smaller of the 2

1. reasonable fee for types of services that were given in this case

2. save life how do you measure under net enrichment? Can’t àcost avoided. value of life would larger than cost avoided.

3. Cannot claim unjustly enriched a 3rd party

4. No restitution or gifts (family personal, etc.) unless extraord