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Contracts
University of Illinois School of Law
Brubaker, Ralph

 
Contracts Brubaker Spring 2014
 
 
•       Part 1: Enforcement of Promises
 
a.      Consideration
i.        Definition:  Promisor received something or was promised something in exchange for her promise
1.      Unilateral Contract: Bargained for performance or forbearance
a.      No enforceable against promisee
2.      Bilateral Contract: Bargained for return promise
a.      Enforceable against promisee
3.      Doesn’t have to come directly from promisee or to the promisor
4.      No assessment fairness of the items exchanged
ii.     Issues frequently occur in 2 situations
1.      Gifts to family members
2.      Gifts to charities
iii.   Formal Alternatives to Consideration
1.      Seal- impression made in hot wax
a.      Important Functions of the Seal:
i.        Encouraged caution before entering into legal binding commitments (slowed down the process) (cautionary)
ii.     Ensured ample evidence that a K had been made (evidentiary)
iii.   Seal made it easy for court and community to distinguish documents with legal significance from those without (channeling)
iv.   Avoids ambiguities about parties’ obligation (clarifying)
b.      Drawbacks
i.        Too restrictive- worked well for nobility but not everyday in the market place
iv.   Uniform Written Obligations Act
1.      Makes signed written promise enforceable “if the writing also contains an express statement, in any form or language that the signer intends to be legally bound”
2.      Adopted in Pennsylvania- construed strictly
a.      Express statement of legally binding à enforceable even w/o consideration
3.      Adopted in Utah- eventually repealed
v.      The bargained for exchange
1.      Restatement Second § 17: Requirement of a Bargain
a.      formation of a K requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration
b.      Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts under the rules stated in §§ 82-94.
2.      Always examine for consideration first
 
b.      Consideration as a flow of benefit and detriments
i.        What has promisee given up as a result of her acceptance of the promisor’s commitment
ii.     What (if anything) the promisor has received as a result of her promise
iii.   “detriment to the promise or benefit to the promisor”
iv.   Hamer v. Sidway
1.      Facts: Uncle promised $5000 if nephew abstained from smoking, drinking, swearing and playing cards and billiards for money until his 21st birthday. 
a.      Nephew complied
2.      Restatement § 71 Requirement of Exchange; Types of Exchange
a.      Consideration à action or return promise must be bargained for
b.      A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and given by the promisee in exchange for that promise
c.       Performance may consist of…
i.        (a) an act other than a promise
ii.     (b) forbearance
iii.   (c) the creation, modification or destruction of a legal relation
d.     Performance or return promise may be given to the promisor or to some other person.  It may be given by the promisee or some other person 
3.      §79 Adequacy of Consideration; Mutuality of Obligation
a.      If consideration is met not additional requirement of
i.        Benefit to the promisor/detriment to the promisee
ii.     Equivalence in the values exchanged
iii.   “Mutuality of obligation”
4.      Restatement § 81 Consideration as motive or inducing cause
a.      Fact that what is bargained for does not itself induce the making of the promise does not prevent it from being consideration for the promise (must just be one of the reasons)
b.      The fact that a promise does not itself induce a performance or return promise does not prevent the performance or return promise from being consideration
5.      HOLDING
a.      Uncle (promisor) sought forbearance- makes $5000 promise to get it
b.      What is sought by the p/or (Uncle) does not itself have to induce the promise- just be one of the reasons (81(1))
c.       P/ee’s forbearance (what is bargained for) doesn’t have to be the only reason- just one of the reasons (81(2))
i.        As long as it is bargained for the law assumes that the promise played a role and it constitutes consideration
•        
 
a.      Shadwell v. Shadwell
i.        Facts: Uncle offers money to nephew in exchange for his marriage (but he was already engaged). 
ii.     Holding (referenced in Hamer)
1.      Cons

an obvious sham = peppercorn
3.      Court must believe that the process was fair and no overreaching by one party
iii.   Exchanges in sums of money
1.      Consideration of only a penny was nominal in exchange for $600 and imposed no legal obligation on the promisor
a.      Exchange of two sums of money w/o any hint that the values represented subjective values (not a rare coin or other sentimental value)
2.      Mere inadequacy of consideration will not void a contract
iv.   Pretense of Consideration
1.      Sham Consideration
a.      Can’t make a promise to make a gift are unenforceable- attempt to support with consideration
b.      Family Promises-
i.        Stark disparities in value (Blue Book for $500,000) says that the parties did not really intend an exchange- but simply drafted the agreement this way to make the promise enforceable
ii.     Court will usually enforce when relatives are dead- not enforce when they are alive
c.       Contract Modifications
i.        Slight adjustments to the promisee’s original duties are sufficient to make a meaningful modification for the other parties’ duties
2.      Recitals of Consideration
a.      State that the promise was supported by consideration- even if there was none
i.        Courts usually adhere to requirement of actual activity
ii.     Might create presumption that consideration was present and at the very least shift burden to the person resisting enforcement
iii.   2 Exceptions
1.      option contracts
2.      guarantees
b.      Option Contracts
i.        Requirement of consideration substantially relaxed for options
ii.     Restatement Second makes recitals effective in option K (INSERT CITE)
1.      Promise to keep open is enforceable so long as all other terms are fair and the option is to be exercised in a reasonable time