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Contracts
University of Illinois School of Law
Brubaker, Ralph

Contracts Brubaker Spring 2016
 
Introduction
K: law— state CL
           — Rest 2nd of K's (sometimes to see rest 1st to see development or minority)
           — UCC article 2 (statute) [sale of goods K's (general principle still apply, unless changed by UCC)]  
K law: enforcing promises
§ 1: contract is a promise
— support market
(1) Barter
(2) Medium of exchange
(3) Credit— promise (a) credit sale—to pay; (b) loan of money—to repay
(c) service—to perform/to pay
(4) promise for promise
 
English common law has strict promise requirement: cause of action
(1) covenant: promise made under seal
—evidence (evidentiary)
—formality (cautionary)
(2) debt: collect sum certain in money
                — quid pro quo
               — benefit to the promisor
(3) assumpsit: breach of duty
— misfeasance
— nonfeasance: detrimental to promisee/ suffer harm by reliance on promise
I. Enforcement of Promises
1. Consideration
2. Past consideration
3. Consideration as Bargain
Harmer v. Sidney
Uncle Willy————————-little Willy
(promisor)                                (promisee)
Issue: was there consideration?
Benefit of uncle? The court didn't care—Detriment to little? Give up right to smoke, drink
 
§ 71 (1): performance or return promise
§ 79 (a) Not benefit to promisor; Not detriment to promisee
 
Has to ask to forebear to be consideration
 
§ 71 (1) must be bargain for exchange (BFE)
§ 71 (2) sought by promisor in exchange; promise in exchange by promise
 
71 (2) sought by P'sor in exchange       71 (1) BFE             71 (2) given by Psee in exchange
Psor makes the promise to get it                                         Do it get what's promise
 
How can it be bargain to exchange, if Psee would get it anyway?
Promisor: § 81 (1) one of reasons make the promise
                                 ———-conditional promise
(conditional language is indication for promise, even P'see would do it anyway; don't care about motive)
 
Promisee: § 81 (2) one of reasons do it
                                  ——Do it (actually; not care about motive)
 
§ 79 (b) not an equitable value (focus on bargain, not the fairness of exchange)
 
Legal benefit, legal detriment: the same as bargain for exchange (not actual benefit, detriment) p37
 
P40 Problem. The first step towards consideration problem is it enforceable or not?
Walk through § 81 (1) (2)
Eee (Psor)—non-compete promise→Co (P'ee)

Fund —pension pay right away
§ 71 (4) maybe given by P'ee
 
President (Psor)—garrenty to pay → Supplier (P'ee)—credit sales (consideration)
                                                                            ↓
                                                                         Corp
§ 71 (4) can be given by 3rd-Party
 
So, bargain for exchange is all matters
———————————————————————————————————————–
If no condition in promisor, no consideration— not enforceable; but may be irrevocable gift
Gift—delivery
Promise—consideration: (1) evidentiary (2) cautionary
 
P91 bottom: economic analysis
Why gratuitous promise not enforceable even with the upside?
(1) evidentiary—mistakes
Crim—beyond of reasonable doubt; civil—preponderance of evidence
(2) cautionary—loss of promises
(3) administrative cost
(4) non-market
(5) non-legal actions (social reputation; other sanctions)
(6) disappointed expectations
 
P39-40 note (4) A—B, $1000 to a magazine
Peppercorn.
Why not consideration, what is missing? Not one of reasons to make promise.
Because try to make promise enforceable, so try to find consideration—peppercorn
 
  
Not really bargain, just a gift promise (peppercorn), try to make it enforceable
Why not peppercorn not BFE? Peppercorn is worthless, especially compare to the farm
But, in §79 if the requirement of consideration is met, there is no additional requirement of …
Must satisfy the consideration requirement
§ 79(a) (b) — may help find BFE (not the test)
(1) Imbalance of the transaction (benefit/detriment)
(2) transaction within social, personal contact—may not be BFE, more likely be gift
 
BFE—§ 71 (2) —Question of facts
Keep § 81 (1) in mind (Res1 peppercorn sufficient consideration, not in Rest 2nd)
 
Why not enforce gratuitous?
(1) evidentiary concern: intent-actual bind? Actual made? Pretend to bargain is to make it enforceable
(2) cautionary concern: put people on notice (have legal consequence)
So that's why engage such activity (that's why 1st Rest acknowledge it enforceable)
 
§ 81(1) one of reason make promise—conditional promise
— not sham, pretense, nominal “consideration” (2nd restatement)
 
P41 note (1)
City —–use o

                       ← listen and catch us not play 3 in a row
If no bargain for promise, then conditional gift promise
Radio station actual bargain people listen to radio (BFE)
He said he stop listening radio (P'see side, listen to radio because to win 25,000. if not stop listen, still not lose, just one of the reason enough)
 
P59 note (3) consideration in promise to pay 1 million dollar?
Casino———–1 million→customer
           ← come to our casino, land on 1m marker
Come to this casino is BFE
 
There is always a condition of p'sor BFE —express or implied
If look for BFE, first look for condition that is bargained for
 
Terms—–conditions (express or implied)
                  (1) BFE (2) extraneous/ incidental
Express term trump implied term
 
P62 Lake land v. Columber
 
Eee———non-compete—————-→Eer
      ← continue employment (I won't fire)
Eee already work for 3 years, then came to the non-compete contract (the Eer sandbag the Eee)
But still BFE established (as long as one of the reason) →consideration
Sign the agreement in order to keep job, but implied condition
(what if give a paper, say nothing, just ask to sign, still consideration)
 
Eee bargain for return promise or performance (actual continue employment)?
If return promise, then it's illusory (can't serve as return promise); so it's actual performance of continue employment.
At will employment is default rule (all presume at will, unless both party specify period)
[Psor bargain for doesn't has to be a return promise, also could be performance]  
But how much this continue employment being bargained for?
Reasonable period of time——–implied condition in bargain (otherwise, not BFE, no consideration)
 
Don't do reasonable time in abstract, case by case analysis. (10 years enough)
 
Psor bargain for performance: only enforceable only Psor actual receive the performance