a. Rules:
i. Default Rules and Gap Filling Rules
1. These rules can be contracted around
2. Rules about what is sufficient to reach an agreement and what the parties’ obligations are under that agreement
3. Govern when the parties have remained silent, absent agreements to the contrary.
ii. Mandatory Rules
1. Obligation of Good Faith may not be disclaimed
iii. Impracticability defense- is an equitable defense to be applied when fair and just. When something has made performance vitally different than anticipated
II. Bases of Contract Liability
i. Promise + Consideration
ii. Promise + Reliance
iii. Promise + Antecedent benefit
iv. Promise + Form
RST (2nd) § 71: Consideration
§ A performance or return promise must be bargained for
§ A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
§ The performance may consist of
· An act other than a promise, or
· A forbearance, or
· The creation, modification, or destruction of a legal relationship
v. Mixed Motives and Nominal Consideration Problem:
· RST (2nd) § 81 Consideration as Motive or Inducing Cause:
1. The fact that what was bargained for does not of itself induce the making of the promise does not prevent it from being consideration for the promise
· Nominal consideration:
a. May be found invalid; not sufficient consideration.
b. Used to dress up a gift promise, not a bargain for exchange
vi. Limits of the Consideration Doctrine
1. Adequacy of Values Exchanged
a. Comment: If there is consideration the courts will resist requests to inquire into the adequacy of agreed upon exchange
b. Sufficiency: relates to whether there is a legal detriment incurred as part of a bargained exchange of promises or performances, courts do require this
· False recitals of consideration: the agreement will not be enforced for lack of sufficient consideration (e.x. false legal claims)
· Forbearance of claims and defenses
1. Forbearance to assert or surrender of a right to avoid legal suit honestly believed to be valid, with reasonable basis for support, is sufficient consideration
c. RST (2nd) § 79: Adequacy of Consideration; Mutuality of Obligation: If the requirement of consideration is met, there is no additional requirement of
· Equivalence in the values exchanged; or
· Mutuality of obligation
2. Pre-existing Duty Rule
a. Common Law: rule is that the performance or the promise to perform a pre-exisitng duty does not constitute consideration
b. UCC 2-209 (1): Modification: an agreement modifying a contract for the sale of goods needs no consideration to be binding.
· TEST:
1. Needn’t be unforeseen, just good faith in bargaining
c. RST (2nd) § 89: Modification of Executory Contract- “ a promise modifying duty under a contract not fully performed on either side is binding
· TEST:
1. Prior to full performance on either side
2. Underlying causal circumstances were unanticipated by parties
3.
. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”
b. Restitution and Quasi-Contract
· Moral Obligation: Promise + Antecedent Benefit
1. Restitution as a basis for liability for unjust enrichment
a. Benefit conferred on the ∆ (∆’s gain), not the detriment incurred by the π
2. Elements of Quasi-Contract, Implied in law:
a. ∆ received a benefit
b. An appreciation or knowledge by the ∆ of the benefit
c. Under the circumstances that would make it unjust for the ∆ to retain the benefit w/o paying for it.
ii. Moral Obligation
1. May support promise in absence of traditional consideration, if the promisor has been personally benefited or enriched by the promisee’s sacrifice and there is, as a consequence, a just and reasonable claim for compensation
a. Moral obligation by itself entitles π to nothing until a promise has been made.
2. RST (2nd) § 86: Promise for Benefit received
a. 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.
b. A promise is not binding under subsection (1)
