§1 Contract: a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
Promise; Promisor, Promisee, Beneficiary:
1) A promise is a manifestation of intention to act..refrain act..promise understanding of commitment made
2) The person manifesting the intention is the promisor
3) The person to whom the manifestation is addressed is the promisee
4) Where the performance will benefit a person other than the promisee, that person is a beneficiary
Hawkins vs McGee: D says “I will guarantee to make the hand a 100% perfect hand or 100% good hand.” “Three or four days; not over four; then the boy can go home…back to work” D sues b/c hairy hand. Held: for D. §(1) Solicited repeatedly- the doctor has manifestation of a promise with result of action §(2) the guarantee is sufficient for intent
BASIS FOR ENFORCING PROMISES
When you get a contracts problem look for promise and then check to see if there is: consideration/bargained for exchange + benefit received in the past + reliance + [special law]; if yes then the promise is enforceable
1) When a P sues a D for breach of contract, the P claims that the D made a promise and did not keep it, and the P asks the court to enforce the promise.
2) A court will not enforce the D’s promise unless the P can show a basis for enforcement.
3) The three modern bases for enforcement are: consideration, reliance, and in a few cases moral obligation.
4) In seeking to prevent enforcement, the D may argue that the P cannot show one of these three bases for enforcement.
I. CONSIDERATION as a Basis for Enforcement
a. General rule: Consideration for the D’s promise may be: (1) either a promise or a performance that was (2) bargained for in exchange for the D’s promise.
b. Hamer v. Sidway: RULE: the party who abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for a promise gives sufficient consideration to create a legally binding contract [uncle makes promise to give nephew 5k if he refrains from smoking/drinking/gambling until 21] (8) §79-(a) – “If the requirement of consideration is met, there is no additional requirement of … a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee.”
i. consideration does not need to be monetary or benefit the receiver
ii. 71 Requirement of Exchange; Types of Exchange
c. Fiege v. Boehm: RULE: Forbearance to sue for a lawful claim or demand is sufficient consideration for a promise if the party forbearing has an honest intention to prosecute litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well-founded [lady that alleged man to be dad and he paid child support so she would not press bastardy charges but he was in fact not dad](9) §76:“forbearance to assert an invalid claim…by one who has not an honest and reasonable belief in its possible validity…is not consideration.” Good faith belief
i. §74 Settlement of claims: We will hold a claim even if the claim is invalid as long as the claim is doubtful, or the party believed it to be valid.
d. Early courts required the consideration to be “sufficient”. Later, nominal consideration-It is a peppercorn if both parties know it’s a sham. A peppercorn can be consideration when sought by person making exchange – no equivalence requirement. The things exchanged do not have to equal in value.) was accepted. Modern courts no longer evaluate consideration’s sufficiency.
e. Sweetheart Stadium- City wants to spend as little as possible… but want a major league in their town. Bargained on how much they would give to get a sports team. Descent saying: It is inadequate consideration so it looks like a gift…you can’t make a gift for public funds. HELD: for City (1) was purchasing something from the team even though small amt compared to revenue from team.
i. §79 Adequacy of Consideration; Mutuality of Obligation- We do not look at how much the consideration is met by as long as it is met.
f. Past Actions as Consideration
g. Past Consideration
h. Courts reason that contracts require a bargained for exchange to be enforceable
i. § 71- Requirement of Exchange; Types of exchange
1. performance or a return promise must be bargained for
2. 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.
3. performance may be:
a. an act other than a promise, or
b. a forbearance, or
c. the creation, modification, or destruction of a legal relation
4. performance or return promise may be given to the promisor or to some other person and may be given by promisee or other person
i. Feinberg v. Pfeiffer Co.: RULE: Past services is not sufficient consideration to support a promise; [Pfeiffer stopped making pension payments, pursuant to a resolution adopted by the B. of D. to Feinberg after she retired] (10)
i. acts which happened before the agreement cannot count as consideration, since they were not bargained-for at the time they were performed
ii. §86 Promise for Benefit Received: A promise made in recognition of benefit previously received by the promisor to promisee is binding to the extent necessary to prevent injustice.
1. not binding under (1)
a. if the promisee conferred the benefit as a gift (recipient bears burden of showing gratuitous intent) or for other reasons the promisor has not been unjustly enriched; or
b. to the extent that its value is disproportionate to the benefit (meaning may not enforce entire benefit only part)
iii. RS §71(2) Requirement of Consideration- 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.
j. Moral Obligation
k. Mills v. Wyman: RULE: Past expense is not sufficient consideration to support a later promise to pay for the expenses. [Wyman failed to pay Mills as promised for the expenses Mills incurred from providing care for Wyman’s ill son](11)
i. Moral obligation means no obligation
l. Webb v. McGowin: RULE: Past act of saving a party from death or serious bodily injury, that results in injuries to the saving party, is sufficient consideration.: New Rule of Moral Obligation [roofer crippled while saving boss’ life may collect promised pension].(12)
i. occasionally, courts may enforce payment for past services which were extremely valuable, or where denial would be extremely unjust
m. Cotnam v. Wisdom: RULE: When a physician renders emergency medical services to a person, who due to his medical or mental condition is not capable of agreeing to the treatment, the law will imply a contract for the reasonable value of services. [ W was a physician who responded to an emergency call from a spectator to perform emergency surgery on H (decedent) in an effort to save H’s life, but the operation was unsuccessful, and H died without regaining consciousness](25)
i. occasionally courts may recognize an implicit agreement, or implies an agreement the parties would have reached if they had been able to bargain, under the doctrine of “quasi contract” or “constructive contract”
ii. especially common when a party provides emergency professional services
n. RULE: If a contract if given under false pretenses to make a gift seem like a promise (i.e. much more than market value), then it is not valid
i. § 86 Promise for Benefit Received (2)(b)
o. The Requirement of Bargain
p. Kirksey v. Kirksey: RULE: a bargained-for exchange is required for all contracts, and merely changing position in reliance on a statement is insufficient to impose contractual liability in absence of any bargain [a widow attempts to impose contractual liability for a promise made by her brother-in-law which induced her to leave her residence and move to his estate].
i. one party’s merely changing position in reliance on the other’s promises was not deemed sufficient consideration (this was before restatement about reliance)(13)
q. Employee Contracts
r. CAB v. Ingram: RULE: non competition covenants that are not unreasonably broad are enforceable, when executed by an employee after becoming employed, when the employee continues to be employed by the company for a substantial period of time and receives benefits beyond continued employment; [I started his own collection company after signing non-competition covenants while still employed with his former employee CAB](14)
s. Employee Handbooks: employers may make their employee handbooks into an enforceable employee contract
t. Bankey v. Storer Broadcating Co.: RULE: Statements of employment contained in employee handbooks do not create binding contracts, unless they give affected employees reasonable notice [B was fired by S after S changed its employee handbook deleting the “for cause” agreement effectively making it an at-will employment] (16)
v. Broadnax v. Ledbetter: RULE: if a party promises a reward, it may be accepted by anyone who: performs the requested service, knew of the reward offer; and performed the service to receive the reward [sheriff that offered reward for return of captured prisoner but guy that returned was unaware of the reward] w. Promises as Consideration
i. RULE: Under modern law, promises constitute consideration, even if they are not yet fulfilled.
1. RS §71 Requirement of Exchange; Types of Exchange (see above)
2. RS §75 Exchange of Promise for Promise
a. Except stated in
mages (out-of-pocket costs, and losses incurred in changing position), not expectancy damages (expected profits from the promise)
III. RESTITUTION as an Alternative Basis for Recovery
a. Restitution is an alternative basis for recovery applied when there is no [valid[ contract, but one party benefited from another’s act. To prevent unjust enrichment, courts may require the beneficiary to pay the actor.
b. RULE: Doctors providing emergency medical services without a contract may revocer reasonable fees from the patient. See Cotnam v. Wisdom. Although, generally, non-professional emergency assistance is presumed gratuitous.
c. Callano v. Oakwood Park Homes Corp.: RULE: Quasi-contractual recovery is not available when an alternative remedy based on an actual contracts exists; [operators of a nursery seek to recover payment for shrubbery from the home builder, although a contract existed only with the now-deceased home owner and court says to go after his estate] (26)
d. RULE: Mechanics Liens: Generally, construction jobs involve a general contractor, who then delegates work to subcontractors. If the contractor fails to pay the subcontractors, they have no contractual claim against the owner. To protect them, “mechanics’ lien” statutes give them a lien (security intent) in the finished property to secure payment.
e. Pyeatte v. Pyeatte: RULE: (exception) While ex-spouses are not entitled to restitution for performing usual duties incidental to marriage, restitution is available if the spouses had an agreement and one spouse made extraordinary efforts which benefited the other solely. [after spouses agree to put each other through graduate school, the husband uses the wife’s money to graduate law school, then divorces her] f. RULE: 3 types of promises are enforceable on the basis of moral obligation
i. Promises to pay the debt after the statute of limitations has run (§82-3)
ii. Promise made by an adult to perform a duty imposed by a promise that the adult made when he was a minor and could have avoided on that ground
iii. Promise barred by bankruptcy §83-4
IV. Reforming the Doctrine of Consideration
a. Many states enforce promises made without consideration if they are in writing
b. Dementas v. Estate of Tallas: RULE: even if the promise is made in writing, if the promise is to pay for past services, it may still be unenforceable even if written [friend cannot recover on decedent’s written promise to pay for past errands, since the promise as made after the services were performed]
THE BARGAINING PROCESS
I. The Nature of Assent
a. Parties to a contract must manifest an assent to the terms of the contract.
b. Mistakes and confusion frequently occur between contracting parties. In determining if the assent was valid, courts employ either an objective or subjective standard.
c. Lucy v. Zehmer: RULE: A contract is enforceable despite one party’s subjective belief that the parties are joking [two drunks agree to a farm sale written on the back of a bar bill](33)
i. Leonard v. PepsiCo: RULE: A humorous offer in a television commercial is not binding on the advertiser if a reasonable person would have known that the offer was a joke [Pepsi’s ad for a private jet] d. Balfour v. Balfour: RULE: traditional view is reluctant to enforce agreements between spouses.
e. Winston v. Mediafare: RULE:When parties negotiate the terms of an agreement, the issue of whether they intended to be bound in the absence of a writing signed by both parties may arise and the court will look at the following factors, whether:
i. There has been an express reservation of the right not to be bound in the absence of a writing
ii. There has been partial performance of the contract
iii. All of the terms have been agreed upon
iv. The agreement is the type that is usually committed in writing (29)