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Contracts
University of Iowa School of Law
Carrasco, Enrique R.

Contracts
Carrasco
Fall 2011
Elements of contract: 
1.      voluntary exchange between two parties
2.      a promise or a set of promise between  voluntary parties ( promise: commitment to be bound)
3.      remedy for the breach of obligation
Code
1.      goods: 2-105
1)      goods and service
2.      CL: 1-103 (b) “ unless displaced by the particular provision of the code, the principle of law and equity supplement its provisions
3.      merchant: 2-104(1)
4.      good faith
chapter1 Consideration
 
I.                   Promise
        I.            Common law
1.      RST 2,4  PROMISE
1)      Manifestation of intention to act or refrain from acting in a specific way
2)      Manifestation so made as to justify a promisee in understanding that a commitment has been made
3)      Promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
–          Case Hawkins v. McGee 
·         Evidence that the doctor repeatedly solicited, sought to experiment on skin grafting
·         He spoke with the intention that they should be accepted at their face value, as an inducement  for the granting of consent to the operation
     II.            CODE
1.      UCC 2-313 EXPRESS WARRANTY
–          not necessary to use word such as “warrant” or “guarantee” or that the seller has a specific intention to make a warranty (pro-consumer)
–          distinguish affirmation of the value of the goods or a statement of opinion or commendation
–          it is generally a question of fact
1)       affirmation of fact or promise
a.       affirmation of fact or promise made by the seller
b.      relates to the goods
c.       become part of basis of the bargain
2)      description of goods (comment5 photo)
a.       made part of the basis of the bargain
3)      exhibition of sample
–          Bayliner Marine Corp v. Crow
·         “pop matrix”- Statement is not the particular boat purchased –relates to the goods
·         “brochure ”-Seller’s opinion
II.                Consideration
History: CL actions for enforceable K
Covenant: enforce K under seal   1) evidentiary 2)cautionary
Debt: enforce unsealed promise to pay a definite sum of money/ quid pro quo-reciprocation
Assumpsit: promisee sought to recover damages for physical injury to person or property on the basis of a consensual undertaking.
1)      Based on misfeasance- done in an inconsistent manner detrimental to the promisee. Later extend to nonfeasance.
2)      A party that had given promise in exchange for promise had incurred a detriment.
Consideration
General:
1)      REST 71: to constitute a consideration, a performance or a return promise must be bargained for.
2)      Function: evidentiary/ cautionary
3)      Ct does not inquire into the adequacy of consideration
a.       pretense of bargain: false/nominal/duress/unconscionable – indicate lack of bargain REST 71 comment (b) and illustration5
b.      tiny effect without value can suffice
c.       equity court more willing to examine adequacy McKinnon
i.                    judges as of the time K was made Tuckwiller
Bargain 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
1)      Gratuitous promise
–          Hamer v. Sidway: the uncle promise to pay his nephew in change for his nephew’s refraining from various vices.
a.       Conditional gift: a gift in the language of bargain but without real bargaining.
–           Kirksey: if u come down and see me (enforced by PE)
–          Tramp hypo: if u go aroung the corner to the clothing shop there, u may purchase an overcoat on my credit. No reasonable man would understand the short walk was requested as the consideration for the promise. It would be that in the event of the going, the promisor would make him a gift.
b.      Depend on motive manifested by the parties. (Q of fact). Motive not dispositive if there are some aspects of a bargain. REST 81
·         There must be a MANIFESTATION of a bargain, a MANIFESTATION of reciprocal inducement.  If you can identify the bargain, it is irrelevant what the promisor's or promisee's motives might be.
·         Comment b states:  “Even in the typical commercial bargain, the promisor may have more than one motive, and the person furnishing the consideration need not inquire into the promisor's motives.”  E.g.  Even though the promisee's promise that she will sell her BMW to the promisor for $40,000 may partly induce the promisor to promise to pay $40,000, the promisor may also want to make the promise to pay $40,000 for a BMW because his neighbors will think he's rich.  In other words, a reneging promisee can't argue successfully that there was no consideration because the promisor made the promise to impress his neighbors.  Comment b goes on to state: “Unless both parties know that the purported is mere pretense, it is immaterial that the promisor's desire for the consideration is incidental to other objectives and even that the other party knows this to be so.” The same holds true for the promisee:  She may be induced to make her promise not only for the money but also because she wants to demonstrate to her socialist comrades that she is not a shallow, materialistic bourgeois.
c.       Mixture of bargain and gift: the promise is bargained for
2)      Past consideration
a.                   General rule: Past service does not furnish consideration
i.                    Where service requested before promise to pay, implied K
ii.                  Not requested
–          Feinberg v. Pferiffer Co. : there is no consideration for d’ promise to pay P pension for life where the resolution was made in view of her past performance, where she was an at-will employee that she could quit at any time and her continued employment is not the condition for the efficiency of the resolution.
–          Mills v. Wyman: Father’s promise to P for his past rendering service to his son is not support by consideration.
b.                  Exception1: Pre-existing debt: running of the statute of limitation, might be enforceable without consideration REST 82&83
c.                   Exception2: Substantial benefit – minority jurisdiction REST 86
–           Webb v. McGowin: The court made out a fiction/presumption that the promisor will consent to the saving of the promisee and he would promise to pay the promisee. The material benefit to the promisor will suffice to support the subsequent promise. Compare with Mills, the promisor has actually committed to the obligation by starting paying promisee, the promisee is benefited.
–          NY enacted statuteus to make enforceable promises to pay for services previously received
3)      Rewards: if the promisee not aware of promise, performance is not bargained for
–          Broadnax: return escaped prisoner not knowing the rewards
–          Offer and acceptance: the offeree did not know the offer
a.       REST 51: An offeree who learns of an offer after he has rendered part of performance may accept by completing the requested performance.
Performance & Promise
1)      Voidable and unenforceable performance/promise
a.       Voidable promise not to sue is binding
–          Fi

and modification 
a.       Exchange of forbearance of using the remaining right 
b.      Must not fully perform on either side
Schwartzreich case: legal fiction
–          1st K: 90$
–          2nd K: mutual rescinding of the 1st K
·         Fact: torn the signature of 1st K
·         Consideration: (K consists of duty and correlative right. give up the remaining right under the 1st K , forbearance of using the right
–          3rd : $100   There’s no pre-existing duty, even though for the same service, 2nd and 3rd contingently depends on each other
3)      New consideration: a slight consideration suffices to support modification.
Rest73: a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.
4)      Partial payment of debt
a.       Foakes v. Beer rule: a debt’s part payment of a debt presently due and undisputed will not constitute consideration for the creditor’s promise to discharge the entire amount due.
b.      Accord and satisfaction: debtor of a liquidated debt offers some additional benefit or detriment, or if debtor of an unliquidated debt offers to pay partial debt.
i.                    Accord: offer and acceptance of the new agreement.  One promise to render a new performance and other promise to accept in discharge the original duty.
Ø  Now under the modern view, it follows that if the obligor has not breached the accord, the original obligation is suspended in order to allow the obligor to complete the performance of the accord.  Full satisfaction/ payment in full  form did not constitute an offer to offer of accord
ii.                  Satisfaction: stipulated performance under the accord has been carried out
Ø  If the obligor fails to perform the accord, the obligee may elect to enforce either the original duty, which is suspended pending satisfaction of the accord, or the accord itself. 
Ø  Upon satisfaction, both the original duty and the duty under the accord are discharged.
Ø   If the obligee tries to breach the accord and recover under the original obligation, the obligor may raise the accord as an affirmative defense; she can also be granted equitable relief to prevent the obligee from interfering with the performance of the accord
iii.                An accord and satisfaction should be distinguished from substitute contract.  Under a substitute contract, the parties intend to discharge the original duty as soon as the new agreement is formed.  Consequently, in the absence of an express agreement to the contrary, the original duty can no longer be enforced.  Contrast substitute contracts with an accord and satisfaction:  under the latter situation the original duty is merely suspended pending satisfaction. 
Ø  The intentions of the parties.  And in some cases this will be question of fact.
Ø  There is a general presumption, however, that the parties intended an accord and satisfaction