Contracts I– Outline
Drahozal – Fall 2003
I. Consideration as a Basis for enforcement
What is a contract?
§ § 1 defines a contract as a promise or a set of promises for the breach of which the law gives remedy, or the performance of which the law in some way recognizes as a duty.
The meaning of “enforce”
Law concerned with relief of promises to redress breach and not with punishment of promisors to compel performance. Expectation of what you would have been in if the promise had been fulfilled.
Expectation: benefit of the bargain, worse off than if the contract had been performed
Reliance: the performance caused detriment
Restitution: return benefit
A. The Basis for Enforcing Promises
§ 17 Requirement of a Bargain – (1) the formation of a K requires a bargain in which there is a manifest of mutual assent to the exchange and a consideration. (2) Whether or not there is a bargain a K can be formed under special rules § 82-94.
§ 71 Requirement of Exchange; Types of Exchange – (1) to constitute consideration, a performance or 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) There performance may consist of: (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation. (4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
Hamer v. Sidway – Court of Appeals of NY, 1891 (Hamer is the assignee of the claim v. Sidway is D and executor of estate) (Uncle promising $5K to nephew for forbearance)
§ 71(3)(b) It doesn’t matter so much that someone benefited, but that the nephew gave up some right (forbearance of sin) which does constitute consideration because he abandons some legal right and limits freedom of action in the future
§ 79 Adequacy of Consideration; Mutuality of Obligation – If the requirement of consideration is met, there is not additional requirement of (a) a gain, advantage, or benefit to the promisor or a loss, disad, or detriment to the promise; or (b) equivalence in the values exchanged; or (c) “mutuality of obligation”
§ 81 Consideration as Motive or Inducing Cause – The fact that what is bargained for does not of itself induce the making of a promise or performance or return promise does not prevent it from being consideration for the promise.
Feinberg v. Pfeiffer Co. – St. Louis Court of App., MO, 1959 (Π suing for breach of K after Δ ceased payment of promised retirement benefits.)
Past actions are not consideration for a contract to be valid and enforceable, and that reliance upon a promise is consideration for a contract to be enforceable.
§ 86 Promise for Benefit Received – (1) 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. (2) A promise is not binding (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extend that its value is disproportionate to the benefit.
Mills v. Wyman – Mass., 1825 (Π suing for breach of K, father of sick person that Π helped promised to cover expenses and then decided not to)
A promise made out of moral obligation arising out of a benefit previously received is not enforceable. A benefit conferred before a promise is made can