Contracts Outline 2006
Restatement of Contracts: first published in 1932, and then in 1981 done to correlate with the UCC. Restatements are not statutes but are an analysis of the law. It is not binding, but very persuasive and highly regarded.
Uniform Commercial Code: the UCC is a model code adopted by all of the states except Louisiana. The UCC deals with the transactions in goods.
Contract is defined a bit different in the UCC
UCC provides a warranty which can be used as the element of the future
§ 1: Contracts: a contract is a promise or a 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. There is an element of the future with a contract.
Three fundamental assumptions:
a. Relief of promises to redress breach, no punitive damages unless frot with emotion
b. Relief granted to the aggrieved promisee should protect expectation. Put promisee in position would have been had promise been performed.
c. Appropriate form of relief is substitutional not specific
§ 2: Promise; Promisor; Promisee; Beneficiary:
Promise: a promise is an assurance or undertaking, however expressed, that something will or will not be done in the future. Promises enforceable by law are called contracts.
Promisor: the promisor is the person who make the promise.
Promisee: the person to whom the promise is addressed is called the promisee.
Beneficiary: when performance of a promise will benefit someone other than the promisee, that person is called the beneficiary.
§ 3: Agreement Defined; Bargain Defined:
Agreement: a manifestation of mutual assent on the part of two or more persons.
Bargain: an agreement to exchange promises or to exchange a promise for a performance or to exchange performances
§ 4: How a Promise May be Made: a promise may be stated in words wither oral or written, or may be inferred wholly or partly from conduct.
Consideration: is a benefit received by the promisor or a detriment incurred by the promisee.
Promissory estoppel: where one party acts to her detriment in reliance upon a gratuitous promise, the detrimental reliance of the promisee, within limits, will be deemed sufficient for estopping the promisor from asserting the defense of lack of consideration.
Expectation Interest- the promisee’s injury consists in being worse off than if the promise had been performed. If awarded expectation you will be put in the position had the contract been kept.
Reliance Interest- The promisee’s injury consists of being worse off than if the promise had not been made. Can receive any money paid to third parties because you relied on the contract
d. Restitution Interest- The promise may have rendered some performance in return for the broken promise. Can receive any money to whom you paid because of the promise.
I. Fundamentals of Consideration
A. § 71: The requirement of Consideration
i. to constitute consideration, performance/return promise must be bargained for
ii. performance/return promise is bargained for if it is sought for and given in exchange of the promise
iii. performance may consist of an act other than a promise, a forbearance, or the creation/destruction/modification of a legal relation
iv. may be given to/by third person
B. Hamer v. Sidway: Uncle promises to pay if nephew forbears from drinking / smokingàenforceable promise.
i. § 79: if the requirement of consideration is met, there is no add’l requirement of gain, advantage, or benefit to promisor OR a loss, disadvantage, or detriment to the promisee.
C. Implication of Bargain Theory
i. Promises to make a gift are unenforceable
ii. Sham promises are not considerations
iii. Promises to settle lawsuits can be consideration BUT there must be bargained for exchange AND good faith belief claim.
1. Fiege v. Boehm: forbearance from bringing paternity action is consideration (even though he was not the father) b/c she made promise in good faith
2. Fiege shows that no consideration would be a claim that lacked reasonably good faith
iv. Unsolicited action is not consideration
1. Feinberg: by offering retirement benefits, not trying to get her to stay and work.
2. Kirksey v. Kirksey: no consideration when sister-in-law moved to live near brother-in-law, court said mere gratuity. Merely changing position in reliance on a statement is insufficient to impose contractual liability in absence of any bargain
v. Past Action is not consideration because the benefit is conferred before the promise is made. Feinberg v. Pfeiffer
1. Alternative theoryàmoral obligation
2. Alternative theoryàrestitution
D. §76: conditional promise is not consideration
E. §77: illusory promises
I. §86: promise for be
1. Benefit conferred
2. Not a gift (must be expectation of payment) and not officious intermeddler
3. No compensation would be unjust (b/c there was enrighment
4. Can’t be used to avoid limits imposed by a contract
5. If there is a contract, can’t use restitution theory
iv. Callano v. Oakwood Park, 108: Callanos K’d to put in shrubbery for Pedergast, who dies b/f paying. Oakwood sells the house who receives more $ because of shrubbery. Oakwood received unjust enrichment, but:
1. there was a K b/w Callano & Pendergast so can’t use restitution theory and try to circumvent K.
2. Implying K only available to prevent unjust enrichment in limited situations
3. Restitution is not available when there is an alternative remedy (ie suing estate of Pendergast)
v. Mechanic’s Lien: statutory, has claim against house and usually homeowner will pay rather than have home foreclosed on.
C. Alternative theory to ConsiderationàMoral Obligation: promise for benefit previously received is binding to the extent necessary to prevent injustice. Sometime morality requires you to keep promise even if there isn’t consideration.
i. Webb v. McGowin, 45: worker injured himself to keep brick from falling on head of boss, boss promised to pay him and then stopped paying him; degree of material benefit conferred. Also degree of injuries
1. Where the promisee cares for, improves, and preserves the property (human life) of the promisor, through done w/out his request, its is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of the material benefit received.
2. Mills v. Wyman 44, court did not apply this theory b/c moral obligation is not enough
a. Maybe b/c promise made by father, who did not receive benefit
b. Son died
IV. What Promises does the Law Enforce
A. Generally must be “bargained for”
ii. §17: formation of K requires a bargain in which there is a manifestation of mutual consent and a consideration