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Contracts
University of Kansas School of Law
Drahozal, Christopher R.

Contracts Outline
 
I)       Interests
A)    Expectation Interest
i)        Promisee’s injury consists of being worse off than if the promise had been performed
ii)      Can include expected profits
iii)    As if the contract had been performed
iv)    Usual remedy for breach of contract is money damages to meet promisee’s expectation
B)    Reliance Interest (Promissory Estoppel)
i)        If the promisee had changed its position to its detriment in reliance on the promise
ii)      Does not take into account profits
iii)    As if the contract had not been made
C)    Restitution Interest
i)        If promisee has not only relied on the promise but has conferred a benefit to the promsor
ii)      As if the contract had not been made
II)    Consideration
A)    Restatement (2nd) 71
i)        Consideration:
(a)    Performance or return must be bargained for
(b)   A performance or return promise is bargained for it is sought by the promisor in exchange for his promise and given by the promisee in exchange for that promise
ii)      Hammer v. Sidway – Child refrains from drinking and using tobacco until his 21st bday in exchange for $5000 from his uncle. Courts rule that refraining from any legal right is sufficient consideration
B)    Not consideration
i)        Peppercoron
ii)      Gifts
(a)    Kirksey v. Kirksey – Brother-in-law offered woman a house if she came to live with him. House was considered a gift and did not qualify as consideration for a contract
iii)    Past Actions
(a)    Feinberg V. Pfeiffer Co – Employee promised pension after she retired, whenever that may be. 
(b)   Webb. V McGowan – Man diverted falling block by falling with it. D

injury to the promisee is a sufficient legal consideration for the promissor’s agreement to pay
C)    Requirement of a Bargain
i)        Central Adjustment Bureau – Promise of future employment is not sufficient consideration for a covenant not to compete
D)    Promises as Consideration
i)        Traditional Approach (Strong v. Sheffield)
(a)    Take promise literally
(b)   If promise has no substance (i.e. is peppercorn). Cannot be consideration
(c)    Could party breach promise? If not, is illusory.
ii)      Modern Approach (Mattei)
(a)    Parties believe they have a deal
(b)   To give substance to deal, courts imply missing term
(c)    E.g. good faith reasonable satisfaction
(a)    Satisfaction clause – illusory promise
iii)    Restatement (second) § 90
(a)    A promise which the promisor should reasonably expect to induce action or forbearance
(b)   Of a definite and substantial character on the part of the promisee
(c)    Does induce such action or forbearance
(d)   Is binding if injustice can be avoided only by enforcement of the promise
E)     Reliance as a Basis of Enforcement
i)        Ricketts v. Scothorn – Reliance on a promise meant to bring about a certain action makes the promise enforceable. Ricketts offered Scothorn $$ to induce her to quit her job
ii)      Promissory Estoppel
(a)    What needs to be shown for estoppel:
(a)    Promise must be made
(b)   Promise must be relied upon
Intentional action/contemplation that a certain action