Contracts I Outline Fall 2006
A. Bases for Enforcing Promises
What is a contract?
a. § 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.
b. Legally enforceable promise.
The meaning of “enforce”
a. 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.
i. Expectation interest: Put non-breaching party in same position as if contract performed.
a. $1000 down payment, $500 for garage, and $1500 profit for selling car
ii. Reliance interest: Put non-breaching party in same position as if contract never made
1. Paid $500 for the garage to keep car. Paid $1000 down payment.
2. Put non-breaching party back to its original position: $500
3. Broader interest, includes interest to third parties, like garage owner
4. Might also categorize the $1000 as reliance interest too
iii. Restitution interest: Put breaching party in same position as if contract never made-Give back benefits.
1. Wrongdoing party must give back down payment, for ex.
2. Restitution interest is usually less than reliance interests
1. Fundamentals of consideration
2d § 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.
2d § 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.
Breach of contract claim, must have consideration
eory to bargain-exchange.
1. Forbearance to act is sufficient for consideration.
2. Forbearance must be requested by one party
3. Promises to make gifts has no forbearance
4. Detriment can be giving up your legal right to enjoy certain liberties.
Unilateral contract: one party promises to do something
Inducement: One party must induce the other party to do something
Restatement (Second) of Contracts 71:
o A performance or a return promise must be bargained for AND
o Sought by the promisor in exchange for his promise AND
o Given by the promisee in exchange for that promise.
o Consideration is a bargain-for exchange.
If the requirement of consideration is met, there is no additional requirement of
Benefit to the promisor OR
Detriment to the promisee
NOTE: Restatement doesn’t mention legal rights, but courts interpreted Hamer v. Sidway differently.