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

CONTRACTS I – FALL ‘07 – DRAHOZAL – OUTLINE
Contract – Legally Enforceable Promise
Three interests to be protected
· Expectation Interest: “Benefit of the bargain” – Put non-breaching party in position as if K was performed
o Promisee’s injury results in being worse off than if promise had been performed
o Remedy as if K performed
· Reliance Interest: Put non-breaching party in position as if K had not been made
o Promisee’s injury consists of being worse off than if promise not made
o Remedy as if K never made
· Restitution Interest: Non-breaching party relied on interest and conferred benefit on promisor; prevent unjust enrichment
o Remedy to put promisor in same condition as if K never made
Expectation – The position a party would have been in had the contract been performed
Reliance – The position a party would be in had the promise not been made (because promisee changed position to his detriment in reliance on the promise)
Restitution – The position a party would be in had the promise not been made (because the promisee conferred a benefit on the promisor)

BASES FOR ENFORCEMENT OF PROMISES

Must have: Consideration and Assent (And an offer and acceptance) to form a K
CONSIDERATION AS A BASIS FOR ENFORCEMENT
FUNDAMENTALS OF CONSIDERATION
· Consideration
o Benefit received by promisor or detriment incurred by promisee
o Courts infer detriment when party obliges himself through bargain to perform in a certain manner
o That a promise is bargained for is usually enough to make it enforceable
· The element of bargain assures that, at least when K formed, both parties see advantage in K for anticipated performance
· ABSTENTION FROM CONDUCT (HAMER V. SIDWAY)
o FACTS: Decedent promised nephew that if he would refrain from drinking, tobacco, swearing, and gambling until 21, he (uncle) would pay $5k – When nephew reached 21, informed decedent that he kept bargain – Decedent reaffirmed obligation but retained funds – Decedent died w/out paying
o ISSUE: Does a promisee’s abstention from legal but harmful conduct constitute legal and sufficient consideration for a promise to pay money?
o HOLDING: YES
§ A waiver of any legal right at request of another party is sufficient consideration
§ Can’t say that uncle didn’t benefit from nephews abstention
o Need to differentiate a bargain promise from a donative promise
§ Test: how parties view condition
o To constitute consideration, a performance or return promise must be bargained for
§ If consideration requirement met, no addition requirement of a gain, advantage, or benefit to promisor or loss, disadvantage, or detriment to promisee
o Hypo: A promise for a gift – No consideration under bargain theory
· Peppercorns – something very small may not be consideration
· C

edge of P, voted to give raise and guaranteed retirement income for life – After vote, P informed of action and told she was free to leave whenever she saw fit – P worked for another year and half and would have continued w/out added benefits – Retirement plan major factor in decision to retire – D paid payments for several years but stopped when new president ordered – P sued to recover payments b/c she suffered severe medical problems and couldn’t work anymore
o NO CONSIDERATION:
§ Past service not consideration – consideration is sought in the future
§ Continuing work for 1.5 years after promise not consideration – wasn’t bargained for
§ Retirement/forbearance from other work – wasn’t consideration b/c company wasn’t bargaining for it
o For something to constitute consideration, it must be bargained for
o Bargained for if sought by promisor in exchange for his promise and given by promisee in exchange for that promise
o NOT CONSIDERATION: Gifts, peppercorns, past action, and unsolicited action not sought by promisor
Past action is not consideration b/c benefit conferred before promise is made