I. Consideration as a Basis for enforcement
What is a contract?
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
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
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.
) 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
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”
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.
Peppercorn promise – not a real bargain in good faith because it is arranged only to satisfy the requirement of consideration. A sham!
Settlement of Claims – (1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless (a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or (b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. (2) Execution of an instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.
– If there is a good faith, subjective belief that the claim could be determined to be valid, from a consideration standpoint it doesn’t matter if it ultimately does or does not actually turn out be valid. Good faith means “I really believe it to be true.”
There must be a bargain going on to have consideration, I’ll do this if you do this. 71 (1) (2) In Hamer the uncle gave up money if the nephew gave up his rights. In Feige the woman gave up right to bring action if the man paid money.
(2) Past Actions cannot be consideration because they cannot be bargained for in return for the promise since they already happened.
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.
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.
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 hardly be said to have been given in “exchange” for the promise. Exceptions to this include statute of limitations, minor child, and bankruptcy.
It is well settled that a moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or obligation resting on the promisor.
A promise which is based in gratuity is not enforceable as a contract.
(3) Unsolicited Action
(4) Illusory Promises
Types of contracts
Unilateral contract: a promise only on one side.
Bilateral contract: both sides make a promise
Illusory– A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance unless (a) each of the alternative performances would have been consideration if it alone had been bargained for; or (b) one of the alternative performances would have been consideration . . .
If there is no restriction of the lawful freedom of action by one party then there is no consideration and the co
ough there was not K expressed in words or on paper. This K generally uses restitution interest.
Quasi-contract cases must involve some direct relationship between the parties. Quasi-contractual obligation is frequently based upon the doctrine of unjust enrichment. It is not unjust enrichment if you are apart from the actual person who was enriched. Would the Π have expected payment from the Δ? No, it was expected from the person the Π originally contracted with. It rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another, and on the principle of whatsoever it is certain a man ought to do, that the law supposes him to have promised to do. Callano should have just brought suit against Pendergast’s estate for the shrub planting.
Measure of recovery: the reasonable value of what was received in terms of what it would have cost to obtain it and the extent to which the value is increased.
Overview of Contracts so far:
Expectation — position if promise had been performed — benefit of the bargain —Consideration
Reliance — position if promise had not been made — out of pocket/lost opportunities
Restitution — prevent unjust enrichment — Quantum Meruit/Valebant/value of benefit received — quasi contract/contract implied in law
II. The Bargaining Process
A. The Nature of Assent
– Requirement of a bargain: formation of a contract requires a bargain w/ manifestation of mutual assent to the exchange and a consideration
– Effect of Misunderstanding: (1) There is no mutual assent to the exchange if the parties attach different meanings to their manifestations and (a) neither party knows the meaning attached by the other, or (b) each party knows the meaning attached by the others. (2) The manifestations of the parties are operative under the agreement when the meaning attached to them by one of the parties if (a) that party doesn’t know of any different meaning attached by the other party, and the other knows the meaning attached by the first party; or (b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.