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

CONTRACT FORMATION – Is there a legally enforceable promise?

CONSIDERATION = §71(a): a performance or a return promise must be bargained for, which means
§71(b): must be sought by the promissor in exchange for the promise, and given by the promisee in exchange for the promise (inducement)
Different from benefit/deteriment approach

I. Gratuitous Promises w/ NO CONSIDERATION

A. Unilateral Contracts (Promise for Performance)

1. Surrender of an Invalid Claim (Fiege)
a. Rst 2d §74à1. “good faith” (subjective) &
b. “reasonable belief” (objective) in validity of claim are necessary
2. Peppercorn = evidence of sham bagain
a. Rst. allows it because seal offered a way to make gratuitous promises binding
b. Rst 2d doesn’t allow because it undermines consideration theory
3. Legal Duty = Pre-Existing Duty Rule
a. Promise to carry out existing legal duty not consid.
b. Promise not to carry out illegal duty not consid.
4. Past Action (Feinberg) “On retirement, $200/mo.”
a. Example = Central Adjustment Bureau possible consid:
i. Future raises? Unsolicited, not in deal
ii. Hiring? Past action, before deal
iii.

injustice (Webb v. McGowen)
c. ALTERNATE RULE: restitution
5. Unsolicited Action – (Kirksey- didn’t want her to come but did)
a. If = condition for gratuitous promise
b. ALTERNATE THEORY: reliance

B. Bilateral Contracts (Promise for Promise)
1. Illusory Promiseàlike peppercorn
a. Trad. Rule: Strong v. Sheffield = forbear “until I want” has no consid.
Mod. Rule: Mattei v. Hopper = court implies good faith & reasonable standard to satisfaction clasuses

RELIANCE
I. Elements of Promissory Estoppel (Rst. 2d §90)
A. Promise
B. Promisor should reasonably expect to induce reliance
C. Actually induced reliance
D. Binding if necessary to avoid injustice
E. Remedy limited as justice requires (expectation or only reliance damages)
II. Differences with 1st Rst.
A. No reliance of a “definite and substantial character” clause
B. Always expectation damages
III. Equitable estoppel
A. Representation of facts
B. Promisor contemplated reliance
C. Reliance
Grossly inequitable