Contracts
v What is a contract anyway?
Ø A contract is an enforceable promise.
Ø Unilateral contract – the exchange of a promise for performance.
Ø Bilateral contract – the exchange of a promise for a promise.
Ø Consideration – “denotes the receipt by the promisor of ‘something of value’ from the promisee.”
§ Consideration for a bilateral promise is the exchange promise
§ Consideration for a unilateral promise is the performance.
§ Consideration doesn’t always work out.
§ Whatever consideration is, the idea is that it induced the promisor to make the promise.
§ See Restatement § 17.
v Possible remedies
Ø Damages
§ Expectation Damages
· Awarded to put the party in the position they would have been in had the breach not occurred.
· Pepsi Co. case – the kid would have had to get either the jet or the $23 million.
§ Reliance Damages
· Awarded to make up for whatever costs a party has incurred in reliance on a contract that has been breached.
· Jenn promises to sell me some land in Florida. I hire an attorney in Florida to go check out the title and arrange the papers. Jenn backs out. I can sue for whatever my attorney’s fees are.
§ Restitution
· Awarded to put the party back in the position they would have been in.
· Ex. – I pay $100 for a thingy, then don’t get the thingy. I would be entitled to get my $100 back.
Ø Injunctive Relief
§ Specific Performance
· A party can sue to have to court order the other party to do whatever it was they contracted to do.
· Particularly important in cases where you are dealing with unique things – real estate, artwork, things that are specific and you can’t just go by another one just like it.
· We don’t do a whole lot of specific performance in the states.
Ø Injunctive Relief v. Damages
§ Injunctions are the remedy available under property rules
· Property rules
¨ You cannot take the thing in question because it is someone else’s property.
¨ If they agree to give or sell you the property, that is okay, but other than that, they can’t mess with it.
§ Damages are the remedy available under liability rules
· Liability rules
¨ You can take the thing in question as long as you pay for it. (Perverse result: “Hey, that’s my arm!” Courtesy of Prof. Sh
on
§ Keep frivolous cases out of court
§ Cut down on vagueness
§ Cut down on inadvertent promises
§ Cut down on fraud
§ All of the above reasons are bullshit – consideration is a notoriously shifty, slippery concept that courts kind of keep on hand to help them get the result that they want.
Ø Example: Hamer v. Sidway, Pg. 32
§ Uncle William promised to give Willie $5000 when he turned 21 if he stayed on the straight and narrow until then. Willie did so, abstaining from smoking and drinking and whatnot. (Note: this was a unilateral contract – the exchange was Uncle William’s promise for Willie’s performance.)
§ The court held that there was consideration for this promise, being that Willie actually gave up all those things that he had a LEGAL right to do. The important thing was not that Uncle William had gained any benefit, but that Willie had given up something of value.
§ More on gift promises later.
