Contracts
Fall 2011– Barnes
I. Bases for Enforcing Promises
A. The meaning of “Enforce”
1. Contract – (Restatement § 1) Promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty
Law is concerned with relief of promises to redress breach, not with punishment
Three interests (Remedies for breach of K)
· Expectation Interest (§ 347) – Put you back in position you would have been had K been performed…same as if contract had been performed…compensates for what you could have reasonably anticipated (out of pocket expenses + what would have made)
· Reliance Interest (§ 349) – Put you back in position had the contract not been made (out of pocket expenses less any loss that would have suffered had contract been performed)
· Restitution Interest (§370) – Put you back in position had contract not been made, not only relied on promise, but benefit conferred on other party (just like reliance but allows recovery of benefit conferred to other party)
Punitive damages are not recoverable for breach of contract action unless conduct constituting breach is also a tort
B. Consideration as a Basis for Enforcement
Requirement of Exchange (§71)
(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) The performance may consist of
(a) an act other than a promise
(b) a forbearance (Hamer v. Sidway)
(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.
1. Consideration is value given by one party in exchange for performance
2. Forbearance based on an invalid claim is consideration if claim is reasonable and made in good faith (Fiege v. Boehm)
· § 74(1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless:
(a) the claim of defense is in fact doubtful b/c of uncertainty as to facts or law
(b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid
3. Peppercorn of consideration – something of value must be given, the actual value doesn’t matter as long as it’s genuinely bargained for.
Past Consideration – Past services are not valid consideration for a promise, consideration looks to the future
· Cannot bargain for things that happened in the past (Feinberg v. Pfeiffer)
· Exception to past consideration: § 86 – Promise for Benefit Received – 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. (Webb v. McGowin)
– Moral obligation is exception to freely bargained for exchange
– Promise not binding if conferred as a gift or its value is disproportionate to the benefit
– Key to § 86 analysis is to prove that a huge injustice will occur if not compensated
· Good Samaritans not compensated b/c no expectation of compensation when acting, therefore, no unjust enrichment
Requirement of Bargain – promise made w/o consideration is not enforceable, even if promisee acts in reliance on the promise (Kirksey v. Kirksey) – old rule
· Hypothetical: “Lunch time at Tiffany’s” – father promises daughter ring if she meets him for lunch. Bargained for Exchange? Yes, b/c detriment to her & sought by him
· Exception to BFE – Employment Agreements (CAB v. Ingram)
– Maj. Rule – covenant not to compete that is not bargained for is enforceable on the grounds of con
ven though no consideration, K is enforceable if you relied on promise and injustice can be avoided by specific performance.
2. 4 categories of Promissory Estoppel Cases
· Family Promises (Ricketts v. Scothorn)
· Promises to Convey Land – promisee relied by moving onto land and making improvements
· Promises Coupled with Gratuitous Bailments
· Charitable Subscriptions
3. Feinberg v. Pfeiffer – enforceable b/c of her reliance on pension and her loss of opportunity to go back to work. Her retirement was a reasonable consequence of the promise given to her.
4. Damages may be awarded if resultant harm from breaking promise requires remedy to avoid injustice (Cohen – newspaper publishers revealed his identity)
5. Promise that implies a duty which promisee reasonably relies on to his detriment can be enforced (DG Stout v. Bacardi)
D. Restitution as an Alternative Basis for Recovery
Requirement That Benefit Be Conferred (§ 370)
A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.
1. To recover on theory of Quasi-Contract, the plaintiff must prove the defendant was enriched or received a benefit, and that retention of the benefit w/o payment would be unjust (Callano)
2. Two measures for recovery under Restitution (§ 371)
· Reasonable value you would pay someone else to do the same thing
· Value of increase in property
– Choose greater of the two
