CONTRACTS OUTLINE §2
Introduction and Overview
I. A contract is a promise or a set of promises that the law deems of specific value to award damages if breeched.
a. Restatement §1à A contract is a promise for the breach of which the law gives remedy or the performance of which the law in some way recognizes as a duty.
II. Requirements of a Traditional Contract
b. Mutual Assent
a. Bargained for Exchange (promise for promise; performance for performance)
b. No BFE but Enforce
i. Unjust Enrichment—restitution
ii. Promissory Estoppel—reliance
c. No BFE do not Enforce
i. Past Consideration
ii. Illusory Promise
iii. Un-requested forbearance is not consideration.
IV. Mutual Assent
a. Objective manifestation of intent to enter agreement.
a. Intent to be bound
b. Special Statements
a. Acceptance by promise
b. Acceptance by performance
c. Acceptance by silence
d. Where does acceptance take place
VII. Termination of Acceptance
a. 5 Ways
VIII. Battle of the Forms
a. Common Law
b. (F) 2-207 (The former is the current UCC)
c. (R) 2-207
IX. Pre-Contractual Liability
c. Promise §90
b. Statute of Frauds
c. Lack of Capacity
iii. Public Policy
a. (ONLY TALKED ABOUT AT THE BEGINNING, NOT AT THE END!)
i. Put victim of breach (Π) in the same position he would have been in if the promise had been fully performed (put back in the place it would have been had the contract not been breached)
i. Put the victim of breach (Π) back (with regard to the world) in place they occupied before the dealings/ contract (give me back what I expended, but not what I expected)
i. Put the victim of breach (Π) back in place they occupied before the contract with regards to Δ only (restore to me what I gave to you); Disgorgement—make the Δ disgorge all value that he got from the contract
e. Punitive Damages
ii. ONLY if TORT involved.
f. Specific Performance
ii. Court enforces actual promise (seen often in real estate cases)
a. §71(1)—To constitute consideration, a performance or return promise must be bargained for.
i. THERE MUST BE CONSIDERATON FOR A CONTRACT TO BE ENFORCEABLE!
II. What is “bargained for”?
a. §71(2)—A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is give by the promisee in exchange for that promise. Remember the action must be sought and not gratuitous.
i. Detriment/ Benefit UNLINKEDàDETRIMENT, if SOUGHT, is ENOUGH. (ex: Hamer v. Sidway–detriment (loss of smoking, alcohol) sought by the uncle is enough)
ii. We don’t care whether it is a good bargain or a bad bargainà If you value it enough to REQUEST it, and you get it, there is CONSIDERATION (if you ask for it and you get it, that is consideration, whether it benefits you or not–waiver of a legal right is sufficient consideration for a promise)
iii. We only care about GENUINE, REAL bargains! (Not money promised/ it would please me if you . . . not enforceable b/c not really sought)
iv. IT TAKES A SEEKER TO BE BARGAINED FOR EXCHANGE!!!
v. IT IS CONSIDERATION IF BARGAINED FOR; BARGAINED FOR IF SOUGHT (If sought, it is bargained for, if bargained for, there is consideration).
vi. §79–“peppercorn”à if sought for, don’t have to receive equivalent
vii. What is bargained for does not have to be explicitly stated, so long as a reasonable person could determine that something was sought (i.e. casino case–spin wheel, win jackpot–the only way you spin wheel is if you’re a diamond club member–there is consideration b/c they are seeking her marketing information–and they get it)
b. §71(3)—The performance may consist of
i. an act other than a promise, or
ii. a forebearance, or
iii. the creation, modification, or destruction of a legal relation
c. §71(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.
d. Forbearance (§74)
i. CAN be valid consideration (EX: Hamer v. Sidway—uncle promised nephew 5,000 to give up drinking, smoking until 21; nephew gave uncle consideration of forbearance/ performance that was sought by uncle/ Waiver of a legal right (drinking, etc) is sufficient consideration for a promise (ACTUAL FORBEARANCE)
ii. Even if claim is invalid (false), forebearance from asserting is consideration if the claim is rea
i. Taste Testà subjective test of whether the buyer satisfied
ii. Commercial Fitness Testà objective test of whether a reasonable buyer would be satisfied
2. Requirement/ Output Clause—X promises to buy all necessary supply from (or sell output to) Y and Y agrees to sell/ buy that amount from X. Must be EXCLUSIVE!!(UCC 2-205à “reasonable price” (contract can be made where the price is not settled)
a. UCC 2-306(1)—Such clauses are a valid BFE as long as the buyer/ seller acts in GOOD FAITH (UCC 2-103à honesty in fact and the observance of reasonable commercial standards in fair dealing) and the amount to be purchased/ sold is REASONABLY FORESEEABLE (EX: Eastern Air Lines v. Gulf Oil–the parties consistently relied on each other to act in good faith in the purchase and sale of the required quantities of aviation fuel specified in the contract; not illusory b/c you have to buy commercially reasonable amounts and must be honest in fact)
V. Cases Where NO BFE, BUT Enforceable
a. Quasi/Constructed Contract to prevent UNJUST ENRICHMENT
1. Benefit conferred at the expense of the doer
2. Retention of the benefit
3. Unfair or unjust or inequitable not to be compensated
4. not a gift
ii. The REMEDY for unjust enrichment is RESTITUTION.
1. Court picks lower of fair market value or cost to obtain similar goods/ services when person unjustly enriched is not breacher.
1. Cotnam v. Wisdomà Doctor performed emergency surgery on man who was unconscious upon doctor’s arrival. His benefit was the possibility of survival. The doctor can recover restitution for services rendered.
2. Marriage–Pyeatte v. Pyeatte–C and M married and agreed that M would put C through law school and when he graduated, he would put M through grad school on the same terms; C graduated–informed M he wanted a divorce–M sued for breach of their agreement–Normally, because both parties perform the usual and incidental activities of the marital relationship, there can be no restitution upon dissolution of marriage for the performance of these activities; HOWEVER, the facts of this case demonstrate (and agreement between the spouses) an extraordinary or unilateral effort by one spouse that is to the sole benefit of another (unjust to allow C to retain the benefits of M’s extraordinary efforts)
Collano v. Oakwoodà Shrubs—definitely a case of unjust enrichment (person shall not be allowed to enrich himself unjustly at the expense of another, BUT the remedy must be sought against the party who “retained” the benefit—NOT UNJUST if there is