Contracts I
Amy Schmitz
Fall 2016
Consideration
RS 71: quid quo pro : inducement : promise for a promise : bargained for
Hamer v Sidway: Uncle promised $ & nephew promised not to drink/play cards. Consideration establ’d b/c forbearance of a right is enough, & promisor needn’t benefit.
Cash v. Benward- Soldier wanted insurance for wife. Unit sec promised to help, as did her boss. Cash gave her application and fee. She never sent it. Never got insur, then wife died. Held not enforceable b/c promises were “social niceties”, and soldier gave no consideration (he could have applied on his own; did not give up the right to do so). No PE, b/c promise was vague, non-specific, and no inducement/not reasonable.
Hill v. Chubb Life Insur – Hill wanted increase health insur; Chubb says 60 day notice or give reason for delay. No premium asked for/paid b/c policy = will be auto deducted. Chub req phys exam; Hill does + submit add’l docs. After 60 days, no correspondence. Hill not know delay due to Dr’s not sending docs. Chubb claim 60 day met b/c they asked for additional “hazard activity form”. Hill say no delay mentioned. Hill suffer stroke but no policy yet issued. Additional docs and exam = detriment, and thus consideration for promise 60 day.
RS 79: adequacy/value of consideration unimportant, unless gift. Gift not enforceable.
Kirksy v. Kirksy: Bro-in-law promised to take care of widow/child if widow left her land/home and moved to his. She did so. [land was husband’s, but no right by woman to own in that time, so in leaving she gave up no right]. Ruled unenforceable b/c intent of bro-in-law was “gift”. Why didn’t lawyer pursue PE?
RS 82: Promise to pay actual debt owed, or debt owed if not for SoL is enforceable if: 1. Voluntary acknowledgement of debt; or 2. Statement that will not use SoL as defense
Kim v. Son: Promise written on bar napkin in blood to pay Kim’s investment back from failed company “to the best of his ability”. Kim promises not to sue. But Son not personally responsible for company debt, & Kim has no right of claim against him. No consideration (promise not to sue is not detriment b/c he never had that right in the first place). Not enforceable under 82 b/c debt was never Son’s in the first place.
If Son personally responsible in the first place, then enforceable.
Substitution: when no consideration, P may still be enforceable if:
Promissory Estoppel RS 90- promisor knows P will induce behavior, & promisee reasonably relied on promise to her detriment. Recovery of detriment.
Charitable, & marriage settlement needn’t prove inducement/reliance (Martin Luther v. Boston Univ = charitable donation of papers upon death is enforceable).
Ricketts v. Scothorn – Grandpa visits work and says he has worked something out so she needn’t work; none of his other grandkids do. Gives promissory note (2k/interest). She quits her job. PE applies b/c gpa intended to induce her to quit.
Hayes v. Plantations – Wrker declared intention to retire (after 51 yrs). 1wk before retirement, boss promised to “take care” of him. No formal pension; not union. “Token of gratitude”. Implied continued payments (recv’d 4 annual payments 5k); but stopped after 3yr. PE cannot apply, b/c promise was AFTER he decided to retire. Promise did NOT induce retirement. No reliance. Gift.
Hoffman v. Red Owl – Baker moved family, bought small grocer, sold buis’s, bought land, & tried to secure loan (incl’d using father-IL as partner) to obtain grocery store franchise. Red Owl rep told Hoff to sell his buis, and buy the land, etc, but always kept moving goal out of reach. No K, but PE applied. Bad faith on Red Owl, and Hoffman reliance. Rec’v reliance dmgs. See: Inchoate Agreements
Moral Obligation RS 86: promise comes after act (does NOT induce act). P enforceable if action unjustly enriched & justice requires [but extremely rare]
Webb v. McGowen – P saved life of D by jumping with log to avoid log hitting D. P severely injured/disabled. D promises to pay him $15/every 2 mo for remainder of his life. Pays for 9 yrs until D dies. Estate quits paying. Held enforceable b/c P saved D from death/severe disability which is more valuable than any consideration could provide (and 9 yr establish intent to pay/be bound + how much to pay.)
Harrington v. Taylor – P stopped D from being hit in head with axe by grabbing it with hand. Hand mutilated. D promised to pay for med bills. Only partial payment; refuse to pay rest. Held unenforceable b/c humanitarian act done without expectation of payment. (possibly b/c domestic situation? Man, ex-wife, and mistress?)
Quasi Contract/Implied K RS 197 – no enforce K; theory is unjust enrichment (windfall) & remedy = only if denial causes “disproportionate forfeiture”.
Schott v. Westinghouse – company put out policy to encourage production cost reduction which rewarded empys for submitting suggestions. Reward from $5-$5k if idea approved/adopted. P submitted idea, but it was rejected in writing. Later, P found D had adopted his idea after all. Committed rejected its own agreement “to abide by final judgement” when it used idea after reject; but they rejected in manner of agreement; thus no K. But ct found gross unjust benefit to company b/c they took his idea/rendered services to gain monetary benefit.
Public Works v. Cosby – Architect designed building; then city wanted new plans b/c trying to get grant. City Engineer authorized artch to undertake draft of new plans; & mayor used the plans to submit bid for funding. Council never authorized funds for expanded work & statute prevented payment and gave no authorization to City Eng (but he testified he was authorized, so at least believed he was). Crt held unjust enrichment b/c accepted/used services they knew weren’t free/should have expected payment.
S.T. Grand v. NY City – NY refused to pay balance of debt to co hired to clean reservoir. Evidence & crim conviction showed river never needed cleaning and co + city official conspired to acquire K. No K because fraud. Crt held no unjust enrichment either b/c fraud. Held co must pay NY all monies paid; punishment for using bribes to go around bidding process.
Offer
RS 24: Manifestation of willingness to enter into bargain; understanding that asset is invited and will conclude. Offer must (1) be clear to reasonable p; (2) must definite enough to bind on acceptance; (3) not have any reservations for offeree; & (4) no risk of oversubscription
RS 32: Offer = invitation to accept by promise to perform, or by rendering performance
RS 26: Not offer if known that offeree does not intend to be bound until further negotiations (advertisements & “quotes” are not generally offers)
Leonard v. Pepsico – Pepsi commercial shows Harrier jet and
tute. [PE can also apply]
Krauss v Fox – P wanted to buy land from D; made offer. P countered with “option K” (agreement to hold the offer open till 5pm on June 3). By 3pm of that day, D contacted to say changed mind;would not sell. P went on to sign the counter and send it to escrow anyway, by 4pm of 6/3. P contends that offer was option K, and thus D was required to sell b/c he accepted before time ran. P says his 5k earnest $ serves as consideration. Clear from agreement that 5k was considered for the offer; not for option K. Held for D = option K req’s separate consideration for enforcement. No separate consideration = revocation at any time possible.
Newbringer v. Rifkind – Stock options granted to 5 employees by decedent, Avnet, refused by executor. Each emp promised % of stock after 5 yr employ (or % after each year). Written option K and signed. All attempted to exercise option after 5 yr employ. Testified they relied on this option K in continuing their employ at Avnet. Gave “time” or “effort” in exchange for option K. Held = continued employment is consideration for stock option b/c similar to pension, where if emp knows of it and continues to work, that is consideration + they continued working despite no K to do so + continued working = clearly beneficial to company (reduces turnover, and options K boosts morale & produces better work – accept by conduct).
Drennan v. Star Paving – general contractor asks for bids from subcontractors, which he relies on to create total bids for work. P received bid from D, the lowest for paving floors (7k); so notified them and incl’d in his bid. He won K. After, D stated could not perform/”mistake” in bid at the price, and refused to do paving unless price raised. D then took bids from others, and got it done for 10k from other. But no evidence that option K existed b/c D never promised to keep open in exchange for inclusion in P’s bid. P alleges he relied to his detriment. Held = usage of the trade can prevent revocation b/c D knew how bidding worked, and P reasonably relied. D’s bid made greater chance P’s would be accept. D had every reason to know P would rely. [basically PE]
UCC 2-205: Offer by merchant to buy or sale goods which, by its terms, is left open (option K) is not revocable and does not require consideration.
Rewards: performance is binding and is consideration if performer knew of offer before completing performance (but if performed without knowledge, not binding)
Carlill v. Smoke Bomb – advertisement said 100 pound reward to anyone who used product 3x/day for for 2/wk if they still contracted flu. Held = express promise w/ specific terms & sought to induce performance for its own benefit thus is binding
