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Contracts
University of North Carolina School of Law
Baker, Scott A.

I. IMPORTANCE OF PROMISE

A. Quasi contract elements:

Bailey v. West – pg. 12

Elements
1. Benefit conferred upon D by P
2. Appreciation by D of benefit
3. Acceptance and retention of the benefit when unfair to keep w/out paying

– When costs of transaction are high more likely to get quasi – if low, would have K’d
– If it is certain D wants benefit, probably quasi (medical aid) not when uncertain (say anything)
– Maybe add more here

B. Derivative Contracts

Bolin Farms v. American Shippers – pg. 18

Three Kinds:
1. Forward K – agree on price beforehand to hedge risks – insurance
2. Future K – tradable – ASK BAKER to distinguish
3. Stock options

– Hedging used to prevent risks for both parties – minimizes the risk on either side – like insurance
– Could argue risks were so extreme to be UN4CBL, but in Bolin this was not allowed

3 Reasons for limiting Ks
1. Paternalism – don’t want people doing it
2. External affects – affects parties outside of the two contracting (ex. Drug addicts affect families)
3. Morals – limiting strictly on moral grounds (ex. No selling kidneys, drugs, sex)

C. Unconscionability

Williams v. Walker Thomas Furniture – 2 cases – pg. 536, 538

Must balance procedural and substantive unconsc
– Procedural – lack of meaningful choice, fine print, pressure, confusion
– Substantive – unfair terms – the terms themselves are so one-sided or unfair
– Test: The more procedural that exists, the less subst necessary and vice versa

Ways to avoid unconsc:
– Use larger fonts
– Put it on the front page
– Have seller explain the difficult terms
– Have buyer initial specific clauses

UCC 2-302 Uncons rules – pg. 35 – prevention of oppression and unfair surprise:
1. Refuse the entire K
2. Refuse the unconsc clause
3. Limit application of the unconsc clause
– Court gets to decide what to do

Contract of adhesion elements:
– Form K
– K drafted by seller
– No meaningful choice

Benefits of form K:
– Cheaper than bartering all the time
– Way to control agent of seller – keeps agents from undercutting profits/discrimination

Notes:
– Oppressive terms – benefit to the consumer is less than cost to consumer
– Effectively raises cost and decreases sales so goes against concept of monopoly
– Hard for price to be unconsc – people always know and understand price in general – salient terms
– Consumer has ability to find price on market – their responsibility to investigate

II. CONTRACT LIABILITY

A. Consideration

1. Bargained for and Given in Exchange

Kirksey v. Kirksey – pg. 39
Hamer v. Sidway – pg. 40
Langer v. Superior Steel – pg. 43
Bogigian v. Bogigian – pg. 47

– Consideration – reflects a bargain for exchange – shows mutual inducement
– Mutual Inducement – A’s promise induced by B, B’s promise induced by A
– Both must be true – promises must restrict freedom in some way (ex. Can’t say “if I feel like it”)
– Must give up something not legally obligated to do
– Once legal right given up cannot be used to make a second promise – already given up
– Even if no intention to do it, intentions don’t matter as long as it is a legal right
– Mixed motive – doesn’t have to be only reason for inducement, just partially induced by promise
– Bilateral K – promise exchanged for a promise – consummated when both promises are made
– Unilateral K – promise to give something after performance – consummated when perf is complete
– All Ks are bilateral unless specifically calling for acceptance by performance
– Interfamily promises – courts are unlikely to interfere in these circumstances
– Gifts – condition on giving gift (ex. Come pick it up) usually not enough for consideration

Ways

– pg. 72
– You can shout consid to the housetops, but if no actual consid it is uneneforceable
– Here $1 consid is not enough unlike Thomas – comparative value and moral repugnancy
– Promise to marry is not enforceable
– Blackmail is not enforceable – blackmailer has no need to perform – no K law backing

Fiege v. Boehm – pg. 75
– Rst 2nd § 74 says reasonable belief (subj) OR reasonable basis for belief (obj)
– Rst 1st in this case said needed BOTH
– Again policy concern plays major factor – want to make sure bastard child has support
– Similar to widow and mistress of Thomas and In re Greene

b. Pre-Existing Duty Rule / Modification

– Modifications are allowed for when inadequate damages mean both parties would benefit from mod

Levine v. Blumenthal – pg. 81
– Pre-existing duty rule – fresh consideration is required for modifications
– Courts do not favor this and will often accept sham consideration
– ASK BAKER SEVERAL QUESTIONS

Alaska Packers v. Domenico – pg. 84
– Application of the pre-existing duty rule – nothing changed so modification is unenforceable

Angel v. Murray – pg. 87
– 2-209 changes pre-existing duty rule – no need for consid if in good faith – legitimate commercial reasons
– § 89 – mods are ok if (1) not fully performed, (2) fair and equitable, (3) UN4CBL circumstances
– Prevents extortion better, but has more vague rules – tough to tell good faith/F&E
– 2-209 = goods, 89 = services
– § 73 – Pre existing duty rule