A ROADMAP FOR CONTRACT LAW
Contract
Definition of K: “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.” Restatement 2d § 1
Illusory Promise: (Re 2 77)
· A promise so indefinite that it cannot be enforced or…
· because of the promise itself is optional on the part of the promisor.
· “I’ll get the next one.”
Lucy v. Zehmer
· Facts: P thought he entered a K with the D. P was serious, but D said he was joking. P wanted specific performance of the contract.
· Issue: Was there an enforceable contract?
· Holding: Objective manifestation is what matters in bargain theory. P wins.
· Best Arguments:
o P: Objective manifestation of a K (Re 2d § 2 comment b)
o D: Zehmer knew it was a joke or a reasonable person would understand this to be a joke, intoxication (Re 2 § 16) also.
NIPSCO v. Carbon County Coal
· Facts: P agreed to contract that heavily favored D because it wanted a sure supply of coal. P wanted a declaration that it was excused from the K because the prices were too high.
· Issue: Was P excused under force majeure clause or doctrine of frustration/impracticability?
· Holding: No. Force majeure clause is not valid in this circumstance and as for frustration; NIPSCO is just trying to shift its risk on D.
· Force majeure clause: out of their control or cannot be anticipated. (contractor is prevented from finishing on time)
THE BARGAIN THEORY OF CONTRACT
Consideration
Definition of Consideration: “The principal that our law employs in order to determine whether a promise is worthy of legal protection.” Frier
Requirements of Consideration: Restatements 2d § 71, 79 (not consideration 76)
· To constitute consideration, a performance or a return promise must be bargained for. (Bargained for Exchange)
· 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 promise in exchange for that promise.
· The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation. (71)
Hamer v. Sidway (Forbearance as Consideration)
· Facts: An uncle promised his nephew $$$ If he abstained from certain vices until he reached 21.
· Issue: Is abstaining from some type of legal action such as drinking and smoking valid consideration?
· Holding: Yes. The nephew’s abstinence is a forbearance that amounts to consideration necessary for contract enforceability.
Lakeland v. Columber (Forbearance as Consideration)
· Facts: D signed a noncompete form while already working for D. Later P quit and started competing with D.
· Issue: Is subsequent employment sufficient consideration to support a noncompete form?
· Holding: Yes. Valid consideration exists because of the employee is employed at will and could be terminated at any time.
Petroleum Refractioning v. Kendrick Oil Co. (Forbearance as Consideration)
· Facts: D contracted to buy oil from P unless P stopped making that grade. D stated that the grade is not correct and wouldn’t accept further shipments. P then sold the remaining contract for much less to third party and is suing for the difference.
· Issue: Is giving up a right to produce a certain grade of oil valid consideration?
· Holding: Yes. A benefit to the promisor or a detriment to the promise is sufficient consideration for a contract.
Harrington v. Taylor (Moral Consideration)
· Facts: D promised to pay for P’s injured hand, which was cut when D’s wife was trying to kill D. P intervened.
· Issue: Is a voluntary humanitarian act valid consideration?
· Holding: No. But the D should be morally compelled to pay up.
o Exception: Webb v. McGowin: Valid consideration to take care of an injured P for the rest of his life because P saved the D’s life. D took care of P until D’s death then the estate stopped paying. The humanitarian act was valid because a material benefit had been received. This is hard to distinguish.
Board of Control Eastern Michigan Univ. v. Burgess (Option Contracts/UCC 2-205, Re 2d 87a)
· Facts: P offered D $1 option for the purchase of land and never paid it. P tried to execute the option, but D refused.
· Issue: Was there valid consideration for the option?
· Holding: No. One dollar is valid consideration for options. However, the dollar was never delivered. Thus, there was no option but simple and offer which was revocable.
Fisher v. Jackson (Employment at Will)
· Facts: P was left job (baker) for an offer of another job (news reporter) he couldn’t refuse. Later the P was discharged. Said he left a higher paying job for permanent employment.
· Issue: Is giving up a job valid consideration?
· Holding: No. The employment was a permanent position, not a lifetime job. Giving up the old job is just necessarily incidental to getting a new job.
Reliance
Equitable Estoppel:
· estoppel (reliance) that arises out of a person’s statement of fact, silence, acts or omissions.
· EE is available when one party knowingly misrepresents material facts that are reasonably relied on.
· The misrepresenting party is “stopped” from asserting facts that contradict its misrepresentations.
· Example: Syllabus says due Friday, Professor says you can hand in on Monday, then you hand it in on Monday, professor says, sorry syllabus says it was due Friday.
Promissory Estoppel:
· “A promise that the promisor should reasonably expect will induce promise to take some action of forbearance, when it does in fact induce the action or forbearance, is binding if injustice can be avoided by enforcement of the promise.” Restatement 2d § 90.
· Requirements:
o Promise
o Foreseeable reliance
o Actual reliance
o Injustice absent enforcement
o Remedy can be limited as justice requires
o The court would create a quasi contract between the doctor and the unconscious patient.
Ricketts v. Scothorn (Equitable Estoppel/Promissory Estoppel)
· Facts: Grandfather promised to give P $2000 if she stopped working. Estate refuses to pay P after grandfather’s death.
· Issue: Is there an equitable estoppels which ought to prevent the defendant from alleging that the note in controversy is lacking one of the essential elements of a valid contract?
· Holding: Yes. The grandfather intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the executor to resist payment on the g
Holding: No. Because of the condition of the attorney the letter amounted to a counteroffer not an acceptance. Specific performance was denied.
Merced County Sheriff v. County of Merced (Meeting of the Minds/ Re 2d § 20 & 71a)
· Facts: P was negotiating a raise with D. Both agreed on the language in the contract. After the agreement of the contract there was two different interpretations about the raise. P sued for its interpretation and won.
· Issue: Was there mutual assent (meeting of the minds)?
· Holding: Yes. The D was aware of the P’s understanding.
Ardente v. Horan (Concluded by an Exchange of Letters/Mirror Image Rule)
· Facts: P bid on D’s house. D accepted the offer then P prepared a sale agreement, sent it with a check, and a letter asking if certain items were also included. D then refused to sell. P wanted specific performance.
· Issue: Was the letter a counteroffer or an acceptance?
· Holding: P’s letter of acceptance was conditional because of the additional terms, and therefore a counteroffer.
· Mailbox Rule (Re 2d §63a): Most contract communications (offers, rejections, revocations) take effect when they are received. Acceptances take effect upon the time they are dispatched.
Mid-South Packers v. Shoney’s (Revocability of Offers/Re 2d §42/Exception: UCC 2-205)
· Facts: D purchased pork from P through a proposed contract which was never expressly agreed on. P raised prices on D. D requested old prices but cont’d to purchase pork. When D quit buying pork it offset the final balance in accord with the old prices. P suing for the correct final balance.
· Issue: Was the “proposal” a valid contract?
· Holding: Yes and No. It was valid up until three months where the offer can be revoked under UCC 2-205. The court held that after the time of raised prices a new contract was formed between the parties with each purchase. D loses.
Arango Construction v. Success Roofing (Contracts Accepted by the Offeree’s Performance/Re 2d § 45 & 62)
· Facts: D subcontractor erred in bid for general contractor P. P relied on D’s bid in its own bid. P informed D that it had won the bid. D informed plaintiff it had erred and would not perform the K.
· Issue: Was D’s bid an enforceable contract?
· Holding: Yes. P wins under promissory estoppel (Drennan case).
· Whatcom Case: In that case Whatcom construction had a contract (under the common law) with the City of Blaine to build a sewage treatment plant. This contract was governed by common law because it involved work, labor, and materials. Whatcom also had a contract with a third party to provide a pump. This was governed by UCC because it was just materials.
