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Contracts
University of Oklahoma College of Law
Knippenberg, F. Stephen

Contract – “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” Restatement 2nd of Contracts, § 1
 
Methods of Enforcement: Specific performance, money damages
 
I.                    Bases for Enforcement
A.                  Historical Bases
1.                  Covenant- used to enforce contracts made under seal. (Wax seal, “Seal,” or “L.S.”) – “erosion of solemnity” – too common, seal no longer enforceable.
a.                   Evidentiary function – providing trustworthy evidence of the existence and terms of the contract in the event of a controversy.
b.                  Cautionary function – bringing home to the parties the significance of their acts.
2.                  Debt – used to enforce some types of unsealed promises to pay a definite sum of money. Promisor (debtor); Promisee (creditor)
3.                  Assumpsit – promisee seeks to recover damages for physical injury to person or property on the basis of a consensual undertaking. Misfeasance – having done something incorrectly; Nonfeasance – not having done anything. Only enforced when promisee incurs a detriment in reliance on the promise.
B.                  Modern Bases
1.                  Consideration – a promise or performance given in exchange for a promise
a.               Promise or Performance
(1)               No benefit/detriment – irrelevant if there is an exchange – Hamer v. Sidway – nephew’s performance in refraining from certain legal activities is sufficient consideration for uncle’s promise to pay him $5,000. Since the perfomance is consideration, no benefit/detriment needed. Restatement 2nd § 79(a) – “If the requirement of consideration is met, there is no additional requirement of … a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee.”
(2)               Promise not to bring claim (good faith) – can be considered if made in good faith – Fiege v. Boehm – Fiege’s promise to support Boehm’s child in return for Boehm not filing bastardy proceedings against Fiege is valid because Boehm’s claim was made in good faith. Restatement 2nd § 74(1)(b) – “Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless . . . the forebearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
(3)               Illusory Promise – no real commitment/no consideration – Strong v, Sheffield – D promised to pay her husband’s debt to P (promissory note). P’s promise to forbear collection “until such time as he wants it” is not consideration because there is no fixed time period. Restatement 2nd § 2(1) – “A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.” Illusory promises cannot be enforced unless:
(A)       satisfaction clause – implied-in-law (public policy) – Mattei v. Hopper – P’s promise to buy D’s land if satisfied is consideration because P’s satisfaction is to be made in good faith – P will back out only if truly dissatisfied. Satisfaction – duty of good faith. Restatement 2nd § 205 – “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”
(B)       implied-in-fact – implied term (parties’ expectations) – no technical, real commitment – Wood v. Lucy – D gave P “exclusive right” to market P’s fashion label in return for ½ profits. D argues that P gave no consideration for the exclusive right, but Ct said that P implicitly promised to make “reasonable efforts” in marketing D’s label. Reasonable effort is the implied term. Restatement 2nd § 202(1) – “Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight.”
b.             Given in Exchange
(1)               promise not sought – no exchange, not bargained for nor sought for in exchange for promise. Whitten v. Greeley-Shaw – Greeley-Shaw drafted an agreement in which she would leave Whitten alone given that he provided her with certain things. Ct said that the clause in which Greeley-Shaw would leave Whitten alone is not condiseration because it was not bargained for or sought for by Whitten. Restatement 2nd § 71 – “(1) To constitute consideration, a performance or a 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, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal rela

to donate money to Allegheny College, gave them a $1,000 initial donation and required the school to set up a memorial fund in her name. She later changed her mind and stopped paying the college. After her death, the college sued Johnson’s executor for the remainder of Johnson’s promised donation. Ct (Cardozo) found consideration for Johnson’s promise in the memorial fund she required the school to establish. Cardozo also mentioned that promissory estoppel was being recognized by other states. The dissent said that Johnson’s promise was a conditional promise to make a gift. Cardozo stretched the facts to find consideration – donations to a charitable organization are gifts, but are enforced without consideration.
c.                   Stage 3 – Reliance is explicitly recognized under the new “promissory estoppel doctrine.” Restatement 2nd § 90 – “(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forebearance.” 5 elements for promissory estoppel: 1) promise, 2) action/forbearance, 3) inducement, 4) reasonable expectation, and 5) injustice. Feinberg v. Pfeiffer – the ct used the doctrine of promissory estoppel to enforce D’s promise to pay her pension because P relied on that promise – she would not have retired if it were not for the pension. D & G Stout, Inc. v. Bacardi Imports, Inc. – P relied on D’s assurance that it would remain P’s distributor if P turned down an offer to sell to a third party. Ct used promissory estoppel to enforce D’s promise. The ct in that case also distinguished expectation and reliance damages.