Hoffman Contract Fall 2017
Authorities (look at the predominate purpose of the agreement)
UCC: Sales of goods
Common law: service, sale of land, everything else
Default rule v. contracted out of: stability vs. freedom to contract.
Theories of Obligation
1. Consideration: bargained-for exchange, mutual inducement.
Function: distinguish enforceable contracts with unenforceable contracts.
Justifications:
Evidentiary: prove that parties did intend to make a binding agreement.
Cautionary: make parties aware they are making enforceable promises.
Channeling: put objectives into words.
Yes, consideration:
Bargained-for exchange
Maughs v. Porter: Lot seller wanted to attract people to the auction, Winner wanted to win a car. àConsideration: P’s promise to attend the auction, D’s promise to give a car to the winner of lottery.
Forbearance motivated by the promise
Hamer v. Sidway (NO USE IN EXAM): Uncle promised Nephew money for refraining from alcohol and cigaretteàConsideration: Nephew’s forbearance to rights of drinking and smoking, Uncle’s promise of money. If nephew was going to give up the activities regardless of the promiseàNo consideration: no exchange.
Dicta: Familial context makes this promise more like a gift out of love rather than an exchange seeking return promise.
No consideration:
Consideration is based on motivation at the time of bargaining. Past action does not constitute consideration.
Dougherty v. Salt: Aunt gave Nephew money for being good / “always doing for her.”à No consideration: no exchange.
Dicta: A written promise is not a sufficient condition for consideration.
Consideration vs. Gift: Consideration must be mutual inducement. A gratuitous gift is not consideration. A conditional gift is not consideration if the condition is of no benefit to the promisor.
Tramp Hypo: Businessman tells Tramp that if he walks to the store, Business man will buy Tramp a new coatàNo consideration: no exchange.
Policy: People in exchange deserve legal sanction, thus contract with consideration is enforceable. People giving away gifts are not under sanction and the promise to give a gift is not enforceable, because policy encourages charitable behavior.
2. Illusory Promise: a promise that only one side is bound to perform.
No consideration (yes illusory promise)
Non-Exclusive Relationship: written words in the contract over the relationship. No good faith requirement.
De Los Santos v. Great Western Sugar Company: D promised to pay for any amount of the beets he loaded onto P’s truckàNo consideration: illusory promise. Promise was one-sided and at the will of D, no mutuality existed.
Yes, consideration (illusory promise exceptions: as long as there is consideration)
Exclusive Relationship: the context of the relationship over the written words of the contract. The relationship includes an implied return promise to act in good faith and best effort as consideration.
Wood v. Lucy, Lady Duff-Gordon (Cardozo): P and D were in an exclusive employment relationshipàConsideration: D’s grant of exclusive rights to sell, P’s returned promise to act in good faith and use best efforts.
Dicta: A contract may be enforced by implied consideration without explicit terms of the contract.
Consideration at the moment of bargain: An at-will employment contract does not fail for lack of mutuality (i.e. Employee can leave at any time, at-will) since there was consideration between these two parties at moment of promise.
Weiner v. McGraw-Hill: Employee forfeited other job offers and promotions in the old job to get the job offer and the promise for job security except for just cause from EmployeràConsideration: Employee’s forbearance to other jobs, Employer’s promise of job security.
Dicta: Consideration is based on motivation at the time of bargaining, no need to last the entirety of the promise.
Satisfaction Clause: (a) Commercial value or qualityàpast standard factors test. (b) Fancy, taste, judgmentàgood faith test. The promisor’s duty to exercise the judgment in good faith is his consideration.
Mattei v. Hopper: A clause states that P would buy D’s land if leases “satisfactory to P” are obtainedàConsideration: P’s promise to buy the land if satisfaction clause is satisfied, D’s return promise to sell the land.
3. Promissory Estoppel: a recoverable promise made without consideration when the reliance on the promise was reasonable, and the promisee relied to his or her detriment.
Elements (R2d §90):
Promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person
The promise does induce such action or forbearance
Injustice can be avoided only by enforcement of the promise.
Remedy (R2d §90): limited as justice requiresàreliance damages.
Yes, Promissory Estoppel
Hoffman v. Red Owl Stores: D’s constant reassurances (but no actual promise) caused sympathetic P to substantially rely to his detriment (sold his business, moved his family, purchased business site)àNo consideration: D was induced by nothing, no promise from P. àPE: all three elements are met.
No Promissory Estoppel
Limits: detriment must be substantial in economic sense
The detriment suffered in reliance on the promise must be substantial in an economic sense;
The substantial loss must be foreseeable by the promisor;
the promisee must be reasonable in justifiable reliance on the promise.
Injustice can be avoided only by enforcement of the promise.
Cochran v. Robinhood Lane Baptist Church: Church promised Lady some benefits until she remarried or diedàNo consideration: Church was not induced in anyway. àNo PE: detriment in restraint from remarriage is not a PE cause of action.
Dicta: The restraint of marriage could not constitute consideration because it was void as a matter of policy.
4. Unjust Enrichment: one party is unfairly enriched at the expense of another.
Implied-in-law contract / quasi-contract: a legal fiction imposed to prevent unjust enrichment even if no intention of parties to bind themselves contractually can be discerned.
Elements:
A benefit conferred on receiver by the giver;
Appreciation or knowledge by the receiver of the benefit;
Acceptance or retention of the benefit by the receiver under circumstances making it inequitable for receiver to retain the benefit.
Remedy: restitution.
Burden of production: on P.
Unjust Enrichment vs. Gift: Unjust enrichment occurs when the conferring party expects return. A gift is given without the reasonable expectation of receiving something in return.
Yes, Unjust Enrichment
Equity test: balance the relationship, workload, community expectation and policy concern.
Sparks (D) v. Gustafson (P): P was a longtime friend of D’s deceased father and took care of his estate for 2 years 5 hours a day, seeking payment from DàUE: all three elements met.
Exception: Kershaw v. Tracy Collins Bank & Trust Co.: a longtime friend took care of a widowàNo UE: fail the 3rd element. D’s behavior was reasonably expected from a friend and the payment was not expected.
Quantum Meruit: Employee is entitled under quantum meruit to the reasonable value of the services provided, unless the contract specifically provides otherwise.
Britton v. Turner: P promised to work for D for a year and stopped after 9.5 months. D refused to pay for the service renderedàUE: The hired laborer shall be entitled to a compensation for the service actually performed, and the contracts must be presumed to made with reference to such understanding.
Policy: this rule will leave no temptation to the employer to drive away the employee from his service near the end of the term to escape payment, nor to the employee to desert his service ahead of time without sufficient reason.
Unmarried cohabitants: each be entitled to a share of the wealth jointly accumulated during the cohabitation, otherwise it may be unjust enrichment.
Watts v. Watts: P and D were unmarried cohabitants lived in a “marriage-like” relationship. D refused to share equally the wealth accumulated through their joint efforts or compensate P in any wayàUE: all three elements are met.
Arguments of no UE:
P lived upon D, which was in consideration to all the services she provided.
The court should be careful when it impinges into personal relationships such as marriage.
Policy: courts are reluctant to protect unmarried relationship, in order to encourage people to get married to get protection of law.
No Unjust Enrichment
Equity test: information-disclosing rule. the receiver should reasonably understand that compensation is expected from P. (use implied-in-fact contract elements)
Bloomgarden v. Coyer: P set up Ds for a business agreement and sought payment for the setup afterwardsàNo UE: fail the 3rd element. D had no reason to believe that the services
records”):
Click “I agree” satisfy SoF.
Emails is “writing” in the sense it is tangible (can be saved on a hard drive or printed).
Part Performance: may prove the existence of contract and except SoF.
Examples: payment made and accepted; goods made and accepted.
Exceptions:
Land sale: part performance or specific performance (e.g. improvement of the land) does not remove the statute.
Employment: part performance of a more-than-1-year contract is not enough to bar the statute.
UCC 2-201:
Sale of goods over $500 must be in writing and signed; K is still valid if it omits or incorrectly states term; K is unenforceable to change quantity beyond what was specified.
Between merchants, if a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, objections need to be given within 10 days, otherwise (1) is satisfied
Ks that are not in writing but are enforceable if:
goods are specifically-manufactured for buyer, cannot be resold, and seller has already begun or committed to manufacturing;
if the breaching party admits the existence of K, but the K is not enforceable beyond the quantity of goods admitted;
if goods have been received and paid, or received and accepted.
§ 139 Enforcement by Virtue of Action in Reliance (Equitable Estopell)
Elements (same as PE):
The promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person
Does induce the action or forbearance
Injustice can be avoided only by enforcement of the promise.
Remedy: reliance
Injustice test:
other available remedies, particularly cancellation and restitution;
the definite and substantial character of Promisee’s action or forbearance;
evidence of existence of the promise, by Promisee’s action or forbearance, or else;
reasonableness of the Promisee’s action or forbearance;
foreseeability by the Promisor.
No SoF issue
Leading Object or Main Purpose Rule: A promise to debt of another person is unenforceable unless in writing, or unless the leading purpose of the promise is for the promisor’s own benefit.
Howard M. Schoor Associates, Inc. v. Holmdel Hights Construction Co.: Attorney was counsel and partner of D company and promised to pay for the debt of D to PàNo SoF:
SoF vs. PE: SoF applies with equal force under either a breach of contract or promissory estoppel theory.
Dumas v. Infinity Broad Corp: No SoFàIt is unnecessary for the court to take a separate promissory estoppel analysis if the contract breach claim could not satisfy the requirement of statute of frauds.
Equitable Estoppel: can enforce an oral agreement that violates the SoF to avoid injustice to a P who has reasonably relied. RST 139.
McIntosh v. Murphy: P relied on an oral promise and moved to Hawaii for a sales job. D fired P two months later and breached the one-year long employment contractàSoF Exception: oral promise is enforceable, notwithstanding SoF, if the injured party seriously changes his position in reliance on the promise and failing to enforce the promise would result in unconscionable injury.
Dissenting opinionàSoF: (a) No equitable estoppel because D did not promise to hire P under a one-year contract, but just hire him on a trial basis. SoF was precisely enacted to avoid such case: P’s fraud. (b) Even if D promised, court should not take exception to SoF using equitable estoppel. The sole function of judiciary is to interpret the statute, not to modify the statute.
