Spring 2011- Dessent, Contracts
Ch. 1 Overview
Factors: geography, era, political view, and juries behave in strange ways (why cases are settled.)
A. Reasons for Contract Law and Its Sources
1. Why we need Contract Laws
-in addition to serving as a source for enforcing promises, contract law provides a means of allocating risk among parties.
-“ The central objective behind the system of contract remedies is compensation, not punitive.”
2. Sources of the Common Law of Contracts
a. The Restatements
§1 Contract: a promise or set of promises for the breach of which the law gives a remedy.
b. The Holmes Paradox: while he spoke of not viewing the law as rigid, his legal decisions rarely
strayed from old common law precedents.
c. The Philosophical Debate Today: strict constructionism (consistency and predictability of the law
i.e. Scalia) v. judicial activism (judge’s own beliefs i.e. Ginsburg.)
-keep in mind Williston, Holmes, and Corbin
d. Treatises
B. Common Sense: When is a contract worthy of a court’s time?
1. Key Recent Cases
a. Leonard v. Pepsico, Inc. (S.D.N.Y. 1999)- question of what a court requires in order to hold that a
contract has been formed.
Facts: ∏ set out to get a harrier jet for 7 million pepsi points after seeing a pepsi commercial. Purchasing points seemed like a more attainable option so ∏ collected $700,000, and issued check with 15 original pepsi points. ∏ wrote in “1 Harrier Jet” on the order form. Δ rejected ∏’s submission claiming it is not included in the catalog or on the order form, saying the jet was clearly a joke (“In my opinion, no reasonable person would agree to your analysis of the commercial.”)
Issue: does an advertisement that was clearly a joke create legal obligations? No.
Rule: Not if an objective, reasonable person would not have considered the commercial an offer
Conclusion: Δ’s motion for summary judgment granted
o At what point does it become absurd that no reasonable person would think the offer was serious?
o Δ said jet was not offered in catalog. (no offer)
o Judge Woods said “the Court must not consider Δ’s subjective intent in making the commercial, or ∏’s subjective view of what the commercial offered, but what an objective, reasonable person would have understood the commercial to convey.
o Should this have been a jury question?
§ Obvious joke v. reasonable person
· i.e. what if an immigrant not familiar with the English language?
b. Harris v. Time, Inc (Cal.App. 1987)
Facts: ⫪’s son opened envelope that said he would receive a free watch just by opening the envelope when in fact he had to subscribe to a magazine subscription.
Issue: is recipient of mail entitled to the promised item viewable through envelope? is this a contract? No.
Rule: the opening of the envelope and mailing in the data sought was insignificant to ⫪’s, but of great value to ∆. ∆ have a difficult time getting recipient’s to open their mail. This action is “de minimis non curat lax.” (waste of the courts time.) Eliminating junk mail lies with Congress, not with the courts. Only real damage is feeling foolish for opening junk mail.
Conclusion: judgment affirmed in favor of ∆.
o While there was an offer, there was no acceptance
o Lawyer looks at this as one of those rare cases where punitive damages should be awarded- Court did not agree
· Time says there was no consideration
§ Dessent says no- it was of value to Time
c. Abrams v. Ill. College (Ill. App. 1979)
Facts: College student (⫪), after continuously failing courses and being notified he was being dismissed from the school, alleges a binding and enforceable oral contract with college for informing him that everything would be done to assist him and would find some way to help him.
Issue: when is an oral statement a legal contract?
Rule: a binding and enforceable oral contract cannot arise unless the terms of the alleged agreement are sufficiently definite and certain. A court cannot enforce a contract unless it is determined what it is. They must have expressed their intentions in a manner that is capable of understanding.
Conclusion: College also not in violation of hopeful, unenforceable expectation in handbook. Judgment affirmed in favor of ∆.
o Court came up with rule: void for vagueness
· Common law says it has to be precise, with terms of acceptance
· What would a reasonable person think in this situation
§ It is desirable, it is not an offer
d. Three Recent Cases Dismissed(not worthy of a court’s time)
1. Blackmon sought royalties for use of Iverson’s nickname “The Answer” that Blackmon claimed
he gave to him and Iverson promised proceeds on the product. Not a valid contract because
there was no bargain and the terms are too vague and uncertain to be enforceable.
2. Does a “would-be streaker” have a valid claim for breach of contract against the two
strangers who offered him $200 to streak? There was an offer of acceptance, and a bargain for exchange, but it’s illegal.
3. Judge threw out Rosie O’Donnell magazine case because neither side had any proof.
C. Remedies when a Contract is Breached (no punitive damages, only expected damages.)
o Equitable remedies: injunctions, special performances
o monetary damages
o compensatory damages-
· most common type: allow the aggrieved party to recover her “expectations” under the contract
· if expectation damages cannot be proven, a ⫪ could sue for reliance damages
· if ⫪ wants money restored (like a down payment or deposit) if a breach happens, these are restitution damages.
Ch. 2 Common Law Contract Formation: “Consideration”
Formation: offer (a willingness to be bound), acceptance (negotiate and settle), consideration (the bargained-for exchange.)
A. Some Hypotheticals
o “A Contract requires a bargained-for-exchange.” Justice Holmes
B. The Restatement (Second) of Contracts
§ 17. Requirement of a Bargain
-“the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.”
§ 71. Requirement of Exchange; Types of Exchange
(1) to constitute a 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 promise 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 relation
Most contracts are bilateral. Some are unilateral (not asking anyone to do it, no one offered. Seeking a performance i.e. asking class to mow lawn.)
o Abrams- bilateral
o Pepsico/Harris- unilateral
C. Two Classic Cases discussing Consideration:
1. ******Hamer v. Sidway (NY C. of A. 1891)******* establishes basic principle of consideration
Facts: an uncle promised his nephew $5,000 if he did not drink or smoke until he was 21. Nephew complied and uncle sent a letter saying that he would hold the $ until nephew was capable of taking care of it. Uncle died without paying his nephew.
Issue: whether, by virtue of a contract, ∆’s testator became indebted to his nephew on his 21st bday? Yes.
Rule: “A valuable consideration in the sense of the law may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by another…It is enough that something is promised done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him.”
Conclusion: Judgment in favor of ⫪. ⫪ abandoned his right to use tobacco and drink upon the strength of the promise. It is sufficient that he restricted his lawful freedom of action upon faith of his uncle’s agreement.
o Nephew assented. He did it. Sidway is the executor of the uncle. Nephew sold the note to Hamer.
o The letter the uncle sent to nephew is a breach of the original offer. Uncle offered to pay interest which was a new offer. Uncle dies and nephew sues
o Others arguing over the money.
o Δ said there was no consideration: there was no legal detriment to him
· Consideration: a legal detriment that allows someone to sue
· Nephew had a legal right to do those things and he gave it up
o Court said there is no need to find the benefit to the uncle, but they could prob find one
o Court cited Shadwell (pro-plaintiff) and Talbott (pro-defendant)
· Court treats cases all the same even though they are not
o Because there was an agreement bargained for and a legal detriment, defendant can sue
o Don’t know if it is unilateral or bilateral. Don’t know what the uncle wanted. But doesn’t matter because nephew did it. Court didn’t have to address that issue.
o There was no condition in the original contract- uncle breached original contract, but offered him interest. Nephew accepted new contract. There was offer, acceptance, and consideration.
o Legal detriment v. personal benefit
· Had legal right to smoke, drink, and gamble, and he gave it up. Because it was healthful is irrelevant
· Still a legal detrime
lf the winnings. Δ won almost $2 million and refused to pay. Summary judgment at trial court was in favor of Δ.
Issue: whether the agreement was void for lack of consideration
Rule: A contract must be based on valid consideration. Consideration is a bargained-for exchange of promise. Consideration consists of benefits and/or detriments to the contracting parties. The detriments must induce the parties to make the promises and the promises must induce the parties to incur the detriments.
Analysis: ∏ asserted that the Δ bargained with her to go to Las Vegas in return for intangibles that the Δ thought the ∏ offered (good luck and realization of the dream.) The ∏ said she gave up her right to remain in Houston in return for the agreement to split any winnings. The ∏ also asserted the agreement was an exchange of promises.
Conclusion: the ∏ raised a genuine issue of material fact sufficient to defeat the Δ’s entitlement to summary judgment based on the affirmative defense of lack of consideration. Trial court’s judgment reversed and remanded for further proceedings.
– Consideration for plaintiff- legal detriment to have to leave Houston (identify the legal detriment)
– Obvious joke? Had a dream, pay for expenses, half of winnings
– “this one’s for you, pudding.” Does that mean that all of it should go to ∏? Prob not. They agreed to split it.
– A gift, hope or desire, past consideration, forms (for “values received” or “$1”), and moral duty are not consideration (not a bargained for exchange.)
– Legal detriment to leave Houston. Even so, still viewed agreement to share this cosmic information as perceived by Iacono
E. Past Consideration and “Moral Obligations”: The Strict Common Law View
– “The social order rests on the stability and predictability of conduct, of which keeping promises is a large item.”
– General common law principle that past or previous consideration did not support a current promise and help form a new contract.
1. Mills v. Wyman (Mass. 1825)- traditional common law view that a promise made in
recognition of a “moral obligation” arising out of a benefit previously received is not
enforceable. A benefit conferred before a promise is made can’t have been given in
“exchange” for the promise.
Facts: ∏/appellant (Mills) appeals on the judgment made in favor of Δ/appellee (Wyman) to recover for expenses promised to Mills by Wyman for taking care of Wyman’s sick son.
Issue: whether a promise without any consideration can be enforced
Rule: A promise without any consideration is universal in its application and cannot be enforced. It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity.
Analysis: The promise declared on in this case appears to have been made without any legal conclusion. This is a strong example of particular injustice sometimes necessarily resulting from the operation of general rules. If there is nothing paid or promised for it, the law leaves the execution of it to the conscience of him who makes it.
Conclusion: Judgment affirmed in favor of Δ.
– Bound morally, but not bargained-for exchange.
2. Webb v. McGowin (Alab. C. of A. 1935)- minority view. Ex of judicial activism.CA and virtually all
other courts still hold that no consideration has been given to form a contract when a Δ has
subsequently promised to pay a plaintiff for prior injuries. (there was no “bargained-for
exchange and thus no consideration. Past consideration is no consideration.)
Facts: ∏/appellant saved boss (Δ/appellee) by falling with block instead of letting block fall on boss. ∏ was crippled for life and Δ offered to pay him $15 every two weeks until ∏ died. Δ did
