1. What is a contract? How is it formed? What are its elements?
2. If there is a contract, what are its terms and what does it mean?
3. If there is a contract and we know what it means, has the party fulfilled its obligations? (Breaches and Defenses)
4. If there is a contract, we know its terms, and we know it has been breached, what remedies will the law allow?
Burch v Double Diamond Homes
– Burch’s signed, but didn’t know/realize it bound them to arbitration
The court found the Double Diamond contract to be an adhesion contract. This means the Burch’s did not have a choice as to the terms of the contract. While the courts will uphold adhesion contracts where there is “plain and clear notification of terms and an understanding of consent,” they are not required to do so if the contract is unconscionable.
3 grounds for making a contract enforceable:
– something given in exchange for the promise (consideration)
– reliance on the promise (promissory estoppel)
– unjust enrichment (restitution)
Formation of Contract
Offer and Acceptance
Sometimes a writing.
I. Enforcing Promises: Bases of Legal Obligation
A. Intent to be Bound: Objective Theory of Contract
consideration: basis for forming a K
think “bargained for promise or performance”
– what matters is what a reasonable person would think was meant in the K from reading it
– ‘subjective intent’ should not matter
Ray v Eurice Bros
– architect Ray entered into K with Eurice Bros to build a house
– they changed the specs a few times, Ray’s lawyer made the final draft
– Eurice, after signing, called Eurice saying that a well was also needed (had been left out)
o (this showed they had read it)
Trial court: no meeting of the minds (as to the 5 or 7 pages of specs)
“Absent fraud, duress, or mutual mistake, the one having the capacity to understand written doc. who reads and signs it, or w/out reading it or having it read to him, signs it, is bound by his sig.”
– unilateral mistake by Eurice
Park 100 v Kartes
– A rep from Park 100 cornered the Kartes and said they had to sign the ‘lease papers’ before they could move in the next day
o it was actually a personal guarantee of the lease
– they called their lawyer who said ‘yes, the lease has been approved,’ so they signed w/out reading it
I: Did the Park 100 rep use fraud to get the Kartes’ signatures (which would make the K void)?
Trial Court: said Kartes should have read it anyway, K is enforceable
Appeals: the misrepresentation by Park 100 supercedes Kartes’ duty to read
– a material misrepresentation of past or existing fact by the party to be charged
– was false
– was made w/ knowledge or w/ reckless ignorance of falsity
– relied upon by complaining party
– proximately cause complaining party injury
Contractual Obligation Defenses:
1- fraud and nondisclosure (Park 100)
2- unilateral and mutual mistake (Eurice – failed)
3- unconscionability (Bursch)
B. Enforcing Exchange Transactions: The Doctrine of Consideration
– consideration is required for contractual obligation
Restatement 71: Requirement of Exchange; types of exchange
(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 relation. . . .
What constitutes performance?
(a) an act other than a promise;
(b) a forbearance; or
(c) the creation, modification, or destruction of a legal relation.
When is an exchange of promises or performance NOT consideration?
• Reward Example.
– Kayla puts up signs around the neighborhood offering $100 for anyone who finds her dog, and gives a description of the dog.
– Joey doesn’t see the sign, but finds the dog, and using the tag on the dog’s collar, returns the dog to Kayla.
– Kayla can tell that Joey doesn’t know about the reward so she doesn’t give him anything but a thank-you and a Coke.
– Can Joey enforce Kayla’s promise when he sees the sign the next day?
• No, because there is no consideration.
• Even though Kayla sought performance (someone finding and returning her dog) in exchange for her promise to pay $100 reward, Joey did not give the performance (returning the dog) in exchange for the promise to pay the $100 because he was not even aware of the promise.
Past performance is not consideration.
Moral obligation is not consideration.
Not all conditions are consideration.
C. Protection of Promisee Reliance: Promissory Estoppel
1. Promissory Estoppel: Charitable Subscriptions
Restatement § 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 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 (1) w/out proof that the promise induces action or forbearance
Reliance is reasonable
Binding if justice requires.
Kirksey v Kirksey
– brother-in-law offered to give her place to live on his land if she came to visit him (her husband had died)
– she packed up her kids and moved, he eventually kicked her into a shack in the back, then out completely
Majority: just a gift, no consideration
Dissent (follow this):
– she had detriment of moving, leaving her home, expenses
– he may have even benefited from her being there (taking care of house and such)
o although he probably wasn’t seeking her performance
Note: court did not look at promissory estoppel here – if so, her reliance would probably not have been seen as reasonable (you don’t expect ppl to just give you a home)
Greiner v Greiner
I: whether his mothers promise to give him the deed to land was an enforceable K
1st: consideration? no, bc mother does not benefit (so court doesn’t even look at this)
2nd: promissory estoppel:
o promise? – yes, we find thru evidence
o induces reliance? yes – he gave up his own home and land
§ note future courts will do analysis w/ detrimental reliance