Contracts
Saiman
Spring 2014
Table of Contents
Consideration
Requirement of Bargain
Giving up a legal right
Past/Moral Consideration
Complexity:
Unilateral contracts
Employment/non-compete agreements
Exchange of Promises
Illusory promises
Good faith as basis of promise
Alternatives to Consideration
Reliance as replacing consideration
Elements of reliance
Measure of reliance v. Contract measure
Feinberg/Scothorn
Reliance in business context
Restitution/Unjust Enrichment
Defendant’s Gain v. Plaintiff’s Loss
How to measure unjust enrichment
Contract favored over unjust enrichment
Restitution, a contract remedy
Fuller’s 3 Interests
Offer & Acceptance
Actions
Offers v. Invitations
Nature of Offer
Ads as offers
UCC v. Common Law rules and context
Which Party offers v. who accepts
Negotiations v. offers
Revocation under common law and UCC 2-205
Mistakes in Offers
Offer & Acceptance Complications
Acceptance under Mirror Image Rule and Last Shot Rule
Strict applications v. liberal applications
UCC innovation of 2-207
Rolling Contracts
Hill, Gateway, Kloceck, ProCD
UCC 2-207 Application
Pre-Contractual Liability
Negotiations do not create contract
Exceptions
Calldata, Dixon, Red Owl
Letters of Intent/Agreements to Agree
Standard for contractual definiteness
Remedies
Equitable remedies
Standards and principles for obtaining
L&E perspective on rights allocation
Money Damages
General Measure
Calculating lost profits
UCC Cover transactions
Lost volume seller
Cost of Completion v. Diminution in value
Relevance of willfulness in assessing damages
Incidental/Reliance damage
Consequential damages
More Damages
Avoidability
Foreseeability
Certainty
Emotional/Subjective Damages
Fuller’s 3 Interest and Limitation Principles
Agreed damages (liquidated/stipulated)
Enforcement
Status Reasons
Bargaining Process Reasons
Undue Influence
Duress/Pre-Existing Duty
Misrepresentation/Concealment
Fiduciary Duty
Substance of the Bargain Reasons
Sufficiency of consideration
Contracts of adhesion
UCC/Unconsciousability
Federal Arbitration Law
Contract Interpretation
Parole Evidence Rule
Fully integrated agreement
Partially integrated
N.O.M. clauses
Express Terms
Four Corners Approach
Broader Context Approach
Gap Fillers
Performance & Breach
Conditions
Express
Interpretation
Constructive/Implied
When are conditions implied?
Problems of forfeiture
Substantial performance/interpretation
Divisibility
UNJER in favor in breaching party
UCC Perfect Tender Rule
A’s rights & obligations when B breaches
Adequate Assurances of Due Performance
Contracts, General
Enforceable Promises: An Introduction
Necessary Factors
Mutual Asset—offer + acceptance=contract
Consideration or one of its substitutions
Restatement 2d § 1
A contract is a promise or set of promises for the beach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty
Courts are unwilling to enforce promises unless the promise has given the promisor in something in return for the promise
Remedying Breach (recovery/damages)
Restatement 2d § 352-damages are only recoverable for an amount that evidence permits with reasonably certainty
Fund
be given to the promisor or to some other person. It may be given by the promise or by some other person (3rd party)
Restatement 2d § 79. Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of
(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment the promise (Hamer v. Sidway); or
(b) equivalence in the values exchanged; or
(c) “mutuality of obligation”
Consideration as a Basis for Enforcement
Benefit/Detriment Theory
Were the benefit and/or detriment given in exchange for each other? Did they induce each other?
Legal Detriment
Exists where party
Engages in act that party was not previously obligated to perform; or
Refrains from exercising legal right to
Measured relative to promisor’s promise
Hammer v. Sidway
Facts: Uncle offered nephew $5000 when he turned 21 if he would forbear his legal right to drink, smoke, and gamble
Held: The legal detriment faced by P was sufficient consideration
It is enough that something is promised, done, forborne or suffered by the promise as consideration for the promise made to him
According to 2d § 79, additional benefit to promisor not needed
When looking at issues of consideration, we always have to ask whether stipulation is actually consideration or whether it’s just a condition.
Forbearance/ Settlement Agreements
Dyer v. National By-Products
Facts: gave up the right for suit and gave Dyer lifetime employment, workers comp: get paid a certain amount immediately and give up the right to sue
Issue: If you cannot bargain, is there consideration?
Analysis: Needs a reasonable basis. It demonstrates how little consideration can be given to support a settlement agreement
you can bargain with some forbearing on a legal right, but there might be some limit
