Contracts Outline Kirgis Fall 2012
1. Essence of a Contract: Exchange
a. At least 2 parties, an offer by one, acceptance by other, a memo in writing in some cases, and consideration. Also learn what can defeat a claim
b. Legal duties arise from a valid agreement with consideration- enforceable contract
i. Consideration: bargained for exchange, each one gives up something. Parties ought to max. autonomy, no duress. Mutual reliance of 2 dealers on their respective promises
ii. Agreement: 2+ people have expressed themselves in harmony
1. Types of Agreements
a. Standard Form Agreements
i. No revising: insurance, lease, deed, etc. Already agreed on terms
ii. Noncommercial specially draft agreement
1. White v. Benkowski- relational exchange
iii. Specially drafted agreement
b. Oral Agreements
c. Informal Agreements
iii. Mutual Assent
1. Occurs upon acceptance of a valid offer to contract
c. Social exchange devices
i. Purpose of contract relationship is exchange
ii. Offer, acceptance, consideration (bargained for exchange)
iii. Must be a promise; some commitment for future
iv. Contractual activity: agreement performance, cessation
v. Key is what a reasonable person would expect– would a reasonable person take the words (written or oral) to be a commitment to be bound or seeking a commitment?
vi. Purpose of complaint: set out basis/theory of recovery/obligation valid claim in law
d. Theory of obligation
i. Common Law recognized general basis for imposing legal duties
1. Predominant theory: agreement w/ consideration
ii. Requirement for a prima facie duty to arise under the theory
e. Discrete v. Rational Exchange
i. Discrete: little interaction b/w parties
ii. Relational: occurred through time in a process of continuous interaction b/w parties
f. Note:
i. No basis of law in awarding punitive damages in contacts breach cases
ii. If could, would invalidate efficiency. Parties want to plan transaction and know exposure. Punitive damages would deter people from entering contracts. Good for economy.
1. Only in tort: collect for pain and suffering. Where D acted with malice, recklessness. Deter blameworthy conduct.
g. Remedies for breach of a duty arising under a theory
i. Must prove breach of contract. Just b/c promise broken may not award damages. Case has to fit into existing theory of obligation to support remedy. Will affect remedy: damages, adjudication, specific performance
ii. Monetary remedies
1. Lost expectancy damages
a. Designed to put the P in the monetary position he would have been in if the agreement or promise had been performed. Promised vs actual condition
2. Reliance Damages
a. Designed to put the P in the monetary position he would have been in if the agreement or promise had not been made
3. Restoration/Restitution
a. Sum equivalent to the value of any benefit the P conferred on the D, restoring this value to the P
4. P recovers no more than nominal damages
a. UCC 1-305; put in as good position as if the other party had fully performed but neither consequential or special damages may be had
5. Sullivan v. O’Connor
a. Breach of contract and negligence to nose operation. Took 3 ops not 2.
b. Is a compromise: reaches a result that is neither full expectancy nor full reliance, but is more than restitution
c. Expectancy. Measured by value after (actual post-op) and expected value (promised condition). Pain and suffering of 3rd op. only.
d. Reliance damages b/c easier to calculate than expectancy. i.e. costs paid to Dr., diff b/w pre-op condition & actual post-op condition, pain & suff. of all 3 ops., lost earnings
e. Doctor argued unsuccessfully that the plaintiff should get only restitution: return of the fee paid to the doctor.
2. General Theories of Obligation
a. Two dimensions
i. Substantive requirements for the prima facie applicability of each theory
1. i.e. The requirements of a valid agreement with consideration
ii. General justifying rationale
b. Obligation arising from an agreement w/ Consideration
i. Bargain concept- bargained for exchange
1. Hardesty v. Smith
a. Lamp had no utility
i. Consideration if thing/invention is worthless?
b. Yes, Freedom of contract. Doesn’t matter worth $0, parties decision. Purchaser is best arbiter. Private autonomy: power to effect changes in their legal relations.
2. Dougherty v. Salt
a. P rec’d note from Aunt $3,000. At Aunt’s death, D refused to pay. Claiming a gift & unenforceable.
b. Consideration for promise b/c other person is a good person?
i. No. No exchange/consideration. Note was voluntary & unenforceable gift. Boy gave up nothing.
ii. Restatement first of Contracts § 75
1. Definition of Consideration
a. Consideration for a promise is
i. An act other than a promise, or
ii. A forbearance, or
iii. The creation, modification, or destruction of a legal relation, or
iv. A return promise,
b. Bargained for and given in exchange for the promise.
c. Need to give something up. i.e. Went to college, get $3000.
i. Promissory note w/ consideration is not revocable
ii. Absence of reliance, no consideration, wouldn’t be enforced. Reliance could be if started building.
d. Needs to be an actual agreement, serious enough for court to enforce, and focuses parties on what they’re doing i.e. bargaining transaction.
2. Maughs v Porter
a. Ad in newspaper for Model Ford auction
b. Is showing up consideration?
i. Yes, sufficient consideration for the promise enforced.
3. Carlisle v T&R Excavating
a. Considering consists of either a benefit to the promisor or a detriment to the promisee
4. Hamer v Sidway: KNOW NAME
a. Nephew would get $5k if refrained from drinking/drugs under 21.
b. Is forbearance (restraint/tolerance) of a right sufficient consideration for a promise?
i. Yes. Waiver of legal right is sufficient consideration for a promise.
ii. Benefit to promisee- exchange??
iii. Benefit to promisor would be strong case. Extract a promise for your benefit.
iv. Famous b/c stands for proposition that consideration w/ no tangible for promise to promisor, or detriment to promisee.
5. Restatement § 81
a. Don’t have to show what is bargained for induced promise but at least part
b. Gratuitous or donative promise: generally it is not enforceable be
more $. Is there consideration to pay extra afterwards? NO.
i. Already obligated à not giving up anything more.
f. Problem 2-4. Illusory? No, something is required. Held to be valid contract. 24 hr notice.
i. 1/11 seller off hook. Yes, seller complied with 24 hour notice. On 2/1: NO.
c. Obligation Arising from Justified Reliance- Promissory Estoppel
i. Promissory Estoppel: promise made w/o consideration may be enforced to prevent injustice if the promisor should have reasonably expected promisee to rely on promise & promisee did rely
1. Non-enforcement of a promise can be unfair when the promisee incurred some loss in relying justifiably on the promise. Prom Est. has developed to provide relief in such cases.
ii. Kirksey v Kirksey, 1845
1. P wife of D’s brother. She relied on his promise but no exchange/ bargain for consideration. Mere gratuity.
2. Don’t have to know why someone offering something.
3. At this point in time, no doctrine for promissory estoppel so no consideration for promise
iii. Note: To not get stuck in Prom Est., say something in negotiation. i.e. not agreeing till I sign on dotted line…then reliance is not as reasonable. Prom Est. not applicable if reliance isn’t reasonable.
iv. Ryerss v. Trustees of Presbyterian Congregation
1. P encouraged congregation to build church. Promised to give $100 gift. P relied on promise and would benefit from church in neighborhood.
2. Enforceable contract? Unknown. But reliance is why there’s remedy
v. Seavey v Drake
1. Parol agreement father would give portion of land. Died w/o will and never gave deed to P.
2. Does improvement of land induced by doner’s promise to give the land to party making expenditure make consideration for promise? Also, statute of frauds issue.
3. Yes. Evidence is admissible: father’s land son making improvements.
a. Specific performance: remedy requires fulfillment of legal/contractual obligation when monetary damages are inappropriate or inadequate. Equitable remedy.
b. Grautitous promise to convey land if the promisee has been given possession or has both been given possession and made improvements
vi. Equitable Estoppel
1. Misrepresentation of fact à Reliance on misrepresentation
2. The facts must be known to the person who is to be estopped at the time when the representation of fact was made (or the material fact was concealed), or at least, the circumstances must be such that he must have known the true fact. The true fact must be unknown to the other party.
3. Estoppel is based on accountability for deliberate words or conduct that induced reliance and consequent detriment.
