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Contracts
Wayne State University Law School
Findlater, Janet

Contracts

Contract:a legally enforceable promise
Restatement 1- contract defined: A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty
Bilateral contract- promise seeking a promise (1 promise)
Unilateral contract- promise seeking a performance (doing or not doing something)
(2 promises)- more common

1st Question- Does the code apply? (For all transactions involving movable goods)

I. Basis for Enforcing Consideration
A. Consideration- usually court does not judge the adequacy of consideration only if consideration exists or not

1. Restatement 71- The Requirement 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
(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
2. Voluntary obligations
3. Benefit/Detriment-benefit to promisor or detriment to promisee
4. Bargain Theory- promisor makes promise seeking promise/performance

The promise is made to induce the promisee to do something (promisor is seeking something)- bargaining for something- this something must be what the promisor wants in exchange for the promise

a. Forbearance (legal detriment) is valuable consideration
1. Hamer v. Sidway-
**Uncle promises to pay nephew money if he
forbears from the use of alcohol, tobacco, swearing
and playing cards until he is 21 years old.
**Non-economic detriment
**Nephew abandons his legal right to partake in
these activities.
**Valuable consideration may consist either of
some right, interest, profit or benefit accruing to one
party, or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the
other.

2. Fiege v. Boehm- Fiege (D) promises to pay money if Boehm (P) would refrain from instituting bastardy proceedings, but Fiege after blood tests realizes that Boehm’s bastardy claim was invalid and refuses to pay.
Forbearance to pursue a valid claim is consideration
Forbearance to peruse an invalid claim may serve as consideration if at the time of the promise the parties believed in GOOD FAITH (no proof of fraud or unfairness) that the claim was valid

3. Restatement 74- Settlement of Claims
(1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless-
(a) the claim of defense is in fact doubtful because of uncertainty as to the facts or the law, or
(b) the forbearing party or surrendering party believes that the claim or defense may be fairly determined to be valid (good faith)
(2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim of defense exists
3. The Requirement of Exchange
a. Transactions lacking bargained for exchange
b. Gratuitous Promised (gift promises)- no exchange
c. Conditions put on gifts do not constitute a bargain
d. Kirksey v. Kirksey- Moving in with brother was not what brother was seeking, it was simply a condition placed on the gift of having a place to reside and raise the children
e. Employment Contracts
1. Indefinite term- “At will”- employment at will of employer
2. Definite term- “Just cause”- employer must have just cause to terminate employment before term
3. Mutuality- employer is not bound to fire for good cause if the employee can leave for any

t act
· Usually moral obligation is not consideration
· Unless to prevent injustice
· Material benefit received
m. Illusory Promises- no consideration
1. A promise is illusory if the performance terms are optional- no commitment
2. Strong v. Sheffield- Sheffield (D), payer, gave a note to Strong (P) payee, for a past due dept. The only consideration was that Strong would forbear his demand for payment, although no time period was set. Two years later Strong demands payment and Sheffield refuses to pay.
· Illusory- if by its terms the performance of promise is entirely optional with the promisor
· The consideration is to be tested by the agreement and not what was done under it.- Technically there was no agreement by Strong
3. Restatement 77- Illusory and Alternative Promises
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless
(a) each of the alternative performances would have been consideration if alone had been bargained for
(b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration
n. If the promisee is unaware of the promise- no consideration
1. If a reward is promised for an act and the actor performs without knowledge of the reward, he is not entitled to the reward
B. Reliance as Basis for Consideration
1. Partial fix for gratuitous promises