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Contracts
Wayne State University Law School
Abramowicz, Sarah

 
Abramowicz
Contracts A
Fall 2014



Bases for Enforcing Promises
I.                   What is a contract? And other hypothetical considerations
a.       Essentially, a contract is an enforceable promise.
b.      “A promise or 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.”—RST § 1.
c.       Promises in a medical context—the importance of context, wording, and transactional nature
i.      “A doctor’s statements to a patient can be construed as a contract to provide certain results, but only if intent to promise certain results is very clear.” Hawkins v. McGee.
1.      The doctor also solicited the patient, meaning that he was likely intending his language to be taken as a promise.
ii.      Non-absolute language (“the operation could give you a better knee”) is enough to safeguard a doctor from having made an enforceable promise. Anglin v. Kleeman.
iii.      Some cases have exhibited a low threshold for promise, such as when doctor said, “You’ll be able to throw away your pillbox.” Guilmet v. Campblee.
d.      A seller’s statements about a good being sold are enforceable promises if either an (a) affirmation of fact or (b) description of the goods AND (a) or (b) becomes part of the basis for the bargain. UCC 2-313(1), Bayliner Marine Corp. v. Crow.
i.      Affirmation of fact—made by seller to buyer and forms part of basis for the bargain, thereby becomes an express warranty that the goods will live up to the affirmation.
1.      But when the affirmation is not about the specific good being purchased, or one substantially similar, then no warranty is made.
2.      Counter-example: Nike says the sneaker has a carbon sole, but it is actually concrete. They made an affirmation of fact, and so the promise is enforceable.
ii.      Description of the goods—if description becomes part of bargain’s basis, express warranty made that the goods will conform to the description.
1.      But a “seller’s opinion or commendation” is an exception—essentially, the court leaves room for salesman’s language.
2.      E.g., Nike saying that they have made the greatest sneaker ever conceived by human ingenuity.
e.       Theories of contract enforcement
i.      Contract as promise/”moral ground”—Promise is enforceable when it is intentionally made so as to give the promisee the ground to expect the “promised performance.”
ii.      Consent theory—the law wants to uphold promises that are consented to for the sake of making a “legally enforceable obligation.” Alternative to contract as promise.
iii.      Reliance—promises are enforceable when the promisee reasonably relies on the performance of the promise, often to promisee’s detriment.
iv.      Other theoretical grounds for enforcing a promise
1.      Economic efficiency
2.      Predictability (?)
3.      Fairness
4.      Social justice
5.      Distribution
f.       UCC and defining “contract”
i.      Article 2 applies to the sale of goods (UCC 2-102), which are moveable things (2-105(1)).
ii.      Application to goods/services contracts is determined by which factor is predominant.
1.      Predominant factor in a lawn-mowing contract is the service.
2.      Predominant factor in a sale of clothing is the good sold.
iii.      Checklist: Does the UCC apply?
1.      Is it a contract for sale of goods within Article 2?
2.      What are the implications if the UCC applies?
3.      If contract is within UCC, determine if the party/parties are consumers or merchants.
II.                What makes a promise enforceable?
a.      Is the promise supported by consideration?
i.      Was there a bargained-for exchange?—bargain theory of consideration
1.      A contract requires a bargain, which includes
a.       Manifestation of mutual assent AND
b.      Consideration. RST § 17.
2.      Consideration—bargained-for performance OR return promise sought by promisor in exchange for promisor’s promise. RST § 71.
a.       “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 the promise.”
b.      No peppercorns!
3.      Adequate consideration does not require (a) benefit to promisor/detriment to promisee OR (b) equivalence in values exchanged. RST § 79.
a.       “Sham” or “nominal” consideration will not suffice.
b.      An uncle promising $100 to his nephew if he refrains from smoking is consideration, despite no benefit accruing to the uncle. Hamer v. Sidway.
4.      Motivation for the promise does not have to be the consideration. RST § 81.
a.       (1) “The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise.”
b.      (2) “The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise.”
c.       Getting paid to paint Obama—the motive is fame, but the consideration ($/performance) is still valid.
5.      Policy benefits
a.       Freedom of contract—uphold the decisions made by able parties
b.      Subjective nature of value exchanged—determining value, under the benefit/detriment school of thought, can be quite difficult
c.       Why make enforceability of promises hinge on consideration? Fuller:
i.      Evidentiary function
ii.      Cautionary function—let’s people know what they’re getting into
iii.      Channeling function—let’s people know where to go/what to do or think regarding a promise
ii.      Was a legal claim forborne?—Settlement of claims.
1.      If so, there may be consideration.
a.       Subjective approach
i.      Corbin—good faith belief in validity of forborne claim provides sufficient consideration for a promise to settle.
ii.      RST § 74—forbearance to assert/surrender of a claim is insufficient UNLESS
1.      There is a legal uncertainty around the claim’s validity, so that it may prove to be valid, or
2.      The party has a good faith belief that the claim/defense may be fairly determined to be valid
3.      Perhaps take a look at part 2 as well?
iii.      Policy
1.      Upholds the spirit of the bargain
2.      Note that it puts a party on the hook for something that they legally should not be on the hook for. While this can be particularly important and good in paternity cases, it can lead to seemingly unfair consequences for a party that doesn’t do its due diligence.
b.      Objective approach—Williston

ere a good Samaritan was denied repayment after caring for Wyman’s son. Of course, Mills undertook this burden of his own accord.
c.       A moral obligation was deemed sufficient consideration for a subsequent promise to pay where the promisor received a material benefit in Webb v. McGowin.
d.      Voluntary life-saving action has been considered to NOT suffice for consideration in Harrington v. Taylor, where the plaintiff received a promise from the defendant after injuring herself while saving his life.
e.       Policy
i.      Williston/formalist: promises should not be enforceable on the basis of moral obligation because such a policy would not conform to other rules/concepts in contract theory (objective approach)
ii.      Corbin/realist: goal is to achieve the just result, so morality should come into play.
iii.      Reasons for enforcing moral obligation: leads to “just” result
iv.      Reasons for NOT enforcing moral obligation
1.      So many more promises (notes say “all”) could become enforceable on this basis.
2.      Judicial tyranny.
3.      Things get messier (subjective).
iv.      Did the promisor seek to induce performance by the promisee?
1.      Asking this question helps distinguish between a gift and a bargained-for exchange.
2.      It is a gift if the promise is not seeking to induce a performance (or return promise).
3.      But it is a bargained-for exchange if the promisor is seeking to induce performance.
4.      A promise is conditional “if its performance will become due only if a particular event, known as a ‘condition,’ occurs.” (p. 72).
a.       E.g., a homeowner paying $1,000 to the insurance company in exchange for the company’s promise to pay $100,000 if a fire damages the house.
b.      The addition of a condition assures the promisor that his promise will not be due until the other party has performed its promised action.
5.      Examples
a.       Kirksey v. Kirksey (p. 58)
i.      Widow’s brother-in-law promises widow a place to stay and land to tend if she moves 60 miles down to his property. She is furnished with the promise for two years until being kicked out.
ii.      Holding: no consideration, promise was “a mere gratuity.”
b.      Williston’s example of the man telling a “tramp” that if she goes down the street to the store, she can buy a coat on his credit. Williston writes that this is a gift, as he is obviously not seeking to induce the performance of walking over.