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Contracts
Wayne State University Law School
Findlater, Janet

 CONTRACTS OUTLINE FALL 2008 FINDLATER
CHAPTER 1 BASES FOR ENFORCING PROMISES
Questions:
1.      Does the Code apply? (Service or Transaction?)        Unilateral-Promise seeking performance
2.      Is there an offer?        
3.      Is there a contract?
4.      SOF apply?                             Bilateral-Promise seeking promise
SECTION 3: Consideration as a Basis for Enforcement
(A) Fundamentals of Consideration p. 29-46
Consideration=bargained for exchange
-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
-“benefit” v. “detriment”
-Hamer=Uncle benefited from nephew not doing the big 4. Nephew had a detriment by abstaining from things which he was legally entitled to do.
Fiege=She forebeared from her legal right to bring charges (detriment) He didn’t have to go to court (benefit)
-forebearence of a “good faith” claim is consideration, even if that claim turns out to be invalid
§71: Requirement of Exchange; Types of Exchange
§1 Contract

Consideration includes:
a.       The actual transfer of something of value
b.       Promises to exchange something of value
c.        Legal detriment
d.       The reliance of one party on the promise of the other
Situations Involving No Consideration:
1.       Past Payment Value
2.       Pre-Existing Duty
a.       Existing debts
b.       Modifications of existing contracts (Alaska Packers)
3.       Moral Consideration (Sick Son Case)
4.       Illusory (no limit on the freedom of action, wife being surety)
5.       Gratuitous (gift, conditional, Sister Antillico)
6.       Voidable promises (minors)




MOTIVE IS IRRELEVANT
Hamer v. Sidway-Was the Uncle’s promise without consideration? (Unilateral Contract)
-There was consideration.  The uncle sought a performance and got a performance in the form of forbearance.  Matters not that the nephew benefited from the performance; he had the legal right to engage in these activities and he did not do it.
CONTRACT NOT FORMED UNTIL PERFORMANCE COMPLETED
(Detriment=giving up legal rights)
Uncle promises nephew that if he gives up drinking, tobacco, swearing, gambling(“the big 4”) until he was 21, he would pay nephew $5000. Nephew completes performance, uncle puts money in a trust. Uncle dies, executor of will won’t give money. Wife sues for $5000.

Party who abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for a promise, gives sufficient consideration to create legally binding contract.
Fiege v. Boehem-(forbearance as consideration)
Unilateral Contract
Forbearance to sue for a lawful claim or demand is sufficient consideration for a promise if the party forbearing had an honest intention to prosecute litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well-founded
Boehm agreed to pay money to Fiege for kid as long as she does not press bastardy charges against him. He stops paying. She brings charges. He is acquiited. She brings suit to enforce contract. Boehm argues that the contract was without consideration because Fiege did not give up a legal right by forbearing the filing of false charges.

The Requirement of Exchange: Action in the Past (p. 46-56)
§86 Promise for Benefit Received
-…prevent injustice
Comment b= “Facts such as the definite and substantial character of the benefit received, formality in making of the promise, reliance on the promise or the probability of such reliance may be relevant to show that no imposition results from enforcement”
Past acts generally do NOT constitute as consideration. However, reliance can be substitute for consideration.
Feinberg v. Pfeiffer(“workin’ woman”)- Do past acts constitute as consideration? (RELIANCE, §86 Past Acts, §90)
-promise wasn’t made on condition that she stay an extra eighteen months. She could have quit that day.
-court found no consideration, however, since she relied on the pension, and did not seek other employment (and fell ill), she relied on the promise of that pension.

Woman works 37 years for company. In recognition of her service, the board votes to give P a pension when she decided to leave the company.  P works for 18 months and then decides to leave her position and collect her pension.  At first the pension is paid but when the Company leadership changes they stop payments.  P files suit to collect the unpaid portion of her pension.
Moral Obligation: Mills v. Wyman(dying son)-benefit conferred before promise made can’t be said to have been given in “exchange” for the promise. No consideration. Moral obligation is NOT consideration. Maybe an alternative basis, but still not consideration. Even under §86, this wouldn’t be enforceable. (§86 wasn’t around yet) (Emergency situations, maybe for past act)
Defendant’s son fell ill, plaintiff took care of him, Defendant promises to pay for some of the expenses incurred by the out of gratitude.  Defendant refuses to pay and plaintiff sues to collect.
Webb v. McGowin (life saving consideration)-McGowin caused himself serious bodily damage by preventing the death or injury of Webb, there was consideration because Webb incurred a detriment by falling, and McGowin a benefit.
-a past act CANNOT constitute consideration. This case undermines that, however, a moral obligation was enforced here.
***Saving someone from death constitutes consideration ,even if he didn’t ask you to****

Webb prevented a large piece of wood from dropping at 75lbs. on the head of an employee below by falling with the wood. In turn, he sustained serious injuries, and was disabled for life. Having prevented serious bodily harm, or death, McGowin agreed to pay $15 a week to care for Webb to maintain him. These payments were made up until a few weeks after McGowin’s death.



The Requirement of Bargain (p. 56-67)
§3 Agreement Defined; Bargain Defined
Incidental Detriment- “Walk to the corner and I’ll buy you a coat” = a condition, not consideration.
Implicit Bargain-The mutual promises to employ and to be employed on an ongoing at-will basis according to agreed terms are supported by consideration: the promise of one serves as consideration for the promise of the other.
Kirksey v. Kirksey (Sister Antillico)-Was D’s promise legally enforceable? Promise was a mere gratuity. At this time, reliance on a promise was not upheld as consideration. Gratuity=gift, not an enforceable promise. Her moving was not motivation for the promise, moving is a condition to receive gift. (BEFORE RELIANCE WAS USED). HE DID NOT BARGAIN FOR HER TO MOVE DOWN THERE, NOT WHAT HE WAS SEEKING
D promised P place to live. P abandoned current home, moved to D’s property. After two years, D throws her out. Trial court awards P, judgment is reversed.
Lakeland Employment Group v. Columber (contract not to compete)-Court held that consideration exists. At time of signing the non-comp agreement, both employer & employee (at will) had a legal right to terminate at will employment relationship when Columber presented with it. Neither party did so, and Columber remained employed for ten more years. Employee seeing something? Employment (Time, scope, geography)
Columber started at will 1988. 1991, he signed a non competition agreement. Worked for ten more years after signing. Trial court said it lacked consideration. Reversed.
Non Comp Agreement=forbearance=”let’s keep working”=continues at will relationship=CONSIDERATION
Employee Handbooks  Are Employer’s bound by the handbooks setting out companies policies? Handbooks may be binding if the court construes continued job performance to be acceptance and consideration.
Gordon appears to be an at will employee. An at will employee is retained for an indefinite amount of time. The handbook is not a contract (at least, not in Michigan; Bankey). The handbook is only a set of company policies put in place to benefit both the employer and the employee. The fact that Gordon has not read the handbook is not surprising; most employees don’t. At will employees have no guarantee of job security. They are usually allowed to be fired at any time, for any reason. Although the handbook is not a contract, and the employer can unilaterally change the provisions of the handbook (employer would need to give reasonable notice to employees of any change), the employer is still bound to what is in the handbook. If the handbook states that la

thorn rule.  When someone alters their position because they are relying on a pr., the pr. is enforceable.  In this case Feinberg quit her job on the assumption that the pension would be paid.  The pension was paid for a few years but then the company discontinued payment.  At that point she could not put herself in the same position she was in prior to her retirement.
Woman works 37 years for company. In recognition of her service, the board votes to give P a pension when she decided to leave the company.  P works for 18 months and then decides to leave her position and collect her pension.  At first the pension is paid but when the Company leadership changes they stop payments.  P files suit to collect the unpaid portion of her pension.
Cohen v. Cowles Media Company-The plaintiff has the right to recover under the doctrine of promissory estoppel.  NOTE It is difficult to tell why the court took this route because there seems to be consideration.  Under §90, the promissee must rely on the pr., which Cohen did.

Some Questions for Cohen:
1.       Did he reveal info only after being assured that his name wold remain confide ntial? If the promise was given after he supplied info, promissory estoppel would not apply
2.       If court thought both parties had a good moral argument, how can they be sure that enforcement of the promise is required in order to prevent injustice?
Plaintiff gave information to a newspaper on the condition that he would remain anonymous but the paper published his information anyway.

Promissory estoppel is applicable only where enforcement of a promise is required in order to prevent an injustice
Specific Relief: Money Damages
Expectation = Amount of $$ it will take to get the wronged party to the same position he would have been in had the promise been performed (preferred form of damages)
Reliance = Amount of $ wronged party is out based on how much he spent in reliance of the promise.
Restitution = The breaching party gives the wronged party his money back. (A gave B $$, B broke his promise, B has to give A back his money).

Cotnam v. Wisdom

When a Dr. renders emergency medical services to a person, who dues to his medical or mental condition is not capable of agreeing to the treatment, the law will imply a contract for the reasonable value of servies.

Implied Contracts= NO MEETING OF THE MINDS

Implied contracts do not require any evidence of mutual understanding

CHAPTER 2: CREATING CONTRACTUAL OBLIGATIONS
The Nature of Assent (p. 116-126, 2-4)
Intent of Parties=“Objective” (Reasonable Person) v. “Subjective”.
Intent to be bound: When is it not there? Promise (content or circumstances) is insufficiently serious as to the promisor’s intent to be bound (“I’ll sell you my mansion for a stack of pancakes.”).Optimistic statements (Your son will probably recover from the flu).Family promises (promises between family members = red flag)

Intent to be bound:  A promisor may not be bound by their promise if it is clear from the circumstances that the promisor did not intend to be bound.  When determining if there is a contract, ask two questions: (1) Was there an offer?  (2) Was there an acceptance?
§18 Manifestation of Mutual Assent
Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance
§19 Conduct as Manifestation of Assent