Janet Findlater- Fall 2010- Contracts A
1) The UCC (CODE)
a) Applies when there is a transaction in goods.
b) 2-205 : Goods are anything that is moveable.
c) Trumps common law (restatement) when there’s a dispute.
d) If UCC is silent on an issue, common law will control (UCC 1-103)
2) Chapter 1: Basis for Enforcing Promises
a) Contract: an enforceable promise
i) (formally defined as a promise for the breach of which the law provides a remedy for)
b) Promise : a commitment to the future
c) Consideration: makes a promise legally enforceable
i) It is value given by one party in exchange for performance, or a promise to perform, by another party.
ii) Can be giving up a legal right, abstaining to do something, or a benefit to the promisor, and detriment to the promisee.
d) Bargain Theory Analysis (MOST USED) (71)
i) Consideration is a bargained for exchange of performance or return promise which is given in exchange for the promisors promise.
ii) The court decides what is “sufficient” to show consideration.
iii) Page. 38 Note 4: Dad gives his son $1000 if his son gives him a book valued at $1.
(1) This is NOT a bargain. It is merely a hoax to seem as a bargain.
i) OLD VIEW
(1) A benefit to the promisor and a detriment to the promisee.
(2) The promisee gives up something of value, or gives up something that he has the legal right to do.
f) Restatement 71: Requirement of exchange (consideration)
(a) To constitute consideration, a performance or return promise must be bargained for
(b) A performance or return promise is bargained for if it’s sought by the promisor in exchange for his promise and is given to the promisee in exchange for that promise.
(c) The performance may consist of:
(i) An act other than a promise, or
(ii) A forbearance, or
(iii) The creation, modification, or destruction of a legal relation
1. Ex. Promise not to take court, or sue
(d) The performance or return promise may be given to the promisor or to some other person. It may be given to the promisor by some other person.
ii) A promise to make a gift is unenforceable b/c it lacks the bargain element, there’s no consideration
iii) But, if the promisor imposes a condition, and the occurrence of this condition is of benefit to him, then the bargain element will probably be present.
iv) Altruistic pleasure
(1) The fact that one who makes a promise as a gift expects to derive altruistic pleasure, or love or affection, from making the gift, does NOT constitute a bargain or consideration.
g) Bilateral K: a contract seeking a promise
i) *most K’s are bilateral
ii) In Bilateral promises, the promisor is the person who’s promise we are seeking to enforce.
h) Unilateral K: a contract seeking a performance
i) Hamer v. Sidway (pg. 34): uncle and nephew case
(1) Promise made by uncle to pay $5000 if nephew refrained from Big 4.
(2) Nephew did so, estate for the uncle refused to pay.
(3) Detriment to the promisee, giving up big 4.
(4) Forbearing to do what he had a legal right to do (Big 4) is sufficient for consideration.
(a) If the nephew was going to give up the big four already before the promise was made….does it still constitute consideration in the restatement sense?
(i) Yes, just because he has other motivations doesn’t mean his case will be defeated.
ii) Fiege v. Boehm (pg. 40)
(1) D made a promise to P that he would pay child support to her, if she didn’t bring a paternity case against the father (he was worried about his public image)
(2) The promise was seeking performance.
(3) She gave up the right to bring a claim against him (forbearance)
(4) However, he was not the father…if her claim was in good faith, she would have a breach of contract suit, however if she knew he wasn’t the father, she would not.
(5) Restatement 74: giving up an invalid claim can be consideration as long as there was a good faith belief, at the time of the deal, that the claim was valid.
j) Requirement of Exchange – Action in the Past
i) Feinberg v. Pfeiffer (pg. 46)
(1) Employment case.
(2) P sued when D stopped paying her after they had promised to pay for the rest of her life, upon her retirement.
(3) The promisor must be seeking future performance, not rewarding past acts.
(4) She did not bargain for anything, she chose voluntarily to continue working, she was not asked to do so.
ii) Mills v. Wyman (pg. 50)
(1) Ill son, father case
(2) Father promised to pay for the expenses that P incurred while caring for his son.
(3) Morally, the father whould have to pay, but legally no, b/c no consideration.
(4) A promise made in recognition of a moral obligation from a past benefit is not enforceable.
iii) Webb v. McGowin (pg. 52)
(1) Falling block case.
(2) McGowin promised P compensation in return for his past act (saving his life) until P died. D dies and McGowins executors refuse to pay.
(3) ***In this case, Moral Obligation HAS to entail a material benefit (saving his life).
(a) In mills this would still not constitute consideration because the dad did NOT have a “material” benefit.
(b) The benefit CANNOT be mental.
(4) More specifically, only those promises that result in an injustice (someone being crippled to save the life of another, etc.) are enforceable on the grounds of material benefits. (RULE 86 of the restatement)
(5) Material benefit can be consideration IF:
(a) Material benefit to the promisor, AND (saved his life)
(b) Material detriment to the promisee, AND (injuries)
(c) Promisor would have struck this bargain if he could have prior to the incident.
(d) Restatement 86
iv) Restatement 86: Material benefit
(1) a promise made in recognition of a benefit previously received by the promisor form the promisee is binding to the extent necessary to prevent injustice (must be a material benefit to prevent injustice)
(2) A promise is not binding under section 1:
(a) If the promisee conferred the benefit as a gift,
(b) Or to the extent that its value is disproportionate to the benefit.
k) Reliance and Gratuitous Promises
i) Kirksey v. Kirksey
(1) Viewed as a “conditional gratuitous promise.”
(a) “If you will come down to see me, I will give you a place to live.”
(2) Remember, we need both sides of the wheel, not just one.
(3) Rule 86, although not made at the time, still couldn’t be used in this situation because it was not a past act.
(4) **There must be something bargained for, the absence of this makes this promsie gratuitous.
(5) Restatement 71 Comment C:
(a) If it is a mixture of a gift and a bargain, we consider it a bargain.
i) Lake Land Employment Group of Akron, LLC v. Columber (pg. 58)
(a) Was there consideration to enforce the non-competition agreement.
(2) He was an at-will employee, meaning he could be fired, or could quit at any time.
(3) The court rules that the employer NOT firing him, is consideration for the non-compete agreement.
(a) The disagreement of the dissenters
(b) Resnick says that is no consideration because the employer does not lose anything, they still retain the right to fire at any time.
(c) Pfeifer says that there is also no consideration, but ALSO that there is no longer an at-will employee relationship. He is saying consideration has to be something else.
ii) **Generally, in an at-will employment case, continued employment is consideration.
m) Employee Handbook Promises
i) Tusane Case (background for supreme court rulings in book) (MI supreme court case)
(1) He interviewed for a job at blue cross blue shield
(2) Asked his boss about job security
(a) Said we “try to fair and consistent in the way we treat our employees, and we release our employees for just cause only”
ii) Gave him a handbook, handbook detailed the procedures that they would have to follow in order to discipline, it also listed what was meant by “good/just cause”.
iii) He got fired, blue cross took the stance that historically, those promises were not binding, the
ing half of his profits, it is implied that he actually try to obtain profits.
(6) RULE: if a promise can be implied from the circumstances, then there is consideration.
ii) Termination clause
(1) An at will termination clause, is illusory, and it results in no contract.
(2) If there is ANY kind of limit on your termination, it has to be done in writing, or give notice (30 day notice) and this is a contract and is enforceable
(a) Promises which forseeably induce reliance on the part of the promisee will often be enforceable without consideration, under the doctrine of promisorry estoppel.
(b) There is usually no consideration b/c promisor is usually not looking for anything in return from the promise, but simply imposes a condition.
ii) Restatement 90: Promise reasonably inducing Action or Forbearance
(i) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise. The remedy granted for breach may be limited as justice requires.
(ii) A charitable subscription or marriage settlement is binding under (1) without proof that the promise induced action or forbearance.
(2) Actual Reliance
(a) The promisee must actually rely on the promise.
(3) Forseeable Reliance
(a) The promisee’s reliance must also have been reasonably forseeable to the promisor.
(4) Promises to make a gift
(a) Promissory estoppel is most often applied to enforce promises to make gifts, where the promisee relies on the gift to his detriment.
1. This may be applied between family members
t) Rickettes v. Scothorn (pg. 89)
i) Promise from Rickettes, is to pay her $2000 with a 6 per cent annum if she doesn’t work.
ii) She quit work.
iii) Why is it viewed as no consideration?
(1) They are saying that he “wanted” her to not to have to work, but he didn’t bargain for it.
(2) He didn’t strike a bargain with her, it was merely what he “wanted” her to do.
iv) They rule that the promise is binding due to “equitable estoppel”
v) She relied on his promise, and it was reasonably foreseeable.
u) Feinberg v. Pfeiffer revisit
i) Was the promise of the pension enforceable because of P’s reliance on it?
ii) Reliance WOULD make this promise enforceable.
iii) It would be easily foreseen.
v) Cohen v. Collins (pg 98)
i) P provided newpaper reporters with info on condition that his name would not be used.
ii) D published his name.
iii) Parties were not thinking in terms of a binding agreement (K). Violation of the newspaper’s first amendment rights.
iv) Restatement 90 says NO reliance/consideration…
w) General Motors v. Willow Run (pg.)
i) P gave tax abatement in exchange for D’s investing in their auto plant. D expressed sentiment of continuing production and employement at the plant. D closed it down 3 years later.
ii) Bargain – space for tax break
iii) Reliance – employees depended on jobs…
iv) Holding: there was no promise, there was merely an expression of hope…in the corporate world between businesses things change, restatement 90 allows for this flexibility need.