Professional Documents
Culture Documents
I.
Promisory Liability
A. Consideration R.2d 82-94
1. To have a contract, must have mutual assent and consideration R.2d 17
Except as stated in Subsection (2), the formation of a contract requires a bargain in
which there is a manifestation of mutual assent to the exchange and a consideration.
2. Whats required to show consideration? R.2d 71
a) Bargained for
b) Reciprocal inducement
c) Performance
(1) An act other than a promise
(2) A forebearance
(3) The creation, modification, or destruction of a legal obligation
3. Reciprocal Inducement
a) Partial inducement is enough!
b) No gratuitous promises constitute consideration
(1) Good feeling aint good enough.
(2) Kirksey v. Kirksey plaintiff was the widow of defendants brother defendant
wrote a letter offering her a place to stay on his land. After she went there, he kicked
her off. Held to be no reciprocal inducement. (Could have one on reliance?)
(3) Langer v. Superior Steel plaintiff had retired from the steel company and get a
letter promising him $100 a month for the rest of his life as long as he did not work
for any other company. He took the money and did not work they discontinued the
payments after 4 years. Court held it to be a contract, because the not working was
consideration; there was reciprocal inducement.
(4) Promises can move between gift and exchange up to the point of performance.
Example: Guy who gave niece a rare book as a gift, then she gave him an antique
penny. When he wrote a letter acknowledging the book in exchange for the penny
he turned the gifts into an exchange. Then, when he did not give the book, he had
breached.
c) Forbearance does count as consideration
(1) Fiege v. Boehm the man believing himself to be the father of a womans bastard
child paid child support in return for her forbearance to sue him in court. When he
found out he was not the father, he stopped paying. Court held that, if she believed in
good faith that he was the father, and he believed that he was the father, then the
contract was valid with forbearance as the consideration.
(2) R.2d 74(1) Forbearance to assert or the surrender of a claim or defense
which proves to be invalid is not consideration unless: a)the claim or defense is in
fact doubtful because of uncertainty as to the facts of the law, or b)the forbearing or
surrendering party believes that the claim or defense may be fairly determined to be
valid.
4. Adequacy of Consideration
a) Traditional and the 1st Restatement went under benefit-detriment theory there must
be some gain to the promisor and some detriment to the promisee in order to constitute
consideration.
b) Not relevant in modern times: R.2d. 79 If the requirement of consideration is met,
there is no additional requirement of a)gain, advantage, or benefit to the promisor or a loss,
disadvantage, or detriment to the promisee; or b)equivalence in the values exchanged, or
c)mutuality of obligation.
c) Modern common law feels that private parties should be trusted to enter bargains that
are mutually beneficial, even if weird to the outside observer.
d) Unconscionable bargains are an exception
(1) Jones v. Star Credit outrageously overpriced refrigerator was sold to a family
on Welfare by a door-to-door salesman, who then sued them when they could not pay
for all of it.
(2) R.2d 79 Comment e gross inadequacy such as shocks the conscience or is
said to be the badge of fraud may be unenforceable.
(3) The FTC has a section for unconscionability
(4) UCC 2-302 the court may strike any part of a contract that it finds
unconscionable, or if the whole contract is permeated with it, strike the whole thing.
Evidence will be heard from both sides as to the commercial circumstances.
Comment discusses public policy and unequal bargaining power.
5. Pre-Existing Duty Rule
a) The performance or promise to perform a pre-existing duty is NOT consideration.
(1) Alaska Packers men waited until they got all the way to Alaska, where there
were not other workers, before demanding more money. Company would not pay it
when they got back.
a) Mills v. Wyman woman took care of a sick man, when he died, his father promised to
pay her for the care, but then did not. There was no legal obligation.
b) Harrington v. Taylor friend of a woman caught the axe as the woman was trying to
kill her husband. Husband promised to pay friend for the hand, but didnt. Again, no legal
obligation.
3. Quasi-contract
a) A confers benefit on B with the expectation of payment
b) A gives B the right to turn down acceptance of the benefit, unless there is a good
reason why he didnt.
c) Bailey v. West plaintiff, a horse caretaker, sued West, a horse owner, over the care of
a horse. The horse had been delivered to the plaintiff by Wests employee, there was
evidence that he sent letters to more than one person to find out who owned the horse, and
that West explicitly sent back the bill, saying the horse was not his. Court would not allow
recovery under quasi-contract.
4. An oral promise to pay an antecedent debt or quasi-contractual debt is
consideration. R.2d 82
a) S.o.l. Is a matter of public policy we want people to know at what point they can
have peace and no longer fear suit. If someone chooses to waive that right and promise to
pay, more power to em.
b) Traditional was one of pre-existing duty rule need new consideration
c) Manwill v. Oyler denied consideration on an oral promise to pay debt after the statute
of limitations on the debt had passed, because there wasnt evidence that there was ever a
contract in the first place. 82 only works if the s.o.l is the only thing barring enforcement.
5. R.2d 86: Promise for Benefit Received: A promise of a benefit previously received
by the promisor from the promisee is binding to the extent necessary to prevent
injustice.
a) Webb v. McGowin guy who fell out of window with a block and severely injured
himself in order to avoid killing his boss. Boss promised to pay man, and did, until his
death, when the payments stopped. The court made mentions about the value of life but
they were really applying 86 yet this case is weak. Try not to use it.
D. Nominal Consideration
1. R.2d 71 Comment: A mere pretense of a bargain does not suffice, as where the
is a false recital of consideration or where the purported consideration is merely
nominal
f) Traditional method was subjective, that if A offered to B and gave him until later to
decide, Bs acceptance during that period would not be valid if A could show that she did
not intend at that time. However, did have to have some evidence of inner intent.
B. Offer
1. An offer is an act by which a person confers on another the ability to form a
contract between then by saying I accept.
a) 24 an offer is the manifestation of willingness to enter into a bargain, so made as to
justify another person in understanding that his assent to that bargain is invited and will
conclude it.
b) An invitation to bargain is not an offer 26
c) Need a specific price, will not take less than usually doesnt cut it. Not usually price
quotes.
d) Need words that indicate that the ability to create a contract has been extended.
e) Keep in mind context of conversation is it actually a counteroffer? Are there phrases
like for immediate acceptance?
f) When in doubt, courts usually hold there is no offer
g) The offeror is the master of the offer!
h) UCC on offer: 2-204, 2-206 any manner of offer & acceptance reasonable, quote
for prompt shipment is considered an offer
2. Offeror can destroy an offer at any time up until acceptance, with the exception of
option contracts.
3. Advertising
a) Most advertisements are not considered offers
b) Exception- Lefkowitz v. Great Minneapolis Surplus Store (1957) man saw three
advertisements for womens coats that said only that he had to be the first one at the store.
When he got there, they would not sell to him, saying that he was not female. Court held
that the third advertisement, which gave a price and clear, definite actions that customer
had to do to indicate acceptance, was an offer.
c) Public policy comes into play here courts do not want to allow advertisements that
appear close to bad faith.
d) Bottom line make sure you are vague when you advertise!
C. Acceptance
1. The acceptance method may be stipulated by the offeror, and that method must be
satisfied to constitute acceptance. R.2d 30, 50, UCC 2-206
D. Counteroffer
1. Extending a counter-offer negates the original offer.
2. Once a counter-offer has been extended, then the original offer cannot be
accepted, even if the counter-offer is the rejected.
3. Mirror-Image Doctrine the acceptance must accept exactly what the offer offered.
a) An acceptor can add suggestions or inquiries to the acceptance, but the acceptance
cannot be condition on these additions, or it becomes a counteroffer. 59, 61
b) The UCC allows minor changes to the acceptance to still be an acceptance, as long as
the offeror doesnt object to them. 2-207. In this coming spring, there will be a
knockout rule, whereby the additions can be knocked out of the acceptance upon
objection, but the acceptance still stand.
c) Minneapolis & St. Louis Railways vs. Columbus Rolling-Mill Co. (1886) Columbus
sent out an offer to sell a certain quantity at a certain price. MN responded for the same
price but a different quantity and requested a contract to sign. Columbus sent no contract
and rejected the offer. MN then tried to order the original offer, and Columbus rejected
again. Under the mirror-image doctrine, MN could not accept, but had counter-offered and
been rejected.
4. An offer cannot be accepted after the power to accept has been terminated. 35
a) Option contracts cannot be terminated. The premium is paid for the right to accept
anytime within a certain period.
b) Reliable information that the offer has been accepted by someone else is a withdrawl
of the offer.
c) Death is a revocation of offers. Generally, no notification required. 48
III. Contract Interpretation
A. When you will use this.
1. There already is a contract! Formation is not in dispute.
2. Is the language ambiguous?
3. If so, what evidence is relevant to interpreting the ambiguous language?
2. Hierarchy of evidence
a) Express contract terms
b) Negotiation of the contract
c) Course of Peformance when the contract is halfway finished, look at what has
happened so far.
d) Course of Dealings when there have been several sequential dealings between the
parties, look at past ones to determine a pattern.
e) Trade Usage
f) Dictionary
3. Equipoise whats the default?
a) The person bringing the suit bears the burden of proof
b) The party who wrote the agreement will bear the loss
c) Or just judge it a failure of mutual assent R.2d 201(3) Peerless (contract specified
the ship on which the cotton would arrive, but there were two ships of the same name. The
contract was held unenforceable by failure of mutual assent.)
D. Integration and the Parol Evidence Rule
1. When is the PER raised?
a) You must have something in writing!
b) You must have something else be it oral or written
c) There must be an already enforceable agreement
d) It is not applicable:
(1) To interpreting a writing
(2) To prove the non-existence or invalidity of an agreement
2. Parol evidence rule tells you how much extrinsic evidence you may use given the
level of integration.
a) PER R.2d 213 (1) A binding integrated agreement discharges prior agreements to
the extent that it is inconsistent with them (2) A bind completely integrated agreement
discharges prior agreements to the extent that they are within its scope (3) An integrated
agreement that is not binding or that is voidable and avoided does not discharge a prior
agreement. But an integrated agreement, even though not binding, may be effective to
render inoperative a term which would have been part of the agreement if it had not been
integrated.
3. Is it an integrated writing?
a) If totally integrated, also known as COMPLETE:
(1) It is the last expression of ALL terms of the agreement
(2) It cannot be contradicted or supplemented by prior or contemporaneous written
or oral agreements.
(3) Merger clause is strongly persuasive.
b) If partially integrated, or FINAL:
(1) It has adopted SOME of the terms of the agreement
(2) It cannot be contradicted, but can be supplemented by prior or contemporaneous
written or oral agreements.
c) If not integrated then you can use prior agreements.
4. How do tell the level of integration?
a) Look for a merger clause strong persuasive evidence of total integration.
b) 4 corners rule
(1) You look at the writing. And thats it.
(2) Totally form approach, no substance
(3) If the documents seems to cover it, it does cover it.
(4) If there is an averment of fraud, then you can use parol evidence.
(5) Gianni guy who couldnt sell tobacco, and thought he had orally contracted to
be the exclusive dealer of soda. Written agreement didnt say that judge looked
only at written agreement.
c) The objective test
(1) The issue in dispute is not ordinarily in the writing
3. R.2d 224 Condition Defined: A condition is an event, not certain to occur, which
must occur, unless its non-occurrence is excused, before performance under a contract
becomes due.
4. There are conditions precedent & conditions subsequent
a) Most conditions are precedent.
b) R.2d refers only to precedent conditions.
c) Conditions subsequent are things in which the contract will not be enforced if
something doesnt happen within a specified time most common example is insurance.
They are always conditions of notice.
d) Distinction is for one of burdens of proof plaintiff has the burden to show that a
condition precedent was met; defendant has the burden to show that a condition subsequent
was not met, as they are an affirmative defense.
B. Express Conditions
1. What are they?
a) Mandatory conditions in order for one party to give the return promise
b) They must be agreed upon between the parties
c) If the condition isnt met, the contract dissolves
d) Defense to express conditions are they were not express and substantial performance
should be permitted.
e) The penalty of an express condition is harsh.
2. What you should think about when entering one:
a) What must one receive in order to have the exchange?
b) What events could occur to impair that exchange?
3. Conditions are different from promises
a) The promisor does not have the right to sue the promisee for failing to meet the
condition. The contract is simply void.
b) Neither party is obligated to hold up their end.
c) To make a condition into a promise, remove the IF.
(1) I promise to buy your house IF the roof is in good repair.
(2) I promise to buy your house with a roof in good repair.
(a) party who made the condition prevented the other party from fulfilling it
(b) Substantial hindrance or failure to cooperate will constitute prevention,
provided the conduct is wrongful
(6) Disproportionate Forfeiture (unconscionability)
C. Constructive Conditions of Exchange
1. What are they?
a) They dont really exist! They are constructions of the court in place of explicit
conditions. 226
b) You can only have them in bilateral contracts.
c) They are not the same as express conditions, because both parties can sue.
d) They often occur when each party considers their performance conditional upon the
other persons performance. They must happen together.
(1) In order to get them to occur, the court picks one and makes it a condition of the
other. This is sometimes arbitrary, but they give their reasons Kingston (man sells
gives apprentice his silk firm but wants financial security, wont give firm w/o
security, court determined security would have to go first)
(2) Then, if As performance is a condition of Bs performance, and B doesnt
perform, then A doesnt have to perform and can sue B. So its not an express
condition.
(3) Or if B performs but breaches the contract immaterially, A must then perform,
and can only sue for the set-off costs of that immaterial breach.
2. Modern default is that the contracts are dependent, and we need a CCE.
a) R.2d 234 when they are simultaneous promises, they should go simultaneously,
unless one will take a lot of time, and then it should be done earlier.
b) UCC 2-507 and 2-511 for goods, the simultaneous exchange of goods and payment
in a sale.
c) Traditionally, contractual obligations were treated as independent unless contracted
otherwise.
3. Sequential conditions
a) Like getting a haircut.
b) R.2d 234 what they mean by one persons part taking a lot of time.
(b) But he can sue for breach if the goods were imperfect and he was forced to
use them by time crunch
(5) The seller must be given the time to cure if that time still remains 2-508
5. Divisibility of Contracts
a) Its not easy to prove.
b) Have to establish separate consideration
(1) Helps if there are two different payment schemes like fixed for the first and perhour for the second
(2) Lowy v. United Pacific contracting for development work that had two separate
jobs. They completed 98% of the first job, and then halted over a dispute the
plaintiff immediately hired someone else for the second half of the work, and then
sued the contractor for breach. Court held that breach on the second part did not
negate damages on the first part.
c) R.2d 240
d) If the persons services are unique and cant be replaced, then not divisible
V. Damages
A. Compensatory Damages
1. Why do we have compensatory damages?
a) To compensate for the harm
b) NOT for deterrence or punishment.
2. Types of remedies R.2d 344 and comment
a) Monetary
(1) Expectation Damages
(a) Amount that will place the injured party in the place they would have been
but for the breach.
(b) Plaintiff is ex post whole.
(c) Usually the largest amount given
(d) Strategically, you go for this.
(e) More difficult to prove difficult to measure.
B. Punitive Damages
1. Generally not permitted in contract
2. Exceptions for fraud & misrepresentation public policy; presence of a tort,
violation of a fiduciary duty
3. Purpose is deterrence & punishment
4. Boise v. Clark car dealership that turned back the odometer on a used car to sell
as new.
5. Punitive damage amount must be proportionate to compensatory.
6. R.2d 355
C. Nominal Damages
(1) A trifling sum
(2) Indicated that there was liability, but no damage
(3) Also called declaratory judgment
(4) Why would plaintiff seek this?
(a) They just wanted to win.
(b) They failed to prove damage.
D. Limitations on Damages
1. There are limitations on expectation damages
a) Avoidability/Mitigation
(1) If one party knows that the other party intends to breach, they must stop work.
They cant sue for damages for anything they did past the point of notification.
(Rockingham County v. Luten Bridge contractors building a bridge continued long
after they had received notice that the contract would be breached) R.2d 350(1)
(2) The injured party does retain the right to sue for the breach itself.
(3) UCC 2-704(2): A seller can either cease manufacture or continue, whichever will
cause the least damage. Remember, a good is a moveable thing.
(4) There is no DUTY to mitigate, but avoidable loss is not recoverable, so youd
better do it.
(5) The effort must be reasonable, and no more R.2d 350
(6) Why do we have it?