Contracts/Obligations (Bowers) Study Guide

Fall 2006
Overview Sheets Topic General Statements of Contract Law . What is a contract (formalism) .. What is an offer ((ir)revocability) . What is acceptance What makes a contract enforceable ... What is a donation . Overview of the Uniform Commercial Code Random Bower-isms . Case briefs (in alphabetical order) Page Number 2 3 6 9 11 14 16 18 19

General Statements of Contract Law

A contract is an agreement between two or more parties creating obligations that are legally enforceable or otherwise recognizable; more simply put, a contract is a promise o In making a promise, we are inherently restricting our own freedom Questions to ponder o We rationally desire to restrict our own Why do we enforce promises? freedom because the choices we might Is life better off if we enforce promises? make for ourselves are not necessarily the choices that we should make for the betterment of society at large This is the economic principle of prisoners dilemma As the economy evolves, so too does our understanding of what is best for society o A breach of contract is a violation of a contractual obligation, either by failing to perform ones obligation, or by interfering with another partys performance o A cause of action is a factual situation that allows one party to obtain a legal remedy from another party Contract law is designed to incentivize good behavior and decentivize bad behavior Common law versus civil law in contracts o Common law looks at contracts objectively (i.e. what would the sober guy at the end of the bar think) Common law is a ex post decision making strategy (deciding after the fact) o Civil law looks at contracts subjectively (i.e. was there a meeting of the minds) This idea of subjectivity in the civil law system comes from the idea of the autonomy of you; if two parties agree, there is something magical about two autonomies being in sync Civil law is an ex ante decision making strategy (deciding before the fact) o Downsides to both systems: Common law downside if someone else is determining who is in a contract and who isnt, people may enter contracts without intending to or realizing that they have Civil law downside people lie; since swamis do not exist, people can say they never agreed, and who is to know the difference? Also, can we really plan the future of contract law?

What is a contract? (formalism)

COMMON LAW Contract = promise (1 of Restatements) What is a contract? Promise = manifestation of intent that the promisee can justifiably rely on (2 of Restatements) Contracts require consideration A promise is formed when both parties can be seen as reasonably intending to enter a contract; it must begin with an offer from the offeror to the offeree Note: this means that the parties should have mutual assent in order to enter a contract; however, when mutual assent is questioned, it is to be determined from the perspective of the guy at the end of the bar (i.e. third party); therefore, this means mutual assent is determined by the parties outward actions (Lucy v. Zehmer, Virginia 1954); in other words, mutual assent should be an objective determination There are no real formalities required in a common law system, so contracts are not limited to the elite CIVIL LAW Contract = obligation Art. 1906 (Definition of contract) A contract is an agreement by two or more parties whereby obligations are created, modified, or extinguished. Contracts require cause Art. 1927: A contract is formed by the consent of the parties established through offer and acceptance. Additionally, the consent concept of a meeting of the minds is carried over from the 1870 Code (Belgard Construction Company v. Collins, Louisiana 1993); meeting of the minds is a subjective determination Art. 1798 of CC of 1870: As there must be two parties at least to every contract, so there must be something proposed by one and accepted and agreed to by another to form the matter of such contract; the will of both parties must unite on the same point. Requiring the minds to meet and the formalism of an offer and acceptance ensures (more than at common law) that contracts are truly and intentionally made

What is the benefit of contract requirements?

How is a contract formed?

Civil law is more formalistic in the manner of determining if there was a contract than common law Allowing mutual assent to be determined by outward actions allows for the misinterpretation of when contracts are/are not formed. This problem would be solved if we had either (a) swamis that could read peoples intentions or (b) an unmistakable formality (ex: grunt and slither) that identified mutual assent [disadvantage would be increasing formalism increases the price of contracting] Requiring a true offer and acceptance can lead to mindless formalism, which can in turn make the establishing of offer and acceptance arbitrary (North Louisiana Milk Producers Association v. The Southland Corporation, Louisiana 1977) Meeting of the minds is ridiculous because there will always be details left out (ex: color of delivery truck this is an idiosyncrasy) Solution: swamis! (grunt and slither may be harder in civil because meeting of minds is too subjective)

What is the downside of the contract requirements?

COMMON V. CIVIL

Both common and civil include the idea of a contract including an offer and an acceptance, but civil law lays out more formalistic requirements of identifying what the offer and acceptance precisely were Both common and civil law include the idea that the two parties should agree on the contract, but civil law does this through a subjective meeting of the minds, while common law does it through an objective mutual assent The requirements in both systems create the formation of contracts that are unintentional and vice versa. (Common examples: Embry v. Hargadine, McKittrick Dry Goods and Oswald v. Allen) In other words, neither system is perfect in establishing when a contract is/isnt made.

Contract/Formality Cases
CASE A Embry v. McKittrick (created) North Louisiana Milk Producers (created) ARGUMENT Contracts are unintentionally created/ not created CASE B Oswald v. Allen (not created) Belgard Construction (not created)

Contact/Formality Stories
Advantage of having formalism: If we have formalism, then the contractual jaws will not be shut on anyone unknowingly Ex: Im studying in the library for exams. A colleague of mine has been eyeing my car for weeks now because I have a hybrid and get great gas mileage. My colleague walks up to my cubical on the second floor and says he will buy my hybrid for $2,000. I wave my hand up because I dont want anyone bothering me Im studying! He interprets this as me saying, we have a deal, while I mean this as, get the hell away from me. Since there is a lack of swamis in the library around exam time, theres no way to tell if we both wanted there to be a contract. If we have no formalism whatsoever, the relaxed 3L on the other side of the second floor who saw the whole scene may say that my hand raising appeared to be a gesture of acceptance (ex: Lucy v. Zehmer) Therefore, I may have very well entered myself into a contract to sell my hybrid without even knowing it. From a societal perspective, we dont want people to be able to unknowingly enter into contracts, because then people will be hesitant to begin to make deals with one another at all, out of fear of getting caught in a contract that they did not intend to enter.

Advantage of not having formalism: If we do not have formalism, the cost of contracting is far less Ex: Same scenario of me studying and a colleague wanting to buy my hybrid. This time, there are a set of detailed rules as to how the sale of a hybrid can take place in a law library, and the rules involve me grunting and slithering five times with a French accent to show my acceptance. This is going to be a big expense on me because I: (a) dont know all of the rules yet since Ive only been through 1 semester of law school, (b) Im not very good at grunting and slithering, and (c) my French accent is lousy at best. So in order for me to enter into this contract, I need to: (a) hire an attorney from the local bar to teach me the rules, (b) hire an instructor to teach me to grunt and slither properly, and (c) hire a French native to help me work on my French accent. All told, this is going to be a very expensive contract for me to enter into, and since Im just a 4

law student and have student loans to worry about, there is no way I will be able to enter into the contract if I wanted to

From a societal perspective, we dont want to make it so expensive that everyone save the Bill Gates of the world cannot enter into a contract

Balance: The best thing for society is for there to be a balance between the two extremes, and that balance should be judged on a case-by-base basis We want people to enter into contracts with one another, because when they do, they are inherently restricting their own individual freedoms because they have tied themselves to another person (ex: I sell my hybrid to my colleague, I cannot sell it to someone else); when people tie themselves to one another, the decision making process is changed from what is best for me? to what is best for the group? (ex: it may be best for me to drive 70 mph an hour down Dalrymple because I can get to school quicker, but now that Ive contracted to sell my car, that decision is not good for my colleague and I because I may wreck the car and then not be able to sell it to him) [this is represented theoretically in the game theory principle of prisoners dilemma] When people make decisions that are better for society-at-large

Random points of formalism: Ex (words as formalism): Words have meaning, but the meaning is based on the context, as Dudley Moore showed us in Bedazzled. For example, if I walk into Calandros to buy meat, I tell the butcher, Give me a half-pound of that pastrami, customary practices say I am not asking for a donation, though the definitional meaning of my words implies such. Idiosyncrasies o The person with the idiosyncrasy is in the best position to ensure the idiosyncrasy is met (i.e. I only want to be paid for my hybrid by someone wearing red clown shoesthats just odd-ball of me) o An idiosyncrasy is whatever is against customary norms of the industry (ex: if its customary that when I sell my car, I include the tires on the car, too, then if I remove the tires of the car before I sell it, I am being idiosyncratic; or if its customary that it does not matter what color shoes my colleague is wearing when he pays me, then if I require him to wear a certain type of shoe I am being idiosyncratic) o Civil law cases: Idiosyncratic party bears burden: Lyons Milling Co. v. Cusimano Non-idiosyncratic party bears burden: Ouachita Air Conditioning, Inc. v. Pierce

What is an offer? ((ir)revocability)

COMMON LAW 24 of Restatements: 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. Every contract begins with an offer from the offeror to the offeree. The outcome of a case may depend on who was the offeror and who was the offeree; these roles are not as set in stone as one might like 36 of Restatements: An offerees power of acceptance may be terminated byrevocation by the offeror In common law, unilateral contracts [unilateral contract = promise made by one party that is contingent on the other partys action] are revocable up until the point of action (Petterson v. Pattberg, New York 1928) Note: a unilateral contract is different from a bilateral contract [bilateral contract = promise made in exchange for a promise] Determining the point of action is difficult Partial performance of a unilateral contract has become to be accepted as a point of action such that the offer is irrevocable (Marchiondo v. Schnek, New Mexico 1967), but that begs the question, when has enough performance occurred to become partial performance? If the advertisement is extremely specific, it can constitute an offer (Lefkowitz v. Great Minneapolis Surplus Store, Minnesota 1957) If the advertisement is not specific, it is not an offer, but a solicitation for the buyer to make the seller an offer (Mesaros v. U.S., Federal Circuit 1988) CIVIL LAW An offer is a unilateral declaration of will that a person (offeror) addresses to another (offeree) Offers must be precise and complete

What is an offer?

When is an offer revocable?

Art.1928: (Irrevocable offer) An offer that specifies a period of time for acceptance is irrevocable during that time. When the offeror manifests an intent to give the offeree a delay within which to accept, without specifying a time, the offer is irrevocable for a reasonable time. In civil law, an offer is not automatically revocable.

What are the problems with revocability?

Whos standard do you use as a reasonably amount of time that an offer must be open? The offeror or the offeree?

Is an advertisement an offer?

If the advertisement is from a merchant to a consumer, it is more likely to be considered as an offer (Johnson v. Capital City Ford Company, Inc., Louisiana 1955) If the advertisement is from a merchant to a merchant, it is less likely to be considered as an offer, but a solicitation for the buying merchant to make the selling merchant an offer (North Central Utilities, Inc. v. Walker Community Water System, Inc)

COMMON V. CIVIL

Unless otherwise stated, civil law requires offers to be irrevocable for a reasonable amount of time Common law allows offers to always be revocable, unless there has been partial performance Both systems strive to incentivize good behavior and decentivize bad behavior: In civil law (Louisiana) this means protecting consumers from merchants (note: Bowers does not think this goal is achieved through the Louisiana obligations law because it decreases the worth of consumers offers). In common law this means restricting bait and switch advertising.

Offer/Revocability Cases
ARGUMENT CASE B COMMON LAW: Offers are always Marchiondo v. Schnek (revocable revocable/offers are revocable until until performance) performance CIVIL LAW: Offers are irrevocable for reasonable amount of time (Art. 1928), unless otherwise stated Lefkowitz v. Great Minneapolis Mesaros v. U.S. Surplus Advertisements can/cannot be (not enforceable) enforceable [if enforceable ad is an (enforceable) offer; if not, ad is a solicitation for an Johnson v. Capital City Ford North Central Utilities v. Walker offer] (enforceable) Community Water System (not enforceable) CASE A Petterson v. Pattberg (always revocable)

Offer/Revocability Stories
Advantage of having offers be continually revocable: If offers are always revocable, then the offeror has the advantage of keeping up with the market and having the heads I win, tails you lose scenario Ex: Im offering to sell my colleague my hybrid now for $2,000, and hes mulling the idea over in his head for the night. In the middle of the night, every hybrid manufacturing plant in the U.S. explodes, so there is an instantaneous shortage in the supply of hybrids, thus the demand for my used hybrid has shot up over night. If I cannot take back my offer, then Im stuck taking a price for the car ($2,000) that is far below the market equilibrium price at the time of the actual sale. This means that the most efficient point in the market is not being achieved. From a societal perspective, we always want the equilibrium price to be reached because that is when the greatest gains are made to society overall; also, since we want people to enter into contracts, if we make offers irrevocable, then offerors are less likely to make advanced offers (ex: I offer to sell my car, but you have to say yea or nay on spot no chance to go home and consult your wife) because they do not want to get stuck with a bum deal. The fewer offers there are, the less advantageous it is for buyers, because there are fewer options, so all of the options become more expensive.

Advantage to having offers be continually irrevocable: If offers are always irrevocable, then the offeree has the advantage of keeping up with the market and having the heads I win, tails you lose scenario Ex: Same scenario with the hybrid plants exploding. My colleague would be nuts and behaving irrationally if he didnt buy my car the next day because the demand for hybrids is skyrocketing due to the decreased supply! And, if instead hybrids begin mass producing themselves like bunny rabbits, then my colleague can turn down my offer because the supply has increased, thus lowering the demand, and decreasing the equilibrium price. 7

From a societal perspective, then buyers are less likely to consider entering contracts out of fear the contract will be pulled away from them at the last minute. (Ex: Say my colleague needed a loan to buy my hybrid $2,000 is a lot for a 1L. Why would be go through the trouble of getting a loan from the credit union when I, the offeror, may take the offer away from him at the last minute?)

Balance: The best thing for society is to have a balance between offers being always revocable and always irrevocable that allows both offers and acceptances to keep up with the market, without giving either party the heads I win, tails you lose advantage Common law does this stating that contracts are revocable until partial performance (Marchiondo v. Schnek) o The question then becomes, what constitutes partial performance? The answer is determined by a judge Civil law does this by stating that all offers are irrevocable for a reasonable amount of time, unless otherwise stated in the contract (Art. 1928) The advantage for common law in this sense (theoretically) is that common law determines if the contract should/shouldnt be revocable ex post because it allows the judge to say there was or wasnt partial performance based on the facts of the case o Civil law attempts (theoretically) to make these decisions ex ante by having a blanket rule that offers are irrevocable, though history and case law has shown that reasonable amount of time in civil law is a very short amount of time, so in many ways the civilian outcome is no different than the common outcome

What is an acceptance?
When is an offer accepted? COMMON LAW Common law uses the mailbox rule for establishing acceptance for all contracts CIVIL LAW Irrevocable offers are accepted when the offeror receives the acceptance. (Art. 1934) (Ambrose v. M&M Dodge, Inc.) Revocable offers and option contracts are accepted via mailbox rule (Art. 1938) [option contracts = a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and the offeree may accept within that time (Art. 1933)] Offers, both irrevocable and revocable, must be accepted within a reasonable amount of time. (Art. 1931: A revocable offer expires if not accepted within a reasonable time.)

When must offer be accepted?

An offer must be accepted in a reasonable amount of time (Akers v. J.B. Sedberry, Inc., Tennessee 1955) For conversations, this means by the end of the conversation unless otherwise stated Offers must be unequivocally accepted (Ardente v. Horan, Rhode Island 1976)

How must an offer be accepted?

Acceptances, however, need not be verbal or written; acceptances can be shown in silence, too (Cole-McIntyre-Norfleet Company v. Holloway) Offers and acceptances can also be implied, such that they are never verbalized (Seaview Assn of Fire Island, N.Y., Inc. v. Williams) [implied-infact contract = contract to which the parties are presumed to have intended because of a tacit understanding (assumption) that the contract exists; i.e. a fake contract]

Art. 1927 Unless the law prescribes a certain formality for the intended contract, offer and acceptance may be made orally, in writing, or by action or inaction that under the circumstances is clearly indicative of consent. Unless otherwise specified in the offer, there need not be conformity between the manner in which the offer is made and the manner in which the acceptance is made. When action is not clear, there is no consent (Illinois Central Gulf Railroad Company), but acceptances can follow whatever means of acceptance is provided for in the contract (Ever-tite Roofing Corporation) Acceptances can be implied if implication is reasonable (Ryder v. Frost); acceptances can not be implied (Cardinal Wholesale Supply, Inc. v. Chaisson)

Acceptance = counteroffer?

If acceptances are not unequivocal, they can be viewed as counteroffers If the terms of the original contract are accepted by the offeree after the original offer has expired, this acceptance turns into a counteroffer(Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Company, Fifth Circuit 1981)

COMMON V. CIVIL

Civil law requires irrevocable offers to be accepted via the receipt rule and revocable offers to be accepted via the mailbox rule. Common law requires all offers to be accepted via the mailbox rule. In both systems, offers must be accepted in a reasonable amount of time. In both systems, offers can be accepted by silence, implication, or whatever means is provided for in the contract; frequently though, there are cases that fall on both sides of the issue This means that in both systems, the rules for acceptance are far from perfect and leave judges with a lot of leeway to determine when an offer was accepted. CASE A Akers v. J.B. Sedberry ARGUMENT Offers must be accepted in a reasonable amount of time (what is reasonable and to whom?) CASE B Art. 1931

Acceptance Cases

Seaview Assn of Fire Island (implied acceptance) Cole-McIntyre-Norfleet (acceptance in silence) Ryder v. Frost (implied acceptance)

Ardente v. Horan (no contract because acceptance was not unequivocally stated) Acceptance can be implied, and sometimes acceptance has to be unequivocally stated Cardinal Wholesale Supply v. Chaisson; (not implied acceptance and unreasonable amount of time) Illinois Central Gulf Railroad v. International Harvester (not implied by silence)

Acceptance Stories
Advantage of having acceptance via mailbox rule: If acceptances are made via mailbox rule, then when the buyer deposits his letter of intent in the mail, then the contract is made; this means the buyer cannot revoke the contract based on new information and have a heads I win, tails you lose advantage of the buyer Advantage of having acceptance via receipt rule: If acceptances are made via receipt rule, then the seller actually receives the letter of the buyers intent, the contract is made; this means the buyer does not get trapped into a contract too quickly Advantage of having acceptances be implied: No formalism requirements (see formalism) Advantage of having acceptances not be implied: Parties need not worry about getting stuck in a contract they did not intend to enter (see formalism)

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What makes a contract enforceable?

COMMON LAW
When is a contract enforceable? Consideration makes a contract enforceable. Consideration = exchange of something of value for something of value

CIVIL LAW
Art. 1966 (No obligation without cause) An obligation cannot exist without a lawful cause. Art. 1967 (Cause defined; detrimental reliance) Cause is the reason why a party obligates himself. Cause = reason (Litvinoff = purpose, motive, or end); (Bowers = sense)

What implications do the cause/consideration doctrines have?

The consideration doctrine originally led courts to hold that only bargained-for contracts could be enforceable. However, fake bargained for contracts (when the consideration was only nominal), were not enforced because there was not true consideration (Schnell v. Nell, Indiana 1861) On the flip side, the inadequacy of consideration is not enough to negate a contract because the court does not want to judge why one party values something at a certain level (Batsakis v. Demotsis) When a bargained-for contract is based on something worthless there is no contract (Newman & Snells State Bank v. Hunter) Peppercorn Doctrine 90 of Restatements: 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 enforcement of the promise. The remedy granted for breach may be limited as justice requires. 90 allows makes a promise enforceable when the promisee has relied on it, provided it was reasonably expected that the promisee would rely on it (Feinberg v. Pfeffier Co) 90 is subjective because its based on ...as justice requires. This means the court can hold the exact opposite in a similar case (Hayes v. Plantation Steel Co) Detrimental reliance includes: Not engaging in legal behavior (Hamer v. Sidway) Forbearance to litigate (Dyer v. National ByProducts, Inc.)

The cause doctrine is much broader than the consideration doctrine Bargained-for contracts are easily enforceable, as are other contracts, such as donations. This is an advantage of the civil law society

Art. 1967: A party may be obligated by a promise when he knew or should have known that the promise would induce the other party to rely on it to his detriment and the other party was reasonable in so relying.Reliance on a gratuitous promise made without required formalities is not reasonable. Louisiana, theoretically, does not need Art. 1967 because legal detriment would be cause, provided it is legal There must be a promise, a reasonable reliance, and the reliance must be detrimental

Legal Detriment

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Common law does not enforce contracts in which an illegality was the consideration

Legality

Art. 1966 cause must be lawful Art. 1968: The cause of an obligation is unlawful when the enforcement of the obligation would produce a result Also has a public policy unenforceability section ( 178- prohibited by law or against public policy. 179 of Restatements) If a cause is repugnant to public policy (ex: marriage), it is not enforced (McMahon v. Hardin) who decides public policyjudge or legislature? Cause must be lawful, so gambling between the parties cannot be the cause in Louisiana (Lamy v. Will), but if you give someone money to gamble, that may be lawful cause (Lauer v. Catalanotto) Louisiana theoretically does not need natural obligations articles because they should be covered under cause (Bowers argument) However, in Louisiana, a moral duty can give rise to a natural obligation. Natural obligations cannot be enforced (Art. 1761), but if a natural obligation was made, the exchange cannot be transcended. A moral duty gives rise to a natural obligation if:
Moral duty must be felt towards a particular person, not persons in general Person making the moral duty must feel strong about it such that he feels he owes a debt Duty can be fulfilled by payment The offeror must recognize the obligation by either performance or promised performance Fulfillment must not impair the public order

Traditionally, a moral obligation is not alone consideration (Mills v. Wyman) This goes against what the consideration doctrine was designed to do enforce promises that were actually made; is it likely contracts based on moral obligations were actually made? Yes. Moral duty This evolved to say that a moral obligation that creates a great material benefit can be enough consideration (Webb v. McGowin) Doctrine of Moral Consideration

Donations

Promise to make a donation is unenforceable (Congregation Kadimah Torahs-Moshe v. DeLeo) Once a donation has been made, it cannot be undone SEE DONATIONS SECTION Pre-existing duty rule established that if the duty is going to change, there must be new consideration (ex: I am going to remit your debt; when I do, we must have new consideration you should give me a hawk and a robe (Foakes v. Beere) Restatement 73) This was taken to a formalistic extreme

A promise to perform a natural obligation moves the natural obligation to a civil obligation, and is therefore, enforceable. (Thomas v. Bryant) Promise to make a donation is enforceable (Baptist Hospital v. Cappel and Louisiana College v. Keller) Once a donation has been made, it can be undone if not done properly (Spanier v. DeVoe) SEE DONATIONS SECTION Promise to remit a debt is lawful cause (Hicks v. Hicks); promise to remit a debt is not cause because it is only a moral obligation that has not risen to the level of a natural obligation, so it is not enforceable (Service Finance Co. of Baton Rouge v. Daigle)

Remitting debt

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Common law vitiates contracts based on mistake (Chapter 6 of Restatements) Restatements 151: A mistake is a belief that is not in accord with the facts. Error

Art. 1948: Consent may be vitiated by error, fraud, or duress. Art. 1949: Error vitiates consent only when it concerns a cause without which the obligation would not have been incurred and that cause was known or should have been known to the other party. Civil law vitiates some obligations based on error (Calhoun v. Teal and Saunder v. NOPS), but the error must be of the principal cause (Oil City Realty v. Bordelon) Question: error seems to be a separate doctrine from cause, but why need error at all

COMMON V. CIVIL

Goal of doctrines: make sure that only promises that were truly made are enforced Problem of doctrines: they both allow promises that should have been enforceable to fall through the cracks

Multiple causes: If there are multiple causes, the Civil Code does not tell us how to determine which cause should be used o Ex: The purpose behind me selling you my car is to make $2,000 so I can pay my fee bill for second semester. But I won the lottery last night and am now a millionaire, so I dont need the $2,000 for law school...since my cause is not present anymore, can I call off the deal? Say I had two causes: (1) to get the money for my fee bill and (2) to get rid of my car so I force myself to bike to school everyday to get in shape; I win the lottery so my first cause may not be present anymore, but I still need to get in shape, so the second cause is aroundwhich story should the judge listen to? Say my cause was to get the money and my colleagues cause was to be able to get to school because his car recently broke down and hes otherwise stranded in Riverbend every morning; if I win the lottery, my cause may be gone, but his cause is still presentwhos cause should a judge listen to? o This is the downside of the cause doctrine we get fascinated with words and forget to get at the heart of the issue: was there a deal? If so, we should enforce it Example of a bad cause case: Carpenter v. Williams (cause = moving for work, so the purchase of the house not enforceable) Problem with consideration: Consideration is lawyers taking formalism of words and running wild o Foakes v. Beere gave us the hawk or a robe line, but that did not mean every promise needed a hawk or a robe o Lawyers have spent 600+ years taking those words and applying the utmost formalism to them, to the point of absurdity The real solution is to ask: was there a promise? If so, what was it? That is what should be enforced

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What is a donation?
COMMON LAW CIVIL LAW Civil law establishes a spectrum between gifts and contracts. GIFT (Art. 1523) Gratuitous donation donation made for nothing (ex: I will give you X regardless of what you do or did) Onerous donation donation on which charge is on the donee (ex: you have to do X in order to get Y) Remunerative donation donation made to recompense the donee for services provided (ex: you did X so I will give you Y) Contract obligation between parties (ex: I give you X in exchange for Y) CONTRACT (Art. 1906) Gratuitous donation of an immoveable or incorporeal moveable requires an authentic act (Art. 1536) Gratuitous donation of a corporeal moveable requires the rules of obligations (i.e. offer and acceptance) Onerous donation and remunerative donation requires the rules of obligations (i.e. offer and acceptance) Note: offer and acceptance in these cases is usually easy to find, especially as acceptance can be implied

What is a donation? What are the requirements for enforcing an actual donation (i.e. one that has taken place)? Common law requires all actual donations to be made via donative intent and delivery The advantage of only requiring donative intent and delivery is that once a donation is made, it cannot be rescinded

What are the (dis) advantages of each system?

The disadvantage of requiring an authentic act to make some donations is that it allows some donations to be rescinded because of mindless formalism (2 witnesses and 1 notary) (Spanier v. DeVoe, Louisiana 1900) The advantage of the civil law system is that it recognizes that there is a spectrum between gifts and contracts, so some gifts can be reclassified as forms of contracts and still enforces (Succession of Lawrence, Louisiana 1995)

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What are the requirements for enforcing a promised donation?

Technically in common law you cannot enforce promised donations. Enforcement requires consideration (consideration = exchange of something of value for something of value), so if a donation is exchanged for something of value, then it isnt really a donation, but a contract Common law does have the principle of promissory estoppel in which an otherwise unenforceable gratuitous promise enforceable when the promisee has relied upon the promise and thereby incurred injury You cannot enforce promised donations under a common law system (Congregation Kadimah Torahs-Moshe v. DeLeo, Massachusetts 1989)

In civil law, the same rules apply to donations that are actually made and donations that are merely promised to be made.

What are the (dis) advantages of each system?

You can enforce promised donations under a civil law system (Baptist Hospital v. Cappel, Louisiana 1930)

COMMON V. CIVIL

In civil law, promised donations can be enforced. In common law, promised donations cannot be enforced. In civil law, actual donations can be rescinded. In common law, actual donations cannot be rescinded.

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Overview of the Uniform Commercial Code (UCC)

2-204 of the UCC says a contract can be found in any matter that there is an agreement o Therefore, the manner in which the deal was negotiated is irrelevant (Empire Machinery Co. v. Litton Business Telephone Systems) o This is good because it takes away any rules of formalism and allows people to make unformalistic contracts when they sell goods; there are too many types of contracts out there to impose formalistic one-size-fits-all rules Ex: I want to be able to sell my car in the libraryI shouldnt need a roomful of lawyers to do it o Note: this seems mighty similar to Lucy v. Zehmer o The downside to no formalism is people get trapped in contracts unknowingly and before they intended to 2-209(1) establishes that an agreement modifying the sale of goods needs no consideration to be binding o The preexisting duty rule does not prevent parties from modifying contracts when unexpected or unanticipated difficulties arise during the course of the performance of a contract, as long as the parties agree voluntarily (Angel v. Murray and Gross Valentino Printing v. Clarke) Incorporation Doctrine look at the manner of past dealings between the parties and how the industry works Shrink wrap contracts are okay by the UCC (ProCD, Inc. v. Zeidenberg) o The majority of contracts are for goods, and the majority of goods are mass produced Mass production means mass contracts If contract law should incentivize good behavior, how can that be done when in todays world everything is on a supersize scale how are incentives given and taken? The free market is the great incentivizer Therefore, it is irrelevant if an individual buyer does not negotiate for an individual contract for every good purchased o The idea of mass goods being directed by the market allows for mass contracts directed by the market o Buyers are still bound by the contracts of sellers, regardless of a lack of negotiation o The benefits of allowing shrink wrap contracts is it lowers the cost of contracting Ex: if I have to haggle with Bill Gates every time I want to upgrade my Microsoft, it will be outrageous for me to buy anything o The downside (according to consumer advocates) is that it hurts the buyer because the buyers power to negotiate is taken away This is really a bunch of bull the free market is the buyers protection 16

Ex: say Microsoft starts putting in their shrink wrap contracts a clause that says, everyone who purchases Windows has to send their first born son to the Microsoft campus to do one year of cleaning, and if you do not send your firstborn son, then we will charge you $500,000news of this will travel across country as quickly as jokes pass through law firms, and no one will buy Microsoft products

Battle of the Forms first form out the door winsto a point (Ionics, Inc. v. Elmwood Sensors, Inc.) o Mass contracts do have a negative effect they create mass pre-created contracts I send you my form which has a pre-printed contract on it (i.e. fine print), and you respond with your form which has your pre-printed contract on it o When parties conduct themselves as if there is a binding contract, then terms adopted after the original expression of assent to the contract are nullified if the contradict and the default rules of contract law (as established by the UCC) take affect The good thing about having pre-made contracts is you dont have to haggle over the process of contracting Ex: Im selling my hybrid I dont want to haggle over how we are going to transfer the title, I just want to do it This also means that the cost of all idiosyncrasies are born by the idiosyncratic party

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Random Bower-isms
Risk Both parties want the lowest cost risk possible, and the party that can bear the risk the cheapest should bear it (Losecco v. Gregory, Louisiana 1901)

Contractors and Subcontractors Contractors make their bids by calling subcontractors for the lowest number up until the last second (traditional imagery: men in business suits running down Florida Boulevard from their pay phones to drop off the bid first; men in business suits standing at the courthouse door on their cell phones, waiting to shoot their bid in the basket) o If a contractor has relied on a subcontractors bid, the subcontractor cannot later increase his bid (Drennan v. Star Paving Company); he may, however, bid chop o A contractor may bid shop after he wins a contract (Southern California Acoustics, Inc. v. C. V. Holder, Inc.) General problem with trying to pre-write law You cannot plan for pink elephants falling from the sky, just like you cannot plan what shirt you will wear in 2 months o This is the downside to civil laws ex ante decision making strategy you cannot pre-plan the law! Similarities in doctrines outcomes Facts of social life drive results, not the doctrine Mindless formalism We dont have swamis Its absurd that a promise made in front of 40 bishops and a rabbi cannot be enforced, whereas a promise made in front of two witnesses and a notary is enforceable

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Case Briefs for Contracts/Obligations (Bowers)

This covers the majority of cases discussed in Contracts/Obligations, but it is inevitably lacking a few

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Akers v. J.B. Sedberry, Inc. (Tennessee, 1955) Facts o Akers and Whitsitt visit their boss, Sedberry, to tell her of the financial straights the company is in at the Tyler, Texas office o They offer their resignation at the beginning of the conversation as a good faith gesture o Sedberry pushes away their resignation, speaks to them, and sends them back to Texas o A few days later, Sedberry telegrams to accept their offers of resignation Procedural Background o Trial Court ruled in favor of Akers and Whitsitt Legal Issue o How long can an offer be accepted? Offers can be terminated by: The offeree rejecting the offer The offeree not accepting the offer within the allotted time The offeree not accepting the offer within a reasonable amount of time What is a reasonable amount of time? If the offer and acceptance is verbal through the course of conversation, the offer expires at the end of the conversation Holding o BLACK LETTER LAW: An offer made during the course of a faceto-face conversation expires either by its terms or at the end of the conversation if no express expiration is provided o Affirmed trial courts decision

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Ambrose v. M&M Dodge, Inc (Louisiana 1987) Facts o buys a lemon from , so and work out a deal for how the will pay the for the defects of the car The deal does not include (at least in writing) any mention of what to do about the s loan s attorney inquires about the loan aspect after the two parties have verbally agreed to a deal (contract) and the papers plus the check are sitting on the s desk, signed, but unsent to the says no deal because loan isnt in the contract Procedural Background o Trial court denied s claim of res judicata Legal Issue o Was the contract agreed to? No because the never received the contract Art. 1938 Reception of revocation, rejection, or acceptance: A written revocation, rejection, or acceptance is received when it comes into the possession of the addressee or of a person authorized by him to receive it, or when it is deposited in a place the addressee has indicated as the place for this or similar communications to be deposited for him. o Was there a true meeting of the minds? It is debatable that the answer is no, because the signed thinking there would be a loan repayment, while the thought no, there would not be a loan repayment If you require the minds to meet, then there is always the possibility of people coming back and saying they didnt agree we dont have swamis Subsidiary rules try to tell us that people agree (signing, sendingetc.) Does the mailing actually give us any extra information about whether or not the minds meet? If dispatch is required, then you have to do the dance and do all the formalities o This is leading us to the idea that the idea of minds meeting probably isnt a viable theory, but Holding o Affirms trial court decision (no contract)

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Angel v. Murray (Rhode Island, 1974) Facts o Maher ( ) is the city garbage man; he has a 5 year contract (which hes had for 20 years) that says the city will pay him X amount for collecting and removing all combustible and noncombustible waste products from the city o 3 years into his 5 year contract, the number of units in the city grows by 400 o Maher goes to the city council and asks for an additional $10,000 to do the job hes already been hired to do because of this increase in units City council questions him about it in a public meeting, and then agrees to give him the extra money o Same scenario next year o Civil action law suit brought against city, city CFO (Murray), and Maher Procedural Background o Trial court ruled in favor of Legal Issue o Does a modification to a pre-existing contract have to go through consideration if it needs to be modified because of unexpected circumstances? No: UCC 2-209(1): An agreement modifying a contract within this Article needs no consideration to be binding This establishes that an agreement modifying the sale of goods needs to consideration the sale of services was a sale of goods, so a modification in the agreement needed no consideration Holding o Reverse and remand o Black letter law: The preexisting duty rule does not prevent parties from modifying contracts when unexpected or unanticipated difficulties arise during the course of the performance of a contract, as long as the parties agree voluntarily.

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Ardente v. Horan (Rhode Island, 1976) Facts o Ardente made an offer to purchase Horans house; Horan agreed and had paper work drawn up o Ardente sent the paper work back, signed, and included a note asking if other items were also included (i.e. furniture) o Horan did not sign the papers and pulled out of the deal Procedural Background o Trial court dismissed the case Legal Issue o Was Ardentes letter and acceptance with independent conditions/limitations, or was it a counteroffer? Acceptances must be unequivocal and clear that whether or not the other conditions are accepted by the offeror, the offeree is accepting the original offer The letter form Ardente implied the offer was contingent on the sell of the additional items Holding o When acceptance is accompanied by further demands, the offeree makes a counter-offer, terminating his power of accepting o Acceptances must be unequivocal in order to be acceptances and not counter offers o Trial court affirmed

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Baptist Hospital v. Cappel (Louisiana, 1930) Facts o LA Nursing Board threatened to pull s nursing standing (like accreditation) if the did not build a new nursing facility needed to raise $100,000 o signed a $500 pledge card, to be paid in 4 installments pays first installment and then does not pay the last 3 Procedural Background o Trial court found for Legal Issue says he never would have signed pledge card if he had known where the o hospital was going to be built This is ridiculous because clearly you have to build the building somewhere other than where the building is currently located The reason he gave money (he claims) was to keep nursing school standing, but that has already been accomplished, so who cares if he pays the rest? This desire has not been lessened, so what he was suppose to get out of promise has been achieved he must pay up his end Holding o Affirmed ( is bound by his pledge)

Note: this shows how the cause doctrine is all about who has a better story of their reason for making a promise had the said the reason he wanted the nursing school to remain in its location was because he owned the hamburger stand across the street, that may have been justifiable cause to rescind his donation

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Batsakis v. Demotsis (Texas, 1949) Facts o

was stuck in Greece during WWII and borrowed money from acknowledged she got the money from in a letter that said she would repay the $2000 with 8% interest o actually only loaned $25 says forced her to sign the contract in order to get the $25 Procedural Background o Trial court found there was inadequate consideration to enforce the contract, but rules in favor of in the amount of $1,163.83 This figure is $750 plus interest (court saying the drachmas were worth $750) o appealing saying he wants the entire $2000 plus interest Legal Issue o Was there sufficient consideration for the contract to exist? Yes the transaction was essentially a sale of 500,000 drachmas for $2000 This basically says that a court will not interfere in what parties deem as valuable If thought 500,000 drachmas were worth $2000, so be it o The promisor has to take into account the likelihood of ever getting this money paid back Holding o Reversed and remanded o Black Letter Law: Mere inadequacy of consideration will not void a contract.

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Belgarde Construction Company v. Collins (Louisiana, 1993) Facts o Collins store is destroyed; Belgarde comes in offering his consulting services to help her Consulting services include figuring out how much insurance should give her (so insurance company doesnt screw her), helping bidding for a contractor, etc. Fee for consulting is 25% of additional money Collins gets from insurance company o Collins thinks Belgarde is a contractor; thinks she may really be contracting with the engineer Belgarde hired to do an inspection Collins tries to pay engineer and he says hes already been paid (by Belgarde) o Belgarde says they had a contract that she accepted the terms of when she asked Belgarde to drop off some plans in Alexandria She says she did not know he was a consultant and never made a contract with him Procedural Background o Trial court found they did not have a contract Legal Issue o Was there a meeting of the minds? Court says no (Bowers thinks this is fishy) If no meeting of the minds, there is no contract Holding o Affirms trial court holding, but says Collins must pay the engineers fee

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Calhoun v. Teal (Louisiana, 1901) Facts o sold to what he promised would be 250 acres of land for a set price of $7/acre (total = $1,750) actually only sold 198.65 acres demanded his money back for the missing 51+ acres and reach a compromise that will give 50 acres and not have to pay back the money then sells the land to a third party (Swafford) o Ten years go by. learns that she actually did sell 250 acres like she originally promised; the surveyor screwed up Now wants back the 50 acres that the said she screwed up for which she paid him 50 acres Procedural Background Legal Issue o There was a mutual mistake contract annulled Holding o For - has to give the extra 50 acres back

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Cardinal Wholesale Supply, Inc. v. Chaisson (Louisiana, 1987) Facts o

has company CMD that at one time had co-owners Kreig and Delahoussaye Co-owners K and D signed a personal guarantee in order to get credit from Cardinal for purchases for CMD Guarantee had a waiver of written acceptance o Credit application was denied, but Cardinal put guarantees in a safety deposit box without signing them o K and D sell their part of the CMD o Chaisson obtains credit from Cardinal o 8 years later, CMD becomes insolvent o Cardinal signs the guarantees and seek sot enforce the guarantees Procedural Background o Trial court found for Chaisson Legal Issue o Notice of acceptance was waived, but that doesnt mean there isnt the necessity for an acceptance a contract must contain an offer and acceptance Cardinal never accepted original guarantees (they never gave CMD credit) Holding o Affirm trial court no contract

Note: It is hard to reconcile Ryder and Chaisson because in one the Court does not force there to be an acceptance and in one the Court does force there to be an acceptance

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Carpenter v. Williams (Louisiana, 1983) Facts o lives in Lafayette; works in Cameron o Employer orders to move closer to work o contracts to buy s house to comply with employers orders o Employer rescinded its orders; now refuses to buy the house Procedural Background Legal Issue says the only reason he was going to buy the house was to comply with o the employers orders and was aware that was the reasoning behind the purchase o Since was aware of this, when the reason for the purchase ended, then the cause for the purchase ceased, so the contract became unenforceable Holding o Hold for

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Cole-McIntyre-Norfleet Co. v. Holloway (Tennessee, 1919) Facts o Holloway placed an order for 50 barrels of meal from Cole, but the order (aka offer) was never accepted or rejected o When the barrels of meal were due for delivery, Holloway asks for order, but Cole says they dont have a contract Procedural Background o At Tennessee Supreme Court on appeal after Circuit Court inferred the existence of a contract due to the unreasonable delay in notifying Legal Issue o Can acceptance be inferred from an unreasonable delay? Yes, especially in a task like selling goods where there is a time limit to how long you can wait Contracts must be accepted/rejected in a reasonable amount of time, or they will presume to be accepted Holding o Black Letter Law: When the subject of a contract, either in its nature or by virtue of the conditions of the market, will become unmarketable by delay, the offerees delay in notifying the offeror of rejection or acceptance will amount to acceptance by the offeree o Acceptance may be inferred from silence where the circumstances afford a basis for such an inference o Affirmed Circuit Courts holding

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Congregation Kadimah Toras-Moshe v. DeLeo (Massachusetts, 1989) Facts o A dying man orally promised (multiple times) the Rabbi of to give the $25,000 o Man dies with no will; no money given to , so sues Estate Administrator for money Procedural Background o Trial court and Appellate court find summary judgment for Legal Issue o Is an oral contract without consideration or reliance enforceable? Consideration something of value exchanged between parties in a contract (what did the dying man get in return? Nothing, i.e. no consideration) Reliance dependence or trust on the words or actions of another o Donative promises are rarely enforced Donative promises are often difficult to prove rarely in writing Usually they are made with little thought Would create too much work for courts and infringe upon rights of family, friends, etc. o The consideration doctrine seems absurd in this case because there is really no doubt that the dying man wanted his money to go to the so why not enforce his wishes? The consideration doctrine was (poorly) designed to make sure we have a lot of confidence that the promise was actually made by the people claiming they were promised money. The consideration rule says the promises that were probably actually made were only those that were bargained for this rule, however, means that gift/donative promises sometimes fall through the cracks Holding o Affirm no contract o Black letter law: It is against public policy to enforce an oral promise of a charitable donation if made without consideration or reliance

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Davis v. Jacoby (California, 1934) Facts o Mrs. Davis is Whiteheads niece and the two families are very close (closer than any other relative) o Both Whiteheads fall ill and via letter, ask Mr. and Mrs. Davis to come help take care of them and their finances Mr. Whitehead promises to leave them their assets when they die o Mr. Davis sends a letter back to Mr. Whitehead promising to come and help o Before Mr. and Mrs. Davis reach California, Mr. Whitehead dies and he does not change his will o The Davises take care of Mrs. Whitehead (unknowledgeable about the unchanged will) o When Mrs. Whitehead dies, their assets are given to a different nephew Procedural Background o Supreme Court of California is taking an appeal for a lower courts refusal to grant specific performance Specific performance court forcing a party to keep a promise Legal Issue o Was the letter a unilateral or bilateral contract? Bilateral contract contract in which there are mutual promises between two parties to the contract; each party being both a promisor and a promise If it was a bilateral contract, then Mr. Davis promise was all that was needed to enter the contract that promise was given through the letter If it was a unilateral contract, the Davises had to get to California to act before the contract became valid Holding o Reversed o Black Letter Law: When the intent and circumstances surrounding an offer to contract are ambiguous with respect to whether the offer is for a bilateral or unilateral contract, there is a presumption that the offer was for a bilateral contract o An offer to contract is presumed to be bilateral rather than unilateral when the offer is ambiguous

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Deutschmann v. Standard Fur Company, Inc. (Louisiana, 1976) Facts o ordered a fur coat with special features from paid $400 as a deposit on the coat used verbage that has special meaning in fur industry, but could mean something else in lay terminology Coat did not meet s standard so she returned; suing for her deposit Procedural Background o Trial court dismissed Legal Issue o Consent vitiated by error was in the better position to correct the mistake because he knew the o industry terminology; he bears responsibility Holding o Reverse

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Drennan v. Star Paving Company (California, 1958) Facts o Drennan is a general contractor bidding for a construction job Gets bids from subcontractors, including , so he can make his overall bid o gives the subcontracting bid of $7,131.60 o wins the overall bid, but when he goes to s office to say the bid was accepted, says the bid was wrong and was actually $15,000 o has to find a new company to do that paving, and that costs him $3,817 more than originally was going to cost him Procedural Background o Trial court found for Legal Issue o Is an offer revocable once the has relied upon the offer? No. 90 fits this case like a glove 90 of Restatements: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third party and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. s offer was reasonably expected to induce action (reliance) on the part of the o s reliance on the offer = consideration Holding o Affirmed Black letter law: an offer is not freely revocable if the offeree has substantially relied on the offer

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Dyer v. National By-Products, Inc. (Iowa, 1986) Facts o loses his foot on the job; promises lifetime employment in exchange for not suing o Thereafter, is fired by Procedural Background o Trial court dismissed on summary judgment because there was no evidence of a reciprocal promise to work for the employer for life and the only claim against the should have been workers comp Legal Issue o Can forbearance to litigate a claim, even though unfounded and invalid, provide sufficient consideration to enforce a contract? Yes courts prefer people to settle outside of court Forbearance can provide sufficient consideration if the claim is made in good faith This favors compromise and disfavors parties that try to test the compromise There are material facts still in question, so summary judgment is inappropriate o The court is not automatically throwing out the case because the s claim is based on a worthless claim (no legal basis should have gone through workers comp); instead it is asking the trial court to investigate the issue of what subjectively knew about the validity of the claim This means that at the next trial, the needs to say, I really thought I had a good case in court. Holding o Reversed and remanded o Black letter law: Forbearance to litigate a claim, even though invalid, may provide sufficient consideration to enforce a contract as long as there was a good faith belief in the claim

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Edinburgh v. Edinburgh (Louisiana, 1988) Facts o Third partys house destroyed in Hurricane Betsy o Third party makes a deal with and : they fix the house and pay the mortgage (they were married at the time), and the third party will leave the house to them in her will o (husband) fixed the house and paid the mortgage o and divorce o Third party dies and leaves the house to the (wife) only sues to quiet the title; reconvenes to get his half Procedural Background o Trial court held for Legal Issue o relied on the promise to his legal detriment because: Representation was made by third party that she would give him the house He justifiably relied on that promise Holding o Reversed in part ( and each get half)

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Embry v. Hargadine, McKittrick Dry Goods (Missouri, 1907) Facts o Embry was an employee at McKittrick Dry Goods and he was a on a yearto-year contract o Upon this contract running out, he sought to extend his contract for the next year o After many attempts at speaking to McKittrick about the contract, he cornered McKittrick in his office one day and asked to discuss the terms of the contract, saying if they couldnt talk about it now, he would leave and look for another job o McKittrick said he didnt have time at the moment, but to go back to work o Embry interpreted this as a contract for the following year at the same terms he had the previous year o McKittrick fires Embry three months into the next year o Embry sues McKittrick for a breach of contract Procedural Background o Trial court rules in favor of McKittrick Legal Issue o Was a contract made? Under the same thinking of Lucy v. Zehmer, yes, a contract was made because a reasonable man could interpret the conversation between Embry and McKittrick as a contract of employment o If a contract was made, what terms were agreed to? Embry believes the contract agreed to had the same terms as his previous contract, however those terms are never specifically spelled out Court found that Embrys version of the conversation with McKittrick is correct, and thus a reasonable man could have interpreted the terms of the contract to be the same as they were previously o What does ruling mean for the long run employer/employee relationship? Potentially, employers may be less willing to enter into conversations with employees for fear of being bullied/tricked/obligated into a contract Employers will hire fewer employees if they believe it will be harder to exit a contract with them (France is a prime example of a legal system that has created practically lifetime employment, but the disadvantage is a high unemployment rate) o Could we institute more rules or formalities to prevent employers and employees from entering into contracts without knowing the terms? Yes, but the more formalities implemented, the higher the cost for entering into a contract The rule most regularly implemented is the one that says the contract will not change unless x, y, and z occur. Holding o BLACK LETTER LAW: Both parties need not subjectively intend to enter into a contract in order to find that a contract has been validly formed o Court reversed trial courts decision

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Empire Machinery Co. v. Litton Telephone Business Services (Arizona, 1977) Facts o Litton sells an undeveloped telephone system to Empire o Empire signs the paperwork for the system, which under the rules established by Litton, constitutes an offer to buy the system The offer must still be accepted by Litton o Litton can accept the offer by signing the contract at the headquarters, but they never do Litton does, however, send notice to Empires old telephone service provider that they are now the telephone service provider for Litton Procedural Background o Trial court found in favor of Litton, saying a binding contract was never consummated Legal Issue o Even though the ESA (Equipment Sales Agreement) was never signed, did they still have a contract? Yes because the conduct of Litton indicated acceptance, even though the manner laid out for accepting wasnt met The negotiation process is not the important part the question is a matter of fact: was there a deal HOLDING o Reverse and remand o Black Letter Law: Conduct by an offeree tending to indicate acceptance may create a binding contract notwithstanding the offerees failure to accept in the manner prescribed by the offeror

Note, this outcome is strikingly similar to the outcome in Lucy v. Zehmer. The concept behind the UCC is the same as the concept behind law in general: good behavior should be rewarded, bad behavior punished. What is good and bad is what society says is good and bad, and that can change from case to case. The UCC allows for more liberal interpretations so people do not feel caught by firm rules of offer and acceptance, though it is arguable people were never caught by the rules.

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Ever-tite Roofing Corporation v. Green (Louisiana, 1955) Facts o and wrote up a contract for to do reroofing work for o had not sent a written acceptance of the contract back to the , BUT, the contract said it could be accepted by sending in written acceptance OR upon commencing performance of the work. o When went to go commence the work, the had hired someone else to do the reroofing job o suing for damages (lost income) from job Procedural Background o Trial court says there was no contract and the owes nothing to the Legal Issue o Louisiana law forces contracts to be irrevocable for a reasonable amount of time, and can be accepted in writing or by whatever means is set forth in the contract If nothing is set forth in the contract, then the dispatch rule is automatically in effect; however an offeror can protect himself from the dispatch rule by having some other means of acceptance If an offeror has another means of acceptance, then the parties must (a) negotiate over that means of acceptance and (b) abide by it Background rules allow parties not to reinvent the rules every time they make a contract having the background dance steps be the steps that will trap the fewest people is good o 8 to 9 days is a reasonable amount of time, so the offer was irrevocable during that time period o And regardless, the contract could be accepted via commencing work Holding o Reverse trial court find for

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Feinberg v. Pfeffier Co. (Missouri, 1959) Facts o starts working for when shes 17 o At a board meeting one day, the board decides they are going to make a retirement package for whenever she retires at $200/month o Two years later, retires and pays out o s original CEO dies; his wife takes over She keeps paying until she gets ill and her son takes over and cuts her check to $100 o gets cancer and is unable to work Procedural Background o Trial court and appellate court find for Legal Issue o Past consideration is not sufficient to make a promise legally enforceable, but contends that she lost her opportunity for employment by retiring and based that decision on the $200/month check she had been promised She quit her job based on the promise by to her legal detriment o 90 of restatements: a promise which the promisor should reasonably expect to induce action or forbearanceon the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise Holding o Affirm

Note: reading this case with Hayes v. Plantation Steel Co. makes you question if there is anyway to really restate the law. Bowers says, no, you cannot really restate the law and what you should ask is, Was there a promise? If so, what was the promise, and then enforce that promise.

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Gross Valentino Printing Co. v. Clark (Illinois, 1983) Facts o Clarke ( ) is the publisher of Cinefantastique (a magazine) o agrees to have print the magazine for $6,695 says some changes need to be made to the layout, but it can be done in house free of charge; then says theyll have to send it out and up the price o gets a letter from saying the work will cost $9,300 o receives first 5,000 magazines o signs purchase order with higher price on it, but only pays $4,650 o receives other 15,000 magazines and tells he wont pay the higher price Claims lack of consideration and business compulsion and fraud Procedural Background o Trial court granted summary judgment for and awarded $5,116.20 Legal Issue o Does a modification of a contract for the sale of goods require consideration in order to be legally enforceable? No. UCC 2-109(1) says that the modification of a contract for the sale of goods does not require consideration UCC 2-107 says goods are all things, including specially manufactured goods that are movable at the time of identification to the contract for sale Florida case (Cardozo v. True) considers the UCC 2-107 broadly and includes books as goods, so magazines seen as goods Holding o Affirm trial court o Black letter law: The modification of a contract for the sale of goods does not require consideration to be enforceable

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Hamer v. Sidway (New York, 1891) Facts o Uncle promises to pay his nephew $5K if he doesnt smoke, drink, swear or gamble prior to age 21 (Bowers: wine, women, and song) Nephew is successful, but uncle holds on to the money and dies before paying him o goes to will executor to get money, but the executor will not pay him Procedural Background o Trial court ruled in favor of Legal Issue o Is giving up wine, women and song consideration? Yes, but it is waiving a legal right Legal detriment, or the forbearance of legal rights, is considered consideration Holding o Affirm o Black letter law: In general, a waiver of any legal right at the request of another party is a sufficient consideration for a promise.

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Hayes v. Plantation Steel Co., (Rhode Island, 1982) Fats o Hayes () works for for 25 years o s original owner says they will take care of upon his retirement; give him $5,000/yr, though this money is never agreed to by the board of directors o New boss takes over and cuts off the checks Procedural Background o Trial court said there was an implied-in-fact contract and that the theory of promissory estoppel applied; ruled in favor of Promissory estoppel in contracts, a doctrine that makes an otherwise unenforceable gratuitous promise enforceable when the promisee has relied upon the promise and thereby incurred injury Implied-in-fact contract where there is no express agreement between the parties, but the facts and circumstances between the parties makes it reasonable to infer the existence of a contract under law Legal Issue o The problem with this case is that had decided to retire prior to making any promises did not give consideration for the $5K o The difference between this and Feinberg is who relied on what In Feinberg, relied on the check and factored receipt of the check into the decision of whether or not she would retire In Hayes, did not factor the check into his decision about retirement and did not rely on the check o Note: the court is using the old consideration doctrine to say there was no promisethey can do this because of the subjectivity of 90 of the Restatementsbut it does beg the question, can you really restate the law? Holding o Reverse and remand o Black letter law: Promissory estoppel is inapplicable where the promises does not actually induce reliance

Note: how does this reconcile with Feinberg v. Pfeffier? It doesnt, really, because the holdings are exactly opposite. Bowers says this shows us that there is always a case and counter-case, so the law cannot really be restated. Instead we should ask was there a promise? If the answer is yes, then we should figure out what the promise was, and then enforce that promise.

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Hicks v. Hicks (Louisiana, 1919) Facts o Mother sells son ( ) a plantation worth $10,000 He agrees to pay $500 installments He pays the first one He send notes for the next five installments, but she cancels the notes (i.e. she remits the money) in front of a notary o Mother dies o Other coheir is suing to say the plantation should be equally divided and does not own more of the plantation Procedural Background o Trial court held for Legal Issue o Once the debt has been remitted, it is irrevocable Holding o Reverse hold for

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Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Company (Fifth Circuit, 1981) Facts o John Hancock approves Houston Dairy for a loan, but the terms of the loan must be accepted within a certain amount of time o Houston Dairy returns the proper paperwork and deposit to accept the loan, but after the deadline for the original offer o Thereafter, Houston Dairy wants to pull out of the agreement and get their deposit back; John Hancock claims there is a contract Procedural Background o Trial court said there was a contract, so the deposit was lost to Houston Dairy if they pull out Legal Issue o Was there actually a contract? Houston Dairy did not accept the offer by John Hancock within the time limit originally set, so the original offer technically expired The acceptance by Houston Dairy became a counteroffer, making John Hancokc the offeree The offeree has to accept the offer, which John Hancock did not verbally do o John Hancock says they accepted by depositing Houston Dairys cashier check, but Houston Dairy unaware the check was cashed Holding o Reversed o Black Letter Law: An acceptance of an offer that has expired by its own terms acts instead as a counter offer that must be accepted by the original offeror in order to form a binding contract o A purported acceptance of an offer after time has expired for doing so is instead a counter offer

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Illinois Central Gulf Railroad Company v. International Harvester, Louisiana 1979 Facts o leased land to for a specific purpose for a number of years o Value of the land increased (building of Superdome across the street) and wanted to change the purpose of the land said no, but eventually did it anyway o For 16 months did not object to change in the land (unclear if they actually knew the change occurred) o says they accepted the offer by the to change the land by their silence; says the broke the original contract and they never accepted new terms of the contract Procedural Background o Trial court held for the o Appellate court held for the Legal Issue o Was there a second offer by the , and if so, did the consent to it? It is clear there was an original offer and acceptance The original contract (offered by and accepted by ) said Why would a company care what the land could be used for one specific purpose purpose land was used for? If value of land increases, leasing The may have made an offer, but the never consented to it, so company wants to be able to rethere was no different contract from the original one. negotiate the contract and get a A delay by the in answering is just part of the problem of piece of the increased value. large corporations you cannot take their silence as an acceptance Holding o did not imply consent through their silence o Affirm trial courts decision

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Ionics, Inc. v. Elmwood Sensors, Inc. (1st Circuit, 1997) Facts o o o o

Ionics makes water dispensers; Elmwood makes thermostats Ionics bought thermostats from Elmwood to use in the water dispensers Water dispensers catch on fire due to defect in thermostat Forms each company sent to the other were in direct opposition: Ionics contract said the remedies would be cumulative, whereas the Elmwood contract said their liability would be at their discretion Legal Issue o Whos contract wins? The UCC, 2 (207) covers the battle of the forms by saying the first form out of the gate wins Former rule was the last form out of the gate wins Any terms that are in disagreement are nullified and the default terms expressed in the UCC are put into place Holding o Black Letter Law: What contracting parties express assent conditional on the other partys acceptance of new terms and subsequently conduct themselves in a manner that indicates the existence of a contract, UCC 207 operates to nullify the new terms to the extent they contradict any new terms added by the other party, or the terms of the original offer. o 207 find seller responsible

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Johnson v. Capital City Ford Company, Inc. (Louisiana 1st Circuit, 1955) Facts o

put out ad in Baton Rouge newspapers advertising that said if you buy a 54 Ford, then when the 55 Fords came out, you could trade up for free (sans sales tax) Note: this is a merchant making an offer to a consumer o purchases a cheap 54 and then wants to trade up for a 55 Procedural Background o District Court ruled the advertisement constituted an offer and the dealer was bound when the accepted Legal Issue o Was the advertisement an offer? The advertisement was not overly specific, but it was an offer nonetheless In Louisiana, this promotes the idea that offers merchants make to consumers are offers The effect of this is that merchants always begin with offers that are so bad, a consumer wont want the offer This also leads to consumers promises not being worth much (the signed a paper saying only the material on the paper was part of the contract advertisement wasnt on the paper) Had the pointed out to the clause that said the contract only included what was on the paper, the might have been able to win the case (note: this is an important distinction when you look at North Central Utilities) Holding o Affirm District Court

48

Kethley v. Draughon Business College, Inc. (Louisiana, 1989) Facts o teaches at s school o asks to teach an extra class; agrees o is not compensated for the extra class, though there was no agreement as to whether he would be or not Procedural Background o Trial court held the contract be rescinded, but .the can get relief Legal Issue o It was reasonable for the to think that if he taught 2 courses instead of 1, he would get paid more, therefore, he relied on the promise to his detriment o The promise here is implied Holding o should get damages

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Lefkowitz v. Great Minneapolis Surplus Store (Minnesota, 1957) Facts o Lefkowitz responds to an advertisement that says the first person on a particular day will receive a fur stole for $1 o First time Lefkowitz responds to the advertisement, the store owner tells him the store policy is to only sell to women o Lekfowitz responds to a second advertisement that more specifically states the first person to arrive will get the free stole Legal Issue o Is the advertisement an offer? In Mesaros v. U.S., advertisements were not offers, but in this case, the court says they are because of the overly specific Law is about behavior. language Law tries to incentivize good behavior and decintivize bad Does it matter that Lefkowitz knew the store policy to not sell to behavior. men? (court does not answer this question) Why does the court rule this way? To stop or cut down on bait and switch advertising Holding o BLACK LETTER LAW: When an advertisement is clear, definite, and explicit, and leaves nothing open for negotiation, it may be construed as an offer

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Lamy v. Will (Louisiana, 1962) Facts o and

were gambling at a bar; lost $150 Next day paid $15 in cash to and gave him a check for $135 to make up difference Check was not honored when tried to cash it (insufficient funds) Procedural Background o Trial court held for Legal Issue o Art. 2983 says you cant collect money won via gaming o Art. 1893 says obligations without cause or with unlawful cause have no effect o claims it isnt gambling money, but money he gave the as an advance Cites cases (Clemons and Brand) that say lending money to a gambler even if you know the money will be used for gambling should still be enforced to be repaid o The court would side with the (and they feel bad for the ) if the was not a participant in the gambling, i.e. if he was a third party Holding o Reverse hold for

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Lauer v. Catalanotto (Louisiana, 1988) Facts o gave $10K to gamble in Vegas and the two would share in the gains/losses o borrowed $1,300 to gamble himself Procedural Background o Trial court dismissed s claim and upheld s claim to reconvene for a loan of $1,300 given to Legal Issue o It is irrelevant that the gambling happened in Vegas where its legal its not legal here o As for the borrowing.it must be mutual illegal intent to gamble, and the intent must be communicated to the other party in this case that didnt happen Holding o Affirm trial court

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Levine v. Blumenthal (New Jersey, 1936) Facts o

rents retail space from for $175/month for the first year, and $200/month for the second year Great Depression hits and cant afford second years higher price o pays first year rent for second year and then leaves o sues for difference Procedural Background o Trial court demurred for Legal Issue o Parties are legally bound to do what they have promised to do (preexisting duty rule) and any modifications must be based on consideration Holding o Affirms trial court o Black letter law: An accord and satisfaction must be supported by separate consideration. Accord and satisfaction an agreement to use a substituted performance to satisfy a pre-existing debt and the receipt of that performance fully discharges the pre-existing debt

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Louisiana College v. Keller (Louisiana, 1836) Facts o Keller promises to give $500 for a subscription to the college o Keller doesnt pay Procedural Background Legal Issue says there in was insufficient legal consideration, so the promise should o be invalid was not getting anything in exchange for his donation o Contract says the parties will waive all informality in this obligation Cannot do that because formality is required for donations (to prevent false donations?) Holding o has to pay (we want to enforce charitable subscriptions)

State did their part; his consideration was the education of children This would not have been consideration under common law because the college didnt give up anything Cause (sense) is what rules in civil society

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Lyons Milling Co. v. Cusimano (Louisiana, 1926) Facts o

ordered flour from through brokers has two plants: one in Lyons and one in Hudson Hudson produces low gluten flour Lyons produces high gluten flour wanted high gluten flour; shipped low gluten flour refuses to pay for it because he needs the flour to make macaroni and that requires high gluten flour Procedural Background o Trial court ruled for o Appellate court ruled for Legal Issue o was operating in good faith when he rejected the flour Holding o Reverse appellate court; hold for

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Lucy v. Zehmer (Virginia, 1954) Facts o Lucy offered to buy a farm owned by Zehmer o The offer was made (and arguably agreed to) at a bar with a contract written and signed on the back of a bar tab o Zehmer claimed he never meant the contract to be serious, it was all done jokingly; Lucy wants Zehmer to be forced to sell him the farm Procedural Background o Trial court dismissed the case, saying Lucys specific performance court requirement complaint failed to establish his right to specific for a party to do what they promised to do performance o Lucy appealed the dismissal Legal Issue o Is a contract, or a promise, made, even when one party thinks the contract is a joke? If a reasonable man would believe that the mutual assent agreement by both parties parties outward actions were the formation of a contract of a contract, then the parties mutual assent is not a prerequisite; in other words, mutual assent is determined from the reasonable mans perspective The basic concept is the undisclosed intent of a person, or what he/she is thinking, cannot be known by the outsider; therefore, the actions of a person, and not their thoughts, dictate if a contract has been made o If actions are the determining factor, why do we not institute formal, unmistakable actions to show a contract being made? (Bowers idea of a grunt and slither test) This was the concept behind promises being under seal in the 16th and 17th centuries in England Unfortunately, in an effort to escape royalty, American colonials dropped the under seal theory o The problem with formalities is that if you impose too many, they impose a higher cost on the process of contracting, thus limiting the ability to contract to the elite Holding o BLACK LETTER LAW: When a partys actions and statement could reasonably be seen as manifesting an intent to enter into a contract, the party will be bound to the contract, even if the party had no subjective intent to enter into the agreement o Decision was reversed and remanded

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Marchiondo v. Schenk (New Mexico, 1967) Facts o Schenk offered Marchiondo the brokers fee for brokering a real estate deal for him; Marchiondo accepted the deal within the allotted time frame o Schenk revoked the offer Procedural Background o Dismissed on demurrer by trial court Legal Issue o Could Schenk revoke his offer? Technically, the contract was a unilateral contract because Marchiondo had to broker the deal to get paid, but was under no obligation to do so if he didnt want to Following the logic of Petterson v. Pattberg, one would presume Schenk could revoke the offer However, Marchiondo had already done some work on brokering the real estate deal before Schenk revoked This creates a situation of partial performance If theres partial performance, then no, Schenk cannot revoke Holding o Black Letter Law: partial performance of a unilateral contract creates a conditional contract that cannot be revoked by the offeror until (a) the allotted time of the offer is up or (b) a reasonable amount of time has gone by if the offer is silent on the exact amount of time

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Martin v Schluntz (Louisiana, 1991) Facts o has property in New Orleans; wants to rent it for $500 o says hell rent it for $450 Oral agreement of $450 sent in letter from to in April of 1987 Never signed an agreement because was in the middle of taking law school exams (ironic!) o then sends letter saying hes vacating in August of 1987 says vacating because they never signed a lease o checks out apartment after vacates and it is damaged to the point it cant be rented for 3 months Procedural Background o suing for damages and two months rent and rent differential; says there was never any agreement between the parties ( suing for $4,740; repairs = $235) o Trial court held for and awarded her $275 Legal Issue o Tenants story is he never made a promise o The parties entered a month-to-month contract because there was never any lease signing o As for rent, did detrimentally rely on the lower rent, so she is entitled to get the $150 back o She can also get back the damages Holding o Affirm trial court

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McMahon v. Hardin (Louisiana, 1929) Facts o (wife) hires to spy on (husband) o Eventually catches (husband) having an affair o (wife) and (husband) get divorced o never gets paid his $2,000 Procedural Background o sues both because: Wife promised to pay Husband was the head of the wifes asset at the time of the promise o Trial court held for Legal Issue o s compensation was contingent on (husband) having an affair and catching him o Is this contract enforceable, or is it repugnant to public policy? Public policy supports marriage, not dissolves it Holding o Affirm contract unenforceable

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Mesaros v. U.S. (Federal Circuit, 1988) Facts o U.S. Mint made a number of special coins for sell; special offer on coins sent out to regular coin buyers o Mesaros purchased a large quantity of coins via credit card o Agency used to process credit cards messed up the orders, and individuals ordering via credit card did not receive their order Procedural Background o Trial court ruled in favor of the U.S. Legal Issue o Was the advertisement an offer, or was it an invitation for the buyers to make an offer? If the advertisement was an offer, then (theoretically) the acceptance would be when the Mesaros sent in their credit card information, i.e. their response to the advertisement would be the acceptance However, if the advertisement is merely an invitation for the buyer to make an offer to the U.S., then the Mesaros would be making the offer and the U.S. would be accepting once the order was processed o Advertisements are (typically) not offers because it would be unreasonable; too many people may respond, not enough inventory, etc. Note: In common law systems, the The exact opposite rule results in the exact same advertisement is a solicitation for an offer, result. What does that mean for contract law? the payment is the offer, and the processing It means that contract law is not governed by rules, it of the payment is the acceptance; in civil is governed by society. law systems, the advertisement is the offer and the payment is the acceptance However, while completely different rules govern the same action, the result in a case like this would be the same In common law systems, the reasoning would be the same as the aforementioned reasoning; in civil law systems, sellers can use an affirmative defense to withdraw from contracts (ex: cost changed too much, demand exceeded supply, etc.) Holding o There was no contract between the Mesaros and the U.S., so the Mesaros are not entitled to the coins they ordered

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Mills v. Wyman (Massachusetts, 1825) Facts o Son of returns from a cruise very ill o takes him in and cares for him from February 5th to February 20th, when the son dies o On February 24th, the (father of the dead boy) writes a letter saying he will compensate for the expenses Procedural Background o Trial court ruled in favor of the Legal Issue o Is a moral obligation enough to justify enforcing a promise? No. This promise was unsupported by consideration. The father had no obligation to his son, since his son had reached manhood The court does not want to give contract law a sense of morality Holding o Affirm o Black letter law: A moral obligation is not always sufficient consideration to enforce a promise

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Myers v. Acme Homestead Association (Louisiana, 1931) Facts o o o o

were shareholders in a building and loan association applied to withdrawal from the association on October 22, 1929 Received check for withdrawal on December 2, 1930 They are suing for the dividends the association collected between the withdrawal date and the time they were paid Procedural Background o Held for Legal Issue says that since accepted the checks, they accepted not being paid the o dividends They wrote about all rights reserved o says the by-laws specifically state that they shouldnt get the money Holding o Affirmed

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Newman & Snells State Bank v. Hunter (Michigan, 1928) Facts o Lee Hunter took a loan of $3,700 from and used 50 shares of stock in his company as collateral o Hunter dies and his estate and company are insolvent o Hunters wife ( ) took up her husbands debt and interest with her own note tries to collect on s note and claims a lack of consideration Procedural Background o Trial court ruled in favor of the Legal Issue o Can you enforce a worthless consideration? The husbands note was worthless at the time of his death because the husbands estate was insolvent The collateral was worthless, too, because the company was insolvent Therefore, it is irrelevant if the widow took over the note Holding o Reversed o Black letter law: A transaction based on otherwise worthless consideration is not enforceable

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North Central Utilities, Inc. v. Walker Community Water Systems, Inc. (Louisiana 2nd Circuit, 1987) Facts o

advertised for bids for the construction of a water distribution system believed was a public entity, and thus had to operate under the public bidding rules o bid (and was a low bidder), but did not choose the o is suing for economic losses for not being chosen Procedural Background o Trial court dismissed case on summary judgment Legal Issue o Was the advertisement a true offer? Offers must firmly reflect the intent of the offeror to enter into a contract These words were not expressive enough of a true offer; they merely show an intent to sell, not a real offer o How does this hold with Johnson? This is a contract between two merchants/businesses businesses know you have to read the fine print Holding o Affirm trial court

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North Louisiana Milk Producers Association, Inc. v. The Southland Corporation (Louisiana 2nd Circuit, 1977) Facts o traditionally has sold milk to (and others) at a minimum price set by a regulatory committee, but in 1976 decided to sell milk at the price set by their board (note: board price is higher than regulatory committees minimum price; also, the is legally able to sell milk at the higher price) o sends customers (including ) a letter saying they will be changing the price every month sends a letter back, basically bitching about the price change o Eventually, orders milk from ; ships milk o pays old, lower price o sues for difference between lower price and the price they were charging Procedural Background o Trial court found there was a contract at the higher price Legal Issue o Did the accept the s higher price? Or did the accept the s offer to only pay a lower price? Court says that made the offer and accepted it Bowers says this is somewhat arbitrary could have picked either way, but Article 1927 requires that there be an offer and an acceptance Acceptance was shown by ordering the milk Holding o Affirm the trial court decision (contract at higher price)

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Oil City Realty v. Bordelon (Louisiana, 1988) Facts o Case 1: Kopiski signs purchase agreement for house with to buy s house; Kopiski does not perform purchase agreement; sue and win $18,816.30 o Case 2: who owns the deposit the Kopiskis made? (deposit = $1,000) Procedural Background o Trial court held owned the deposit Legal Issue o The reason the Kopiskis wanted the house was so they could convert it into a 4 bedroom house o They found out right before the sale that the lot was burdened by a rightof-way pavement, and they couldnt add on to the house o Can the contract be invalidated due to error? In order to invalidate a contract due to error, the error must relate to the principal cause for making the contract and the other party must either know or be presumed to know of this principal cause Holding o Affirm

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Oswald v. Allen (U.S. 2nd Circuit, 1969) Facts o Oswald, a Swiss Swiss coin collector, makes an agreement with Allen to buy her Swiss coins o It is ambiguous if Oswald wants to buy Allens Swiss coin collection of all of her Swiss coins Procedural Background o Trial court ruled in favor of Allen Legal Issue o Is there a contract between Allen and Oswald? No, because the terms were too ambiguous When a term or terms used to express an agreement is ambiguous and the parties understand it in different ways, a contract cannot exist unless one party is aware of the other partys understanding Holding o Affirms trial court o No contract exists between parties who each hold reasonable but erroneous understandings of the bargain
Does Oswald v. Allen jive with Embry v. McKittrick? No, not really. But this is a point of contract law to understand: for every point you want to make via case law, there is a case that says the exact opposite. Contract law is thinking about the long term policy ramifications of the outcome.

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Ouachita Air Conditioning, Inc. v. Pierce (Louisiana, 1972) Facts o gets an air compressor unit (York unit) and it doesnt work correctly o calls ; recommends getting a 4-ton condensing unit; agrees o installs and Amana unit o told he didnt want the Amana after it was installed (when he realized it was an Amana unit) buys a York unit and asks to come pick up the Amana; wont o wants the old York unit or $250 for the value of the used York unit Procedural Background o Trial court dismissed demands of both parties Legal Issue o This is a classic misunderstanding between the parties o Consent was lacking because of error of fact which constituted a principal cause for making the contract, even if didnt know it Holding o Affirm

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Perry, Jr. v. Perry, Sr. (Louisiana, 1987) Facts o o

(father) is co-owner of Ogden-Perry Theaters, Inc. gives (son) substantial stock in the corporation; then they agree that the corporation will buy back the stock in order to finance the sons law practice o Corporation ends up going bankrupt, and cant buy back the stock o sues father ( ) as guarantor of the contract, court rules for , sheriff seized assets because he cant pay son any other way During seizure, the mother of (wife of ) faints o files an injunction for the seizure, claiming revocation for ingratitude of the donee (the son) Procedural Background o Trial court found for , taking away the prior execution of judgment for the Legal Issue o Ingratitude of the donee is one reason to revoke cause o Revocation is based on two facts: Seizing the property by the son The objects to be seized were suspect of easy liquidation o Revocation can be done if the donee is guilty of cruel treatment, crimes or grevious injuries Son guilty of this Grevious injuries = injuries that naturally are offensive to the donor Taking stuff from your parents is naturally offensive Holding o Affirm

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Petterson v. Pattberg (New York, 1928) Facts o Petterson owed Pattberg money for his mortgage o Pattberg offered Petterson a deal: pay the mortgage completely off by a certain date, and I will remove $780 from the principle of your mortgage o Petterson takes Pattberg up on the offer, but when he goes to pay him the mortgage in its entirety (in time), Pattberg says he has sold the mortgage to someone else who will not offer Petterson the $780 off o Petterson sues Pattberg for the $780 he now owes Procedural Background o Trial court and appellate court refuse to dismiss the case and rule for Petterson Legal Issue o Can a unilateral contract be revoked up until the last second? Yes. The activation of the unilateral contract is dependent upon acceptance, and acceptance is only shown through action (in this case, the payment of the mortgage minus $780) Up until the point of action, regardless of how imminent that point may be, the contract can be revoked Holding o Reversed; case dismissed o BLACK LETTER LAW: An offer to enter a unilateral contract may be withdrawn right up to the very moment performance is begun

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ProCD Inc. v. Ziedenberg (7th Circuit, 1996) Facts o ProCD markets the price for their software (digital address book) differently for individuals and businesses o Zeidenberg buys ProCD software as an individual and uses it like a business by selling it via the internet o The shrink wrap license inside the software box and on the CDROM says the product can only be used for non-commercial purposes Procedural Background o Trial court and appellate court found for Zeidenberg, saying shrink wrap license was ineffectual because Zeidenberg could not accept the offer of the contract Legal Issue o Is the license in a software package a binding contract? Yes because the opening of the box is the acceptance to the terms of the contract It is impractical for the entire contract to be in plain sight on the box The buyer can return the software after opening if he wants to reject the terms of the contract Holding o Black Letter Law: A licensed enclosed in a package forms a binding contract if the package provides notice that the purchase is subject to the license and if the buyer can receive a refund if the buyer does not agree to the terms of the license o Reversed

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RTL Corporation v. Manufacturers Enterprises (Louisiana, 1983) Facts o

and have an oral agreement for 2 cranes, labor and other equipment (emergency situation) Hourly rate worked out, but some pricing not finalized o After work is done, sends an invoice for $143,016.93 pays $107,023.68, but calls and says it is only a partial payment then writes payment in full on the check stub o suing for rest of money Procedural Background o Trial court dismissed o Appellate court affirmed, stating that the lessors deposit of a check tendered in full payment by the lessee constituted an accord and satisfaction, thus extinguishing the lessees obligation Legal Issue o Trial court erred because they said full payment check constituted accord and satisfaction o If this is an altering of the original contract, then there must be mutual consent to alter the original contract Holding o Reverse

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Ryder v. Frost (Louisiana, 1848) Facts o Ryder and Frost are partners in Illinois their business fails o Ryder settles affairs, takes the assets and gives Frost a bond of indemnity There is a matter outstanding they had a debt to the Leavitts; previously claimed fraud, but they still owe the Leavitts $6,000 o Leavitts say they will instead take $2,000 in cash Ryder writes Frost and says can you foot $1,000 of the bill? Frost says no, but he will give Ryder $500 to help liquefy the demand (wants the debt cleared from the record) Frost does not say a time Ryder has to let him know that he will accept the $500 Procedural Background o Trial court found for Frost, saying Frost owed no money as there was no contract Legal Issue o Did Ryder accept Frosts proposal in a reasonable amount of time? Did Ryder imply acceptance? He may not have notified Frost, but he completed his end of the bargain, so the obligation on his end was complete Holding o Reversed found for Ryder; Frost stuck paying

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Saunder v. New Orleans Public Service (Louisiana, 1980) Facts o injured in a bus accident o (bus operator) gets doctor (quack!) to examine by just looking at the bruise, not touching it, not x-raying, nada o s doctor says will be fine in a week - believes doctor o offers $100 for her troubles; accepts o s pain continues; she goes to two more doctors and is diagnosed with something which she gets medication for and it goes away Procedural Background o Trial court held for and awarded her $2,900 Legal Issue o We want to encourage people to compromise (like the and did), but compromises are based on mutual consent This contract/compromise was based on error The error in this contract was that the proper medical test was performed both parties were relying on the s doctor being a reasonably capable doctor Holding o Affirm

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Schnell v. Nell (Indiana, 1861) Facts o Theresa Schnell promises three people (including ) that she will leave them $200 in her will o Theresa Schnell dies, but all of her property (as she has none) goes to her husband, and the $200 promise is void o (Theresas husband) then tells the 3 that he will pay them if they pay him 1 cent o The 3 (including ) sign contract to this affect, but never pays Procedural Background o Trial court found for Legal Issue o Is nominal consideration enough to validate a contract? Nominal consideration consideration in name only No, nominal consideration is not enough to validate a contract Point of bad lawyering: he could have been motivated by other factors the s lawyer did not show that there were other factors should have shown because then it wouldnt have been a nominal consideration because the would have gotten more out of the deal o This is doing the exact opposite of what the rule was originally made for Holding o Reverse o Black letter law: Nominal consideration in form rather than in substance and will not create a legally enforceable contract.

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Seaview Assn of Fire Island, N.Y., Inc. v Williams (New York, 1987) Facts o The Williams purchase a house at Fire Island, but refuse to pay the association dues that go along with living within the association (think condo dues) Procedural Background o Trial court and Appellate court ruled in favor of Seaview Assn Legal Issue o Was there ever a contract? The contract was implied, but never spelled out If you live in a condo, there is a tacit understanding that you are required to pay condo dues o There is the idea of a default clause that the court will accept when one party should have known they were signing up for something they did not technically sign up for (in this case, the dues) Default clauses are necessary because you cannot write clauses into contracts for every scenario Example: no contract has a clause for what would happen if a pink elephant destroyed property; should this happen, the judge answers the question, what would the contract have said if when it originated the parties knew they needed to write a pink elephant clause? In this case, had the parties been required to spell out the dues, the Williams would have had to sign saying they would pay the dues Holding o Affirm previous decisions o Black Letter Law: When a party purchases property with knowledge that the property is subject to certain conditions of ownership, the party manifests an acceptance of, and must conform with, said conditions of the implied-in-fact contract

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Service Finance Co. of Baton Rouge v. Daigle (Louisiana, 1977) Facts o alleges that put up a chattel mortgage to secure indebtedness (i.e. they are trying to get paid by the ) o claims bankruptcy (this means he wouldnt have to pay all of his creditors) o says after he declared bankruptcy, the reaffirmed indebtedness Question: does this reaffirmation constitute a new agreement to pay? Procedural Background o Trial court held for Legal Issue had conversations with and said he would continue to pay his debt to o them made 3 subsequent payments o The expression that he was going to keep paying is not enough to constitute a valid contract it is only recognition of a moral obligation, but that moral obligation has not risen to the level of a civil obligation Holding o Affirm trial court

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Southern California Acoustics Co., Inc. v. C.V. Holder, Inc. (California, 1969) Facts o is a subcontractor, and made a bid to general contractor, o made its bid to LA Unified School District ( 2) In s bid to s, s name was listed o gets the bid from 2, and the paper prints the bid winners, including the (as a part of s bid) never contacted to tell them yea or nay on the bid o asks 2 if they can substitute a new company in for ; 2 allows them o sues and 2 Procedural Background o Trial court ruled in favor of Legal Issue o Is the listing of a subcontractors bid in the contractors prime bid enough to count for implied acceptance? No. There was never any connection between the and the , so there was never any acceptance. Communication was only given to the third part, 2. There was no course of dealing between the and the , so silence on the part of the did not constitute acceptance The listing in the paper was a government required listing, but that cannot count as acceptance The reliance on the part of the to not take other projects because of what they read in the newspaper was unreasonable Holding o Affirm o Black letter law: The listing of a subcontractor in the contractors prime bid is not an implied acceptance of the subcontractors bid

Note: The problem with the 90 analysis is that it binds subcontractors, but does not bind general contractors. This may mean the subs are never going to give their true lowest number to the general contractor.

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Spanier v. De Voe (Louisiana, 1900) Facts o sold a plantation to for $5 Procedural Background o Trial court said the contract was null and void Legal Issue o Was there consideration? Article 1893 of Civil Code of 1805 (Necessity for cause): An obligation without a cause, or with a false or unlawful cause, can have no effect. Article 1896 of Civil Code of 1805 (Cause, definition): By the cause of the contract, in this section, is meant the consideration or motive for making it; and a contract is said to be without a cause, whenever the party was in error, supposing that which was his inducement for contracting to exist, when in fact it had never existed, or had ceased to exist before the contract was made. o No. The $5 was not intended as serious. What was probably driving the contract was the love and affection of the mother for the daughter. (Like a phony contract in Schnell v. Nell) o This wasnt a contract, it was a donation o In order for a donation to be valid, the form is of the essence This form wasnt signed by the right people Holding o Affirm trial court no contract; no donation; property goes back to the o Donations must be done via an authentic act (1 notary + 2 witnesses) o The donee didnt jump through the hoops

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Sparks v. Gustafson (Alaska, 1988) Facts o Sparks, Sr. purchased interest in a building o Gustafson managed the Sparks., Sr. building free of charge o Sparks, Sr. dies, but Gustafson continues to manage the building on behalf of Sparks, Sr. estate o Gustafson gets new tenants for Sparks, Sr. building and makes some out of pocket payments; does not document fully all of his expenses o Building loses money; Sparks, Sr. estate tries to sell building to Gustafson, but they dont reach a deal o Sparks, Sr. estate sells building to a third party Procedural Background o Gustafson originally sues saying he had an oral agreement with Sparks, Jr. to buy the building, and Sparks., Jr. breached that agreement by selling building to someone else, and to get back the personal money he put into the building o Sparks, Jr., files counter claim for an accounting of Gustafsons income and expenses o Trial court awarded Gustafson $67,706 for his services Legal Issue o Sparks was unjustly enriched by Gustafson because Gustafson gave Sparks a benefit for which Sparks did not compensate Gustafson o This may have been expected as an act of gratuity between friends, but Gustafson spent 5+ hours a day on the building too much work to be considered on gratuity between friends Holding o Trial court affirmed o Black letter law: A person is unjustly enriched when he or she receives a benefit from another for services or goods for which one would normally expect to be paid.

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Stoll v. Goodnight Corporation (Louisiana, 1985) Facts o worked for and received a bad check in the course of her employment o She was suppose to report any checks that she was doubtful of the legitimacy of, but she did not report this particular check o told she would be better off if she reimbursed the company the $778.75 for the bad check she did o Two weeks later she was fired o She is suing for the $778.75 Procedural Background o Trial court held for Legal Issue o s payment was a natural obligation o A natural obligation cannot be enforced by a court, but once it has been freely made, the debtor cannot reclaim what has been paid Was it actually voluntary? She was afraid she would lose her job Court ignores this saying her perceived fear was erroneous Holding o Affirmed

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Succession of Lawrence (Louisiana, 1995) Facts o Jones (aka Dee) was Lawrences nephew and, by all accounts, best friend o Lawrence wanted to leave Jones his money, but he clearly had no understanding of the legal requirements to do so Procedural Background o Trial court found Jones was entitled to the money because the services he rendered for Lawrence roughly equaled the amount of money he was being given by Lawrences estate Legal Issue o Onerous donation value of object must be (roughly) equal to the charges imposed on the donee Onerous contract one in which each party obtains an advantage in exchange for his obligation Gift was about equal to services o Remunerative donation value of service to be recompensed must be (roughly) equal to the gift o However.the rules to apply to this case are the ones for obligations o Court wants to enforce the clear will of the parties Holding o Jones is the owner of the money o THIS IS A REMUNERATIVE DONATION if he was paying him back for services; THIS IS AN ONEROUS DONATION if he was requiring his to do the services in order to get the succession court doesnt know which one it is, but that doesnt matter because for bother you dont need an authentic act

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Thielman v. Gahlman (Louisiana, 1907) Facts o claims she is an heir of Gahlman and is trying to recover 1/5 of his real estate o The real estate has been sold to the because Board and lodging provided Gahlman was worth $30/mo. (3 mos = $90) Real estate = $3,300 o is saying the dead guy gave him the property, so it should be taken out of the estate In a common law society the would have won because he gave consideration (he took care of his uncle) In a civil law society, this is looked at as an onerous donation Procedural Background o Trial court found as owner; dismissed claim of Legal Issue o Was the transfer to a donation? says no because there was no acceptance or delivery It was also not made under the proper conditions for a donation (private signature) Could be recognized as an onerous donation (advantage in exchange for a something; excessively burdensome?), but court recognizes as an innominate donation (having no specific classification because they are not strictly contractual) o Was the transfer to a valid sale? says no because of the uncertainty of the price Holding o Affirms

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Thomas v. Bryant (Louisiana, 1994) Facts o Bryant promises to pay for his wifes son (through a previous relationship) rehab o When the son (Thomas) came to collect, the was separated from the wife/mother o Bryant admits he signed the promissory note Procedural Background o Trial court held for Legal Issue o Is this moral duty a natural obligation that can serve as cause that would make the civil obligation enforceable? Rules for a moral duty rising to the level of a natural obligation: Moral duty must be felt towards a particular person, not persons in general Person making the moral duty must feel strong about it such that he feels he owes a debt Duty can be fulfilled by payment The offeror must recognize the obligation by either performance or promised performance Fulfillment must not impair the public order Holding o Affirmed

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U.S. Fidelity & Guaranty Co. v. Crais (Louisiana, 1930) Facts o suing for $500 o Johnson was an employee of and he embezzled more than $30,000 He couldnt pay it all back, but worked out a deal where he would pay back as much as he could and his friends would help pay back the rest so could avoid criminal prosecution o had contract with that he would pay an amount (presumably $500) to help his friend Procedural Background o Trial court held for Legal Issue o A contract supported only by the consideration not to criminally prosecute for embezzlement is against public policy, and therefore is void o Is it supported by valid consideration? What did expect in return for his money? If it was for his friend to not be criminally prosecuted, then that would be unlawful cause under Art. 1968, so no cause It has been uniformly held that a promise to perform an existing contractual obligation to a third person, or the performance of it does not constitute a valid and legal consideration. o Why is this promise unenforceable? The did not surrender any legal right, so there was no benefit exchanged to the o The s past consideration to pay back the bank is not enough Holding o Reverse; find for

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Webb v. McGowin (Alabama, 1935) Facts o Webbs line of work involved him clearing pine blocks from the upper floor of a mill, and dropping them to the ground below One day, in order to prevent one of the blocks from falling on , Webb fell with the block Webb succeeded in not hitting , but caused himself serious bodily injury, to the point he was no longer able to work o Within a month, agreed to pay Webb $15/2weeks for the rest of his life o Eventually dies and his estate stops paying Procedural Background o Trial court rendered judgment of nonsuit against Legal Issue o Was there sufficient consideration, even though the benefit (the life saving) was never requested? Yes. Preservation of life has a material value Comparison had swallowed poison and a doctor got him an antidote, would be expected to pay the doctor A moral obligation can be sufficient consideration, when the promisor has received a benefit and then promises to pay for the previously rendered service Holding o Reverse and remand o Black letter law: When a material benefit is conferred to another without request, the beneficiarys subsequent promise to pay for the benefit is sufficient consideration.

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Wood v. Lucy, Lady Duff-Gordon (New York, 1917) Facts o

is a famous fashion designer and hires to exclusively endorse products with her name; proceeds to be split 50/50 o endorses some products without telling or splitting the proceeds with him Procedural Background o Appellate court said the contract lacked mutuality and found for Legal Issue o Note: this case unravels the consideration doctrine. o What did the give up as consideration? Nothing. However, this is a serious business contract and should be treated as such, so the court looks at it as an implied contract, in which the promised to sell the s endorsement because otherwise the agreement would be underminded o Really, this is an illusory promise expression cloaked in promissory terms, but upon closer consideration, reveals the promisor is not committed to any act or forbearance Holding o Reverse o Black letter law: Exclusive dealing arrangements impose an obligation by the seller to use his best efforts to distribute and market goods

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Wortmann v. French (Louisiana, 1982) Facts o In 1976, the (ex-husband) transferred to his wife ( ) a house worth $4,500 for $10 and other good and valuable consideration (i.e. sex) and the household furnishings o is now trying to annul that transfer Procedural Background o Trial court held for because no contracts between spouses Legal Issue o CC only outlaws commutative contracts between spouses it does not outlaw donations o $10 does not constitute a sale (isnt this the consideration in effect?????) o Cause of the transfer the husbands desire to have a quick divorce without bringing his cheating into it Is this really a legitimate cause? Maybe not, but the court is not going to overturn it as cause because it was compensation for being a lousy husband If it was a donation, did there have to be an authentic act? Presumably the deed was transferred to her. Holding o Reverse

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