outlineContract I G.docx

outlineContract I G.docx

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outlineContractIG

ContractsOutline

EnforceableContracts

I.QuickHistory

a.OldCommonLaw（before1800）

i.Writofcovenant:

promisewithseal（formalizedandenforced）

ii.Writofassumpsit:

promiseandconsideration（notformalbutstillenforced）.

b.RestatementI（19thandearly20thcentury）

i.Gratuitouspromise:

promisestomakeagift.

ii.Promisesofconsideration:

promisesbasedonexchangeorbargain.

iii.Simpleformulaforconsideration:

1.DidA,inpromisingB,giveupalegalrightorpromisetogiveupalegalright?

And,

2.DidAmakethatpromiseinwholeorinpartsothatBwouldgiveupalegalright?

iv.Ifbothofthesequestionsareyes,thereisconsiderationandthecontractisenforceable.IftheanswerisNo,thenthecontractisnotenforceable.

1.Formalwayofanalyzingenforceablepromises.

c.RestatementII（Early20thcenturytotoday）

i.Formalwayofanalyzingproblemwaswrong.

ii.Theconsiderationformulaworks,butwehavetoaddreliance.

1.Endupwithanotjustformula,butaseriesofcasesthatgiveprecedentsoffairness.

II.DonativePromises,Form,andReliance

a.DonativePromises

i.DaughertyvSalt—Promissorynotealonenotenforceable.

1.Auntgivesnephewpromissorynote.Nephewdidnotgiveupalegalright.Thereforepromisenotenforceable.

ii.Conditionalpromisesnotenforceableunlessthereissomebenefitonpartofpromisor.

1.“Ifyouholdoutyourhand,Iwillgiveyou$5.”Notenforceablebecauseholdingouthandisonlymeansofexecutingpromise—donativeandnoconsideration.

2.Ifdoingastudyonhands,thenpromiseisenforceablebecauseIbenefitfromlookingatyourhand.

iii.SchnellvNell—Nominalconsiderationsarenotenforceable.

1.Widowerpromisespaymentofsumleftinwife’swill.Promisestopay$200inexchangefor$.01.

2.Promisehastheformofbargainbutlackssubstance.

3.Promisemadeonlytomakecontractvalid—butcontractnotvalidbecauseitlacksconsideration.

4.ExceptionstoNominalConsiderationrule:

Optionsandguarantees

a.Option:

anoffertosellhouseatasetpricecanbebindingwitha$1.00considerationfromthepotentialbuyer.

b.Guaranteeofanother’sdebt:

acosigneronaloancanbeboundbymerenominalconsideration.

b.Reliance—IsPworseoffbecauseofPromise?

i.KirskeyvKirskey—Casewherenoreliancedoctrinegivesunfairresult.Movetowardareliancedoctrine.

1.DpromisesPlivingquartersifPsellsherhouse.PsellshouseandmovesontoD’sproperty.Drenegesonpromise2yearslater.

2.Promisewasdonativeandthereforenotenforceable.

a.ConditionalPromise:

DtoldPtosellhouseonlysoDcouldgivePnewlivingquarters.

3.D,however,didrelyonthatpromiseinsellingherhouse.DharmedbyP’sfailuretokeeppromise.

ii.EstoppelenPais,promissoryestoppel,andbroaderlawofreliance

1.EstoppelenPais—Relianceonastatementoffact.

a.IfAmakesstatementtoB,andBhasreliedonthatstatement,Aisprevented（estopped）fromdenyingthetruthofthestatementincourt

b.ApromisesBwheatinwarehouseascollateralonloan.Adefaultsonloan.Brequestswheat,butAsaystruthfullythatthewheatneverexisted.AisestoppedfromdenyingtherewascollateralbecauseBreliedonA’sstatementthattherewaswheat.

2.PromissoryEstoppel—RelianceonPromise

a.Restatement90—Apromisethatthepromisorcanreasonablyexpecttoinduceactionorforbearanceonpartofpromiseisbindingifinjusticecanbeavoidedonlybyenforcementofpromise.

i.ThisoverturnstherulinginKirskey

b.Notethatdefendantisnotestoppedtodenylackofconsideration.

3.Eisenberg’slawofreliance—Largerprincipleofrelianceisanycourseofconductuponwhichsomeonerelies.

a.TimesMirror:

CitysoughttosecureTimespropertyunderpowerofeminent.Timespurchasedotherland.Citydidnotgothroughwithproceedings.Timessuesclaimingrelianceoneminentdomainproceedings.

b.TimesdidnotinvolveEstoppelinPais（notrepresentationoffact）norPromissoryEstoppel（bringingtheproceedingwasnotapromise）—morelikeathreattotakeproperty.

iii.FeinbergvPfeiferCo.—Relianceuponapromisewithoutconsiderationisenforceable.

1.Pretiresuponpromiseofpension;companylaterrevokespension;Pretiredinrelianceuponpromise.

2.Althoughtherewasnoconsideration（Pdidnotgiveupalegalright—shecouldhavekeptworking）,sheisinaworsepositionthanshewouldhavebeenwerethepromisenevermade.

3.ContrastwithHayes—employeedidnotretireinrelianceonpromise.

a.PromisewasmadeafterPdecidedtoretire—Pwouldhaveretiredwithoutpromiseandtherebyisnoworseoffhadthepromisenotbeenmade.

iv.WaltersvMarathonOil--lostprofitsareapropermeasureofdamagesincasesinvolvingpromissoryestoppel.

1.Pspurchasedandmadeimprovementsonvacantservicestationbasedonpromisesmadeby（andnegotiationswith）Marathonrepresentatives.

2.WhenDrenegedonpromise,Pcollectednotonlylostmoney,butlostprofitsbasedonrelianceprinciple.

3.RelianceDamagesandExpectationDamages—Judgescandecideeitherremedy.

a.RelianceDamages—PutsPwhereshewouldhavebeenhadthepromisenotbeenmade.

b.ExpectationDamages—PutsPforwardwereshewouldbehadthepromisebeenkept.

III.TheBargainPrincipleandItsLimits

a.TheBargainPrinciple

i.HamervSidway—considerationevenwhenpartyisbetteroffjustfromhavinggivenupthelegalright.

1.Unclepromisednephewsumifherefrainedfromalcohol,tobacco,cursingandgamblinguntil21yrs.Old.

2.Uncledies,estatearguesthatthereisnoconsiderationsincenephewwasbetterofffromrefraininganduncledidnotbenefitfromrefraining.

3.Courtrulesthatawaiverofanylegalrightattherequestofanotherpartyissufficientconsideration.

ii.DaviesvMartelLaboratoryService—givingupanylegalrightissufficientforconsideration.

1.IngivinguptheprivilegetorefrainfromservingonMartel’sCouncilandpursuingMBAdegree,Psufferedalegaldetrimentthatconstitutessufficientconsiderationbetweenparties.

iii.BatsakisvDemotsis—ct.mustawardamountprovidedintermsofcontractregardlessofwhetherthosetermswerefair

1.PlentD$25andrequiredDtopayback$2000plusinterest.Dneededmoneybadly.

2.Ct.favorsPbutawardsPonly$750（whatct.thoughtwasfair）.Pappealsforfullamountandwins.

iv.ChouinardvChouinard—Hardbargainingpositionsandfinancialcircumstancesdonotconstituteduress.

1.BrothersforcedFathertosettleownershipdisputebeforetheywouldsignforaloanthatthecompanyneeded.Fatherlabeledthisapproachblackmail.

2.Duressusuallygrantedonlyifpartycreatesthecircumstancesthattheyareexploiting.

v.FraudandDuress

1.Fraud:

misstatingapresentfact（lying）andhavingnointentionofkeepingthecontract.

a.Ihavetotellyoueverymaterialfactaboutcompany/houseIsellyou.

2.Duress:

threateningpartyandputtingpartyindangerinordertohavethatpartymakeapromise.

a.Promiseecreatedthepredicament.

vi.PostvJones—Maritimelaw:

whenforcedtomakeapromiseinahelplesssituationthatpromiseisnotenforceable.

1.Sunkenvessel’scargoauctionedoff;maritimelawrequiresdutytorescue;contractisunenforceablebecauseonepartyhadnopositionofpower.

2.Incommonlaw,duressissuesinacontractusuallyonlyapplyifthedefendanthasputtheplaintiffinthepositionofdangerheisnowexploiting.

3.Strandedtravelerexample:

shouldtravelerbeboundtoapromisehemakesinahelplesssituation?

a.Thereisconsideration.

b.Eisenberg’s‘distress’defense—likeduressonlyapplicablewhereexploitingpartydoesnotcreatethehelplesssituation.

vii.PeoplevTwoWheelCorp—Pricegauging

1.Duringhurricanecompanysoldgeneratorsatexceedinglyhighprices.Orderedtopayrestitutiondamagestothosetheysocharged.

2.PriceGauging—duringanyabnormaldisruptionofthemarketforconsumergoods,nopartywithinchainofdistributionshallselloroffertosellanygoodsorservicesforanamountwhichrepresentsanunconscionablyexcessiveprice.

b.Unconscionability（lastresortdefense）

i.Unconscionability:

1.NoChoice:

Anabsenceofmeaningfulchoiceonthepartofpartytogetherwithcontracttermswhichareunreasonablyfavorabletotheotherparty,or

2.GrossInequality:

Agrossinequalitytooneparty,or

3.NoKnowledge:

Partylackedcompleteknowledgeoftheprovisionsofcontract.

ii.Unconscionabilityhasthreepossibleperformanceterms

1.UnconscionabilityofPrice

a.Partydoesnotgetmarketpricebecause

i.Theywerecutofffrommarket（postvJones）

ii.Theywereignorantofprice.

b.Partydoesgetmarketprice,butmarketpricewasunconscionable（TwowheelandBatsakis）—theKmayormaynotstand.

2.UnconscionabilityofObject

a.Youpaidmarketpricebutdidn’timproveyourpreviousstanding.

i.Buyingtwovacuumcleaners.

3.UnconscionabilityofAuxiliaryTerms

a.WilliamsvWalker-ThomasFurniture—ContractvoidedwhenPlackedproperknowledgeofcontracttermsandtermswereunreasonable

i.FurniturecontractcontainedprorataclausethatallowedStoretorepossessallitems,thoughPowedverylittleoneachitem.

b.WeavervAmericanOil—paradigmexampleofcourtssteppinginwhenPwasunawareofrisks.

i.P-leasorbadlyburnedduetoD’snegligenceonleasedproperty.

ii.Leasecontaineda‘holdharmless’clausethatallocatedriskstoleasorfornegligenceofleasee.

iii.ClausewasunconscionablebecausePimproperlyboretheburdenoftherisks.

iii.SubstantiveandProceduralUnconscionability

1.SubstantiveUnconscionability—Didnotgetmarketprice.

a.Sellingoilfor$1perbarrelwhenitisworth