outlineContract I G.docx

1、outlineContract I GContracts OutlineEnforceable ContractsI. Quick Historya. Old Common Law (before 1800)i. Writ of covenant: promise with seal (formalized and enforced)ii. Writ of assumpsit: promise and consideration (not formal but still enforced).b. Restatement I (19th and early 20th century)i. Gr

2、atuitous promise: promises to make a gift.ii. Promises of consideration: promises based on exchange or bargain.iii. Simple formula for consideration:1. Did A, in promising B, give up a legal right or promise to give up a legal right? And,2. Did A make that promise in whole or in part so that B would

3、 give up a legal right?iv. If both of these questions are yes, there is consideration and the contract is enforceable. If the answer is No, then the contract is not enforceable.1. Formal way of analyzing enforceable promises.c. Restatement II (Early 20th century to today)i. Formal way of analyzing p

4、roblem was wrong.ii. The consideration formula works, but we have to add reliance.1. End up with a not just formula, but a series of cases that give precedents of fairness.II. Donative Promises, Form, and Reliancea. Donative Promisesi. Daugherty v SaltPromissory note alone not enforceable.1. Aunt gi

5、ves nephew promissory note. Nephew did not give up a legal right. Therefore promise not enforceable.ii. Conditional promises not enforceable unless there is some benefit on part of promisor.1. “If you hold out your hand, I will give you $5.” Not enforceable because holding out hand is only means of

6、executing promisedonative and no consideration.2. If doing a study on hands, then promise is enforceable because I benefit from looking at your hand.iii. Schnell v NellNominal considerations are not enforceable.1. Widower promises payment of sum left in wifes will. Promises to pay $200 in exchange f

7、or $.01.2. Promise has the form of bargain but lacks substance.3. Promise made only to make contract validbut contract not valid because it lacks consideration.4. Exceptions to Nominal Consideration rule: Options and guaranteesa. Option: an offer to sell house at a set price can be binding with a $1

8、.00 consideration from the potential buyer.b. Guarantee of anothers debt: a cosigner on a loan can be bound by mere nominal consideration.b. RelianceIs P worse off because of Promise?i. Kirskey v KirskeyCase where no reliance doctrine gives unfair result. Move toward a reliance doctrine.1. D promise

9、s P living quarters if P sells her house. P sells house and moves onto Ds property. D reneges on promise 2 years later.2. Promise was donative and therefore not enforceable.a. Conditional Promise: D told P to sell house only so D could give P new living quarters.3. D, however, did rely on that promi

10、se in selling her house. D harmed by Ps failure to keep promise.ii. Estoppel en Pais, promissory estoppel, and broader law of reliance1. Estoppel en PaisReliance on a statement of fact.a. If A makes statement to B, and B has relied on that statement, A is prevented (estopped) from denying the truth

11、of the statement in courtb. A promises B wheat in warehouse as collateral on loan. A defaults on loan. B requests wheat, but A says truthfully that the wheat never existed. A is estopped from denying there was collateral because B relied on As statement that there was wheat.2. Promissory EstoppelRel

12、iance on Promisea. Restatement 90 A promise that the promisor can reasonably expect to induce action or forbearance on part of promise is binding if injustice can be avoided only by enforcement of promise.i. This overturns the ruling in Kirskeyb. Note that defendant is not estopped to deny lack of c

13、onsideration.3. Eisenbergs law of relianceLarger principle of reliance is any course of conduct upon which someone relies.a. Times Mirror: City sought to secure Times property under power of eminent. Times purchased other land. City did not go through with proceedings. Times sues claiming reliance o

14、n eminent domain proceedings.b. Times did not involve Estoppel in Pais (not representation of fact) nor Promissory Estoppel (bringing the proceeding was not a promise)more like a threat to take property.iii. Feinberg v Pfeifer Co.Reliance upon a promise without consideration is enforceable.1. P reti

15、res upon promise of pension; company later revokes pension; P retired in reliance upon promise.2. Although there was no consideration (P did not give up a legal rightshe could have kept working), she is in a worse position than she would have been were the promise never made.3. Contrast with Hayesem

16、ployee did not retire in reliance on promise.a. Promise was made after P decided to retireP would have retired without promise and thereby is no worse off had the promise not been made.iv. Walters v Marathon Oil-lost profits are a proper measure of damages in cases involving promissory estoppel.1. P

17、s purchased and made improvements on vacant service station based on promises made by (and negotiations with) Marathon representatives.2. When D reneged on promise, P collected not only lost money, but lost profits based on reliance principle.3. Reliance Damages and Expectation DamagesJudges can dec

18、ide either remedy.a. Reliance DamagesPuts P where she would have been had the promise not been made.b. Expectation DamagesPuts P forward were she would be had the promise been kept.III. The Bargain Principle and Its Limitsa. The Bargain Principlei. Hamer v Sidwayconsideration even when party is bett

19、er off just from having given up the legal right.1. Uncle promised nephew sum if he refrained from alcohol, tobacco, cursing and gambling until 21 yrs. Old.2. Uncle dies, estate argues that there is no consideration since nephew was better off from refraining and uncle did not benefit from refrainin

20、g.3. Court rules that a waiver of any legal right at the request of another party is sufficient consideration.ii. Davies v Martel Laboratory Servicegiving up any legal right is sufficient for consideration.1. In giving up the privilege to refrain from serving on Martels Council and pursuing MBA degr

21、ee, P suffered a legal detriment that constitutes sufficient consideration between parties.iii. Batsakis v Demotsis ct. must award amount provided in terms of contract regardless of whether those terms were fair 1. P lent D $25 and required D to pay back $2000 plus interest. D needed money badly.2.

22、Ct. favors P but awards P only $750 (what ct. thought was fair). P appeals for full amount and wins.iv. Chouinard v ChouinardHard bargaining positions and financial circumstances do not constitute duress.1. Brothers forced Father to settle ownership dispute before they would sign for a loan that the

23、 company needed. Father labeled this approach blackmail.2. Duress usually granted only if party creates the circumstances that they are exploiting.v. Fraud and Duress1. Fraud: misstating a present fact (lying) and having no intention of keeping the contract.a. I have to tell you every material fact

24、about company/house I sell you.2. Duress: threatening party and putting party in danger in order to have that party make a promise. a. Promisee created the predicament.vi. Post v JonesMaritime law: when forced to make a promise in a helpless situation that promise is not enforceable.1. Sunken vessel

25、s cargo auctioned off; maritime law requires duty to rescue; contract is unenforceable because one party had no position of power.2. In common law, duress issues in a contract usually only apply if the defendant has put the plaintiff in the position of danger he is now exploiting.3. Stranded travele

26、r example: should traveler be bound to a promise he makes in a helpless situation?a. There is consideration.b. Eisenbergs distress defenselike duress only applicable where exploiting party does not create the helpless situation.vii. People v Two Wheel CorpPrice gauging1. During hurricane company sol

27、d generators at exceedingly high prices. Ordered to pay restitution damages to those they so charged.2. Price Gaugingduring any abnormal disruption of the market for consumer goods, no party within chain of distribution shall sell or offer to sell any goods or services for an amount which represents

28、 an unconscionably excessive price.b. Unconscionability (last resort defense)i. Unconscionability: 1. No Choice: An absence of meaningful choice on the part of party together with contract terms which are unreasonably favorable to the other party, or2. Gross Inequality: A gross inequality to one par

29、ty, or3. No Knowledge: Party lacked complete knowledge of the provisions of contract.ii. Unconscionability has three possible performance terms1. Unconscionability of Pricea. Party does not get market price becausei. They were cut off from market (post v Jones)ii. They were ignorant of price.b. Part

30、y does get market price, but market price was unconscionable (Two wheel and Batsakis)the K may or may not stand.2. Unconscionability of Objecta. You paid market price but didnt improve your previous standing.i. Buying two vacuum cleaners.3. Unconscionability of Auxiliary Termsa. Williams v Walker-Th

31、omas FurnitureContract voided when P lacked proper knowledge of contract terms and terms were unreasonablei. Furniture contract contained pro rata clause that allowed Store to repossess all items, though P owed very little on each item.b. Weaver v American Oilparadigm example of courts stepping in w

32、hen P was unaware of risks.i. P-leasor badly burned due to Ds negligence on leased property.ii. Lease contained a hold harmless clause that allocated risks to leasor for negligence of leasee.iii. Clause was unconscionable because P improperly bore the burden of the risks.iii. Substantive and Procedural Unconscionability1. Substantive UnconscionabilityDid not get market price.a. Selling oil for $1 per barrel when it is worth