Consideration As a Basis For Enforcement Tom grants a license to paint a fence, in exchange for an apple

Consideration As a Basis For Enforcement Tom grants a license to paint a fence, in exchange for an apple.

When Do We Enforce? Possible Reasons to Enforce Morality? Commercial v. family or social transactions? Certainty (e.g., written v. oral; formalities)? Reliance? Exchange (consideration)? The Oath of the Horatii, by David. Do swords make a difference?

Why Is Consideration A Basis for Enforcement? Consideration is what was given in exchange for a promise. Recall: Exchange makes both parties better off; encouraging exchanges makes society as a whole better off. The Grand Bazaar, Istanbul: Exchange Makes the World Prosper?

Two Kinds of Consideration And Two Types of Contract Consideration might be promise, or something other than a promise (money, goods, service, etc.). Promise for promise: Bilateral contract Promise for something other than promise: Unilateral contract. Bilateral Unilateral

Hypothetical Exchanges: What Kind of Contract? Store and buyer exchange new slicer/dicer for $50, as is, without any representation as to its quality or character. Store and buyer exchange new slicer/dicer, satisfaction guaranteed, for $50. Store and buyer exchange new slicer/dicer, satisfaction guaranteed, for buyers promise to pay $50 within 30 days.

Hamer v. Sidway Binding Contract? Or After-Dinner Blather?

Hamer v. Sidway Exchange? Or Gratuity? Promise: If you refrain from drinking, tobacco, swearing, cards or billiards for money until 21, I will pay $5,000. The nephew assented thereto. Bilateral? Unilateral? Breach: Uncle fails to pay. Why? Bargaining? Or Gifting?

The Language of Exchange: From Archaic to Modern Did promisor receive a benefit? Did promisee experience a detriment? Modern focus: Was there an exchange or bargain? Did consideration by one motivate consideration by other? Professor Faust makes a famously bad exchange

Hamer v. Sidway: Benefit? Detriment? Bargain? What if it were necessary to prove benefit to Uncle? What if it were necessary to prove nephews detriment? Is proving process of exchange easier for the plaintiff? An advantage of modern approach: Proof of value of benefit or loss is irrelevant. Is temperance a detriment?

Family Promises: Exchange? Gift? Familial Duty? Gratuitous promise (not in exchange for consideration) is not a contract. Family members often promise with ambiguous motives and purposes (compare business transaction: gift unlikely). Is pacta sunt servanda appropriate for families?

Hypothetical Family Promises Father promises son, if you graduate from high school, I will pay for your college education. Son graduates from high school, but daughter becomes seriously ill, and medical expenses consume all of fathers earnings. Father promises daughter, If you graduate from high school, I will give you a car. Daughter barely graduates, but she has become a drug addict. Father promises eldest of 4 children, If you will help me with the business for the next 6 years, I will leave the business to you in my will. Father dies intestate (without a will) and business passes to children in 4 equal shares).

Family Promises: Reasons for Judicial Caution Plausible exchange might be gift, act of love, fulfillment of sense of familial duty. Family as micro- sovereignty; danger of state intervention. Other deterrents v. breach (reputation; alienation)? Some families really are sovereignties

Non-Familial Social Promises: Exchange? Gift? Something Else? Possible social relationships? Possible motives: Selfless love, instinctive or moral duty, enhancement of relationship. Is pacta sunt servanda right? Difficulty of enforcement? Should courts defer to other deterrents v. breach? Will he keep his promise to love her until the end of time?

Hypothetical Social Promises Suzy promises to go to the Barristers Ball with Sam. The next day, Alex asks Suzy to the Barristers Ball, and she agrees, jilting Sam. Sam and Suzy promise to love each other until the end of time. Alex proposes marriage to Suzy; Suzy agrees. Alex and Suzy are in love but not married. They sign a partnership agreement and open a law firm together

Back to Hamer v. Sidway Enforceable Family Promise? Relatives might intend very specific exchange. Relatives might want enforceability. Reasons to enforce Uncles promise? What would Uncle Bill want?

Problem The facts are the same as in Hamer v. Sidway, but at the anniversary party one of Little Bills cousins overhears Uncle Bill say, I dont give a hoot if he has some fun now that hes eighteen. The only reason I told asked him to stay away from vices is that Juniors mother insisted on it. I dont care. Ill give him the money either way when hes ready for it. Is the promise enforceable?

Problem Uncle Bill is worried that he might die soon, but he doesnt yet have the $5,000 in hand. He decides to make his promise binding. He tells Little Bill, I promise $5,000 on your 21st birthday, in exchange for that pencil in your hand (or in exchange for your promise to give me a pencil on your 21st birthday). Little Bill hands the pencil to Uncle Bill (or promises the pencil). Contract?

Problem The facts are the same as in Hamer v. Sidway, except that the Uncle is Father, and Father is alive and is refusing to pay. Are there any reasons a court might be more cautious in deciding to enforce the contract?

Problem Uncle Bill forgot that Little Bill is only two days short of 21. He intended that Little Bill should break bad habits by an extended period of abstinence, and he believed Little Bill would have to follow the rules for another three years. Three days later, Little Bill announces he is 21, and he visits Uncle to demand his mother-$!?&-ing money. He holds a cigar in one hand, a beer in the other, and a deck of cards in his pocket. Is Uncle Bills promise enforceable?

Feige v. Boehm Bargained-for Exchange Meets Lack of Choice

The Curious History Of Paternity Before Blood Tests Early rule: Bastard has no father. Fear: People might lie about sex and paternity. Transition: Bastardy proceedings, in criminal court, child support. Do they lie about sex? Defendants: 80 %; witnesses: 60 %; complainants: 50 %.

Feige v. Boehm The Contract & the Breach Louiss promise: Pay medical expenses, lost salary, $10/week. Consideration: Hildas promise not to sue. Defense: Hildas promise worth- less; not based on a valid claim. Holding: Enforce the contract.

A Closer Look at Feige: The Peppercorn Theory? Recall pencil & pretense problem. Honest and reasonable belief in possible validity? Promise not to sue is consideration. Claim asserted in bad faith? Promise not to sue not consideration. Arent both promises valuable?

Compare Restatement 74(1) Settlement of Claims (General) Forbearance to assert or the surrender of a claim is not consideration unless: (a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, OR (b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. What about Hildas claim?

Problem Louis was happily married and he spurned Hilda. In fact, Hilda managed only a brief kiss with Louis. However, when Hilda realized she was pregnant by another man, she sought revenge against Louis. She tells Louis that if he did not pay $1000/month child support, she would sue and publicly allege their affair. Louis promised to make the payments. When the child was one year old, Louis obtained a DNA sample that proved the child was not his. He stopped making payments to Hilda. Should a court enforce Louiss promise?

Settlement of Invalid Claims No Consideration? Or No Choice? Are Feige and 74 consistent with lessons re fairness, peppercorns and pretense? Could promise not to assert frivolous claim be valuable? Was exchange voluntary? Do such exchanges make society better off?

Involuntary Bargains Coercion and Deception Promise must be product of voluntary exchange. Exchange by coercion or deception not voluntary. Do such exchanges make society wealthier? Doubtful claim: Reasons to promote settlement? A negotiated and voluntary exchange?

Problem Lawyers advise RIF that layoffs are likely to spawn lawsuits. Thus, RIF asks every laid off employee to sign a promise not to sue based on any claim related to employment, in exchange for 12 monthly installments of $2,000. Suddenly, RIF has a more urgent need for the money. Is the promise to pay laid off employees $2,000 monthly binding?

Restatement 74(2) Standardized Release The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists. Advantages of this rule? Risks?

Problem Suppose RIF (from two slides ago) had a severance pay plan for years before the layoffs. The plan promised the payment of $2,000 per month for one year in the event of an involuntary layoff. Would this additional fact affect your answer?

Feinberg v. Pfeiffer Co. Could her employer refuse to pay her pension, just because? p. 39

Feinberg v. Pfeiffer Co. Promise and Breach Service: 37 yrs employment. Promise: A firm obligation of the corporation to pay $200/mo. if and when she retires, for life. Breach: Seven years after Feinbergs retirement, company sends reduced pension of $100/ month.

Is There Consideration? Past and Pretext in Bargaining Is 37 years service consideration? What about 1 years of service after the promise? What about retiring? Sum: Goods, services or money flowing between two parties are not always in exchange. Ask her about benefit and detriment.

Problem You are an attorney for Pfeiffer Co. Mr. Lippman asks you to draft a resolution that will make the companys promise binding, so that Mrs. Feinberg will get the pension even if Mr. Lippman dies and someone else takes over. What ideas do you have?

Morality & Good Conscience Substitutes for Present Exchange?

Mills v. Wyman Good Deeds Unrewarded? Is fathers promise to pay? What if father promised to pay, if you will continue to look after him? What if 1 st Samaritan made the above promise to 2 nd Samaritan to persuade second Samaritan to care for the young man? p. 44

Webb v. McGowin Rescuing a failed disability plan? p. 45

Webb v. McGowin Morality a Reason to Enforce? Promise: $15 (in 1925 dollars) biweekly for life. Breach: Jan. 34, payments discontinued. C.A. Morality alone a basis for enforcement. S.C.: Only if there is material and substantial benefit to the person of promisor, and injury to promisee. Do some plaintiffs win on sympathy alone?

Promise for Benefit Received: Does Morality Count? Injury to promisee personally. Benefit to promisor. Circumstances precluded advance negotiation. RS 86: (1) enforcement necessary to prevent injustice; (2) not a gift; and (3) promise not disproportionate to benefit. Keep your promises!!

Problems Reconsider Feinberg v. Pfeiffer. Outcome? Reconsider Mills v. Wyman. Outcome? Hamer v. Sidway: Uncle Bill promises nephew $5,000 in recognition of his successful abstinence from vices.

More Problems In Recognizing an Exchange Things that look like exchange but arent; and things that dont seem to be, but are.

Kirksey v. Kirksey Antillico moves to Talledega p. 50

Kirksey v. Kirksey The Promise and the Breach Promise: If you will come down and see me, I will let you have a place to raise your family. Possible motivations? Breach: After 2 years, he moved her to lesser house, then evicted her. Possible motivations for breach? Dear Sister Antillico: Trying to help? To find company? To get land?

Does the Language Reveal Bargain or Something Else? Ambiguous words: I will if you What was his likely intention? What might she reasonably have understood or known? Important circumstances? Family setting? Off the land and out of luck?

Central Adjustment Bureau v. Ingram Can an implied bargain keep this bird from flying? p. 53

Promise and Breach C.A.B. v. Ingram Circumstances: Job requires access to confidential data Promise: No competition for two years after termination. Breach: Employees resign and compete. Defense: Employer gave nothing in exchange Will a contract shut the door?

Implied Bargain: On the Border Between Contract & No Contract Problem: Give and take without express bargaining. Could parties expect in moral or social sense, but not legal sense? Could such bargaining occur in commercial or employment realm as well as in social realm? An implicit bargain: So easy even a cave man could do it!

Hypothetical Ace Garbage ran a small garbage collection business with a fleet of ten trucks. Best Garbage also ran a garbage business with ten trucks. One day, Ace lost a truck in an accident, and another was sidelined by engine trouble. Ace needed another truck badly, and it asked Best if it could borrow one for a day. Best said yes. Ace did use one of Bests trucks for a week, and then returned it when Ace no longer needed it. Ace and Best agreed to a rental fee, and Ace paid the fee. Six months later, Best needed a truck quickly when it suddenly acquired a new major client. It asked Ace if it could borrow a truck for week while it looked for a new one to buy. Ace refused. Has Ace violated a legally enforceably duty?

To Enforce Or Not to Enforce? That Is the Question Can we clearly describe the alleged promise? Alternative means of enforcement: Exit from relationship; loss of reputation, trust. Would parties expect absolute duty? Do parties need judicial enforcement to facilitate a useful exchange?

An Implied Bargain? What Did Employer Give in Return? Did employees reasonably expect something in return? Should parties reasonably expect judicial enforcement? Would judicial recognition of implied bargain facilitate a useful exchange? If they contracted, what did employer give? Did the employer give at least a peppercorn or two?

Problem Ben Rift received an Employee Handbook on the day he began employment with Ace Company, but he never read the Handbook until the day he learned his job was being eliminated. On that day, he read the Handbook and learned that the company had a Severance Pay Policy that paid an involuntarily terminated employee $1,000 for every year of service with the company. If the company refuses to pay this benefit, will Ben have a valid breach of contract claim against the company?

Problem CIN asked all employees to sign the following: In consideration for my continued employment with Crypto, I promise not to divulge any trade secrets or confidential information to any other person, including any other employer. Melba Brainard signed the agreement. One week later, CIN terminated her employment as part of a reduction in force. Is there any basis in contract law, based on these facts, for a lawsuit by Brainard against CIN? Assume Brainard resigned after a week and went to work for CINs chief competitor. Would CIN have a valid breach of contract claim against Brainard?

Practice Essay Question John Doe and Jane Smith had a romantic relationship, but they had decided not to get married. One day, John asked Jane to move into the house he owned (he was still paying off the mortgage). He told Jane that she could live rent-free if she bought the groceries and did most of the housekeeping. She agreed. One year late, Jane gave birth to John Jr. As a result she took one half- year off from work and then reduced her work hours to part-time, although this suspended much progress in her advancement in her employers business. Five years later, John asked Jane to take John Jr. and leave the house, because he was in a new relationship. Jane has no savings or substantial property or investments. Johns house has appreciated in value, he has reduced the amount of the mortgage, and he has increased his own savings by about $100,000. Does John owe Jane any obligation under Contract law?

Strong v. Sheffield The perils of suing a widow

Strong v. Sheffield Should Court Imply a Bargain? A demand note? How did Louisa become involved in Gerardus debt? What might Uncle have given as consideration? Possible bilateral contract? Possible unilateral contract? Reason not to imply bargain? Cause for concern about the alleged bargain?

Mattei v. Hopper Could this be a binding contract?

The Exchange of Promises In Mattei v. Hopper Matteis promise: To pay balance subject to obtaining leases satisfactory to [Mattei]. Hoppers promise: To deliver the deed and possession of the property. Breach: Hopper refuses to execute exchange. Motivation for breach? MY

Promises Subject to Conditions: Are They Illusory? Who decides if leases are satisfactory? How? Did Mattei make promise? Or was it illusory? Reason to treat promise as a real promise? Will we know if promisor is honestly dissatisfied? Would you buy a house without an inspection?

Problems (1) Recall the Casso problem in the assignment during the first week of class. Based on what you know now, what defense might Casso assert against Guggenheim? Whats the right result? (2) What if Casso delivered a painting, but Guggenheim refused to pay because the painting was not satisfactory. What facts or evidence might Casso adduce to prevail in his breach of contract claim against Guggenheim?

Eastern Air Lines v. Gulf Oil Corp. Will the oil company let the airline fill her up?

A Contract Between Gulf Oil And Eastern Airlines Background: Gulf wants assured long term customer; Eastern wants assured long term supply and price advantage. Problem: Predicting price and quantity over 5 years. Solution: Quantity is what Eastern requires; price tied to Platts price. Watch and learn as savvy business people predict the future of oil.

Gulfs Alleged Breach: But Was There a Contract? Price controls on old domestic oil. K price based on Platts (old domestic oil) New /foreign oil not controlled; higher price. If Gulf can be free of this contract, it can sell more new jet fuel at the higher market price. Pssst Wanna buy some foreign gas?

Is Promise to Buy Requirements Illusory? UCC 2-306(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

Problems Requirements Contracts Eastern buys jet fuel from Exxon, tells Gulf it has no more requirements. Eastern acquires Southeast Airlines, and merges Southeast into Eastern. It wants Gulf to supply requirements for the entire corporation. Eastern charters planes to other airlines, but fuels them as Eastern planes. Eastern becomes the largest airline in the world, partly because it has the cheapest supply of jet fuel, and its demands for jet fuel continue to grow.

Problems Output Contracts Gulf sells some of its jet fuel to Delta. Gulf closes its refinery because it is the operation is unprofitable. Then it refuses to supply Eastern. Gulf plays hardball in collective bargaining negotiations. When the union fails to accept Gulfs demands for cuts in benefits, Gulf locks out the employees and closes the refinery. It can no longer supply Eastern. Prices go up. Gulf expands refinery and increases output.

What Remedy For Breach Of a Requirements Contract? What is expectation interest? Why might award of damages based on expectation be deficient? Is specific performance practical? Fuel oil is on the way!

Wood v. Lucy, Lady Duff-Gordon The defendant fancies herself a creator of fashions. Judge Cardoza

Fashions for the Masses And a Titanic Back-Story Luciles fashions target the rich. After contract with Wood, Lucile endorses fashions for middle class Sears & Roebuck! Did Sears contract breach Woods contract? From Masion Lucile of ParisSears needs fashion help!

Luciles Contract with Wood: The Express Provisions Woods express promise? To return half of profits. Illusory? Or binding? What does Lucy give Wood? Exclusive right to place endorsement. Breach: Lucy bypassed Wood; granting endorsement. The Titanic scandal: What did Lucy really think of the common people?

Was There an Implied Promise? What Kind of Promise? Can we clearly describe an implied promise by Wood? Should we imply one? Should Lucy have known judicially enforceable contract was intended? Would judicial enforcement facilitate a useful exchange? Will we know if Wood breaches his promise? Luciles It Girls: Would they buy from Sears?

Reliance As a Basis for Enforcement

Ricketts v. Scothorn Will Katie get her retirement?

The Promise in Ricketts v. Scothorn Bargaining? Does It Matter ? What is Grandpa Ricketts bargaining for? Why is he so generous? How does Katie respond? Why didnt Grandpa keep his promise? How might you have advised Grandpa? Would contract law fulfill his intentions?

Restatement Section 90 Promissory Estoppel (1) 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 the breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

The Breach of Promise Claim Did Katie Prove Her Case? What if she sued for basic breach of contract? Did Grandpa promise? Did she act in a way Grandpa should have expected? Did she prove detriment? Is enforcement necessary to prevent injustice? Would other heirs agree?

Problems Grandpa sends note to Katie, saying only, Here is a reward for being such a good granddaughter. Katie quits her job. Facts are as reported in the courts decision, but 2 mos. before trial, Katie marries the richest man in Nebraska. The promise is not to Katie but to her unmarried brother Ken. Granddaughter Karen is entitled to of remainder of Grandpas estate. Just before trial, Karens husband dies, leaving only debts.

More Problems Antillico Kirksey builds her own cabin, plows her own field. You receive a call from an organ- ization that finds homes for orphaned horses otherwise des- tined for a slaughterhouse. The solicitors voice is seductive, and you love horses. You pledge $500. One month later, you receive the bill for your daughters braces--$3,000. Can you renege on the pledge? Antillico improves her property.

Fienberg v. Pfeiffer Co. Feinberg Rescued After All? Was there a promise? Did it induce reliance? Should promisor have foreseen this reliance? Does justice require enforcement? What is the remedy?

D & G Stout v. Bacardi Imports Loser Gets a Bacardi Hangover.

D&G Stout: Can Estoppel Rescue An Illusory Promise? Why no contract claim? Do facts support promissory estoppel? Loss for which D&G seeks recovery? Is D&G seeking too much? Bacardi wins the hangover

Illustrative Hypothetical Worker has good job with Company A in Dallas. Company B offers him a better job and better pay in Houston. Worker resigns job in Dallas, sells his home, moves to Houston and buys new home. When he shows up for work, Company B informs him the job is no longer available. Promissory estoppel? What measure of damages?

Promissory Estoppel And the Remedy Issue If reliance is basis for claim, does it also limit remedy? See Restatement approach. Was D&G seeking expectation? Or reliance? Does reduced price for D&G reflect loss of expectation of business with Bacardi? Or detriment to bargaining position with National? How did Bacardis breach affect D&Gs cards?

Problem After hearing Bacardis promise, Stout (Generals President) calls his attorney (you) to discuss some matters and he mentions his conversation with Bacardi and his negotiations with National. Do you offer him any advice?

Restitution as an Alternative Basis for Recovery

Cotnam v. Wisdom 1936 Flxible Buick: Designed to serve as ambulance or hearse. Which might Harrison have preferred?

Cotnam v. Wisdom Alternative Theory Needed? Would contract claim fail? Alternative remedy? Was there a benefit? Measure of recovery? What if you (a law student) were the Good Samaritan? Did Harrison receive a benefit?

Restatement Section 370 Grounds for Restitution A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance. (emphasis added). Might there be other occasions, under other rules, for Restitution? See Restatements of Restitution, Torts, and Property.

Restatement Section 371 Measures of Restitution Interest If a sum of money is awarded to protect a partys restitution interest, it may as justice requires be measured by either: (a) The reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimants position; or (b) The extent to which the other partys property interest has been increased in value or his other interests advanced.

A Third Measure of Restitution? Remember Moral Consideration? Restatement Section 86. Promise acknowledging benefit conferred. Enforcement necessary to prevent injustice. Gift not intended. Promise not disproportionate. Keep your promises!!

Collano v. Oakwood Park Homes If it was delivered to you by mistake, is it yours to keep?

Collano: If Defendant Received Benefit By Accident How did defendant end up with this benefit? If delivery is accidental, is it yours to keep? Did Oakwood have choice in retaining benefits? Potential unfairness of requiring compensation? Alternative remedy for the plaintiff? Gunning for the wrong party?

Documents

Consideration As a Basis For Enforcement Tom grants a license to paint a fence, in exchange for an apple