Hillman Contract Hornbook

Outline
I. Bargain Theory for enforcing promises and the requirement of an agreement
a. The Bargain theory of consideration
-To make the promise enforceable the promisor must bargain for consideration in exchange for
the promise.
-Differences between a condition necessary to receive a gift vs consideration
-Promisors gratitude for the promisees past good conduct or services does not constitute
consideration- because nothing is extracted r supplied in exchange for the current promise.
b. The promisors motive
-Court measures what a reasonable person would consider your motive, regardless of what your
actual motive may be.
-Motive has to include getting something in return/exchange. Though it doesnt have to be the
primary reason.
-Restatement of Contracts 81 (1) The fact that what is bargained for does not itself induce the
making of a promise does not prevent it from being consideration for a promise.
-Reasonable person must believe the promise actually induces that consideration.
c. What must be extracted
-To constitute consideration, the promisor must bargain for wither a return promise or a
performance.
-promise for promise: executory bilateral exchange.
-Performance for promise: acts and forbearances benefit to the promisor or detriment to the
promisee
-Hamer v. Sidway: uncle and nephew- refrain from gambling, drinking etc until 21. Nephews
forbearance from his legal right constituted consideration.
d. Forbearance to sue as consideration
-If valid claim, yes it constitutes consideration contract enforceable.
-If invalid claim, doesnt constitute consideration contract unenforceable.
-If invalid claim BUT you REASONABLY and HONESTY believed you had a claim, the law
treats your forbearance to sue as good consideration.
-Restatement 74(1) you only have to be reasonable OR honest about your beliefsdoesnt have
to be both.
-Policy: may lead to negligence which the law should seek to discourage.
e. Policies behind enforcing bargained for exchanges:
-Fuller: evidentiary, cautionary, channeling. + Exchange transactions are more important than
gift promises and therefore require all of the resources of the law.
-Dissent: gift promises would lose their symbolic/fuzzy value if they were legally enforceable.
f. Adequacy of consideration.
-The court should allow parties to decide the adequacy of the consideration in question.

Hardesty v Smith: Useless lamp. (at one point) You considered the lamp valuable, not for us to
say if it was or not.
-Restatement 79(b) If the requirement of consideration is met, there is no additional
requirement of equivalence in the values exchanged.
- Many courts feel uncomfortable enforcing imbalanced exchanges , especially when the
imbalance is severe may suggest one party taking advantage. Dixon v. Dixon 2005 court
held that five dollars and other love and consideration was adequate for a house when
deciding whether there has been a failure of consideration, this court has held that the slightest
consideration is sufficient to support the most onerous obligation.
g. Mutuality of obligation and illusory promises
confined to Executory Bilateral Exchanges (in other contexts the mutuality does not apply,
because the consideration was already given.)
-If you want to
-exchanges with a conditional promise on one side the agreement lacks an obligation on your
part, you reserved the right not to do something.
-De Los Santos v. Great Western Sugar Company: as many beets as may be loaded
-This means lack of mutualitymaking the contract unenforceable
Language may appear to be illusory but the circumstances demonstrate that the promisor did
intend to commit. Wood v. Lucy, Lady Duff-Gordon. Had not promised in so many words that
he would make reasonable efforts implied promise: Lucy wouldnt have contracted with him if
it wasnt expected + He wouldnt make profits if it wasnt expected.
-Satisfaction Clauses contracted to be done to your satisfaction. You COULD argue that you
had not entered an enforceable contract however many courts would interpret satisfaction
clause to require good faith.
-Good faith obligation your decision about satisfaction must be reasonable or honest.
TESTS: IF the clause deals with:
commercial value or quality, operative fitness, or mechanical utility where satisfaction can
easily be compared with other market alternatives THEN
1)Reasonableness Standard of Good Faith: compare to others like it (comparable, similar prices
etc.) You cannot decline if it compared favorably to others considered comparable.
IF it deals with fancy, taste or judgement THEN
2) Honesty Standard of Good Faith: determine whether you were truly dissatisfied or if you had
ulterior motive.