Enforceability of Promises: The nature of Legal Duty and Obligation

- The Nature of Promise-A Commitment

o King v. Trustees: “objective manifestation of promissory intent”
o Determining if a promise took place: Look at the intent of the person who made the
commitment; Intent must be to create a relationship between the parties ; To examine
intent, look at surrounding facts, what a reasonable person would understand about
them; ANY statement can be a promise

- Understanding Contractual Intent: The Objective Theory of Contracts

o Lucy v. Zehmer: Farm, $50k; “An agreement or mutual assent is of course essential to a
valid contract but the law imputes to a person an intention corresponding to the
reasonable standard, manifest an intention to agree, it is immaterial what may be the
real but unexpressed state of mind.”
- Enforcing Promises: Legal Theories of obligation
o Obligation by reason of an Agreement supported by Consideration
 The Donor Promise Principle
 Dougherty v. Salt; Aunt & $3k; Absent consideration, a promise to make
a gift in the future is not enforceable until it is delivered
 The Peppercorn Principle and the Equivalency Theory
 Hamer v. Sidway; Uncle & Nephew; BARGAIN THEORY OF
CONSIDERATION; It is enough that something is promised, done,
forborne, or suffered by the party to whom the promise is made as
consideration for the promise made to him; In general a waiver of any
legal right at the request of another party is sufficient consideration for
a promise; “Consideration” means not so much that one party is
profiting as that the other abandons some legal right in the present, as
an inducement for the promise of the first.
 Batsakis v. Kemotsis; $25 now for $2000 later; the adequacies of
consideration will not be balanced in the absence of a reason to do so
 The Past Consideration Doctrine
 Hayes v. Plantations Steel Company; implied in fact doctrine, guy
retirement; implied in fact contracts still require consideration; only
difference between implied and express is the manner parties manifest
their assent; promise was meant as a “token of appreciation” not
inducement; he also had no reliance
 Gratuitous Conditional Promises
 Kirksey v. Kirksey; sister-in-law moved; the promise by the brother was
a mere gratuity; gratuitous absolute promise & gratuitous conditional
promise; promise is unenforceable b/c promisor made promise and did
not seek anything in return; brother did not seek performance in return
o Obligation by Reason of Reliance: The Promissory Estoppel Doctrine
 Three kinds: oral contemporaneous evidence, prior written evidence, or prior
oral evidence; EVERYTHING THAT HAPPENS AFTER CONTRACT IS FORMED=
MODIFICATION, NOT PAROLE EVIDENCE ; no written contemporaneous because
that is the contract
 FOUR CORNERS: Concerned with integration (What is the scope of the
agreement (terms, warranties, etc.), collateral agreements: included or
 excluded) & meaning; has to be collateral to the agreement- if it is the type of
agreement the court usually sees in an agreement like this, then will generally
include
 TRAYNOR TWO-STEP: Provisionally admit; If it appears agreement is partially
integrated or NOT integrated and does not change terms: admit it and let the
parties work it out; If “reasonably susceptible” to two or more meanings admit
to parol evidence for purpose of defining meaning
 Noncommercial Promises
 Ricketts v. Scothorn; granddaughter $2k year to quit job; note not given
in consideration, but she relied on it, quit her job
 Wright v. Newman; “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.” R2K
§90
 Contract and Family Law
 Charitable Subscriptions
 Allegheny College v. National Chautauqua County Bank; woman
promises money to college; is held enforceable; judge transforms the
scholarship in the woman’s name into consideration
 Commercial Promises
 Barker v. CTC Sales Corporation; a promise of employment for an
indefinite term is insufficient to support a cause of action for breach of
an employment contract; promise relied on was for employment for an
indefinite period of time
 Cohen v. Cowles Media Company; guy running for office & newspaper;
test for PE is not whether the promise should be enforced to do justice,
but whether enforcement is required to prevent an injustice;
o Obligation by Reason of Unjust Enrichment: The Restitution Doctrine
 Bloomgarden v. Coyer; “Generally, in order to recover on a quasi-contractual
claim, the plaintiff must show that the def. was unjustly enriched at the
plaintiff’s expense, and that the circumstances were such that in good
conscience the def. should make restitution. B/c the quasi contractual
obligations rest upon equitable considerations, they do not arise when it would
not be unfair for the recipient to keep the benefit without having to pay for it.”
o Obligation by Reason of Promise for Benefit received: The Promissory Restitution
Doctrine; R2K §86
 Mills v. Wyman; son sick, Mills took care of him; moral obligation is a sufficient
consideration to support an express promise AND there must be some
preexisting obligation; legal obligation always sufficient consideration to support
express or implied promise
 Webb v. McGowin; working in mill, guy saved other guy; a moral obligation is
sufficient consideration to support a subsequent promise to pay where the
promisor has received a material benefit, although there was no original duty or
liability resting on the promisor. Benefit to the promisor or injury to the
promisee is a sufficient legal consideration for the promisor’s agreement to pay.
OFFER & ACCEPTANCE R2K §§200 and 201
- Mutual Misunderstanding & Objectification
o Raffles v. Wichelhaus; Peerless ship and cotton; parties objectively and subjectively
mean different things; No mutual assent=no contract; “The subjective agreement of the
parties will be honored, but where there is an objective meeting of the minds, either
party will be entitled to rely on the reasonable meaning of the terms that were
expressed; But, where there is both no subjective agreement AND no unambiguous
reasonable meaning, the argument will fail.”
- The Theory of Offer & Acceptance
o The promissory nature of an offer
 Owen v. Tunison; “would not consider less than half” is not an offer to sell
 Leonard v. Pepsico; joke promises are stupid, don’t make them; there was no
reasonable offer here b/c no reasonable person would understand that Pepsi
intended to make a binding contract upon acceptance of its offer
o The condition of acceptance
 International Filter Co. v. Conroe Gin, Ice, and Light Co.; seller’s offer became
an enforceable contract as soon as the buyer accepted according to terms
o Acceptance by silence
 Day v. Caton; guy built wall; silence, accompanied with knowledge that the
party rendering the service expects payment may fairly be treated as evidence
of an acceptance of it and as tending to show an agreement to pay
o Contracts of adhesion
 Carnival Cruise lines v. Shute
- Termination of the power of acceptance
o Termination by offeror revocation
 Dickinson v. Dodds; guy was buying property and seller sold to someone else;
Words or conduct incompatible with a continuing interest in entering a contract
on the terms of the offer will revoke the offer
o Termination by offeree rejection or counteroffer
 Step-saver Data Systems, Inc. v. WYSE Technology; box top license; UCC 2-207;
box top license not a conditional acceptance under 2-207l additional terms. Box
top not final expression;
o Termination by death or incapacity
- Effect of pre-acceptance reliance
o Unilateral Contracts
 Petterson v. Pattberg; Guy coming to pay off mortgage; Not a contract AT ALL,
because it is just an offer until full performance
 Davis v. Jacoby
o Bilateral contracts
 James Baird Co. v. Gimbel Bros. ; Offer only accepted after contract awarded to
main contractor- offer cannot be accepted b/c notified other parties they could
revoke at any time prior to contract being awarded; RELIANCE IS NOT
REASONABLE and nature of offer specified can’t accept until get general
contract; OFFEROR IS MASTER OF OFFER, if offeree goes out and does a bunch
of reliance unrelated to contract conditions, offeror not bound by that reliance,
 expressly conditioned on certain things happening- reliance does not erase
those conditions- NOT reasonable to rely in those conditions
 Drennan v. Star Paving; Offer can be accepted at any time; No conditions: “we
hope you rely on our bid”- pure case of promissory estoppel, reliance was
reasonable and detrimental, enforcement is just
o Pre-Offer Reliance on Negotiations
 Pop’s Cones, Inc. v. Resorts International Hotel, Inc.; Reliance was definite and
substantial (also has to be reasonable)
o Pre contractual Agreements
 Empro Mfg. Co. v. Ball-Co. Mfg. ; There are no magic words- look at parties
objective manifestations of parties intent to be bound; look at test of letter and
parties actions; THERE IS NO RELIANCE IN NEGOTIATIONS, there can be no
reliance until you actually get to the promise
- Electronic Contracting
o Hill v. Gateway; arbitration agreement in computer purchase;

The Scope of Contractual Obligations

- Identifying the Terms of a Written Agreement: The Parol Evidence Rule
o Integration Test and Collateral Agreement Rule
 Thompson v. Libby; logs; there is nothing on face of contract to indicate that it is
a mere informal and incomplete memorandum; must be presumed that the
whole engagement of parties and manner and extent og the undertaking was
reduced to writing
 Mitchill v. Lath (did not go over in class, but talked about in review); is the case
for FOUR CORNERS DOCTRINE: The Mitchells are trying to buy a house on left
side, on other side there is an ice house. They don’t want the icehouse there-
during negotiations Mitchells say only way they will buy house is if icehouse is
removed. Is that collateral agreement the type of agreement that would be
naturally omitted or included in the sale of house contract. CLEARLY there are
two separate agreements and not disputed that parties made those agreements
Integration under four corners rule and Trayner two step look at naturalness-
(get standards for naturalness- almost always is there separate consideration for
the two agreements)- in Mitchell the answer is no so icehouse stays.
 Materson v. Sine; Doesn’t make sense for judge to determine what is naturally
included, so 1) allow parties to provisionally admit evidence regarding scope of
agreement and 2) judge looks at to determine if it is possible if agreement does
exist

- Interpreting the Terms of the Agreement

o Pacific Gas and Electric Co. v. GW Thomas Drayage & Rigging Co. ; There will always be
ambiguities in K law, parol evidence is how we deal with those ambiguities
o Frigaliment Importing Co. v. BNS International Sales Corp.; Chickens; clear the D’s
subjective understanding was stewers- this subjective intent would be irrelevant if it
didn’t coincide with objective meaning; Subjective understanding only relevant where it
coincides with objective meaning
- Supplementing the Agreement with Implied Terms
 o Common Law Implications
 Wood v. Lucy Lady Duff-Gordon; was an implied promise
 ILLUSORY PROMISE: made to a person, on its face make a commitment,
but provides a way for promisor to back out; based on promisor
o Caveat Emptor & Warranties
 Warranty Liability
 Keith v. Buchanan; breach of warranty case; sailboat; affirmation of fact
vs. opinion; Has to be “part of the basis of the bargain” There has to be
some degree of reliance by the buyer; Burden on the seller to prove
non- reliance; Would a reasonable consumer understand that is it
puffing, meant to make a sale, rather than a warranty; Three factor test
to see if puffing: 1. Non-specific; 2. Equivocal; 3. Indicates experimental
nature of goods. Difference between an affirmation of fact, promise or
description AND an opinion or commendation: Better test is to look to
the surrounding facts and circumstances- including commercial practice
and consumer understanding- and ask whether a reasonable consumer
would understand the statement to be puffing rather than a warranty
made for purpose of increasing the likelihood of sale; Presume, unless
there are strong factors to the contrary, that any seller statement is an
affirmation of fact.
 Warranty Disclaimers
 Consolidated Data Terminals v. Applied Digital Data Systems; sold
computer parts, messed up; where a contract includes both specific
warranty language and a general disclaimer or warranty liability, the
former prevails over the latter where the two cannot be reasonably
reconciled
- Insurance Contract
o C&J Fertilizer; reasonable expectations doctrine; rewrites the parties’ contract according
to the judge’s determination after the fact
o Wilkie v. Auto-Owners Insurance Group; backlash to C&J; redefines reasonable
expectations to mean; if there is more than one way to reasonably interpret a contract,
the contract is ambiguous, and one of these interpretations is in accord with the
reasonable expectations of the insured, this interpretation should prevail
- The Implied Legal Obligation of Good Faith; UCC §1-205
o Locke v. Warner Bros.; breach of duty of good faith of employment; Eastwood’s gf;
good faith in accordance with fair dealing
- Employment Contracts
o Dufner v. American College of Physicians; at will employee; presumption is that
employees are at will, hard to rebut; if contract is silent, considered at will;
PROMISSORY ESTOPPEL IS NOT REASONABLE IN AT WILL EMPLOYMENT SITUATIONS

Contracts Unenforceable by Operation of Law

- The Distinction between void and voidable Contracts
o Buckeye Check Cashing Inc. v. Cardegna; distinction between void and voidable;
contract was void but still enforced arbitration agreement;
- The Public Policy Doctrine: Court will not enforce a contract if it violates public policy; “Clear and
unequivocal public sentiment”
 o Illegal Contracts
 Anheuser-Busch Brewing v. Mason; if entering into a contract where subject
matter is illegal, then contract is illegal
o Contracts in Contravention of Public Policy
 Hewitt v. Hewitt; enforcing common law marriage would go against Illinois
public policy; don’t want people living together, want to value marriage
o Covenants not to compete in employment contracts
 American Broadcasting Companies v. Wolf; “good faith duty to negotiate” –
can only arise if in the contract or statute; Underlying the strict approach to
enforcement of these covenants is the notion that, once the term of an
employment agreement has expired, the general public policy favoring robust
and uninhibited competition should not give way merely because a particular
employer wishes to insulate himself from completion. ; balance between rights
of employer and rights of a person’s livelihood; “Unduly interfere with
individual’s livelihood and inhibit free completion where there is no
corresponding injury to the employer other than the loss of a competitive
edge.”
 White v. Fletcher/Mayo/Associates; merger then fired; he had to sign not
compete; classified the agreement containing the covenant; came after sale
from new company; if he has bargaining power of a mere employee it is a
subordinate agreement & enforced as written or not at all
- Unconscionability – Contracts void for unfairness
o BASIC TEST: From UCC: “The basic test is whether, in the light of the general commercial
background and the commercial needs of the particular trade or case, the clauses
involved are so one-sides as to be unconscionable under the circumstances existing at
the time of the making of the contract.”
o History & Purpose of the Doctrine of Unconscionability
 Williams v. Walker-Thomas Furniture Company; when a party of limited
bargaining power, and hence, little choice, signs a commercially unreasonable
contract with little or no knowledge of its terms, it is hardly likely that his
consent, or even an objective manifestation of his consent, was ever given to all
the terms. In determining reasonableness or fairness, the primary concern must
be with terms of the contract in light of the circumstances existing when the
contract was made.
o Elements of Unconscionability
 Stirlen v. Supercuts; he had no real power to change the terms of his
employment contract; if arbitration clause is unconscionably one sided and
unfair in numerous aspects, it will be unenforceable

ADHESION CONTRACTS (Form Contracts): Problems with: Lack of assent by consumer (objective
manifestation of assent), Deceptiveness of some producers, Perceived inequalities of bargaining power,
Share of the surplus, Non-negotiable

REVOCATION OF OFFERS: Four means by which an offeree’s power of acceptance may be terminated:
Rejection/counteroffer, Lapse of time, Revocation by offeror, Death or incapacity of offeror or offeree,
FIFTH WAY? Expiration of the offer by its own terms; Common Law, general Rule: An offer created a
power of acceptance in the offeree (and a correlative liability to contract in the offeror if the offeree
exercises that power), An offeror retains a power of revocation (and a correlative liability to lose any
chance to contract in the offeree if the offeror exercises the power of revocation), An offeree may
exercise her power of acceptance at any time before revocation, An offeror may revoke at any time
before acceptance, Words or conduct that are inconsistent with a continuing interest in forming a
contract on the terms of the offer manifest an objective intent to NOT enter a contract on the terms of
the offer.