Professional Documents
Culture Documents
1-21
What are the goals of this class? Introduce us to the basic legal content of the law of contracts Prepare you to perform various roles within our legal profession: practitioner, judge, arbitrator, legislator, legal advisor, and policy-maker Explore different approaches to law and different ways to construct a system of contract law that addresses the contemporary needs of the communities in which we operate. What roles could you play in the legal profession? Practitioner, judge, arbitrator, legislator, legal advisor, and policy-maker To what extent is it possible to determine what the law is? You can look up statutes and research case law. But, for the average person, this is a very difficult undertaking. Why is it important to consider what the law ought to be, from the perspectives of : (1) a lawyer: knowledgeable of current law; may have to argue in favor/against current interpretation of law (2) a judge: you may have to be the arbiter (common law) (3) a policy-maker: you may have to decide what is in the best interest of the overall society; takes contemporary societal norms/morals into consideration (4) a legislator: you may need to write and enforce legislation to progress the law What is a contract? Restatement (Second) of Contracts: A contract is promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. Restatement (Second) of Contracts: a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made. The result of a contract is the creation of a legal relationship involving rights and duties of persons. What is the role of contract law in society? Employment agreements, sales contracts, promissory note or check, rental or lease agreement, etc. Contracts are the foundation of our entire society. Why do we have contract law? Fear of legal sanctions people will uphold their promises Economic reasons our society depends upon free exchange in the marketplace and contract law makes this possible. Exchanges in the marketplace always depend upon voluntary agreements between individuals and other persons. Such voluntary agreements could never work without contract law.
Makes possible private, voluntary agreements. Social order rests upon stability and predictability of conduct, of which keeping promises is a large item. Facilitation of economic exchange enforcing contracts facilitates trade by promoting present reliance on future promises When should promises be enforced, and why? Promises should always be enforced Economic importance e.g. credit Political advantages private contract is a powerful tool for diffusing power in a society, for dividing decision-making and opportunities between the state on the one hand and private persons on the other. The social order rests upon stability and predictability of conduct, of which keeping promises is a large item. When should promises not be enforced, and why? Generally, promises should always be enforced However, if there is an occurrence that arises and if the non-occurrence of this event was a basic assumption of the contract, a promise should not be enforced. Why do these questions matter? When individuals enter into contracts, it is important to know not only the purpose the contract serves, but also under what circumstances these contracts may be rendered null and void. What are the sources of contract law? Writ of Assumpsit breach of contract where the defendant was alleged to have broken a promise made to the complaining party Common Law in most jurisdictions, contract law is not codified, and thus the primary source of general contract law is case law. (Stare Decisis) Statutory Law Restatement - bench and bar, the Restatement of Contracts (currently in the second edition) has no legal force but nevertheless provides highly persuasive authority. It is a systematic statement of prevailing law both decisional and statutory. Uniform Sales Act codification of sales law in the U.S. which began in 1902 Uniform Commercial Code (UCC)created under the auspices of the American Law Institute and the National Conference of Commissioners on Uniform State Laws, has been adopted by every state except Louisiana. Proposed revisions to Article 2, governing contracts for the sale of goods, have been finalized and presented to the states for enactment. It is a comprehensive statute dealing with a wide range of commercial transactions. United Nations Convention on Contracts for the International Sale of Goods (CISG) ratified by many of the leading trading nations including the United States and China (but not the United Kingdom and Japan), it governs many transactions for the sale of goods between parties with places of business in different nations.
UNIDROIT Principles of International Commercial Contractsnonbinding authoritative text similar to the Restatement. What is their hierarchy? Statutory law takes precedent over common law. Why are sources important? It might be easier to understand a single law or legal principle if all laws had a single source. There are many sources, however, and the laws springing from each have a different scope and effect. Therefore, it is important to know something of these sources in order to understand how particular laws affect us. What is the difference between an outcome and a holding? An outcome is A holding is the appellate courts answer to a legal question. An appellate court either affirms, reverses or modifies the decision below. Compare Bolin Farms with Bailey. In each case: What social policies did the holding promote? Bailey Bolin What social policies did the holding not promote? Bailey Bolin Did the court achieve the right outcome in the case? Yes, in both cases, the court achieved the right outcome. Did the court achieve the right balance among policies in articulating the law? Yes, the court did achieve the right balance among policies in articulating the law. How would you have decided the case if you were the judge? Same as were decided in both. How would you present the case if you represented the plaintiff? Bailey Bolins How would you present the case if you represented the defendant? Bailey Bolins If you were a policy-maker or congressman and wished to either codify the holding or enact a contrary law, what would your law say? What are your reasons for the law?
CLASS 2: Offer, p. 250-269 What is the Restatement? A statement of rules of law in certain subjects, adopted and
promulgated by the American Law Institute, the statement of a rule being entitled to weight as a product of expert opinion and as the expression of the law by the legal profession. A systematic statement of prevailing law, both statutory and decisional.
Is it authoritative? What does it mean to be authoritative? Yes. Although they are secondary sources, the Restatements are authoritative and have been cited by practitioners, scholars, and judges. No they have no legal force & are non-binding. Is it persuasive? What does it mean to be persuasive? Yes. Because of their high quality and the reputations of the authors, the restatements are often cited as a highly persuasive general depiction of the law, even though they are technically not primary sources of law.
Exercise: The Case of His and Hers Mercedes (p. 257) 1. State Conclusion: The P, Mears, is entitled to either the automobiles or damages as a result of Nationwides breach of contract. 2. State the Law with Authoritative Citations: Craft v. Elder & Johnston Co. an offer that is accepted by the seller may not be modified or revoked in terms of prices or terms o Nationwide accepted the offer when it confirmed Mears as the winner of the contest and used his slogan Restatement of Contracts 24 o An offer was made to Mears, which he accepted by sending in his slogan. A contract was formed, as Mears was declared the winner and his slogan was used. Therefore, there is an obligation to fulfill the prizes 3. Additional Applicable Reasons
4. Apply to Facts:
5. Conclude: Therefore, Nationwide Insurance did breach their contract, rendering Mears entitled to collect either the autos or damages.
Facts: Great Minneapolis Surplus Store (D) has advertisements in the newspaper offering new coats
and lapins for $1 for the first people who show up when the store opens on Saturday. On each of the advertised Saturdays, Lefkowitz (P) was first to show up and demanded the items and showed his willingness to pay the $1. The D refused to sell stating that the house rule was that you had to be a woman. D contends that the newspaper advertisement was not an offer and could be withdrawn at any time. Rather, it was an invitation to offer that is not a contract until accepted by the seller.
Issues:
Is an advertisement that states the price, the quantity and the rules (first come first served) an offer or an invitation to offer? Offer.
Thus, was the advertisement an offer? Yes. If so, did the plaintiffs conduct constitute an acceptance? Yes. Ruling: Judgment for P. Holding: Appellate court agreed with trial court that this was in fact an offer that was accepted
when Lefkowitz showed up willing to pay the $1.
Reasoning:
RULE: ADVERTISEMENTS AS BINDING OFFERS - test of whether a binding obligation may originate in advertisements addressed to the general public is whether the facts show that some performance was promised in positive terms in return for something requested. o In this case, the performance was being first to the store on Saturday morning. RULE: OFFER - where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract Thus, Court ruled that the trial court was correct in holding that there was in the conduct of the parties sufficient mutuality of obligation to constitute a contract of sale.
(2)
38. REJECTION
(1) An offerees power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention. (2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.
Humble Oil & Refining Co. v. Westside Investment Corp., p. 376 - 379 (1968)
[plaintiff]: Humble Oil & Refining Co. [defendant]: Westside Investment Corp. Procedural Posture: Westside, Humble, and Mann (3rd party petitioner) each filed a motion for summary judgment. Court granted Westsides motion only. Petitioner (Humble) appealed the judgment of the Bexar County Civil Court, Fourth District (Texas), which dismissed his claim for specific performance of an option contract for the purchase of real estate. Court of civil appeals confirmed. Facts: On Apr. 5, Westside (seller) and Humble (buyer) entered into a written contract where Westside agreed to sell property to Humble with consideration the payment of $35k, and there was consideration for the option contract $50 paid (consideration given for the option contract so that Westside could not retract the offer until after the time stipulated in the contract). Contract said Humble could accept by giving notice by June 4th, 9pm, and paying $1750 within 10 days after acceptance. On May 2, Humble sent letter to Westside, accepting the offer, provided that the seller install utility lines to the property before the date of closing. Then, on May 14th, Humble sent a letter to Westside, accepting Westside's original offer as it was, and stating that "the exercise of said option is not qualified" and Westside can disregard the amendment proposed in their May 2nd letter. Humble then paid the $1750 in the time period asked for in the contract, to an escrow agent that had been designated for this transaction. Westside admits he entered into the option contract with Humble, but contends that the option agreement was terminated by Humble in the letters of May 2 & May 14. May 2nd was a conditional acceptance, which rejects the option contract. Issues: Whether Humble's May 2nd letter, proposing an amendment to the option contract was a rejection of the option contract, thereby terminating the buyer power of acceptance. Rule: When valid consideration is given for an option to purchase (i.e. option contract), the contract is irrevocable for as long as the option is available. Holding: The court reversed the judgment of the trial court and held that petitioner was entitled to specific performance of the option contract, because the option contract was an independent agreement between the parties and did not terminate negotiations regarding the contract of sale. Reasoning: Court says the May 2nd letter did not terminate the option contract. Westside had an obligation, in consideration for the $50 paid, to keep the option contract open for a specified time. Although during this time Humble had the right to either accept or reject the offer, thereby ending the transaction, they were not barred from negotiating the contract, since it was a separate offer from the option contract.
Facts: Star Paving (D) submitted a subcontractor bid to Drennan (P), a general contractor, for a public school construction project. Drennan used Star Pavings bid of $7,100.00 to prepare his final bid and was awarded the contract. The next day Star Paving informed Drennan that it had underestimated the cost of the project and refused to do the work for less than $15,000. Drennan hired another subcontractor to do the work for $11,000 and sued Star Paving for the difference between $11,000 and $7,100.
Rule:
Reasoning: It was analogous to a unilateral contract, i.e. substantial effort or reliance makes the contract whole. Plaintiff bound themselves to act based on the defendant's terms, so the defendant should also be bound.
Facts: Behee placed $5,000 in escrow with Hendricks as a deposit on real estate owned by Smith. A disagreement arose between the parties and eventually Behee mailed a written offer of $42,500 for the real estate and $250 for a dinner bell and flower pots. Smith signed the agreement but Behee notified an agent of Smith that he had withdrawn the offer before he received notice of the acceptance. Hendricks brought an interpleader action against Behee and Smith and Behee filed a cross claim against Smith. Issues: Whether a contract was entered into between Smieth and Behee. Holding: No. Judgment for Behee was affirmed Rule: There is no contract until acceptance of an offer is communicated to the offeror An uncommunicated intention to accept an offer is not an acceptance.Unless the offer is supported by consideration, an offeror may withdraw his offer at any time "before acceptance and communication of that fact to him. Notice to the agent, within the scope of the agent's authority, is notice to the principal, and the agent's knowledge is binding on the principal. Reasoning: Before Behee was notified that the Smiths had accepted his offer, Behee notified the agent of the Smiths that Behee was withdrawing the offer. The notice to the agent, being within the scope of her authority, was binding upon the Smiths. Behee's offer was not supported by consideration and his withdrawal of it was proper.
Issues: Do the Greens have an obligation to inform Ever-Tite Roofing that they are securing another roofers services if their signed agreement was that Ever-Tite could accept the offer by commencing work? Does the commencement of work start with the credit report, loading up the trucks? Holding: Appellate court reversed trial courts decision saying that the Greens had to pay the Roofing company $85.37 for the loading of the trucks plus $226 for the expected profit from the job. Rule: Withdrawing an Offer
Reasoning: it was the intention of P to accept the contract by commencing the work, which was one of the ways provided for in the instrument for acceptance Court ruled that since a simple phone call could have solved this problem, and since the roofing company acted in a reasonable amount of time, the Greens had to pay. Court ruled that acceptance of the contract commenced with the loading of the trucks with the necessary materials.
Minneapolis & St. Louis Ry. Co. v. Columbus Rolling-Mill Co., p.330-332 (1886)
[plaintiff]: Minneapolis & St. Louis Railway Company [defendant]: Columbus Rolling-Mill Co. Procedural Posture: Plaintiff appealed a judgment of the Circuit Court of United States for the Southern District of Ohio finding defendant did not breach any contract between the parties because no contract existed. Facts: Minneapolis (P) sent a letter to Columbus Rolling-Mill Co. (D) for a quote for prices of 500 to 3,000 tons of 50 lb. steel rails and for 2000 to 5000 tons of 50 lb. iron rails for delivery in March 1880. Columbus responded with a statement that they did not make steel rails but will sell the iron rails for $54 per gross ton spot cash, F.O.B. his mill with a condition of excuse by strike, destruction of serious damage to plant or for any causes beyond their control and that if such was acceptable to be notified before December 20, 1879. Minneapolis then sent a telegram on the 8th of December to Columbus for 1200 tons and a request to reply. Minneapolis sent another telegram with a confirmation and a request for a contract as well as a template of the rail and a query into splices and the prices for the splices for this lot of iron. On December 18th, Columbus sent a telegram to Minneapolis telling them it could not book at that price. On December 19th Minneapolis sent another telegram for an order for 2000 tons as per Columbuss letter of the sixth (this was a mistake for the word eighth). Another query was sent to confirm the order of the 19th and finally Columbus responded on January 19th stating that there was no contract. Minneapolis sued Columbus and the jury gave the verdict to Columbus. Minneapolis appealed. Issues: Once an offer is rejected, can it be revived by a unilateral act of acceptance? Holding: No. Once an offer is rejected it cannot be revived by a unilateral act of acceptance; The Court affirmed the judgment and found since plaintiff did not accept defendant's offer, no contract was formed. Rule: Restatement 36 Methods of Termination of the Power of Acceptance (1) An offerees power of acceptance may be terminated by Rejection or counter-offer by the offeree UCC 2-207: Additional Terms in Acceptance or Confirmation Reasoning: Columbus offered to sell between 2000 and 5000 tons of rails. Minneapolis sent an acceptance for 1200 tons. That acted as a rejection of the original offer and as such Columbus responded indicating a refusal to accept that order. The negotiations were at an end. Minneapolis cannot fall back on Columbuss original offer. The railroads letter of acceptance on December 19th was merely a new offer to do business which Columbus refused. There was no contract.
Holding: The Purchase Order constituted an offer. No, the forum selection clause is not enforceable against D. Yes. Under UCC 2-207 in order to avoid accepting an offer by sending a written confirmation containing additional or different terms, that acceptance must be expressly conditioned on the offerors assent to those terms. Rule: 2-207. Additional Terms in Acceptance or Confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. Reasoning: Purchase Order constituted an offer o It was the initial communication between P and D o Sent to P after P was informed that it would need to negotiate with subcontractor o Order Acknowledgment references the Purchase Order D not bound by the forum-selection clause o Forum-selection clause was contained in the fine print attached to an Order Acknowledgement sent by P after D had submitted an offer o Assuming Order Acknowledgement operated as an acceptance, the forum-selection clause at issue altered the parties contract and is not enforceable against D.
No, action to enjoin arbitration did not have to be brought in judicial district designated in arbitration clause No, granting of preliminary injunction was not abuse of district court's discretion.
Rule: UCC 2207(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. Reasoning: To obtain preliminary injunction, Textile needed only to show that serious questions were raised (and they did). Requesting a party to contest the very existence of an arbitration agreement in a forum dictated by the disputed arbitration clause would run counter to that fundamental principle. Under 2207(3), the disputed additional terms regarding arbitration on which the parties do not agree simply drop out and are trimmed from the contract o Thus, the supplemental terms proposed by A...BMH, including the arbitration clause, is not a part of the contract. Textile did not waive its right to object to arbitration.
Reasoning: A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. o Terms inside Gateway's box stand or fall together. If they constitute the parties' contract because the Hills had an opportunity to return the computer after reading them, then all must be enforced. ProCD applies to this dispute o Gateway shipped computers with the same sort of accept-or-return offer ProCD made to users of its software.
Practical considerations support allowing vendors to enclose the full legal terms with their products. o Cashiers cannot be expected to read legal documents to customers before ringing up sales. o If the staff at the other end of the phone for direct-sales operations such as Gateway's had to read the four-page statement of terms before taking the buyer's credit card number, the droning voice would anesthetize rather than enlighten many potential buyers. o Others would hang up in a rage over the waste of their time. o And oral recitation would not avoid customers' assertions (whether true or feigned) that the clerk did not read term X to them, or that they did not remember or understand it. o Writing provides benefits for both sides of commercial transactions. Customers as a group are better off when vendors skip costly and ineffectual steps such as telephonic recitation, and use instead a simple approve-or-return device. The court held that UCC 2-207(2) only applies where there is a battle of the forms, and that it did not apply in this case because there was only one form.
Reasoning: Gateway provides no evidence that at the time of the sales transaction, it informed plaintiff that the transaction was conditioned on plaintiff's acceptance of the Standard Terms. Moreover, the mere fact that Gateway shipped the goods with the terms attached did not communicate to plaintiff any unwillingness to proceed without plaintiff's agreement to the Standard Terms. Because plaintiff is not a merchant, additional or different terms contained in the Standard Terms did not become part of the parties' agreement unless plaintiff expressly agreed to them. Gateway states only that it enclosed the Standard Terms inside the computer box for plaintiff to read afterwards. It provides no evidence that it informed plaintiff of the five-day review-and-return period as a condition of the sales transaction, or that the parties contemplated additional terms to the agreement. The Court finds that the act of keeping the computer past five days was not sufficient to demonstrate that plaintiff expressly agreed to the Standard Terms.
Rule: The court of appeals concluded that forbearance of a right was sufficient to sustain a promise, whether or not it in fact benefited the promise or a third party or had any substantial value to anyone. Reasoning: The nephew gave upon his legal right to use tobacco and drink liquor based upon the uncles promise that for such forbearance, the nephew would receive $ 5,000. It was inappropriate to speculate on the nephews effort required to give up the use of those stimulants or that his performance actually proved a benefit to him. It was sufficient that the nephew restricted his lawful freedom of action within certain prescribed limits upon the faith of the uncles agreement.
Rule: - Restatement (Second) of Contracts 90: PROMISE REASONABLY INDUCING ACTION OR FORBEARANCE 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. - A good consideration exists if one refrains from doing anything he has a right to do.
Reasoning: By receiving monthly payments, P impliedly accepted the conditions and thus was prevented from seeking other employment o The P was induced by the promises made to refrain from seeking other employment Unlike in Kirksey, here there was a benefit to be derived by the promisor o P had knowledge of methods used by D and D would not want him to be employed by a competitive company. Legal Detriment Rule: o If a detriment of a definite and substantial character has been incurred by the promisee, then the court may enforce the promise
Reasoning: Passante v. McWilliam o In gratitude for loan, the board promised to give Passante a 3 percent stock interest in the company. When the company rescinded its promise, Passante sued for breach of contract. The judgment of the trail court for the D found that the stock had not been bargained for in exchange for arranging the loan. Passante had already arranged the loan before the idea of giving him stock was ever brought up the promise is a mere promise to make a gift and not enforceable Jara is similar in fact to this case. Evidence from testimony of Sr. reveals that Jr.s promise not to increase compensation without unanimous shareholder agreement was unsolicited. o Jr. called Sr. for advice; Jr. volunteered an entirely unsolicited promise that the shareholders would agree on how much money compensation would be. o Jr.s promise did not arise from an previous objection or inducement that Sr. may have made The son's promise was gratuitous, despite his subjective state of mind. o Offered without expectation of any exchange promise or performance. Sr. did not make any further contributions to the business Because of the lack of consideration, there was no contract and thus no breach of contract. No bilateral contract was created regarding the future exercise of voting rights. o Sr. gave a non-committal, rather than a binding response when Jr. called him.
Reasoning: Denman: The agreement showed a sufficient legal consideration quite independent of the moral feeling which disposed the executors to enter into such a contract Patterson: motive is not the same thing with consideration. Consideration means something which is of some value in the eye of the law. o Consideration exists if there is some benefit to P or some detriment to D. o The contract includes provisions requiring P to pay ground rent and make repairs. Coleridge: motive need not be stated o Cannot agree with D that this was a voluntary conveyance as the payment of 1 pound annually is valuable consideration.
Questions from Syllabus: 1. What is consideration? - With some exceptions a promise must be supported by consideration in order to be enforceable. - Consideration requires a bargained exchange in which each party incurs a legal detriment. - Two elements of consideration: [1] Bargained exchange Consideration is a bargained-for performance or return promise which is given by the promisee in exchange for the promisor's promise. Consideration need not be furnished by or to the parties themselves as long as it is part of the bargained exchange. Even if the promisor's promise induced performance or a return promise by the promisee, if such inducement was not sought by the promisor, there is no bargained exchange. In such circumstances, the promise is merely an unenforceable gift. [2] Legal Detriment: A legal detriment exists where the party: Engages in an act that the party was not previously obligated whether statutorily or contractually to perform; or Refrains from exercising a legal right
3. Is it a matter of proof? If it is, can it be overcome with other forms of proof, such as formalities? -
4. Is it a matter of fairness? What does your answer indicate about the role of party autonomy in contracts? -
Issues: Whether Browning is to be bound by his promise to Johnson. Whether the law regards Johnsons act of giving up sale contract as legally sufficient consideration to support Brownings promise to pay him for such an act. Holding: Yes, Browning is to be bound by his promise to Johnson. Yes, Johnsons consideration was sufficient. Rule: The court must apply the rule followed in the State of Washington that parties who are competent to contract will not be relieved from a bad bargain they make unless the consideration is so inadequate as to be constructively fraudulent Reasoning: The court held that the seller's promise was supported by sufficient consideration and the case did not require the court to consider the relative values of the things exchanged. This is a unilateral contract in which a promise is given in exchange for an act of forbearance. o Promise: Browning promises to pay Johnson $40,000 o Act: Johnson gives up contract of sale
Sufficiency of consideration in unilateral contract: Prof. Williston o The requirement of sufficient consideration for the unilateral contract was met by the detriment incurred by the promisee (Johnson) OR by a benefit received by the promisor (Browning). Johnson suffered legal detriment Anything that fulfills the requirements of consideration will support a promise whatever may be the comparative value of the consideration, and of the thing promised. The relative values of a promise and the consideration for it, do not affect the sufficiency of consideration Contract of sale: o Mutually assented to o Originally it was fully acceptable to both parties o No misrepresentation, no fraud, no duress Browning bargained for Johnsons act of giving up the contract of sale
Rule: A showing of novelty is not required to validate a contract for the sale of an idea. The decisive question is whether an idea has value, not whether it is novel. Reasoning: Traditionally, parties at contract are free to make their bargain, even if the consideration exchanged is grossly unequal or of dubious value. It is enough that some real value in the eye of the law was exchanged. The fact that the sellers may not have had a property right in what they sold does not, by itself, render the contract void for lack of consideration. Defendants conduct shows that defendant received something of value (paying plaintiffs o Researched before buying it o Aggressively marketed the technique o Used it in advance of competitors o Received benefits of precluding its disclosure to others o Made payment to the P for 2 years Lack of novelty does not demonstrate lack of value
A contract for future illicit cohabitation is unlawful. There is consideration present in such a case, but the law strikes the agreement down as immoral Other good and valuable considerations is plausible, but there is not proof that in fact anything good or valuable had been given at the time the contract was made. Bankrupts purported immunity from having to pay taxes and other charges on the claimants house is not enough since he was never chargeable with these expenses; his previous payments were gratuitous. No claims for claimant to release bankrupt from o Imaginary claims of release are not consideration Although the parties here may have intended to make a valid agreement, the most solemn and formal document possible cannot disguise what is in reality a gift. o A seal is only presumptive evidence of consideration on an executory instrument o Agreement is unenforceable.
Reasoning: Forbearance from asserting a legal claim known to be invalid is not valuable consideration. To be valid consideration, the claimant must subjectively believe in good faith that the claim is valid, and that belief must be reasonable from the standpoint of a reasonable person in the position of the claimant. In this case, there was no proof of fraud or unfairness As long as the original claim of paternity was in good faith, the Ds promise would be enforced The fact that the P good faith belief turned out be mistaken did not matter.
Basic principle that a consideration, to support a contract, consists either of a benefit to the promisor or a detriment to the promisee Any consideration, however insignificant, satisfied this rule The test is whether there is an additional consideration adequate to support an ordinary contract, and consists of something which the debtor was not legally bound to do or give. Sufficient consideration: a payment of part of debt and an agreement of debtor to refrain from voluntary bankruptcy o Contemplation of bankruptcy is not enough.
where it would be impossible to find other workers. Consent by the defendant under such circumstances is not valid consideration. A party to a contract who refuses to perform, and coerces a promise from the other party to pay additional compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the necessities of the other party. Company did not provide a voluntary waver of the breach of the original contract. In fact, the company knew nothing of the breach until the expedition returned to San Francisco. Superintendent had no power to make a new contract and no power to change the original or waive any rights.
Reasoning: Under the preexisting duty rule, a modification of a contract must be supported by consideration. This rule is necessary to prevent the hold up game whereby a party to a contract will refuse performance unless additional consideration is given, under circumstances in which it would be very difficult or impossible for the other party to cover (Alaska Packers Assn). Courts will not enforce an agreement that has been procured by coercion or duress and will hold the parties to their original contract regardless of whether it is profitable or unprofitable Courts are reluctant to apply the pre-existing duty rule when a party to a contract encounters unanticipated difficulties and the other party, not influenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract. The modern trend is for courts to enforce agreements modifying contracts when unexpected or unanticipated difficulties arise during the course of performance of a contract, even though there is no consideration for the modification, as long as the parties agree voluntarily. Under UCC 2-209(1) such a modification must be in good faith and obtained without extortion. In this case the modification was fair and equitable, voluntarily entered into, and motivated by events that were not anticipated and not foreseeable at the time the original contract was made. Restatement Second of Contracts 89D(a) is the applicable rule for this case. Prohibits modifications obtained by coercion, duress, or extortion Fulfills societys expectation that agreements entered into voluntarily will be enforced by the courts Case as applied to the three criteria of 89D(a) First it was voluntarily agreed to Maher plead his case and city council voted to authorize the Mayor to sign an amendment to the 1964 contract The promise modifying the original contract was made before the contract was fully performed on either side Modification was made in June of 1968 at a time when the five-year contract which was made in 1964 had not yet been fully performed by either party The underlying circumstances which prompted the modification were unanticipated by the party Original contract was premised on an increase of 20-25 per year. The 400 unit increase was beyond expectation and were unanticipated at the formation of the 1964 contract. The modification is fair and equitable It was a substantial increase for which $10,000 can be said to be fair and equitable.
Stephanie Stewart Professor Cheng Exercise: The case of the Dissatisfied Entertainer, p. 91
While taking into account the modern trend away from a rigid application of the preexisting duty rule, it is still the case that the trial judge erred in giving instructions to the jury, under which they had a duty to award damages to Ajax, the plaintiff, if they found that there was consideration for the making of the $35,000 contract. According to the American Law Institutes Restatement Second of the Law of Contracts 89D(a): A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. However, the modification is only enforced if the parties voluntarily agree to the revision and if the modification was not to remedy an unprofitable or unfair original contract. The case at hand fails to satisfy all three criteria set forth in 89D(a). Although the formation of the new contract fails to fulfill the subsequent criteria, it does comply with the first requirement, which demands that the modification of the original contract be made before the original contract is fully performed by either side. Prior to the event at Bonds resort hotel, Ajax contacted Bond to renegotiate the price terms of the original contract. Therefore, at the point of modification, neither party had fully performed the terms of original contract. The second of the criteria provided for under 89D(a) states that the underlying circumstances which prompted the modification be unanticipated by the parties. However, in Angel v. Murray (1974), the court clarifies its position on the modern trend away from the preexisting duty rule and recognizes that, courts should enforce agreements modifying contracts when unexpected or unanticipated difficulties arise during the course of the performance of a contract. In this case, Ajaxs demand for greater compensation did not arise from an unanticipated difficulty, but rather from Ajaxs desire to amend an unprofitable contract. Such a modification is not justified under 89D(a). The third criterion requires the modification to be fair and equitable, which is not the case here. Ajax demanded a $15,000 increase for a performance of the same duration and same caliber as Bond had originally contracted him for. Furthermore, 89D(a) prohibits modifications obtained by coercion, duress, or extortion (Angel v. Murray). Although he originally refused to renegotiate the terms of the original contract, Bond was forced to reconsider once Ajax threatened to not appear. Therefore, Bonds commitment to the new contract was not entirely voluntary. In fact, Ajaxs actions are comparable to the hold-up game that Chief Justice Roberts warns of in Angel v. Murray. Ajaxs refusal to perform without the promise of more money is similar
to the contractor who refuses to complete work under an unprofitable contract unless the price term is renegotiated. Finally, under the preexisting duty rule courts have generally found modifications of original contracts to be unenforceable if the individual contracted is only performing work that would have been required of him under the original contract. Here, Ajax is merely performing the work, namely his performance at Bonds resort hotel, which was already required of him under the original contract. Since Ajaxs case does not quite satisfy the unexpected or unanticipated difficulties exception, which permits modification of contracts, the contract between he and Bond should be held to the preexisting duty rule and the modification should be deemed unenforceable. Therefore, the instructions provided for by the trial judge to the jury did not take into account all three of criteria required under 89D(a) and inaccurately permitted the jury to uphold the modification of the contract. However, in light of the facts of the case, the jury would have been better to receive instructions regarding the preexisting duty rule. We reverse.
Unforeseen reason the unforeseen reason that would excuse P from taking only so much of the whisky as it desired to take, if any, left the amount it should take entirely to its discretion. o Contract places no limitation whatever on the meaning of the words unforeseen reason, so any reason that the company might assign for not taking the whisky would relieve it of any obligation to do so. Did not need to be good or reasonable reason. Unenforceable contract because it lacked mutuality. o Therefore, the contract was never binding upon Rehm-Zeiher and cannot be enforced.
judgment on the pleadings. The intermediate appellate court reversed on the grounds that the contract lacked mutuality because Wood never promised to do anything. Wood appealed the dismissal of the complaint.
Facts: - D employed P to help her to turn her reputation in fashion into profit. - P was to have exclusive right (for one year), subject to Ds approval, to place her endorsement on the designs of others and to place her own designs on sale, or to license others to market them - In return, D was to receive half the profits derived from any contracts P made - Exclusive right initiated on April 1, 1915 and it was to last from year to year unless terminated by notice of 90 days. - P argues that he kept the contract and that D breached it by placing her endorsement on fabrics and dresses without his knowledge and withheld the profits. Issues:
Whether the intent of P, who offered to buy, and D, who offered to sell, to enter into a K that was mutually binding.