Ch 1:Section 3 - Consideration as a Basis for Enforcement

Question 1

Debt

Answer 1

The promise is or is not given in exchange for something; used to enforce promises to pay a definite sum of money

Question 2

Quid pro Quo

Answer 2

This for that; bargain of promises

Question 3

Assumpsit

Answer 3

theme of misfeasance; the promisor undertook an assumpsit to do something, had done it in a manner inconsistent with that undertaking to the detriment of the promisee; promisee must have incurred a detriment b/c in reliance on the promise

Question 4

Exchange of Promises

Answer 4

when a party had only given a promise in exchange for the promise of another

Question 5

Consideration (Restatement 71-86)

Answer 5

must be a bargain, in promise there must be a benefit to the promisor AND/OR detriment to the promisee

• *Without consideration, the promise will NOT be enforceable
• • Full consideration, sufficient consideration will NOT work**
• • CONSIDERATION IS NOT MOTIVE/INTENT** sole focus is on detriment and benefit

Question 6

Hamer v. Sidway

Answer 6

** Family Contract
** consideration:
-promisor: uncle
-promisee: nephew
Bargain: $$ for forbearance of legal right
Pr benefit: intangible happiness
Pe detriment: lost of legal right
(p. 40, examples)

Question 7

Gratuitous promise

Answer 7

• Courts will not enforce gift or gratuitous promises but they will enforce promises which are supported by consideration.
• One argument against enforcing gratuitous promises is that enforcement leaves no room for a promisor’s regret or for changed circumstances.

Question 8

Peppercorn

Answer 8

Token payment, consideration of a trifling value

- - could be used to make a gratuitous promise
p. 39, note 4

Question 9

unilateral contract

Answer 9

promise for performance

Question 10

bilateral contract

Answer 10

promise for promise

Question 11

Dyer v. National By-Products

Answer 11

Is a good faith belief in a contract claim (promise) enough to justify suit in an unclear claim?

Question 12

Restatement §74

Answer 12

Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless

• *The claim or defense is in fact doubtful b/c of uncertainty as to the facts of the law OR
• *The forbearing of surrendering party believes that the claim or defense may be fairly determined to be valid

Question 13

Corbin on good faith forbearance (pg. 44)

Answer 13

forbearance is sufficient consideration if there is any reasonable ground that the claimant’s ILL FOUNDED claim belief is just to try to enforce his claim. He must be asserting his claim in good faith

even though invalid, is detriment if good faith

Question 14

Williston on good faith forbearance (pg. 45)

Answer 14

Forbearance from suit on a CLEARLY invalid claim is insufficient consideration for a promise, forbearance from suit on a claim of doubtful validity is sufficient consideration for a promise if there is a sincere belief in the validity of the claim.

if invalid, good faith belief is not enough to constitute consideration

Question 15

Moral Obligations

Answer 15

Often not enforced; especially if consideration if absent or if events happened prior to the bargain

– enforcing moral obligations does not give people the opportunity to change their minds and begs the question of what constitutes morality

Question 16

Mills v. Wyman

Answer 16

Mills actions were done in the past (prior to the promise); no consideration

– Gratuitous promise

Question 17

Webb v. McGowin

Answer 17

while this is a gratuitous promise(no consideration/ no bargain); the court held to uphold the promise because it would seem unjust not to
(due to the extent of P’s injuries)

Question 18

Harrington v. Taylor

Answer 18

No consideration for past actions; no bargain

Question 19

Kirksey v. Kirksey

Answer 19

her moving is a condition to a gratuitous promise

Question 20

Restatement §86

Answer 20

Promise for benefit previously received is binding

Question 21

Conditional Gift v. Bargained For Promise

Answer 21

**Where do we draw the line btwn a conditional gift and bargained for exchange: no bright line rule – fact dependent

**be able to explain conclusion on exam

Question 22

Lake Land v. Columber

Answer 22

Majority: there was consideration because employer gained the non-compete and employee gave up the right to quit (change in position)

Dissent 1: the majority situation could still occur and they could still fire him tomorrow

Dissent 2: ® 3 solutions (different jurisdictions have applied each)

					1. No consideration b/c employee hasn’t gotten anything (raise, benefits, …etc) OR **standard answer when applying traditional notions of consideration
					2. Future promise of employment OR
					3. Consideration is forbearance of firing for not signing the covenant

Question 23

At will employment

Answer 23

can fire at any time, can leave at any time (MOST WORK)

• can be terminated at any time for any reason
• So prevalent, its hard to apply contract principles to at will situation

Question 24

For Term Employment

Answer 24

if you sign at contract to work for a certain period of time

• requires cause for termination
• Exchange of promises
• Specific (but not exclusive) list of things that you may be fired for

Question 25

Consideration is Prospective

Answer 25

You need to know at outset (signing) if there is consideration

Question 26

Employment Handbooks

Answer 26

Supplemental to contract; many employers add acknowledgment clauses to create more protections for the employer

– if the handbook is part of the original contractual agreement, any modification of the handbook is a modification of the agreement and MUST have consideration (@ EACH MODIFICATION - i.e. raise, additional bonuses)

Question 27

Pine River State Bank v. Mettille

Answer 27

The fact that the employee continued to work after getting his handbook was consideration for the rules and regulations in the handbook
(he could’ve quit, but he didn’t)

Question 28

Rewards

Answer 28

A reward offer may be accepted by anyone who performs the service called for WHEN THE ACCEPTOR KNOWS IT HAS BEEN MADE AND ACTS IN PERFORMANCE OF IT

(so you can’t accept the reward offer if you didn’t know there was an offer in the first place)

Question 29

Promises as consideration

Answer 29

• A promise that is bargained for is consideration if the promised performance would be consideration

Question 30

Strong V. Sheffield

Answer 30

Pr - nothing; guarantor’s are unusual cases b/c they don’t get anything in return
Pe - NONE; forbearance to take payment was not defined by specific time

** the contract was illusory, could’ve been fixed if there was a specified time of forbearance

Question 31

Conditional Promises

Answer 31

A promise is conditional if its performance will become due ONLY if a particular event occurs (the condition must occur before the promisor must perform)

-implied condition - the court may impose a condition by implication

– DOES INTENT/MOTIVATION MATTER? - no, just performance

Question 32

Restatement §51

Answer 32

offeree who learns of an offer AFTER he has rendered part of the performance may satisfy the bargain by completing the performance (i.e. Rewards)

Question 33

Conditional Promises

Answer 33

A promise is conditional if its performance will become due ONLY if a particular event occurs (the condition must occur before the promisor must perform)

• implied condition - the court may impose a condition by implication (service first, payment second; i.e. car repairs)
• express condition - their performance is due if something happens (i.e. insurance company)

– DOES INTENT/MOTIVATION MATTER? - no, just performance

Question 34

Restatement §51

Answer 34

offeree who learns of an offer AFTER he has rendered part of the performance may satisfy the bargain by completing the performance (i.e. Rewards)

Question 35

Illusory Contracts

Answer 35

P’e must have a detriment

– contracts are illusory if it leaves a party free to perform or withdraw AT HIS OWN WILL

Question 36

Real Estate Contracts

Answer 36

Impt b/c property is not fungible; these contracts are usually complex, lengthy, detailed, and facilitated by lawyers

– can often fall apart b/c of a number of intervening activities btwn contract and formal closing

Question 37

Mattei v. Hooper

Answer 37

The fact that he had to do something in good faith means he incurred a detriment – which makes the contract NOT illusory
– Court says a conditional promise must be done in good faith; if condition cant be met after a good faith effort, promises can be broken w/o breach

pr - Bargain (to sell) Benefit ($$)
pe - Bargain (to buy), detriment ($$, time and effort to get leases.

Question 38

Deposit Receipt

Answer 38

Real estate contract; agreement first and performance (closing) later – may be conditional

Question 39

Good Faith Standard

Answer 39

Court believes this is an appropriate standard; easier to determine than RPS
** The fact that he has to do something in good faith means he’s incurring a detriment

Question 40

Contracts for the Sale of Goods

Answer 40

governed by Article 2 of the UCC

Question 41

Zoltek

Answer 41

Requirement’s Contract - seller agrees to sell the buyer the buyer’s requirement of goods; without requirement that quantity be specified at the time of contract formation

– NOT illusory b/c p’e detriment was that buyer had to buy if zoltek price matched

Question 42

Reliance as a basis of enforcement

Answer 42

Reliance - change in position by the promisee

DAMAGES FOR RELIANCE FAVOR RELIANCE!

RELIANCE BASED PROMISES ARE NOT ENFORCEABLE UNLESS NOT ENFORCING IT WOULD CREATE AN INJUSTICE

Question 43

Ricketts v. Scothorn

Answer 43

Equitable Estoppel

Damage Analysis:

• Expectation= $2000 +6%
• reliance = lost salary
• restitution = lost job (intangible)

Question 44

Equitable Estoppel

Answer 44

Relied upon an act, admission, conduct (FACT) and position was changed for the worse (detriment) based on the promise(Fact)

Question 45

Promissory Estoppel

Answer 45

Relied upon promise of D and position was changed for the worse based on the promise

Question 46

Restatement 1st § 90

Answer 46

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee and which does induce such action/forbearance IS BINDING if injustice cannot be avoided only by enforcement of the promise

Question 47

Feinberg v. Pfeiffer Co

Answer 47

Reliance - lost salary
Expectation - $200 a month

unjust - b/c she can’t get an equitable job and she has cancer

Question 48

Kirksey v. Kirksey

Answer 48

Reliance - moving expenses

She can’t get back the price of the original land b/c he told her to sell it and she decided to abandon it

Question 49

Tiffany’s Hypo

Answer 49

Reliance - cost of trip to lunch

Expectation - ring

Question 50

Wood v. Lucy, Lady Duff-Gordon

Answer 50

Court created a standard of “best efforts” for exclusivity clauses

– his implied promise is his detriment; he has to do something (reasonable efforts to make contracts)

Question 51

Efforts required by contracts

Answer 51

Output requirement contracts - good faith/reasonable commercial standards

Exclusive dealing contracts - best efforts (b/c it is so restrictive to one person)