CHAT GPT study Flashcards
1
Q
Flashcard 1: Q: What is a contract?
A
A promise or set of promises for which the law provides a remedy or recognizes as a duty.
2
Q
What determines intent in contract law?
A
The objective theory of contracts, not personal or subjective intent.
3
Q
What are the elements of a contract?
A
1) Agreement (offer and acceptance)
2) Consideration
3) Legal Capacity
4) Legal Purpose
4
Q
What are the required elements in common law contracts?
A
1) Identification of Parties
2) Subject Matter
3) Price
4) Quantity
5) Time for Performance
5
Q
In Stambovsky v. Ackley, house haunting
A
In Stambovsky v. Ackley, why was the buyer allowed to rescind the contract? A: The seller knew the house had a reputation for being haunted and failed to disclose it, which the buyer could not have discovered through inspection.
6
Q
What is the difference between State Common Law and the Uniform Commercial Code (UCC)
A
Common Law governs most contracts, including employment and real property, while UCC generally applies to the sale of goods.
7
Q
What is an express contract?
A
An agreement manifested by oral or written language.
8
Q
What is an implied contract?
A
A contract inferred from the conduct of the parties.
9
Q
What is a unilateral contract?
A
A promise for performance. Example: April promises to pay Bill if he paints her house.
10
Q
What is a bilateral contract?
A
A promise for a promise. Example: Mary promises to sell her truck to Dan for $5,000, and Dan promises to pay $5,000.
11
Q
What happens if a contest participant complies with the rules of the contest?
A
A unilateral contract is formed, and the organization is bound to fulfill the offer.
12
Q
What is a valid contract?
A
A contract that meets all the requirements for a binding agreement.
13
Q
What is a void contract?
A
A contract that is void from the beginning or illegal, such as a contract entered by someone adjudged incompetent.
14
Q
What is a voidable contract?
A
A contract that can be avoided due to reasons such as fraud or misrepresentation.
15
Q
What is an unenforceable contract?
A
A contract where breach provides no remedy, such as one not satisfying the Statute of Frauds.
16
Q
What is the difference between executed and executory contracts?
A
Executed contracts are fully performed, while executory contracts have yet to be fully performed.
17
Q
What is the difference between formal and informal contracts?
A
Formal contracts include contracts under seal and negotiable instruments, while informal contracts include all other agreements.
18
Q
What is a quasi-contract
A
An equitable contract imposed to prevent unjust enrichment of one party at the expense of another.
19
Q
What is the contra preferentem rule?
A
Ambiguities in a contract are interpreted against the party who drafted the contract.
20
Q
Agreement
A
Definition: Mutual assent to the same bargain.
Key: Parties must agree on contract terms.
21
Q
Offer
A
A promise or commitment to do or refrain from doing something in the future. Distinguish: Not preliminary negotiations, price quotations, advertisements, social invitations, or offers made in jest.
22
Q
Preliminary Negotiations
A
Example: A statement like “I would consider $200,000” is not an offer. It’s a negotiation starter, not a commitment.
23
Q
Advertisements.
A
Rule: General rule – advertisements are not offers, unless they contain a definite promise and a specified person or group can accept
24
Q
Ads: Case: Leftkowitz v. Great Minneapolis Surplus Store—Leonard v. Pepsico, 88 F. Supp.2d 116 (S.D. N.Y. 1999). COMPARE WITH: Leftkowitz v. Great
Minneapolis Surplus Store, 86 N.W.2d 689 (Minnesota 1957) : “Saturday 9 AM Sharp, 2 Brand New Fur Coats, Worth
to $100.00, First Come First Served, $1 Each.”
A
Case: Leftkowitz v. Great Minneapolis Surplus Store—Ad specific enough to be an offer
25
Social Invitations
Social Invitations
Rule: Social invitations are not binding offers.
Example: Cancelled social events offer no legal remedy.
26
Revocation of Offers
Rule: Offers can be revoked anytime before acceptance but are effective only when received by the offeree.
27
Mailbox Rule
Definition: Acceptance of an offer is effective when mailed, not when received by the offeror (unless otherwise stated).
28
Consideration
Consideration
Definition: Something of value given in exchange for a promise. It can be a promise for a promise, performance, or forbearance.
29
Past Consideration
Rule: Past acts cannot serve as valid consideration for a current promise.
30
past consideration: Case: In re Estate of LovekampFacts: Appellant (former wife) and decedent (former husband) were previously married but had been
divorced for eighteen years. She alleged that the time of the divorce she and decedent entered into a
verbal agreement that he would pay her $60,000.00. The agreement, she alleged, was “to prevent the
forced sale and partition of the ranch and cattle jointly held by the parties.” In Appellant’s deposition
and answers to interrogatories, however, she clarified that the agreement was not entered into at the
time of the divorce in 1975, but rather in July, 1981. They did not own any property jointly at that
time. The circumstances were that several months after the decedent had been feeling ill and,
according to Appellant, talked about selling his house and 80 acre ranch. He said he was going to ask
$120,000.00 for it. He then gave Appellant a check for $60,000.00 and told her it was for coming back
and staying with him after they divorced. He told her that she could cash the check if he sold the
property or if something happened to him. The check was dated July 29, 1981. When decedent died in
September, 1999, the check, of course, was too old to cash, thus this claim was asserted against the
estate
Case: In re Estate of Lovekamp—No valid consideration for a past act.
31
Promissory Estoppel
Definition: A doctrine allowing recovery if someone reasonably relies on a promise and suffers a detriment, even if no formal contract exists.
Example: A church relying on pledges to build a new structure.
32
Illusory Promises
Illusory Promises: Rule: A promise that does not bind the promisor to any legal detriment is illusory.
Example: “I promise to buy your car if it rains tomorrow” – valid because rain is beyond control.
33
Q: What are void contracts?
A: Void contracts have no legal effect. Examples include:
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Persons Under Conservatorship: void or voidable
void
35
Habitual Drunkards: void or voidable
void
36
Duress by Physical Compulsion: void or voidable
void
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Minors: void or voidable
voidable
38
intoxication: void or voidable
voidable
39
Those Who Claim Mental Incompetence: void or voidable
voidable
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Duress by Improper Threats: void or voidable
voidable
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Example of void or voidable : P works for D under an at-will arrangement, by which the employment may be terminated at
any time at the option of either party. D threatens to fire P unless he agrees to sell shares of stock in D
back to the company. This would probably be found to constitute duress, even though D theoretically
has the right to fire P for no reason. Therefore, if P sold (or agreed to sell) the shares to D under these
circumstances, a court would probably
Therefore, if P sold (or agreed to sell) the shares to D under these
circumstances, a court would probably void the transaction.
42
void or voidable: Example of Economic Duress: The Internal Revenue Service assesses a large tax and penalty against
Weller. Weller retains Eyman, the accountant who prepared the tax returns on which the assessment
was based, to challenge the assessment. Two days before the deadline for filing a reply with the IRS,
Eyman declines to represent Weller unless he signs a very expensive contingency fee agreement for
the services.
In this situation, a court might find that the agreement is voidable because of economic
duress. Eyman threatened only to withdraw his services, something that he was legally entitled to do.
However, he delayed the withdrawal until two days before the IRS deadline. It would have been
impossible at that late date to obtain adequate representation elsewhere.
43
void vs voidable validity
A void contract is never valid and has no legal effect from the outset.
A voidable contract is valid until voided by one of the parties.
44
legal consequence void vs voidable
In a void contract, neither party can enforce the contract.
In a voidable contract, one party has the right to enforce or cancel the contract.
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Undue influence may be rounds for rescission of a contract. This is where one person overpowers the
will of another by use of moral, social or domestic force. This frequently arises in situations involving
the elderly: void or voidable
voidable
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Fraudulent Misrepresentation:
4 Fraudulent Misrepresentation Elements:
1) A misrepresentation of material fact must occur;
2) There must be an intent to deceive;
3) The innocent party must justifiably rely on the misrepresentation; and
4) To collect damages, a party must have been harmed as a result of the misrepresentation.
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fraud misrepresentation, fraud inducement, or fraud of factum/execution: A misrepresentation that is consciously false and is intended to
mislead another
Fraudulent Misrepresentation:
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fraud misrepresentation, fraud inducement, or fraud of factum/execution: A defendant misrepresents a material fact to motivate a plaintiff to take an
action on the basis of false information
fraud inducement
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fraud misrepresentation, fraud inducement, or fraud of factum/execution: A defendant misrepresents a signature on a document (forging the
signature of another on a contract)
fraud of factum/execution
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outcome of possible fraud: Selleck v. Cuenca
Facts: Actor Tom Selleck purchased a 10-year old horse named Zorro for his 20-year old daughter
from Dolores Cuenca. Selleck purchased the horse for $120,000 as his daughter wished to ride the
horse in high-level amateur competitions. However, several weeks after purchasing the horse, the
Selleck family discovered the horse was lame. The sellers allegedly gave the horse steroid injections
for the horse to appear healthier prior to the sale. The defendant argued that the Selleck family did not
do their due diligence in checking the horse’s veterinarian records
Outcome? The Selleck family was awarded more than $187,000 for the defendant’s misrepresentation
by conduct.
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fraud misrep or misrep of law: A misrepresentation that is consciously false and is intended to
mislead another.
fraud misrep
52
fraud misrep or misrep of law: A misrepresentation of law ordinarily does not entitle a party to relief from a contract. exception with experts
misrep of law
53
Doctrine of Mistakes who is responsible
Courts are likely to grant relief only when there has been a mutual mistake of material
fact as to the very essence of an item (both parties mistaken) as contrasted with a unilateral mistake
(one party mistaken) or a bilateral mistake of value.
Example: A case out of 1880s Michigan involved the sale of a cow thought to be “barren” (sterile).
The seller was about to sell the cow for $80, and both parties thought the cow was sterile. Right before
the cow was delivered, the seller discovered the cow was pregnant (the value of a breeding cow in that
time was approximately $750), and the seller refused to deliver the cow. Who wins?
In the case of Sherwood v. Walker, 33 N.W. 919 (Mich. 1887), the Michigan Supreme Court found that
the mistake went “to the very nature of the thing” and the seller won.
Example 2: A decedent’s estate sells two oil paintings for $60. The buyer likes the paintings and
believes they are not originals, but buys them anyway. Later, the buyer finds out the paintings are in
fact originals and worth over $1 million. The decedent’s estate would like to rescind the contract. Who
wins?
In the case of Nelson v. Rice, 12 P.3d 238 (Ariz. App. 2000), the Arizona Court of Appeals ruled for
the buyer. The court reasoned that the Estate had every opportunity to investigate the paintings and
assumed the risk of the mistake.
54
What is of higher importance verbal or written contracts
General Rule: A verbal contract is just as valid and enforceable as a written contract.
55
does statue of frauds put verbal and written contracts on same level or different
under a law known as the statute of frauds.
Contract “Within the Statute of Frauds” – Contract that requires written proof. If written proof is
not required, then it is “outside the statute of frauds
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inside or outside Statute of Frauds: Verbal agreements that don’t involve land or marriage.
outside
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inside or outside Statute of Frauds: Contracts for the Sale of Land or an Interest in Land
within Contracts for the Sale of Land or an Interest in Land (e.g., life estates, mortgages, easements, leases over 1 year).
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inside or outside Statute of Frauds: Contracts that Cannot Be Performed Within One Year
within Contracts that Cannot Be Performed Within One Year (if no slight possibility of completion within a year).
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inside or outside Statute of Frauds: Contracts to Pay Another’s Debt
within
Contracts to Pay Another’s Debt (guaranty/surety).
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inside or outside Statute of Frauds: Contracts in Consideration of Marriage
within Contracts in Consideration of Marriage (e.g., prenuptial agreements).
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inside or outside Statute of Frauds: Contracts for the Sale of Goods
within Contracts for the Sale of Goods Worth $500 or More.
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inside or outside Statute of Frauds: Contracts by Executors to Pay Estate Debts from Personal Funds.
within
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inside or outside Statute of Frauds: verbal contracts
within Contracts that Cannot Be Performed Within One Year (if no slight possibility of completion within a year).
64
What evidence can be used in contracts according to parol evidence
Parol Evidence Rule: If a court finds that a written contract represents the complete and final
statement of the parties’ agreement, it will not allow either party to present parol evidence. Parol
evidence is testimony or other evidence of communications between the parties that is not contained in the contract itself
65
parol evidence: Can prior negotiations be introduced as parol evidence?
no
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parol evidence: Can agreements made before the contract be used as parol evidence?
no
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Are verbal agreements made at the same time as the contract allowed as parol evidence?
no
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parol evidence: Can evidence outside the contract ever be allowed under the Parol Evidence Rule?
no unless exception
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inside or outside Statute of Frauds: can evidence that has been subsequently modified be used as parol evidence
yes. Exceptions to Parol Evidence Rule
Contracts Subsequently Modified: Evidence of any subsequent modification (verbal or written) of a
written contract can be introduced in court; however, any modification subject to the statute of frauds
must be in writing.
68
inside or outside Statute of Frauds: can incomplete contracts be used as parol evidence
yes. exception of parol evidence : Incomplete Contracts: When the written contract is incomplete in that it lacks one or more of the
essential terms (a partially integrated contract), the courts allow additional evidence to “fill in the
gaps.” If a contract is a total integration, then it is complete. A merger clause in the contract is
excellent evidence that the parties intend the contract to be a complete expression of the agreement
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inside or outside Statute of Frauds: can contracts with ambiguous term be used as parol evidence
yes . exception of parol evidence : Contracts Containing Ambiguous Terms: When the terms of a written contract are ambiguous and
require interpretation, evidence is admissible to show the meaning of the terms
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inside or outside Statute of Frauds: can with errors be used as parol evidence
yes exception of parol evidence: When an obvious or gross
clerical or typographic error exists that would not represent the agreement of the parties, parol
evidence is admissible to correct the error
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parol evidence accepted or not: Example: Davis agrees to lease office space from Stone Enterprises for $3,000 per month. The signed
written lease provides for a monthly payment of $300 rather than the $3,000 agreed to by the parties
Example: Davis agrees to lease office space from Stone Enterprises for $3,000 per month. The signed
written lease provides for a monthly payment of $300 rather than the $3,000 agreed to by the parties.
Because the error is obvious, Stone Enterprises will be allowed to admit parol evidence to correct the
mistake
70
What is a Covenant Not to Compete?
An agreement in employment contracts where employees agree not to work for competitors or start competing businesses for a specified time after leaving the company.
71
In what types of jobs are Covenants Not to Compete typically found?
They are typically found in employment contracts for workers in middle or upper-level management positions.
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Are Covenants Not to Compete enforceable in all states?
No, enforceability varies among states. Some states, like California, Minnesota, North Dakota, and Oklahoma, generally do not enforce them in employment contracts.
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Are Covenants Not to Compete enforceable in Pennsylvania?
They are disfavored in Pennsylvania, but can be enforced if they are:
Closely related to the employment relationship,
Reasonably necessary to protect a legitimate business interest, and
Limited in scope.
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What is Champerty
Champerty is the unlawful maintenance of a lawsuit in exchange for a share of the thing in dispute or profits from the litigation.
75
What is Maintenance in the context of champerty?
Maintenance is the officious intermeddling in a lawsuit by supporting either party with money or other resources without having a legitimate interest in the case.
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Contract Law Part IV: Statute of Frauds: General Rule to Statute of Frauds
general rule: a verbal contract is just as valid and enforceable as a written contract . However, some verbal contracts are unenforceable under a law known as the statute of frauds.
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What is a contract "within the statue of frauds"
a contract that requires written proof. If written proof is not required, then it is "outside of frauds"
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Contract Law: Agreement and Consideration is this an offer When a government entity or private firm needs to have construction work done,
contractors are invited to submit bids
Invitations to Bid: When a government entity or private firm needs to have construction work done,
contractors are invited to submit bids. The invitation to submit bids is not an offer. The bids that
contractors submit are offers, however, and the government entity or private firm can bind the
contractor by accepting the bid
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Invitation to Bid: Is this an offer Live Auctions: In a live auction, a seller “offers” goods for sale through an auctioneer
Live Auctions: In a live auction, a seller “offers” goods for sale through an auctioneer, but this is not
an offer to form a contract. Rather, it is an invitation asking bidders to submit offers. In the context of
an auction, a bidder is the offeror, and the auctioneer is the offeree. The offer is accepted when the
auctioneer strikes the hammer.
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Contract Law Agreement and Consideration: is specific offer to contract an offer
Specific Offer to Contract: A person or business expresses a clear intention to be bound by certain terms if accepted.
Example: "I will sell you my car for $5,000, if you agree by Friday."
81
Contract Law Agreement and Consideration: Offers in Commercial Transaction
Offers in Commercial Transactions: Offers made with the intent to create a binding contract.
Example: A company sends a written proposal offering to supply goods at a fixed price within a specific time frame.
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Contract Law Agreement and Consideration: Communication of Offers Rule
One cannot agree to a bargain without knowing that it exists
83
Contract Law Agreement and Consideration (Communication of Offers): Gyabaah v. Rivlab Transportation Corp., 958 N.Y.S.2d 109 (N.Y.A.D. 2013)
Adwoa Gyabaah was hit by a bus owned by Rivlab Transportation Corporation. Gyabaah filed a suit in
a New York state court against the bus company. Rivlab’s insurer offered to tender the company’s
policy limit of $1 million in full settlement of Gyabaah’s claims. On the advice of her attorney, Jeffrey
Aronsky, Gyabaah signed a release (a contract forfeiting the right to pursue a legal claim) to obtain the
settlement funds.
The release, however, was not sent to Rivlab or its insurer, National Casualty. Moreover, Gyabaah
claimed that she had not decided whether to settle. Two months later, Gyabaah changed lawyers and
changed her mind about signing the release. Her former attorney, Aronsky, filed a motion to enforce
the release so that he could obtain his fees from the settlement funds.
Gyabaah v. Rivlab Transportation Corp., 958 N.Y.S.2d 109 (N.Y.A.D. 2013)
Adwoa Gyabaah was hit by a bus owned by Rivlab Transportation Corporation. Gyabaah filed a suit in
a New York state court against the bus company. Rivlab’s insurer offered to tender the company’s
policy limit of $1 million in full settlement of Gyabaah’s claims. On the advice of her attorney, Jeffrey
Aronsky, Gyabaah signed a release (a contract forfeiting the right to pursue a legal claim) to obtain the
settlement funds.
The release, however, was not sent to Rivlab or its insurer, National Casualty. Moreover, Gyabaah
claimed that she had not decided whether to settle. Two months later, Gyabaah changed lawyers and
changed her mind about signing the release. Her former attorney, Aronsky, filed a motion to enforce
the release so that he could obtain his fees from the settlement funds. The court denied the motion, and
Aronsky appealed. The reviewing court held that there was no binding settlement agreement. The
release was never delivered to Rivlab or its insurer nor was acceptance of the settlement offer
otherwise communicated to them
84
Contract Law Agreement and Consideration (Revocation and Acceptance): Revocation
An offeror may revoke the offer at any time before the offeree accepts - revocation is not effective until received by the offeree.
85
Contract Law Agreement and Consideration (Revocation and Acceptance): Supervening Illegality - Revocation
A statue or court decision that make an offer illegal automatically terminates the offer
86
Contract Law Agreement and Consideration (Revocation and Acceptance): Revocation, supervening illegality - revocation, acceptance, silence as acceptance. what is the following an example of Example: Lee offers to lend Kim $10,000 at an annual interest rate of 15 percent. Before Kim can
accept the offer, a law is enacted that prohibits interest rates higher than 8 percent. Lee’s offer is
automatically terminated.
Supervening Illegality – Revocation: A statute or court decision that makes an offer illegal
automatically terminates the offer.
Example: Lee offers to lend Kim $10,000 at an annual interest rate of 15 percent. Before Kim can
accept the offer, a law is enacted that prohibits interest rates higher than 8 percent. Lee’s offer is
automatically terminated. (If the statute is enacted after Kim accepts the offer, a valid contract is
formed, but the contract may still be unenforceable).
87
Contract Law Agreement and Consideration (Revocation and Acceptance): Acceptance
Voluntary act the offer that shows assent (agreement to the terms of an offer.
88
Contract Law Agreement and Consideration (Revocation and Acceptance): Silence as Acceptance
The general rule is that mere silence of the offerree does not amount to acceptance of an offer. However there is an exception in the case of previous dealings between an offeror - offeree where silence has previously constoitued acceptance
89
Contract Law Agreement and Consideration (Revocation and Acceptance): Revocation or supervening illegality - revocation. A statute or court decision that makes an offer illegal automatically terminates the offer.
Supervening Illegality – Revocation: A statute or court decision that makes an offer illegal
automatically terminates the offer.
90
Contract Law Agreement and Consideration (Revocation and Acceptance): Revocation or supervening illegality - revocation.
Revocation: An offeror may revoke the offer at any time before the offeree accepts – revocation is not
effective until actually received by the offeree.
91
Contract Law Agreement and Consideration (Revocation and Acceptance): When does acceptance take effect - upon receipt of the offeror, or dispatch by the offeree?
Mailbox Rule: If mail is the authorized medium, the acceptance letter is effective the moment it is mailed, even if the offeror never recieves the letter of acceptance
However,
the offeror can work around the mailbox rule by simply stating in the offer that the acceptance is not effective until it actually received
92
Contract Law Agreement and Consideration : Law of Consiideration
Consideration: Element of bargained-for-exchange it can be a promit for a promise for performance or a promise for a forebearance to act
93
Contract Law Agreement and Consideration : Law of Consideration - gifts
promises to make gifts are generally unenforceable due to lack of consideration. The reason for this is because no "detriment" is suffered by the promise
94
Contract Law Agreement and Consideration : Law of Consideration - can this be a law of consideration: Example: Relative says to A, “I will give you my diamond engagement ring when I die.” If the relative
dies, and gives the diamond engagement ring to B, A
Lack of Consideration – Gifts
Rule: Promises to make gifts are generally unenforceable due to lack of consideration. The reason for
this is because no “detriment” is suffered by the promisee.
Example: Relative says to A, “I will give you my diamond engagement ring when I die.” If the relative
dies, and gives the diamond engagement ring to B, A cannot enforce the promise in court to obtain the
ring.
95
Contract Law Agreement and Consideration : Law of Consideration - can this be a law of consideration: An uncle promises his nephew $5,000 if the nephew will refrain from smoking, drinking and gambling until he reaches the age of 21. The nephew abstains. Is there consideration?
Answer: In the case of Hamer v. Sidway, 124 N.Y. 538 (1891 New York), the New York Court of
Appeals held the uncle’s promise was supported by consideration and was “bargained for.” Even
though the uncle did not economically benefit from the promise, he obtained something in exchange
from the nephew that was desirable (his relative’s health).
96
Contract Law Agreement and Consideration : Law of Consideration (illusory promise)
Illusory promise: courts require that there be a possibility that the promisor will incur legal detriment; otherwise, the promisor's promise is illusory
97
Contract Law Agreement and Consideration : Law of Consideration Gifts, Void, Illusory: courts require that there be a possibility that the promisor will incur legal detriment
law of consideration illusory promise
98
Which of the following best describes an illusory promise?
A. A promise where the promisor is legally bound to perform specific actions.
B. A promise that appears to create an obligation but does not actually bind the promisor to any performance.
C. A promise that requires a legal detriment on both parties.
D. A promise where both parties agree to exchange something of value.
E. A promise that is enforceable only when in written form.
Answer:
B. A promise that appears to create an obligation but does not actually bind the promisor to any performance.
98
Illusory Promise and fortuitous events
If a promise is conditioned on a fortuitous event (something beyond either party’s control),
the promise is not illusory.
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Illusory Promise True or False: “I promise to buy your car for $4,500 if it rains tomorrow or if I am hired by TNT Corporation or if the Philadelphia Phillies win the next World Series.”
. Since it is possible that it will
rain or that I will get the job or Philadelphia may win, there is a possibility I will have to buy your car
(and incur a legal detriment).
100
Illusory Promise True or False: “If profits continue to be high, everyone
will get a 10 percent bonus at the end of the year – if management agrees.
Example: If the condition is within the total control of the promisor, then the promise is illusory.
The President of Tuscan Corporation says to her employees, “If profits continue to be high, everyone
will get a 10 percent bonus at the end of the year – if management agrees.” This is illusory since
performance depends solely on the discretion of management.
101
Illusory promise: Abe contracts to hire Chris for one year at $5,000 per month, reserving the right to
cancel the contract at any time.
Abe contracts to hire Chris for one year at $5,000 per month, reserving the right to
cancel the contract at any time. On close examination of these words, you can see that Abe has not
actually agreed to hire Chris, as Abe could cancel without liability before Chris started performance.
This contract is illusory
102
Illusory promise: Abe contracts to hire Chris for one year at $5,000 per month, reserving the right to cancel contract after Chris has begun performace by giving Chris 30 day notice.
f Abe reserves the right to cancel the contract at any time after Chris has begun
performance by giving Chris thirty days’ notice, the promise is not illusory. Abe, by saying that he will
give Chris thirty days’ notice, is relinquishing the opportunity (legal right) to hire someone else instead
of Chris for a thirty-day period. If Chris works for one month and Abe then gives him thirty days’
notice, Chris has an enforceable claim for two months’ salary ($10,000).
103
Lack of Consideration – Past Consideration
A promise to pay for services received in the past is usually not held to be supported by
consideration
104
Past consideration: Appellant (former wife) and decedent (former husband) were previously married but had been
divorced for eighteen years. She alleged that the time of the divorce she and decedent entered into a
verbal agreement that he would pay her $60,000.00. The agreement, she alleged, was “to prevent the
forced sale and partition of the ranch and cattle jointly held by the parties.” In Appellant’s deposition
and answers to interrogatories, however, she clarified that the agreement was not entered into at the
time of the divorce in 1975, but rather in July, 1981. They did not own any property jointly at that
time. The circumstances were that several months after the decedent had been feeling ill and,
according to Appellant, talked about selling his house and 80 acre ranch. He said he was going to ask
$120,000.00 for it. He then gave Appellant a check for $60,000.00 and told her it was for coming back
and staying with him after they divorced. He told her that she could cash the check if he sold the
property or if something happened to him. The check was dated July 29, 1981
Is this claim against the estate valid? The Oklahoma Court of Civil Appeals upheld a trial court
ruling which found the agreement was invalid due to past consideration.
105
Lack of Consideration – Preexisting Duty
Rule: Under most circumstances, a promise to do what one already has a legal duty to do does not
constitute legally sufficient consideration.
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Preexisting Duty: Ajax Contractors begins construction on a seven-story office building and after three months
demands an extra $75,000 on its contract. If the extra $75,000 is not paid, the contractor will stop
working. The owner of the land, finding no one else to complete the construction, agrees to pay the
extra $75,000.
The agreement is unenforceable because it is not supported by legally sufficient
consideration. Ajax Contractors had a preexisting contractual duty to complete the building.
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Preexisting Duty: Ajax Contractors begins construction on a seven-story office building and after three months jax Contractors had asked for the extra $75,000
because it encountered a rock formation that no one knew existed.
Example: Looking at the prior example, suppose that Ajax Contractors had asked for the extra $75,000
because it encountered a rock formation that no one knew existed. If the landowner agrees to pay the
extra $75,000 to excavate the rock and the court finds that it is fair to do so, Ajax Contractors can
enforce the agreement. If rock formations are common in the area, however, the court may determine
that the contractor should have known the risk. In that situation, the court may choose to apply the
preexisting duty rule and prevent Ajax Contractors from obtaining the extra $75,000.
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Uniform Written Obligations Act
Uniform Written Obligations Act: “A written release or promise, hereafter made and signed by the
person releasing or promising, shall not be invalid or unenforceable for lack of consideration, if the
writing also contains an additional express statement, in any form of language, in any form of
language, that the signer intends to be legally bound.” – 33 Pa. Stat. § 6
109
Promissory Estoppel:
Also known as detrimental reliance. Under this doctrine, a person who has
reasonably and substantially relied on the promise of another may be able to obtain some measure of
recovery. Under this doctrine, a court may enforce an otherwise unenforceable promise to avoid the
injustice that would otherwise result.
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Agreement and Offer: A church solicits and receives pledges (commitments to contribute funds) from church
members to erect a new church building. On the basis of these pledges, the church purchases land,
hires architects, and makes other contracts that change its position.
Example: A church solicits and receives pledges (commitments to contribute funds) from church
members to erect a new church building. On the basis of these pledges, the church purchases land,
hires architects, and makes other contracts that change its position. Because of the church’s detrimental
reliance, a court may enforce the pledges under the theory of promissory estoppel.
111
Example: A church solicits and receives pledges (commitments to contribute funds) from church
members to erect a new church building. On the basis of these pledges, the church purchases land,
hires architects, and makes other contracts that change its position. Because of the church’s detrimental
reliance, a court may enforce the pledges under the theory of promissory estoppel.
