Contracts Flashcards
Consideration
Bargin for exchange
Consist of
Consideration
A benefit to the promisor
or legal detriment to the promisee
Past acts are not consideration
return promises Can be
Consideration does not need to be equal
Illusory promise
Promise rendered unenforceable due to indefiniteness or lack of mutuality
ex. Strong v. sheffield- Contact lack mutuality, as there was no date on when debt should be payed
gratuitious promise
Promise made w/o consideration
Not enforceable
Forbearance from legal actions
Forbearance from actions that you are legally permitted to are considered detriment to the promisee so that constitutes consideration
ex. Hamer v. sidway, Nephew refrains from drinking, smoking, gambling until he turn
What is a
contract?
A contract is an agreement on two levels, enforceable and a promise
Restatement § 1: “A contract is promise or set or 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”
What constitutes a
Bargain?
Promises based on moral obligation but made w/o consideration do not constitute an enforceable contract unless it is tied to a preexisting legal obligation
Gifts are not enforceable (not breachable since no promise)
Mills v. Wyman
Kirksey v. kirksey
Lake land employment v. columber
Promises as consideration
A promise is a manifestation of intention to act or refrain
Justify a promisee in understanding that a commitment has been made.
Wood v. Lucy, lady Duff-Gordon
Satisfactory Clauses
Clauses which parties will need to be satisfied with outcome in order to perform
ex.
Commercial value or quality (objective)
Fancy, taste, and judgment (subjective)
Mattei v. hopper
Reliance
Substitution for consideration
Sub for consideration (reliance)
Detrimental Reliance
Promise to promisee,
that the promisor should reasonably expect to induce action or forbearance of the promisee (or third person)
which actually induces such action of forbearance; AND
Injustice can only be avoided by enforcing the promise
Feinburg example (pension money)
Sub for consideration (reliance)
Restitution
Plaintiff must prove the Δ was enriched
Plaintiff must prove retention of the benefit without payment would be unjust.
Must be some direct relationship between Plaintiff and Δ
Must be the LAST Resort
Unjust enrichment
Ex. Cotnam v. wisdom
Callano v. oakwood parl homes corp
What is
equitable estoppel
A defensive doctrine preventing one party from taking unfair advantage of another when, through false language or conduct, the person to be estopped has induced another person to act in a certain way, with the result that the other person has been injured in some way.
Injustice b/c of mistake fact (false language)
Ricketts v. scothorn- change position for the worse
What is
Promissory Estoppel
R2K Sec 90: “ a promise which promisor reasonably expects to induce action or forbearance is binding if injustice can be avoided only by enforcement of the promise”
a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment
Changes for Donation- good to enforce for policy (even if no consideration)
Feinberg v. Pfeiffer- P disqualifies for work as result of an illness, so she relied on D promise to pay pention
Cohen v. cowels- newpaper that promises not to release leekers name
Quasi contracts
Promisee shall never recover on the promise but he shall recover on fairly compensation to him for the injuries incurred
Either the promise is binding or you have to restore the status quo
generally
Moral obligation
Courts may still enforce a contract in the absence of consideration
Typically unlikely, rare and depends on the court
Moral obligation
enforceable?
promised to pay your debt(s) after the statute of limitation
promised to perform an avoidable duty (infant still paying rent after 18th birthday)
Promise to pay for great benefit (ex. Webb v. mcgowin (dropped pine block) (enforced)
Harrington v. taylor (neighber puts hand infront of axe saving abusive husband from death) (not enforced))
What is
Offer
manifestation of willingness to enter a bargain, which justifies another person’s understanding their assent to the bargain is invited and will conclude it.
Must have clear instructions!!!
Is the offer really just an invitation to negotiate?
Is there something the “offeror” must still do?
Is Party A making Party B use A’s documents to make an offer?
Advertisements as offers
Normally unilateral offers which may be withdrawn at any time
Not contractual until Sale offered by buyer which gives the seller an opportunity to accept
Advertisements are an offer when there is no room for negotiation and clearly state all terms
ex. Lefkowitz v. Great Minn Surplus
What is
Acceptance
the manifestation of assent to the terms made by the offeree.
Offeror is the master of the offer
How can
Acceptance look like
May be a return promise or performance.
Offeror may specify manner of acceptance.
If acceptance is by return promise, offeree must notify offeror.
If acceptance is by performance, no notification is necessary unless offeror specifies it
SILENCE NOT ORDINARILY ACCEPTANCE
definition
Consideration
Benefit to the promisor or a detriment to the promisee
Generally
Consideration
Does not have to be equal
does not include previous actions
Offer has lapsed
Once the time period stated in the offer has elapsed
or after reasonable time (when no stated)
when face-to-face (usually considered expired at the end of the conversation)
Reasonableness is determined by facts and circumstances
Offer may be revoked
At anytime by the offeror
Offeror may revoke offer through their conduct but the offeree must be aware of the conduct
Notice of revocation does not have to be communicated directly
ex. Dickinson v. dodds
When is an offer rejected?
when acceptance is not the mirror-image of the offer
A mere inquiry as to a change in the proposed offer does not constitute a rejection.
What if acceptance is not a mirror image?
it is a rejection to initial offer and a counter offer
The parties then switch and the counter offer extinguishes the intial offer
Last Shot doctrine
The contracting party which makes no objection, impliedly accepts any additional terms contained in the final counteroffer
Terms in the final counter offer are controlling
Mailbox rule
Acceptance occurs when the offeree sends their letter (acceptance) in the mail
NOT when the offeror receives the letter
Option contract created by part performance
The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer
Ex. offered $100 to walk a mile and accepting. Starting the asked-for performance (walking the mile) creates an option contract
Option contract b/c
Offeree doesnt have to complete performance (dont have to walk the mile); and
If the performance isnt completed, the offeror isnt obligated to do their part either (pay the $100)
Liability despite dailed negotiations
Courts sometimes provide remedy to harmed parties despite there not being an enforceable contract
examples of
Liability despite failed negotiations
Drennan v. Star Paving (1958) General contractor may enforce a subcontractor’s bid not under contract but under promissory estoppel
Hoffman v. Red Owl Stores (1963) Court awarded reliance damages to P despite the fact no final agreement was reached (due to the bad conduct of the defendant
Channel Homes Center v. Grossman (1986) The parties had exchanged promises of value to another (letter of intent), there was sufficient consideration to support a binding agreement to negotiate in good faith
Indefinite terms
Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
Terms of contract should be definite
ex. Sun printing & publishing Ass’n v. remington paper co. - Court held that the price was too vague because only a maximum price was set and a mechanism through which to reach a price each month, and in the event of disagreement between the parties, was not specified
Generally
Statute of Frauds
Affirmative Defense
Require that the following types of contracts be in writing
1. Executor-administrator provision
2. suretyship provision
3. marriage provision
4. land contact provision
5. one-year provision
executor-administrator provision
SoF
Contract of an executor or administrator to answer for a duty of their decedent
Suretyship provision
sof
Contract to answer for the duty of another
most commonly concerns for the duty of another
Langman v. alumni ass’n
Statute of Frauds did not bar enforcement of the mortgage assumption clause because through its actions, the Alumni Ass’n had accepted the deed and its terms.
And the Alumni Ass’n received a direct benefit and did not merely act as surety.
Marriage Provision
Contract made upon consideration of marriage
Land contact provision
Contract made for the sale of an interest in land
Does not include:
Contracts concerning real estate agent commissions.
Agreements to revoke a previous sale agreement.
One year provision
SoF
Contract that is not to be performed within one year from the making thereof
Oral agreement may come under the Statute of Fraud if, by its terms, the contract could not be performed within one year (e.g.: “over a period of two years, we will refurbish the community center).
Even if, by its terms, an oral agreement could not be performed within one year, the agreement falls outside the Statute of Frauds (e.g.: “we will build the tallest building in the world”).
ex. CR klewin v. flagship properties
How to enforce
statute of frauds
Be evidenced by any writing;
Signed on or on behalf of the party to be charged which;
Reasonably identifies the subject matter of the contract;
That is sufficient to indicate that a contract has been made by the parties or offered by the signor to the other party; and
States with reasonable certainly the essential term of the unperformed promises in the contract.
Exceptions
statute of frauds
If performance relates to what the contract is about
Beacer v. brumlow- Departure from normal rule because Seller was a “laughing defendant” who fully admitted there was an agreement to sell and invoked Statute of Frauds to avoid liability.
exception to the statute of frauds
what if performance doesn’t relate to what contract is about?
Recovery traditionally limited to situations where person was falsely told, and reasonably relied upon the assertion, that Statute of Frauds did not apply.
Ex.monarco v. Le Greco- estoppel was extended to situations where unjust enrichment or unconsciousable injury would occur if not for the court interference
Limits on the bargin
Status
Party may be deemed to only enter into voidable contract or voidable contracts
Policing the bargin
Infants
Under 18 yrs
Can only enter voidable contract.
An infant may void their contract with the other party at any time, but not vice versa.
Infant would have to return whatever benefit and would have to pay for damage, wear and tear, etc.
Infants cannot void out contracts for necessities!
Status
Mental defect
A person may only be able to incure voidable contractual duties by reason of mental illness of defect
Must look at whether an action was actually so unreasonable that it could only be the result of mental illness
Congnitive test- meaning and effect of the words
restatement test- nature and consequences of the transaction
mere weakness of mind body or both is not sufficient
ex. ortelere v. teacher’s retirement bd.
cundick v. broadbent
Duress
a party’s assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim
maybe be overt/improper threat, or economic duress (econ is debatable depending on the court)
duress/modification
Pre-existing duty rule
If a party to a contract does what they’re already obligated to do in exchange for a modification of a contract, the modification will be voidable.
ex. alaska parkers ass’n v. domenico- An agreement has been made without consideration when it is made for an already contracted-for performance.
avoiding the
pre-existing rule
rescission and modification
Schwartzreich v. Bauman-Bausch, Inc. (1921) Courts found there were three contracts between the parties (initial contract, contract to terminate initial contract, and modified contract) so there was new consideration for modified contract.
Watkins & Son v. Corrig (1941) Oral contract to pay nine times the initially agreed-upon price rescinded and modified the initial written contract, so defendant had to pay higher price.
undue influence
unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them, is justified in assuming that person will not act in a manner inconsistent with his welfare
if a party’s acceptance was induced by undue influence by the other party, the contract is voidable by the victim
when will a court consider
undue influence
situations
Whether discussions were conducted at an unusual or inappropriate time
Absene of third-party advisors or insistence they not be present
Insistence that the agreement be entered into ASAP
Misrepresentation
a statement which is not accord w/ the facts
Material if it would induce a reasonable person to manifest their assent if the person makitng it knows it would likely induce the recipient to do so.
When do we care about
misrepresenation
It is fraudulent (i.e.: when the maker makes this misrepresentation with the intent to induce assent)
When a misrepresentation prevents formation of a contract (i.e.: when the misrepresentation concerns an essential term of the contract)
When a misrepresentation makes a contract voidable (i.e.: when the recipient’s consent assent was induced by the misrepresentation)
Concealment and non-disclosure
Parties do not have a duty to disclose where they do not share a relation of trust and confidence (Swinton v. Whitinsville).
But once a party starts talking, they must keep talking.
If a party is asked a question, they cannot lie, but they’re not obligated to answer.
Indirect communications can be misrepresentation, concealment, and non-disclosure.
types
Mistake
unilateral
Only one party is mistaken about a material aspect of the contract.
Mistake
Bilateral
Both parties are mistaken about a material aspect of the contract.
Mistake
Contract with latent ambiguities may be non-binding as the ambiguity means there was no meeting of the minds (Peerless ship case).
Party may be obligated to complete not-quite impossible project if they were in a better position to discover latent defect (Stees v. Leonard).
Could be avoided through renegotiation.
Mutual Mistake
“Diamond in the rough” case
A party bears the risk of their mistake if they enter into a contract with limited knowledge (related to subject of mistake) and treated their limited knowledge as sufficient.
“Pregnant cow” case
Parties both mistakenly believed cow was sterile and agreed to sale of sterile cow.
Parties were both mistaken about basic assumption under which contract was made, so no meeting of the minds.
Equity limits on the bargin
A “court of” equity may award specific performance as a remedy
If you come to a court of equity, you must come from equity/have clean hands
If you’re found to have been a bad actor, you cannot recover under an equity theory
ex. McKinnon v. Benedict
Tuckwiller v. tuckwiller
Adhesions contracts
form contracts
A contract where the parties are of unequal bargaining power and the contract is prepared by the party with greater bargaining power, effectively eliminating the ability of the less powerful party to negotiate
Parties are typically bound by adhesion contracts even though there was no negotiation.
Parties may argue that a term is suprising and should not be enforced
ex. O’Callaghan v. Waller & Beckwith; Housing crisis
Can argue that term is surprising and should not be enforced
Surprise must be objective/reasonable
If it’s a term you should expect, cannot say it was surprising
May be surprised at substance of term or existence of term
Unconscionability
Some contracts are so substantively unfair that courts will refuse to endorse them.
Unlike other doctrines, it looks at bad outcomes rather than bad processes.
Unconscionability arguments rarely prevail, particularly where both parties are sophisticated parties.
Remember Williams v. Walker-Thomas!
generally
Remedies
When one party breaches an enforceable contract, the other party will be entitled to a remedy based on the circumstances of the resulting loss or injustice. The court will award money damages, one or more equitable remedies, or some combo of legal and equitable relief
Alternative to consideration, usually monetary
Specific Performance
remedies
Specific performance may be awarded as a remedy for the breach of a contract for the sale of goods if a legal remedy would be inadequate
Like when contacted, good is considered unique, hard to obtain through the market ex. Family heirloom
Campbell soup co. v. wentz
how to get
Reliance
argument
To establish a reliance argument, the claimant must prove:
1. There was a promise to the promisee;
2. That the promisor should reasonably expect to induce action or forbearance of the promisee;
3.Which actually induced such action or forbearance from the promisee;
4.Because of which the promisee suffered a detriment;
5. And injustice can only be avoided by enforcing the promise.
Claimant will receive reliance damages.
last resort
What are
reliance damages
actual amount the promisee has expended in reliance on the promise
(Put the promisor in a position which she would have been had the contract not been made)
how to get
Restitution
Alternative to breach (claim)
To establish a restitution claim, the plaintiff must prove:
The defendant was enriched by their action;
Retention of the benefit without payment would be unjust; and
Injustice could only be avoided through the court’s action.
relationship matters
Callano v. Oak Park- shrubbery case
What is
Restitution Damages
the actual benefit the promisee has conferred on the promisor
Measured by
The reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant’s position, or
The extent to which the other party’s property has been increased in value or his other interests advanced.
types of remedies
just name them
expectation
reliance
restitution
expectation damages
remedies
As if contract had been fulfilled; puts individual in the position they would be in had promise been performed.
reliance damages
remedies
as if contract had not been made and loss based on reliance had not occurred.
Restitution Damages
remedies
as if contract had not been made and individual has restored to them any benefit they have conferred to the other party.
Limitation on Damages
Mitigation
Requires victim of breach to take reasonable steps to limit the accrual of damages.
Rockingham Cnty v. Luten Bridge Co.- construction company should not have completed work
Parker v. Twentieth Century Fox- constructive service is permittable when
Limitation on damages
Foreseeability
Limits damages to those foreseeable by promisor
Limitation on Damages
Certainty
Restricts a party’s recovery to those damages that can be proven with sufficient certainty
Precludes recovery for losses beyond those the evidence can estimate with reasonable certainty.
Liquidated Damages
Parties may stipulate their own remedies
can request, special action or money (amount of how to calculate)
Parties may not stipulate punishment for breach
*punitive damages are rarely awarded in breach cases
Courts will usually honor the liquidated damages agreement
ex. term agreements when breaking a lease (amount stipulated the breeching party will pay to get out of contract)
Incomplete or defective performance
If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on
*The diminution in the market price of the property caused by the breach, or
The reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him
