Contracts Midterm Flashcards
Promise
- Rstmt §2 – Promise; Promisor; Promisee; Beneficiary
Promise (oral, written or inferred from conduct): a manifestation of intention to act or refrain
from acting in a specified way so made as to justify a promisee in understanding that a
commitment has been made.
Agreement
- Rstmt §3 – Agreement
Defined; Bargain Defined
Agreement: manifestation of mutual assent on part of two or more persons
Bargain: agreement to exchange promises or to exchange a promise for a performance or to
exchange performance
Hawkins v. McGee – Doctor promised perfect hand
H: received damages for difference of hairy and normal hand
RULE: you can recover when the other party breaches, only recover the difference
Lucy v. Zehmer – Drunken Sale of Land on Back of Restaurant Check
§201 Whose Meaning Prevails
ISSUE: Is a written contract enforceable even if D was allegedly drunk, joking, and had no
intention to sell?
HOLDING: Yes, the Ds actions as objectively observed indicated that he was serious.
1. We look to the outward expression of acts and words. What is reasonably interpreted
Embry v. Hargadine, McKittrick Dry Goods Co. – renewal of employment contract / Secretive intentions do not count
§201 Whose Meaning Prevails
ISSUE: Is a written contract enforceable even if D was allegedly drunk, joking, and had no
intention to sell?
HOLDING: Yes, the Ds actions as objectively observed indicated that he was serious.
1. We look to the outward expression of acts and words. What is reasonably interpreted.
Embry v. Hargadine, McKittrick Dry Goods Co. – renewal of employment contract / Secretive intentions do not count
§201 Whose Meaning Prevails
ISSUE: Under the circumstances, did D’s responses to P’s inquiry regarding his re- employment constitute a valid contract, irrespective of D’s subjective (aka secretive) intent?
HOLDING: There was a manifestation of intent, and a reasonable jury would find there was acceptance of the bargain by Ds actions. There was a valid contract
RULE: Objective Standard = Decision must be made based on the objective intention/interpretation of both parties. D’s subjective/secret intention (i.e. that he didn’t actually intend on keeping promise) cannot be taken into consideration bc that could never be known by P.
§201 Whose Meaning Prevails
- if the Ds words can reasonably be interpreted as agreeing to a contract, then a contract is made absent of a meeting of the minds.
Oswald v. Allen – Swiss coin collection, misunderstanding of items in purchase
ISSUE: Does a valid contract exist if there is an ambiguity of what was meant in the
agreement?
HOLDING: No! No contract exists if the two parties’ understandings are different.
There is no way to know the understanding of what a reasonable man would understand
from the language of the agreement.
RULE: Ambiguity in essential terms cannot lead to a reasonable interpretation.
Requirements of a valid offer §24
Manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
- § 26 – Prelim negotiations; Invitation to enter a bargain, not an offer (Advertisements)
a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is
addressed knows or has reason to know that the person making it does not intend to conclude
a bargain until he has made a further manifestation of assent.
Mesaros v. United States – Advertisement to buy coins, ads are not offers
ISSUE: Whether an advertisement constitutes an offer.
HOLDING: NO! it is unreasonable to believe an ad creates an intent to be bound. Would
create infinite contracts.
RULE: § 26; The order form buyers sent would be an invitation to form a contract or bargain.
An advertisement for goods for sale is not an offer, it is an invitation to enter into a bargain.
- § 33 – Certainty (Uncertainty may = lack of intention to be bound)
Terms of the contract must be reasonably certain to have manifestation of intent
Terms are “reasonably certain” if they provide a basis for determining the existence of a breach and or give an appropriate remedy
The fact that terms are left open or uncertain may show that manifestation of intent is not intended to be an offer or an acceptance.
Academy Chicago Publishers v. Cheever – Breaking deal to publish decedent’s stories
§33
ISSUE: Whether there is a K if there was not a meeting of the minds on the terms of
the agreement.
HOLDING: NO! There was no meeting of the minds in the terms of the agreement.
RULE: § 33; when terms are too vague, there is no way to rule in favor of one party
or another.
1. Precaution: Must be clear enough in contract to enforce it
2. An agreement between parties that lacks certainty in its material terms is not a
valid K unless the conduct of the parties show meeting of the minds for the
material terms, or if a trial court can reasonably enforce the terms.
§33 pt 2
If you do not know what It would take to breach an agreement , then clearly there is no K.
§ 30 – Form of Acceptance Invited
§ 35 – Offeree’s Power of Acceptance
An offeror gives an offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer
A contract cannot be created by acceptance after power of acceptance has been terminated in on of ways listed in Rest. 36
§36 – Methods of Termination of the Power of Acceptance
Offeree’s power of acceptance can be terminated by:
1. rejection or counter-offer by offeree, or
2. lapse of time, or
3. revocation by offeror, or
4. death or incapacity of the offeror of offeree
In addition, offeree’s power of acceptance terminated by the non-occurrence of any condition of acceptance under the terms of the offer
Ardente v. Horan – “Mirror Image Rule” Selling Home With Additional Items Not Part of Purchase/Sale Agmt”
ISSUE: Is there acceptance when an offeree sends an acceptance along with additional terms conditions?
HOLDING: No contractual obligation formed. The letter did not clearly state that even without those items they accept.
- Consistent with Embry: Where the listening party takes it in a particular way, and that was reasonable, then the speaker is bound to what they said. (must be clear, or else its your fault)
RULE: With offer to form a bilateral contract, offeree must communicate acceptance to the offeror before any contractual obligation can exist. Acceptance cannot propose additional conditions/terms to offer…such conditions would need offeror’s acceptance
Mirror Image
An offer to bargain from XàY is not valid unless Y accepts to terms of the offer
§ 39 – Counter-offers
A counter off is an offer made by an offeree to his offeror
relating to the same matter as the original offer and proposing a
substituted bargain from that proposed by the original offer
An offeree’s power of acceptance is terminated by his making of
a counter-offer.
§ 57 – Effect of Equivocal Acceptance
Where notification is essential to acceptance by promise, the offeror is not bound by an acceptance in equivocal (unclear) terms unless he reasonably understands it as an acceptance
§ 59 – Purported Acceptance which adds Qualifications
A reply to an offer which purports to accept it but is conditional
on the offeror’s assent to terms additional to or different from
those offered is not an acceptance but a counter-offer.
Ex of unconditional acceptance with a request:
Buys a car for $20,000
and accepts offer. They request to pick up on Tuesday. This doesn’t
change the contract.
UCC rejects the “mirror image rule”
Under UCC…acceptance will usually be valid
even if the acceptance is different from the offer UCC §2-207
§41–Lapse of Time
An offeree’s power of acceptance is terminated at the time specified or after a
reasonable time.
§ 43 – Indirect Communication of Revocation
An offeree’s power of acceptance is terminated when the offeror takes an action that is inconsistent with their intention to enter the contract.
Ex. Sells to someone else
§ 46 – Revocation of General Offer
advertisement in newspaper terminated when
offeror releases a general notification equal to that of the offer and no means of
notification is reasonably available.
Firm offers of goods (UCC)
are not revocable
Petterson v. Pattberg – Unilateral contract; performance to pay mortgage, slammed
door in face.
ISSUE: Is there acceptance when an offeree attempts to perform in a unilateral contract?
HOLDING: No, there was one act to be done: pay.
RULE: Unilateral contract acceptance is only done when performance is
completed. Can be revoked before.
Note: This holding would not fly today. Pattberg did not allow Petterson to perform, and there was detrimental reliance on the contract.
§ 42 – Revocation by Communication from Offeror Received by Offeree
An offeree’s power acceptance is terminated when the offeree receives
from the offeror a manifestation of an intention not to enter the proposed contract. To avoid the offeror revoking at any time, must have consideration.
Marchiando v. Scheck – seller revoked promise to give commission to broker if he got a seller
ISSUE: Can a unilateral contract offer be revoked if there is part performance?
RULE: Part performance makes the offer irrevocable
§ 45 – Option contract created by part performance or tender
Where an offer invites an offeree to accept by rendering a
performance and does not invite a promissory acceptances, an option contract is created when the offeree tenders or begins the invited performance or tenders the beginning of it.
Mailbox rule
does not apply to revocation, only acceptance. Revocation occurs by mail once it is received.
SUMMARY of Valid Offers:
Offer must convey certainty & definiteness to the offeree
Uncertainty/indefiniteness may indicate offeror’s intent not to be bound
Generally…most offers presumed to be revocable anytime before acceptance…however…
Exceptions (irrevocable K’s) = Options Contracts (§25), Firm Offers (UCC §2-205) & when performance
has already begun (aka partial performance)
Validity of Certain Types of Offers:
Offers Made in jest (Lucy v. Zehmer) = not valid
Soliciting Bids = Offers soliciting bids (“I’d like to sell…) not valid offers
Advertisements = Most ads not valid offers – Must look for specific terms & words of commitment for the ad to be a valid offer (see: Mesaros)
§ 50 – Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise
In the manner invited or required by the offer
By performance
By promise
§ 53 – Acceptance by Performance; Manifestation of Intention Not to Accept
Offer can be accepted by performance only if the offer invited acceptance by
performance.
Davis v. Jacoby – Niece makes a promise to look after Aunt (MAILBOX)
§58
ISSUE: Is there acceptance when there is a promise to perform?
HOLDING: This was not a unilateral contract, but bilateral. There was a
promise to perform. Promise to perform counted as acceptance because it was
invited by the offeror.
Rule:
§32- Either method of acceptance would have been sufficient because both were invited. Depends on what the offeror requests as acceptance.
§63- An acceptance made in a manner and by a medium invited by an
offer is operate and completes manifestation of mutual assent as soon as it leaves the offeree’ possession (sent acceptance in the mail and before received).
Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Co. – Applied for loan. Requirements to accept sent after due date, created a counteroffer.
ISSUE: Is there acceptance to a counteroffer made after a lapse of time when there is no reasonable way to know there was acceptance?
HOLDING: Not acceptance, because there was no notification.
RULE: Acceptance of an offer is invalid unless reasonably communicated to
the offeror (cashed the cashier’s check), unless acceptance was invited by performance
§ 41-If the time specified, or a reasonable time to accept has lapsed,
then acceptance turns into a counteroffer.
§ 54-Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance (unless requested).
If the offeree knows the offeror has no reasonable way of knowing abut the performance, they must send a notification.
Cole-McIntyre-Norfleet Co. v. Holloway – traveling salesman, previous dealings with
barrels of meal (that expire)
ISSUE: Whether acceptance by silence is sufficient to create a K.
HOLDING: Silence was sufficient for acceptance because there were past
dealings that made it reasonable to believe silence meant acceptance.
RULE: Acceptance can be created by silence because of previous dealings
§69 Silence has an implied expectation for compensation
i. Ex: Go to a barbershop and get a haircut. The client accepts by silence that they will have to pay the barber.
When silence was mentioned as a method of acceptance, or can
be reasonably understood as acceptance.
Look at past dealings to understand if this was the normal form
of acceptance.
Summary of Ways Acceptance by Silence May Be Valid:
Reason to Understand = When the offeror has given the offeree reason to understand that silence will constitute acceptance & the offeree subjectively intents to be bound
Benefit of Services = When offeree silently receives benefits of services (NOT GOODS), acceptance is valid for those services when:
Offeree had reasonable oppty to reject those services; or
Offeree knew or should have known that service provider expected compensation
Prior Conduct = A “course of prior dealing” may make it reasonable for offeree’s silence to be construed as consent
Acceptance by Dominion = When offeree receives goods, and keeps them, this exercise of “dominion” is likely to be held as an acceptance
UCC 2-204 –in General
A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by the parties
Agreement may be found for sale even though the moment of the making is undetermined
If the parties intended to make a contract, absence of terms does not matter. We will fill in what the parties intended for the contract to say. (use gap fillers)
UCC 2-205 – Firm Offers
An offer by a merchant to buy or sell goods in a signed writing which by its
terms gives assurance that is will be held open and is NOT revocable, for lack of consideration, during the time stated.
1. Offer
2. Merchant
3. To buy/sell
4. Gives assurance that is will be held open
5. In a signed writing
6. Which is for the time stated, or a reasonable time (up to 3 months)
UCC 2-207 – BATTLE OF THE FORMS
Contract may be formed but the terms may bring a dispute.
b. Additional terms are construed as proposals for addition.
c. Differing terms - Knockout rule – conflicting terms knock each other out and
do not become part of the contract
Empire Machinery Co. v. Litton Business Telephone Systems –
FACTS: Wanted to get a phone system, entered negotiations, factual dispute about whether there was acceptance.
HOLDING: If an offeree with authority to legally bind its organization takes steps to begin performance of its contractual obligations that would lead a reasonable offeror to believe that the contract has been accepted, such conduct
may constitute acceptance of the contract.
RULE: Exception to common law: Acceptances may be made by beginning a
performance.
Insteel Wire Products Co. v. Dywiday Systems Int’l USA
ISSUE: Whether there was an offer (yes), and if there was an agreement?
HOLDING: There was an agreement because the conduct of both parties
demonstrated assent. Term materially altered agreement, considered counteroffer, specific and affirmative assent to the seller’s counteroffer is necessary to create contract
RULE: § 2-207
RULE: Knockout rule
Reilly Foam Corp. v. Rubbermaid Corp.
FACTS: Reilly Foam alleged that rather than obtaining sponges solely from Reilly Foam, Rubbermaid continued to obtain sponges from another supplier and failed to make set minimum purchases. Rubbermaid denied that the contract created between the parties called for Reilly Foam to be its exclusive supplier.
HOLDING: Breach
RULE: Knockout rule
§2-207(2) – On the inconsistent item, the parties’ form terms are knocked out of the contract
Sun Printing & Publishing Ass’n v. Remington Paper & Power Co.
FACTS: Paper prices might fluctuate, wanted to let it go by market shift.
HOLDING: No binding contract, agreement to agree. The terms were not
specific enough, and did not set a reasonable time.
RULE: Must be able to apply a reasonable price.
- § 2-305 – Open Price Term
- § 2-309 – Absence of Specific Time Provisions; Notice of Termination.
Arnold Palmer Golf Co. v. Fuqua Industries, Inc.
FACTS: Memorandum of intent signed, included requirement to have board of directors approve, yet revoked before giving to board of directors.
ISSUE: Needed to figure out if memorandum of intent was agreement to agree (not enforceable) or a contract.
RULE: Memorandum of intent can be binding if the parties signed, and essential terms were stated. There must be a clear understanding and intent to be bound to terms.
§ 26 Preliminary Negotiations
a. A manifestation of willingness to enter into a bargain is not an
offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
§ 27 Existence of Contract where written memorial is contemplated a. Memorandum of intent to create a contract. Is it a contract?
Copeland v. Baskin Robbins U.S.A. – Co-packing agreement,
FACTS: There was an agreement to negotiate a co-packing agreement and
Baskin Robbins pulled out before trying to negotiate.
RULE: Agreement to negotiate can be binding if both parties promised – must
at least try to negotiate in good faith.
The Requirement of Writing (Statute of Frauds) – generally oral agrmt are binding
Statute of Frauds says that…
Even tho all elements of the prima facie case to make out a contract are present;
Certain kinds of agreements will not be enforceable unless they are in writing;
These include:
i. Agreements for sale/lease of real ppty
ii. Agreements that are not performed within in one year
iii. UCC - Agreements for sale of goods over $500
Requires:
i. Writing
ii. Signature – by person who is denying the contract
iii. Sufficient info/essential terms (UCC price terms not usually req’d)
§ 134 – Signature
any symbol used to show intent to authenticate the writing – includes e-sig
§ 134 – Signature
Exception to requirement of writing
§ 139 – Enforcement by Virtue of Action in Reliance
(like promissory estoppel)
§ 2-201 – Formal Requirements; Statute of Frauds
Goods $500+ must be contracted in writing
Between merchants – must be in writing, writing has to be sent in reasonable time, and
receiving party has 10 days to make objection.
Oral contracts need not be in writing if:
These are: (a) goods specifically manufactured for the buyer and the seller has made a substantial beginning go the manufacture; (b) party admits K for sale was made for specific qty of goods; or (c) if goods being sold are received & accepted or payment has been made & accepted
- will find the statute satisfied even if the writing “omits or incorrectly states a term (can omit price term and code will provide “gap filler.” Only term required is qty)
§17 – Requirement of a Bargain
Formation of K reqs a bargain in which there is a manifestation of mutual assent (offer +
acceptance) to the exchange and a consideration
Whether or not there is a bargain…a K may be formed under special rules applicable to
formal K’s or under the rules stated in §§82-94
§71 – Requirement of an Exchange
The promisor made the promise to induce the return promise of performance; and…
The promisee undertakes the specific performance in exchange for the promise made by
the promisor
§ 79 – Adequacy of Consideration; Mutuality of Obligation
A gain to the promisor or a loss to the promisee
Equivalence in the values exchanged; or
Mutuality of obligation
Congregation Kadimah Toras-Moshe v. DeLeo – gifts are not consideration
FACTS: Guy said he wanted to make a donation to synagogue, but died before making the donation. Synagogue sued estate for breach of contract and reliance
on promise.
ISSUE: Whether there is consideration to make a K when there is no motive or
inducing cause.
HOLDING: No consideration, no K.
1. Possible argument? § 90 – Detrimentally relied on the promise – does not hold.
RULES:
1. “Benefit v. Detriment” Analysis – If the agreement affords the donating
party no legal benefit AND the not receiving the donation does not create any legal detriment to the recipient…then there is no legal consideration for the donor’s offer
Schnell v. Nell –Promise to give $200 in exchange for penny – disguised as a gratuitous promise
ISSUE: Whether a nominal consideration is enforceable
RULE: Nominal considerations are almost like having no consideration at all.
There is no K.
§ 79 Adequacy of Consideration; Mutuality of Obligation
1. If the requirement of consideration is met, there is no additional requirement of
a. equivalence in the values exchanged; or (equivalence is not necessary)
Ex: “for the love of my wife” is NOT consideration. iv.
95(1) – Sealed Contract
1. In the absence of statute a promise is binding without consideration if
a. It is in writing and sealed
b. The doc containing the promise is delivered
c. The promisor and promise are named in the doc
Hamer v. Sidway – promise to uncle not to drink until 21
ISSUE: whether there was consideration when the nephew gave up his freedom?
HOLDING: the uncle asked for something in exchange for money, there was consideration.
RULE: § 79
i. Consideration if a person gives up something they are legally allowed to do.
ii. A waiver of any legal right (i.e. drinking/smoking…etc) at the request of another party, is a sufficient consideration for a promise
unequal amounts of consideration is still consideration
§ 79 - Mere inadequacy of consideration will not void a contract
Runzheimer Int’l, Ltd. v. Friedlen – Illusory promise not to fire
FACTS: Employee signed covenant not to compete in order to not get fired. There was no time stamp, could have been fired 5 min later – illusory promise not to fire.
ISSUE: Was there consideration when the employee was at his detriment and did not benefit from the not to compete agreement?
RULE: There must be a benefit on both sides for there to be consideration.
Wood v. Lucy, Lady Duff-Gordon
FACTS: Wood sued lucy because she put her name on products and Wood was supposed to have the exclusive right to put the name on products and split the contract. But did he make a good faith effort to do what he promised, or was it illusory?
ISSUE: Whether an implied promise creates consideration.
RULE: An implied promise can be consideration. But then must operate in
good faith.
RULE #1: A promise may be lacking and yet the whole writing may be instinct with an obligation imperfectly expressed…see: §2-306 –
a. A promise to use reasonable efforts may be implied from the all the circumstances of a K
RULE #2: An implied promise to use best (reasonable) efforts in bringing about the agreed upon performance can be considered sufficient consideration.
RULE #3: The duty of good faith can compensate for vagueness in an agmt to avoid invalidation of a contract that was clearly intended by the parties.
HOLDING: By granting an exclusive privilege to Wood where Lucy’s sole compensation depended created an implied promise that he would use reasonable efforts to try. NOT ILLUSORY.
d. For sale of goods: UCC 2-306 requires “best efforts” in exclusive dealing contracts.
Levine v. Blumenthal – request to pay less rent
FACTS: Contract for 2-year rental and option to renew for higher price in 3rd year. Couldn’t pay rent in 2nd year because of great depression. Asked to keep rent at the first year’s rent, and landlord did. Then landlord sued to recover balance of rent.
ISSUE: Is the landlord entitled to the money? Was there consideration for the modification of lowering of the rent?
HOLDING: the landlord is entitled to the money because the contract modification had to be supported by consideration, which it was not.
§ 73 – Performance of a Legal Duty
1. There can’t be consideration if there was already a legal duty imposed
Gross Valentino Printing Co. v. Clarke
FACTS: P was printing magazines for D. D agreed to the terms. Then P informed D that the price needed to change b/c they had to outsource and would cost more to print. D did not object because he was desperate for the magazines to print in time.
HOLDING: Consideration was not required; P was able to recover from D.
RULE: ***UCC 2-209 – Modification needs no consideration to be binding. Only requirement is modification must be made in good-faith to be K. Desire
to escape a bad bargain or the extortion of a modification without legitimate commercial reason would be bad baith.
1. Lack of consideration is not a defense for goods.
ii. Hold Up Problem – person that is hired to do something for $50k cannot
threaten quitting for another $50k. Promise to pay the additional $50k would not
be K under-preexisting duty rule.
Angel v. Murray
FACTS: Garbage man had duty. Then built more houses in his zone which required him to do more work. This was a new circumstance that was not anticipated by the parties and the modification of the contract for more money would be fair and equitable.
RULE: § 89 – Modification of Executory Contract (MIDTERM)
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; or (unanticipated difficulties excuse consideration)
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise. (promissory estoppel)
Truhe v. Turnac Group, L.L.C
Naussau Trust Company v. Montrose Concrete Products Corp.
Reliance on a Promise (PROMISSORY ESTOPPEL as a SUBSTITUTE for Consideration)
Defined: serves as a “consideration substitute” that renders certain promises otherwise lacking in consideration binding and enforceableèIn such cases, the promisee’s reliance is treated as an independent and sufficient basis for enforcing the promise. Promissory estoppel can be viewed as a legal device that prohibits the promisor from denying the existence of a contract for lack of consideration.
Restatement §90: Promise Reasonably Inducing Action or Forbearance
What is needed for promissory estoppel to work?
1. A promise reasonably expected to induce reliance (aka reasonably foreseeable);
2. Promisee actually relies on the promise (in a reasonable way);
3. The reliance leads to some detriment by the promisee (definite/substantial); and
4. Injustice can only be avoided by enforcement of the promise
§ Meaning: “You are STOPPED from taking back your promise”
§ In certain situations where there’s no “consideration” but where there’s still a contract “scenario” &
there’s still an injury with damages associated…PE can be used as a “substitute” where consideration
would ordinarily be needed to enforce the K
In PE situation…π cannot recover “expectation damage” but they CAN be given damages to “make them
whole” (aka Reliance Damages)
Garwood Packaging Co. v. Allen & Co, Inc. – move across the country
FACTS: D promised to make an investment in P, but then they didn’t. P made big life
decisions like moving across the country with anticipation of the investment. P sued for
reliance on the promise.
HOLDING: The promise was not enforceable because the P should have reasonably
known that the investment was not guaranteed. The move across the country was at their
own risk.
Feinberg v. Pfeiffer Co. – “Retraction of promise to long-time employee for lifelong pension”
ISSUE: Is a gratuitous promise to give an employee a lifelong $200/mo pension package enforceable if the promisee justifiably relies on the promise and revocation of the promise results in detriment to the promisee?
HOLDING: YES…promissory estoppel – D made promise that should have reasonably been expected to induce P into retirement sooner than later (if not immediately). At the time, P still had several years of work left in her and only retired in reliance on the promised pension.
Drennan v. Star Paving Co. – sale of real estate “Awards Damages on Basis of Promissory Estoppel”
FACTS: Contractor submits bid on project, but must find subcontractors, so needs to
know how much subcontractors will charge. Drennan gave a low bid and SP factored that into the calculation and got the job. Then Drennan raised bid because first bid was a mistake.
ISSUE: Can reasonable and justifiable reliance on a promise render the promise binding? What is the test for applying promissory estoppel?
HOLDING: YES…the very purpose of §90 is to make a promise binding even though there was no consideration in the sense of something being bargained for & given an exchange
i. D’s revocation of the promise was silent (§45) – acting in justifiable reliance on a unilateral offer is sufficient to make that offer irrevocable for a reasonable pd of time. D didn’t tell P their quote was a mistake until P’s bid was already accepted – P obv never could’ve known
ii. Upon making the promise D should’ve known that if their quote was lowest it would induce reliance and be used for the bid…P relied on D’s quote when calculating its bid & it induced action on part of P to make the bid
Sparks v. Gustafson – caretaker of building was told he could buy building
FACTS: Sparks appealed suit against him for breach of purchase agreement. Sparks sold
building to a third party after promising to make an agreement with Gustafson after he cared for the building for many years for no payment.
RULE: Unjust enrichment exists where the D has received a benefit from P and it would be inequitable for D to retain the benefit without compensating P for its value.
HOLDING: Sparks retained a benefit from Gustafson’s work which he was not paid for (and it was not a gift). It was implied in law (not in a contract but will act like it was)
Quantum Meruit (quasi contract)
Mills v. Wyman – PAST CONSIDERATION = doesn’t count: “Dad promises to pay woman for
caring for his son AFTER learning what she did”
Theory of the Case: That Wyman breached his K with Mills where he promised to pay for the services Mills rendered to W’s son
HOLDING = NOT VALID CONSIDERATION = D (father) had no moral obligation or duty to pay P bc the services were rendered in the past and the promise was made after the fact
Webb v. McGowin – “D’s offer to pay P for saving his life”
FACTS: McGowan promised to take care of Webb and pay $15 every 2 weeks after saving
his life. After Webb died, the estate continued to pay and then stopped. Webb sued.
Theory of Case: D’s promise to pay P $15 every 2 wks as repayment for saving his life
was sufficient consideration to justify enforcing the promise
RULE = VALID CONSIDERATION = A moral obligation is sufficient consideration to
support a promise to pay where the promisor has received a material benefit, although there was no pre-existing duty by the promisor
a. § 86 – Promise for Benefit received
i. A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.
A promise is not binding under Subsection (1)
1. if the promisee conferred the benefit as a gift or for other reasons the
promisor has not been unjustly enriched; or
2. to the extent that its value is disproportionate to the benefit.
d. P saves D’s life (material benefit) D MUST follow thru on any subsequent promise
