Module 6 Flashcards
What is promissory estoppel?
The enforcing of a promise injuriously relied on by a promisee
What is a donative promise?
A promise to make a gift
Will an informal, unrelied on, gratuitous promise be enforced?
Generally no
What is a gratuitous promise?
In business when a party gratuitously agrees to raise or lower the contract price to reflect changing market conditions. This is not a gift, and the promisor is not entitled to restitution after performing
What is assumpsit?
When a promisor had undertaken to do something and had done it carelessly to the detriment of the promisee (misfeasance)
What is nonfeasance?
Promisor simply did not perform
What must there be in a contract?
Benefit to the promisor and a detriment to the promisee
What is consideration?
Legal detriment that has been bargained for by the promisor, and exchanged by the promisee in return for the promisor’s promise
What are the three elements that must coexist to make a binding transaction?
1) promisee must suffer legal detriment
2) detriment must induce the promise
3) promise must induce the detriment
4) bargain for objectively understood
What does it mean for the promisee to suffer legal detriment?
Promisee must promise to do what he was not legally obligated to do, or refrain or promise to refrain from doing what he is legally privileged to do
Does it matter who the consideration is going from or to?
No, the detriment can be given by someone other than the promisee and go to a person other than the promisor. As long as it is bargained for and given in exchange for the promise it doesn’t matter
What does it mean for detriment to introduce the promise?
The promise must be made to induce the conduct of promisee
What does it mean that the promise must induce the detriment?
The promise must induce the promisee to exchange her conduct for the promise. Offeree must actually/apparently be induced to act by the promise
If Ally says to Bee, “if you paint my house I promise to pay you $10,000.” Bee performs. Find the consideration
- Bee has incurred legal detriment because Be performed an act that he was not legally obligated to perform
- A was exchanging a promise to pay for the act
- be painted knowing of the offer and intending to accept
How does motive relate to consideration?
It can be evidence about whether an exchange was intended
What is wrong with this promise?
A mother tells her son that because he isn’t as rich as his brothers she will pay him $5000 for 30 days
Not enforceable because the promisor didn’t request or induce anything in exchange. No detriment, so no consideration
What is wrong with this promise?
Someone says because they have named their child after you a promise to pay you $5000
It is not enforceable because the promise didn’t induce a detriment. The promisee didn’t know about the offer/have any intent to accept when the offer was done. Past consideration isn’t consideration.
What is the problem with making an exchange when something has already occurred?
Parties cannot bargain for something that has already happened. Past consideration is not consideration
What does prospective mean?
Bargaining for something in the future. Consideration exists
What do courts do when there is inadequate consideration?
They want parties to make their own bargains, so generally they do not get involved in issues of consideration adequacy
What is a grubstake?
When a loan is made to help someone start an enterprise, and it is often conditional upon whether or not the enterprise is successful. In these situations it is okay that consideration is much more than the detriment because of the risk involved
What is wrong with this situation?
A tells B that if it rains tomorrow he will pay him $10.
B cannot enforce the promise even if it rains because A has merely made an unenforceable conditional promise to make a gift
How do you figure out whether the promisor has bargained for the detriment, or has made a conditional gift?
Consider many factors:
- The smallness of the detriment
- whether the happening of the contingency would be a benefit to the promisor (contract making state of mind)
- if the benefit is merely the pleasure of altruism (gift making state of mind)
If an offeror dies before there is an acceptance what is one way that the contract wont be terminated?
If there was consideration it would have made the offer irrevocable
What is sham/nominal consideration?
Nominal gesture given as a formality and done to create a contract (feigned or pretended)
The only consideration is false or sham recital of consideration, does that make the offer irrevocable?
- majority view: consideration hasn’t been paid or given
- minority view: opposite result
- Restatement two: no consideration (option contracts/credit guarantees = special treatment)
*
Is it possible to make a gratuitous gift enforceable by using some sort of bargain? Ie) having someone pay $10 as a token for $100,000 gift?
- restatement two: no just a formality instead of a genuine bargain. Token payment is nominal consideration
- your number two: the token manifests a bargained-for exchange
What happens when a promisor has more than one motive?
- it doesn’t matter, unless both parties know the consideration is just pretense it is immaterial that the promisor’s desire for the consideration is incidental to other objectives
When a promisor has more than one motive is the promise enforceable?
Under the objective theory, so long as the promisee doesn’t know that the detriment is only a pretense the promise is enforceable. But if it is clear that the consideration is only pretense, the promise is not enforceable
Is surrender of a valid claim detrimental?
It is, and if it is bargained for it constitutes consideration
What is your duty with regard to unfounded claims?
Not to assert a claim you know is unfounded
Can a contract be entered into under threat?
No it will be set aside on the ground of duress
If a party believes in/isn’t certain about the validity of a claim, should the surrender of an invalid claim still be non-detrimental?
A) earliest view: no detriment because a person has the right to assert an unfounded claim
B) modern view: consideration if it was asserted in good faith and if a reasonable person would believe it was well-founded
C) other courts: the only requirement is good-faith so long as the invalidity of the claim is not obvious.
D) statement two: must be either good faith or objective uncertainty about the validity of the claim
What is an invalid claim?
When the promisor is bargaining for a discharge of duty
What is the pre-existing duty rule?
Where a person performs/promises to perform a legal obligation, or promises to refrain from doing/refrains from doing what he is not legally privileged to do… Person has not incurred detriment
What is the simple version of the pre-existing duty rule?
A rule that prevents a party from promising the identical consideration in one agreement that the party is already duty-bound to perform by a previous agreement
What is an example of the pre-existing duty rule?
If a landlord promises it tenant to refrain from evicting her if she pays her past rent, the landlord can still evict her even if she pays because it was her duty to pay the rent
How do duties imposed by law relate to the pre-existing duty rule?
A promise is made to a subpoenaed witness in consideration for his testimony: not enforceable because by law the witness had to testify
How do contract duties relate to the pre-existing duty rule?
If you hire someone offering to pay them $900 and then a few months later agree to modify to pay $1000 it is not enforceable because that person did not incur detriment. They were just performing their existing duty under the original contract
What is an attempted modification without consideration?
Changing the wages of a contract and nothing else
Under the pre-existing duty rule if the parties mutually decide to rescind their original contract and enter a new contract with the new terms is that enforceable?
Yes because there’s no prior commitment from the old contract, because they were discharged by the rescission
Under the pre-existing duty rule is it possible to have a simultaneous rescission and new agreement?
No because the parties clearly intended the rescission to be contingent on the new contract and the new contract is contingent on the recession: this is called employing fictions
If the parties agree to an addendum to clarify their contract is that okay?
Yes, no new consideration is required
What is a circumstance that a modification to a contract would be upheld even without consideration?
If it arises out of unforeseen difficulties in the performance of the prior agreement ie) if you agree to excavate a site and then find that it is solid rock then the person agrees to pay you more (under the pre-existing duty rule this new promise is not enforceable because the unforeseen difficulty didn’t amount to impracticability so it didn’t excuse the person from perform. If this is in a place that recognized that exception this new promise would be binding
What does the UCC say about a modification because of unforeseen difficulties?
It is fair and useful because the modification is ancillary to the original exchange and has utility. A promise to modify before either party has fully performed is binding as long as it is fair and equitable. Dispenses with the need for consideration regarding modifications
What is an express modification?
An unforeseen problem arises and the parties orally agreed to change the contract. It is binding even without consideration
What is cardinal doctrine?
When major changes are demanded and performed, the contractor is entitled to the contract price plus compensation for the reasonable value of the changes
It possible to create detriment by giving up your legal right to breach?
No the ability to breach is not a legal right, it is the same as committing a tort
What is promissory estoppel?
I promise that is enforceable when A promisor makes a promise to promisee relies on it to his detriment
How does the pre-existing duty rule work with three party cases? It) if you make a contract with one party and then another party agrees to give you more money for doing the same thing, which will affect their bottom line
- classical view: agreement is void because you are doing what you were originally going to do
- modern view/restatements: third-party promise is enforceable because your existing duty was to the other person not that person
What happens when your pre-existing duty is owed to a member of the public? Ie) like a police officer to protect people
That duty would preclude you from accepting a reward for something that is already your job
If you pay part of a debt does that satisfy the whole debt?
No because you’re only doing what you were already legally obligated to do
What do some court say about part payment of a debt that is accepted?
A minority of courts say that if the payment is accepted in full then the liability for the full balance is discharged. If your creditor agrees, in consideration of part payment to discharge the debt, the promise is binding
The landlord gives you a break on rent for a few months what happens next?
The court say he had a donate of intent and receipts are sufficient delivery of the gift. This is not binding for future months
What is a liquidated claim?
Ones that are undisputed about their existence or amount
What is an unliquidated claim?
When there is a dispute about liability, amount due, or other things like method of payment. This is still true if the party’s assertion isn’t correct as long as it was in good faith and reasonably asserted
What is Satisfaction?
Discharge of a legal duty by paying what is due
What is accord?
Agreement that settles a dispute or compromise. It offers to give/accept a certain performance in the future to satisfy/discharge the obligor’s existing duty. Performance is the satisfaction
What are the three issues of accord and satisfaction?
- Have the parties gone through the process of offer and acceptance (accord?
- Has the accord been carried out (satisfaction)?
- Are the offer and acceptance supported by consideration?
* yes = binding accord and satisfaction
* no = no accord and satisfaction
What must an offer of accord make clear?
That it is seeking a total discharge. If not, any payment made and accepted is treated as part payment
If someone owed a creditor $100 on a liquidated claim and sent a check for $50 marked paid in full, and the creditor cashed the check. What happens?
The words make it clear the offer is seeking a complete discharge. Caching/depositing the check was an acceptance and performance
What happens if you retain a check for an unreasonable time?
That is an acceptance
What is the rule for retaining cashiers checks or cash ?
Any exercise of dominion creates a contract
What happens in this situation? Someone owes a creditor $100 on a liquidated claim. There was a good-faith dispute between the two and the amount was uncertain. The creditor honestly tells the person he is entitled to $100 and the person honestly says the creditor is only entitled to $50. Person sends a check for $75 marked payment in full and creditor cashes it
Consideration comes from the good faith dispute and compromise that involved a detriment to both parties
If someone owes a creditor a hundred dollars on a liquidated claim, they have a good faith dispute and the person sends $50 and the creditor cashes it. What happens?
- majority view: this claim is unliquidated so there’s no consideration to support Accord/satisfaction
- minority view: defendant is only doing what he is legally obligated to do
What is a fiduciary relationship?
Where one has an obligation to act for the other’s benefit
What are the rules of a fiduciary relationship?
When an agent is accountable for another person’s money, the agent can’t impose any conditions, otherwise it is a flagrant abuse of the powers of the relationship
If an accord/satisfaction are formed and the creditor gets a partial check what do they do?
- if they cash the check: they have assented and will forgo the balance
- if they want the rest they must refuse the check
If a check is accidentally cashed, what happens?
There’s a split about whether it can be set aside for mistake or not
What is the consideration in a bilateral contract?
Is not the uttering of a promise, it is the promised performance
What is mutuality of consideration?
Both parties must be bound or neither is bound
** widely discredited
Does the restatement amend the theory of mutuality of consideration?
Says that a nonbinding promise constitutes consideration if its performance would be detrimental
How does the doctrine of mutuality apply to unilateral contracts?
It doesn’t because the offeree is not bound to do anything
What is an illusory promise?
An expression cloaked in promissory terms, but on closer inspection, actually shows that the promisor isn’t committing to do anything
If there is no mutuality of consideration what does that do to a bilateral contract?
Voids it
Why is this an example of an illusory promise? Ie) A creditor promises to forbear until the time that he wants his money
There is no consideration
When does the restatement say an offer is binding as an option contract?
If it is in writing, signed by the offeror, includes a consideration, and proposes an exchange on fair terms within a reasonable time
What is one way to avoid illusory promises?
By inserting into an agreement the requirement of good faith or reasonableness
What is an implied promise?
When the court will infer a promise on the part of the plaintiff to do something
What is the UCC’s rule about best efforts?
Lawful agreement by either the seller or the buyer for exclusive dealing in goods imposes, unless otherwise agreed, an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale
How does it work where a party makes a promise of alternative performances?
Each alternative must be detrimental, otherwise there’s no consideration
What kind of promise is this? A and B enter a bilateral agreement where A will provide services for a year and B will pay. B retains the power to terminate at any time without notice
This is an illusory promise
What are the four propositions of the UCC?
A) if an agreement is silent on duration it is valid, but terminates after reasonable time, and can be terminated by giving reasonable notice
B) The agreement says termination can happen anytime: reasonable notice is still required
C) if the agreement says it can be terminated at any time without notice: this is unconscionable and the term should be stricken, and substituted with a reasonable time
D) if the time for giving notice is specified: it is still subject to the rule of good faith inherent in every contract
What is an aleatory promise?
Conditional on the happening of a fortuitous event ie) Insurance promising to pay money if there is a fire
What Happens when there is performance under avoid bilateral contract?
It can be treated like an offer to unilateral contract, on performance there is a forging of a good unilateral contract out of a bad bilateral contract
What are the two things that must happen before a forging can occur?
A) offer and acceptance must be completely fulfilled and the promise requested must have been given
B) The action performed must be detrimental, otherwise there is no consideration
Where is forging generally relevant?
To most void bilateral contracts and applies in situations where the agreement was too indefinite to be enforced
What is a requirement contract?
When a buyer expressly agrees to buy all of the buyer’s requirements of the stated good from the seller who agrees to sell that amount to the buyer
What is an output contract?
When the seller agrees to sell all of the output of a certain item to the buyer and the buyer agrees to buy that output from the seller
How do Requirements contract and output contracts differ?
Their rules are nearly the same
Where is the consideration in a requirement or output contract?
From the buyer’s/seller’s surrender of power to contract with others
How Does the UCC regulate output/requirements contracts?
Must occur in good faith, and can’t require an unreasonably disproportionate supply to the stated estimate
What is a conjunctive contract?
Promises that involve two things that must happen
Must all of the considerations in a contract to be valid?
No if it involves a number of different things, and one already happened, that one consideration being invalid doesn’t stop the rest from having consideration
How is good-faith involved in every offer ?
It is implied, so upon acceptance it becomes a term of the contract
What does bargained for mean?
Any terms in the agreement that are assented to by both parties (doesn’t mean dickering, haggling, discussion)
