Professional Documents
Culture Documents
I. Elements of a Contract
A. Offer
B. Acceptance
C. Consideration
D. Future action (or future forbearance)
Key cases
o Bailey v. West
[horse farm; boarding a horse]
Even implied-in-fact contracts must have mutual understanding
as the basis
Mere voluntary service does not create an obligation or a
contract
Key terms
o Promisor / Promisee
o Offeror / Offeree
Key Cases
o Kirksey v. Kirksey
[offer for widowed sister-in-law to come live]
Gratuitous promises (gifts) are not consideration
Conditions needed to accept gifts, if not bargained for, are not
consideration
o Hamer v. Sidway
[grandson promises not to drink or smoke]
Forbearance from future acts or from exercising a legal right
can be consideration if that forbearance is in the interest of the
promisor
o Thomas v. Thomas
o Nominal consideration/Mixed Motives
o Brothers own property, one brother dies says his wife can stay
in house for $1/yr, as long as she remains unmarried, and
maintains the house
o While the considerations seems nominal it is sufficient because
fore bearing from legal right (remarrying) and maintaining the
house is sufficient consideration
o Also ruled this way b/c it is what the husband wanted
o R§71 - the consideration induces the making of the promise and the
promise induces the furnishing of the consideration
A. Nominal consideration
a. Consideration in name only merely to cover the pretense of a gift
b. Value is so low as to actually be a sham (R§79)
c. Cases:
o In re Greene
Performing illegal acts are not consideration
Forbearing from filing frivolous lawsuits is not
consideration
B. Mixed motives
a. If promisor gets what is bargained for, the motive is irrelevant (R§81)
b. Consideration pertaining to one motive of a contract makes the whole
contract valid
c. Cases:
o Thomas v. Thomas
Nominal consideration/Mixed Motives
Brothers own property, one brother dies says his wife
can stay in house for $1/yr, as long as she remains
unmarried, and maintains the house
While the considerations seems nominal it is sufficient
because fore bearing from legal right (remarrying) and
maintaining the house is sufficient consideration
Also ruled this way b/c it is what the husband wanted
C. Adequacy of values exchanged
a. The relative values of promise and consideration do not affect
sufficiency (R§79)
b. Sufficient consideration need not have actual value, only that it was
bargained for
c. Sufficiency only requires parties to value the consideration at time of
the contract
i. Fiege v. Boehm
Fiege agrees to pay child expenses if Boehm agrees not
to sue for bastardity
When court looks at the validity of a claim it looks at the
circumstances at the time the agreement was made and
if contract was in good faith at the time the contract was
made, then it is a valid contract
d. Adequacy speaks to the actual value of the consideration
e. Courts rarely review adequacy, but if they do, there are limited
circumstances
i. Promisor was not aware of value disparity so did not actually
bargain for it
ii. The bargain process itself was flawed (unequal sophistication of
the parties)
iii. The outcome of the contract, if enforced, would shock the
conscience
iv. Jones v. Starr Credit
o Freezer case
o ∆ sold P freezer at grossly overpriced price
o Court looked at unconcionability of the price Jones paid for
the freezer and said that salesman took advantage of
Jones’ circumstances and lack of knowledge
o Court trying to protect the buyer
Cases:
o Browning v. Johnson:
When second contract was made, the plaintiff was giving up his
legal right to sue, this is consideration
o Apfel v. Prudential-Bache Securities, Inc.
Computer system was novel at the time contract was entered
into, after a few years system no longer value and P no longer
wants to pay
Court looks at the value when the contract was made
D. Pre-existing Duty
a. Under common law, performance of a pre-existing duty is not
consideration (R§73)
b. Therefore, changes to existing contracts (duties) require new
consideration
i. Levine v. Blumenthal (also under b)
o Leasee’s had a pre-existing duty to pay their lease
o When landlord agreed to not increase the rent for the
second year of the lease, it was not a new contract b/c
there was no new consideration on the part of the leasees
c. Primary purpose of the preexisting duty rule is to prevent the "hold-up
game"
i. Alaska Packers’ Association v. Domenico
o Refusing to fulfill a pre-existing duty unless receive a
pay increase is considered duress and therefore
invalidates a new contract
d. Allows modification of a contract only if the following are true (R§89)
i. Parties voluntarily agree; [and]
ii. Contract not fully performed on either side; [and]
iii. Circumstances were unanticipated by the parties; [and]
iv. Modification is fair and equitable to both parties
1. Angel v. Murray
o ∆ provided garbage services at a set rate, then
asked for more money b/c of major increase in #
of houses, council agreed to give him more
money
o City council then sues and claims preexisting
duty so want their money back
o Court rules in favor of ∆ b/c of reasons listed
above
e. Contracts under the UCC can be modified without additional
consideration (U§2-209)
E. Mutuality of obligation
a. If one party can withdraw at its own discretion then the promise is
illusory (R§77)
i. Wood v. Lucy, Lady Duff Gordon
o Not an illusory contract
o Wood had exclusive rights to Duff’s endorsements and
fashion designs. Duff changes mind and decides to go
w/Sears instead
o Duff claims contract was illusory b/c Wood did not have
to actually do anything
o Court says there was an implied promise to do work (it
was his livelihood) making the contract valid
o Wood could also have claimed promissory estoppel if
breach did not work
ii. Omni Realty v. Seattle First National
o Omni put in contract that they would buy the land
subject to a satisfactory feasibility study
o Sellers decided not to sell after all claiming the contract
was illusory
o Court said it was not illusory b/c had to have a specific
reason to change mind
o Contract was made in good faith and wanting an
inspection of the property prior to completing purchase
is not uncommon
iii. Rehm-Zeiher Co. V. F.G. Walker Co.
o Illusory contract is a one-sided contract where
one party is allowed to not perform for any
reason they see fit
o Lack of mutuality renders agreements
nonenforceable
A. A moral obligation arising from past action can be, in limited circumstances,
consideration
a. Promisee acted to prevent imminent death or other such extreme
emergency
b. Promisee suffered grave or severe detriment
c. Presumed consent by the promisor
d. Conduct of the promisor confirms the promise
o Case: Webb v. McGowin
[worker injured preventing death of McGowin; McGowin
promises care]
Only extreme detriment creates moral obligation
Circumstances and continuous conduct prove intended contract
Future act is the injuries
B. Moral obligation is not created by simple gratitude or sentiment
o Mills v. Wyman
[father of sick sailor offers payment]
A promise out of gratitude is not consideration
Benefit received by another does not create a moral obligation
[father/son]
o Harrington v. Taylor
Similar to Mills
Neighbor saves husband as wife is about to hack him w/an axe
and ends up hurting her hand
Husband says he would pay her then changes mind, neighbor
sues
Unfortunately offering to pay a good Samaritan is not
consideration b/c for past act
C. If found, moral obligation creates a contract
D. Courts now focus on prevention of unjust enrichment rather than "moral
obligation" (R§86)
E. Quasi-contract is not actually a contract, rather it is implied-in-law
a. Benefit is conferred from A to B
b. B knows of and appreciates the benefit
c. B had opportunity to decline benefit before it was conferred
d. It would be unjust for B to retain benefit without paying or
compensating A
Bailey v. West (revisited)
[horse farm; boarding a horse]
Quasi-contract requires benefit be recognized and appreciated
V. Promissory Estoppel
Note
Key Cases
o Ricketts v. Scothorn
[grandfather promises money; granddaughter quits job]
Promises that reasonably induce reliance allow granting PE
Relevant Restatement or UCC
o R§90 - the principle of this section is flexible; the promisor is affected
only by the reliance which he does or should foresee, and enforcement
must be necessary to avoid injustice
o R§90 - the force of particular factors varies in different types of cases:
thus reliance need not be of substantial character in charitable
subscription cases, but must in cases of firm offers and guaranties
o R§90 - relief may sometimes be limited to restitution or to damages or
specific relief measured by the extent of the promisee's reliance rather
than by the terms of the promise
VI. Damages
A. Expectation
a. The reliance takes the place of consideration
b. The value of contract is calculated and ordered paid as if there was no
breach
B. Specific Performance
a. Contract terms must be performed as agreed
b. Usually ordered for real property or for unique goods and services
C. Reliance only
a. Recovery only of expenditures or foregone opportunities (or both)
b. Under this theory losses of expected profits are not considered
D. Restitution
a. Order to return or disgorge benefit that was unjustly received
b. Limited by the extent of the reliance rather than the terms of the
promise
Key Cases
IX. Offer
Key Cases