Chapter 1: Introduction to Contract Law

A. Three Principles of Contract Law

1. The Bargain Principle a. The central belief that an agreement to exchange on thing for another gives rise to mutual obligations. A deal is a deal. b. Market transactions are thought to exist between people who are not otherwise obligated to each other, arms length transactions. c. The bargain must exist over the same thing, with the same understanding and during the same time. d. Meeting of the Minds e. The bargain principle is a contract because it involves two promises f. Expectation damages are associated with remedy to the bargain principle. g. Each person is entitled to the benefit they expected from the exchange distributive claim Bargain and the Market Note Neo-Classical Economics and Contract Law The economic theory most closely associated with the bargain principle is neo-classical economics. The Assumption of Neo-Classical Economics are: people act in their own self interest in the pursuit of self interest, people act rationally people have success to perfect information (this assumption means that people have the knowledge to act rationally) people and resources are freely moveable there are no artificial restrictions on entry to the marketplace (relying on this assumption we must conclude that the marketplace remains competitive because buyers and sellers are free to move in and out of the market and thereby effectuate the free mobility of people and resources) the current distribution of wealth and resources is taken as a given (acceptance of the current distribution is an important assumption in the neo-classical model because the allocation of resources and rights derived from the model is determined by people casting wealth-based economic votes. In other words, to the extent people cast their votes in the marketplace by

spending dollars, the initial allocation of dollars will affect the outcome of the voting) 2. Reliance: Trust, Responsibility, Injury a. The reliance principle begins with the idea that people do rely upon each other in many situations and that such reliance often is morally and politically valuable b. Reliance flows from an indication of trust c. People act relying on a person to act a certain way or to fulfill some action that you reasonably rely to your detriment, when this occurs the other party is liable d. There must be actual reliance, and injury that was foreseeable e. Main components of reliance i. Trust ii. Responsibility of harm iii. Injury f. There is only one promise made in reliance, therefore no contract exists g. To remedy the goal is to place the person in the same situation they were in before the promise or reliance was made h. The reliance principles purpose is to correct wrongs, focusing on harm and out of pocket losses. Those who cause the harm should be accountable i. Compensation is in the form of a Corrective or Restorative Claim injury compensation Equitable Estoppel A defensive doctrine preventing one party from taking unfair advantage of another party when, through false language or conduct, the person to be stopped has induced another person to act in a certain way, with the result that the other person has been injured in some way. Elements: 1. There was a false representation or concealment of material facts 2. The representation was known to be false by the party making it, or the party was negligent in not knowing its falsity. 3. It was believed to be true by the person to whom it was made 4. The party making the representation intended that it be acted on, or the person acting on it was justified in assuming this intent

5. The party asserting the estoppels acted on the representation in a way that will result in substantial prejudice unless the claim of estoppels succeeds. Promissory Estoppel: The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promise to rely on the promise and if the promise did actually rely on the promise to his detriment. 3. Restitution: Unjust Enrichment and the Duty to Right Other Wrongs a. The restitution principle holds that one who violates a duty or commits some wrong ought to be required to repair any injury she or he has caused b. One promise, No Contract c. The principle is reduced to the idea that one ought to pay for a benefit unjustly retained. d. By unjust retaining one party must confer a benefit and the other party must retain it restoring a benefit e. Acting without communication between the parties f. A claim for unjust enrichment is generally said to require proof of three elements: i. The plaintiff must show that she conferred a benefit on the defendant and that the defendant retained the benefit (i.e. didnt give it back or pay for it) ii. The plaintiff must show that she did not confer the benefit as a gift some courts say that the plaintiff must prove that she conferred a benefit with an expectation of payment AND iii. The plaintiff must prove that she was not acting officiously in conferring the benefit. To avoid the charge of officiousness, the plaintiff must show some good reason (like emergency) why she did not first negotiate a contract with the defendant before conferring the benefit. g. The Restatement of Restitution 2 (1937) provides: A person who officiously confers a benefit upon another is not entitled to restitution therefore. Implied Contracts Implied in Law (Quasi-Contract) A contract implied in law is not actually a contract but instead a remedy. It is used in restitution cases, in order for a court to find

remedy the court must use an implied in law contract to do so. Dont look at the actions. It is considered a fictitious legal duty to remedy unjust enrichment Implied in Fact Implied in fact contracts do allow you to look at the actions. This actually exists either as a contract in writing, a verbal agreement, or through past conduct

Chapter Two: Contract Formation

A. Difference and Meaning in Communication
The objective theory assumes that a standard of shared meaning already exists or that one ought to exist, and this assumption is controversial. The subjective approach of the doctrine of misunderstanding is a viable approach when the court cannot find an objective meaning 1. The Objective Theory of Interpretation Note In evaluating the Meaning of McKittiricks words and behavior, the court evaluated what a reasonable person in Embrys position would understand McKittircks words and behavior to mean. This is the objective approach to interpretation. Note On Informal Contracts and the Objective Theory Informal Contracts As a general rule, oral contracts are enforceable; there is no general common law rule requiring written evidence of a contract. Objective Theory: Rationale and Criticisms Under the objective theory the meaning of words, conduct, and circumstances is determined from the perspective of the reasonable person. Under the subjective theory the court would evaluate what people actually thought (by indirect evidence) and the court would find a contract only of their thoughts were the same, i.e. if there were a meeting of the minds

Three Variations on the Objective Test Formalist: Where the reasonable person is positioned outside of the history and the circumstances of the party and who sees the conduct

apart from the context in which they were uttered or performed. A universal observer such as a judge or the law student. Positional: The measurement of the understanding of the reasonable person who is the observer. This is the Embry you are a reasonable person who is not emotionally involved but taking not of the situation. The meanings of words are interpreted according to the understanding of a universal observer who is placed in a position of the recipient of the communication. In Embry the reasonable person does have his job, employment history, and contextual knowledge and concerns. This is the most commonly used variation of analysis of the objective test. Social Identity: this reasonable person test interprets the meaning of words and conduct according to the understanding of an observer who is placed in the position of the recipient of the communication but who also has the social identity of the recipient. This was used in the Steelworker case. The weakness of this test is that it requires the court to determine the understanding of another person. This test arises from Article 8 of the United Nations Convention on Contracts for the International Sale of Goods. 2. An Alternative Theory of interpretation: The Doctrine of Misunderstanding
a. where the parties have different understandings of the terms of the contract then there is no understanding b. In the Peerless case the court ruled that, because each party had a different ship in mind at the time of the contract, there was in fact no binding contract. c. Restatement (Second) of Contracts (1981). Section 20 states in part: i. There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations AND ii. Neither knows or has reason to know the meaning attach by the other. iii. Even though the parties manifest mutual assent to the same words of agreement, there may be no contract because of a material difference of understanding as to the terms of the exchange

B. Offer and Acceptance: The Mechanics of Contract Formation

I. Offer: a manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his/her assent to that bargain is invited and will conclude it.
A. Offerer/Promisor: person making the offer 1. Offerer is the creator of the power of acceptance and may fashion it to his will. B. Offeree/Promisee: person in which the offer is directed towards C. Conditions of Offer: 1. Typical offer: Promissory Note 2. Manifestation of the previous intent trumps present actual intent 3. Does not form K until an acceptance is made 4. If the terms of the offer are changed or any new ones added by the acceptance, there is not meeting of the minds, and consequently no contract; thus a counteroffer is formed 5. Limits of acceptance MUST be put in the actual offer itself 6. Can lapse or expire in time 7. Must be communicated to the offeree before acceptance is possible D. Revocation 1. Offerer can freely revoke an offer at anytime before it is accepted 2. Notice must be given to the offeree 3. Can be revoked simply by offering the contract to someone else 4. Can be revoked by time expiration E. Counteroffers 1. New offer comes into existence when terms of original offer are changed, thus rejecting it 2. Nullifies or rejects the original offer 3. Exceptions: a) Grumbling acceptance: Terms that do not affect that basis of the offer F. Bottom line 1. Question: Would a reasonable person in the listeners or readers position understand that the speaker is making a commitment and bargaining for a return promise or performance? 2. Four Guides/Factors: a) Any words or conduct indicating a present willingness to commit; relevant to what a reasonable person would have understood

b) The number of people to whom the communication is addressed: In many situations, the fact that a communication is sent to more than one person makes it less likely that it was an offer c) How detailed the communication is regarding the terms of K d) Any relevant community practice, course of dealing, course of negotiations, or other circumstances that would effect a reasonable persons interpretation of the communication

G. General Rules 1. Price quotes are not offers **Southworth** a) Exceptions: i. They are sent to a limited number of people ii. They are sent to several people but there are only a limited number of people whom can eventually accept iii. They otherwise communicate a willingness to enter into K with numerous people 2. Generally Ads are not offers; they are invitations to offer a) Exceptions i. They limit the number of people who may accept ii. They invite the reader to do or not do something iii. For some other reason they communicate a willingness to commit. iv. How the detailed the communication is. **They are not transformed into enforceable offer merely by a potential offerees expression of willingness to accept the offer through, among other means, completion of an order form. 3. Rewards a) If a person performs the condition required to receive the award, they are entitled by law to received what was promised 4. Commercials b) Whether an offer has been made depends on the objective reasonableness of the alleged offerees belief that the advertisement or solicitation was intended as an offer (what an objective reasonable person would have understood the commercial to convey) H. Termination 1. Rejection or counteroffer Normille v. Miller 2. Revocation of the offer Normille v. Miller 3. Lapse: the offer is said to simply expire after passage of a specified or reasonable period of time (conversation: till conversation is over; writing: reasonable or specified time (1 yr))

4. Death of the offeror or the offeree

II.

Acceptance: a manifestation of a willingness to enter into the exchange as offered

A. Conditions of acceptance 1. The appropriate manner and exclusive mode of acceptance is defined and must be communicated in the offer 2. An attempted acceptance is not effective unless it conforms to the manner and content indicated by the offer. 3. An acceptance is still effective if the addition only asks for something that would be implied from the offer and is therefore immaterial. 4. Express assent cannot be presumed by silence or mere failure to object; silence is not acceptance unless manifestation is entered Klocek v. Gateway B. Contents of acceptance 1. Mirror image rule: an acceptance must manifest assent to all of the terms of the offer without varying or adding to them a) Exceptions i. Grumbling acceptance ii. UCC 2-207 (sale or lease of goods) 2. UCC 2-207 a) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance event though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms (additl and different terms) b) Effect on contract- the addtl terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: i. The offer expressly limits acceptance to the terms of the offer ii. They materially alter it iii. Notification of objection to the has already been given or is given within a reasonable time after notice of them is revised (Additional terms) c) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of both parties do not otherwise establish a contract. In such a case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any

supplementary terms incorporated under any other provisions of this Act. - Conducts trumps writing, as long as there is no objection 3. Knockout Rules: a) Conflicting terms in the offer and acceptance cancel one another out; when there is an offer and additional terms from offeree conflict with terms in the offer, both pieces of writings cannot prevail, thus they cancel each other out. b) different terms are not treated as additional terms for disposition under section 2207(b), c) Section 2207(b) is limited to its express language. d) The offerees form is treated only as an acceptance of the terms in the offers form which did not conflict e) Ultimate K includes those non-conflicting terms and any other terms supplied by the U.C.C. **Course of dealings: btw business entities, there are customs and practices that they are used to dealing with each other. It establishes a pattern **Usage of trade: Same trade as course of dealing, trade practices are fairly well standard act. May not necessarily have been dealing business with the other before **Implied warranty of fitness: a product is deemed fit for the purpose of which it is intended, thus if the product harms one based on something that it is not impliedly fit to do, then the maker cannot be liable for it. **material terms: substantive terms, that information is necessary to the determination of the issue of acceptance (deal breakers) C. Purchase Orders 1. If the offer on the purchase order is unambiguous in inviting acceptance only by signature, then no K exists until the purchase order is signed accordingly; however, if defendants offer is ambiguous in inviting acceptance, a contract could be found to exist. D. Contests 1. Offerers are accepted by their plain and ordinary meanings that were expressed and announced, not by the ones that were left unannounced 2. Accepting a sponsors offer to participate in a contest creates an enforceable contract; thus, awarding a prize to a contest winner is a contractual duty. E. Box top License 1. Standards of 2-207

C. Complicated Assent: Indefinite Agreements

A. Enforceability 1. The definiteness or degree of detail, in a communication is a factor in deciding whether or not is was an offer. 2. If a communication (or series of communications) does not include the terms of the proposed contract with some degree of detail, courts are less likely to find that the communication was a manifestation of intent to enter the exchange 3. Indefinite contracts are not enforceable, because they require the courts to write the contract for the parties. a) Rather than refuse to enforce an indefinite contract, most contemporary courts will consider first whether the parties intended to be bound. If they did, then the court will attempt to find a way to fill the gaps in the contract in order to enforce it. B. Terms of Prices/Goods/Services 1. If a contract for the sale of goods or for hire without a fixed price or consideration being named, it will be presumed that a reasonable price or consideration is intended and the person who enters into such a contract for goods or service is liable therefore as on an implied contract. Varney v. Ditmars a) The courts cannot aid parties in such a case when they are unable or unwilling to agree upon the terms of their own proposed contract b) Court cannot determine vague terms. c) Will grant *quantum valebant: Reasonable values of goods and services 2. If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract. Cobble Hill Nursing Home v. Henry and Warren Corp. a) Unless a court can determine what the agreement is, it cannot know whether the contract has been breached, and it cannot fashion a proper remedy. b) Courts will not impose contractual obligations when the parties did not intend to conclude a binding agreement. c) If the parties intended to agree, and there is enough for the court to determine that they DID intend to agree, then the court WILL interpret what was the agreement. 3. Whether the parties intended to be bound, even upon the failure of the pricing mechanisms, is a question of fact properly resolved by the Trier of fact. Oglebay v. Armco a) Specific performance or an injunction will not be granted unless the terms of the contract are sufficiently certain to provide a basis for an appropriate order. b) Where the parties intend to conclude a contract for the sale of goods and the price is not settled, the price is a reasonable price at the time of delivery if the prices is to

be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. c) An agreement to agree: you must have a mechanism in place to adjust terms and come back to discuss and renew as time goes along. If you cant come to agreement, then the renewal cannot come into place.

D. A Brief History of Jurisprudence

I. Jurisprudence: the study of knowledge about justice. (Legal theory, philosophy of law)

Chapter 3. Consideration
Definitions: *mesne: occupying a middle position, intervening and intermediate Sub judica: the instant case Volenti non fit injuria: he who consents cannot resist thereby

A. The Consideration Doctrine

1. A return promise or performance that is bargained for
2. Promisee must give to the promissory, in exchange for something from the promissory 3. Must be meaningful, which is different from valuable 4. Courts will look at efficiency, and not adequacy of the consideration 5. An election of the promissory, which still has a benefit to the promise 6. Cannot reserve to the right change the terms 7. Cannot be something that you are already obligated to do (i.e police officer) 8. Cannot be a previously performed act (i.e. doctor acting in emergency, and later billing) I. A Return Promise or Performance A. Promise or performance 1. A promise is legally enforceable if it is given in exchange for a bargained for return promise or performance 2. Any promise or performance is sufficient without regard to whether it is valuable or beneficial to the promissor or costly to the promise 3. In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise (Hamer v. Sidway) B. Pre existing duty rule 1. A promise to do something you are already obligated to do is no promise at all nor bargained for consideration for a promise by the other party

2. Where a party does what it is already legally obligated to do there is no consideration and no detriment. 3. Cannot get someone to waive their liability for something that you are legally obligated to do; party cannot condition another parties participation upon waiving something that the 1st party is legally obligated to do. (White v. Villages) C. Illusory promise 1. A statement may sound like a promise yet not be a promise 2. They are not a promise, and cannot suffice for consideration 3. Words of promise which by their terms make performance entirely option with the promisor does not constitute a promise; cannot reserve the right to change your mind. 4. Illusory and Alternative Promises a) A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless b) One of the alternative performances would have been consideration if it alone had been bargained for; or c) One of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration 5. Alternative promises a) May be made because each of the alternative performances is the object of desire to the promise The promise may desire one performance only, but the promisor may reserve an alternative which he may deem advantages The promise is consideration if it cannot be kept w/out some action of forbearance which would be consideration if it alone were bargained for. If the promisor has an unfettered choice of alternatives, and one alternative would not have been consideration if separately bargained for, the promise in the alternative is not consideration b) Alternatives not dependent on promisors free choice A promise may give the promise a right to choose one of several stated performances. The selection among alternative performances may be left to events not within the control of either party The promise, if bargained for, is consideration if any one of the alternatives are subject to conditions which cannot exist or occur. The promise may be consideration even though a conditional power of choice is left to the promisor. 6. It is immaterial for terms of the contract itself to recite the claimed consideration; there is no requirement that they do.

Complaint only has to state a cause of action for which the court can grant relief. (Maszewski v. Piskadlo) 7. Courts will not presume if a contract was entered into for illegal or moral reasons (Maszewski v. Piskadlo) D. Mutuality of obligation (rejected by restatement (2nd) of contracts) 1. Requires that the parties exchange promises that are equally enforceable E. Considerations must be bargained for 1. Bargained for: the return promise or performance was sought by the promisor in exchange for the promise 2. The promise or performance was the reason or inducement for the promise 3. Getting the performance does not have to be the actual or predominant motive of the promisor 4. The objective appearance is of a bargained for exchange, structured so that the return promise or performance is the price of the promise, is required 5. A promise that is gratuitous is not enforceable without consideration 6. If it violates public policy, then it is invalid; not bargained for, no distinction made

Chapter 4. Alternatives to the Bargain Model

A. Promises Reasonably Relied Upon: Restatement (Second), Section 90
Promissory Estoppel: an affirmative defense to a defense. Stops a party from claiming there was no promise; an equitable principle: because they have induced me to rely, they are estoppsed from denying me the promise. Ricketts v. Scothorn A. Requirement of a Bargain: 1. Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration 2. Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in 82-94

B. Promise Reasonably Inducing Action or Forbearance;

Restatement Contracts, 2d, 90 p242 1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise or a third person and which does induce action or forbearance, is binding if injustice can be avoided ONLY by enforcement of the promise. The remedy granted for breach may be limited as justice requires. The Promise Three views on the degree of formality and clarity required of a promise enforced because of reliance have been articulated and, as yet, most jurisdictions have not made a clear choice among them. The three alternatives are: 1. The promise must be of the same degree of definiteness and commitment as is required for an offer 2. The promise can be less definite than is required for an offer 3. The promise must be more definite and more clearly a commitment than is required for an offer. Case: State Bank of Standish v. Robert N. and Kathleen Curry: 1. It is the value of trust that forms the basis of entitlement to rely

2. Reasonable reliance: reliance is reasonable only if it induced by an actual promise 3. Promise: a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made a. A promise may be stated in words, either orally or in writing, or may be inferred wholly or partly from conduct. b. A promise must be distinguished from a statement of opinion or a mere prediction of future events. 4. Both traditional contract and promissory estoppels theories of obligation use an objective standard to ascertain whether a voluntary commitment has been made. Look at the words and actions of the transaction, as well as, the nature of the relationship btw. the parties and the circumstances surrounding their actions. 5. Where the parties have left open some matters to be determined in the future, enforcement is not precluded if there exists a method of determining the terms of the contract either by examining the agreement itself or by other usage or custom that is independent of a partys mere wish, will, or desire. 6. An enforceable agreement may be found even though the determination is left to one of the contracting parties, as long as, he is required to make it in good faith in accordance with existing standard or with facts capable of objective proof. Case: Joseph Hoffman v. Red Owl Stores, Inc. Whether the promise necessary to sustain a cause of action under promissory estoppels must embrace all essential details of a proposed transaction between promisor and promise so as to be the equivalent of an offer that would result in a binding contract between the parties if the promise were to accept the same. 1. It would be a mistake to regard an action grounded on promissory estoppels as the equivalent of a breach of contract action. 2. Conditions to meet requirements of an offer are a. Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promise? b. Did the promise induce such action or forbearance? c. Can injustice be avoided only by enforcement of the promise? 3. Injustice would result here if plaintiffs were not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment. Case: Jo Laverne Alden v. Elvis Presley 1. Detrimental action or forbearance by the promise in reliance on a gratuitous promise, within limits, constitutes a substitute for consideration, or a sufficient reason for enforcement of the promise without consideration.

2. No injustice results in refusal to enforce a gratuitous promise where the loss suffered in reliance is negligible, nor where the promises action in reliance was unreasonable or unjustified by the promise. 3. The limits of promissory estoppels are: a. The detriment suffered in reliance must be substantial in an economic sense b. The substantial loss to the promise in acting in reliance must have been foreseeable by the promisor c. The promise must have acted reasonably in justifiable reliance on the promise as made 4. Gift is not synonymous with a gratuitous promise. A gift has to be complete to be considered a gift. Case: Guy Kinoshita v. Canadian Pacific Airlines, Ltd. And D.W. Merrell Ronald K. Nakashima v Canadian Pacific Airlines, Ltd. And D.W Merrell 1. If an employer chooses to issue a policy statement, in a manual or otherwise, and, by its language or by the employers actions, encourages reliance thereon, the employer cannot be free to only selectively abide by it. Having announced a policy, the employer may not treat it as illusory. 2. A standardized agreement is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing. 3. To create expectations and induce reliance by employees as a group, it should not be able to escape liability on the grounds that a particular employee was unaware of the rules and thus did not receive a promise.

B. Promises Made in Recognition of Past Benefits

1. Something that happened (a promise or performance) before a promise is made cannot be consideration for that promise because, by definition, it is not bargained for the promise was not made in order to induce the promise to do something. Case: Mills v. Wyman: 1. A mere verbal promise, without any consideration, cannot be enforced by action cannot be departed from to suit particular cases in which a refusal to perform such a promise may be disgraceful. 2. A moral obligation is sufficient consideration to support an express promise; There must have been some preexisting obligation, which has become inoperative by positive law, to form a basis for an effective promise. 3. Express promises founded on such preexisting equitable obligations may be enforced; there is a good consideration for them. 4. A deliberate promise, in writing, made freely and without any mistake, one which may lead the party to whom it is made into contracts and expenses cannot be broken without a violation of moral duty. 5. Legal obligation does not exist except in the very cases provided for in the statute, and never until the party charged has been adjudged to be of sufficient ability therto. 1. Moral consideration Doctrine: 1. A new promise to pay for a past debt is enforceable, even though the new promise is not supported by bargained for consideration. . Case: Joe Webb v. Floyd McGowin 1. Life and preservation of the body have material pecuniary values, measurable in dollars and cents. 2. A moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor. 3. A moral obligation is sufficient consideration to support an executor promise where the promisor has received an actual pecuniary or material benefit for which he subsequently expressly promised to pay. Case: Lena Harrington v. Lee Walter Taylor

1. However much the defendant should be impelled by common gratitude to alleviate the plaintiffs misfortune, a humanitarian act of this kind, voluntarily performed, is not such consideration as would entitle her to recover at law. II. Restatement Second section 86 1. A promise made in recognition of a benefit previously received by the promisor from the promise is binding to the extent necessary to prevent injustice 2. A promise is not binding under Subsection (1) a. If the promise conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched b. To the extent that its value is disproportionate to the benefit Alternative to Restatement Second Section 86 1. A serious promise made in recognition of a benefit received by the promisor or rendered by the promise in the past is not unenforceable by reason of lack of consideration.

III.

C.

Review of Bases of Liability in Contract and Restitution

I. Promise under Seal 1. A promise is enforceable if it is sealed. 2. A seal is treated as merely rebuttable evidence that there was a bargained for consideration.

Case: William Edwin Van Brunt III v. Robert Rauschenberg Case: Realty v. Valley

Chapter 5: Restrictions on the Power to Contract

I. Contract Defenses - Defenses to a breach of contract action OR - Used as a basis for rescinding a contract that no one has breached

1. The doctrine of illegality and public policy refuses enforcement because the purpose or effect of contract violates a law or conflicts with basic public values. 2. The various statutes of frauds preclude enforcement of certain kinds of contracts unless they are evidenced by some writing. 3. The doctrines of age and mental incapacity make contracts entered by young people and people who are mentally challenged voidable.

A.

Illegality and Violation of Public Policy

Case: In the Matter of Baby M 1. Surrogacy contract is invalid because it had a direct conflict with existing statutes and conflict with the public policies of the State, as expressed in its statutory and decisional law. Case: A.C. v. C.B 1. Petitioners sexual orientation, standing alone, is not a permissible basis for the denial of shared custody or visitation. Issue should not be the nature of the sexual orientation, but whether and how those activities affect the child. It is a factual issue and not a matter of law. Thus it should be decided by the Trier of the fact.

B.

Statute of Frauds

1. Generally, oral contracts are fully enforceable, but there are exceptions when the K are covered by one or another statute that requires some written evidence before a K will be legally enforced. 2. A person may not sue for enforcement for the following promises unless the agreements or some memorandum thereof shall be in writing, and signed by the party to be charged therewith.

3. 4. 5. 6. I.

a. A promise of an executor or administrator to answer for the debt of his decedent b. A promise to answer for the debt of another c. An agreement made in consideration of marriage d. A contract for the sale of an interest in land e. Any agreement that is not to be performed within one year from the making thereof and f. An agreement for the sale of goods for a price of more than ten pounds sterling. Writing does not have to be formal, or even signed by both parties K can be enforceable against one party (who signed or adopted the writing) while it is not enforceable against the other party. If one party wrote down the agreement for his or her own files, and the other did not, then the K may be enforceable against the first party but not the second. Writing does not have to be made at the time of contract.

Lack of Capacity 1. Capacity Doctrine promoted the belief that men of European descent are intellectually and morally superior to all other people. 2. 42 USC 1981 provides that all people, regardless of race or ethnicity should have legal right to contract. 3. Contemporary contract law holds that all children are legally incapable of contracting and adults with mental incapacity are legally incapable of contracting, including in some cases, adults rendered mentally incapable by alcohol or drug intoxication. Thus, they are voidable. 4. Minors and mentally disabled may avoid the contract b disaffirming it. However, upon reaching the age of majority or upon recovering capacity he/she may choose to ratify or affirm the contract, and if performance under contract is ongoing, continuation of performance may be treated as implied affirmation. 5. Even if the contract is voided, a child or person with mental incapacity may be liable in restitution if the other party provided necessaries or necessities to the child or person with mental incapacity.

Case: James Halbman, Jr. v. Michael Lemke 1. Absent misrepresentation or tortuous damage to the property, a minor who disaffirms a contract for the purchase of an item which is not a necessity may recover his purchase price without

liability for use, depreciation, damage, or other diminution in value. Case: Shoals Ford, Inc. v. Maxine Clardy 1. To avoid a contract on the ground of insanity, it must be satisfactorily shown that the party was incapable of transacting the particular business in question. It is not enough that he was the subject of delusions not affecting the subject matter of the transaction, nor that he was, mentally weak. 2. A party cannot avoid a contract, free from fraud or undue influence, on the ground of mental incapacity, unless it can be shown that his insanity was of such character that he had no reasonable perception or understanding of the nature and terms of the contract.