Contracts 1.16.2007
Consideration (cont.)
Review
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Past consideration
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The promisee had already taken the action when
the promise was made (Feinberg v. Pfeiffer)
“I promise to give you a gold watch for your hard
work last year”
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Promise unenforceable – past “consideration”
But if watch delivered, donor cannot get it back!
Moral consideration
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Convoluted history
Modern US rule: mere moral obligation to
perform a promise does not make it binding;
is not consideration
Mills v. Wyman
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Father’s written promise to pay for care of son
who died after care given is not enforceable
But see . . .
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Webb v. McGowan
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Sometimes courts do enforce promises having no
consideration, if
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Benefit material (substantial and of more than
sentimental value
Promise in writing
Partially performed
Especially against dead promisors’ estates
Rest. Contracts § 86
§ 86. Promise For Benefit Received
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(1) 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.
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(2) A promise is not binding under Subsection (1)
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(a) if the promisee conferred the benefit as a gift or for other reasons
the promisor has not been unjustly enriched; or
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(b) to the extent that its value is disproportionate to the benefit.
On to . . . .
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The Requirement of Bargain
Kirskey v. Kirskey
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Facts
“If you will come down and see me, I will let
you have a place to raise your family”
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What does this mean?
Bargain or not?
Williston’s Homeless Person
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“If you go around the corner to the clothing
shop, you may put an overcoat there on my
credit.”
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Consideration? Why or why not?
Father to estranged daughter “If you will meet
me for lunch, I will buy you the emerald ring
from Tiffany”
Central Adjustment Bureau v. Ingram
(Tenn. 1984)
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Facts
What is “at will employment”
Why does this create problem for non-comp
signed after employment relationship already
entered into?
How does law ‘solve’ this problem?
A little legal sleight of hand . . .
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Employer has no obligation to keep
employing worker
Employee has no obligation to keep working
But if employer does not fire employee but
keeps him on job for substantial period
Its as if employer had promised not to fire employee
and has performed on that promise
Counseling . . .
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How would you structure non-comp to make
sure it has consideration?
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(Non-comps have special problems in
California – see blog)
Promises as Consideration
Employee Handbooks
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What is the issue, as far as consideration is
concerned?
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Are policies in the handbook promises from
the employer that are not supported by
consideration
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Nothing from the employee in exchange for what
is in the handbook.
Rewards
Broadnax v. Ledbetter (Tex. 1907)
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Sheriff Ledbetter offers $500 reward for
capture of escaped prisoner Vann.
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Broadnax captured and returned Vann, but
failed to allege he knew of the offer
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What result from Tex. Sup. Ct.?
§ 71. Requirement Of Exchange; Types Of Exchange
(1) To constitute consideration, a performance or a return promise must be bargained
for.
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(2) A performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise and is given by the promisee in exchange for that promise.
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(3) The performance may consist of
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(a) an act other than a promise, or
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(b) a forbearance, or
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(c) the creation, modification, or destruction of a legal relation.
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(4) The performance or return promise may be given to the promisor or to some other
person. It may be given by the promisee or by some other person.
What if . . .
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Broadnax found out about offer after he had
captured Vann but before he returned him to
jail?
§ 51. Effect Of Part Performance Without Knowledge Of Offer
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Unless the offeror manifests a contrary intention, an offeree
who learns of an offer after he has rendered part of the
performance requested by the offer may accept by completing
the requested performance.
Promises as Consideration
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The puzzle of instant retraction:
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Why enforce a promise if there has been no
reliance on it?
Lucy v. Zehmer (Va. 1954)
Conditions
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Very quick and dirty introduction
Take insurance policy
Insurer promises to pay if your house burns down
Promise is enforceable before house burns down
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If Insurer says, I repudiate the policy!, you can get your premium
back
But obligation to pay fire damages arises only upon
the occurrence of the condition – fire damage
Is a promise really a promise . . .
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Or is it the mere illusion of a promise?
§ 75. Exchange Of Promise For Promise
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Except as stated in §§ 76 and 77, a promise which is
bargained for is consideration if, but only if, the promised
performance would be consideration.
§ 77 and § 76
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§ 77. Illusory And Alternative Promises
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A promise or apparent promise is not
consideration if by its terms the promisor
or purported promisor reserves a choice
of alternative performances unless
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(a) each of the alternative performances
would have been consideration if it alone
had been bargained for; or
(b) 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.
§ 76. Conditional Promise
(1) A conditional promise is not
consideration if the promisor knows
at the time of making the promise
that the condition cannot occur.
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(2) A promise conditional on a
performance by the promisor is a
promise of alternative performances
within § 77 unless occurrence of the
condition is also promised.
Strong v. Sheffield (NY 1895)
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Why does the court decide that the
defendant’s endorsement is not supported by
consideration?
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Why is Strong’s promise illusory?
Assignments in Farnsworth
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75-86
86-95
97-102
103-112
119-130
130-141
142-151
151-156
158-160
165-172