INTRODUCTION:
What is a contract?
 Layperson = Binding promise or agreement (oral or written)
 Legally = Promises for which a breach allows a legal remedy.
 Zheng’s definition - “Contracts are promises, the breach of which is enforceable by law.”
Types of Contracts
 Formal
o Ex. Cell phone plan, apartment lease, service contract
 Informal
o Ex. Bet with a friend
PART 1: BASES FOR ENFORCING PROMISES
1. THEORIES OF CONTRACT ENFORCEMENT
a. Reason why Ks should be legally enforceable?
i. More efficient when promises are binding
ii. Less economical/more expensive when promises can’t be relied upon
b. Ex Anti Point of View - in majority of society’s best interest for promises to be
binding.
c. Ex Post Point of View - having promise might not be in the best interest of
individual (buyer in buyer’s market, seller in seller’s market)
d. Utilitarian Argument (Economic Efficiency) - looks at what is best for society as
a whole (Ex-Anti) not what is best for a specific individual (Ex-Post).
2. CONSIDERATION
a. Consideration MUST be bargained for.
i. Consideration must be sought by promisor in exchange of his promise and
is given by the promise in exchange for that promise.
1. Object of promise could be useless/worthless; however valid as
long as that’s what the parties wanted.
2. EXCEPTION - Peppercorns - set minimum threshold
3. R2§71: (1) consideration must be bargained for; (2) it’s bargained
for if sought by promisor in exchange of his promise and is given
by the promise in exchange for that promise; (3) performance is
act, forbearance; creation/destruction of legal relation; (4)
performance must be given to the promisor or to some other
person.
4. R2§79: if consideration is met, no additional requirement of gain,
loss, detriment, or “mutuality of obligation.”
5. Hamer v. Sidway - forbearance of activity that person legally had
a right to do can count for consideration.
b. Consideration is needed for an enforceable agreement
i. Promises, generally, are sufficient consideration
1. Conditional Promises are due only if a particular condition is
satisfied.
2. Implied Promises can be sufficient consideration.
a. Wood v. Lucy - court said implied contract; “promise may
be lacking, but writing instinct with obligation.” Can look
outside the 4 corners of doc to determine implied
obligation.
b. Structural Polymer Group v Zoltek - Requirements
contract satisfies obligation of promise and is not illusory.
Court red in “good faith” that should P require the product
that they would buy from D.
3. Illusory Promises are not sufficient consideration (uncertain
terms).
a. Strong v. Sheffield - ruled illusory because of indefinite
amount of time “until such time as I want my money.”
b. EXCEPTION: Mattei v. Hopper - ruled valid because
contract terms imposed a good faith effort on part of
developer to obtain satisfactory leases.
i. Two Types of Satisfaction: General fitness, value
standard AND Satisfaction clauses (D’s judgment
sufficient to support contract--good faith)
ii. Past Consideration, generally, is not valid consideration.
1. Feinberg v. Pfeiffer - gift of employee in return for years of
service held to be past consideration & not valid consideration; no
exchange, no bargain.
2. EXCEPTION: R§86 - past consideration IS BINDING to the
extent necessary to prevent injustice; however, (2) not binding if
(a) conferred as a gift; or (b) value is disproportionate.
3. EXCEPTION: N.Y. GEN. OBLG. L §5-1105-PAST
CONSIDERATION-valid so long as (1) in writing; and (2) signed
by promisor and would have been valid consideration but for the
time it was given/performed.
iii. Moral Obligation, generally is not valid consideration.
1. Mills v. Wyman - sick adult son, father promised to pay medical
bills. Court ruled promise made in recognition of moral obligation
arising out of benefit previously received is unenforceable.
2. EXCEPTION - Webb v. McGowin - falling lumber case; saved
D from certain death but P crippled. Court ruled that it’s a moral
obligation, but sufficient because D received material benefit.
3. EXCEPTION to EXCEPTION - Harrington v. Taylor - ax in
hand - act performed voluntarily is NOT consideration-this was
not a material benefit; Also, in contrast to Webb, D only made
single payment while in Webb payments lasted a number of years.
a. NOTE: Court notes: moral obligation + D’s admission of
obligation could tip scales in favor of enforcement
c. Cases
i. Hamer v. Sidway
ii. Feinberg v. Pfeiffer Co.
iii.
iv.
v.
vi.
Mills v. Wyman
Webb v. McGowin
Harrington v. Taylor
Kirksey v. Kirksey
1. Held to be a gratuitous promise because promise wasn’t bargained
for.
Strong v. Sheffield
Mattei v. Hopper
Structural Polymer Group, Ltd. v. Zoltek Corp.
Wood v. Lucy, Lady Duff-Gordon
vii.
viii.
ix.
x.
3. RELIANCE
a. Reliance on a promise can be sufficient consideration.
i. Reliance on a promise is sufficient consideration if promise changed
position for the worse (detrimental reliance) upon reliance of that
promise. (Not exactly the same as consideration, because will not typically
result in Expectation Damages, only Reliance Damages)
1. Ricketts v. Scothorn - grandfather/daughter - promissory note and
granddaughter quits job/takes on debt in reliance on that note
2. A promise reasonably expected to induce action and does
induce action is binding if injustice can be avoided only by
enforcement of the promise.
a. R2§90 Added “The remedy granted for breach may be
limited as justice requires.” (R§90 used to have “definite &
substantial character”)
b. Feinberg v. Pfeiffer - gift in return for years of service-past consideration, but held to be sufficient because P gave
up gainful employment in reliance on pension payments.
c. D&G Stout v. Bacardi - P relied on promise of continued
business relationship (D heavily involved in selling
negotiation), but D backed out & as a result P had to sell
for huge loss. NO K, but P entitled to damages because
they reasonably relied on promise of D.
b. In cases of reliance damage awarded will not be in the amount of the K or
“promise” but instead the amount of expenses/loss in value resulting from the
detrimental reliance. Important to determine if valid K existed or if awarding
damages based on reliance to determine the damages that will be awarded.
c. Cases
i. Ricketts v. Scothorn
ii. Feinberg v. Pfeiffer Co.
iii. D & G Stout, Inc. v. Bacardi Imports, Inc.
4. RESTITUTION
a. Cases
i. Cotnam v. Wisdom
ii. Callano v. Oakwood Park Homes Corp.
iii. Pyeatte v. Pyeatte
PART 2: CREATING CONTRACTS
1. NATURE OF ASSENT
a. Cases
i. Lucy v. Zehmer
ii. Specht v. Netscape Communications Corp
2. OFFER
a. Cases
i. Owen v. Tunison
ii. Fairmount Glass Works v. Crunden-Martin Woodenware Co.
iii. Lefkowitz v. Great Minneapolis Surplus Store
3. ACCEPTANCE
a. Cases
i. Wucherpfenning v. Dooley
ii. International Filter Co. v. Conroe Gin, Ice & Light Co.
iii. White v. Corlies & Tift
iv. Ever-Tite Roofing Corporation v. Green
4. TERMINATION OF THE POWER OF ACCEPTANCE
5. BATTLE OF THE FORMS
6. DEFINITENESS
PART 3: STATUTES OF FRAUDS
1.
2.
3.
4.
SCOPE
SATISFYING THE STATUTE OF FRAUDS
SALE OF GOODS
ESCEPTIONS
PART 4: INTERPRETING CONTRACTS
1.
2.
3.
4.
5.
6.
7.
8.
PAROL EVIDENCE RULE
EXTRINSIC EVIDENCE OF INTENT
COURSE OF DEALING
USAGE OF TRADE
COURSE OF PERFORMANCE
LIMITS OF OBJECTIVE INTERPRETATION
GAP FILLERS
WARRANTIES AND MANDATORY TERMS
PART 5: PERFORMANCE AND BREACH
1.
2.
3.
4.
5.
CONDITIONS
CONSTRUCTIVE CONDITIONS OF EXCHANGE
SUSPENDING PERFORMANCE AND TERMINATING THE CONTRACT
MITIGATING DOCTRINES
ANTICIPATORY REPUDIATION
6. ASSURANCE OF PERFORMANCE
PART 6: REMEDIES
1.
2.
3.
4.
5.
6.
SPECIFIC PERFORMANCE
REMEDYING BREACH
MEASURING EXPECTATION
LIMITATIONS ON DAMAGES
STIUPULATED, LIQUIDATED & PUNITIVE DAMAGES
THE ECONOMICS OF REMEDIES
PART 7: VALIDITY OF CONTRACTS
1.
2.
3.
4.
5.
6.
7.
CAPACITY
OVERREACHING
UNFAIR TERMS
STANDARD FORM AND ADHESION CONTRACTS
UNCONSCIONABILITY
PERFORMING IN GOOD FAITH
PUBLIC POLICY
PART 8: GETTING OUT OF CONTRACTS
1.
2.
3.
4.
MISTAKES
IMPRACTICABILITY
FRUSTRATION OF PURPOSE
HALF MEASURES