Name: __________________________________ February 10, 2021 & February 11, 2021 Contracts Dean’s Scholar Session with Audra Gale In all of your law school classes, the big picture is the most important thing. You need to see the forest (tort law as a whole), not just the individual, separate little trees (the cases and concepts). Contract law will become simpler if you can see where each piece falls into the larger scheme – Professor Rosenblum’s Syllabus is extremely helpful in this department. Key: cases will be in green, restatement sections will be in hot pink, short reminders in red. What Constitutes a Promise? What Constitutes a Promise? Requirement of Bargain Return Promise as Consideration Real Estate & Goods Contracts CB pp. 58-61, 71-80, 86-90 Kirksey v. Kirksey, Strong v. Sheffield, Mattei v. Hopper, Wood v. Lucy, notes 2&3, p.59, note 2, p.60 Kirksey v Kirksey Brother promised widow to live on farm. Consideration just is/isn’t there… if/then statement may have led her to believe. BUT there is no quid pro quo here… he is not getting any benefit. “If you come down and see me, I will let you have a place to raise your family, and I have more open land than I can tend; and on account of your situation, and that of your family, I feel like I want you and the children to do well.” P abandoned her land and moved to residence of D. D allowed her to live there for 2 years and then moved her to a less comfortable residence in the woods. Finally, D required P to leave. Issue: Is the promise to let someone live on land a gift, which is unenforceable, or a bargained-for exchange, which is an enforceable contract? Rule: Without consideration, allowing someone to live on one’s land is a mere gift, not a binding contract. Moving across the country DOES/DOES NOT count as consideration. Letter would have had to be more specific regarding what they were exchanging and the length of time . The offer of use of the land is a mere gift. There is not sufficient consideration in a promise to a promise that if they move their home the promisor will give them a place to live and therefore there is no contract. Language expresses and conveys a “feeling” which undermines consideration. No quid pro quo . The if/then statement might lead her to believe that she can believe in this promise and trust it, but there was no consideration. Different from Hamer because there was an exchange and there was a time frame there. Restatement of Contracts 2nd §71 – Requirement of Exchange; Types of Exchange 1. To constitute consideration, a performance or a return promise must be bargained for. 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 promise in exchange for that promise. 3. The performance may consist of a. An act other than a promise, or b. A forbearance, or c. The creation, modification, or destruction of a legal relation. 4. The performance of return promise may be given to the promisor or to some other person. It may be given by the promise of by some other person. A Return Promise as Consideration Restatement of Contracts, 2nd §75- Exchange of a Promise for Promise Except as stated in §76 and 77 [illusory promises], a promise which is bargained for is consideration if, but only if, the promised performance would be consideration. Strong v. Sheffield Illusory promise. If you believe in an an illusory promise, you’re a loser. No quid pro quo P sold a business to D’s husband on credit. At a later date, credit was put into writing as a promissory note, payable on demand. P promised he would not call in the debt if d promised to pay the debt if her husband couldn’t. D endorsed the promissory note. Issue: Is a promissory note endorsed without a clear additional promise enforceable? Rule: When a promise is exchanged for a promise (and purports to serve as consideration), there must be mutuality between the two parties (i.e., a legal obligation on both sides). “__nudum pactum____” = an agreement not supported by consideration and therefore not enforceable. “___illusory promise___” = a promise that does not legally bind promisor to do anything in particular, and therefore cannot constitute consideration. A promise in form, but not in substance. P’s promise imposed no duty of forbearance – just a promise subject to P’s whims. He didn’t give her anything in return – no bargain for exchange. He offered nothing in return, it was too good a bargain for him to be bound by. He would’ve been better off if he gave her $20 or something in her favor so there was a bargain for exchange. A lack of obligation on both sides of the contract. Has the D signed and the P received extra security, and lowered the debt, it would be consideration, with detriment on both sides. Categories of Contracts: Contracts for the sale of goods (UCC ONLY USED FOR THIS, NOT SERVICE CONTRACTS.) Contracts for real estate transactions: more complicated contracts because they involve more than two parties and very large purchases. Construction contracts Employment agreements Contracts between/among family members. Courts most likely refrain from endorsing ___family____ contracts. Pyeatte is the exception. Mattei v. Hopper Real estate contract. _____satisfaction____ clause. Argument here is that satisfaction clause undermines consideration and makes it sort of an illusory promise. Court says no, that’s not true. P was interest in buying D’s property in order to build shopping center. Agreement between P and D stated that P was required to deposit $1,000 with the real estate agent and then had 120 days to “examine the title and consummate the purchase.” P got satisfactory lease and informed D. Within the 120 days, D refused to sell to P. Issue: Does a “satisfaction” clause in a contract render it unenforceable for lack of mutuality of obligation? Rule: If a “satisfaction” clause in a contract has specific restrictions and is made in good faith, then IT IS/ IS NOT BINDING. Good faith means honestly considering the thing in question before saying they were or were not satisfied. o There is a 120-day restriction on the “satisfactory” clause and therefore it is not an illusory promise. o Binding because there are standards that apply to that level of satisfaction clause. Either: 1. Commercial standard: reasonable test. 2. Fancy taste or judgement standard: good faith test. Consideration in Review Hamer- can be forbearance. Feinberg- cannot be past action. Kirksey: Cannot be gratuity. Strong: cannot be illusory Mattei: but it can include a satisfaction clause. SUBSTITUTIONS FOR CONSIDERATION: LIBERALIZED NOTION OF PROMISSORY ESTOPPEL Substitutes for Consideration Promissory Estoppel CB pp. 90-100, 104-112 Wood v. Lucy (review), Ricketts v. Scothorn, Feinberg v. Pfeiffer, Cohen v. Cowles Media, D&G Stout v. Bacardi Imports PE IS A SUBSTITUTION FOR CONSIDERATION. Wood v. Lucy, Lady Duff-Gordon Focus on what parties actually mean in their agreement – implied promise is given life. D is a “creator of fashions” i.e. influencer, whose name gives value to things she designs and endorses. D hired P to make money off of this. She promised exclusive rights to place her endorsements on designs in return for half of all profits derived from these contracts The exclusive rights were to last one year, and then for another year, etc. unless terminated by the notice of 90 days. D placed her endorsement on designs without including P; P received no money. Issue: Does a promise that includes an implied promise have consideration? Rule: “We think, however, that such a promise [tp use reasonable efforts to place Lucy’s endorsements] is fairly implied. The law has outgrown its primitive stage of formalism, when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today. A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation’, imperfectly expressed.” – Movement away from formalism and language meaning being so stubborn and exacting. (Justice Cardozo). The contract’s text implies a duty for P to try to make D money. This promise gives the contract consideration and it is therefore binding. Implied promise… i.e. what the parties actually meant. Movement away from legal formalism. Later becomes known as implied in fact contracts– arise where the case facts indicate to the court that parties intended to make a contract but failed to explicitly articulate promises. Ricketts v. Scothorm Proto/precursory of promissory estoppel. D gave his grand-daughter, P a letter stating: “I have fixed out something that you have not got to work anymore. None of my grandchildren work, and you don’t have to.” P then quit her job but received permission from D to still work. Estate of D refused to pay P. Issue: If there is no bargained-for exchange, but promise relies on the promise, is the promise enforceable? Rule: If promisor influences promise to alter their position for the worse on the faith of the promise, the promise is enforceable under the doctrine of promissory estoppel. D promise intentionally influenced the P to alter her position for the worse of the faith of his note being paid when due. It would be grossly inequitable to permit the maker to resist payment on the ground that the promise was given without consideration. Promissory Estoppel: Equitable doctrine. Promisor bound to their promise, despite lack of consideration (i.e. bargained for exchange), where promise reasonably relied on promise to their detriment (and such reliance as reasonably foreseeable to promisor). Elements of Promissory Estoppel: 1. Reliance 2. Detriment 3. Foreseeability Restatement of Contracts. 2nd §90. Promise Reasonably Inducing Action or Forbearance 1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such 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. Kirksey v. Kirksey (Revisited) THIS IS NOT HOW THE CASE WAS RESOLVED, BUT WHAT WOULD BE THE RESULT IF IT WAS LOOKED AT THROUGH THE MODERN STANDING RULE? The offer of land is a mere gift. There is not sufficient consideration in a promise to a promisee that if they move their home the promisor will give them a place to live and therefore there is no contract. o BUT, IF WE LOOKED AT IT WITH THE RULES OF TODAY, enforceable because of foreseeable detrimental reliance? Damages: Expectation? No. Reliance? Yes! Feinberg v. Pfeiffer Co. (Revisited) Issue: Is a promise enforceable when the promisee relies on it? Rule: If promisor influences promisee to alter their position for the worse on the faith of the promise, the promise is enforceable under the doctrine of promissory estoppel. P quit her job in reliance on D’s promise of the money during her retirement. By quitting her job, P lost her salary which is a detriment to her. It was reasonably foreseeable to D that P would rely on the promise of the money during her retirement. D induced P’s detrimental reliance, thereby invoking promissory estoppel. The court ultimately enforced that promise made to her. Example of when Promissory Estoppel does NOT work and is NOT in play: How is Hayes v. Plantations Steel Co. (Pg. 98) different or the same as Feinberg? Employee announced his retirement prior to the boss saying we will give you a retirement benefit. They didn’t reward him this benefit because it was made after. He wasn’t relying on this promise when he retired. Cohen v. Cowles Media Co. Gubernatorial scandal. P, an associate of a gubernatorial candidate, informed D about the opposing candidate. D promised to keep plaintiff’s identity confidential. D printed P’s name and P lost his job. Issue: Is a newspaper’s promise of anonymity a binding contract? Does Promissory Estoppel win in a conflict with the 1st amendment? Rule: YES/NO A newspaper’s promise of anonymity is a binding contract due to the doctrine of promissory estoppel. o “The test is not whether the promise should be enforced to do justice, but whether enforcement is required to prevent an injustice.” (MN Supreme Court Justice Simonett). P relied on D’s promise of anonymity _. By relying on D, P lost his job. It was reasonably foreseeable to defendant that P would rely on this promise of anonymity. He is able to recover against them. True for all equitable remedies - not looking to create fairness in every single case. An equitable remedy is exceptional. Looking for injustice. Not looking for everything to be fair (that would be a perfect world, not the business of the law; would be a hot mess & too much for the law to deal with). Whether is it Promissory Estoppel or Specific Performance, looking for injustice and seeks to remedy it. D&G Stout, Inc. v. Bacardi Imports, Inc. Reliance in merger and acquisition context. National offered to buy P’s company. D promised to stay with P’s company if they didn’t sell to National. P withdrew from negotiations with National. D left P’s company, forcing plaintiff to accept a lower offer from National. Issue: Is the promise by a client not to terminate their contract binding when the promisor relies on this promise regarding a business deal? Rule: The promise by a client not to terminate their contract is binding when the promisor relies on this promise regarding a business deal, due to the doctrine of promissory estoppel. P relied on D’s promise to stay with them if they refused National’s first offer. By relying on D, P had to take a lower second offer from National. “All parties knew [the business deal] would be devalued once Bacardi announced its intention to gO elsewhere.” Bacardi was liable for the expenses from having a deal that was much less lucrative than originally planned.