Anglo-American
Contract and Torts
Prof. Mark P. Gergen
Class Nine
Introduction to contract and
legal bases for enforcing promises
Contract
“A promise that the law will enforce”
The common law concept of contract
excludes . . .
Gift
Misstatement/misrepresentation
A completed barter exchange
(swap) . . . Strictly and technically speaking
Gift—intent to make gift + delivery
Misstatement/misrepresentation
• Actionable as deceit (fraud) and
negligence (negligent misrepresentation)
• Basis for estoppel or waiver
These are not treated as problems of contract.
Promise
Explain the difference between
• A promise
• A statement of fact
What is the difference between promising to do
something in the future and stating you plan or
intend do something in the future?
Not all promises are enforceable as contracts.
A promise to make a gift is not generally
enforceable as a contract.
The doctrine of consideration generally defines
what promises the law will enforce.
Additional bases for enforcing a promise include
reliance (US) and a witnessed deed (England).
The device of a witnessed deed replaced the
device of a seal
Obligation in contract requires
1) An apparent expression of intent to undertake
an obligation (e.g., by promise, agreement,
offer & acceptance . . .)
2) A legal basis for enforcing the obligation such
as consideration.
3) Sometimes written evidence of the obligation
under the statute of frauds.
Historical background (pp. 112-113)
Writs that were principal antecedents to modern
contract action:
• Covenant (obligation under seal)
• Debt (promise to pay sum certain
for performance already received)
• Assumpsit (undertakings)
Overtime the use of assumpsit grew to be a
general basis for enforcing a promise if there was
“consideration.”
So what is consideration?
• Bargain theory (US and Australia)
• Benefit given or detriment incurred in return
for promise (England)
In the US consideration is equated with bargain. Other bases
for enforcing a promise (e.g., reliance) are described as
alternatives to consideration.
So what is a bargain?
Anything that is in someone’s legal power to
do or not do can be the subject of a bargain . .
. an act, a promise to act, a forbearance, a
promise to forbear, a change in a legal
relationship . . . See p. 114, citing Restatement
Second Section 71.
But there must be a bargain . . .
Restatement Second, Contracts § 71 (p. 114)
(1) To constitute consideration, a performance or
return promise must be bargained for.
(2) A performance or return promise is bargained for it
is sought by the promisor in exchange for his promise
and is given by the promisee in exchange for that
promise.
“reciprocal . . . inducement, each for the other” (Holmes)
There is no bargain in these two cases so the promise is not
enforceable:
1) A performs a service for B asking nothing in return.
Grateful B promises A $.
2) B promises A $ asking nothing in return. Grateful A
performs a service for B.
Grandparent promises grandchild $ for trip to NY. This is a
conditional gift and not a bargain unless grandparent
promised the $ to induce grandchild to go to NY.
In the US, a gratuitous promise is not enforceable even if
B declares it to be a legal obligation. Nor can it be made
enforceable by falsely casting it in the form of a bargain.
The device of a trust is used to retain control over
resources while committing them to another in the future.
Performance of a pre-existing legal duty is not
consideration.
Foakes v. Beer (House of Lords 1884), p. 119
Beer agrees to forego the payment of interest on a £2019 judgment to which
she is entitled if Foakes pays £500 principal immediately so long as the
balance is paid in £150 half-yearly installments. Foakes pays the £500.
This is a bargain. Beer promised to forego interest to induce
Foakes to pay. And Foakes was induced to pay by her promise.
Held the promise is unenforceable. Payment of a pre-existing
debt is not consideration.
This rule prevents mutual beneficial adjustments of contracts
when the adjustment is one-sided.
Consideration is not a problem if the adjustment is a settlement
of an honest dispute or if than debtor does more than perform
the existing obligation. See p. 121 top.
Other responses
• Abolish requirement of consideration for contract
modifications. UCC 2-209(1), p. 119 (top)(applies only
to sales of goods)
• Some states have statutes giving effect to signed
releases without consideration.
Combe v. Combe (KB 1951), p. 116
After divorce is finalized ex-husband promises to pay ex-wife £100
per year. Ex-wife promised nothing in return.* Ex-husband
doesn’t keep promise, apparently because ex-wife earned more.
Seven years on ex-wife sues for the money.
* At pp. 117-118 Denning argues that had she promised to
forbear from applying for maintenance that would not be
consideration because such a promise is not legally binding
under family law. Nor is her forbearance consideration because
ex-husband did not make promise on this condition.
Lower court held the promise was binding on the basis of
promissory estoppel. This was relying on Central London Property
Trust, Ltd. v. High Trees House, Ltd. (“High Trees”).
Landlord agrees to accept half rent in 1940 for an
unstated period. In June 1945 Landlord demands full
rent going forward. Held Landlord may increase rent
going forward but it may not demand unpaid rent before
June 1945.
In Combe Lord Denning holds the lower court erred in applying
the doctrine. What was its error? What does he mean by “the
principle [of estoppel] never stands alone as giving a cause of
action in itself”? (p. 117, 2nd paragraph).
Restatement Second, Contracts Section 90 (pp. 115-116).
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.
After divorce is finalized ex-husband promises to pay ex-wife £100
per year. Ex-wife promised nothing in return. Ex-husband doesn’t
keep promise, apparently because ex-wife earned more. Seven
years on ex-wife sues for the money.
What result in the US? Do you need more facts?
The law of obligations and promise based on moral obligation
Contractpromise based
Restitutionbenefits based
Sometimes called quasi-contract,
implied in law contract, and unjust
enrichment
Tortsharm based
Mills v. Wyman (Mass. 1825), p. 121
Mills cares for Wyman’s adult and independent son, Levi, who is
deathly ill and incapacitated, providing food, a bed, and paying for
medical care. Levi dies after several weeks. Learning of his son’s death
and Mills’ service a sad but grateful Wyman writes a letter promising
to reimburse Mills expenses.
Webb v. McGowin (Ala. 1935), p. 122
While dropping heavy. block of wood from the upper floor of a window,
Webb spots McGowin immediately below. Webb throws himself from the
upper floor of a mill to divert the block, grievously injuring himself. A
grateful McGowin orally promises to pay Webb $15 every two weeks for
his life for maintenance asking for nothing more in return. McGowin’s
executor reneges after McGowin dies.
Promise, harm, and benefit . . . but there is no consideration for
the promise under the bargain theory.
Contractpromise based
Mills & Webb
Restitutionbenefits based
Tortsharm based
The US authorities cited at p. 122 would permit the claim.
Happily claims such as these hardly ever arise . . .