Considering Past
Consideration
Contracts – Prof. Merges
Jan. 18, 2011
Hamer and Feige Recap
Rest. 2d, § 71
(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.
§ 74. Settlement Of Claims
(1) Forbearance to assert or the
surrender of a claim or defense which
proves to be invalid is not
consideration unless
(a) the claim or defense is in fact doubtful
because of uncertainty as to the facts
or the law, or
(b) the forbearing or surrendering party
believes that the claim or defense may
be fairly determined to be valid.
Was the claim doubtful in fact?
• Covers most actual cases
• Litigation often has an element of
uncertainty
Was the claim doubtful in fact?
• If so –
– Does it matter that the “surrendering
party” did not believe it was
doubtful?
What if the claim is in fact
absurd – not viable at all?
• Does Rest. 2d adopt a purely subjective
standard in this case?
• (b) the forbearing or surrendering party
believes that the claim or defense may
be fairly determined to be valid.
Rest. 2d, § 74 (2)
(2) The execution of a written instrument
surrendering a claim or defense by one
who is under no duty to execute it is
consideration if the execution of the
written instrument is bargained for
even though he is not asserting the
claim or defense and believes that no
valid claim or defense exists.
Feinberg v. Pfeiffer Co.
• Procedural History
– Who won below? Who is appealing?
Key Facts
• Employment History
• Board Meeting
• Resolution
Long period of employment
• 37 years at time of Board resolution; 39
years at time of retirement (1949)
• Isn’t this a “benefit to the promisor”?
• Isn’t this a detriment to the promisee?
Additional Facts
• Pfeiffer Co. paid retirement funds for 6
+ years
– Why is this not enough to bind Pfeiffer?
– What led to the company stopping the
payments?
The retirement bargain
• When informed of the Board resolution
in 1947, what did Ms. Feinberg say?
The retirement bargain
• When informed of the Board resolution
in 1947, what did Ms. Feinberg say?
• “that she would have continued her
employment whether or not such a
resolution had been adopted” –
relevance?
What is “the basic issue in
the case”?
What is “the basic issue in
the case”?
“. . . Whether plaintiff has proved that she
has a right to recover from defendant
based upon a legally binding
contractual obligation to pay her $200
per month for life.”
-- Top p 49
What are defendant’s
arguments?
What are defendant’s
arguments?
• Bd resolution was merely “a promise to
make a gift”
• No contract resulted
• No consideration
What consideration was
recited in the Bd resolution?
• “many years of long and faithful
service”
• What is wrong with this?
What was missing?
What was missing?
• Nothing in the resolution which
made its effectiveness
conditional upon plaintiff’s
continued employment
Apply Rest. 2d § 71 to Feinberg
§ 71 (2):
sought by the promisor in exchange for
his promise AND is given by the
promisee in exchange for that promise.
Promisor
Promise to pay the pension
Promisee
Promisor
Promise to pay the
pension
Promisee
37 Years
of
service?
1 and ½
years
additional
service?
Promisor
Promisee
Rest. 2d, § 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 promisee in
exchange for that promise.
Hamer applications
• Hypo 1: Uncle promises
$$
• Nephew spontaneously
says “I’ll refrain”
Hamer applications
• Hypo 2: Nephew says “I’ll
refrain”; Uncle says, “to
reward you, I’ll give you $$”
It’s simple:
“reciprocal
mutual
inducement,”
that’s the key!
Promisor
Promisee
Mutual reciprocal
inducement!
Plaintiff’s arguments
• Contract/consideration
• Other?
Feinberg’s end of
employment
• Why the Q&A on the role of the
retirement payments in her decision to
quit working at Pfeiffer Co.?
“Change of position”
• Lost opportunity type of “out of
pocket” outlay
• Discussed in the context of Sullivan v.
O’Connor
Mills v. Wyman
• Procedural History
• Key Facts
Stefán
Henrik, 1920
“Good Samaritan” stories
• Bukhari Hadith - 4:538
• O my sons, be generous to strangers
and you will be given exactly what was
given to the great Abraham, the father
of fathers . . .
Testament of Jacob (mishram) 7:22
Mills v. Wyman
• What was the holding?
• Why?
Benefit/detriment analyis
• What is the problem here?
• Promise to pay money, to compensate
for expenditure of time and resources
caring for a sick son
Timing again
• Father’s promise did not induce the
care for the son
• The care was NOT bargained for
• It was therefore . . . A gift
What is the court’s attitude
toward Mr. Wyman?
• Limits of legal liability
• Difference between legal rules and
moral rules/social norms
§ 82. Promise To Pay Indebtedness;
Effect On The Statute Of Limitations
(1) A promise to pay all or part of an
antecedent contractual or quasicontractual indebtedness owed by the
promisor is binding if the indebtedness
is still enforceable or would be except
for the effect of a statute of limitations.
(2) The following facts operate as such a
promise unless other facts indicate a
different intention:
(a) A voluntary acknowledgment to the
obligee, admitting the present existence of
the antecedent indebtedness; or
(b) A voluntary transfer of money, a
negotiable instrument, or other thing by the
obligor to the obligee, made as interest on
or part payment of or collateral security for
the antecedent indebtedness; or
(c) A statement to the obligee that the statute
of limitations will not be pleaded as a
Webb v. McGowin
• Procedural History
“Nonsuit” ?
• Dismissal of plaintiff’s cause of action
• Failure to state a claim (10b-6, Federal)
What was missing?
What was missing?
• “In consideration” recitation (p. 52) –
effect?
Benefit/detriment again
• What is wrong with this deal: I save
your life/hurt myself, you pay me $$?
How does Joe Webb shift his
strategy on appeal?
How does Joe Webb shift his
strategy on appeal?
• “Material benefit” argument
Boothe v. Fitzpatrick
• Why relevant?
Boothe v. Fitzpatrick
• Why relevant?
• “Material Benefit” conferred
• No prior agreement
Boothe v. Fitzpatrick
• Why relevant?
• “Material Benefit”
– Compare to Mills v Wyman
– Physician and unconscious patient case
Boothe v. Fitzpatrick
• Why relevant?
• “Material Benefit”
– Compare to Mills v Wyman
– Began Payments – Relevant?
mm
• m
How would the case come out
today?
California Civ. Code § 1606. Good
consideration; legal or moral obligation
An existing legal obligation resting upon the
promisor, or a moral obligation originating in
some benefit conferred upon the promisor,
or prejudice suffered by the promisee, is also
a good consideration for a promise, to an
extent corresponding with the extent of the
obligation, but no further or otherwise.
"In California, the acknowledgment of a
prior unenforceable obligation gives
rise to a new enforceable promise,
supported by a 'moral obligation' which
is regarded as sufficient consideration
...." Gen. Credit Corp. v. Pichel, 44
Cal.App.3d 844, 118 Cal.Rptr. 913, 916
(1975) (citing, inter alia, Cal. Civ.Code
§ 1606).
Webb v. McGowin
• What benefit was conferred by Webb?
• What role was played by the
subsequent promise to pay;
– And the actual payments?
Webb – Dr./patient case
• Benefit conferred
• Expectation of “conferring party”
– Any differences?
Mills and Webb: Reconciling
cases
• Work at it – really try
• “Progress” or “realism” may be the
ultimate explanation, but do not start
there
NY Statute
• N 2 p. 55
Elements
• Material benefit conferred
• Subsequent promise by “promisor” -ratification