Enforceability

Question 1

How do we know what promises to enforce?

Answer 1

1. Serious promises (should be enforced) versus non-serious promises (should not be enforced)
2. Are they intended to create a legal consequence?
3. No distinction between express and implied contracts.

Both kinds have consideration, can be enforced

Question 2

For a K to be enforceaable, the promise must be

Answer 2

Supported by consideration

Question 3

A promise is supported by consideration

Answer 3

A promise is supported by consideration when it is “bargained-for.”

Question 4

A promise is bargained for when

Answer 4

A promise is bargained for when **it is sought by the promisor in exchange for his promise, and is given in exchange for that promise (mutual inducement) **

Question 5

Consideration turns on

Answer 5

Consideration turns on the relationship between the promises

Question 6

Enforceability Analysis:

Answer 6

Preliminary Q: New k or modification? (look at the scope of the original and compare to new consideration)

Step 1: What is the promise?

Step 2: What is the consideration** proffered in support of? **either return promise OR performance

Step 3: Was consideration bargained for?

• Did promisor make the promise in order to get the consideration?
• Did promisee give consideration in order to get the promise?
• If BOTH are yes, then it is enforceable.

Question 7

A gratuitous promise or a gift is

Answer 7

A gratuitous promise or a gift is not a bargained for agreement, so it is not supported by consideration

• Gift is revocable up to time of delivery.
• Only becomes effective upon actual delivery of the thing that was promised.

Question 8

Benefit to one party/ detriment to other

Answer 8

is not the key to a bargain, but it can certainly be evidence of a bargain/consideration.

Question 9

Any suspension of a legal right is

Answer 9

Any suspension of a legal right is a detriment…anytime someone suspends his or her legal right, it is pretty solid evidence of inducement.

Hamer v. Sidway: Uncle promises $5,000 to nephew if he refrains from drinking, smoking, and gambling.
This is a bargained for agreement because the promises were mutually inducive. So even though the uncle probably was not actually benefited, this is valid consideration

Question 10

Hamer v. Sidway

Answer 10

Uncle: give up billiards, cards, gambling, swearing, tobacco, etc. until you’re 21 and you’ll get $5,000. Nephew turned 21, uncle said wait a little longer. Uncle died.

HOLD: There is consideration because nephew took on a forbearance of legal rights in exchange for the $5K.
This is a bargained for agreement because the promises were mutually inducive. So even though the uncle probably was not actually benefited, this is valid consideration

Question 11

Legal detriment:

Answer 11

Legal detriment: if a person does something they are under no legal obligation to do or if they don’t do something they have a legal right to do.

Question 12

Restatement § 71

Answer 12

§ 71(1): for consideration, a performance or a return promise must be bargained for.

§ 71(2): Bargained for if it is sought by promisor in exchange for promise and is given by the promise in exchange for that promise.

§ 71(3)(a): performance may be act other than a promise (b) forbearance, (c) creation, modification, or destruction of a legal relation.

Question 13

Johnson v. Otterbein University

Answer 13

D promised to pay P for clearing the university’s debt; if they didn’t use the money to clear debt, then the money was to be refunded. They tried to collect, he never paid.

HOLD: No consideration here. Promise may be revoked at any time before payment because there is no consideration; no consideration provided because the agreement to use $ for debt-payment went to university’s general obligations, not specifically because D wanted it so. Liabilities were incurred after suit was initiated.

Question 14

In the context of consideration, the performance at issue may consist of:

Answer 14

In the context of consideration, the performance at issue may consist of:

• *1. An act other than a promise
  2. A forbearance
  3. The creation, modification, or destruction of a legal right.**

Question 15

Past Consideration

Answer 15

Past Consideration

If the promise used was something already performed, then it is past consideration and can’t be used!

The consideration was not induced by the promise made, or vice versa.

Question 16

Moore v. Elmer

clairvoyant

Answer 16

At D’s request, P, a clairvoyant, performed a test sitting for D. In exchange for performing test sittings, D signed a letter promising to pay P or her heirs the remainder of P’s mortgage, if D should die as P predicted. P sued to recover $ promised.

HOLD: No consideration. Services rendered upon request support a later promise to pay for such services only in cases where original request implies an agreement to make payment for services. Services rendered as a mere favor is not consideration. Consideration is executed when individual renders services or performs requested duties. If something was already given or performed before promise was made, it will not satisfy the bargain requirement.

Question 17

Mills v. Wyman

if son returned from voyage at sea

Answer 17

When D’s son returned from a voyage at sea, he fell ill. P gave him shelter and took care of him until he died (? – not really). D wrote P promising to pay D the expenses associated with taking care of P’s son. However, D later refused to make such a payment. P brought suit.

HOLD: Moral obligation is sufficient consideration only where good or valuable consideration previously existed. No bargaining, P did not provide services at D’s request. If the child was a minor, there would be consideration as parents should take care of minors.

Question 18

Antecedent Valuable Consideration

Answer 18

Some pre-existing legal obligation that had been made inoperative by positive law, like a debt that was determined unenforceable because the person filed for bankruptcy.

Question 19

Moral obligation as consideration

Answer 19

is valid consideration only if there is a pre-existing legal obligation, which was made inoperative by law, and which the promisee is reviving with their promise:

• Statute of limitations, infant, bankruptcy
• It is actually past consideration in “moral garb”

Question 20

Pre-Existing Legal Duty

Answer 20

When nothing new is promised.

• The promise made is for work that they have already been contracted to perform.
• Also… usually amounts to extortion, because it is under coercive circumstances. (Stylk & Alaska Packers)
• Similar to past consideration… but different.
• Exception: If the prior contract was waived.
• But it must be waived by someone with the

Question 21

Stilk v. Myrick

deserts on ship

Answer 21

Two crew members deserted; captain unable to hire replacements. Agreed to divide pay of two deserters if Ps would finish the trip shorthanded. D later refused to pay additional wages.

HOLD: Modifications of employment contracts which are occasioned by emergency or duress are unenforceable. Duty already required the crew members to complete the trip. Case would be different if the crewmen could have left the ship at any port, or if the crew were arbitrarily fired, but neither situation present.

Question 22

Alaska Packers’ Assn. v. Domenico

salmon fishers

Answer 22

D hired P in SF for a contract for salmon fishing. Once P got to AK, they stopped work and demanded higher wages. Impossible to hire new people on short notice, D’s superintendent agreed to pay them new terms for higher wages, even though he said he had no authority. D refused to pay – P sued for higher terms.

HOLD: When a party refuses to perform and thereby coerces a promise from the other party to the contract to pay him increased compensation for doing that which he is already legally bound to do, there is no consideration. No warrant for inference that says the D’s voluntarily rescinded or modified the contract; repetition of the same legal promise.

Question 23

Brian Construction and Development Co. v. Brighenti

Answer 23

P hired for construction of Post Office; P subcontracted D, who agreed to do foundation work for building. D was required to do “everything requisite and necessary to finish the entire work properly.” D discovered remains of another building; unanticipated by either party and required more work than originally thought. D refused to continue without additional compensation; P offered 10% more + extra cost, D worked for a while, then quit. P had to do it himself, and suffered major losses.

HOLD: Generally, when a party agrees to perform an obligation which he is already obligated to perform, albeit for a different price, the second agreement does not constitute a valid contract. However, the doctrine of unforeseen circumstances provides an exception to general rule; when unforeseen circumstances make the performance of a contract unduly burdensome, the parties may agree, in view of the unchanged circumstances, to an adjustment in price.

Question 24

Analysis for pre-existing legal duty

Answer 24

analysis to include a preliminary question…

Is it a new contract or a modification of an existing contract?
Look at the scope of the original contract and compare to new consideration… is it the same?

Question 26

Pre-existing Legal Duty Rule

Answer 26

A pre-existing duty can’t constitute further consideration to modify a contract…if you want to modify a contract, the modification must be supported by further consideration.

Stilk v. Myrick: Sailors already had duty to sail the boat back under the contract…so they can’t claim those services were sufficient consideration for a promise to pay them more.

Rationale: Prevents extortion.

Question 27

EX: A father promises to pay the debts of his son because of his moral obligation to provide for his children

Answer 27

cannot be sufficient consideration because there was never a legal duty on the father to pay.

Question 28

Bates’ ** What Is Consideration Analysis**

(Know this word for word!)

Answer 28

• K = enforceable promise
• Promise is enforceable when supported by consideration
• Consideration = bargained for
• A promise is bargained for when it is sought by the promisor and given by the promisee

Q1: What is the promise we are trying to enforce?

Q2: What is the consideration proffered in support of - either return promise or performance

Q3: Was consideration bargained for

Question 29

UCC § 2-209:

An agreement modifying a contract

Answer 29

§ 2-209: An agreement modifying a contract needs no consideration.

• World of commerce – people adjust things all the time
• However, must meet a good-faith test.
• Use of bad faith to escape performance is barred
• Rejection of pre-existing duty rule in favor of more direct approach

Question 30

3 Requirements to change a K

(Exception to PELD)

Answer 30

1. Are there unanticipated circumstances?
2. Which significantly increase the burden on the promisor/promisee? (_additional & substantia_l)
3. Is the burden (cost of unanticipated circumstances) created > the original compensation promised? Or not within the contemplation of or K of the parties?

Question 31

Unlawful or immoral consideration

Answer 31

Court will not enforce agreement where consideration is unlawful, like a promise based on meretricious sexual services, but couple simply living together does not fit that category (Marvin).

Question 32

Adequacy of consideration

Answer 32

General Rule: Courts are not concerned with whether consideration is adequate…as long as there is mutual inducement, it does not matter if the trade is “even.”

However, inadequacy of consideration can be evidence that there really was no bargain…that the consideration was merely a sham or pretense

like Newman where the bank gave the wife her dead husband’s worthless note in exchange for her promise to pay his debt…not really a bargain.

Question 33

Nominal Consideration

Answer 33

Merely nominal consideration is not satisfactory consideration

Consideration in name only…sham/pretense that we talked about earlier. If the consideration is merely symbolic, it does not represent a bargain, so the promise is unenforceable.
Courts won’t analyze this very hard, but if the agreement is for the exchange of things of determinate value, the court can spot what is merely nominal.

Question 34

Schnell v. Nell

Answer 34

Promise to pay $600 for “consideration” of one cent…pretty easy to see this consideration is merely symbolic.
However, if the one cent piece was of some sentimental value, it might have been evidence of a bargain

Question 35

Nominal consideration may be valid for an option contract if

Answer 35

it is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time.

• In these cases, the party is paying $1 (what would normally be nominal consideration) for the offer to remain irrevocable, rather than consideration for the thing purchased (Smith v. Wheeler)
• Value of the offer being irrevocable is intangible, so the court allows this type of exchange.
• Majority of courts require that the dollar actually be paid, even though the court in Smith did not.

Question 36

Intent to be legally bound

Answer 36

Even if a person makes a promise and also explicitly states in writing that they intend to be legally bound, courts will not enforce the promise if it is not supported by some sort of valid consideration.

Question 37

Pennsylvania Exception to the intent to be legally bound requirement

Answer 37

Exception: Uniform Written Obligations Act

*ONLY in Pennsylvania*

Consideration is not required if the party expresses an intention in the writing to be legally bound.! A substitute for consideration.

• Express statement must be clear and unambiguousà courts won’t infer additional expression of intent to be bound.
• Words of obligation in the contract (“I promise to pay”)
• The statement must be additional… something extra added in specifically to be an express statement that they intend to be legally bound. (ex: “I promise to pay” is not additional!)

Question 38

Ricketts v. Scothorn

Grandfather asks grandaughter to stop working

Answer 38

P was working as a bookkeeper; grandfather said stop working, none of his grandchildren had to work and neither should she. Agreed to pay $2K at 6% interest. Money was not conditioned on her not working or anything else. She left her job; grandfather died, D sued executor for balance of the note.

HOLD: When payee changes her position to her disadvantage, in reliance on a promise, a right of action on the promise arises. No bargaining, no consideration, but it would be grossly inequitable for the executor to resist paying just because it lacked consideration.

Question 39

Greiner v. Greiner

Disinherited son

Answer 39

When father died, D was disinherited; P decided to put D on equal footing with other children. D said he wanted to move into a home, P said she would give him some land and a home to live in. D moved back; P never executed deed to property. No consideration for P’s promise to give D the land, but D made expenditures to improve the land, relying on his mother’s promise.

HOLD: A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee is binding if injustice can be avoided only by enforcement of the promise. Land given to son. Estoppel applies

Question 40

Allegheny College v. National Chautauqua County Bank of Jamestown

Scholarship Donor

Answer 40

Donor agreed to pay P $5,000 30 days after her death to start a fund for students entering the ministry. Paid $1,000 during her lifetime and then repudiated the promise; P sued D to recover unpaid balance.

HOLD: A bilateral agreement may exist although one of the mutual promise is a promise implied in fact. College created fund, memorial, etc. She can’t enjoy the benefits without expectation that there is payment of the remainder. Sufficient consideration here.

Question 41

Test from Allegheny

(Cardozo)

Answer 41

Consideration has to come from donee, not somewhere else

1. promise
2. reasonable expectation
3. Act of definite and substantive character
4. Does it
5. Injustice

By taking the $1,000 they created the duty, a duty is a promise, the promise was their consideration

Question 42

Will principle

Principles of enforceability

Answer 42

Will principle – parties consent to be bound voluntarily, “meeting of the minds,” therefore enforceable

exception: objective manifestation of consent unless subjective intent can be proven to be contrary

Question 43

Reliance principle

Principles of Enforceability

Answer 43

Reliance principle – liable for harm caused by verbal behavior (oral or written)

Question 44

Restitution principle

Principles of Enforceability

Answer 44

Restitution principle – to prevent unjust enrichment of promisor (one of benefited and now wants out)

Question 45

Economic efficiency

Principles of Enforceability

Answer 45

Economic efficiency – if benefits of enforcement exceed benefit of unenforcement (max. of social wealth)

Question 46

Substantive fairness

Principles of Enforceability

Answer 46

Substantive fairness – only enforce contracts that are fair – “just” prices and terms

Question 47

Bargain principle

Principles of Enforceability

Answer 47

Bargain principle – mutuality of inducement (also look at fairness of bargain, look for consideration)

Exception: “I promise to take out the trash” no bargain, not enforceable

Question 48

Expressed Contracts

Answer 48

Expressed Contracts – promise said in words, acceptance by oral, silent, written acceptance

Question 49

Implied Contracts

Answer 49

Implied Contracts – contract inferred from acts in light of surrounding circumstances (fear: holding people to agreements they never agreed to make)

Question 50

Marvin v. Marvin

Answer 50

I: What principles should govern distribution of property acquired in a non-marital relationship?

R1: Courts shall enforce express contracts between non-marital partners except if it’s founded on sex

R2: Courts inquire into conduct to determine if there is an implied contract – there is when a man and a woman live together and agree to pool their earnings and share equally in their joint accumulation, equity will protect the interests of each in such property.

R3: Quantum meruit (not a contract at all, but a method to collect damages, applied when courts believe not applying would result in unjust enrichment) – recoverable for the reasonable value of household services rendered less the reasonable value of support received if he can show that he rendered services with the expectation of monetary reward

H: looks at will and reliance principles, theory of quantum meruit, and implied contracts

Dissent: decision would result in cases inundating court, hard to collect damages

Question 51

Morone v. Morone,

cohabitation, implied contract?

Answer 51

R: there is no implied contract

H: in living together you provide services without an expectation of payment – it is hard to determine in retrospect which services were gratuitous and which were not

Question 52

“Consideration” rundown by Bates

Answer 52

1. A promise is enforceable if there is consideration
2. A promise is supported by consideration when it is “bargained-for.”
3. A promise is bargained for when it is sought by the promisor in exchange for his promise, and is given in exchange for that promise (mutual inducement)
4. Consideration turns on the relationship between the promises

Question 53

Bates EXAM NOTE:

Don’t ever say a K is enforceable bc there was consideration –>

Answer 53

This is a conclusion!!!

Must use the test to prove this!