Cases & Related Restatement Sections Flashcards
(41 cards)
Batsakis v. Demotsis
Bargained for exchange involving P giving D 500,000 Drachmae (~$25) for the D’s promise to repay P with $2000 in the future.
H: Inadequacy of consideration didn’t invalidate the contract. Evidence to show that D really was bargaining for that b/c she needed the money instantly. (if consideration had been nominal, then not okay)
RS2 Sec. 79 - Adequacy of Consideration; Mutuality of Obligation
Schnell v. Nell
Example of Nominal Consideration.
D had contract with his kids to give them $200 for $0.01. D claimed that there was no consideration.
H: Consideration was nominal, so contract wasn’t legally enforceable. D didn’t actually want the penny so it wasn’t bargained for. It took the form of a bargain, but not the substance of a bargain.
RS2 Section 79
Dougherty v. Salt
Aunt wrote a promissory note for $3000 to nephew and wrote “value received” on it. This was meant to show that there was consideration.
H: Not a bargain. It was a simple donative promise (gift). Money wasn’t in exchange for anything (other than love and affection from nephew - which was not even stated in the note and probably wouldn’t be enough anyway). Simple recital of consideration isn’t enough
Mills v. Wyman
P provided emergency care to D’s adult son. D promised to reimburse P for expenses, but didn’t pay.
H: Ther services provided were not bargained for, so no consideration. Also, no unjust enrichment b/c D didn’t receive any benefit (his son did). D had a moral obligation to repay P, but that’s not legally enforceable.
Past Consideration is not Consideration
RS2 Section 86 - Promise for Benefit Received
and not one of the exceptions in RS2 82 or RS2 83 (Statute of Limitations and Bankruptcy) or of 86 (Unjust Enrichment)
Webb v. McGowin
Past Consideration - Exception
Employee saved his boss’ life at the expense of injuring himself. Boss promised to pay him every two weeks for the rest of the employee’s life. Boss died and his estate stopped the payments.
H: Promise was enforceable even though based on a past consideration. Even though there was no bargain, the boss would have been unjustly enriched. Boss would have requested it if given the opportunity.
RS2 Section 86 - Promise for Benefit Received
Pennsy Supply, Inc. v. American Ash Recycling Corp
Implied Promises
D offered the P aggrite to be used in paving work free of charge. The aggrite had problems and the P sued D for breach of contract for the cost of having to remove it.
H: D had to pay for the cost of removal. The aggrite seemed like a gift, but really the bargain was “if you get rid of this material for us (save us the cost of disposal), then you don’t have to pay for it”
Klockner v. Green
Promise v Consideration
Stepson and step grandaughter (Ps) brought suit against estate of Edyth to enforce alleged oral contract. Edyth had promised Ps to reimburse them if they continued to care for her. Lower court granted the D’s motion to dismiss saying that there was no consideration for Edyth’s promise b/c (based on Ps’ testimony, they would’ve cared for her anyway).
H: Reversed. The promise was binding. Edyth bargained for P’s services and promised to repay them. Ps fulfilling their end of the bargain doesn’t need to be solely induced by the offer of compensation to qualify for enforcement. Doesn’t matter what the motives were to perform their end of a bargain.
Hamer v. Sidway
Promise v. Consideration
D (uncle) verbally promised his nephew (P) that if P refrained from smoking, drinking, swearing, and gambling until he turned 21 that he would give him $5000. P held up his end of the bargain then D died before giving him the money. P sued estate for the money.
I: Did this bargain have sufficient consideration to enforce the contract?
H: Yes. P forbore (abstained) from something that he had a legal right to do and D benefitted from P honoring his wishes by forbearing his legal rights. This was a unilateral contract and it’s not up to the courts to determine whether D actually benefitted from P’s forbearance as long as there was valid consideration.
Not in case, but P would also likely succeed under a claim from RS2 Section 45 - Option Contract Created by Part Performance or Tender.
Wood v. Lucy, Lady Duff-Gordon
Implied Promise and Illusory Promise
Wood entered in contract with Lucy to help her monetize her endorsements by giving Wood exclusive right to place Lucy’s endorsements on the designs of others and Lucy’s designs. Wood found out that Lucy violated the contract by placing her endorsements on things w/o his knowledge so he sued. Lucy said that the contract was based on an illusory promise b/c contract didn’t explicitly state that Wood should use reasonable efforts to complete his end of the bargain.
I: Was there a valid contract?
H: Yes. There was an implied promise that Wood would put in effort to market goods and bring in profits. It was implicit in the agreement that Wood had an obligation to Lucy to promote her goods.
RS2 Section 77 - Illusory and Alternative Promises
Kirskey v. Kirskey
Promissory Estoppel/Reliance
BIL offered SIL a place to live after her husband died. She moved down there and after 2 years, the BIL made her move, so she sued.
H: Under classical contracts, not really a bargain here, just a gift and heer moving was one of the conditions to accept the gift.
This case provides a good example of reliance, even though the law at the time didn’t recognize it. Today, SIL would likely win under the Doctrine of Promissory Estoppel.
RS2 Section 90 - Promise Reasonably Inducing Action or Forbearance
Feinberg v. Pfeifer Co
Promissory Estoppel/Reliance
F: D agreed to pay P $400/month, then when she retired they would pay her $200/month until she died. D got a new president who decided that the $200/month was just a gift and lowered the amount to $100/month. P sued.
I: Is D legally obligated to continue paying the $200/month?
H: Yes. P likely would not have retired if she knew that the pension amount would be lower - she relied on the promised pension amount. There was no consideration or bargaining here, but the court recognized that P took an action (changed her behavior) based on the promise so it was enforceable.
Note: If P had planned to retire on a certain date anyway and D made the promise after that, it likely wouldn’t be enforceable b/c P wouldn’t have changed her behavior based on the promise.
RS2 Section 90 - Promise Reasonably Inducing Action or Forebearance
Angel v. Murray
Modification (No consideration needed) & Legal Duty Rule
Trash collector was paid a fixed rate for collecting city’s trash, then population skyrockets and it’s more expensive than anticipated to continue job. The city agreed to pay him more for the trash collection but then decided to try to get the extra money back - saying that it was given w/o consideration and collector had a legal duty to perform.
H: trash collector could keep the money. Absence of consideration isn’t grounds for reversing a modification where the modification has already been performed. Legal duty rule does not apply when there are unforeseen circumstances and the opposing party agrees to compensate for those circumstances.
Note: Generally you need new consideration for modification UNLESS modification has already been performed or modification is fair and equitable in view of circumstances not anticipated by the parties
RS2 Section 89 - Modification of Executory Contract
RS2 Section 73 - Performance of a Legal Duty
Lingenfelder v. Wainwright Brewery
Modification, Legal Duty, Duress
P brought suit against D for not paying extra in a contract to build a brewery. P asked for more money to finish the brewery even though that’s what they had already contracted for (P was mad that D went to a different company for the ice machines).
H: P was already obligated to finish the brewery, so he can’t demand additional compensation by taking advantage of the necessities of the other party. There was no consideration for the modification b/c the D wasn’t getting anything in return for the extra money and there weren’t any other circumstances that required extra money. Note if D had paid P before, D would have to bring a suit under a duress claim to get that money back (difficult hurdle).
RS2 Section 89 - Modification of Executory Contract
RS2 Section 73 - Performance of Legal Duty
RS2 Section 175 - When Duress by Threat Makes Contract Voidable
Foakes v. Beer
Origin of the Legal Duty Rule (and judge’s discomfort with it)
From a previous judgment, Foakes owed Beer a sum of money which required Foakes to pay interest on the sum. In a new, separate agreement they agreed that Foakes would pay Beer $500 immediately, then the rest of the principal in installments in exchange for not having to pay any interest.
I: Did the new agreement have consideration?
H: No. The promise to pay a preexisting debt is not valid consideration - you are already legally obligated to do so.
Ruling in this case is still alive today, but gravely wounded. Now if the debtor fulfills their side of the bargain before the lender changes their mind, the lender doesn’t have a claim.
RS2 Section 73 - Performance of a Legal Duty
ASAL v. Office Pavillion
Illusory Promise
Contract was unenforceable for lack of an essential term - the minimum quantity of chairs that ASAL was required to order. Because this was missing, ASAL wasn’t obligated to purchase any orders at all - which was an illusory promise.
Prof’s note: If they had framed it as a firm offer (UCC Section 2-205), then they wouldn’t need any consideration (b/c it’s for a sale of goods)
RS2 Section 77 - Illusory and Alternative Promises
Andreini v. Hultgren
Duress and Improper Threat
Doctor essentially forced patient to sign waiver of liability form or he would refuse to perform the surgery - while the patient was already on the operating table.
H: Improper threat by the Doctor. Patient was allowed to recover from the botched surgery even though he signed the waiver form
RS2 Section 175 - When Duress by Threat Makes a Contract Voidable
RS2 Section 176 - When a Threat is Improper
Chouinard v. Chouinard
Example of Duress
There were 3 owners of a company, Fred, Ed, and Al. There was a debate among the 3 as to the exact percentages of ownership. Fred needed a loan for the company which the lender refused to give until the ownership debacle was settled. Fred gave Ed and Al each a third of the company (even though that probs wasn’t real amount) b/c he wanted the loan. Fred secured the loan then brought suid against Ed and Al for duress.
H: No duress. Ed and Al took advantage of Fred’s tough situation, but that wasn’t illegal. There was no threat of considerable financial loss nor impending bankruptcy that would establish duress attributable to Ed and Al.
RS2 Section 175 - When Duress by Threat Makes a Contract Voidable
RS2 Section 176 - When a Threat is Improper
Totem Marine Tug & Barge v. Alyeska Pipeline
Economic Duress & Disproportionate Bargaining Power
Totem had a contract with Alyeska to transport a bunch of material for them. Due to a series of complications which caused Totem to be late, Alyeska terminated the contract. Totem, while on verge of bankruptcy, signed a settlement agreement that let Alyeska off the hook in exchange for less than half of what was owed from the original contract.
I: Was this a case of economic duress?
H: Yes. Totem didn’t have any other reasonable alternatives than to accept the settlement or go out of business. Also Alyeska knew that Totem Toten was on verge of bankruptcy and took advantage of Totem’s inferior bargaining power.
Williams v. Walker Thomas Furniture
Unconscionability
Contract involving a pro rata clause (substantive unconscionability) which was hidden in the contract (procedural unconscionability) where the furniture retailer kept a security interest on all other purchases and all purchases could be repossessed, even if $0.01 was owed on that item.
H: Deemed to be unconscionable, also an example of disproportionate bargaining power. There was an absence of meaningful choice on part of the plaintiff.
Dissent: P knew full well what she was getting into and took the risk anyway. Should be cautious about this approach when deciding a ruling - should promote freedom of contract instead.
Prof: If we decide that this kind of contract is unenforceable, will this company go out of business? If it does, then will people like P not have access to the product anymore?
RS2 Section 208 - Unconscionable Contract or Term
UCC Section 2-302 - Unconscionable Contract or Clause
Maxwell v. Fidelity Financial Service
Substantive Unconscionability - Poster child for why it’s necessary
P bought a solar water heater from a door to door salesman who sold it with financing from Fidelity at a ridiculous interest rate and even put their house on lien. The water heater never worked.
H: One-sided contract (substantive unconscionability). Terms were grossly unfair to “shock the conscious”. Also mentioned that a lot of people just submitted to door to door salesmen to get them out of their house, even if they didn’t want what they were selling. Said that substantive unconscionability was enough to prove it (already protections in place for procedural - fine print clauses, mistakes, etc.)
RS2 Section 208 - Unconscionable Contract or Term
UCC Section 2-302 - Unconscionable Contract or Clause
In Re the Marriage of Witten
Limits on Contracts
Court decided to stay out of dispute over what to do with frozen embryos of a divorced couple. Court went with what was written in the “embryo storage agreement” with the hospital - if a stalemate occurs on what to do with the embryos, they would stay in the storage facility (contemporaneous mutual consent model - ultimately up to each individual and they have equal say)
Courts like to stay out matters which are way too personal and those that go aginst public policy
Hawkins v. McGee
Expectation Damages
Doctor promised Hawkins a 100% perfect hand. Doctor screwed it up and Hawkins subsequently grew thick hair all over his hand. Sed for breach of warranty and was awarded expectation damages (the difference between what he got, a painful hairy hand, with a 100% perfect hand. Did not award tort damages (poor guy)
Could argue that this ruling goes against public policy b/c it would discourage doctors from performing certain procedures and could flood the court with patients who said doctor “guaranteed” it would be successful
RS2 Section 347 - Measure of Damages in General
Peevyhouse v. Garland Coal & Mining
Alternative to Loss in Value of Performance (Diminution in Value)
Kind of a ridiculous and unfair case. But the Peevyhouse’s rented their land out to the mining company and there was a reclamation provision in the contract. But the cost to repair would have been $29,000 where the diminution of value for the property was only $300.
H: Court said that the provision wasn’t an incidental part of the contract and only awarded $300 and the land stayed the way it was. (Even though the Peevyhouse’s specifically contracted to make sure the mining company would fix the land since they saw what they did to their neighbors)
RS2 Section 348 - Alternatives to Loss in Value of Performance
H.P. Droher & Sons v. Toushin
Diminution in Value
Droher agreed to build a house for Toushins. When it was done, it was found that a steel post in the basement was too low which caused the house to sag. To repair it would cost $20,000 and the diminution in the value of the house was way less.
H: Since Droher acted in good faith, the owner was only allowed to recover the difference between the value of the property as completed and what the value of the property would be in the contract had been completed correctly.
RS2 Section 348 - Alternatives to Loss in Value of Performance
