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Contracts

Contracts. Consideration -- 1. Fundamentals. “Will” theory before 19 th century Covenant Promise made under seal Binding because promisor willed it Debt Assumpsit From malfeasance to non-feasance Finally, to exchange of executory promises. Formality – why?. Evidentiary Cautionary

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Contracts

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  1. Contracts Consideration -- 1

  2. Fundamentals • “Will” theory before 19th century • Covenant • Promise made under seal • Binding because promisor willed it • Debt • Assumpsit • From malfeasance to non-feasance • Finally, to exchange of executory promises

  3. Formality – why? • Evidentiary • Cautionary • Especially under the UCC, formality has taken a beating • What is the UCC? • But there is still Statute of Frauds • Some states still allow promises under seal

  4. Is there really such a thing as Contract Law? • The field of contract law invented in a way by Samuel Williston (1920) • Wrote treatise, taught at Harv. L. S. • Unified somewhat disparate areas of • Family contracts • Real estate contracts • Insurance contracts • Employment contracts, etc. • But some idiosyncrasies survive

  5. Hamer v. Sidway • Facts • NY Ct App 1891 • Uncle promised $5000 to nephew if he did not drink, smoke, gamble until he was 21

  6. Was there consideration under the bargain test? • Was something, a promise or a performance, given in exchange for the promise to pay $5000? • Was the forbearance bargained for? • Sought by uncle in exchange for promise? • Given by nephew in exchange for promise?

  7. What if . . . • Suppose nephew had promised to forebear drinking, etc. Consideration? • Yes, if return promise what what uncle was seeking in exchange for his promise. • But in situations like this (for obvious reasons) it is performance that is usually sought

  8. Bilateral vs. Unilateral contracts • Just terminology • Bilateral: • A promise is exchanged for a promise • P says: I will pay you $1000 if you paint my house • Q says: I accept – I promise to paint your house • There is a contract. Each promise consideration

  9. Unilateral contract • Promise for a performance • P says “I will pay you $1000 to paint my house” • Q promptly begins painting the house. • There is a contract • Performance is the consideration for the promise.

  10. Benefit and Detriment • Language not used in Restatement 2d • Still lingers in decisions • Not necessary for there to be real benefit or detriment • Presupposed by exchange theory that both parties benefit in voluntary exchange • E.g. not relevant that it was good for nephew to give up smoking and drinking, and so no detriment to him in some sense. • He forebore legal right he had

  11. Gratuitous promises • Give examples of unenforceable gratuitous promises • What about a completed gift? • Why enforce contracts (based on promises) but not gift promises? • Gift promises not efficient? • Delivery of gift performs cautionary and evidentiary functions of consideration

  12. Bargain theory • Oliver Wendell Holmes • “reciprocal conventional inducement” • “sufficiency” of consideration • Libertarian principle in contract law – court does not enquire into value of things exchanged. • Only question, was there an exchange.

  13. Problem p. 32 • Is there consideration for this purported contract?

  14. Peppercorns

  15. Peppercorns • Can a peppercorn be consideration? • Restatement 1st: Yes • Restatement 2nd: No • What’s the difference?

  16. Fiege v. Boehm (Ct. App. Md. 1956)

  17. Fiege v. Boehm • Facts • Was the promise to pay supported by consideration? • Why? • Could Boehm have enforced such contracts against 2 or more men?

  18. Rest. 2d Section 74 • 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. • (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.

  19. Rest.2d. 74 -- illustration • 1. A, a shipowner, has a legal duty to provide maintenance and cure for B, a seaman. B honestly but unreasonably claims that adequate care is not available in a free public hospital and that he is entitled to treatment by a private physician. • B's forbearance to press this claim is consideration for A's promise to be responsible for the consequences of any improper treatment in the public hospital.

  20. Illustration 2 • 2. A, knowing that he has no legal basis for complaint, frequently complains to B, his father, that B has made more gifts to B's other children than to A. B promises that if A will cease complaining, B will forgive a debt owed by A to B. • A's forbearance to assert his claim of discrimination is not consideration for B's promise.

  21. Illustration 4 • 4. A, a real estate broker, is entitled to a commission for selling B's land, amounting to five per cent or $1,500. B claims in good faith that he owes only one per cent or $300, and offers to pay that amount in full settlement of the claim for commission. A accepts the offer. • The payment is consideration for B's promise to surrender his entire claim.

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