Considering Past Consideration

1. Considering Past Consideration Contracts – Prof. Merges Jan. 18, 2011

2. Hamer and Feige Recap

3. 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.

4. § 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.

5. Was the claim doubtful in fact? • Covers most actual cases • Litigation often has an element of uncertainty

6. Was the claim doubtful in fact? • If so – • Does it matter that the “surrendering party” did not believe it was doubtful?

7. 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.

8. 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.

9. Feinberg v. Pfeiffer Co. • Procedural History • Who won below? Who is appealing?

10. Key Facts

11. Employment History • Board Meeting • Resolution

12. 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?

13. 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?

14. The retirement bargain • When informed of the Board resolution in 1947, what did Ms. Feinberg say?

15. 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?

16. What is “the basic issue in the case”?

17. 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

18. What are defendant’s arguments?

19. What are defendant’s arguments? • Bd resolution was merely “a promise to make a gift” • No contract resulted • No consideration

20. What consideration was recited in the Bd resolution? • “many years of long and faithful service” • What is wrong with this?

21. What was missing?

22. What was missing? • Nothing in the resolution which made its effectiveness conditional upon plaintiff’s continued employment

23. 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.

24. Promisor Promisee Promise to pay the pension

25. Promisor Promisee 37 Years of service? 1 and ½ years additional service? Promise to pay the pension

26. Promisor Promisee

27. 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.

28. Hamer applications • Hypo 1: Uncle promises $$ • Nephew spontaneously says “I’ll refrain”

29. Hamer applications • Hypo 2: Nephew says “I’ll refrain”; Uncle says, “to reward you, I’ll give you $$”

30. It’s simple: “reciprocal mutual inducement,” that’s the key!

31. Promisor Promisee Mutual reciprocal inducement!

32. Plaintiff’s arguments • Contract/consideration • Other?

33. 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.?

34. “Change of position” • Lost opportunity type of “out of pocket” outlay • Discussed in the context of Sullivan v. O’Connor

35. Mills v. Wyman • Procedural History • Key Facts

36. Stefán Henrik, 1920

37. “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

38. Mills v. Wyman • What was the holding? • Why?

39. 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

40. Timing again • Father’s promise did not induce the care for the son • The care was NOT bargained for • It was therefore . . . A gift

41. What is the court’s attitude toward Mr. Wyman? • Limits of legal liability • Difference between legal rules and moral rules/social norms

42. § 82. Promise To Pay Indebtedness; Effect On The Statute Of Limitations (1) A promise to pay all or part of an antecedent contractual or quasi-contractual 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.

43. (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 defense.

45. Webb v. McGowin • Procedural History

46. “Nonsuit” ? • Dismissal of plaintiff’s cause of action • Failure to state a claim (10b-6, Federal)

47. What was missing?

48. What was missing? • “In consideration” recitation (p. 52) – effect?

49. Benefit/detriment again • What is wrong with this deal: I save your life/hurt myself, you pay me $$?

50. How does Joe Webb shift his strategy on appeal?