Outline: Contracts - I - Basics

Contracts (Spring 2006, Hull)

I. BASICS

1. Promise - A contract is a promise for a promise (bilateral) or a promise for performance (unilateral). R.2d 32.
2. Consideration - A promise is unenforceable without consideration. R.2d 71.
   1. Act - Benefit to promisor [Cash v. Benward – Promise to fill out insurance form is not a benefit to the promisor, as general niceties are not enforceable promises.]
   2. Forbearance - Detriment to promisee
      1. Hamer v. Sidway – Promise to pay in return for refraining from vices until turning 21, and subsequent compliance, is a detriment to promisee because he gave up what would have been a legal right.
      2. Kirksey v. Kirksey – Sister-in-law who moved did not have detriment because she did not give up a legal right.
   3. California Civil Code § 1605 – "Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise."
3. Exceptions
   1. Moral Obligation/Past Consideration – Promise for a benefit previously received. R.2d 86.
      1. Webb v. McGowin – Promisee who prevented bricks from falling on promisor was entitled to payments promised by promisor, who had kept paying during his life.
      2. Harrington v. Taylor – Promisor who did not pay in full for saving him from an axe was not compelled to pay remainder, because promisee had not acted with expectation of compensation.
   2. Promissory Estoppel - Where there is no contract, courts will still enforce a promise where justice requires. R.2d 90.
      1. Ricketts v. Scothorn – Granddaughter who relied, to her detriment, on grandfather’s wish for her not to work was entitled to promised money despite lack of consideration.
      2. Hayes v. Plantations Steel Company – Employee who announced his own retirement before the promise did not rely on that promise.
      3. Other situations (R.2d 90, comment b)
         1. Definite and substantial character of reliance
         2. Reasonableness of reliance
         3. Formality of promise
   3. Reliance - R.2d 139(a)
      1. Reasonable expectation to induce action or forbearance
      2. Actual induction of action or forbearance
      3. Injustice can be avoided only by enforcement
4. Implied-in-Fact Contract - Obligation to pay for goods or services implied from facts (i.e., flagging down a taxi implies an obligation to pay)
5. Quasi-Contract/Implied-in-Law Contract
   1. Schott v. Westinghouse Electric Corporation – Company who offers employees rewards for improvement ideas, then uses submitted ideas without payment, is unjustly enriched, and has entered a quasi-contract.
   2. Restitution – Where there is a quasi-contract, restitution is a measure of recovery: Reasonable value of goods or services (cost saved or benefit conferred).
   3. Officious intermeddler – A person who voluntarily enriches someone else.
      1. The law does not require compensation here.
      2. Exceptions: Emergency medical care rendered to someone incapacitated so that he is incapable of soliciting such care.
   4. Matter of Estate of Milborn – Couple who helped non-relative decedent had an implied-in-fact contract.
   5. Palimony - When people live together, some services may be legally compensable. On the same facts you can argue either that the service provided were gratuities, or were legally compensable services.
6. UCC Basics
   1. 1-103 - UCC to be supplemented by general principles of law
   2. 1-203 - Obligation of Good Faith (always applicable)
   3. 2-104 - Merchant
   4. 2-105 - Goods - Services under Restatement; Goods under UCC; Mixed:
      1. Majority - Predominance Test
      2. Minority - Gravamen test