Contracts 1 Review

Front 1

Consideration

Back 1

A performance or a return promise must be bargained for.
Consideration is the benefit that each party gets or expects to get from the contractual deal -- for example, Victoria's Secret gets your money; you get the cashmere robe.
Each party is giving up something for the exchange.

Front 2

Promissory Estoppel

Back 2

1. a Promise
2. Foreseeable Reliance
3. Reliance
4. Injustice absent enforcement

When a person makes a false statement to another and the listener relies on what was told to him/her in good faith and to his/her disadvantage.
Example: Bernie Blowhard tells Arthur Artist that Blowhard has a contract to make a movie and wants Artist to paint the background scenery in return for a percentage of the profits. Artist paints, and Blowhard then admits he needed the scenery to try to get a movie deal which fell through and there are no profits to share. Artist sues and the judge finds that Blowhard cannot deny a contract with Artist and gives Artist judgment for the value of his work.
Rule

Front 3

Rule for Promissory Estoppel

Back 3

For a finding of promissory estoppel, the requirements are: a promise which the promissor should reasonably expect to induce action or forbearance of a definite and substantial character, that the promise did induce such action or forbearance, and whether injustice can be avoided only by enforcement of the promise.

Front 4

Illusory Promise

Back 4

an agreement to do something that is so indefinite one cannot tell what is to be done or the performance is optional (usually because it is just a gesture and not a true agreement). Therefore, the other party need not perform or pay since he/she got nothing in what he/she may have thought was a contract.

Front 5

Past Consideration

Back 5

A past promise or act which forms the basis of a future promise.

Front 6

Moral Consideration

Back 6

Consideration based on a moral duty.

Front 7

Moral Obligation is Sufficient Consideration under the following circumstances:
1.2.3.

Back 7

1. Debts barred by the statute of limitations
2. Debts incurred by infants,
3. Debts of bankrupts

Front 8

Preston gives Henry a new car for Henry’s birthday. Later, Henry promises to repay Preston the value of the car.
Is Henry's promise enforeceable?

Back 8

No. Henry’s promise is unenforceable because the benefit that Preston gave Henry was given as a gift and there is no moral obligation to repay the value of a gift.

Front 9

Pre-Existing Duty Rule

Back 9

A rule that prevents a party from promising the identical consideration in one agreement that the party is already duty bound to perform by a previous agreement.
Example: A private road gives access to three homes in a small community in up-state New York. The owners of these homes are responsible to maintain the road. After a blizzard, the owner of the home at the road's end contracts with a plow service company to clear the entire road. Under the preexisting duty rule, the plow service company could not then create a side agreement with either of the other two home owners to be paid for the service it has already been contracted to do.

Front 10

Promise Reasonably Inducing Action or Forbearance

Back 10

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 and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
2. A charitable subscription or a marriage settlement is binding under subsection (1) w/o proof that the promise induced action or forbearance.

Front 11

Forbearance

Back 11

an intentional delay in collecting a debt or demanding performance on a contract, usually for a specific period of time. Forbearance is often consideration for a promise by the debtor to pay an added amount.

Front 12

Expectation Damages

Back 12

tries to place the harmed party in the position he would have been in had the breach not occurred.
Compensation awarded to the party harmed by a breach of contract for the loss of what he reasonably anticipated from the transaction that was not completed. In other words, expectation damages is compensation that tries to place the harmed party in the position he would have been in had the breach not occurred.

Front 13

Remedies -
Restitution Interest

Back 13

The restitution interest is the plaintiff's interest in the value of the benefit the plaintiff has conferred on the defendant; the goal of the award is to restore defendant to defendant's pre-contract position
The Plaintiff has in reliance on the promise of the defendant conferred some value on the defendant. The defendant fails to perform his promise. The court may force the defendant to disgorge the value he received from the plaintiff.

Front 14

Remedies-
Reliance Interest

Back 14

Our object is to put him in as good a position as he was in before the promise was made.
The Plaintiff has in reliance on the promise of the defendant changed his position. For example, the buyer under a contract for the sale of land has incurred expense in the investigation of the seller's title, or has neglected the opportunity to enter other contracts. We may award damages to the Plaintiff for the purpose of undoing the harm which his reliance of the Defendant's promise has caused him. Our object is to put him in as good a position as he was in before the promise was made.

Front 15

Remedies-
Expectation Interest

Back 15

Here our object is to put the plaintiff in as good a position as he would have occupied had the defendant performed his promise.
Without insisting on reliance by the promisee or enrichment of the promisor, we may seek to give the promisee the value of the expectancy which the promise created. We may in suit for specific performance actually compel the defendant to render the praised performance to the plaintiff, or in suit for damages, we may make the defendant pay the money value of this performance. Here our object is to put the plaintiff in as good a position as he would have occupied had the defendant performed his promise.

Front 16

Special Damages-
Consequential Damages

Back 16

Expenses or other losses beyond general damages that the Plaintiff would never have incurred but for the breach.
Example: Faulty furnace that blows up and injures a family, the consequential damages would include pain and suffering and medical expenses. In commercial, it consists of lost profits for a non-breaching buyer. If a builder of a motel fails to built it as promised, loss in value damages for the owner will consist of the cost of substitute performance or the diminution in value occasioned by the defective performance.

Front 17

Limitations on the Recovery-
Certainty

Back 17

Plaintiff is denied any relief that is too speculative or uncertainty as to:
1. Causation- the fact that the breach caused the type of injury that P alleges
2. Amount - The extent to which P suffered (dollar amount in damages)
3. Or Both Causation and Amount.

Front 18

Limitations on the Recovery-
Foreseeability

Back 18

reasonable anticipation of the possible results of an action, such as what may happen if one is negligent or consequential damages resulting a from breach of a contract.

Front 19

Limitations on the Recovery-
Avoidability

Mitigation of Damages

Back 19

The plaintiff has a duty to make reasonable efforts to avoid the consequences of the breach and to reduce the damages that defendant would otherwise pay. While expressed as a "duty," a party is not actually required to mitigate. But If a party does not mitigate, the damages are computed as if they had mitigated.
Where one person has committed a tort, breach of contract, or other legal wrong against another, it is incumbent upon the latter to use such means as are reasonable under the circumstances to avoid or minimize the damages. The person wronged cannot recover for any item of damage which could thus have been avoided.

Front 20

Nominal Damages

Back 20

Awarded for breach of contract when P has a valid cause of action against D but actual damages have not been proven and cannot be presumed.
Example: 6 cents

Front 21

Quantum Meruit

Back 21

In the law of contracts, a doctrine by which the law infers a promise to pay a reasonable amount for labor and materials furnished, even in the absence of a specific legally enforceable agreement between the parties.
Courts have crafted four basic elements that the plaintiff must prove before she may recover under the doctrine of quantum meruit: (1) that valuable services were rendered; (2) that the services were rendered to the defendant; (3) that the services were accepted, used, and enjoyed by the defendant; and (4) that the defendant was aware that the plaintiff, in performing the services, expected to be paid by the defendant.

Front 22

Rule of Compensation

Back 22

The goal of contract damages is to compensate the injured party for the loss, not punish the breaching party for the breach.

In a contract between S and B, if S breaches then S hall pay a penalty of $5000 to B. This is NOT Enforceable because it violates the Rule of Compensation.