Contracts--The Element Of Reliance And The Bargain (And Limitations)

Front 1

Define: PROMISSORY ESTOPPEL

Back 1

(a) A promise that may be enforced to avoid injustice even when B’s reliance is unbargained for. (A makes a promise to B that A should reasonably expect would induce B to act or fail to act, and B does so.

Front 2

How did KIRKSEY v. KIRKSEY demonstrate the element of RELIANCE?

Back 2

(1) P’s husband died and P’s brother in law invited P to move her family to D’s estate but kicked her out after 2 years. (2) Held: A gratuitous promise is not legally enforceable after the promisee had suffered loss and inconvinence in reliance on the proise. (3) This action would problaly have been reversed in modern courts.

Front 3

How did FEINBERG V. PFEIFFER CO. demonstrate the element of PROMISSORY ESTOPPEL AS CONSIDERATION

Back 3

PROMISSORY ESTOPPEL AS CONSIDERATION (1) Case where Feinberg (P) worked for the companty for 37 eyars and the directors said that they would take care of her. She retired then was not able to work later due to medical conditions. The board discontinued services to her. (2) Held: A gratuitous pension plan is enforceable if the promise retires in reliance on continued payments.

Front 4

How would FEINBERG be distinguished with another rcase where soemoen said that he would retire and the company said that they would take care of her but they did not? [Hayes]

Back 4

(1) Hayes, P, waws note induced to retire; instead the company made gratuitous payments after hayes had decided to retire.

Front 5

What is the FIRST RESTATEMENT APPROACH to damages for breaches of PROMISSORY ESTOPPEL?

Back 5

(a) §90—provides that reliance can make a donatives promise enforceable, it does not specify the appropriate remedy for the breach. (b) Arguably, because the promise is enforceable to the extent of the reliance, the reliance measure instead of the expectation measure should be used.

Front 6

How does D&G STOUT, INC. V. BACARDI IMPORTS, INC. demonstrate the RELIANCE MEASURE OF DAMAGES?

Back 6

(a) Company was in trouble and a supplier promised to act as P’s distributor. But no. then P lost more money and reputation. D never said how long they would be the suppliers for. (b) Held: A party who promises to maintain a business relationship can become liable for damages when the promise relies to its detriment on the promise. (c) By way of analogy, an employee terminated for an at will employment can recover expenses uncured in moving for a job.

Front 7

HOW did WALTERS V MARATHON OIL CO demonstrate the EXPECATATION MEAUSRE for PROMISSORY ESTOPPEL

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(a) Here the court noted that a case based on promissory estoppel could not use expectation damages. Rather, promissory estoppel was an EQUITABLE matter and the trail court could fashion a remedy appropriate to the particular case.

Front 8

When is there sufficient consideration?

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(1) Sufficient consideration is present only when each party to the contract has intended to secure something from the other party that he was otherwise not legally entitled to (2) Ie: each party must be bargaining for something form the other party, not matter how nominal this may seem to other, outside parties.

Front 9

When can the courts infer a LEGAL DETRIMENT for CONSIDERATION?

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(1) The courts may infer a legal detriment whenever a party obliges himself through a bargain to perform in a certain manner, even if the performance is not detrimental in the ordinary sense of the term.

Front 10

How did HAMMER V. SIDWAY demonstrate the ELEMENT OF BARGAIN from ABSSTENTION FORM LEGAL CONDUCT?

Back 10

(1) Decedent promised his nephew that if he would refrain from drinking, smoking and such vice, that he would pay him 5000.. Nephew did, but decedent’s estate never paid up. (2) Held: A promisee’s abstention for legal but harmful conduct constitutes legal and sufficient consideration for a promise by the promisor to pay money. (3) The nephew suffered the detriment of not indulging in the vices. The uncle, his money. (4) Abstention was the price of the promise.

Front 11

Ex: A promises to provide B a hotel room if B comes to Los Angeles. Is there a bargain?

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(1) No. There is no bargain; B’s coming to Los Angeles was merely a condition to fulfillment of the gift. It was not the bargained-for price of A’s making the promise. (2) The distinguishing test is how the parties view the condition.

Front 12

When is ADEQUACY OF CONSIDERATION sufficient?

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(1) Any performance that is bargained for is consideration, regardless of whether the values exchanged are equivalent (restatement 2nd §71, 72, 79). (2) However, a gross inadequacy of consideration may be evidence of fraud, mistake, duress, or undue influence.

Front 13

How did HANCOCK BANK & TRUST CO V. SHELL OIL CO illustrate ADEQUACY OF CONSIDERATION: NO RELIEF FOR BAD BARGAIN?

Back 13

(1) P acquired premises leased by D in a foreclosure sale. Lease said that you could hold it for 15 years but it could be terminated within 90 days notice (2) Held: A contract based on a bad bargain for one of the parties is enforceable. (3) Unless governed by statutory restrictions, a contract supported by any consideration is enforceable.

Front 14

How does BATSAKIS V. DEMOTSIS demonstrate ADEQUACY OF CONSIDERATION: NO RELIEF WHERE CONSIDERATION IS PLAINLY INADEQUATE

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(1) WWII, P loaned 25 dollars for a contract that D would pay back 2000 with interest. (2) Held: A court will NOT inquire into the sufficiency of consideration where the note states that a certain sum has been received. (3) There was a valid contract at the time. (4) The courts will not examine the contract between the parties to determine whether the consideration received bye each side was equivalent.

Front 15

How does DURESS affect the ADEQUACY OF CONSIDERATION?

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(1) Contracts made under duress by CERTAIN KINDS OF THREATS are voidable (2) Restatement 2nd §175, 176

Front 16

How does UNCONSCIONABILITY affect the BARGAIN PRINCIPLE?

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(1) If a contract contains unconscionable elements, a court may avoid an unconscionable result by enforcing only the nonoffending terms or by limiting the application of any unconscionable term. (2) Equitable relief will be refused if it would be unfair because of deficiencies in the bargain, even where the contract is not unconscionable.

Front 17

How does WILLIAMS. V. WALKER-THOSMAS FURNITURE CO demonstrate the LIMITATIONS ON THE BARGAIN PRINCIPLE?

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(1) P had form contract which made all credit transactions of a buyer to be lumped into one account and each installment payment was to be spread pro rata over all items being purchased until all items were padi off. If purchaser defaulted, P could repossess the items. D defaulted and all her furniture, not only from the defaulting payment, was repossessed (2) Held: P’s contract provision on repossession was unconscionable. (3) D is poor in economic class and can easily be taken advantage of.

Front 18

Define: HYBRID TRANSACTION

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(1) A transaction that contains both a purchase of a GOOD and a SERVICE.

Front 19

What are the TWO approaches to HYBRID TRANSACTIONS that contain a PURCHASE of both GOODS and SERVICES? Which is PREFERRED? Why?

Back 19

(1) Predominant factor test (2) Severed contract approach (3) PREDOMINAT FACTOR TEST PREFERRED—The severed contract would be too difficult to apply. [from a carpet and installment notecase]

Front 20

Define: PREDOMINANT FACTOR TEST [unconscionability in hybrid transactions

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(1) Te test for inclusion is whether the predominant fact is the rendering of services with incidental goods, or a contract of sale, with labor incidentally involved.

Front 21

Define: SEVERED CONTRACT APPROACH [unconscionability in hybrid transactions]

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(1) Severs the contract into different parts so that the UCC apples to the sale of goods but not to the nongoods aspect of the contract, such as the provision of services. (2) A suit based on defects with the goods would be covered by the UCC (3) A suit based on he services would not be covered by the UCC.

Front 22

How does MAXWELL V. FIDELITY FINANCIAL SERVICES INC demonstrate NO NOVATION OF AN UNCONSCIONABLE CONTRACT? [limitations on the bargain principle]

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(1) P purchased a solar water heater for a price from a door to door sales man. He heater was never installed properly and never worked property. The costs of repairs was more than their house. They changed the contract so that it became crazy unconscionable. Then wanted relief from it (2) Held: A party may NOT avoid the unconscionability of a contract through a novation, where the terms of the new contract are as egregious as the original contract. (3) A valid novation requires a previously enforceable debt; if the original agreement was invalid, P had no obligation that could be renewed in the purported novation. Everyone got what they wanted.