Contracts

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Restatement (2nd) of Contracts: #1

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A promise or a set of promises for the breach of which the law give a remedy or the performance of which the law in some way recognizes as a duty

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Objective Theory of Contract

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Contract law follows the objective theory of contracts. That is, a party's intent is deemed to be what a reasonable person in the position of the other party would think that the first partys objective manifestation of intent meant. For instance, deciding whether A intended to make an offer to B, the issue is whether A's conduct reasonably indicated to one in B's position that A was making an offer.
- if the offeree knew it was made in jest, then it is unenforceable
- If the offeree did not know it was made in jest, and the ordinary reasonable person would also not have believed it was in jest, then it is an enforceable contract (usually freedom of contract will kick in)
- However, if the offeree knew it was in jest, but the reasonable person would not have, and the offeree claims he did not know it was in jest, the offeror can provide evidence that offeree knew, and it would not be enforceable.

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3 elements in a transaction (each can be called a K)

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° Agreement-in-fact
° Agreement-as-written
° Set of rights & duties created by 1 & 2

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"Intention to Be Bound: The Objective Theory of Contract. (Ray v. William G. Eurice & Bros., Inc.)"

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1. RULE – Objective theory of Contracts. If there is a unilateral misunderstanding, the court will enforce the K as a reasonable person would have understood it.
2. RULE – If there is a bilateral misunderstanding then there is no meeting of the minds, and the court will not enforce the K.
3. RULE – The goal of contract enforcement is to put the person in the position they would have been in had the contract not been breached.

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Restatement (2nd) of Contracts: #24 - Offer

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OFFER DEFINED - An offer is the manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his assent to that bargain is invited and will conclude it.

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Bilateral Contract

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Contract in which both sides make promises. (A says to B, " I promise to pay you $1000 on April 15 if you promise now that you will walk across the Brooklyn Bridge on April 1st." This is an offer for a bilateral contract, since A is proposing to exchange his promise for B's promise.

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Unilateral Contract

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A unilateral contract is one which involves an exchange of the offeror's promise for the offeree's act. That is, in a unilateral contract the offeree does not make a promise, but instead simply acts.

Example: A says to B, "If you walk across the Brooklyn Bridge, I promise to pay you $1,000 as soon as you finish."

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Restatement (2nd) of Contracts: #26 PRELIMINARY NEGOTIATIONS. (It is important to distinguish between preliminary negotiations and an offer. Preliminary negotiations are merely invitations to enter into an offer)

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a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of intent.

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Restatement Section 33 - Offer must be certain and definite

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terms of the contract must be reasonably certain. Certainty is a basis for determining the existence of a breach and for ginving an appropriate remedy.


2. Conduct
• Direct language to a large group of people or to 1 potential offeree
 Large groups: not assume that the sender of the offer meant to subject self to whole group do potential binding acceptances
3. Circumstances under which words spoken
• Solid/committed manner
4. Course of parties’ dealings
• How they generally deal w/ each other

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Rest. § 17 Mutual Assent

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Common law: Generally, offer and acceptance. Courts look to the intent of the contracting parties. In doing so, courts don’t look to what they subjectively meant, but they look at in with an objective approach. What would the reasonable man have believed the contract to be?

b. Sale of Goods: UCC Section 2-204: A contract for the sale of goods may be made in any manner sufficeint to show agreement, including conduct by both parties which recognizes the existence of such a contract. (Good even though the moment of its undertaking in undetermined, and one or more of the terms are left out)

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Express Contract

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Agreement of parties that is stated in words either in writing or orally.

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Implied In Fact Contract

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Contract where agreement of the parties is inferred from their conduct.

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UCC § 2-204 Sale of Goods

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(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

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U.C.C. § 2-305 Open Price Term

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(1) The parties, if they so intend, can conclude a contract for sale even though the price is not settled. In such a case, the price is a reasonable price at time for delivery if nothing is said as to price.

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U.C.C. § 2-308 Absence of Specified Place for Delivery

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Unless otherwise agreed, the place for delivery of goods is the seller's place of business or, if he has none, his residence.

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2-310 Open Time for Payment

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Unless otherwise agreed, payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery.

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Anytime there is a sale of goods, envoke UCC section 2

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when there is not a sale of goods, go to the common law principles

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Advertisements (Are they offers?)

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Most advertisements appearing in newspapers, store windows, etc, are not offers to sell. This is because they do not contain sufficient words of commitment to sell. This is because they do not contain sufficient words of commitment to sell. (Ex: A circular staring, “Men’s jackets, $26 each,” would not be an offer to sell jackets at that price, because it is too vague regarding quantity, duration.
1. Specific terms: But if the ad contains specific words of commitment, especially a promise to sell a particular number of units, then it may be an offer.
2. Words of commitment: Look for words of commitment (Send three box tops plus $1.95 for your free cotton T-shirt,” is an offer even though it is also an ad because the advertiser is committing himself to take certain action in response to the consumer’s actions.
3. A quotation of price is an invitation of an offer, not the making of one.

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Common law "mirror image" rule:

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the offer accepted must be exactly the same as the original offer. If the response conflicts at all with the terms of the offer, or adds new terms, the purported acceptance is in fact a rejection and counter offer, not an acceptance.

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Acceptance

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1. A manifestation of assent by the offeree to the terms of the offer;
2. The acceptance must be made in the manner invited or required by the offer; and
3. The acceptance must occur while the offer is still open, i.e., if the offer has already been revoked, the acceptance is not effective to create a contract.

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Restatement §50 Acceptance

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manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer

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Bilateral contract acceptance

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• Bilateral Contract: A promise in Exchange for a promise. Making the return promise constitutes the acceptance.
• Only accept by another promise
• Express or implied
 Express: promise communicated to offeror
 Manifestation to enter K relationship – objective
 Rest § 50(3): Require the offeree to complete every act essential to the making of the promise
2. Require notification of acceptance unless otherwise stipulated
3. By conduct
• Rest § 69: conduct specified by offer
 Silence not acceptance except where there can be an implied in fact K
 Most often a rejection
 Rule: offeror cannot impose silence on the offeree
 Exception: silence effective means of acceptance if consistent w/ course of dealings (§ 69 (1c))
 Offeree may have affirmative duty to notify the offeror – can’t just decide on own to accept by silence
 Act/dominion/control: offeree takes action demonstrating act of dominion over goods or services & expectation of payment is known (§ 69 (1a))
4. Mail box rule
• Rest. § 63: acceptance given upon dispatch & is effective as long as method is a reasonable method of acceptance. Where it is reasonable to respond to an offer by mail, then the acceptance dates from the time it was sent, rather than from the time it was received.
 Hypo: I offer to sell you my Caddy for $400, and send you an offer through the mail. On Tuesday, I change my mind add I mail you another letter revoking that offer, that letter does not arrive until Friday. It is only good when it is received. Under mailbox rule,if you accept by mail, the acceptance happened when the letter was POSTED.
 One party will be bound by a K & not know it
 Mailed acceptance must be properly addressed and other normal precautions must be taken to ensure delivery. (§ 66)
 If misaddressed, or sent in a way not agreed upon, but gets there anyway in a timely fashion it is still effective when dispatched (§ 67)
 If A sends a revocation on Aug. 3rd and B accepts A’s offer on Aug 4th by depositing the acceptance in the mail, and A’s letter gets to B on Aug 5th, what happens? There is a contract. B deposited the acceptance before he got A’s revocation.
 A written acceptance is effective when dispatched. (Rest 2d. of K § 63)
 Mailed acceptance must be properly addressed and other normal precautions must be taken to ensure delivery. (§ 66)
 If misaddressed, or sent in a way not agreed upon, but gets there anyway in a timely fashion it is still effective when dispatched (§ 67)
2. Terms of Acceptance (Rest 2d of K § 60)
• If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract. If an offer merely suggests a permitted place, time or manner of acceptance, another method of acceptance is not precluded
3. Acceptance by Silence (Rest 2d of K §69)
• General rule is that silence may not be taken as acceptance.
 Exceptions:
a. The offeree accepts services, knowing the offeror expects payment and having had reasonable opportunity to refuse such services.
b. The offeree accepts goods, and takes steps inconsistent with the offeror’s ownership.
c. It is a term of the contract that silence will constitute acceptance

 Rational: To do otherwise puts an unreasonable burden on the offeree. Restatement (2d) 69
 Reason to understand: If he offeree has been given reason to understand that silence is acceptance, then one through silence may be bound.
 Had a reasonable opportunity to reject them but did not (this goes to services, not UCC)
 Prior course of dealings: custom to accept by silence.
 Acceptance by dominion: Uses offerors goods as his own or inconsistent with the offeror.
 Acceptance must be unequivocal: §39
• At common law: Mirror image rule: Acceptance must mirror the offer’s terms, neither omitting nor adding terms. Whenever an offeree accepts an offer, but adds conditions or limitations to the agreement, unless the acceptance was made clearly independent of the new conditions, it acts as a rejection and counteroffer and requires acceptance by the original offeror.
Problems that can arise with the mirror image rule:
 They can cease on a difference in the form to say that they never really had a contract.
 Injustice: let one party just slip out of the deal for reasons that had nothing to do with the variation between offer and acceptance.
 A dispute could arise as to something within the form. One form says 20 day delivery, and another says 30, who’s form wins? “last shot rule”
Last shot rule: Common law rule that the terms in the last document sent were the controlling terms. “The last shot”, before performance began, wins the battle. In most cases this will be the seller. Buyer send the offer, Seller sends acceptance, goods are sent and there is a problem. The last shot was sent by the seller
a. Example fact pattern: Buyer sends its offer through a standardized purchase order form. Seller replies and accepts with its acknowledgement acceptance form. The Goods are shipped, accepted, and even payed for, but finds them to be inferior. The buyer brings an action and the seller claims that because the acceptance did not actually match the terms of the buyers offer, the form was not an acceptance of the offer, but rather, a counter offer, which was accepted by the buyer receiving and accepting (maybe even paying for the goods). Therefore, the counter offer was accepted. This analysis is entirely correct, and therefore, the seller got the last shot and their terms are the ones that are victorious with respect to their agreement.

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Lonergan v. Scolnick: Δ places an ad, invites offers. π said he was interested, Δ responds that he’d have to act fast. Δ then sold to another person.

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RULE - For a meeting of the minds, there must be an offer and an acceptance of that offer.

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Izadi v. Machado (Gus) Ford, Inc.: Δ placed ad for car at value calculated based on $3000 trade in. He then refused the offer to π, said π’s car was not worth $3000.

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1. RULE – In General advertisements are invitations for offers, not offers themselves.
Exception: Language that indicates commitment may constitute an offer. Does it give reader the power to do something? Look for specific terms about quantity, price, mode of acceptance.
2. RULE – A K must be read as a whole.

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Normile v. Miller: π made offer to buy Δ’s house, with deadline to accept. Δ returned the contract to π, signed but with modified terms. π took time to consider the new terms. Δ sold the house to another buyer.

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1. RULE – Offeror can limit the time in which offeree may accept
(rest 2d § 60)
2. RULE – Offeror may revoke the offer at any time as long as offeree is given notification.
3. RULE - It is enough that offeree receives reliable information, even indirectly, that the offeror had taken definite action inconsistent with an intention to make the K
4. RULE – A counteroffer implicitly rejects the prior offer.
-Negotiations may be made without their being a counteroffer if the party states so explicity. If you say you do not intend to reject the initial offer, then you have not rejected it
5. RULE – Death revokes an offer.
Exception: If there is an option, then death d/n revoke the offer.
6. RULE – Rejection is only effective when received, not when dispatched. But this limits power.
An acceptance mailed after a rejection is mailed: depends on which is received first. If acceptance is received first it’s an acceptance. If the rejection is received first, the acceptance will be considered a counteroffer when subsequently received. So the rejection is effective if recieved, despite the mailbox rule.

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Unilateral Contract Acceptance

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 Unilateral Contract: A promise in Exchange for a performance. Rendering the performance constitutes the acceptance. This gives the offeror a guarantee that he does not have to pay unless he gets the performance.
 Part performance, under modern law, will create an option and suspend the offeror’s power to revoke. This is addressed below and see rest 2d of K § 45.
• (Restatement Section 45) Means there was an offer that requires performance to accept.
• Hypo: X, I will pay you $500 for painting my house. Only way you can accept is by painting my house. If you start performance, offer is irrevocable.... Let’s say that all the guy does is goes out and buys a lot of paint, he prepares to start performance... Offer may still be revoked. Mere preparation is not enough. This is inequitable, but it’s not quite a contract... Quasi-contract acts as sort of a safety net, where contract rules create a harsh result.
2. Offeree can decide not to perform w/o any obligation
3. 1st Rest. required full performance before any obligation by the offeror (VIP)
• Only way to accept is complete performance
4. Modern:
• Notice of acceptance not required unless
 Offeror requests notification
 Offeree knows offeror has no way of knowing the performance has occurred unless given notice
 If offeree does not give notification under either 1 or 2, the offeror’s contractual duty will be discharged unless
 Offeree exercises reasonable diligence to notify the offeror of acceptance
 Offeror learns of performance w/in reasonable time
 Offeror indicates that notification is not required
 Notification good upon dispatch!!!!
• Starting performance for acceptance
 Beginning preparation is not enough
 Creates an option
 Offeror can’t take it back
 Offeree does not have to continue to accept

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Mailbox Rule

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Acceptance is effective upon dispatch.
1. Offer provides otherwise – Mailbox rule does not apply if offer provides otherwise
2. If acceptance is lost in transmission, the applicability of the mailbox rule depends on whether the communication was properly addressed
a. Properly address: If acceptance is properly address, it is effective at the time of dispatch even if lost and never received
b. Not properly addressed: If the acceptance is not properly address, or not properly dispatched, it will be effective upon dispatch only if it received within the time in which a properly dispatched acceptance would normally have arrived.
3. If offeree sends both an acceptance and rejection, the rule depend on which Is dispatched first.
a. If rejection is sent first, the acceptance will be effective if offerer receives it before he receives rejection
b. Accetpance dispatched first: If the acceptance is sent before rejection, the acceptance is effective upon dispatch, and the subsequently dispatched rejection does not undo the acceptance.

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Unilateral K (CL and Modern)

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1.RULE – Traditional CL held that in unilateral K, performance had to be completed to constitute an acceptance.
2. RULE – Modern law (rest 2d of K, § 45) holds that part performance creates an option contract. Mere preparation d/n create the option. Creation of binding K is conditional on completion.

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Cook v. Coldwell Banker/Frank Laiben Realty Co (Section 45) π worked for real estate co. they promised bonus if she met sales level by certain time. She did. They lengthened the time period. She left.

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a. This is an example of Section 45 of the restatements: offeror is attempting to revise or change the offer in an attempt to disqualify the Pl conduct as an acceptance. By changing the terms.
- The court states that a substantial performance is necessary for acceptance, however, section 45 states that acceptance is tendered after the beginning.
- most courts agree with 45 beginning for an option contract
b. She has an option: an irrevocable contract. “Option contract”: one that cannot be revoked because they have promised not to. Acceptance will be granted even an attempt to revoke or a change in the offer. She can still perform to the original terms.
c. Brooklyn Bride Hypo: A changes the deal and says he has to juggle balls the rest of the way: does he B then have to? No, he started the original deal. He does not have to change because, she is not able to revoke the original offer when started substantially
1. RULE – An offeror may not revoke an offer where the offeree has made substantial performance. Again, an option is created, see above rule.
Rationale: There is an implied promise that if partial performance is given, the offer will not be revoked.
*a note on Rest § 45. It d/n say anything about substantial performance, just that performance needs to begin. Courts have yet to adopt this more liberal view, stick to subtantial performance.

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Look for 2 things in acceptance:

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1. Look at who is accepting, and how they are accepting.
Person accepting must be the person to whom the offer was made.

Offeree must know of the offer at the time he accepts.
i.e. I offer $500 to whoever can find my dog. You don’t know of reward, but you find and return dog. You cannot claim reward, because you didn’t know of the reward when you did it.

2. Look for HOW acceptance is happening... (fact patterns to watch for):

1) By a return promise. I promise to sell, you promise to buy. Only time this does not apply is in a unilateral contract.

2) All there has been is a START of performance... An offer is made and there is a start of performance. I’ll pay you $500 to paint my house... You start to paint my house. If the offer says, “this offer can be accepted only by performing” it is a unilateral offer. This requires performance for acceptance, NOT merely the START of performance. To accept a unilateral offer, you must do the WHOLE thing, not just start to perform. Merely starting to perform does not obligate the offeree.
a. Nevertheless, when performance has begun, courts look to this as an option contract, which makes it irrevocable.

What if it is silent as to how to accept, it is bilateral? Starting performance on a BILATERAL contract IS acceptance, and creates the contract.
Offer is made, start, but not completion of contract. Look at nature of offer. If it is unilateral, offeree can walk away. If it is bilateral, start of performance is acceptance.
(If offer is silent as to acceptance, and it looks to be a unilateral contract, argue that they may have been looking for a return promise nevertheless, and by beginning performance (what would normally create an option in a unilateral offerz), would then be full acceptance in a bilarteral situation—never hurts to try).

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Termination of offer prior to acceptance - Rest. § 36

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• Lapse of time
• Offeror can say in offer how long offer open
 If not say, then a reasonable time
• Acceptance after specified time is counteroffer
• Face to face or phone offer last only for the length of the conversation, unless expressly stated otherwise
2. Other events after an offer
• Death/incapacity of offeror or offeree
• Destruction of the subject matter
• Supervening illegality
 Law is passed that disallows the K
3. Revocation by the offeror
• Offeror can revoke any time prior to acceptance
 Offeror manifests intent not to enter into the K & communicate expressly or impliedly to offeree
 Express: effective as soon as offeree receives notice of revocation
 If revocation ambiguous, generally will assume that revocation occurred
A. how: looking for a later statement by the offeror that he changed his mind, or later conduct indicating that he’s changed his mind. The key is the offeree must be aware of what was said, done or written. Watch for offeree awareness.
Hypo: I offer to sell my Cadillac to Sharon Stone, next day, I change my mind while standing in the shower. Is this a revocation? Not unless she was in the shower with you.
 B. when: when does revocation become effective. Two rules: 1) you have to complete revocation before acceptance has occurred. You cannot revoke the offer after the offeree has already accepted. 2) if a revocation of an offer is sent through the mail, it is not effective until it is received.
• When not: some offers are irrevocable. You are held to the offer. Four situations where offers cannot be revoked:
 option: I offer to sell you my Caddy for $400 dollars, and you pay $25 in exchange for my promise to keep the offer open only to you. I am receiving consideration for that promise. That means there is both a promise to keep the offer open, and you get something for that promise.
 Where the offer has been foreseeably and reasonably relied on. An offer can’t be cancelled if there is foreseeable and reasonable reliance on the offer. i.e. BarBri decides to hire someone to remodel a room, and person goes out and seeks bids from people to supply chairs, the person uses your bid in making a deal with BarBri, the offer is irrevocable.
• Offers irrevocable for a period of time
• Option K (Rest. § 87 (1a))
 Must be in writing
 Signed by offeror
 Offeree pays consideration to keep K open to him only for a period of time
 Acceptance upon receipt; must be accepted before option expires
• Reliance on offer (equitable option K Rest. § 87 (2))
 Holds offer open before acceptance
 Offer made that is reasonably expected to induce action is binding if it is the only way to prevent injustice
• Unilateral offer when offeree commenced performance
 General rule: once the offeree begins performance, the offer becomes irrevocable for reasonable time
 Offeree must always remain ready, willing & able to perform

- Some cases in which there is protection from the offer being revoked
1. Offers of a reward made to the general public
2. Offers of commission to a real estate broker
3. Offers needing a long series of acts involving substantial trouble, time, expense on part of offeree
4. Rejection
• Rejection is the situation in which the offeree turns it down. This kills the offer.

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Counter-offer Rest. § 39-40

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1) counteroffer: Section 39,40 Restatements. to counter offer is to reject. I offer to sell Caddy for $400, you say I’ll only give you $200, you have rejected the first offer and given a counteroffer.
Watch for fuzzy factual line between counteroffer and bargaining... I offer my Caddy for $400, you say, “will you take 2" this is bargaining, not a counteroffer. The $400 offer is still alive and still on the table. You will have to show the legal difference between counteroffer and bargaining.
- Don’t confuse this with a counter inquiry: A offer B blackacre for $5000. B says “will you take $4800? B has not made a counter offer, but has merely made an inquiry. He still carries the power of acceptance.
a. Example Case: Normile v. Miller: Can a person rely on the first offer when the offeror has made a counteroffer? No, the counteroffer is a NEW offer which must be accepted (within a reasonable time of course), which makes the original offer void. The courts states when a prospective buyer does not accept a seller’s counteroffer within a reasonable time, the prospective buyer does not have the power to accept the counteroffer after the counteroffer has been revoked by the seller.
(i) This was not an option promise: they can accept by the specified time, it doesn’t say it won’t be offered until anyone else until that time.
(ii) A writes to B I will sell you blackacre for 100,000 and B writes back will you consider less, she says no. Can he still accept the offer? Yes, he did not reject her offer and he did not make a counteroffer, he merely made a query. He should be able to accept.

2) conditional acceptance: “I accept IF”, means “I reject”.

3) additional terms: “I accept AND”
Common Law Rule: Mirror Image Rule... Adding terms, means you have rejected.
Different rule for a sale of goods, Sec. 2-207 “Battle of the Forms”—See complete outline of 2-207 p.?? infra.

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Termination of Offer by Revocation Exceptions

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1) EXCEPTION: option contract supported by consideration

2) EXCEPTION: UCC 'Firm Offer'-a writing, signed by merchant, promising to buy or sell goods, AND which promises to hold the offer open for a certain period of time

3) EXCEPTION: Unilateral contract is involved and the offeree starts to perform the requested act

4) EXCEPTION: Promissory Estoppel; the offeree RELIES on the offer being kept open and the offeree will suffer an injustice if the offeror is allowed to revoke, so the doctrine of promissory estoppel can operate to prevent the offeror from revoking his/her offer prior to acceptance

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Lapse of time

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If no time stated as to how long offer will remain open, then law deems it to remain open for a "reasonable" period of time

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Restatement (Second) §87 Option Contract

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"(1) An offer is binding as an option contract if it : (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) is made irrevocable by statute. (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice."

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Consideration

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an act, forbearance, or the promise thereof done or given by one party in return for the act or promise of another

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Silence as Acceptance

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silence cannot/is not acceptance

EXCEPTION: custom in the industry is otherwise; or, past/prior relationship b/w parties is/was otherwise

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Restatement § 38

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(1) An offeree's power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.

(2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.

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2 theories of consideration

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1. Benefit Detriment: Retatement (Second) Sections 71 & 79
2. Bargained for exchange Restatement (Second) Sections 71 & 79

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Uses of doctrine: The requirement of consideration renders unenforceable two main types of transactions

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1. Promises to make gifts
2. Business situations in which one party has not really promised to do something or given anything up, even though he may appear to have done so

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The Detriment element

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1. Non-economic detriment: All that is needed a limit of some right, it need not be actual costly, difficult, etc. It has to be legal, and they don’t care whether the detriment was actual (was it hard for him to quit using alcohol)…. That is not at issue.
a. Suppose Willie never wanted to drink or smoke and he never would have done those vices, would that matter? Yes, he still had the legal right. It doesn’t matter how hard or easy for him it was, it is the fact that he obtained from exercising his legal right(s).
b. Was the uncle benefited here in a legal sense? What has he gotten? Behavior. Is he legally entitled to this otherwise? No. He has induced his nephew to do something and it happened. He engaged in behavior he wanted him to, which he would have not otherwise had the opportunity to do.

2. ADEQUACY OF THE CONSIDERATION – Courts generally don’t inquire about the value equivalent: was this a good deal? Court’s don’t care. As long as the promise suffers some detriment, no matter how small, the court will not find consideration lacking merely because what the promise gave up was of much less value than what he received.
a. Extreme disparity in value between what the promise gives up and receives may suggest that there is not in fact a “bargain” in which case there will be no consideration even though the detriment requirement is satisfied.
3. Pre-existing duty rule: If party does or promises to do what he is already legally obligated to do, or if he forbears or promises to forbear from doing something which he is not legally entitled to do, he has not incurred a detriment for purposes of consideration.
a. REMEMBER, THE PRE-EXISTING LEGAL DUTY RULE ONLY APPLIES AT COMMON LAW. IF IT THE SALE OF GOODS, THIS DOES NOT APPLY. it becomes a good faith test rather than of preexisting legal duty.
b. UCC 2-209(1): an agreement modifying a contract…needs no consideration to be binding. But there must be good faith, and any no oral modification clause must be complied with.
c. Even under the traditional pre-existing duty rule, if the party who promises to do what he already bound to do assumes the slightest additional duties, his undertaking of these new duties does constitute the required detriment..

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Bargained theory of consideration

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1. Promise to make a gift is generally unenforceable, because it lacks the ‘bargain” element of consideration
Ex. A says to B, his daughter, “When you turn 21 in 4 years, I will give you a car worth $10,000.” 4 years pass, A refuses to perform, and B sues for breach of K. B will lose, no consideration . A’s promise was not “bargained for.”

RELATED HYPO: What if there were the same facts but aunt said she would give if he was a good boy. This would that change the facts: Is there consideration? Yes, he would have to behave himself.
Problem: that is far to uncertain, that it may not be enforceable (Restatement (Second) section 33,p. 145: terms of the contract are REASONABLY certain).


a. Existence of condition: Even if the person promising to make a gift requires the promise to meet certain conditions in order to receive the gift, there will still be no consideration if the meeting of the conditions is not really “bargained for” by the promisor.
a. A promises his widowed sister-in-law B a place to live “if you will come down and see me.” In response B travels to see A, thereby incurring expenses. Even though B has suffered a “detriment”, the “bargain” element is lacking. A was not promising B a place to live because he wanted to see her, but was merely imposing a necessary pre-condition for to get the gift.
b. But if the promisor imposes a condition, and the occurrence of this condition is of benefit to him, then the bargain element probably will be present.
i. A promsies his nephew $5,000 if B will refrain from smoking, drinking, and gambling until age 21. Here, A’s promise was “bargained for” because A was attempting to obtain something he regarded as desirable.
ii. Altruistic pleasure not sufficient: But the fact that one who promises to make a gift expects to drive altruistic pleasure, or love and affection, from making the gift is not sufficient to constute a “bargain.”
2. Promise to make a gift is unenforceable for lack of consideration, however once the promisor makes the gift, he cannot rescind it for lack of consideration.
3. "Past consideration": If the promise is made in return for detriment previously suffered by the promisee, there is no bargain, and thus no consideration. Thus promises to pay a pre-existing debt, and promises to pay for services already received, usually lack the "bargain" element.

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Promissory Estoppel Restatement (Second) §90 Promise Reasonably Inducing Action or Forbearance

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A. PROMISSORY ESTOPPEL: PROTECTION OF UNBARGAINED FOR RELIANCE
a. Section 90 Restatement (Second) Contracts: (1) a promise (2) which the promisor should reasonably expect to induce action or forberance on the part of the promisee or a third person and (3) which does induce such action or forbearance is binding (4) if unjustice can be avioded only by enforcement of the promise.

B. Did the promisee rely on the promise to his or her detriment?
a. Reliance: recognition that a breach of a promise may work an injury to one who ahs changed his position in a reliance on the expectation that the promise would be fulfilled.

C. Promises within the family.
a. The nature of the bargain theory excluded from its sphere most of the dealins between family members, becaue most promises made between family members are likely to be effectuated by feelings of affection, love or altruism. (remember these are not consideration?) –The courts have found a way to side-step lack of consideration and enforce equitable contracts.

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Kirksey v. Kirksey (Promissory Estoppel)

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D asked his sister in law to move onto his land after her husband died. She packed up her stuff and moved onto his land, and took care of it also. He kicked her out of a nice place and moved her into a shack in the woods. After that he kicked her out of that home. Was this consideration? No, the court said moving was not consideration, it was merely a CONDITION to a gratuitous promise. Dissent did not think so. Her moving was a detriment, her farming the land was a benefit to bro. This you can see opens the door to promissory estoppel. Relaince on his promise: she moved out of her old house relying that she would have one on her bro in laws farm.

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Greiner v. Greiner: (Promissory Estoppel)

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Mother promises child a home on her land. Son moves out of old home in anohter county and moves onto the land and cultivates it. Another child does not want this to happen and she then forces the son who moved off the land. Was there consideration? Skethcy, could be past consideration. Court relies on Section 90 of the Restatment.
Expectation protection: Son got deed and he expected the property to he his. Also,
Relaince protection: Moving and the loss he sustained from making improvements on the land.

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ILLUSORY PROMISE Restatement (2d) 77

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If it makes performance entirely optional with the promisor, this is a promise only in form, but not in substance.
A. Consideration is absent because the offeror has maintained an unequivical right to reneg.
EXAMPLE: A offers to sell B as many packets of widgets at 5 dollars a packet as he will order from her as he chooses to order in the next thirty days. B promises he will do that. Is this a contract? It is couched as a promise but he has not given up his legal duty in any way.
**Remember, do not confuse an Output contract with an illusory one……read the fact pattern carefully.**

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Remember, where there is no consideration, apply promissory estoppel where:

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1. There was a promise
2. Promisee relied on the promise to his/her detriment
3. Promisor reasonably expects relaince on the promise
4. Unjustice can only be avoided by enforcement of the promise.
a. Unjustice usually only means reliance damages (not expectation), therefore, the Pl is usually just made whole as if the promise had never been made.

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Allegheny College v. National Chautaugua County Bank (Perfect case to argue both sides)

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Woman promised college $5000 after her death if they set up a fund in her name. She repudiates this pledge. Was the D promise to make a charitable gift to the Pl after the D death an enforceable contract considering the D paid a portion of the total gift before death? Yes
a. The court finds that there was a bilateral, implied in fact contract. This is an implied promise from the College, from the conduct of the college in accepting the money, the college by implication was obligated and commited itself to do some certain acts.
b. In this famous opinion Cardoza jumped back and forth between consideration and promissory estoppel. Consideration was the basis for upholding the promise. The parties bargained. She would pay money if college would put a scholarship in her name. Then, in dicta he speaks of promissory estoppel. The college relied on her promise, and they put the money in the bank to educate ministers. (Weak argument)
c. Dissent: This was not consideration, and the promissory estoppel argument is ridiculous. Setting up the name of the scholarship was a mere condition of getting the gratuity.

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RESTITUTION: (UNJUST ENRICHMENT): LIABILITY FOR BENEFITS RECEIVED.

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A person who has been unjustly enriched at the expense of another is required to make restitution to the other.
In restitution, there is no promise at all, express or implied. For policy reasons the situation should be treated as if a promise had been made. (Quasi contract). Quasi or impled in law; not a contract, but there is one implied.
If the law does this, it does so because one party has conferred a benefit under circumstances that without payment, retention of that benefit would be unjust in some way. In order to avoid injustice, the court must compel them to pay in some way.
A. Elements:
2. Must be unofficious act (unjustified intermeddlers not compensated)
B. Intent to charge for services (acts done gratuitously not compensated)
C. Whether permission/consent for services would have been given if the person were able to (or whether consent could be reasonably assumed)
D. Whether it was possible to give permission.
***Officious intermeddler: person comes and paints your house when you are at work. You are not liable to pay because you never requested it. This would ruin society***.
HYPO: B is a handyman, and is wlaking down the street, sees A house and he says it needs to be painted so he does, and she comes home and he says I painted your house, that will be 500 bones: She doesn't have to pay.

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Quasi Contract

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not a contractual obligation created by the parties, but is instead an obligation imposed by the law in order to avoid the UNJUST ENRICHMENT of one party at the other party's expense


1. the Pl has conferred a benefit on the D;
2. the D has knowledge of the benefit;
3. the D has accepted or retained the benefit conferred and
4. the circumstances are such that it would be inequitable for the D to retain the benefit without paying fair value for it.

A contract which is implied in law is also called a quasi-contract , because it is not in fact a contract; rather, it is a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. For example, an unconscious patient treated by a doctor at the scene of an accident has not agreed (either expressly or by implication) to pay the doctor for emergency services, but the patient would be unjustly enriched by the doctor's services were the patient not required to compensate the doctor.

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Section 117(d) Restitution

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A person is entitled to restitution for services rendered if (d) he intended to charge for such services: Pl was D employee.

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§ 86 material benefit rule

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If a person receives a material benefit from another, other than gratuitously, a subsequent promise to compensate the person for rendering such benefit is enforceable.
a. This benefit has to be incurred directly to the promisor and made to only the promisee for example:
- A gives emergency care to B’s adult son while the son is sick and without funds far from home. B subsequently promises to reimburse A for his expenses. The promise is not binding under this Section because A would have had to give emergency care directly to B for the promise to be binding.
- Restatemet (Second) Section 86: A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.
- A promise is not binding under subsection one
If a) the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched or 2) to the extent that its value is disproportionate to the benefit.


HYPO: A has looked after B who is 85, she cleans his house, takes him shopping and to church. She has not been paid. B says to A, here is a promissory note for 100Gs payable from my estate when I die. He died yesterday, can she collect on the note?
If Mills applies: They would say past consideration, therefore, no promise…no bargained for exchange. She could argue unjust enrichment or an implied in fact contract, although, it was a gratuitous promise.
If in Webb jurisdiction: Conferred a benefit, and in recognition of this benefit he promised to pay for me. Although in Section 2, if the Restatement: A promise is not binding under Subsection 1, if the promisee conferred the beneifit as a gift or for other reasons the promisor has not been unjustly enriched; or to the extent that its value is disproportionate to the benefit.
- Note: Webb and Section 86 is the majority view, and Mills is the minority.