LAW 505-002 – Contracts I

Basis for Enforcement


There are four bases for enforcement:

  1. Consideration
  2. Reliance
  3. Promissory Restitution
  4. Restitution
Consideration

Consideration is a bargained-for exchange of a promise for a performance or a promise for a promise.

Restatement Second of Contracts § 71

Requirement of Exchange; Types of Exchange

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  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.
  3. The performance may consist of
    1. an act other than a promise, or
    2. a forbearance, or
    3. the creation, modification, or destruction of a legal relation.
  4. The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
Restatement Second of Contracts § 73

Modification of Executory Contract

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Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.

Consideration requires each person's promise or performance to induce the other's.

There is no requirement for the adequacy of the values exchanged, as long as it is more than a mere pretense of bargain.

Gratuitous promises, including conditional gifts are not enforceable.

Motive is not considered as long as the exchange was bargained for.

Illusory promises and alternative promises are not enforceable.

Restatement Second of Contracts § 77

Illusory and Alternative Promises

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A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless

  1. each of the alternative performances would have been consideration if it alone had been bargained for; or
  2. one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration.

There are three way of modifying a contract:

  1. Obtaining new consideration
  2. The exemption in restatement section 89:
    Restatement Second of Contracts § 89

    Modification of Executory Contract

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    A promise modifying a duty under a contract not fully performed on either side is binding

    1. if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
    2. to the extent provided by statute; or
    3. to the extent that justice requires enforcement in view of material change of position in reliance on the promise.
  3. By contracting around, e.g. tearing up the old contract and writing it again.
Implied Warranty

Goods have an implied warranty.

UCC § 2-314

Implied Warranty: Merchantability; Usage of Trade.

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  1. Unless excluded or modified ( [UCC § 2-316]), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
  2. Goods to be merchantable must be at least such as
    1. pass without objection in the trade under the contract description; and
    2. in the case of fungible goods, are of fair average quality within the description; and
    3. are fit for the ordinary purposes for which such goods are used; and
    4. run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
    5. are adequately contained, packaged, and labeled as the agreement may require; and
    6. conform to the promise or affirmations of fact made on the container or label if any.
    7. Unless excluded or modified ( [UCC § 2-316]) other implied warranties may arise from course of dealing or usage of trade.
UCC § 2-315

Implied Warranty: Fitness for Particular Purpose.

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Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

Reliance
Restatement Second of Contracts § 90

Promise Reasonably Inducing Action or Forbearance

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  1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
  2. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

Reliance, also known as promissory estoppel, requires doing something to one's own detriment due to someone else's promise.

Such reliance must be reasonable.

Promissory Restitution
Restatement Second of Contracts § 86

Promise for Benefit Received

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  1. 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.
  2. A promise is not binding under Subsection (1)
    1. if 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.

Must have some reasonable expectation of restitution.

Restitution must be for a material benefit, not merely a sentimental one.


Midterm cutoff


Restitution

Restitution is an obligation imposed by law on ground of justice and equity. Its purpose is to prevent unjust enrichment. Unlike express contracts or contracts implied in fact, restitution does not rest upon the assent of the contracting parties.

Restitution is also known as "quantum meruit," "quasi-contract," and "implied in law contract."

Officious Intermeddler Doctrine

The "officious intermeddler doctrine" holds that where a person performs labor for another without the latter's request or implied consent, however beneficial such labor may be, he cannot recover therefor.

An exception is that of emergency aid, where the service is needed to prevent the others' bodily harm and the helper is a doctor and therefor doesn't give the implication of gratuitousness.

Restatement Third of Restitution § 1

Restitution and Unjust Enrichment

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A person who is unjustly enriched at the expense of another is subject to liability in restitution.

Restatement Third of Restitution § 2

Limiting Principles

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  1. The fact that a recipient has obtained a benefit without paying for it does not of itself establish that the recipient has been unjustly enriched.
  2. A valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment.
  3. There is no liability in restitution for an unrequested benefit voluntarily conferred, unless the circumstances of the transaction justify the claimant's intervention in the absence of contract.
  4. Liability in restitution may not subject an innocent recipient to a forced exchange: in other words, an obligation to pay for a benefit that the recipient should have been free to refuse.