Contract Checklist & Remedies

• Contract Checklist assists in determining the presence, terms, enforceability, performance, and remedies of a contract

Promissory Estoppel and Defenses

• Promissory estoppel and defenses are considerations when assessing contracts
• Mutual assent covering offer, acceptance, and consideration, are key to contracts
• In the absence of a contract, equitable remedies may be explored
• When a contract exists, available defenses should be reviewed

Types of Remedies

• Equitable Remedy (no K)

• Applies when legal remedies are unavailable, particularly when there is no contract but the plaintiff potentially deserves a remedy

• Used when no consideration = no contract = no legal remedy

• Policy behind equitable remedy centers on fairness

• Legal Remedy (K breached)

• Applies when a legal right to damages exists due to a breached contract

• Used in situations where a valid contract is breached

Promissory Estoppel

• Promissory Estoppel is a concept of detrimental reliance
• Arises when reliance on a promise directly results in legal detriment
• Restatement 90 outlines:
• A promise that the promisor should reasonably expect to induce action or forbearance is binding if injustice can only be avoided through enforcement
• Remedy may be limited as justice requires
• Elements necessary:
• Need a promise
• Promisor should reasonably expect to induce action or forbearance, evaluated based on an objective standard of reasonable foreseeability
• The promise must actually induce such action or forbearance, based on a subjective, fact-specific analysis
• Injustice can only be avoided by enforcing the promise or providing a remedy
• Promissory Estoppel will not protect a promisee who has not suffered detriment by relying on a promise if
  • Promisor influences the promisee to alter their position for the worse on the faith of the promise, the promise is enforceable under promissory estoppel
  • Involves reasonable reliance and reasonable foreseeability
  • It acts as a legal restraint to prevent contradiction of previous assertions/promises for gain

Case Law Examples

• Valley Bank v. Dowdy

• Dowdy argued reliance on Valley Bank's promise to transfer title, and spent money repairing the truck, but the bank did not transfer the title as promised

• Dowdy had beneficial use of the vehicle, and the reason for the repair amount loss was failure to pay the note; court found that fairness was not on his side

• Ricketts v. Scothorn

• If no bargained-for exchange exists, enforceability depends on the reasonableness of the promisee's reliance

• Grandfather promised granddaughter she wouldn't have to work, she quit her job then estate of grandfather refused to pay her

• It was deemed reasonable that she quit her job based on the promise

• Ricketts compared to Hamer

• Hamer case involved consideration (legal time remedy = forbearance). Ricketts lacks consideration and involves a gift (equitable remedy time, with no actual contract)

• East Providence Credit Union v. Geremia:

• Reliance can include someone relying on you to pay their insurance/important payment

• Court ruled it was fair A stopped paying because they were told someone would pay it for reimbursement

• Promissory Estoppel used for

• To substitute for consideration

• As a substitute for required writing (statute of frauds), remembered by the acronym MYLEGS: Marriage, year (longer than 1 year to perform), land, executors (promising to pay decedent's debt), guarantees of loans, sale of goods (over some threshold amount of $)

• As a mechanism for making certain offers irrevocable

• Drennan v. Starr Paving Co. states that detrimental reliance by one party on another party's offer can make the offer irrevocable

• As a mechanism for policing unfair bargaining behavior

• Hoffman v. Red Owl Stores states that promissory estoppel can address unfair bargaining

• Continually changing terms was unfair when Hoffman did everything asked but got nothing

Special Rules for Charities

• Charitable subscriptions do not require reliance Charities rely on donations collectively, making reliance a non-essential factor

• Common Scenarios

• Family contracts

• Promises to convey land

• Charity

• At will jobs

• Example: Employer's promise of a pension without consideration can be enforced under promissory estoppel if the employee retired in reliance and is no longer able to work

Defenses

• Defenses prevent enforcement even with valid contract formation
• Include: Deception, Mistake, Duress, Undue Influence, Illegality, Incapacity, Unconscionability, Statute of Frauds
• These voidable contracts can be voided only at the option of the person without the advantage

Defense #1: Deception (umbrella term)

• Key concept = One party to the deal deceived the other
• Involves actual and justifiable reliance
• Categories of deception = Misrepresentation, Non-Disclosure, and Concealment

Misrepresentation

• A false statement of fact, intention, or opinion that is
• Addressing a fact, intention, or opinion material to the contract Made with the requisite state of mind (intentional, negligent, or innocent)
• Actually and justifiably relied on by the other party
• Causing damage to the other party

Details relating to what is considered misrepresentation

• False: meaning untrue, inaccurate, or erroneous
• Fact: something that exists or occurs, and can be proven or verified
• Intention: determination to act a certain way in the future
• Opinion: expression of a person's belief or viewpoint
• Opinions can sometimes be proven or verified
• Mere “puffery” is allowed as it's not a real false statement
• Is material if a reasonable person in the same circumstances would regard the fact as important deciding whether or not to make a contract
• Cousineau v. Walker held that even an innocent misrepresentation can be grounds for voiding a contract if material
• Regarding the “Requisite Som” it Refers to the knowledge of a party making a misrepresentation at the time the party makes the misrepresentation
• A party claiming misrepresentation needs to show that the speaker either
• Knew or believed the representation was not true (intentional or fraud)
• Unreasonably believed the representation to be true (negligent)
• Reasonably believed the representation to be true (innocent)
• It is not usually necessary to establish materiality if the misrepresentation is intentional (rescission of contract AND damages)
• All elements, including materiality, need to be established if it was unintentional (rescission of contract and NO damages)
• A party's reliance is “actual” if the part acted because of a representation
• A person actually relies on a representation if the representation caused her to make a contract (subjective)
• A party's reliance is “justifiable” if it is not completely irrational, preposterous, or absurd
• If a party has any basis for believing another party's representation, even if a reasonable person would not have done so, some courts deem reliance justifiable

Breaking down elements of damage

• Damage means some type of loss, harm, or injury
• Courts require some type of harm before a party is entitled to a remedy
• Similar to torts which involves duty, breach, causation, and harm

Concealment

• Hidden/involves one party engaging in active efforts to prevent another party from learning a fact (rather than lying about a fact)

• Active efforts to prevent another party from learning a fact where

• The concealed fact was material

• The other party actually and justifiably relied on the facts as they appeared without the concealed facts and

• This reliance caused damage

Hypos

• Examples for better understanding of core concepts

Promissory Estoppel and Deception

• Kit’s Candy Retirement Gift
• Past cooking services are not given in exchange for Kat’s promise
• No change in condition by Kit, thus no promissory estoppel

Yard Sale Painting

• The neighbor took a chance on a painting and both parties are subject to any benefits or losses with the sale

Lawyer promise

• A lawyer promises to give to a charity if they won the case
• Because he did not give to a specific charity and the promise was not made to the charity but a client, this is unenforceable

Material to contracts

• For real estate, the legal description of the property is very important
• For real estate, neighbors may or may not be material. It is highly dependent on the client
• For construction, the time frame may or may not be important. It is highly dependent on the client
• For construction, the material being used may or may not be important. It is highly dependent on the client