Contracts Class (JD NEXT) Teacher Notes PDF

Contracts Class 1 (JD NEXT) A contract is a legally binding agreement A promise or a set of promises which the law will enforce The agreement creates rights and obligations that may be enforced in the courts The normal method of enforcement is an action for damages for breach of contract, through in...

Contracts Class 1 (JD NEXT) A contract is a legally binding agreement A promise or a set of promises which the law will enforce The agreement creates rights and obligations that may be enforced in the courts The normal method of enforcement is an action for damages for breach of contract, through in some cases the court may order performance by the party in default. Multiple choice quiz on Hawkins V Mcgee Identifying important facts of the case What important decide against the defendant doctor and award the plaintiff boy Hawkins v Mcgee? The defendant doctor said before operation was decided upon, “I will guarantee to make the hand a hundred percent perfect hand or a hundred percent good hand. Which of the following best describes the term assumptit in Hawkins v Mcgee? A common law form of legal action available to a plaintiff who claims that a contract has been breached. Case of the day (Hawkins V Mcgee) Contracts arise from social relationships Contracts are exchanges between parties Contracts as agreements between parties (Expressive agreements) Contracts as expectations of the parties Is a syllabus a contract? What is the relationship? What is the exchange? What is the agreement? What is the expectation? Contract law ask the basic questions? Have the parties behaved in such a way as to create legally recognizable expectations in one another? If they have, how should expectations be characterized and understood? Was the understanding arrived at faithfully carried out by the parties or somewhat thwarted? If thwarted, what if anything should the law do about it? Hawkins V Mcgee Have the doctor and the young boy and his father acted in such a way as to create legally recognizable expectations in one another? Two step analysis Is there a breach of contract? If so how do you calculate damages arising from breach? Calculating expectation damages The purpose of the law is to put the plaintiff in as good a position as he would of been in had the defendant kept in his contract The measure of recovery is based upon what the plaintiff should have given the defendant, not what the plaintiff has given or otherwise expended We therefore conclude that the true measure of the plaintiffs damage in the present case is the difference between the value to him of a perfect hand or a good hand such as the jury found the defendant promised him, and the value of his hand in its present condition, including any incidental consequences fairly within the contemplation of the parties when they made their contract. The general rule (expectation damages): contracts are usually not enforced through physical compulsion, but rather, are enforced by allowing the injured party a dollar sum sufficent to put him in as good a position as he/she would have occupied had the contact had been performed in full. Class 2 Hamer V Sidway What rule of contract law did the court apply to the facts of Hamer v Sidway? In a general waiver of any legal right at the request of another is sufficient consideration for a promise Which of the following best explains the terms demurrer, executor, and testator as used in hamer v sidway? An executor is appointed by a testator to carry out the terms of his or her will. Consideration Something of legal value given in exchange for a promise Consideration is a necessary element for the existence of a contract Contracts unsupported by consideration are generally not enforceable Consideration consists of two elements Something of legal value must be given and there must be a bargain exchanged for Test for legal value A contract is considered supported by legal value if The promisee suffers a legal detriment Or the promisor receives a legal benefit Most commonly involves a tangible payment (ex money, property) or performance of an act (providing services) (Hamer v Sidway) Process of bargaining or inducement that leads to an enforceable contract Naturally present in most commercial transactions ‘ What about in Hamer v Sidway Consideration, in simplest terms denotes the receipt of the promisor something of value from the promisee Problem Gifts or bargain Suppose that New York State law made it illegal for willie to drink, smoke, or gamble before the age of 21. Uncle William offers and willie accepts. Would this promise be enforceable under the language of Hamer v Sidway? No Suppose now that the agreement concerns armed robbery and homicide instead. New York state law makes it illegal to commit armed robbery or homicide. Uncle William offers, and Willie accepts, $5,000 to abstain from armed robbery and homicide until age 21. How would you expect a court to analyze this promise? No it would not be enforceable From Hamer V Sidway It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle's agreement, and now having fully performed the conditions imposed, it is of no moment whether such performance actually proved a benefit to the promisor, and the court will not inquire into it Abstracting the rule The Rule: A promise to refrain from doing an illegal act is not enforceable. The Reason for the Rule: A promise to refrain from doing an illegal act does not constitute a legal detriment because the promisee (Willie) does not have the right to engage in such conduct. The “take-away” is that consideration requires the receipt by the promisor of something of legal value from the promisee. In analyzing the case, you are looking for facts that establish that something of legal value constituted the consideration of the contract. Facts in Hamer: Willie has the freedom to engage in those activities (gambling, playing cards, smoking) lawfully, and he forbore from doing that in exchange for promise to be paid $5,000 (Lawful Freedom of Action). Rule: A promise to refrain from doing an illegal act is not enforceable. Reason (Policy): Does not constitute a legal detriment because the promisee (Willie) does not have the right to engage in such conduct. Nothing of legal value exchanged (promisee suffers a legal detriment or promisor receives a legal benefit). Consideration requires receipt of the promisor of something of legal value from the promise. Facts that something of legal value to constitute the consideration in the contract. Willie not giving anything of legal value because he is not giving anything up by refraining from those things. Something of legal value must be given – Willie did not have the legal right to do those things in the problem, so no forbearance. Bargained-for exchange Contracts class 2 What statement below best states the issue addressed by the court in Wood v. Lucy, Lady Duff-Gordon? Was plaintiff Wood’s promise illusory and therefore not supported by consideration, since it did not obligate him to take any positive action or do anything of an affirmative nature whatsoever? What do you think Justice Cardozo means by his use of the term sacred talisman in the following sentence? “The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal It takes a broader view to-day. A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed.” Precise words are not required for a contract to be enforceable in modern courts. Facts Who sues whom on what cause of action for what remedy? (trial court level) Wood, who contracted to have the exclusive right to Duff-Gordon’s endorsement, sued DuffGordon, “creator of fashions” whose endorsement was valuable, for breach of contract and damages. Wood alleges that Duff-Gordon breached the contract by placing her endorsement on various products without Wood’s knowledge. What is the procedural posture? (How did the case get from the trial court to the court writing the opinion?) 1. What court is issuing the opinion? The highest court in New York, the New York Court of Appeals. 2. Which party is seeking relief? Wood, Plaintiff, appealed from the intermediate appellate court’s reversal of the trial court’s denial of Defendant’s motion to dismiss (demurrer). 3. What sort of motion is at issue? Demurrer, effectively a motion to dismiss. 4. What was the disposition of the lower courts? Trial court denied D’s demurrer, D appealed, intermediate court found for D, P appealed. What happened? (storytelling and legally dispositive) Wood and Duff-Gordon signed a deal granting Wood exclusive rights to Duff Gordon’s endorsement, excluding even Duff-Gordon herself from using her own endorsement. Duff-Gordon placed her endorsements on a variety of apparel anyway in violation of the alleged contract. Issues What is the legal issue(s) in the case? Does a contract exist where a party is granted an exclusive right to endorse products with the name of the other contracting party, where that licensee promises to pay the licensor one-half of the profits and revenues resulting from that exclusive right, but where no explicit promise to make reasonable best efforts is agreed upon? ○ Can a promise to make reasonable efforts to bring about profits and revenues be fairly implied? Rules What rule(s) do(es) the court apply to decide the case? (Avoid dicta) A promise may be lacking, and yet the whole writing may be "instinct with an obligation," imperfectly expressed (SCOTT, J., in McCall Co. v. Wright, 133 App. Div.62). If that is so, there is a contract. ○ The acceptance of the exclusive agency was an assumption of its duties (Phoenix Hermetic Co. v. Filtrine Mfg. Co., 164 App. Div. 424) What rationale does the court provide to support the rule it applies? (May include legal or policy arguments) We are not to suppose that one party was to be placed at the mercy of the other (Hearn v. Stevens & Bro., Ill App. Div. 101, 106) Application/Arguments/Analysis What arguments does the plaintiff make? Defendant breached the contract by endorsing products with her name, a right exclusively assigned to Plaintiff in the alleged contract between Plaintiff and Defendant. What arguments does the defendant make? No contract exists because the Plaintiff, Wood, “does not bind himself to anything.” How did the court respond to those respective arguments? (Why did the court rule the way it did?) While the contract does not explicitly state that P will use “reasonable efforts,” “[w]e think, however, that such a promise is fairly to be implied.” “The law has outgrown its primitive stage of formalism,” and “[i]t takes a broader view today.” “A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed.” “If that is so, there is a contract.” How is there an implication of a promise? ○ The acceptance of the exclusive agency was an assumption of its duties. ○ “Adapted to the placing of such endorsements” implies that P’s business will be used for the placing of such endorsements. ○ Duff-Gordon only received in return “one-half of all the profits resulting from the plaintiff’s efforts.” Without an implied promise, the transaction would be nonsensical, without business efficacy. ○ P agrees to account for money received in this business, and to register relevant related IP as necessary “to protect the rights and articles affected by the agreement.” In determining the intention of the parties, [this] promise has a value. ○ “His promise to pay the defendant one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly, was a promise to use reasonable efforts to bring profits and revenues into existence.” Conclusion What is the holding? (Reformulate the issue by answering it) Where a party is granted an exclusive right to endorse products with the name of the other contracting party, where that licensee promises to pay the licensor one-half of the profits and revenues resulting from that exclusive right, and where no explicit promise to make reasonable best efforts is agreed upon, a promise to make reasonable efforts to bring about profits and revenues can be fairly implied, and the agreement is a contract. What is the disposition of the court issuing the opinion? The judgment of the Appellate Division should be reversed, and the order of the Special Term affirmed, with costs in the Appellate Division and in this court. Class 3 Basics of consideration promises to make a gift/gratuitous promises Contract law has a problem with promises that are freely given and not induced by a promise of some sort of benefit In kirksey where is the consideration? What benefit is the brother in law getting out of the deal? Gratuitous promises or promises to make a gift in the future are generally unenforceable due to lack of consideration. Promises made out of a sense of moral obligation or honor also lack consideration as held in most states A completed gift promise is not revocable Remeber the rule from class 2 Consideration denotes the receipt by the promisor of something of legal value from the promisee In Kirksey what did the defendant brother in law receive of legal value from dear sister antillico? The free market Principle at work in America Contract Law Parties to a contract are free to place whatever value they want on a contract Opinions as to value often differ from person to person There is no rule in contracts assessing the market value exchange made by contracting parties Adequacy of consideration Adequacy of Consideration The non-equivalence of consideration may be so gross as to be evidence of fraud, duress, over-reaching, undue influence or mistake. But in the absence of these it will seldom affect the enforceability of a promise. The rule as applied in Batsakis? ($25 = $2,000 + interest?) What about mere pretense of consideration, as evidenced by nominal or "sham" consideration? From Notes accompanying Batsakis Therefore, as a general rule, courts do not inquire into the adequacy or sufficiency of consideration… Thus, a party who makes a bad deal is typically bound and cannot claim unfairness in the bargain on grounds of consideration. See 1-2 Farnsworth Contracts § 2.11. The “take-away” is that “freedom of contract” and the free market principle drive much of contract law. In the absence of “some rationale to enforce the promise without consideration,” parties are free to place whatever value they desire on a particular bargain. Class 4 What rule did the court follow in reaching its decision in Feinberg v. Pfeiffer Co. a. Past services are not a valid consideration for a promise. b. A promise which the promisor should reasonably expect to induce action or forbearance 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 c. The consideration sufficient to support a contract may be either a benefit to the promisor or a loss or detriment to the promisee. d. A promise to make a gift is not binding unless supported by a legal consideration Which of the following choices best explains the term “estoppel” a. A legal principle that bars a party from denying or alleging a certain fact owing to that party's previous conduct, allegation, or denial. b. A legal principle that stops a party from entering into a contract without consideration. c. A cause of action used in pleading a breach of contract at common law. d. A cause of action that bars a party from claiming a gratuity as consideration for a contract Promises that lack consideration A prior act or performance that does not support a new contract Problems of past consideration often arise when a party to a contract promises to pay additional compensation for work done in the past Section 90 of the Restatement of the Law of Contracts (1932) states that: “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.” Also known as "detrimental reliance" 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 of a definite and substantial character is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. Promissory Estoppel Elements to be proven – The promisor made a promise – The promisor should have reasonably expected that promisee would rely on the promise. – The promisee actually relied on the promise and engaged in an action or forbearance of a right. – Injustice would result if the promise were not enforced. – Go thru each element for Ms. Freiberg/the Company. What do you think Justice Cardozo means by his use of the term “sacred talisman” in the following sentence: “The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal It takes a broader view to-day. A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed.” b. Precise words are not required for a contract to be enforceable in modern courts. Raffles v Whicleshouse The formation of a contract presupposes mutual assent that both parties are agreeing to the same thing. (the October peerless vs the December peerless) there is nothing to enforce the contract is void. The court is looking at are the two parties agreeing on the same thing? And they are not, they mean two different ships. Therefore there was mutual mistake and therefore no binding contract.