Contracts I: Case Briefs




                        Disclaimer: These notes and outlines are provided as-
               ...
Contracts I: Case Briefs


                                                         Table of Contents
1. Contract Notes......
Contracts I: Case Briefs


                                   1.Contract Notes
1.1What is Contracts?

Contracts is the stu...
Contracts I: Case Briefs


Economic theories believe that the aggregate benefits of promise-making “outweigh” the
aggregat...
Contracts I: Case Briefs


            b. which rules should be treated as default rules (where parties can opt out)
     ...
Contracts I: Case Briefs


                          2.Bailey v. West             (What is a Promise?)
2.1Title and Citati...
Contracts I: Case Briefs


Public policy – a person conferring a benefit cannot require the other to pay for it unless the...
Contracts I: Case Briefs


                   3.Leonard v. Pepsico, Inc.                (What is a promise?)
3.1Title and ...
Contracts I: Case Briefs


    -    is it “objectively” reasonable for the offer to exist? It doesn’t matter what the Leon...
Contracts I: Case Briefs


              4.Kirksey v. Kirksey              (Consideration – Bargain v. Gift)
4.1Title and ...
Contracts I: Case Briefs


               5.Hamer v. Sidway              (Consideration – Bargain v. Gift)
5.1Title and Ci...
Contracts I: Case Briefs




Philip Larson              Page 12
Contracts I: Case Briefs


   6.St. Peter v. Pioneer Theatre Corp.                     (Consideration – Bargain v. Gift)
6...
Contracts I: Case Briefs


6.5Reasoning

D claims that since P did not pay a “valuable consideration”, the arrangement was...
Contracts I: Case Briefs


                  7.In Re Greene             (Consideration – Bargain v. Gift)
7.1Title and Cit...
Contracts I: Case Briefs


    -   There needs to be sufficient consideration on both sides
    -   Something “illegal” ca...
Contracts I: Case Briefs


                8.Batsakis v. Demotsis                (Consideration – Adequacy)
8.1Title and C...
Contracts I: Case Briefs


           o Not if the going rate was $2000 for 500,000 drachmas
    -   What about UNCONSCION...
Contracts I: Case Briefs


                  9.Wolford v. Powers                (Consideration – Adequacy)
9.1Title and Ci...
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    -   Mutuality of Obligation p150– in a bilateral contract “both parties are bound or neithe...
Contracts I: Case Briefs




    -   Summary of Consideration
            o   Consideration question
            o   Gift/...
Contracts I: Case Briefs


           10.Haase v. Cardoza               (Promissory Estoppel - Intrafamilial)
10.1Title an...
Contracts I: Case Briefs


    -   “material benefit rule” -




Philip Larson                       Page 23
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         11.Ricketts v. Scothorn               (Promissory Estoppel - Intrafamilial)
11.1Title ...
Contracts I: Case Briefs


            o     Rationale for not enforcing intrafamilial promises
                       Pr...
Contracts I: Case Briefs


  12.Feinberg v. Pfeiffer Co.               (Promissory Estoppel - Emplymnt Context)
12.1Title ...
Contracts I: Case Briefs


            o   Contract is enforced despite not having consideration. Why?
                   ...
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    13.Hayes v. Plantations Steel Co. (Promissory Estoppel - Emplymnt
                         ...
Contracts I: Case Briefs


    gratuity. Court said that A could be distinguished from a case in which someone promises pe...
Contracts I: Case Briefs


                         Hayes, we see that the promisee expected it but did the promisor? Wou...
Contracts I: Case Briefs


 14.Salsbury v. Northwestern Bell Telephone Co. (Promissory Estoppel -
                        ...
Contracts I: Case Briefs


14.7Analysis

Notes
    -   charitable subscription – charitable giving in the form of a future...
Contracts I: Case Briefs


15.Congregation Kadimah Toras-Moshe v. DeLEO                                 (Promissory Estopp...
Contracts I: Case Briefs


    -   “It is often difficult to determine whether words of condition in a promise indicate a ...
Contracts I: Case Briefs


     16.Coley v. Lang             (Promissory Estoppel – Incomplete Negotiations)
16.1Title and...
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Issue 2: Court ruled that just because the negotiations proved unfruitful does not warrant appl...
Contracts I: Case Briefs


 17.Hoffman v. Red Owl Stores, Inc. (Promissory Estoppel – Preliminary
                        ...
Contracts I: Case Briefs


17.5Reasoning

Issue 2: Facts justify promissory estoppel?
Question: whether the promise necess...
Contracts I: Case Briefs


    -   Hoffman likely DOES NOT expect to be bound. He thinks, up until the last moment, that h...
Contracts I: Case Briefs


    18.East Providence Credit Union v. Geremia                           (Promissory Estoppel –...
Contracts I: Case Briefs


                     Maybe they would have been more careful with the car (e.g. not driven it ...
Contracts I: Case Briefs


        19.Mills v. Wyman              (Material Benefit Rule – Past Consideration)
19.1Title a...
Contracts I: Case Briefs


20.Manwill v. Oyler               (Material Benefit Rule – Promises for Non-Donative
          ...
Contracts I: Case Briefs


    -   That at the time of the promise there was nothing but “bare moral obligation” to suppor...
Contracts I: Case Briefs


    21.Webb v. McGowin I (Material Benefit Rule – Promises for Non-
                     donati...
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    22.Webb v. McGowin II (Material Benefit Rule – Promises for Non-
                      dona...
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Contracts I: Case Briefs

  1. 1. Contracts I: Case Briefs Disclaimer: These notes and outlines are provided as- is without any warranty as to their correctness, completeness, or quality. They are not meant to be a substitute for your own efforts. You may copy and forward this document as long as you do not alter its contents. 8/9/2004 Revision 0.1 Author: Philip Larson 703.798.5244 (tel)
  2. 2. Contracts I: Case Briefs Table of Contents 1. Contract Notes..........................................................................................................................3 2. Bailey v. West (What is a Promise?)....................................................................................6 3. Leonard v. Pepsico, Inc. (What is a promise?)....................................................................8 4. Kirksey v. Kirksey (Consideration – Bargain v. Gift)......................................................10 5. Hamer v. Sidway (Consideration – Bargain v. Gift).........................................................11 6. St. Peter v. Pioneer Theatre Corp. (Consideration – Bargain v. Gift)............................13 7. In Re Greene (Consideration – Bargain v. Gift)...............................................................15 8. Batsakis v. Demotsis (Consideration – Adequacy)...........................................................17 9. Wolford v. Powers (Consideration – Adequacy)...............................................................19 10. Haase v. Cardoza (Promissory Estoppel - Intrafamilial)...............................................22 11. Ricketts v. Scothorn (Promissory Estoppel - Intrafamilial)...........................................24 12. Feinberg v. Pfeiffer Co. (Promissory Estoppel - Emplymnt Context)..........................26 13. Hayes v. Plantations Steel Co. (Promissory Estoppel - Emplymnt Context)...............28 14. Salsbury v. Northwestern Bell Telephone Co. (Promissory Estoppel - Charitable Subscriptions)..............................................................................................................................31 15. Congregation Kadimah Toras-Moshe v. DeLEO (Promissory Estoppel - Charitable Subscriptions)..............................................................................................................................33 16. Coley v. Lang (Promissory Estoppel – Incomplete Negotiations)..................................35 17. Hoffman v. Red Owl Stores, Inc. (Promissory Estoppel – Preliminary Negotiations). 37 18. East Providence Credit Union v. Geremia (Promissory Estoppel – Promises to Insure) ......................................................................................................................................................40 19. Mills v. Wyman (Material Benefit Rule – Past Consideration).....................................42 20. Manwill v. Oyler (Material Benefit Rule – Promises for Non-Donative Material Benefits).......................................................................................................................................43 21. Webb v. McGowin I (Material Benefit Rule – Promises for Non-donative Material Benefits).......................................................................................................................................45 22. Webb v. McGowin II (Material Benefit Rule – Promises for Non-donative Material Benefits).......................................................................................................................................46 23. Lucy v. Zehmer (Offer and Acceptance).........................................................................47 24. Dyno Construction Co. v. McWane Inc. (Offer).............................................................49 25. Lefkowitz v. Great Minneapolis Surplus Store, Inc. (Offer)..........................................52 26. Ever-Tite Roofing Corp. v. Green (Acceptance).............................................................54 27. Ciarmella v. Reader’s Digest Association, Inc. (Acceptance)........................................56 28. Pavel Enterprises v. A.S. Johnson Co. (Revocation)......................................................58 29. Dataserv Equipment v. Technology Finance Leasing (Counteroffer)...........................62 30. Ionics, Inc. v. Elmwood Sensors, Inc. (Counteroffer).....................................................64 31. Step-Saver Data Systems, Inc. v. Wyse................................................................................67 32. Hill v. Gateway 2000, Inc......................................................................................................68 33. Example Brief........................................................................................................................69 Philip Larson Page 2
  3. 3. Contracts I: Case Briefs 1.Contract Notes 1.1What is Contracts? Contracts is the study of the legal enforcement of promises. Answers the following two questions: 1. Should the law intervene to enforce the promise? 2. If so, what are the appropriate steps to “enforce” the promise? Lawyers must predict which promises will be enforced and which broken promises the law will choose to ignore. 1.2Different Theories Positive theory attempts to “explain the patterns of promissory enforcement”. Normative theory attempts to justify the exercise of state coercion through the application of contract law. Autonomy Theories Take an “Ex Post” perspective to adjudication, viewing the process as a mechanism for resolving a specific dispute. Autonomy theories attempt to justify contract law on the ground that promisors have a moral obligation to keep their promises. “To renege is to abuse a confidence he was free to invite or not, and which he intentionally did invite. To abuse the confidence now is like lying: the abuse of a shared social institution that is intended to invoke the bonds of trust.”p24. It argues that “legal enforcement of contract promotes individual freedom by giving people the power to bind themselves with others.” However, what about the freedom to change one’s mind and renege on a promise? Problems with using “moral promise principle” to justify contractual liability: 1. difficult to explain why promises create moral obligation 2. principle doesn’t explain why courts do not enforce all promises Economic Theories Take an “Ex Ante” perspective in adjudication viewing the process as a mechanism for creating rules and rights that will provide incentives for individuals in the future. “Judicial decisions are evaluated according to whether their prospective effects are socially desirable.” As a matter of public policy, enforcement of serious promises will encourage promisees to rely on promises when predicting the future. This is considered socially desirable because it increases productivity. Reliance is detrimental, (and hurts productivity) when the promise is broken because it will frustrate the promisee’s future plans. Philip Larson Page 3
  4. 4. Contracts I: Case Briefs Economic theories believe that the aggregate benefits of promise-making “outweigh” the aggregate harms. Economic analysis of contract law must also determine whether it is “more socially desirable to encourage individuals to weigh their options at the time they are considering breaking a promise, or to encourage individuals to weigh their options at the time they are considering making a promise.” Reliance Theory A “communicated promise often induces the promise to change her course of future behavior. This change in behavior is called reliance on the promise. According to reliance theory, “compensating for this harm is the moral basis for enforcing promises” p28. Skeptical or Pluralist Theory There are many reasons why courts enforce promises and the search for a single, general theory is hopelessly idealistic. 1.3Ways to systematize the law 1.3.1Restatements Restatement of the Law of Contracts – published in 1932 by ALI. Not intended to be enacted as a statute by legislatures. Intended to assist in developing common law of contracts. Original restatement was revised, and 2nd Restatement of Contracts was adapted by ALI in 1979. 1.3.2Reduce common law to statutes and seek adoption by state legislatures e.g. Article 2 of the Uniform Commercial Code (UCC) defined in 1940s by groupo of scholars. Intended to standardize the various state laws governing certain kinds of contracts, namely contracts for the sale of goods. Note: Every state but Louisiana has enacted Article 2, which was just revised in 2001 with final approval in 2003. 1.4Functions of Contract Law rules 1. solve the sorting problem (which to enforce) 2. gap filling (when people make promises that are incomplete, contract rules fill the gaps) 3. rules for determining the meaning of the agreement itself (e.g. parol evidence rule) 4. Define the outer boundary of acceptable bargaining and outcomes a. Fraud, duress, unconscionability Philip Larson Page 4
  5. 5. Contracts I: Case Briefs b. which rules should be treated as default rules (where parties can opt out) and which ones should be mandatory and not subject to variation by mutual consent? (e.g. contracts whose results offend widely-held social values) 1.5Enforcing Promises (p131) A contract is a legally enforceable promise. When a court enforces a promise they can: 1. order compensatory damages paid to P or 2. order D to perform the promise “the ability to rely on the promises of others adds to the confidence necessary for social intercourse and enterprise.” However, “freedom to change one’s mind is necessary for free intercourse between those who lack omniscience”. Courts primarily use three doctrines to distinguish between enforceable and unenforceable promises: 1. Consideration Doctrine a. Performance or promise must be bargained for b. Performance can consist of i. An act other than a promise ii. A forbearance to act iii. Creation, modification or destruction of a legal relationship c. Promise may be given to the promisor or to some other person. Promise may be given by the promisee or by someone else. 2. Promissory Estoppel a. Promise which promisor should “reasonably expect to induce action or forbearance” on the part of the promisee and actually does induce the action is binding if injustice can be avoided only by enforcement of the promise. b. Charitable subscription or marriage settlement is binding without proof that the promise induced action or forbearance. 3. Material Benefit Rule a. Promise made in recognition of a past benefit is binding to the extent necessary to prevent injustice b. Promise is NOT binding if the benefit is a gift Simplification: “bargained for” promises are enforced by consideration but “gift promises” are not. Philip Larson Page 5
  6. 6. Contracts I: Case Briefs 2.Bailey v. West (What is a Promise?) 2.1Title and Citation Bailey v. West, Supreme Court of Rhode Island, 1969 p5 2.2Facts P (Bailey) is suing D (West) for value of services rendered when feeding a race horse for about 4 years. D purchased horse from a third party but the horse turned out to be lame. D had his trainer reship the horse to the seller who refused to accept the delivery. D’s trainer then took the horse to P’s farm where it remained for about 4 years until P sold it. P sent bills for feed and board to defendant. After the 1st bill, D “immediately returned” it saying that he was not the owner of the horse nor was the horse sent to P on his request. PH: bench trial before justice of the superior court with decision for the plaintiff for his cost of boarding for 5 months. P is appealing to try to get damages for the full 4 years. D is cross-appealing. Trial judge found there was a contract “implied in fact” between P and D until P received notification from D that he wouldn’t be responsible for the horse’s board. 2.3Issues 1. Under Rhode Island common law, was their a contract “implied in fact” between P and D? 2. Under Rhode Island common law, was their a quasi contract between P and D? 2.4Decisions 1. No. 2. No. Judgment was that P was a “volunteer” who performed the services “at his own risk”. P’s appeal denied and dismissed. D’s cross appeal is sustained. Cause remanded to superior court for entry of judgment for D. 2.5Reasoning There was no Contract based on “implied in fact” because these require: 1. mutual agreement 2. intent to promise 3. agreement and promise are not made in words, they are implied from facts Court held there was no “mutual agreement” nor any “intent to promise”. Court held that the trial judge made a mistake in finding a contract “implied in fact”. There was no “meeting of the minds” because P knew there was dispute as to the horse’s ownership and his later actions (sending bills to both D and third party seller of horse) proved he did not know with whom he had a contract. There was no quasi contract because in a quasi contract: 1. benefit must be conferred upon D by P 2. appreciation of D of such benefit 3. acceptance and retention of benefit by D in circumstances where it is inequitable to retain the benefit without payment. (doctrine of “unjust enrichment”) Key question, is therefore whether or not P was acting as a “volunteer” at the time he accepted the horse for boarding. It was determined that P was a volunteer boarding the horse “at his own risk”. Philip Larson Page 6
  7. 7. Contracts I: Case Briefs Public policy – a person conferring a benefit cannot require the other to pay for it unless the one conferring has a valid reason for doing so. Since P knew there was controversy, P could not reasonably expect D to pay. 2.6Separate Opinions 2.7Analysis Notes Section: Why do courts give reasons for their decisions? o Common law is based on precedent. Reasoning of previous cases is necessary to determine when precedent is applicable. Notes - To be an agent, means that to take the actions of the agent is as if you took the action yourself. - You can be an agent and acting poorly for your master - section 4 of the 2nd Restatement - Contracts o contracts can be oral o contracts can be inferred by what you do o contract “implied in fact” vs “implied-in-law” (e.g. “implied in equity”, quasi-contracts)  “implied in fact” is a contract  quasi-contracts ARE NOT contracts, however a court can use it to reallocate funds to make things equitable  a “placeholder” cannot make a contract with you (Bailey v. West) o there was a procedural problem as well (p7 paragraph 1) o Was Bailey a volunteer?  He knew that the “owner” of the horse (West) was not willing to pay. o Volunteer is an “exception” to having a quasi-contract… - Hypothetical o What if Bailey sells the horse in 6 months instead of 4 years? West goes to Bailey and says that it turns out he is the true owner and that Bailey should “pony up”. What about 8 months? 4 years? 10 years? - Bailey loses the “implied in law” case. - Main points o Contracts can be inferred by what you do o Contracts can be oral o Section 4 of the 2nd Restatement Philip Larson Page 7
  8. 8. Contracts I: Case Briefs 3.Leonard v. Pepsico, Inc. (What is a promise?) 3.1Title and Citation Leonard v. Pepsico, Inc. , United States District Court, Southern District of New York, 1997 p19 3.2Facts P (Leonard) is suing D (Pepsi) for not honoring an offer of a Harrier Jet (worth ~$25 million) for 7,000,000 pepsi points (worth ~$700,000) on a commercial. P obtained the necessary points by collecting $700,000 from friends and sent a letter to D saying he was interested in taking them up on their offer for one Harrier Jet. D sent a letter back telling him that the commercial was clearly in jest and that no offer ever existed. Harrier Jet was not available in D’s catalog of “redeemable” merchandise. PH: None. It is in district court. 3.3Issues Under New York common law, can D take P up on an offer made in jest in a commercial and thereby create an enforceable contract? 3.4Decisions No. An objective person would not have “reasonably have concluded” that an actual offer of a Harrier Jet was available, therefore there was no offer and no contract. 3.5Reasoning It does not matter what was going through the heads of either party. “if the jest is not apparent and a reasonable hearer would believe that an offer was being made, then the speaker risks the formation of a contract which was not intended.” Since P insists that the commercial appears to be serious, the court MUST explain why the commercial is funny including: 1. the youth is a highly improbable pilot 2. traveling to school in a Harrier jet is an exaggerated fantasy 3. Harrier jets are for “attack” and “destroy” missions and are therefore unlikely to be targeted to civilian consumers 4. the number of Pepsi points needed would have required the user to drink 190 pepsi’s a day for 100 years. Note: even if a promise honestly believes that she has received a promise, enforcement is denied if a reasonable observer would not have believed there to be a promise. 3.6Separate Opinions 3.7Analysis Interesting: It does not matter what was going through the heads of either party. “if the jest is not apparent and a reasonable hearer would believe that an offer was being made, then the speaker risks the formation of a contract which was not intended.” Notes: Philip Larson Page 8
  9. 9. Contracts I: Case Briefs - is it “objectively” reasonable for the offer to exist? It doesn’t matter what the Leonard or Pepsi thinks. - All that matters is the “outward manifestation of intent” such that it justifies the other party in believing. There would have to be an “outward manifestation of intent” on the part of Pepsi Main point: It is an Objective theory. “Objective Person” - Section 2 of the 2nd Restatement. Philip Larson Page 9
  10. 10. Contracts I: Case Briefs 4.Kirksey v. Kirksey (Consideration – Bargain v. Gift) 4.1Title and Citation Kirksey v. Kirksey, Supreme Court of Alabama, 1845 p132 4.2Facts P was the wife of D’s brother who had died and left P with estate and children. D convinced P to sell her land and move 60 miles to his estate where he promised land and a place to raise her children. After two years, D notified P that she had to move to an uncomfortable house in the woods and eventually required her to leave completely. PH: Verdict was found for P with damages awarded of $200. 4.3Issues Under Alabama common law, is selling one’s home and moving 60 miles sufficient consideration to enforce a promise by D to provide P with house, land, etc? 4.4Decisions No. While the judge writing the opinion thought it was, his “brothers” (other judges on the Supreme Court?) thought that D was providing a gift and therefore no sufficient consideration. (Material Benefit Rule) Judgment of the court below was reversed. 4.5Reasoning D was providing access to his estate to P as a gift and there was therefore not binding. 4.6Separate Opinions Judge thought there was sufficient consideration because of the reliance P placed on the promise (e.g. moving 60 miles, selling her home) 4.7Analysis I disagree with the decision. Notes: - Gifts can have conditions. - Gifts w/ conditions are NOT contracts. - He is not offering the house to get her to move. This is not an exchange and therefore there is no contract. - She does not own her land, she just has a preference on it. - Dissenting judge is applying “Benefit”/”Detriment” theory and he is wrong. The correct judges, use the new theory. - Discerning between “Conditional Gift” and a real contract o Contract: If x then y o Conditional Gift: If you move to my land, I will provide you a house etc. o Difference is one of “INTENT”. If you are promising Y to get X it is a contract. If you are promising Y and you don’t really care about X then it is a conditional gift. Philip Larson Page 10
  11. 11. Contracts I: Case Briefs 5.Hamer v. Sidway (Consideration – Bargain v. Gift) 5.1Title and Citation Hamer v. Sidway, Court of Appeals of New York, 1891 p45 5.2Facts P’s uncle promised P $5000 if he did not drink, smoke, play cards or pool until be was 21. P turned 21 and sent uncle a letter informing him that he had not done these things. Uncle sent letter back saying that he intended to provide the money to P with interest at a later date. Uncle died and the executor of his estate (D) refused to pay P saying that the contract lacked consideration because the Uncle did not benefit from the consideration, nor was the promisee harmed, but rather benefited, from the promise (by being healthier). PH: P appeals supreme court of New York decision that reversed a judgment entered on the decision of the court at special term in favor of P. 5.3Issues Under New York common law, is forbearance by one party (P) sufficient consideration to make a promise binding? 5.4Decisions Yes. Forbearance to act (e.g. smoke, drink, etc.) is sufficient consideration to make a promise binding and enforceable. This promise does not require the uncle to have benefited from the performance. However, even if it were, the court says it would have found that the uncle had benefited. Order appealed from reversed. Judgment of the special term was affirmed in favor of P. 5.5Reasoning 5.6Separate Opinions 5.7Analysis Notes: - Court of Appeals is highest court in New York o This is the last word in the New York - “Forbearance” on part of promisee (nephew), that is sufficient consideration… - “Benefit” to promisor OR “Forbearance/Detriment” on part of promisee is sufficient consideration o We do not need normal detriment, we need a “legal detriment” which includes forgoing a legal right. - A “gift”, that is not actually given, but merely promised is NOT enforceable. - Hypothetical: What if the uncle did not ask anything of the nephew but just said, in writing, that on his 21st birthday he would give the nephew $5000 and then he died. This would not be enforceable. - “Bargain for Exchange” - If I promise to pay you not to go to the moon. What about if I cannot go to the moon? - Is “Psychic benefit” sufficient consideration? - “benefit” vs. “detriment” is no longer the rule it is “bargain”/”exchange” - We study it because it is interesting to study the evolution from old theory from old law to new law Philip Larson Page 11
  12. 12. Contracts I: Case Briefs Philip Larson Page 12
  13. 13. Contracts I: Case Briefs 6.St. Peter v. Pioneer Theatre Corp. (Consideration – Bargain v. Gift) 6.1Title and Citation St. Peter v. Pioneer Theatre Corp., Supreme Court of Iowa, 1940 p46 6.2Facts A theatre (D) held a “bank night” in which they were to provide a prize of $275 to a lucky winner. An agent of D announced that P had won. P immediately went in and demanded award of D who refused to pay. D claims that P did not win but that P’s husband had won and that P’s husband was too late (1 second too late) to accept the award. Only testifying witnesses were P and P’s husband so there are no disputes of fact. P is suing D for the $275 plus costs. D claimed that winner had to: 1. sign name to book and 2. claim prize within 2.5 minutes. D made a motion for directed verdict on 7 grounds, 3 of which are discussed in the opinion: 1. no adequate or legal consideration for the claimed promise 3. P was asking for a promised gift based on performing the two requirements above. Since it was a gift and not a legal contract, there was no legal consideration 7. if there was sufficient consideration, then the transaction is a lottery and therefore would be an illegal transaction upon which no recovery could be had D claimed that it clearly was not a lottery referencing the case “State v. Hundling” in which “bank nights” were determined not to be a lottery as a lottery would require P to have paid some “valuable consideration” which they had not done. PH: trial court judged in favor of D. P is appealing ruling of trial court. Relevant cases: Case State v. Hundling, Iowa, the same court held that the arrangement was not a lottery that would be in violation of Section 131218 of the Code and therefore the theatre was not subject to criminal prosecution. Note: “profit accruing remotely and indirectly to the person who gives the prize is not a substitute for the requirement that he who has the chance to win the prize must pay a valuable consideration in order to make the scheme a lottery.” Blake v. Blake – whenever “injury to one party” or “benefit to the other” springs from consideration, it is sufficient to support a contract. 6.3Issues Under Iowa common law, must a promisee pay a “valuable” consideration in order to enter into a viable contract? 6.4Decisions No. The consideration is at the discretion of the Theatre and is specified in the “unilateral contract”, therefore, all that is necessary is performing the acts required for there to be consideration. Since they offered the prize to one based on performing the acts of signing the book and being in close proximity, they controlled the value of the consideration and deemed it sufficient for the enforcement of a unilateral contract. No ground for directed verdict. Court’s ruling was reversed in favor of P. All justices concur. Philip Larson Page 13
  14. 14. Contracts I: Case Briefs 6.5Reasoning D claims that since P did not pay a “valuable consideration”, the arrangement was nothing but a promise to make a gift which is not legally enforceable consideration. Judges however disagreed. They said that a “unilateral contract” had been created where the promisor does not receive a promise as consideration. Rather, the act requested (signing the book and claiming the prize) is sufficient consideration for the contract in a “unilateral contract”. In these contracts the “sufficiency of the consideration” is at the discretion of the party offering to pay the prize and their requested acts therefore are sufficient. Rule: In a unilateral contract, if the act specified by the offering party is performed then consideration is supported. D claimed that “no reasonable person could say that the requested acts were bargained for” to create an enforceable promise. Again, the judges disagreed saying that 6.6Separate Opinions 6.7Analysis Note: Most students misread cases because they fail to see the issues in terms of the applicable law Notes: - If you sign, win and claim then you get the money. - “Unilateral contract” – only way to engage the promise is to engage in the activity required. - Black letter law – you must “fully perform” required acts - “Unilateral” vs. “Bilateral” used to be a big deal. However, the 2nd Restatement did away with the language and it is becoming less relevant. - In a unilateral contract, “Detriment”/”Benefit is not the rule. The rule is that if the act performed by the offering party is performed, then consideration is supported. - Doctrine of Adequacy – p52 paragraph 1 “it matters not how insignificant the benefit…” - Nominal Doctrine – “in re greene”, the $1 is nominal and not “adequate” o If it is so minor that it seems like it is a fraud on the court, the court will decide there is not sufficient consideration. E.g. if the parties are trying to get out of the rules on gifts, for instance - Take away: St. Peter mentions both Benefit/Detriment (even though it is and Bargain/Exchange) - Question: If there is consideration, why isn’t bank night illegal? o Because they haven’t paid any money for the opportunity. o Consideration has a different definition in different circumstances - Gratuitous promises are NOT enforced - Courts have moved from Benefit/Detriment to Bargain/Exchange (p141) o Philip Larson Page 14
  15. 15. Contracts I: Case Briefs 7.In Re Greene (Consideration – Bargain v. Gift) 7.1Title and Citation In Re Greene, United States District Court, Southern District of New York, 1930 p134 7.2Facts P was a woman who had lived in adultery with D for several years. D bought P a $70,000 house on Long Island. When they stopped being intimate and moved apart, P and D signed what was alleged to be a binding contract in which D promised to P to 1. pay her $1000 dollars a month while they both were alive, 2. provide a $100,000 life insurance policy and keep the premiums on it for life, 3. pay rent for four years on an apartment she leased. D went bankrupt and failed to pay so P is suing D for $375,700 to cover these costs. PH: hearing held and judge ruled in favor of P. D’s objections dismissed. 7.3Issues Is past consideration (former cohabitation) sufficient consideration for liability of a new contract? 7.4Decisions No. Judge ruled that past consideration is NOT consideration. Therefore, the contract lacked sufficient consideration to be enforceable. Ruling in favor of D. 7.5Reasoning Rule 1: A contract for future illicit cohabitation is unlawful. While this rule was not broken because the contract was made after they had stopped cohabitation, the judge ruled that the promise was void because of lack of consideration. The consideration was in the past. Judge sought to find other consideration, apart from past cohabitation but could find none. It is not enough that the parties “intended” to make a valid agreement. An agreement is only valid if it has sufficient consideration. “unless consideration is actually present, there is not a legally enforceable contract.” 7.6Separate Opinions 7.7Analysis Notes - he disagrees with the claim that he said he would leave his wife for this woman - Candidates for consideration in this case and decisions… o Illegal cohabitation (not consideration – illegal) o Upkeep on life insurance (not consideration - gift) o Rent (not consideration - gift) o $1 - (not consideration – nominal) o “released the claimant from all claims which she had against him” o “other good and valuable consideration” (no consideration – nominal? Fraud? Or, just not true…) o Placed “under seal” (can “under seal” be consideration?) - (not consideration – nominal) o $1000 per month during joint lives Philip Larson Page 15
  16. 16. Contracts I: Case Briefs - There needs to be sufficient consideration on both sides - Something “illegal” cannot be consideration o Reasoning: Purpose of court finding consideration is typically to enforce the contract. Don’t want to enforce these contracts. - “Past consideration” is NOT consideration o If you wash my car and then ask me for $5, what are you bargaining? You’ve already done the deed. o Only way around this is the “Moral Obligation Doctrine” - Releasing legal claims CAN BE valid consideration (Section 74 of 2nd Restatement P2) o Why didn’t the court find this to be valid consideration in this case?  First Restatement hadn’t come out yet?  Perhaps because the court worries that it is blackmail? - Bargain for exchange o A: If you x, I will y. o B: If you y, I will x. Philip Larson Page 16
  17. 17. Contracts I: Case Briefs 8.Batsakis v. Demotsis (Consideration – Adequacy) 8.1Title and Citation Batsakis v. Demotsis, Court of Civil Appeals of Texas, 1949 p144 8.2Facts In war-torn Greece, Demotsis (D) borrowed equivalent of $25 from Batsakis (P) in exchange for a note that promised to pay Batsakis $2000. D claims there was “want and failure of consideration”p145 ¶last because she never got anything close to $2000. D had money and property in the US but could not access it in Greece because of WWII. She was in “straightened financial circumstances”. PH: In trial court, P sued D to recover $2000+interest. Trial court, without intervention of a jury, found in favor of the plaintiff for $750+interest. P is appealing. D did not like the decision either but has not cross- assigned error. 8.3Issues Adequacy of consideration. Was the $25 in wartime Greece adequate consideration for D’s promise to pay P $2000+interest? 8.4Decisions Yes. Court of Civil Appeals of Texas affirmed the trial court judgment. However, they reformed the judgment to award P the entire $2000+interest. 8.5Reasoning “Inadequacy of consideration will not void a contract”p146¶last Rule 1: Having no consideration or “nominal” consideration will void a contract. Rule 2: Inadequacy of consideration will NOT void a contract. p146¶last. Courts do not look into the adequacy of consideration. “The Peppercorn Theory.”p148 Reasoning: Inadequacy of consideration doesn’t void a contract because the contracting parties got exactly what was contracted for. This may be different if there is fraud or other foul play in the contracting process. However, court will not question the subjective valuations of the consideration of two contracting parties. Court said that 1. “There was consideration” and 2. “they won’t look into the inadequacy of that consideration”. 8.6Separate Opinions 8.7Analysis Note: - letter was not written accurately. It said they exchanged $2000 for $2000 rather than $25 for $2000. - the court could argue that both parties are frauding the court - Defendant is claiming o Want of consideration o Nominal (“inadequate”) consideration - What about DURESS? o Wasn’t D under duress when this contract was made? Philip Larson Page 17
  18. 18. Contracts I: Case Briefs o Not if the going rate was $2000 for 500,000 drachmas - What about UNCONSCIONABILITY? o Philip Larson Page 18
  19. 19. Contracts I: Case Briefs 9.Wolford v. Powers (Consideration – Adequacy) 9.1Title and Citation Wolford v. Powers, Supreme Court of Indiana, 1882 p147 9.2Facts Wolford (P) brought suit to obtain $10,000 against Lehman’s estate (D) based on a promissory note written by deceased. Just before dying, Lehman promised P that if P named his son Charles Lehman Wolford that Lehman would “make the child’s welfare his chief object in life and provide for it generously and give it a good education.” P cared for Lehman during some brief illnesses. When boy was 5 months old, Lehman created a note for P for $10,000 stating that this was how he wanted to carry out his promise. PH: trial court judged for D. Indiana Supreme court reversed. 9.3Issues Was the trial court correct in rendering a judgment for D based on want of consideration? 9.4Decisions No. Indiana Supreme court reversed trial court decision and found there was a contract. They found that P could recover the $10,000. 9.5Reasoning Rule 1: “general rule that where there is no fraud, and a party gets all the consideration he contracts for, the contract will be upheld”p147¶4. Rule2: “the value of all things contracted for is measured by the appetite of the contractors, and therefore the just value is that which they be contented to give.” Statute: Section 79 of 2nd Restatement – courts ought to honor the values that parties have placed on their respective performances” Court does not look into adequacy because there is “absolutely no rule by which the courts can be guided” p148¶1. 9.6Separate Opinions 9.7Analysis - The Peppercorn Theory (a.k.a Adequacy Doctrine) – a peppercorn is sufficient consideration for a promise. (Holmes) - Converse of the Peppercorn Theory (Adequacy) is the Nominal Consideration doctrine in Section 79 of 2nd Restatement – “disparity in value sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense. Such sham or ‘nominal’ consideration does not satisfy requirement of Section 71.” - Section 79 of 2nd Restatement – courts ought to honor the values that parties have placed on their respective performances” - Unconscionability – Section 208 of 2nd Restatement Philip Larson Page 19
  20. 20. Contracts I: Case Briefs - Mutuality of Obligation p150– in a bilateral contract “both parties are bound or neither party is bound” o if for any reason the promise of one party is not binding upon him, it is not sufficient consideration for the promise of the other and the contract is void for want of consideration o what happens in a case where there is an unenforceable promise (e.g. promise to do an illegal act)? My opinion: lack of consideration. - Promissory Estoppel p157– (Section 90 of 2nd Restatement) consideration is no longer the sole tenet underlying the enforcement of promises. Courts have expanded the set to include those based on reliance. o Estoppel can be used to  1. enforce gratuitous promises that would have been beyond the reach of the consideration doctrine • Does this mean that promisee can make a gratuitous promise binding simply by acting on it? (Note: this would “cut up the doctrine of consideration by the roots”)  2. expand liability in cases where there is consideration (Henderson claims this is what courts primarily use it for. p161) o “the extent to which the new section 90 (estoppel) was to be allowed to undercut the underlying principle of Section 75 (consideration) was left entirely unresolved”p161 Notes: - Adequacy Doctrine o Courts do not typically look into the adequacy of consideration o This question only comes up if there is a hint that we are dealing with something else including:  Gift  Nominal  Duress  Unconscionability (e.g. illegal)  Illusory promise - Was this a bargain for exchange or a gift? o If there is no bargain for exchange, you must be able to explain why… o Lehman offered to take care of the boy IF they promise to name the boy after him  Unilateral contract because it is a promise for an act (not promise for a promise) • They do name the boy after him (ACCEPTANCE) • Note: in a unilateral contract, performing the act IS acceptance  Kindness on part of parents for taking care of Lehman is not consideration because it takes place after the contract was made. (It was not part of the BARGAIN for EXCHANGE)  When looking for a bargain for exchange you should look at what is going to the promisor from the promisee. o Court is asking in the following order:  1. Was there a bargain or was there just nominal consideration?  2. If it is a bargain, is it adequate? • Courts often have to address adequacy (even though courts don’t look into adequacy) because it frequently comes up in cases.  This is a better order than the reverse. o Adequacy of Consideration (Section 79)  A) benefit/detriment theory  B) bargain and exchange theory Philip Larson Page 20
  21. 21. Contracts I: Case Briefs - Summary of Consideration o Consideration question o Gift/nominal question (same as deciding there is NOT a bargain for exchange) o Adequacy Hamer Kirksey St. Peter In re Greene Balsakis Wolford Consider- B/D Ben/Det Ben/Det & Only need 1. Barg/Exch Exch ation? Benefit by Conditional Bargain/Exch One form of Act; Gift (Not a consideration is Unilateral K gift enough; Public policy exceptions to consideration Gift/ X X Gift; nominal Gift No gift Nominal? consideration because of ($1); statement exchange of “good and valuable” consideration Adequacy? Adequacy Adequacy Adequacy Adequacy upheld upheld upheld in is upheld pure money even situation though (e.g. war- there is no torn Greece) clear “market value” - Promises given in exchange - Conditional gifts - Conditional promise o E.g. “Offer admission to UNC…your enrollment depends on your successful completion” – admission is revoked. They promise to let him in IF he continues the same level of performance. - Philip Larson Page 21
  22. 22. Contracts I: Case Briefs 10.Haase v. Cardoza (Promissory Estoppel - Intrafamilial) 10.1Title and Citation Haase v. Cardoza, District Court of Appeal, 3rd Dist. California, 1958 p162 10.2Facts Rose Haase (P) is trying to recover $10,000 from Alice Cardoza (D) based on an oral promise. D’s husband died and after he died D told P that D’s husband had left her $10,000 and that she had not given it to her and felt very guilty. D then said “I am going to pay you $50 a month. Will you accept it?” P received these payments until P sent D a note asking to cover the balance due on the $10,000. PH: Trial court granted D’s motion for a non-suit finding that there was no consideration for the promise. P is appealing. 10.3Issues Was there sufficient consideration or justification for an estoppel to allow P to recover $10,000 from D? 10.4Decisions No. Appeal court affirmed trial court in favor of D (P could not recover). Court found no consideration and no reliance on part of P on D’s promise. 10.5Reasoning Court found that D’s promise to pay $10,000 are “not actionable” because there was no consideration. Court could not find any change in position on the part of P which would give rise to an “estoppel as a substitute for consideration.” p164¶2 Rule 1: Corbin on Contracts, section 114 p354,355: “an informal promise without consideration, in any of the senses of that term, creates no duty and is not enforceable” 10.6Separate Opinions 10.7Analysis Notes - Promissory Estoppel (Section 90 of the 2nd Restatement) o alternate way to have a contract enforced o if you find consideration, you DO have a valid contract o if you cannot find consideration, you can use estoppel as a means to enforce a contract - We start w/ Intrafamilial promises because DESPITE the wording in Section 90, they are NOT typically enforced even when there is reliance. - **to use estoppel** you STILL must have a promise!! (not a contract but a promise) e.g. “I intend to give you $10,000 is not a promise” - Courts claims it did not enforce the promise because there was no reliance. However, Mrs. Boardman thinks that the real reason was that courts think: o Family members don’t want their promises to be legally enforceable - Informal promise – promise the parties did not intend to be legally enforceable - Philip Larson Page 22
  23. 23. Contracts I: Case Briefs - “material benefit rule” - Philip Larson Page 23
  24. 24. Contracts I: Case Briefs 11.Ricketts v. Scothorn (Promissory Estoppel - Intrafamilial) 11.1Title and Citation Ricketts v. Scothorn, Supreme Court of Nebraska, 1898 p164 11.2Facts Scothorn (P) sued executor of Rickett’s estate (D) to retrieve $2000+interest based on deceased promissory note. Rickett’s was P’s grandfather. Consideration for the note was that P ‘should’ stop working. Relying on the note, P quit work. Mother of P testified that Ricketts had told her he had given the note to ‘enable’ P to quit work. When Rickett’s died he had paid one years interest on the note and at no time repudiated the obligation. PH: P recovered from D in trial court. 11.3Issues Was there sufficient consideration or justification for estoppel to allow P to recover from D’s estate? 11.4Decisions Yes. Trial court verdict affirmed in favor of P (she recovered the $2000). Court ruled there was no consideration but having quit her job was sufficient reliance for estoppel. 11.5Reasoning Court DID NOT find consideration: “There was no promise on the part of the P to do, or refrain from doing, anything…He gave the note as a gratuity, and looked for nothing in return.” p165¶2 Court DID find estoppel: “is there an equitable estoppel which ought to preclude the defendant from alleging that the note in controversy” is invalid? Yes. PRIMARY REASON: “having intentionally influenced P to alter her position for the worse on the faith of the note…it would be grossly inequitable…to resist payment on the ground that the promise was given without consideration” p166¶1 Definition: Estoppel – “right arising from acts, admissions, or conduct which have induced a change of position in accordance with the real or apparent intention of the party against whom they are alleged.” 11.6Separate Opinions 11.7Analysis - Why didn’t Haase recover? o no estoppel because there did not appear to be reliance…  If showing reliance would have helped Haase recover, aren’t future promisees well advised to rely substantially on such promises. Is this sound social policy? - Reconciling Haase and Ricketts o Just better attorneys? o No, there was reliance in Ricketts and no reliance in Haase - Intrafamilial promises – usually considered “donative” promises and are not generally enforced, despite Section 90 and despite Ricketts p167¶5 Philip Larson Page 24
  25. 25. Contracts I: Case Briefs o Rationale for not enforcing intrafamilial promises  Promisor is a relative and therefore cares about the welfare of the promisee.  Decision to break the promise will take into account any harm the promisee might suffer  Problem: this assumes that intra-familial promisors are likely to keep their promises. Is this true with divorce rates as high as they are? Doesn’t this over- estimate the probability of performance and over-rely on intra-familial promises? - Presumption of Nonenforcement of Donative Promises – “reliance may provide some evidence that a promise was actually made, but it seldom provides full evidentiary security.” p167¶6 - Must the promisor “intend” the promise to be legally enforceable for it to be? - Promissory Estoppel is applied differently in different contexts o Intrafamilial is one of the more “annoying” types but it comes up very frequently  What is the difference between Haase and Ricketts • Haase represents the MAJORITY RULE that promissory estoppel is not enforced in Intrafamilial situations • BOARDMAN’s opinion: Ricketts rule is that if you have a promise between family members, and the person who makes the promise never goes back on it, then you may be able to get the promise enforced under promissory estoppel. Why would you be in court in this situation? Most common answer is DEATH. o Reasons for not enforcing intrafamilial promises that lack consideration  1. You may really want to do it but if it turns out you can’t, the circumstances are likely so egregious, that you may not want it to be binding.  2. Signaling problem – “I’m promising but not promising under the law…” can look like a bad signal  3. Courts don’t want to reduce the number of promises made by family members o - Philip Larson Page 25
  26. 26. Contracts I: Case Briefs 12.Feinberg v. Pfeiffer Co. (Promissory Estoppel - Emplymnt Context) 12.1Title and Citation Feinberg v. Pfeiffer, St. Louis Court of Appeals, Missouri, 1959 p174 12.2Facts P (Feinberg), a former employee of D (Pfeiffer Co.), is suing D for breach of contract in providing her $200 per month for life upon retirement. P began working at D when she was 17. She owned some stock. She received a bonus each year. Board of Directors of D got together to discuss her retirement and resolved that “in view of the length of service” she should get retirement benefits of $200 per month for life and that this should “become a firm obligation of the corporation to be available to her whenever she should see fit to retire”. PH: jury was waived. Trial court found for P with judgment of $5100. D is appealing. 12.3Issues Under Missouri common law, is reliance on a promise to provide a pension sufficient cause of action to make the promise binding? 12.4Decisions Yes, court affirmed trial court’s opinion that P’s reliance on D’s promise to pay her pension in retirement was sufficient. Judgment for P. This court wrongly stated that the reason was that the reliance WAS consideration. However, promissory estoppel is separate from consideration. 12.5Reasoning D claims that the Board of Directors decision was merely a promise to make a gift and that since there was no consideration given or paid by P, it is not binding. “Many years of long and faithful service” is not consideration because it is in the past. P agrees that consideration in the past would not be valid, but says that there were two other elements of consideration: 1. continuation of P in the employment of D 2. her change of position (i.e. her retirement) made in reliance on D’s promise Court agreed w/ D that first of these were not valid consideration. “it is clear from her own testimony that she made no promise or agreement to continue in the employ of D in return for its promise to pay her a pension.” Rule: Restatement of the Law of Contracts §90. “Promissory estoppel is now a recognized species of consideration.” 12.6Separate Opinions 12.7Analysis Notes - what is the correct question to ask to verify whether we should - In Feinberg, there was no consideration because there was no bargain/exchange Philip Larson Page 26
  27. 27. Contracts I: Case Briefs o Contract is enforced despite not having consideration. Why?  Promissory Estoppel – employee relied on promise • §90 – “reasonably expect” her to rely? Yes, it was an official, written letter from the Board of Directors of the company • We have o 1. Reliance o 2. Expected reliance • Odd thing about the case is that she never says she relied on it.  Philip Larson Page 27
  28. 28. Contracts I: Case Briefs 13.Hayes v. Plantations Steel Co. (Promissory Estoppel - Emplymnt Context) 13.1Title and Citation Hayes v. Plantations Steel Co., Supreme Court of Rhode Island, 1982 p178 13.2Facts D (Plantations Steel Co.) is appealing trial court (no jury) judgment for P (Hayes). P worked at D fro 25 years. Manielli, agent of D, said that D would “take care” of P in retirement but mentioned no sum of money or percentage of salary. D had no formal provision of a pension plan for any other employees except those in unions. P was not in the union. D paid P $5000 for a few years and Mainelli testified that it was his “personal intention” that the payments continue. D was then taken over by the DiMartino family. The company then decided to stop making the payments. PH: Trial court found in favor of P saying that D was obligated to pay P $5000 yearly pension based on an “implied-in-fact” contract. Trial judge said Hayes had showed sufficient “detrimental reliance” upon D’s promise and gave rise to promissory estoppel. Trial court ruled that under a section in “Employee Retirement Income Security Act”, “ could not get attorney’s fees. Both parties are appealing. Trial court said that “barring bankruptcy or the cessation of business for any other reason” that Hayes had a right to the continued annual payments. Said that while the $5000 was never specified, it was “established” by the four annual payments. Hayes consideration was voluntarily retiring when he was under no obligation to do so. Trial court found that even if Hayes had not truly bargained for the pension, his reliance on the promise would have been enough to make it legally binding. 13.3Issues Court said that to discuss legal effect of D’s promise to P they must ask two questions… 1. Did P supply required consideration to make the promise binding? (No) 2. Was P’s alleged reliance sufficiently induced by the promise to estop D from denying its obligation to him? (No) 13.4Decisions Court finds in favor of D and reverses trial court decision. D is not obligated to pay P the pension. Court found that there was no consideration and that the reliance was not induced by the promise because P had already decided to retire. 13.5Reasoning Court said that to discuss legal effect of D’s promise to P they must ask two questions… 1. ISSUE 1: Did P supply required consideration to make the promise binding? (No) Potential consideration: a. long years of dedicated service (gratuity) b. work performed during the week between promise and retirement (insufficient consideration) c. reliance (promissory estoppel) Court said that Hayes did not bargain for A) (long years of dedicated service) and it occurred in the past and was therefore not induced by the promise. Therefore, the plantation’s promise was “intended as a token of appreciated for Haye’s many years of service” and was therefore in the nature of a Philip Larson Page 28
  29. 29. Contracts I: Case Briefs gratuity. Court said that A could be distinguished from a case in which someone promises pension in order to force an employee to retire. In this case, Hayes had already expressed his intent to retire. Court said that B (work performed during the week) was insufficient because D did not seek it or try to deter Hayes from leaving or staying. Court said that promissory estoppel requires that the promise induce the promisee’s action or forbearance. Court said that since Hayes had decided to retire before the promise the court could not find that “injustice can be avoided only by enforcement of D’s promise” 13.6Separate Opinions 13.7Analysis - How do you reconcile Hayes and Feinberg? o Intention of the two parties. Do they “intend” to be legally bound? o §90 “a promise which the promisor should reasonably expect to induce action or forbearance”  Judicial Notice – courts can take “judicial notice” of a fact and it is therefore found to be true (e.g. court took “judicial notice” of WWII)  They do not say this in the case, but Mrs. Boardman thinks this court is taking “judicial notice” that people change their behavior when they expect a pension. o Did Hayes rely on the promise? Not clear that he did. o - If all promises induce reliance, why are some not enforceable under §90? o Did they “intend” for it to be enforceable? - Ways Hayes differs from Feinberg o Hayes does not have - Arguments o 1. What you have said is so vague it could not be construed as a promise. o 2. Yes it is a promise, but the court cannot enforce it because the court has no idea what enforcing it would look like. - One problem with promissory estoppel is determining which action o Chose to retire o Did not get another job o Lifestyle changes o 8/31/04 - 2nd Restatement is separate from 1st Restatement because it no longer requires reliance of a “definite and substantial character”. - §90 is one of the most quoted sections in the 2nd Restatement - Elements required for Promissory Estoppel o 1. Promise  Nature of promise can have an impact on whether it is enforced. E.g. promise in Hayes is potentially too vague; Feinberg has promise from corporation not from an individual like in Hayes o 2. Promisor should reasonably expect to induce reliance  §90 only requires “reasonable” expectation on the part of the promisor Philip Larson Page 29
  30. 30. Contracts I: Case Briefs  Hayes, we see that the promisee expected it but did the promisor? Would a reasonable person expect it? o 3. “it does induce reliance” (e.g. reliance occurs) o 4. promise is binding only if injustice can be avoided only by enforcement of the promise  This is often ignored by courts o Note: “remedy granted for breach may be limited as justice requires”  Damages based on promissory estoppel are therefore less than damages based on consideration Notes from essay “legal enforcement of a promise intended by the promisor to be legally enforceable will not deter similar would-be promisors from making such promises in the future. However, if the law enforces promises in contexts where the promisor is not likely to have intended his promise to be legally enforceable, individuals in the future will be less likely to make such promises.” Philip Larson Page 30
  31. 31. Contracts I: Case Briefs 14.Salsbury v. Northwestern Bell Telephone Co. (Promissory Estoppel - Charitable Subscriptions) 14.1Title and Citation Salsbury v. Northwestern Bell Telephone Co., Supreme Court of Iowa, 1974 p189 14.2Facts P (Salsbury) was trying to raise money for Charles City College. Peter Bruno solicited a subscription from D (Northwestern Bell Telephone Co.). Agent of D (Winder) lacked authority to bind D for pledge but conveyed request to superiors and received their consent. Winder then sent a letter to Bruno stating that the contribution had been approved for $15,000, $5000 each over 3 years. College treated the letter exactly like any pledge card. Inconspicuous relevant fact: The College used the promise to gain credit with a creditor. p189¶last PH: Trial court found for P saying that D’s promise of a charitable subscription put in the letter made the promise binding for D. D claims that trial court failed to apply basic contract principles saying that there was “failure of consideration”. 14.3Issues Under Iowa common law in 1974, can charitable subscriptions be legally binding even if they lack consideration? 14.4Decisions Yes, court says that based off of §90 of the 2nd Restatement, charitable subscriptions can be binding without proof that the promise induced action or forbearance. Court affirmed trial court and said D’s promise to P was binding. Court used “public policy” as part of the justification. 14.5Reasoning Court says there has long been a conflict in courts about when to make charitable subscriptions binding. “In reaction to this widespread criticism a number of courts have turned to promissory estoppel as an alternative for the consideration requirement.” “We acknowledge as valid the criticism of cases which enforce charitable subscriptions only on a fictional finding of consideration. But we are reluctant to adopt promissory estoppel as the sole alternative basis for such enforcement.” P190¶5 Rule: Restatement of Contracts §90 has a new subsection added: “2) A charitable subscription or a marriage settlement is binding under 1) without proof that the promise induced action or forbearance” Court found that public policy supports this view because it is logical to bind charitable subscriptions without requiring showing consideration because charitable projects serve public interest. 14.6Separate Opinions - Philip Larson Page 31
  32. 32. Contracts I: Case Briefs 14.7Analysis Notes - charitable subscription – charitable giving in the form of a future pledge - Hypo 1: If I pledged to NPR, they sent me a mug, and then I reneged is this promissory estoppel or consideration? o Mrs. Boardman thinks “Consideration” would be a valid argument in addition to promissory estoppel  Inner motives are not supposed to be relevant to whether or not there is a contract  Counter argument: is NPR in the business of selling mugs? No. - Hypo 2: Could you sue them for breach if they did not send the mug? o If you do argue “Consideration” in the first hypothetical, you must be able to argue “Consideration” in this hypothetical. o If this is a valid contract sustained by consideration, what about the fact that you are purchasing something but can still claim the tax deduction? - Court Reasoned that based on §90 in 2nd Restatement, you can enforce charitable subscriptions even if there is no consideration - Philip Larson Page 32
  33. 33. Contracts I: Case Briefs 15.Congregation Kadimah Toras-Moshe v. DeLEO (Promissory Estoppel - Charitable Subscriptions) 15.1Title and Citation Congregation Kadimah Toras-Moshe v. DeLEO, Supreme Judicial Court of Mass., 1989 p192 15.2Facts Facts were uncontested. P (Congregation) taking action against D (DeLeo), the admin of decedents estate. Decedent made an oral promise, made in presence of witnesses, to give the Congregation $25,000. Congregation planned to use the $25,000 to transform a storage room into a library named after decedent. Decedent died before fulfilling the promise. P says that decedents promise is enforceable because it has valid consideration. Trial court rendered summary judgment for D saying it did not have to give P the $25,000. 15.3Issues Can an oral promise to make a charitable subscription be binding without consideration or substantial reliance? 15.4Decisions No, court affirmed trial courts decision in favor of summary judgment for D. Estate does not need to give the Congregation the $25,000. 15.5Reasoning Gratuitous pledge: Superior court said “this was an oral gratuitous pledge, with no indication as to how the money should be used”. Benefit/Detriment “no legal benefit to the promisor nor detriment to the promisee” Reliance Congregation’s “allocation” of the $25,000 was insufficient reliance to be an enforceable obligation. Court distinguishes this case from others that had “written” promises and involved substantial consideration or reliance. §90 of 2nd Restatement P asks to abandon requirement of consideration or reliance based on 2nd Restatement. Court decided there was no injustice (because there was no reliance) in declining to enforce decedent’s promise. Furthermore, to enforce such a promise “would be against public policy.” 15.6Separate Opinions 15.7Analysis Notes Philip Larson Page 33
  34. 34. Contracts I: Case Briefs - “It is often difficult to determine whether words of condition in a promise indicate a request for consideration or state a mere condition in a gratuitous promise. An aid, though not a conclusive test…, is an inquiry whether the happening of the condition will be a benefit to the promisor. If so, it is a fair inference that the happening was requested as a consideration.” P194¶4 - Based on the 2nd Restatement of Contracts, no longer does reliance have to be definite and substantial. Instead, “the remedy granted for relief may be limited as justice requires” and that “charitable subscription…is binding under Subsection (1) without proof that the promise induced action or forbearance.” - Reason: enforcing charitable subscriptions is good public policy. - Effect: Only three or four state courts have dispensed with a need to show consideration or promissory estoppel in charitable contribution cases. - What effect would enforcement have on future charitable promising? o 1. None. o 2. Enhances charitable treasuries because donees can now enforce against reluctant donors o 3. Reduce charitable promising but not necessarily giving o 4. Reduces charitable treasuries because some donors who would have promised and kept their promise will no longer promise. 8/31/04 - a hope or expectation, even though well founded, is not equivalent to either legal detriment or reliance - Why did the court argue that it was against public policy? “it is an oral promise sought to be enforced against an estate” – what would prevent people from saying they had an oral promise and lying about it. 9/13/04 - Judge Cardozo – famous for being a brilliant legal scholar. Also famous for getting the result he wants. - Allegheny College v. National Chautauqua County Bank of Jamestown o Mary Johnston promises to give Allegheny College $5000. Two years after she makes a down payment of $1000. She later repudiates. She then dies. The College now sues.  Today, this case would be treated as a promissory estoppel case. • In 2nd Restatement, you don’t even have to show reliance, • It’s difficult to show injustice if you don’t have reliance… • Therefore, 2nd Restatement §90 subsection 2 is difficult to enforce. • Example: injustice is tinged with fraud…e.g. intentionally misleading someone. Usually with a charity, there isn’t fraud. Philip Larson Page 34
  35. 35. Contracts I: Case Briefs 16.Coley v. Lang (Promissory Estoppel – Incomplete Negotiations) 16.1Title and Citation Coley v. Lang, Alabama Court of Civil Appeals, 1976 p199 16.2Facts Lang (P) sued Coley (D) for specific performance of alleged agreement in which Coley was to purchase the stock of Lang’s corporation for $60,000. Complaint was later amended to include a claim for damages incurred by Lang in reliance on Coley’s promise. Coley did not want to purchase the assets but only desired to purchase the name and good will of IAS. Coley’s attorney drafted a letter that said “you have agreed to sell to nominee to buy, all outstanding stock of every kind of IAS” and then lists out the amounts to be paid on what dates. It continued saying that “we agree together that on or before September 18th, this letter agreement will be reduced to a definitive agreement binding upon all of the parties hereto and accomplishing the sale and purchase contemplated in this agreement. You agree that until we reach a definitive agreement I may request bid sets from the government…on behalf of the name of IAS.” Lang argued that the agreement was binding and that he had lost $30,000 as a result of the reliance on the letter. The details of the loss are not spelled out. Coley said the letter was just a basic outline of the points that had been agreed to, but that many items were left to be worked out. In particular, Lang had not sought approval of the IRS regarding the pension plan not had other details with the government been completed. Because of this, Coley realized the sale would not work out within the timeframe he wanted and notified Lang of this. Attorney who drafted the letter testified that he informed both parties that the document in question was not binding. PH: Trial court entered judgment for Lang (P) in amount of $7,500 “due to his reliance upon the representation of the agreement by Coley that he would purchase the stock.” Coley is appealing. 16.3Issues 1. Did the “letter agreement” entered into by the parties contractually bind the parties? 2. Can the award by supported on the basis of promissory estoppel or reliance on a promise? 16.4Decisions Appellate court reversed trial court opinion and found in favor of D. The court finds no “action or forbearance” on the part of Lang so there is no promissory estoppel. 16.5Reasoning Issue 1: Court did not find the letter binding. There was no full and definite agreement on the terms. We cannot enforce a portion of an agreement which failed to materialize nor can we supply the terms of the contract. Court did not find a reversible error here because the trial court did not base its judgment on a finding that the “letter agreement” was a binding contract that should be enforced. Philip Larson Page 35
  36. 36. Contracts I: Case Briefs Issue 2: Court ruled that just because the negotiations proved unfruitful does not warrant application of promissory estoppel. It states that “the record discloses no “action or forbearance of a definite and substantial character” on the part of Mr. Lang. Therefore, Court ruled that trial court had “misapplied the law to the facts in this case. 16.6Separate Opinions 16.7Analysis Notes - How far have negotiations gotten? o Turn away from the temptation to answer this by saying there has to be a writing. - NOTE: An agreement to agree is NOT an agreement - However, can you have an agreement to agree except under a specific set of circumstances that are not ambiguous? - There is a temporary lease of IAS name o This was a contract as to the use of the name - If you take all of these steps, I will buy based on things we define later (e.g. pension stuff, etc.). o Boardman thinks this is more like a contract with sufficient consideration than the court wants us to believe. - They did not expect to be bound. - However, they did think that they would only fail to agree if a few things (“X” and “Y”) happen. - Coley thinks X and Y happened, and Lang does not think that X and Y have happened. - By default, parties do not have contracts. You must prove that there was a contract. - If you and I agree on a deal orally, and we agree to write everything down tomorrow and - Agreement to do something in the future does not remove - Mrs. Boardman thinks the court talked about reliance when they should have been talking about injustice. o There is reliance (trial court found $7500 in damages), but if they both agreed to the distribution of risk falling on Lang, there is no injustice. - COLEY REPRESENTS THE MAJORITY OPINION OF COURTS regarding the OUTCOME. o That is, agreements are typically NOT ENFORCED under promissory estoppel o Claim in Coley that there was not reliance is only one way to find that promissory estoppel does not apply.  Promissory Estoppel typically is not enforced during preliminary negotiations.  Typically, you should say there is no “injustice” if the court does not enforce an agreement that both parties understood to be preliminary. Any “reliance” was a risk the party took upon themselves.  An agreement to agree is NOT a binding contract.  An agreement to agree in a broader agreement does not mean that other aspects of the larger agreement are not enforceable.  Philip Larson Page 36
  37. 37. Contracts I: Case Briefs 17.Hoffman v. Red Owl Stores, Inc. (Promissory Estoppel – Preliminary Negotiations) 17.1Title and Citation Hoffman v. Red Owl Stores, Inc., Supreme Court of Wisconsin, 1965 p204 17.2Facts Lukowitz (division manager for D) represented to and agreed with Hoffman (P) that Red Owl would build a store in Chilton and stock it for Hoffman to operate in exchange for P’s putting up $18,000. In reliance, P sold their bakery and grocery store. Also in reliance, Hoffman purchased the building site in Chilton where the new franchise would be located. P’s lost substantial amounts of income and expended large sums of money as expenses. More detail: Hoffman mentioned that $18,000 was all the capital he had available to invest. Red owl manager (Lukowitz) repeatedly assured him this was fine. Hoffman bought a grocery store in Wautoma to learn the business. Lukowitz then advised Hoffman to sell the store to his manager so that they could find him a larger store. Hoffman was reluctant to sell because he would lose the summer tourist business, but he sold on assurance that he would be operating in a new location by fall and that he had to sell this store to get a bigger one. With Lukowitz assurance that everything was fine, Hoffman paid $1,000 on a lot in Chilton. Lukowitz then told Hoffman they would have to sell their bakery so they did, for $10,000. Lukowitz then presented a “Proposed Financing For an Agency Store” that said Hoffman needed to contribute $24,100 instead of $18,000. This then got raised to $26,000. At the final meeting, he was told that his father-in-law would have to sign an agreement that the $13,000 was an outright gift. Hoffman rejected the proposal, terminated negotiations and filed suit. PH: Trial court found in favor of P. They found that Hoffman and Red Owl did not reach a final agreement in negotiations. During the negotiations, Red Owl represented to Hoffman that if he fulfilled certain requirements he would get a franchise. Hoffman reasonably relied on those representations and met all conditions when negotiations stopped. Trial court set out what they thought was reasonable compensation but, at Red Owls motion, ordered a new trial for the issue of damages for the selling of the Wautoma grocery store. Red Owl appealed and Hoffman cross-appealed on the vacation of the Wautoma damages. 17.3Issues 1. Should court recognize causes of action grounded on promissory estoppel? (omitted from case) 2. Do the facts make out a cause for promissory estoppel? 3. Are the jury’s findings regarding damages evidence? 17.4Decisions Issue 2: Yes, the facts make out a cause for promissory estoppel. Court ruled that injustice would result if P’s were not granted some relief because of the failure of D’s to keep their promises which induced P’s to act to their detriment. Issue 3: Trial court awarded all damages except for “loss of profits”. They were not allowed to recover loss of profits like they would have been able to in a “breach of contract” action, because this action is different. Philip Larson Page 37
  38. 38. Contracts I: Case Briefs 17.5Reasoning Issue 2: Facts justify promissory estoppel? Question: whether the promise necessary to sustain a cause of action for promissory estoppel must embrace all essential details of a proposed transaction so as to be equivalent to an offer? No, court found that you could have promissory estoppel even if there was no contract. It can be a separate cause of action from “breach of contract”. They mention 2nd Restatement §90 in justifying this holding. Issue 3: Damages Rule 1: In actions of promissory estoppel, P cannot recover damages for loss of profit. However, evidence of profits would be admissible to afford a foundation for expert opinion as to “fair market value.” 17.6Separate Opinions 17.7Analysis Notes Condition: If you buy the store, you will be a more likely candidate for a franchise? Could you argue promissory estoppel in this case? Probably not. Condition: Can conditions that are individually insufficient for promissory estoppel “add up” to be collectively sufficient? Boardman did not answer this question. Venture Capital firms: you must do X, Y and Z before we’ll even look at you as a potential customer. How would a court handle this? 1. Figure out what the people intended in this situation. Typically, the assumption is that until a full agreement has been made, each side assumes the full risk of their actions. Negotiating in bad faith usually is NOT actionable. However, if you negotiate in REALLY bad faith, at some point it becomes actionable based on promissory estoppel. - Ask not only, is there reliance? but also, what kind of reliance? When did the reliance occur? For example, after taking all of the precautions, Lukowitz - Boardman thinks the court’s work is SLOPPY because of the times things occurred, etc. - What can account for the difference in outcome between this and Coley? o There was no o This depends on what the parties intended to happen. Does Hoffman intend that there be a binding contract? - Option 1: Hoffman believes he has been offered a store if he does X, Y and Z. If he believes he has done X, Y and Z perhaps there is a contract. - Option 2: Hoffman believes that they would continue negotiating in good faith and there was a universe of things that they could use to get out of the contract and a universe of things that would not be sufficient to get out of the contract. - There are certain issues that are legitimate and some that are not. Hoffman believes adding more money is not a legitimate condition. - Did the parties expect to be bound in a certain way? o Note: under this theory they would “both” have to agree on what they were bound to.  Hoffman expected them to be bound and they knew that he did. Therefore, using this knowledge they were acting in bad faith.  If both parties expect to be bound, we do not have Lang/Coley which could be the differentiator. - I promise to keep negotiating with you IF you sell your bakery. o If he sells the bakery and we still continue negotiating, Philip Larson Page 38
  39. 39. Contracts I: Case Briefs - Hoffman likely DOES NOT expect to be bound. He thinks, up until the last moment, that he could get out. Question to keep coming back to: 1. Did the parties expect to be bound? a. This decides many promissory estoppel cases because there is almost always reliance but there is not always injustice!!! Philip Larson Page 39
  40. 40. Contracts I: Case Briefs 18.East Providence Credit Union v. Geremia (Promissory Estoppel – Promises to Insure) 18.1Title and Citation East Providence Credit Union v. Geremia, Supreme Court of Rhode Island, 1968 p214 18.2Facts Plaintiff sues to recover balance due on a promissory note from “husband and wife” (D’s). Defendants filed a counterclaim. D’s borrowed money from P and gave him a promissory note. Payment of the note was secured by chattel mortgage on D’s wagon. Mortgage had a clause that obligated D’s to maintain insurance on the motor vehicle. Mortgage further said that if D’s failed to maintain the insurance, P could pay the premium and add it to their mortgage. D’s received a notice from insurance carrier that premium was overdue. Copy was sent to P who sent a letter saying “If we are not notified of a renewal…within 10 days, we shall be forced to renew the policy for you and apply the amount to your loan.” D called P’s office and told the employee to go ahead and pay the premium. D’s communicated their approval for P to pay the insurance and notified the treasurer of that fact. Later, the motor vehicle was totaled in an accident and D’s were informed that P had not paid the policy. PH: Trial court dismissed P’s complaint and found for D’s on their counterclaim. Trial justice awarded them all of the money P had applied after the date of D’s accident to the outstanding balance of the loan. P appeals. 18.3Issues Whether or not P is precluded from recovering on its loan contract because of its failure to fulfill a promise to D to pay the overdue insurance premium. 18.4Decisions Judgment for D is affirmed and P’s appeal is denied. 18.5Reasoning P urges that the trial court erred in finding for D by referencing a case in which the court refused to apply promissory estoppel to enforce a gratuitous promise made by mortgagee. However, court ruled that P made more than a gratuitous promise. Promise by P to pay the insurance premium was made in exchange for the interest on the money. The interest was adequate consideration. However, if it couldn’t be shown that P intended to get interest on the amount paid by it for insurance, they would have still found for D based on promissory estoppel. 18.6Separate Opinions 18.7Analysis - What if the Geremia’s do not respond to the letter? o To some people the letter sounds like an offer rather than a promise. If it IS a promise, the promissory estoppel will be enough.  Why? Promises to ensure are usually upheld using promissory estoppel. o What is the reliance?  Maybe they would have tried to get more money? Philip Larson Page 40
  41. 41. Contracts I: Case Briefs  Maybe they would have been more careful with the car (e.g. not driven it at all)  Maybe they would have sold the car to pay off the rest of the mortgage. o Boardman thinks they exercised an option on contract 1 o What does it say about promissory estoppel?  Even without consideration, the court would have enforced under promissory estoppel. o Don’t need to know anything about “equitable estoppel”  Philip Larson Page 41
  42. 42. Contracts I: Case Briefs 19.Mills v. Wyman (Material Benefit Rule – Past Consideration) 19.1Title and Citation Mills v. Wyman, Supreme Judicial Court of Massachusetts, 1825 p224 19.2Facts Levi Wyman (Son of defendant), returned from a voyage at sea and got sick in Hartford, CT. Mills (P) took care of Wyman and incurred a number of expenses. Levi Wyman ends up dying despite the treatment. Defendant (Wyman’s father) wrote P a letter promising to pay for the expenses. There was no consideration for the promise. P claims that “moral obligation” is sufficient consideration for the promise. PH: trial court directed a nonsuit. P filed exceptions. 19.3Issues When someone takes care of another’s son when they are sick, and the son subsequently dies, but the son’s father promises to pay the man for the incurred expenses after the fact, is that promise enforceable even though there is no consideration? 19.4Decisions Appellate court agrees that the nonsuit was correct. Judgment entered for Wyman (D) saying he did not have to pay. P paid costs of trial for D. 19.5Reasoning - “what a man ought to do, generally he ought to be made to do, whether he promise or refuse.”p225¶1 - However, “if there was nothing paid or promised for it, the law, perhaps wisely, leaves the execution of it to the conscience of him who makes it...it is only when the party making the promise gains something , or he to whom it is made loses something that the law gives the promise validity” p225¶1 19.6Separate Opinions 19.7Analysis Why is this under the “Material Benefit Rule”? Philip Larson Page 42
  43. 43. Contracts I: Case Briefs 20.Manwill v. Oyler (Material Benefit Rule – Promises for Non-Donative Material Benefits) 20.1Title and Citation Manwill v. Oyler, Supreme Court of Utah, 1961 p226 20.2Facts P alleges that he made payments on D’s behalf over a number of years for roughly $5500. He later transferred a grazing permit worth $1800 and 18 cattle worth $3000 to D. Any action on those transactions would be barred by the statute of limitations. However, P claims that defendants orally agreed to pay the sums to him. D’s filed a motion to dismiss, after which P changed the date when he claimed the oral promise was made. P’s claim that the D’s were under “moral obligation” to pay him back the money and that their oral promise was a binding contract. PH: D’s motion to dismiss P’s complaint is denied by the trial court. 20.3Issues D got a lot of money and “material benefit” from P and promised to pay him back. Do they have a moral obligation that is sufficient consideration for the promise? 20.4Decisions No. Appellate court found that the trial court erred in denying D’s motion to dismiss. Reversed with directions to dismiss the action. D does not have to repay P the money based on moral obligation. 20.5Reasoning - RULE1: “the rule quite generally recognized is that a moral obligation by itself” is not sufficient. o “if a mere moral…obligation were recognized as valid consideration for a contract, that would practically erode to the vanishing point the necessity for finding a consideration” - RULE2: Material Benefit o “the principle that in order for a contract to be valid and binding, each party must…give some legal consideration…conferring a benefit upon him or suffering a legal detriment at his request is…in the roots of our law.”p226¶5 o “the substance of the rule is that where the promisors have received something from the promisee of value in the form of money or other material benefits under such circumstances as to create a moral obligation to pay for what they received, and later promise to do so there is consideration for such promise.”p227¶1 - RULE3: ORAL PROMISE cannot REVIVE Outlawed obligation o “an outlawed obligation” (e.g. because of statute of limitations) can NOT be revived by an oral promise, only by one in WRITING. However, Court Ruled: - that “any benefits conferred on D’s would have been donative.” Philip Larson Page 43
  44. 44. Contracts I: Case Briefs - That at the time of the promise there was nothing but “bare moral obligation” to support the need for D to pay back P. “this alone would not constitute valid consideration to make a binding contract.” 20.6Separate Opinions 20.7Analysis Philip Larson Page 44
  45. 45. Contracts I: Case Briefs 21.Webb v. McGowin I (Material Benefit Rule – Promises for Non- donative Material Benefits) 21.1Title and Citation Webb v. McGowin I, Court of Appeals of Alabama, 1935 p227 21.2Facts Webb (P) was working at W.T. Smith Lumber Compnay, and was clearing the upper floor of the mill. He was about to throw a 75 lb block off the ledge when he noticed that if he did so he would hit McGowin (D). To prevent this, he fell with the block to divert it. He successfully diverted it byt caused himself serious bodily injuries. McGowin, recognizing his moral obligation, agreed to care for him for the remainder of his life. McGowin did pay the agreed to sum for 8 years until he died. P is suing D’s estate to keep getting the payments. PH: demurrers to complaint were sustained. As a result, P took a nonsuit and the assignment of errors is to be addressed by appellate court. ?? 21.3Issues Can a promise, based on moral obligation, be enforced after D’s death when P sustains incredible detriment to provide D with incredible material benefit (saving his life), when D has paid and fully intended to pay? 21.4Decisions Yes. Appellate court said the trial court erred in sustaining the demurrer. They reversed the decision and allowed Webb to continue getting payments from McGowin’s estate. 21.5Reasoning - RULE: Material Benefit Rule o “Where the promisee cares for, improves, and preserves the property of the promisor, though done without his request, it is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of the material benefit received…” - RULE: Moral Obligation o “it is well settled that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor” Court ruled that the services rendered by D were not gratuitous. 21.6Separate Opinions 21.7Analysis Philip Larson Page 45
  46. 46. Contracts I: Case Briefs 22.Webb v. McGowin II (Material Benefit Rule – Promises for Non- donative Material Benefits) 22.1Title and Citation Webb v. McGowin II, Supreme Court of Alabama, 1936 p229 22.2Facts Supreme Court heard the same case… 22.3Issues 22.4Decisions Supreme Court upheld the appellate court’s decision that Webb should continue to get payments from McGowin’s estate saying that the benefit was “material and substantial”. 22.5Reasoning Supreme court verified that “if the benefit be material and substantial” and was to “the person of the promisor rather than to his estate” it is in the class of material benefits which “has the privilege of recognizing and compensating either by an executed payment or an executory promise to pay.” 22.6Separate Opinions 22.7Analysis Philip Larson Page 46

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