Contracts, Second Semester

A Short Review of Where We’ve Been, and How We’re Going to Get to Where We’re Bound

Welcome Back!

n Today, we will

n Review last semester’s exam

n Go over new operating rules and procedures for this semester

n Outline alternative ways to validate promises, including promissory estoppel and Section 86 of the Restatement (Second)

The Exam

n Statistics about performance

n Analysis of each question

n Offer regarding exam review

Basic Exam Statistics

n 89 Students took exam

n Mean: 2.96

n Standard deviation: .5

n Median: B

Grade Distribution – Graph

Common Basic Errors

n Many thought that a bilateral contract was effective only when performance started

n No. Since a promise can be consideration, it is effective (and enforceable) when the promise is given

n Many thought that Schnell stands for the proposition that consideration must be proportional

n No. If any value is given, then consideration is sufficient, and you go on to the next issue.

Common Basic Errors (2)

n Some tried to apply the option contract of Section 45 of the R2K to bilateral contracts.

n No. You don’t need that analysis since the contract is formed when the promise is given

n Many thought that signatures alone were insufficient to “identify the parties” for S/F purposes

n No. If you can tell who they are (signatures are a good bet), then that issue is met.

Common Basic Errors (3)

n Huge error:

n Many concluded their analysis by saying words to the following effect:

n “It is for the court to decide.”

n Well, what standard does the court use? What are clients paying you for? You need to discover a common standard, and then apply it

Question One

n “House for the Plan”

n Average Points: 18.5

n Standard Deviation: 5.6

n Maximum: 33

n Minimum: 7

Major Issues and Problems

n Many thought that bargaining for “a plan” was too indefinite.

n But then never analyzed the issue as whether an objective third party would have thought a deal was made.

n Many thought Alice’s misrepresentation was a central issue, even though your client said he wanted the deal

Question 2

n “Jerk the Chain”

n Average Points: 19.6

n Standard Deviation: 6.7

n Maximum: 37

n Minimum: 5

Major Issues and Problems

n Many said the contract was illegal, and left it at that

n No. Illegality must go to the purpose of the contract, not its execution. There may be separate remedies for illegally performing a contract, but they don’t necessarily go to effectiveness.

Major Issues and Problems (2)

n Many thought the contract void because Mark could not award more than two weeks of overtime

n But what if it was a promise for just two weeks? Is the K void because he promised what he did not have the power to deliver?

n Also, if void, doesn’t Mark get off lightly? That is, there is no contract cause of action against him!

Question 3

n “Internet Voting”

n Average Points: 16.5

n Standard Deviation: 4.6

n Maximum: 29

n Minimum: 7

Major Issues and Problems

n Many didn’t see how an offer could exist, and thus never analyzed acceptance or illegality.

n Many just thought that the actions violated the statute, and that ended the analysis.

n Maybe a contract to solicit votes would violate the statute, but this contract only incidentally violated the statute.

Other Sins:

n Inappropriate humor:

n Q2 was: “a contract baby in a bath water of tort. . . . The soup is in the defenses.”

n Huh?

n Q3 was “Gore-y details of this Bush-league maneuver.”

n Ugh.

Other Sins (2):

n Misstating the facts:

n Q1 was a “get rich quick” plan

n Q3: “constitutional right to do whatever you want in your own room.”

n Irrelevancies

n Hobbes and Wittgenstein were used as authorities by some

n SHOUTING

n Some people thought that their analysis would be improved by highlighting, underlining or PUTTING IN ALL CAPS “buzz” words.

Review of Your Exam

n Sign up with me by email

n Take 30 minutes on average

n Finally, up to 15% of students do worse on second semester by more than two levels (from a B+ to a B-, for example)

n Does not seem to affect those who did exam review as much

New for This Semester

n Longer class, less often

n We’ll now have breaks mid-way through class

n New Room

n Seating chart on Monday

n Faster pace

Detailed Changes

n Standard Assignment goes from keeping three cases ahead of last case finished to keeping four cases ahead

n Go straight through, but skip material on pages 459-499

n Chapter 3, § 4, Part D

n Although requirement to post briefs stays, drop requirement of comments (more later)

Literary Contest

n Basic test: I will offer a dinner for two, anywhere in Las Vegas, to the best analyzed contract issue arising from a literary or film source

n Small print:

n $150 maximum

n No more than one bottle of wine

n And no, you don’t have to invite me

Literary Contest, Continued

n All submissions must be through k2000 list, and sent to everyone

n Due by noon on April 23

n No limit on the number of submissions

n I am the final arbiter of quality, although I might ask the class for help

n Summary:

n Find a contract issue in literature or film (end of Richard III, for example)

n Identify, analyze and resolve it

Review of Markell . . .

n Actual Comments:

n “Class discussion often too rambling; needs to control students (especially some of them) more”

n “Class discussion is very focused and often leads me to look at cases in different light – Makes you think more than any other class”

Review of Markell (2) . . .

n Actual comments:

n “He is too sarcastic and arrogant”

n “His humor is very welcome and is one of the most approachable instructors”

Things to Improve

n “Get rid of comments – their [sic] a waste”

n I did

n “Need a summary at the end of a case”

n How about at the end of a section?

n “Would you answer a question directly?”

n Maybe . . .

On to New Semester . . . .

n Ended last semester with “Consideration”

n On now to “Consideration Substitutes”

The Problem of Past Consideration

n Clearly not “legal” consideration

n Traditional view was that past or “moral” consideration was not sufficient to validate an promise not otherwise supported by legal consideration

n Mills v. Wyman, CB: 310

Further on Past Consideration

n But in many minds it ought to stand on different footing that other promises not supported by legal consideration

n In civil law, such promise can be binding

n Thomas v. Bryant, CB: 314

The Move to “Moral Consideration”

n A promise based on “past” consideration in which the promisor truly tried to compensate the promisee for actions taken in the promisor’s favor

n Webb v. McGowin, CB: 317

n Estate of Hatten, CB: 323

Restatement § 86

n A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice

n A promise is not binding [under this section] if:

n If the promissee conferred the benefit as a gift or for other reasons the promisor is not unjust enriched; or

n To the extent that its value is disproportionate to the benefit

Promissory Estoppel

n When can a promise be enforceable solely because it is relied upon?

n What’s missing: the reliance wasn’t bargained for

n Ricketts v. Scothorn, CB: 330

Section 90 and the Elements of Promissory Estoppel

n “A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.”

Section 90 Dissected:

n Five elements:

n A promise

n That could reasonably induce reliance

n That does in fact induce reliance

n That, if not enforced, will result in injustice; and

n That may or may not be fully enforced; it enforcement is limited “as justice requires”

n Just protecting the reliance interest? Or more?

Promissory Estoppel – Current Uses and Applications

n Employment area

n Knight v. Georgetown Univ., CB: 334

n Katz v. Danny Dare, Inc., CB: 340

n Charitable Subscriptions

n Salsbury v. Northwestern Bell, CB: 348

n Bid Cases

n Back to Pavel, CB: 138

When Do You Use Section 86?

n Section 86, comment f:

n “By virtue of the policy of enforcing bargains, the enrichment of one party as a result of an unequal exchange is not regarded as unjust, and this Section has no application to a promise to pay or perform more or to accept less than is called for by a pre-existing bargain between the same parties.”

n In short, if you have a valid contract, you never should get to Section 86 issues

When Do You Use Promissory Estoppel?

n A failure of normal legal consideration

n See in the bidding cases

n See also in the employment cases, when prevailing legal doctrine is employment at will

n Will a legal contract defeat a claim based on promissory estoppel?

n Ask: Was the reliance reasonable in light of a contrary contract claim?

The Frontier

n Interpretation

n Parol evidence

n Implied covenants

n Good faith and fair dealing

n Statutory

n Post-Formation Defenses

n Impossibility, Impracticability and the like

n Material Breach and Substantial Performance

n Remedies (Of Damages and Specific Performance)

See You Next Monday!