Principals of enforceability:
o Will principle: Commitments are enforceable because the party has willed or freely chosen to be bound by the commitment.
§ Limitation: Inquiry into the subjective state of mind of the promisor.
o Reliance principle: Based on the theory that we ought to be liable for harm caused by our verbal behavior.
§ Limitation: Determining whether a person has reasonably relied upon a promise depends on what most people would do.
o Restitution principle: Seeks to prevent unjust enrichment of a promisor who seeks to go back on their word.
§ Limitation: Applies only to unjust enrichment, thus more narrow than previous two principles
o Efficiency principle: Do the benefits exceed the cost? Can interpret contracts generally (law as a whole) or particularly (individually).
§ Limitation: Can observers ever have information about value-enhancing exchanges independent of the demonstrated preference of the market participants? If such information is available, why bother with contract law at all?
o Fairness principle: Attempts to evaluate the substance of the transaction to see if it is fair.
§ Limitation: Presupposes a standard of value by which the substance of an agreement can be objectively measured.
o Bargain principle: To constitute consideration, a performance or return promise must be bargained for.
§ Advantage: Existence of a bargain is evidence that parties intended to be bound.
§ Limitation: Does nothing for promises to keep offers open, promises to release a debt, promises to modify an obligation, etc.
· Distinguish from gratuitous promises: Gift promises, only effective upon actual delivery of the thing that was promised. They are revocable any time before delivery.
o Johnson v. Otterbein University: $100 donation to university
· Bargain theory: A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise, and is given by the promisee in exchange for that promise.
o Kirksey v. Kirksey: Sister Antillico
o Performance: May be an act other than a promise; forbearance; the creation, modification, or destruction of a legal relation.
o Performance may be given to a third person. May be given by a third person
· Detriment: The abandonment of a legal right, or refraining from exercising a legal right by one party. Must be induced by the other promise.
o Hamer v. Sidway: Nephew gives up drinking
· Past consideration: Past consideration cannot serve as the requirement for consideration; unless the parties had previously agreed that the performance was rendered with the understanding that compensation was made. What was done as a mere favor cannot be later turned into consideration.
o Moore v. Elmer: Clairvoyant prediction man will die before 1900.
· Moral consideration: For moral obligation to be sufficient consideration there must have been some pre-existing obligation, which has become inoperative by positive law. Is acceptable when a material benefit is received.
o Permissible: Debts barred by statute of limitations, debts incurred by infants, and debts of bankrupts.
o Mills v. Wyman: Son falls ill, father promises to pay for the son.
§ Kindness and service was not bargained for. Not done at dad’s request.
o Webb v. McGowin: Man saves another man’s life. Man promises to pay to support
§ Permissible here, because a material benefit was received, and a subsequent express promise to pay was made.
· Pre-existing duty: A common law doctrine that renders unenforceable a promise to perform a duty, which the promisor is already legally obligated to perform, for lack of consideration. One who has a legal duty to perform an obligation cannot recover additional funds for performing that duty.
o Stilk v. Myrick: Captain of ship attempts to reform contract with sailors.
· Contract modification: Modification of the contract after it has been properly formed. Permissible where unforeseen circumstances make performance of the contract unduly burdensome.
o U.C.C. 2-209: “an agreement modifying a contract within this Article needs no consideration to be binding”
o Brian Construction v. Brighenti: Construction contract to perform all work requisite, discovered excavation that needed to be done, neither foresaw.
· Adequacy of Consideration: In order for a contract to be valid, valuable consideration must be exchanged between the parties.
o Newman & Snell’s State Bank v. Hunter: No valuable consideration, worthless piece of paper of husband’s insolvent stock.