Specific Performance – an order from a court to a party to perform as promised
Damages – an award of money
Goals of Contract Damages
Restitution Interest (quasi-contract damages) – the interest of a party in recovering the value conferred on the other party through efforts to perform a contract. Requires the DD to give the money value of the benefit that the DD received from partial performance of the contract. Ordinarily, no enforceable contract exists at the time the suit is brought (either rescinded or never existed) or it is a losing contract (where the victim of the breach would have lost money had the contract been performed). Two elements of restitution: benefit conferred on DD. Retention of benefit w/o compensation would be unjust
Reliance Interest – a party’s interest in recovering losses suffered by virtue of reliance on the contract, whether or not there was a corresponding gain to the opposite party. If expectation damages cannot be ascertained. Puts nonbreaching party back in the position they were in when the contract was made…makes the party ‘whole’ again. = costs incurred by the nonbreaching party in partial performance of the contract.
Expectancy Principle – give the nonbreaching party what he was promised so far as money damages can satisfy; compensation for nonbreaching party, not punishment for breaching party. Aim is to put promise “in as good a position as he would have occupied had the defendant performed his promise.” Limited to reasonably foreseeable damages. There is also a “duty to mitigate damages.”
Groves v. John Wunder (MN) – leased land and wanted it leveled on return.
In a breach of contract by defendant, the PP is entitled to the cost of completing the work/ remedying the defect, which the DD failed to complete, even if the cost of completion exceeds the increase in the fair market value that the work would bring (backward looking)
First restatement…the aggrieved party can get judgment for: the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste (say it’s not economic waste bc it’s not wrecking a completed physical structure)
The dissent argues for the diminution in value…difference in the value of the property as it is and what it would have been worth if it had been built in conformity with the contract (give the mkt/economic value). They believe there would be economic waste here. They want to award the cost of completion only when it is not disproportionate to the value of the property or when changes are aesthetic in nature. (economic waste applies when a structure already exists and would have to be torn down and rebuilt at a cost that would be imprudent and unreasonable). (forward looking)
First restatement…the aggrieved party can get judgment for: the difference btwn the value that the product contracted for would have had and the value of the performance that has been received by the PP, if construction and completion in accordance with the contract would involve unreasonable economic waste
In both cases, replacement cost is the upper level of what PP can recover
i.e., if cost of completion was $8,000 and it added a value of $12,000, then the damages awarded would be $8,000
Measure gives expectancy and deters breach
Peevyhouse v. Garland Coal & Mining Co. (Note) - PP leased DD farm to mine as long as they filled in all pits and smoothed the surface.
Courts granted only the diminution in value of the land, not the cost of completion (Restatement Second)
No person can recover a greater amount of damages for breach of an obligation that he would have gained from full performance
Remedial work was incidental…primary object of contract was economic
Advanced, Inc. v. Wilks (Note) – suit by homeowners dissatisfied with a contractor’s work, court gave a cost-of-repair figure far higher than the probable diminution in mkt value of the house
If property is held for economic value, damages should not exceed change in fair mkt value
However, if property is held for other reasons (special significance) or if court is confident that the money will be used to complete the contract, cost of completion can be awarded even if it exceeds the diminution in value.
the reasonable cost of completing performance OR of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him (no talk about economic waste)
Acme Mills Elevator Co. v. Johnson – contracted to sell grain to PP, then sold to a 3rd party at a higher contract price and thus failed to deliver goods to PP
In a breach of contract for the delivery of goods, the damages formula is mkt price of the goods at the time and place of delivery minus the contract price, even when the breach occurs because the party contracts to a 3rd party at a higher price than the mkt value of the original contract.
This formula may result in a negative number, in which case, the damages would be zero. This is true even if the breaching party benefits
Under the UCC, If buyer covers, he can recover: cover price – contract price.
Efficient breach – when the detriment to the nonbreaching party is smaller than the gains to the breaching party, then the breach is efficient. Breaching party compensate and no one loses . No party is made worse off by nonperformance and at least one party is better off. (Restatement, 2nd, of Contracts)
Looks to replacement costs to put PP in expectancy position
Gives expectancy, but doesn’t deter breach
Laurin v. DeCarlis (Note) – PP bought land from DD and prior to the closing of the transaction, DD took gravel and PP sued for the FMV of the gravel
With a willful breach, PP can collect from the benefit the breacher received. If value of taken property outweighs change in value to real property, cost of taken property is the measure.
Even though it was economically efficient, they must pay
Removal of gravel did not diminish value of land
public policy, fairness
Limitations on Expectation Damages
There are times where the court will not award the expectancy damages that the PP claims. Expectancy awards are limited to reasonable (account for what the nonbreaching party could have/should have done), foreseeable (includes essential and special, but communicated), and measurable (excludes intangibles).
Rockingham County v. Luten Bridge – PP broke contract partway through, but DD completed bridge anyway
If DD rescinds a construction contract, but PP continues construction, the PP is not entitled to damages incurred from the work done past the date of the breach; only entitled to compensation that resulted up until the date of the breach and any profit that would have been made.
Measure of damages – expenses (including labor and material) plus profit on the contract. Only expenses up to notification of breach and total profit expected from the contract. Alternative measure is contract price – expenses saved. This puts them in expectancy position
Doctrine of avoidable consequences – injured party may recover for breach of contract only those losses/expenses which could not have reasonably been avoided. Burden of proof is on breacher to show how much of the loss could’ve been avoided.
Leingang v. City of Mandan Weed Board – contract to cut weeds, weed board breaches
PP can recover constant overhead expenses because the PP must pay them whether or not the contract was breached
Kearsarge Computer, Inc. v. Acme Staple Co. – contract for computer service for a year, DD breaches
PP wants contract price (expectancy), but DD says savings realized and money made by PP after breach from other jobs should be deducted….full contract price given
Gains made by the injured party on other transactions after the breach are not to be deducted from the damages that are otherwise recoverable, unless such gains could not have been made had their been no breach.
Collect the contribution toward fixed expenses that it would have received but for the breach
Parker v. Twentieth Century-Fox – Film studio broke a contract with actress to star in a musical set in L.A. She declined the offer to star in a Western in Australia and sued for contract salary.
In a breach of an employment contract when alternative employment is different and inferior (not comparable and substantially similar) to that which PP has been deprived, the doctrine of avoidable consequences cannot be applied to mitigate the damages awarded PP when the PP rejects this alternative employment (put her in her expectancy)
Claim for lost wages will be reduced by whatever wages the employee did earn or could reasonably have earned from other employment that is similar in kind/location/conditions. When employee doesn’t obtain other employment, the court must determine whether the employee could reasonably have found or should have reasonably accepted another position
Rule for recovery: contract salary – amt employer affirmatively proves employee has earned or might have earned from other employment.
Puts PP in expectancy, but doesn’t encourage productivity
If employee had breached…replacement costs – contracted salary
Billetter v. Posell (Note) – PP employed to work in retail store, DD fires and offers her another job for lower salary
DDs aren’t entitled to credit for unemployment compensation PP received … benefits of this character are intended to alleviate the distress of unemployment and not diminish the amount an employer must pay as damages for the wrongful discharge of an employee…since PP paid, PP should get the benefit of it
If she could get the same job in another company, but for a lower salary, she can take the job and get the difference. If she doesn’t take the job, the lower salary will be deducted anyway.
If she accepts the same job for less pay at the same company, it replaces the previous contract and she can’t sue…would modify her original contract.
Collateral Source Rule – tort rule that denies to tortfeasor a reduction in damages for compensation received by the injured PP from other sources (insurance, unemployment compensation). This is often applied in contract cases.
United Protective Workers. Local No. 2 v. Ford Motor Co., - forced PP into early retirement
Deducted social security and retirement annuity payments from his damages
Otherwise he receives more in damages than if the contract had not been breached
Missouri Furnace Co. v. Cochran – DD stops delivery on coke, PP has to get new contract
In a breach of a delivery contract with delivery dates set in installments and the PP enters in a new forward contract, the PP is entitled to damages calculated by the formula: mkt price at time and place of delivery – contract price (same as Acme Mills)
Breach doesn’t occur until time and place of delivery
Not: New contract – old contract
Future contracts to mitigate damages are entered into at the risk of the nonbreaching party
If UCC had been around, it may have changed things
measure of damages is contract price – market price of the goods at the time the buyer learned of the breach (or reasonable time)
In mitigating damages, the nonbreaching party must act reasonably. But the problem is in determining reasonableness…the nonbreaching party has to act before it knows the consequences (Luten may have thought he was acting reasonably).
Reliance Cooperage Corp. V. Treat (Note) – oak bourbon staves to be delivered in December, but DD repudiates in August.
Court says there is no need to mitigate damages until there are damages to mitigate, and this does not occur until delivery date.
Anticipatory breach – repudiation of a party’s contract duties before the time has come for performance
Nonbreaching party can sue when breach occurs or wait until time of contract, but is discharged from any duties to the other party
Oloffson v Coomer – farmer agreed to sell corn and then anticipatorily repudiated, PP covered
Must cover on date of repudiation, not on date of delivery according to the contract
UCC – await performance by the repudiating party for a commercially reasonable time expires on date you learn of repudiation
Cargill, Inc. v. Stafford – PP was to sell wheat to Cargill
A buyer may urge performance for a reasonable time
If a buyer does not cover within a reasonable time, damages should be based on the price at the end of that reasonable time (when he learned of repudiation) rather than on the price when performance is due.
Neri v. Retail Marine Corp – Contract to sell boat breached by buyer, who had paid a deposit. Retailer later resold the goods.
If a buyer breaches a contract for the sale of goods and later the retailer sells the goods in question, the retailer is still entitled to recover lost profit (and any incidential damages, but not attorney’s fees) if there’s an expandable inventory. Thus contract price – mkt price at time and place of delivery + any incidential damages. But if this doesn’t put the seller in expectancy, then he gets profit + incidential expenses. This is because he would have had both the sales had the contract been fulfilled. This is in line with the UCC. Put him in expectancy position.
If there is no expandable inventory, if they sell at the same price, no recovery, but if it is sold at a lower price, he gets the contract price – resell price (contract price – mkt price), and can recover additional expenses incurred in trying to sell it.
Hadley v. Baxendale – vital mill part broken and sent for repairs. Delivery delayed by neglect and thus shaft was delayed by several days and the mill lost profits.
In a breach of contract to transport goods, when the injured party doesn’t communicate special circumstances regarding the contract, if the breacher’s actions result in unforeseeable, unnatural consequences, the breacher is not liable for damages that result from these consequences. Breacher doesn’t have to pay for damages that couldn’t have been reasonably foreseen, those not communicated; only responsible for those arising naturally because of the breach.
The injured party can recover only those damages that should reasonably be considered as arising naturally (according to the usual order of things) from the breach or might reasonably be supposed to have been in the contemplation of both parties at the time the contract was made, as the probable result of the breach of it.
General damages – those arising naturally out of the breach…always give (ex. Contract price – mkt price or price of cover).
Special or consequential damages – arising out of special circumstances (usually lost profits due to not having the item) – only recoverable if the seller had reason to foresee that the consequential damages were the probably result of the breach.
Tacit agreement test – extent of breaching party’s liability should be within contemplation. Would party have entered into agreement knowing about extent of liability expected/inferred by nonbreaching party? Did the party actually foresee the damages? It is not fair to assume that the party would have agreed to be liable for special damages if it had been part of the contract.
Permits consequential damages only if the seller specifically contemplated or actually assumed the risk of such damages
Not shown in these case???
Lamkins v. International Harvester – lights for tractor to farm at night were delayed for a year
When damages arise from special circumstances and are so large as to be out of proportion to the consideration agreed to be paid for the services rendered under the contract, it raises a doubt as to whether the party would have assented to such liability had it been called to his attention at the making of the contract unless the consideration to be paid was also raised so as to correspond in some respect to liability assumed. (no tacit consent…would not have)
The damages may have been foreseeable, but that’s not enough because damages are way too out-of-proportion to contract price
UCC would overturn this
Victoria Laundry Ltd. V. Newman Industries Ltd. – DD fails to deliver laundry boiler
In cases of breach of contract, the aggrieved party is only entitled to such part of the loss actually resulting, which at the time of the contract was reasonably foreseeable as a likely result of the breach.
What is reasonably foreseeable depends on the knowledge possessed by breaching party. Here DD would’ve known what the boiler would have been used for.
Not everything has to be communicated, can just be reasonably foreseeable – there can be more than one foreseeable possibility.
Prutch v. Ford Motor Co. (note) – defective equipment caused damages to crop
UCC/this case – rejects the tacit agreement test (that permits consequential damages only if the seller specifically contemplated or actually assumed the risk of such damages).
§ 351. Unforeseeability and Related Limitations on Damages
Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
Loss may be foreseeable as a probable result of the a breach because it follows from the breach
In the ordinary course of events, or
As a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know
A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid dispropropiate compensation
Valentine v. General American Credit, Inc. – lost job and sought mental distress damages
In a breach of an employment contract, discharged employee cannot recover mental distress damages resulting from the breach on the basis that the damages were foreseeable because there is a mkt standard by which damages can be adequately determined
Chicago Coliseum Club v. Dempsey – boxer breached contract to perform
PP can only recover expenses that were recovered btwn date of K and date of breach and were incuurred as a necessary expense in furtherance of the performance.
In a breach of a performance contract, the DD is not liable for lost profits that are purely speculative and cannot be calculated to a reasonable degree of certainty.
DD not liable for expenses incurred by PP prior to the signing of the agreement…action is based on written agreement…Greenfield says its wrong
DD not liable for damages incurred by PP attempting to force PP to comply with contract,,,took steps at own risk
DD IS liable for damages incurred by PP after signing the agreement but before the date of breach…only those that are special (including employees) and in furtherance of the contract (put in reliance position)
Security Stove & Mfg. Co. v American Ry. Express Co. – failed to deliver the entire oil and gas burner for an exhibition
Party may recover expenses incurred in relying upon the contract even though the expenses would have been incurred even if contract had not been breached. This includes permanent employee’s time and costs as well as those of booth rental.
This is because PP knew DD would deliver (common law duty) and all its losses were caused by DD’s breach
Anglia v. Reed – actor repudiates, cannot find substitute, cannot produce play
Where lost profits cannot be proved, PP is entitled to recover wasted expenditure and isn’t limited to that incurred after the contract was made
Aggrieved party cannot recover both lost profits and wasted expenditures; must choose btwn them….Greenfield says wrong….Luten Bridge right…they get both….to put in expectancy
L. Albert & Son v. Armstrong Rubber Co. – buyer agreed to buy four machines for reconditioning old rubber. Two were delivered two years late.
Buyer was allowed to recover his reliance expenses – any loss the buyer would have had if the contract had been performed
Restatement of Contracts, Second
§349 Damages based on Reliance Interest
alternative to expectation interest
injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
United States v. Algernon Blair, Inc. – subcontractor ceases work because of contractor’s breach and wants to recover the value of labor already furnished
A subcontractor who justifiably ceases work under a contract because of a prime contractor’s breach may recover the value of labor and equipment already furnished pursuant to the contract regardless of whether he would have been entitled to recover in a suit on the contract.
Where std. expectancy damages produce no recovery for the PP, the PP can recover for benefit conferred on PP (option to sue for either breach of contract or restitution)
He can collect the fair value of goods or services he has conferred even though such a recovery would put him in a better position than the expectation measures would….put him where he was if the contract had never happened.
PP has conveyed a benefit on DD and retention of that benefit w/o compensation would be unjust
Contract price does not limit recovery…since it’s not based on contract….. mkt price of what that work
Oliver v. Campbell – PP agreed to represent DD for a divorce, but was later fired
Where an employment contract is terminated by wrongful discharge before performance is complete, the contract doesn’t operate as a limit to recovery (can treat contract as rescinded).
However, in this case the contract in effect completed and thus he was limited to that contract price and restitution was not permitted under Restatement, Contracts §350 .
Noyes v. Pugin – PP had only partially performed when DD breached the contract.
PP can’t get more compensation than the contract price
The parties agreed to a rate/contract…the court should fulfill that…court should not provide a new contract
Kearns v. Andree – PP made requested changes to a house so that DD would pay for it
Although the contract itself was unenforceable, he can still get restitution
If the changes were done in good faith and in the honest belief that the agreement was sufficiently definite to be enforced, the Pp is entitled to recover reasonable compensation therefore.
Britton v. Turner – PP cut short his work on the farm and wants recover for his 9.5 months of work
A party who has breached a contract is entitled to recover the value of his performance even though he obviously couldn’t recover damages upon the contract itself.
Prevent unjust enrichment of DD.
Breaching party can collect restitution for benefit conferred, but damages are limited to the contract price (not mkt value) and replacement costs
Measure of damages: contract price – cost of completion.
However, this formula is fundamentally flawed – shouldn’t start with the contract price because that is the employer’s expectancy.
Formula should be: value of benefit conferred (can’t be greater than contract) – injury to employer (damages and cost of replacement labor)
Enforcement in Equity
Van Wagner Advertising Corp. v. S&M Enterprises – has billboard lease…wants specific performance
Physical uniqueness isn’t used to grant specific performance if the court can determine with certainty the value of the damage and those damages are an adequate remedy
Specific performance will not be enforced when there is an adequate remedy at law. According to Restatement of Contracts Second, damages are inadequate when:
Damages are too speculative
Can’t attain a substitute
Damages can’t be collected from the breaching party
Specific performance will also not be granted when damages are an adequate remedy to compensate the tenant and equitable relief would impose a disproportante burden on the defaulting party.
Curtice Bros. Co. v. Catts (note) – farmer agreed but failed to sell entire tomato crop to a canning plant
Inability to attain substitute at time and quantity needed would cause serious harm (needs of business are extraordinary), so specific performance will be enforced
Most efficient…affect business rep and break other contracts
Paloukos v. Intermountain Chevrolet Co. – dealership was unable to deliver car because of product shortage
Mkt value was readily ascertainable
Courts will not order the impossible such as ordering the seller to sell to the buyer that which the seller doesn’t have
Fitzpartick v. Michael – nurse agrees to care for man for life, he kicks her out, she wants specific performance
Specific performance will not be granted in a contract for personal services even if there is no adequate remedy at law
contracts that can’t be performed in less than a year must be in writing (but not the case here).
Even though a remedy in contract may not be available, a remedy in restitution may be
Pingley v. Brunson (note) – organ player who wouldn’t play at restaurant for his 3 years contract
When others can substitute (no exceptional skill or ability), specific performance isn’t available
Northern Delaware Indus. Dev. Corp. v. E.W. Bliss Co. – contract in which DD agreed to furnish labor and materials to modernize a plant, didn’t go as fast as agreed, PP wants DD to use more employers as stated in contract
Court is reluctant to enforce specific performance, especially in anticipatory breaches and where they’d have to keep enforcing the performance
Contract of personal services, even of a unique nature, will not be affirmatively and directly enforced.
Relief in equity is discretionary with the court
Court’s objective is expectancy in a breach of contract
valuation to non-breaching party
replacement costs (upper limit)
may be less (PV House)
II. Limitations to Expectancy
has to establish that loss was caused by conduct of DD
has to be Foreseeable (Hadley)
Lamkins…loss not dispropriante to contract
doctrine of avoidable consequences
deduct savings (note case)
expenses of mitigation
Damages must be proved to a reasonable degree of certainty
Higher std than anything else PP has to prove
Includes emotional distress
Breach by owner
After the builder has completed…contract price
Before completion…expenses incurred + profit
Contract price – expenses saved (note cases)
Sales of goods
Breach by seller
Mkt price at t&p – contract price
Doctrine of avoidable consequences is built in
Breach by buyer
Contract price – mkt price at t&p
Unless it causes one to lose a sale..then lost profits is the measure
Breach by employee
m/d excess cost of replacement costs
IV. When expectancy isn’t available
Post/Pre Formation (Anglia takes opposite view)
Limited if it’s a losing contract (note…Armstrong Rubber)
Remedy at law must be inadequate
often for land contracts…and specific performance is routinely granted…
unique goods or mkt isn’t available for the good
if one can’t put a valuation on the product
it is discretionary with the court
Compare benefit to PP and harm to DD if relief granted (Van Wagner)
- available when there is a contract and nonbreaching party seeks to look to restitution instead of contract
measure of damages (m/d)
m/d recovery can’t exceed the contract price
subject to dd’s contract rights
Put in outline why one is better than the other…pros and cons
Grounds for Enforcing Promises
Congregation Kadimah Toras-Moshe v. DeLeo – oral promise of decedent to donate $25,000
Oral contract cannot be enforced when the court determines that there’s neither reliance nor consideration
Consideration – benefit to promisor OR detriment to promisee
A valuable consideration in the sense of the law may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other.
Hope or expectation isn’t equivalent to either legal detriment or reliance
Exchange Through Bargain
Bargain Theory of Consideration
- an exchange of promises, acts, or both, in which each party views what she gives as the price of what she gets.
- promisor – person who makes the promise and whose enforceability is in issue
Hamer v. Sidway – uncle would give nephew $500 at 21 if he stopped certain bad habits
A contract in which the promise gives up some legal right or freedom (legal detriment) for money is consideration and therefore the promise is entitled to what the contract stipulates (even though promisor has not benefited form the promise).
Detriment is forbearance of a legal right..doing something not legally required to do…not necessarily physical detriment
Uncle was benefited in the legal sense….price uncle was willing to pay for nephew’s abstention.
Mutual reciprocal inducement (for uncle it was love and affection of nephew)
Earle v. Angell – aunt promised nephew $500 if he attended her funeral
There is a promise for a promise
This is valid
Whitten v. Greeley-Shaw – parties engaged in extra-marital affair and signed a contract make by DD
The contract was neither bargained for by PP nor given in exchange for his promises
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
The performance may consist of:
An act other than a promise, or
A forbearance, or
The creation, modification, or destruction of a legal relation
The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person
Consideration as Motive or Inducing Cause
The fact that what’s bargained for doesn’t itself induce the making of a promise does not prevent it from being consideration for the promise
Fact that a promise itself does not itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise
Fischer v. Union Trust Co. –land given to handicapped daughter with promise to pay mortgage
In a conveyance of property by gift, with no consideration, the grantor isn’t liable for promises made along with the conveyance (promise to pay mortgage).
Mutual reciprocal inducement – two promises that don’t induce each other don’t constitute consideration – the promise must be induced by each other; bargained for
Writing doesn’t matter
Courts won’t inquire into adequacy of consideration – thus size of consideration doesn’t matter as long as it’s bargained for
Purported consideration or consideration for land only?
Simmons v. United States (note) – guy won $25,000 from a fishing contest
So long as an outstanding offer was known to one, a person may accept an offer by rendering performance, even if he does so primarily for reasons unrelated to the offer (not a gift)
Schnell v. Nell – promised three people $100 for one cent
Courts will consider the adequacy of consideration where the exchange is for unequal sums of money
Embola v. Tuppela – insane man promised $10,000 if PP gave him $50 to get his mine back
There was consideration since there was an uncertain event conditioning getting the $10,000
The DD considered the exchange fair and to his advantage
Duncan v. Black – sells land and cotton allotment
Forbearance of a claim may be consideration as long as such a claim is made in good faith and has some foundation.
It must not be against public morals, public policy, or inherently illegal
Here, the claim was invalid. When a claim is invalid, surrender of it in exchange for money isn’t enforced because the surrender of an invalid claim isn’t a detriment
Restatement of Contracts, Second
Section 74. Settlements of Claims
Forbearance to assert or the surrender of a claim or defense which proves to be invalid isn’t consideration, unless
The claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or
The forbearing or surrendering party believes the claim or defense may be fairly determined to be valid.
The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he isn’t asserting the claim or defense and believes that no valid claim or defense exists
Moral obligation is not consideration to enforce a promise made after services were rendered but not requested.
No mutual reciprocal inducement.
Webb v. McGowin – PP fell with pine block and became crippled to avoid injuring DD, who paid for his upkeep
Moral obligation is 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
Material benefit = valid consideration for his promise…valid because he saved life
When a substantial material benefit is conferred upon a party without being requested, but the party promises something in exchange for it after the fact, the contract is enforceable. It’s implied that he would’ve made the promise beforehand.
Harrington v. Taylor – took ax blow on hand to avoid it hitting DD in head. Promised to pay her damages, but paid small sum and stopped
A humanitarian act voluntarily performed is not such consideration as would entitle her to recovery at law.
Edson v. Poppe – PP drilled a well and installed casing
Since the circumstances do not indicate that the PPs drilling was gratuitous or an act of voluntary courtesy to the DD, the subsequent promise was therefore supported by consideration.
Give them what they didn’t ask for
Restatement of Contracts, Second
Section 86. Promise for Benefit Received.
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.
A promise is not binding under Subsection (1)
If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or
To the extent that its value is disproportionate to the benefit
Reliance on a Promise
Kirksey v. Kirksey (former rule)– brother-in-law promised PP place to raise her family, but kicked her out two years later
Rule at one time was that reliance was irrelevant and a promise is unenforceable even if relied upon
No mutual reciprocal inducement
Ricketts v. Scothorn (note) – grandfather promised PP that she wouldn’t have to work anymore and gave her a note worth $2,000
Promise without a bargain is enforceable where it would be grossly inequitable not to enforce.
Prescott v. Jones (note) – policy not renewed automatically as expected
Letter to renew insurance policy unless notified otherwise is only an intention of purpose; estopple is not available for a promise
Not a statement of fact, just an intention
Without acceptance (some type of words or over action), there is no contract
Promise of future action is distinguishable from factual representations about the past or present
Seavey v. Drake – PP orally given land by father and spent $3000 improving it
Specific performance can be awarded to the promisee when the only proof of consideration of the oral promise is part performance induced by the donor’s promise…Greenfield says its wrong
Displaces statute of frauds
Reliance on a promise is a substitute for consideration if a party relies on the promise reasonably and to its detriment….restatement induces action/forbearance