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Express contracts
oral or written statements; more formal.
Implied-in-fact contracts
inferred by circumstances/actions of parties, just as good as an express contract; real!
Implied-in-law contracts
(also quasi-contract, quantum meruit, restitution, unjust enrichment)

– legal relationships created by the court who looks at the circumstances in order to do justice. Can arise by a promise or agreement by the parties
Unjust enrichment?



One who has received a benefit has a duty to make restitution

1) A benefit conferred on the defendant by the plaintiff

2) Appreciation or knowledge by the defendant of the benefit

3) Acceptance or retention of the benefit by the defendant under circumstances making it in-equitable for the defendant -there is no agreement here, one party receives a benefit from another party
Bilateral Contract
someone offers and someone accepts. Acceptance can be by a promise or performance.
Unilateral Contract offer


An offer inviting only performance (no return promise). Acceptance can only be by full performance.  

1) Offeror is bound when offeree begins performance, creating an option K

2) Offeree is not bound by beginning performance, only accepts by complete performance
Restatement 2d § 1 Contract Defined
a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
Executory contract
a contract that remains unperformed or which there remains something still to be done on both sides.
An undertaking, however expressed, either that something shall happen or that something shall not happen in the future.
Illusory Promise
An apparent promise which, according to its terms, makes performance optional with the promisor.  It seems like a promise, but it’s not legally enforceable.
Watts v. Watts (1987)




over 12 years.

Issue: Whether π is entitled to a share in the accumulated property based on: 1) Δ’s breach of an express/implied in fact K; and 2) unjust enrichment.

Holding: π has a claim resulting from both.

Rationale: 1)Δ did breach an express/implied in fact K.  Consent implied through, 2)If no express or implied in fact agreement exists, recovery may be based upon unjust enrichment—which is sometimes referred to as “quasi K” or “contract implied in law” to prevent injustice.
4 types of enforceable contracts
o Promise + Consideration

o Promise + Form

o Promise + Antecedent Benefit

o Promise + Unbargained for Reliance(Detrimental reliance)
Purpose of consideration





Definition of Consideration

2 requirements
Promise of performance or forbearance of exercising a legal right. 

1) Legal Detriment

2) Bargain for Exchange
Modern Definition for CSN
Bargain for Exchange
Bargain defined

Restatement 2d §
Restatement 2d § 71: Requirement of Exchange; Types of Exchange:

(1) To constitute consideration, a performance or a return promise must be bargained for.

(2) 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

(3) The performance may consist of:
o An act other than a promise, or
o A forbearance, or
o The creation, modification, or destruction of a legal relation.

(4) 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.
Past Consideration
No Consideration!

The “Bargain for Exchange Requirement” is missing when the promise is made in return for a detriment previously suffered by the promisee.  Where the detriment has been suffered before the promise is made, it is obviously not “bargained for” by the promisor.
Plowman v. Indian Refining Co. (1937):




“long and faithful” pension workers"

Issue: Whether appreciation of long and faithful past services provides adequate consideration.

Rule: Past consideration is not valid consideration.  Something delivered before the promise was executed is not CSN because it was obviously not bargained for by the Δ.

Holding: Company’s promise to pay past employees a pension because of their “long and faithful service” is not a binding agreement because past CSN is not valid CSN.
In Re Greene (1930):




Mistress wants money for her past services. “adulterous woman”

Issue: Whether a promise to pay for past services rendered provides adequate csn.

Rule: Past consideration is not consideration. A promise to pay for services already rendered does not provide adquate consideration. The promise, to be valid, must be supported by new consideration, not past consideration.

Holding: Contract at issue lacked consideration for the bankrupt ex-lover’s promise.
Consideration doctrine NOT applicable to executed gifts?
It is only the promise to make a gift, not the making of the gift that is unenforceable for lack of csn. 

Thus it is critical to distinguish between executed gifts, which cannot be undone, and as to which the csn doctrine is irrelevant, and executory gifts, which are usually unenforceable for lack of consideration.
Test for distinguishing bargains from pre-conditions
 ask if there was any benefit to the promisor. If no, usually a condition.
Dougherty v. Salt (1919):




8 y/o nephew wants $ promised - Executory Gift

Facts: 8-year-old attempting to cash in a promissory note (a note that promises something in the future) signed by his aunt for $3000.  Aunt’s estate is withholding the money.  Promissory note contained the words: “value received.”

Issue: Whether the words “value received” provides adequate consideration and if not, what did the Aunt actually confer to her nephew?

Rule: Past consideration and merely recited consideration is not valid consideration. An executory gift is not enforceable. The promise was neither offered nor accepted with any other purpose than to be a bounty/gift. A gift, without delivery, is unexecuted and unenforceable.

Held: It doesn’t matter what the note says.  There was no bargain!  The court will not look at the equivalency of the bargain, the court will only intervene to make sure csn is adequate.  The aunt was conferring a bounty and the promise was neither offered nor accepted with any another purpose: “Nothing is csn that is not regarded as such by both parties.”  It was a gift w/o delivery, unexecuted nor enforceable.
Kirksey v. Kirksey (1845)




Widowed sister offered home from Inlaw - Gift w/ condition

Facts: Brother-in-law promises his widowed sister-in-law a place to live “if you will come down and see me.”  In response to this promise, widow travels to meet brother-in-law, thereby incurring expenses.  Brother-in-law later refuses to live up to his promise. 

Issue: Whether the brother-in-law’s promise was in actuality a gift with a condition.

Rule: Conditions of a gift are not consideration.  A gratuitous gift promise is not enforceable as a contract. Promisor must seek the exchange and benefit for there to be consideration.

Held: Although the widow has suffered a “detriment” sufficient to meet the detriment requirement for csn, the brother-in-law did not promise the widow a place to live b/c he wanted to see her—he was not bargaining for a visit from his sister-in-law by promising her a place to live.  Instead, her coming to see him was simply a necessary pre-condition of her accepting the gift.  No csn b/c only 1 side benefits.  Promisor must seek the exchange and benefit in order for there to be csn.  The promise is thus unenforceable. Promise to give place to raise family, if you come = promise w/o csn, there is no B4Ex, so it is unenforceable. Moving is condition of the promise.
Plowman v. Indian Refining Co (1937)


Issue: Whether appreciation of long and faithful past service provided adequate consideration. Employees had to quit work and come every two weeks for a paycheck. 

Holding: Coming every 2 weeks is not consideration….it is a condition for a gift.
Hamer v. Sidway (1891)




A bargain may be present even though the promisor does not receive any economic benefit from the transaction.
Don’t smoke, drink or gamble until you are 21.

Facts: Uncle promises his nephew $5000 if the latter will refrain from smoking, drinking and gambling until he reaches the age of 21.  The nephew performs and uncle agrees to give the money, but decides it is wiser to hold the money for the nephew.  Nephew agrees but later, uncle dies and estate refuses to pay.

Issue: Whether the uncle’s promise was bargained for and supported by adequate csn.

Rule: Forbearance to act on a legal right is a valid form of consideration. RS § 71(3)(b)  At issue here is a unilateral K.

Held: The uncle’s promise was bargained for, and therefore supported by csn.  Although the uncle may have derived no actual economic benefit from his nephew’s abstinence, he was clearly attempting to obtain something he regarded as desirable (uncle benefitted by knowing his nephew was abstaining from bad behavior).  The nephew, forbore drinking, smoking and gambling—by all accounts, it does not appear that he suffered a “detriment” but rather benefited by the promise.  But, the nephew suffered a detriment by refraining from something that he had a right to do (nephew gave up his legal rights, this constitutes sufficient csn).
Marshall Durbin Food Corp. v. Baker (2005)




evil daughter

o Facts: Baker, former president, brought suit against his former ER to enforce an agreement which would provide him with 5 years of monthly compensation equal to his former monthly salary. Baker had helped rescue ER from dire financial straits.

o Issue: Was a valid contract formed between ER and Baker?
- Was the recital of consideration effective?
- Were the mutual promises illusory?
- Is the contract unenforceable if based on Baker’s forebearance of seeking other employment for lack of consideration?

o Rule: A benefit to the promisor or detriment to the promisee is sufficient consideration for a contract. Where a promisor’s duty is contingent, it is not necessarily illusory. The act of staying with a company is valid consideration if induced by a promise.

o Held: 
- Yes. The recital of consideration was not disputed. However, the ER argued that the contract was not support by consideration.
- No. Mutual promises were not illusory. No valid promise was given by Baker in exchange for ER’s promise of payment. But, ER’s promise was not illusory. Baker’s consideration for the company was not by a return promise, but by an act other than a promise.
- No. Contract is enforceable. Trial court found detriment to Baker and benefit to ER for retaining Baker’s valuable services.
Sufficiency of Exchange

• Nominal:

• Sham:

• Peppercorn:

• Cannot be pretextual:
Modern (2d Restatement) cases reject Nominal, Sham, Peppercorn (1st RS)
• Nominal: consideration that is so insignificant as to bear no relationship to the value of what is being exchanged ($1 for a house).
• Sham: something that is not what it seems. A counterfeit.
• Peppercorn: a small or insignificant thing or amount. Cannot give a peppercorn in return for something of higher value to make it look like a contract.
• Cannot be pretextual: providing a false or weak reason to make something look like a contract.
In re Greene (1930):




Facts: Claimant, “adulterous woman,” provided alleged K under a seal, signed by bankrupt “ex-lover” entitling her to a sum of $375K (or equiv. of), to the trustee of the bankrupt.  They made a sealed written promise with a nominal consideration of $1 and “other good and valuable considerations.”

o Issue: Whether the stipulation of $1 provided adequate csn.

o Held: “Words cannot serve as csn.”  This is a sham or nominal consideration.  While it is true that the law does not normally concern itself with the adequacy of consideration, provided that the consideration was truly bargained for, the recital of purely nominal consideration is usually an indication that there was no bargain at all, but rather a gift, and a promise to make a gift is a promise that won’t be enforced by the courts.
Legal Sufficiency vs. Adequacy
contracts have to be supported by legally sufficient consideration.  Legally sufficient does not mean adquate, fair, equal or reasonable, but it has to be more than pretext.

Consideration is what?
a return promise, an act, a forbearance, alteration of a legal relation
Restatement (2d) § 71(3):
The performance may consist of
 - An act other than a promise, or
 - A forbearance, or
 - The creation modification, or destruction of a legal relation.
Restatement (2d) § 79
Adequacy of Consideration; Mutuality of Obligation

If the requirement of csn is met, there is no additional requirement of

• A gain, advantage, or benefit to promisor or a loss, disadvantage, or detriment to the promisee; or

• Equivalence in the values exchanged; or

• Mutuality of obligation.
Batsakis v. Demotsis (1949):




drachmaes case

o Issue: Whether mere inadequacy of csn voids a K.

o Rule: Consideration need not be equitable, but it cannot be sham or nominal consideration. There was consideration even though the exchange was not even or equivalent.

o Held: Look at the deal itself.  She bargained for an exchange of 500,000 drachmae for a written promise to repay $2000 in the future ($25 worth of drachmaes now, but pay $2000 later).  She can’t back out, regardless of the fact that what she bargained for was grossly inadequate.  Mere inadequacy of csn will not void a K.
Common Consideration Problem 1: Preexisting Duty Rule

Traditional Rule
you must have new csn, however insignificant, to support a modification of a K.

o Why? to deter “hold-up” behavior
Common Consideration Problem 1: Preexisting Duty Rule

Restatement (2d) § 73
Performance of Legal Duty

o Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not csn; but a similar performance is csn if it differs from what was required by the duty in a way which reflects more than a pretense of a bargain.
Levine v. Blumenthal (1936):





depression lease

o Issue: Whether the 2nd agreement was supported by adequate csn.

o Rule: Modification of an executory contract requires new consideration, however insignificant. A similar performance is consideration if it differs from what is required.

o Held: Changing terms of rental agreement during rental terms is unenforceable because there was no new consideration.  Nominal consideration could have satisfied requirement (like paying in cash rather than check; payment on the 29th instead of the 30th. π conferred a gift and although the Δ faced significant economic adversity, judicial abrogation of the csn principle is not warranted.  By altering/modifying the terms of the lease, it necessitated new csn.  Δ gave up her right to file for bankruptcy, π gave up the right to obtain the full rent amount.  Mutual rescission?

o Note: Here, the courts may be seen to be unduly harsh considering the time period.  A different holding might be found in today’s courts under RS § 89.
RS § 89.
Modification Of Executory Contract

A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.
Alaska Packers’ Association v. Domenico (1902):




fishermen want more $ after K begins

o Issue: Whether the 2nd K was supported by adequate csn.

o Rule: Promising to do a pre-existing duty is not (new) consideration.  Any change in the contract requires new consideration. When a party merely does what he has already obligated himself to do, he cannot demand additional compensation.  The party who refuses to perform, and thereby coerces a promise from the other party to the K to pay him an increased compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the other party.

o Held: The second K was a nudum pactum. Court upheld pre-existing duty rule to deter “hold-up” behavior (coercion)—when one party attempts to take unfair advantage of the other by threatening to not live up to his obligations.
Exceptions to the PEDR

A modified contract is enforceable if the parties:
o Executory K means that it hasn’t been performed yet and if something comes up that is unforeseen, the courts will allow you to modify the K, w/o new csn, as long as it is rx and in good faith.

A modified contract is enforceable if the parties:
1. Voluntarily agree (cannot be under duress); and
2. Unanticipated circumstances require/prompt the modification; and
3. Modification is fair and equitable; and
4. Modification occurs before performance is complete by either side.
Exceptions to the PEDR

Restatement (2d) § 89:
o Restatement (2d) § 89: Modification of Executory Contract:
A promise modifying a duty under a K not fully performed on either side is binding:
- If the modification is fair and equitable in view of circumstances not anticipated by the parties when the K was made; or
- To the extent provided by statute
- To the extent that justice required enforcement in view of material change of position in reliance on the promise.
Exceptions to the PEDR

UCC changes the rule
o UCC changes the rule: In the case of K to sell goods, the UCC has in effect abolished the PEDR. 

UCC 2-209(1): An agreement modifying a K w/in this article needs no csn to be binding (no consideration necessary if modification is in good faith).
Exceptions to the PEDR

Angel v. Murray (1974):




trash collector unexpectedly faced with collecting more trash

o Issue: Whether the new K was supported by adequate csn.

o Rule: No consideration is necessary when a reasonable modification is made (is necessary) because of unforseeable events. A promise modifying a pre-existing duty under a K not fully performed on either side is binding if the modification is fair and equitable in view of circumstances not anticipated by the parties when the K was made.

o Held: Court upheld city’s voluntary agreement to pay more $. Modification to contract was binding because of 1) unexpected circumstances/high city growth, 2) the contract was not fully performed on either side, and 3) it was fair and equitable.
Common Consideration Problem 2: Settlement of Claims

Settlement of claims?
How much consideration is exchanged when you give up a case that was not worth anything to begin with?

• Settlement of claims: when you settle a claim or forbear to assert it, this is legally sufficient consideration when the claim is:
o Objectively reasonable OR RS 74(a); Greene
o The party has a good faith belief that the claim may be valid (legally and factually) RS 74(b);
RS § 74: Only one of the above must be met, but Fiege says both must be met. 
Common Consideration Problem 2: Settlement of Claims

Forbearance from bringing suit 1
Forbearance from bringing suit: If the existence or amount of a monetary claim is in rx and bona fide dispute, a settlement will not be invalid for lack of csn.  A similar rule is usually applied to the settlement of other kinds of potential or pending litigation.
Common Consideration Problem 2: Settlement of Claims

Forbearance from bringing suit 2 
o Valid claim surrendered: If a π promises to waive a valid claim, all courts are in agreement that this promise is a detriment to the π and consitutes csn for the Δ’s promise to pay a settlement.

o Surrender of invalid claim: If on the other hand, the claim surrendered by the π is invalid, courts are not in agreement as to whether that surrender is a “detriment” giving rise to csn for the Δ’s promise to pay a settlement.
- Majority view: most modern courts would probably hold that for the surrender of an objectively invalid claim to constitute consideration for settlement, the π must, at the time of the settlement, have had a bona fide subjective belief that the claim was valid and this belief must not have been unrx. (Fiege v. Boehm)
- Restatement view: the 2d restatement takes a more liberal view; either the settled claim must be one whose validity is uncertain, or the π must subjectively believe that the claim has possible merit.
Common Consideration Problem 2: Settlement of Claims

Forbearance from bringing suit 3

Restatement 2d § 74 Settlement of Claims
• Restatement 2d § 74 Settlement of Claims

Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless:
- The claim or defense is in fact doubtful b/c of uncertainty as to the facts or the law (objective), or 
- The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. (subjective)

o 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 is not asserting the claim or defense and believes that no valid claim or defense exists.
Common Consideration Problem 2: Settlement of Claims

Three possible standards
• Three possible standards: 
Greene: objective test = must be objectively colorable; RS 74(a)

Fiege: objective and subjective test = honest and reasonable belief in the validity; RS 74(b)

Restatement (2d) and Hawaii: doubtful in law OR disputed in good faith
Common Consideration Problem 2: Settlement of Claims

In re Greene (1930) 




Mistress wants money

o Facts: Claimant, “adulterous woman,” wants money.

o Issue: What sort of standard does the court employ with respect to settlement of claims.

o Rule: RS 74(a). Objective test is used. Forbearance to assert a claim which proves to be invalid is not consideration unless the claim is in fact doubtful because of uncertainty to the facts or the law.

o Held: What would an objective perspective think w/ respect to the claim?  “No vestige of a lawful claim” even if both parties believed in claim.  Perspective is objective.
Common Consideration Problem 2: Settlement of Claims
Fiege v. Boehm (1956):
woman mistaken about who is the baby daddy

o Issue: What sort of standard does the court employ with respect to settlement of claims.

o Rule: Court used the following test to see if the mother made and agreement in “good faith” (if so, then K is binding):

1. Was her belief that Δ was the father honestly asserted (subjective) – yes

2. Did she have a reasonable basis for support (objective) – yes, it was reasonable that she believed he was the father.

o Held: Objective and subjective test is used.  Parties entering into a K must have a bona fide belief that the claim is valid and the belief must not be unreasonable—what would a reasonable person in the same position do.
Common Consideration Problem 2: Settlement of Claims

In the Interest of Jane Doe (1997): 
teens forced to relinquish parental rights

o Issue: What sort of standard does the court employ with respect to settlement of claims.

o Test: A compromise is supported by good consideration if it is:

1. Based on a disputed or unliquidated claim (unliquidated claim is one that is not previously specified or determined—yet to be established); and
2. The parties make or promise mutual concessions as a means of terminating their dispute.
3. The mutual concessions are asserted in good faith.

o Held: Court determined that there was good consideration. Obviously, there was a dispute/claim. Second, parties had a mutual desire to avoid lengthy and emotional court hearing that would be deleterious to the relationship between parents and foster parents—this constituted mutual concession.
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