Consideration As a Basis For Enforcement

1. ConsiderationAs a Basis For Enforcement Tom grants a license to paint a fence, in exchange for an apple.

2. When Do We Enforce?Possible Reasons to Enforce • Morality? • Commercial v. family or social transactions? • Certainty (e.g., written v. oral; formalities)? • Reliance? • Exchange (consideration)? The Oath of the Horatii, by David. Do swords make a difference?

3. Why Is ConsiderationA Basis for Enforcement? • “Consideration” is what was given in exchange for a promise. • Recall: Exchange makes both parties “better off;” encouraging exchanges makes society as a whole better off. The Grand Bazaar, Istanbul: Exchange Makes the World Prosper?

4. Two Kinds of ConsiderationAnd Two Types of Contract • Consideration might be promise, or something other than a promise (money, goods, service, etc.). • Promise for promise: Bilateral contract • Promise for something other than promise: Unilateral contract. Bilateral Unilateral

5. Hypothetical Exchanges: What Kind of Contract? • Store and buyer exchange new slicer/dicer for $50, “as is,” without any representation as to its quality or character. • Store and buyer exchange new slicer/dicer, “satisfaction guaranteed,” for $50. • Store and buyer exchange new slicer/dicer, “satisfaction guaranteed,” for buyer’s promise to pay $50 within 30 days.

6. Hamer v. Sidway Binding Contract? Or After-Dinner Blather?

7. Hamer v. SidwayExchange? Or Gratuity? • Promise: If you refrain from drinking, tobacco, swearing, cards or billiards for money until 21, I will pay $5,000. • “The nephew assented thereto.” • Bilateral? Unilateral? • Breach: Uncle fails to pay. Why? Bargaining? Or Gifting?

8. The Language of Exchange: From Archaic to Modern • Did promisor receive a benefit? • Did promisee experience a detriment? • Modern focus: Was there an exchange or “bargain?” • Did consideration by one motivate consideration by other? Professor Faust makes a famously bad exchange

9. Hamer v. Sidway: Benefit? Detriment? Bargain? • What if it were necessary toprove benefit to Uncle? • What if it were necessary to prove nephew’s detriment? • Is proving process of exchangeeasier for the plaintiff? • An advantage of modern approach: Proof of value of benefit or loss is irrelevant. Is temperance a “detriment?”

10. Family Promises: Exchange? Gift? Familial Duty? • Gratuitous promise (not in exchange for consideration) is not a contract. • Family members often “promise” with ambiguous motives and purposes (compare business transaction: gift unlikely). • Is pacta sunt servanda appropriate for families?

11. Hypothetical Family Promises • Father promises son, “if you graduate from high school, I will pay for your college education.” Son graduates from high school, but daughter becomes seriously ill, and medical expenses consume all of father’s earnings. • Father promises daughter, “If you graduate from high school, I will give you a car.” Daughter barely graduates, but she has become a drug addict. • Father promises eldest of 4 children, “If you will help me with the business for the next 6 years, I will leave the business to you in my will.” Father dies intestate (without a will) and business passes to children in 4 equal shares).

12. Family Promises: Reasons for Judicial Caution • Plausible exchange might be gift, act of love, fulfillment of sense of familial duty. • Family as micro-sovereignty; danger of state intervention. • Other deterrents v. breach (reputation; alienation)? Some families really are sovereignties

13. Non-Familial Social Promises: Exchange? Gift? Something Else? • Possible social relationships? • Possible motives: Selfless love, instinctive or moral duty, enhancement of relationship. • Is pacta sunt servanda right? • Difficulty of enforcement? • Should courts defer to other deterrents v. breach? Will he keep his promise to love her until the end of time?

14. Hypothetical Social Promises • Suzy promises to go to the Barristers Ball with Sam. The next day, Alex asks Suzy to the Barrister’s Ball, and she agrees, “jilting” Sam. • Sam and Suzy promise to love each other until the end of time. • Alex proposes marriage to Suzy; Suzy agrees. • Alex and Suzy are in love but not married. They sign a partnership agreement and open a law firm together

15. Back to Hamer v. SidwayEnforceable Family Promise? • Relatives might intend very specific exchange. • Relatives might want enforceability. • Reasons to enforce Uncle’s promise? What would Uncle Bill want?

16. Problem The facts are the same as in Hamer v. Sidway, but at the anniversary party one of Little Bill’s cousins overhears Uncle Bill say, “I don’t give a hoot if he has some fun now that he’s eighteen. The only reason I told asked him to stay away from vices is that Junior’s mother insisted on it. I don’t care. I’ll give him the money either way when he’s ready for it.” Is the promise enforceable?

17. Problem Uncle Bill is worried that he might die soon, but he doesn’t yet have the $5,000 in hand. He decides to make his promise “binding.” He tells Little Bill, “I promise $5,000 on your 21st birthday, in exchange for that pencil in your hand” (or “in exchange for your promise to give me a pencil on your 21st birthday”). Little Bill hands the pencil to Uncle Bill (or promises the pencil). Contract?

18. Problem The facts are the same as in Hamer v. Sidway, except that the “Uncle” is “Father,” and Father is alive and is refusing to pay. Are there any reasons a court might be more cautious in deciding to enforce the contract?

19. Problem Uncle Bill forgot that Little Bill is only two days short of 21. He intended that Little Bill should break bad habits by an extended period of abstinence, and he believed Little Bill would have to follow the rules for another three years. Three days later, Little Bill announces he is 21, and he visits Uncle to demand his “mother-$!?&-ing money.” He holds a cigar in one hand, a beer in the other, and a deck of cards in his pocket. Is Uncle Bill’s promise enforceable?

20. Feige v. Boehm Bargained-for Exchange Meets Lack of Choice

21. The Curious History Of Paternity Before Blood Tests • Early rule: “Bastard” has no father. • Fear: People might lie about sex and paternity. • Transition: Bastardy proceedings, in criminal court, child support. Do they lie about sex? Defendants: 80 %; witnesses: 60 %; complainants: 50 %.

22. Feige v. BoehmThe Contract & the Breach • Louis’s promise: Pay medical expenses, lost salary, $10/week. • Consideration: Hilda’s promise not to sue. • Defense: Hilda’s promise worth-less; not based on a valid claim. • Holding: Enforce the contract.

23. A Closer Look at Feige:The “Peppercorn” Theory? • Recall pencil & pretense problem. • Honest and reasonable belief in possible validity? Promise not to sue is consideration. • Claim asserted in bad faith? Promise not to sue not consideration. • Aren’t both promises valuable?

24. Compare Restatement §74(1)Settlement of Claims (General) Forbearance to assert or the surrender of a claim is not consideration unless: (a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, OR (b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. What about Hilda’s claim?

25. Problem Louis was happily married and he spurned Hilda. In fact, Hilda managed only a brief kiss with Louis. However, when Hilda realized she was pregnant by another man, she sought revenge against Louis. She tells Louis that if he did not pay $1000/month “child support,” she would sue and publicly allege their affair. Louis promised to make the payments. When the child was one year old, Louis obtained a DNA sample that proved the child was not his. He stopped making payments to Hilda. Should a court enforce Louis’s promise?

26. Settlement of Invalid Claims No Consideration? Or No Choice? • Are Feige and §74 consistent with lessons re fairness, peppercorns and pretense? • Could promise not to assert frivolous claim be valuable? • Was exchange voluntary? • Do such exchanges make society better off?

27. Involuntary Bargains Coercion and Deception • Promise must be productof voluntary exchange. • Exchange by coercion or deception not voluntary. • Do such exchanges make society wealthier? • Doubtful claim: Reasons to promote settlement? A negotiated and voluntary exchange?

28. Problem Lawyers advise RIF that layoffs are likely to spawn lawsuits. Thus, RIF asks every laid off employee to sign a promise not to sue based on any claim related to employment, in exchange for 12 monthly installments of $2,000. Suddenly, RIF has a more urgent need for the money. Is the promise to pay laid off employees $2,000 monthly binding?

29. Restatement §74(2) Standardized Release 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. Advantages of this rule? Risks?

30. Problem Suppose RIF (from two slides ago) had a “severance pay” plan for years before the layoffs. The plan promised the payment of $2,000 per month for one year in the event of an involuntary layoff. Would this additional fact affect your answer?

31. Feinberg v. Pfeiffer Co. Could her employer refuse to pay her pension, just because? p. 39

32. Feinberg v. Pfeiffer Co.Promise and Breach • Service: 37 yrs employment. • Promise: “A firm obligation of the corporation” to pay $200/mo. if and when she retires, for life. • Breach: Seven years after Feinberg’s retirement, company sends reduced pension of $100/ month.

33. Is There Consideration?Past and Pretext in “Bargaining” • Is 37 years service consideration? • What about 1½ years of service after the promise? • What about retiring? • Sum: Goods, services or money flowing between two parties are not always “in exchange.” Ask her about benefit and detriment.

34. Problem You are an attorney for Pfeiffer Co. Mr. Lippman asks you to draft a resolution that will make the company’s promise binding, so that Mrs. Feinberg will get the pension even if Mr. Lippman dies and someone else takes over. What ideas do you have?

35. Morality & Good Conscience Substitutes for Present Exchange?

36. Mills v. WymanGood Deeds Unrewarded? • Is father’s promise to pay? • What if father promised to pay, “if you will continue to look after him?” • What if 1st Samaritan made the above promise to 2nd Samaritan to persuade second Samaritan to care for the young man? p. 44

37. Webb v. McGowin Rescuing a failed disability plan? p. 45

38. Webb v. McGowinMorality a Reason to Enforce? • Promise: $15 (in 1925 dollars) biweekly for life. • Breach: Jan. ‘34, payments “discontinued.” • C.A.” Morality” alone a basis for enforcement. • S.C.: Only if there ismaterial and substantialbenefit to “the person”of promisor, and injury to promisee. Do some plaintiffs win on sympathy alone?

39. Promise for Benefit Received: Does Morality Count? • Injury to promisee personally. • Benefit to promisor. • Circumstances precluded advance negotiation. • RS §86: (1) enforcement necessary to prevent injustice; (2) not a gift; and (3) promise not disproportionate to benefit. Keep your promises!!

40. Problems • Reconsider Feinberg v. Pfeiffer. Outcome? • Reconsider Mills v. Wyman. Outcome? • Hamer v. Sidway: Uncle Bill promises nephew $5,000 in recognition of his successful abstinence from vices.

41. More Problems In Recognizing an “Exchange” Things that look like exchange but aren’t; and things that don’t seem to be, but are.

42. Kirksey v. Kirksey Antillico moves to Talledega p. 50

43. Kirksey v. KirkseyThe Promise and the Breach • Promise: If you will come down and see me, I will let you have a place to raise your family. • Possible motivations? • Breach: After 2 years, he moved her to lesser house, then evicted her. • Possible motivations for breach? “Dear Sister Antillico:” Trying to help? To find company? To get land?

44. Does the Language Reveal Bargain or Something Else? • Ambiguous words: “I will … if you …” • What was his likely intention? • What might she reasonably have understood or known? • Important circumstances? Family setting? Off the land and out of luck?

45. Central Adjustment Bureau v. Ingram Can an implied bargain keep this bird from flying? p. 53

46. Promise and BreachC.A.B. v. Ingram • Circumstances: Job requires access to confidential data • Promise: No competition for two years after termination. • Breach: Employees resign and compete. • Defense: Employer gave nothing in exchange Will a contract shut the door?

47. Implied Bargain: On the Border Between Contract & No Contract • Problem: “Give and take”without express bargaining. • Could parties expect in moral or social sense, but not legal sense? • Could such bargaining occur in commercial or employment realm as well as in social realm? An implicit bargain: So easy even a cave man could do it!

48. Hypothetical Ace Garbage ran a small garbage collection business with a fleet of ten trucks. Best Garbage also ran a garbage business with ten trucks. One day, Ace lost a truck in an accident, and another was sidelined by engine trouble. Ace needed another truck badly, and it asked Best if it could “borrow” one for a day. Best said yes. Ace did use one of Best’s trucks for a week, and then returned it when Ace no longer needed it. Ace and Best agreed to a rental fee, and Ace paid the fee. Six months later, Best needed a truck quickly when it suddenly acquired a new major client. It asked Ace if it could borrow a truck for week while it looked for a new one to buy. Ace refused. Has Ace violated a legally enforceably duty?

49. To Enforce Or Not to Enforce?That Is the Question • Can we clearly describe the alleged promise? • Alternative means of enforcement: Exit from relationship; loss of reputation, trust. • Would parties expect absolute duty? • Do parties need judicial enforcement to facilitate a useful exchange?

50. An Implied Bargain? What Did Employer Give in Return? • Did employees reasonablyexpect something in return? • Should parties reasonablyexpect judicial enforcement? • Would judicial recognition of implied bargain facilitate a useful exchange? • If they contracted, what did employer give? Did the employer give at least a peppercorn or two?