Anglo-AmericanContract and Torts

Prof. Mark P. Gergen

Class Nine

Introduction to contract andlegal bases for enforcing promises

“A promise that the law will enforce”

Contract

The common law concept of contract excludes . . .

Gift

Misstatement/misrepresentation

A completed barter exchange (swap) . . . Strictly and technically speaking

Gift—intent to make gift + delivery

Misstatement/misrepresentation

• Actionable as deceit (fraud) and negligence (negligent misrepresentation)

• Basis for estoppel or waiver

These are not treated as problems of contract.

Promise

Explain the difference between

• A promise

• A statement of fact

What is the difference between promising to do something in the future and stating you plan or intend do something in the future?

Not all promises are enforceable as contracts.

A promise to make a gift is not generally enforceable as a contract.

The doctrine of consideration generally defines what promises the law will enforce.

Additional bases for enforcing a promise include reliance (US) and a witnessed deed (England).

The device of a witnessed deed replaced the device of a seal

Obligation in contract requires

1) An apparent expression of intent to undertake an obligation (e.g., by promise, agreement, offer & acceptance . . .)

2) A legal basis for enforcing the obligation such as consideration.

3) Sometimes written evidence of the obligation under the statute of frauds.

Historical background (pp. 112-113)

Writs that were principal antecedents to modern contract action:

• Covenant (obligation under seal)• Debt (promise to pay sum certain

for performance already received)• Assumpsit (undertakings)

Overtime the use of assumpsit grew to be a general basis for enforcing a promise if there was “consideration.”

So what is consideration?

• Bargain theory (US and Australia)

• Benefit given or detriment incurred in return for promise (England)

In the US consideration is equated with bargain. Other bases for enforcing a promise (e.g., reliance) are described as alternatives to consideration.

So what is a bargain?

Anything that is in someone’s legal power to do or not do can be the subject of a bargain . . . an act, a promise to act, a forbearance, a promise to forbear, a change in a legal relationship . . . See p. 114, citing Restatement Second Section 71.

But there must be a bargain . . .

Restatement Second, Contracts § 71 (p. 114)

(1) To constitute consideration, a performance or return promise must be bargained for. (2) A performance or return promise is bargained for it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.

There is no bargain in these two cases so the promise is not enforceable:

1) A performs a service for B asking nothing in return. Grateful B promises A $.

2) B promises A $ asking nothing in return. Grateful A performs a service for B.

“reciprocal . . . inducement, each for the other” (Holmes)

Grandparent promises grandchild $ for trip to NY. This is a conditional gift and not a bargain unless grandparent promised the $ to induce grandchild to go to NY.

In the US, a gratuitous promise is not enforceable even if B declares it to be a legal obligation. Nor can it be made enforceable by falsely casting it in the form of a bargain.

The device of a trust is used to retain control over resources while committing them to another in the future.

Performance of a pre-existing legal duty is not consideration.

Foakes v. Beer (House of Lords 1884), p. 119

Beer agrees to forego the payment of interest on a £2019 judgment to which she is entitled if Foakes pays £500 principal immediately so long as the balance is paid in £150 half-yearly installments. Foakes pays the £500.

This is a bargain. Beer promised to forego interest to induce Foakes to pay. And Foakes was induced to pay by her promise.

Held the promise is unenforceable. Payment of a pre-existing debt is not consideration.

This rule prevents mutual beneficial adjustments of contracts when the adjustment is one-sided.

Other responses

• Abolish requirement of consideration for contract modifications. UCC 2-209(1), p. 119 (top)(applies only to sales of goods)

• Some states have statutes giving effect to signed releases without consideration.

Consideration is not a problem if the adjustment is a settlement of an honest dispute or if than debtor does more than perform the existing obligation. See p. 121 top.

Combe v. Combe (KB 1951), p. 116

After divorce is finalized ex-husband promises to pay ex-wife £100 per year. Ex-wife promised nothing in return.* Ex-husband doesn’t keep promise, apparently because ex-wife earned more. Seven years on ex-wife sues for the money.

* At pp. 117-118 Denning argues that had she promised to forbear from applying for maintenance that would not be consideration because such a promise is not legally binding under family law. Nor is her forbearance consideration because ex-husband did not make promise on this condition.

Lower court held the promise was binding on the basis of promissory estoppel. This was relying on Central London Property Trust, Ltd. v. High Trees House, Ltd. (“High Trees”).

Landlord agrees to accept half rent in 1940 for an unstated period. In June 1945 Landlord demands full rent going forward. Held Landlord may increase rent going forward but it may not demand unpaid rent before June 1945.

In Combe Lord Denning holds the lower court erred in applying the doctrine. What was its error? What does he mean by “the principle [of estoppel] never stands alone as giving a cause of action in itself”? (p. 117, 2nd paragraph).

Restatement Second, Contracts Section 90 (pp. 115-116).

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.

After divorce is finalized ex-husband promises to pay ex-wife £100 per year. Ex-wife promised nothing in return. Ex-husband doesn’t keep promise, apparently because ex-wife earned more. Seven years on ex-wife sues for the money.

What result in the US? Do you need more facts?

The law of obligations and promise based on moral obligation

Contract-promise based

Torts-harm basedRestitution-

benefits based

Sometimes called quasi-contract, implied in law contract, and unjust enrichment

Mills v. Wyman (Mass. 1825), p. 121

Mills cares for Wyman’s adult and independent son, Levi, who is deathly ill and incapacitated, providing food, a bed, and paying for medical care. Levi dies after several weeks. Learning of his son’s death and Mills’ service a sad but grateful Wyman writes a letter promising to reimburse Mills expenses.

Webb v. McGowin (Ala. 1935), p. 122

While dropping heavy. block of wood from the upper floor of a window, Webb spots McGowin immediately below. Webb throws himself from the upper floor of a mill to divert the block, grievously injuring himself. A grateful McGowin orally promises to pay Webb $15 every two weeks for his life for maintenance asking for nothing more in return. McGowin’s executor reneges after McGowin dies.

Promise, harm, and benefit . . . but there is no consideration for the promise under the bargain theory.

Contract-promise based

Torts-harm based

Restitution-benefits based

Mills & Webb

The US authorities cited at p. 122 would permit the claim. Happily claims such as these hardly ever arise . . .