Practice ExamFall 2008

Prof. Carol B. Swanson

For Your Test Today… Review your Contracts texts:

Summers/Hillman pp. 47-49, 56-58 Knapp/Crystal/Prince, pp. 71-75, 87-90

Hamer v. Sidway (NY Ct App 1891)(uncle promises nephew $5,000 for abstaining from alcohol, tobacco, cursing, gambling)

Dougherty v. Salt (NY Ct App 1919)(aunt gives 8-yr-old nephew a $3,000 note for “value received”)

CONTRACTS in a NUTSHELL Contracts are enforceable promises Not all promises are enforceable So how do we determine which promises

should be enforced? PRIMARY MECHANISM—

CONSIDERATION! Consideration = bargained-for exchange

Consideration “Gold Nuggets” Benefit to the promisor OR detriment to the

promisee (one way to ascertain existence of bargained-for exchange)

Gift promises/conditional gifts Past consideration (is no consideration) Nominal consideration (in name only) Adequacy of consideration (almost) never

questioned! (peppercorn)

Case Briefing: Hamer v. Sidway Case Name/Court/Date:

Hamer v. Sidway (N.Y. Ct. App. 1891) Procedural Posture (Facts?):

P acq’d K claim as remote assignee from nephew D is executor of uncle’s estate Special Term trial: J/P Supreme Ct (Gen’l Term): Rev’d & rem’d Here: Ct App reverses, affirms Special Term (J/P)

Case Briefing: Hamer v. Sidway Facts Uncle told his nephew that if the nephew refrained

from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he became 21, then the uncle would pay him $5,000.

Nephew agreed and fully performed. When nephew turned 21, parties mutually agreed

that the uncle would hold the $5,000 until the nephew is capable of “taking care of it.”

Uncle died (12 yrs later) without having paid nephew.

P acq’d K claim as remote assignee from nephew. D is executor of uncle’s estate.

Case Briefing: Hamer v. Sidway Issue & Holding Does the consideration doctrine’s

benefit/detriment analysis render enforceable a promise to pay money in return for the promisee’s agreement to give up liquor, tobacco, swearing, and gambling, even though the promisee arguably benefited from performance, and no benefit to the promisor has been demonstrated?

Held: YES.

Case Briefing: Hamer v. Sidway Analysis

Court cites various consideration definitions: “may consist either in some right, interest, profit or

benefit accruing to the one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other” –Exchequer Chamber (1875)

“In general, the waiver of a legal right at the request of another party is a sufficient consideration for a promise” --Parsons

“Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first.” –Pollock

Case Briefing: Hamer v. Sidway Analysis Promisee nephew had legal right to use tobacco,

drink liquor; he abandoned rights for years, based on his uncle’s promise

This forbearance furnishes good consideration, regardless of what effort was required to forego these activities, or whether the nephew or uncle benefited from the forbearance

Ct favorably cites several cases finding consideration where the promisee gave up legal rights: Lakota (drinking); Talbott (tobacco)

Case Briefing: Hamer v. Sidway Rules Consideration may consist either in some right, interest, profit

or benefit accruing to the promisor, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the promisee.

Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first.

In general, the waiver of a legal right at the request of another party is a sufficient consideration for a promise.

If a promisee agrees to forego his legal right to engage in certain activities (like drinking and smoking), that forebearance is good consideration supporting the promise to pay.

What Does Dougherty Add? Aunt hands $3,000 promissory note to 8-yr-

old nephew (printed form contains the words “value received”), saying to him “You have always done for me, and I have signed this note for you”, and telling his mother that she loved the child, wanted to take care of him.

Why does the court conclude that this promise is NOT enforceable?

Mary SAMPLE EXAM Read exam directions Answer the question(s)

Can Mary recover from CT, Grumpo, or Bong? Allocate your time Keep in mind the “BIG PICTURE” IRAC

Issue, Rule, Analysis, Conclusion!

Mary/CT Sample EXAM Can Mary recover $1,000 from CT under contract

law principles? “Can Mary recover from any of them?”

Promise + Consideration (Bargained-for exchange) NOTE other possibilities (you’ll discuss these in

Contracts this fall): Promissory Estoppel (Promise + Detrimental

Reliance) Promissory Restitution (Promise + Moral

Obligation)

Mary/CT ISSUE: Did Mary & CT form an enforceable

contract, based on CT’s representations at the family gathering and her going meat-free for one year?

In other words, did CT’s representations constitute a promise to pay Mary if she remained meat-free for a year, and did her actual performance provide good consideration, rendering his commitment enforceable?

PROMISE + CONSIDERATION!

Mary/CT RULES + ANALYSIS: PROMISE

Define it: An unambiguous statement of commitment to do or not do something

How to determine it: Look to surrounding context, language actually used, etc.

ANALYSIS HERE: Family gathering “Just stop eating meat for one year! If you can

accomplish that, you certainly would deserve $1,000!”

Unambiguous statement of commitment? Tough to find clean “promise” here

If no promise, no binding deal If promise (or not clear), then we need to consider

the next issue...

Mary/CT RULES + ANALYSIS: CONSIDERATION

Define it: Bargained-for exchange How to determine it:

Benefit to the promisor OR detriment to promisee Waiver of a legal right at the request of another party is a

detriment to the promisee providing sufficient consideration to enforce promise, regardless of whether the promisee is otherwise “benefited” by the deal

Look to surrounding context ANALYSIS HERE: (like Hamer v. Sidway)

Mary gave up a legal right (right to eat meat) for one year, and that forbearance is a detriment that supports the finding of consideration

Although she may have enjoyed certain health benefits along the way, that does not offset the detriment she incurred

Can Mary Obtain Relief from CT? Can Mary obtain relief under contract principles? She probably cannot. Her primary difficulty is the absence of an unambiguous

commitment by CT to pay her for performing. His language is suggestive, but seems to fall short of a true “promise.”

If, however, a court finds a “promise,” then Mary’s performance (giving up a legal right by not eating meat) does provide legal consideration, and the promise would be enforceable.

Mary/Grumpo Can Mary recover $1,000 from Grumpo under contract law

principles? “Can Mary recover from any of them?” Promise + Consideration (Bargained-for exchange)

Did Grumpo’s note create an enforceable contract to pay $1,000?

In other words, does consideration support Grumpo’s promise to pay $1,000 when it is given “for all [Mary] has accomplished” and for “good value received”? Bargained-for exchange?

Mary/GrumpoRULES + ANALYSIS: CONSIDERATION

Define it: Bargained-for exchange (presumably already done)

How to determine it: Benefit to the promisor OR detriment to promisee Look to surrounding context: what did these parties

“bargain for”? ANALYSIS HERE: (like Doherty v. Salt)

NOTE content: “for value received” does not establish consideration “for all [Mary] has accomplished”—not bargained for

OTHER: favorite niece enriched aunt’s life (not bargained for)

Can Mary Obtain Relief from Grumpo? Can Mary obtain relief under contract principles? No. The facts do not support the finding of a bargained-for

exchange. The words “good value received” are not conclusive. Grumpo cannot bargain for Mary’s past acts:

Favorite niece who enriched Grumpo’s life “for all [Mary] has accomplished”

This is an unenforceable gift, not a contract supported by consideration.

Mary/Bong Can Mary recover $50 from Bong under

contract law principles? “Can Mary recover from any of them?” Promise + Consideration (Bargained-for

exchange) Is Bong’s promise to pay $50 if Mary

abstained from smoking dope enforceable?

Mary/BongRULES + ANALYSIS: CONSIDERATION

Define consideration, explain how to determine: Been there, done that!

ANALYSIS HERE: Smoking abstention (twist on Hamer):

Mary DOES give up something, BUT... MOTIVE: doesn’t matter that she “had

very little interest in smoking dope”

Can Mary Obtain Relief from Bong? Can Mary obtain $50 under contract principles?

No (unless you are in a jurisdiction that permits smoking dope).

The facts do not support the finding of a bargained-for exchange.

Mary gave up an act she had no legal right to perform (as a matter of public policy, that’s no bargained-for exchange)

TIPS for Exam-Taking SUCCESS Start Today (set up OUTLINE for each class) Communicate Keep in mind the “BIG PICTURE”

Issues/doctrines, not individual cases Cases demonstrate important CONTEXT

Read the question, particularly the “ask,” closely Allocate your time wisely IRAC structure Maintain your sanity

Good Luck!Enjoy Your Fall Semester!Questions or concerns? Feel free to contact me…

Carol Swansoncswanson@hamline.edu

651-523-2138