Posts categorized as "Contract Law"

Are there any special rules governing oral contracts?

Yes.  Generally speaking, oral contracts are enforceable contracts, just the same as written contracts, but there are important exceptions.  Here are some of the major exceptions where parties will not be bound by oral contracts:

1. Contracts that can't be performed in one year must be in writing.  For example, if Mr. A hires Mr. B to work at his company for two years, the employment contract must be in writing.   

2. Contracts for the sale of real property.  If Mr. A wants to sell his house to Mr. B, the contract must be in writing.

3. The Uniform Commercial Code provides that contracts for the sale of goods for over $500 must be in writing.

What if there is a promise without consideration?

A few students asked a variation of the following question: what if someone makes a promise but there is no consideration - - is this ever a contract?  No, it is not a contract.  But in some circumstances a party can sue based on a theory of promissory estoppel. Instead of consideration, we have reliance and an injury.

There is some variation from state to state but to recover based on promissory estoppel the plaintiff must prove that he reasonably relied on a promise made by the defendant and that an injury resulted from the plaintiff breaking his promise.  The defendant should reasonably have expected the plaintiff to rely on the promise.  Especially where a serious injustice occurred because the defendant broke his promise, a court is more likely to allow a plaintiff to sue based on promissory estoppel.  Below is a video discussing promissory estoppel.




Contract Law Videos

I started a contract law playlist on my YouTube page.  Please stop by and let me know what you think.  More coming soon to that playlist and others.

Legally Insufficient Consideration: Past Performance

A student wrote: "I don't understand about the 'past performance is not consideration.'"

Every contract needs consideration.  Generally speaking in a  bilateral contract each party must promise to do something that he was not already required to do, or to agree to not do something he was allowed to do.  For example, A promises to pay B $100 if B agrees to clean A's car.  B agrees.  Now we have legal  consideration.  Both parties are promising to do something they otherwise would not be required to do.  

But something a person already did - - an act prior to negotiating the contract - - is not considered consideration.  This is called "past performance" or "past consideration".  If A cleans B's car and B says, "Great job!  I'll pay you $50" there probably is not a contract.  B doesn't have a contractual obligation to pay A. Why?  

Because A's act occurred in the past.  A & B never agreed that that A should clean B's car.  B might be grateful and might feel a moral obligation towards A but there is no contract.  To have legal consideration the parties must reach an agreement as to what each party will give and each party will get.      

Why is consideration sometimes called bargained for detriment?

We know that a contract requires an offer, acceptance, and consideration.  Loosely speaking, consideration is where one party gives something in exchange for getting something from the other party.  Sometimes consideration is called "bargained for detriment."  

Here is one way to think about why we call consideration "bargained for detriment":

By "bargain" we mean two people agree on something.  "Detriment" here means a party agreeing to do something he doesn't have to do or agreeing to not do something he is allowed to do.

By way of example, normally I don't have to clean your car.  Let's say you promise to pay me and I agree to clean your car.  Cleaning your car is "detriment" because that is not something the law normally requires me to do.  But I agreed to something that I don't have to do in exchange for your promise to pay me.

 So we bargained for (negotiated) my agreement to do something that I normally don't have to do (detriment).  Now we have consideration.  

On the other hand, let's say you promise to buy me dinner because I was a nice person last week.  In this case, I haven't agreed to do or not do anything.  There is no bargained for detriment and you do not have a contractual obligation to buy me dinner.