Quiz 12: Consideration

Business

The defendant argued that the promise to renew the lease was not sufficiently definite to support a claim for promissory estoppel. How did the court respond to this argument

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Essay

Promissory Estoppel: In the 1861 Group , LLC v. Wild Oats Markets , Inc., 728 F.Supp.2d. 1052, 1059 (E.D.Mo. 2010), the trial court dismissed the count for promissory estoppel because the promise to renew the lease was not sufficiently definite to support a claim for promissory estoppel. The appellate court denied the motion to dismiss the promissory estoppel because the plaintiff alleged all of the elements for promissory estoppel. A promissory estoppel is made when parties who have reasonably and substantially relied on the promise of another to their detriment they can obtain some measure of recovery to avoid injustice. The required elements for promissory estoppel are: • A clear and definite promise made. • The promisee must justifiably rely on the promise of the promisor. • That reliance is reasonable and substantial. • Justice will be served by enforcing the promise.

Q 2

Preexisting Duty Tabor is a buyer of file cabinets manufactured by Martin. Martin's contract with Tabor calls for delivery of fifty file cabinets at $40 per cabinet in five equal installments. After delivery of two installments (twenty cabinets), Martin informs Tabor that because of inflation, Martin is losing money and will promise to deliver the remaining thirty cabinets only if Tabor will pay $50 per cabinet. Tabor agrees in writing to do so. Discuss whether Martin can legally collect the additional $100 on delivery to Tabor of the next installment of ten cabinets.

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Preexisting Duty: • A preexisting duty occurs when consideration is not legally sufficient if one is either by law or contract under a preexisting duty to perform the action being offered as consideration for a new contract. • Here Marteen tells Tabor that due to economic reasons he will not fulfill his end of the contract unless Tabor pays more than the contracted amount. • Marteen's unforeseen difficulty does not present a defense to preexisting duty because the type of risk that Marteen assumed when he made the contract was typical for his business. • Unforeseen difficulties that are the types of risks ordinarily assumed in business do not qualify for an exemption to preexisting duty.

Q 3

Suppose that the plaintiff's costs in accommodating the defendant's request had been $5,000 instead of $ 1,350,000. Would the outcome of this case have been any different Why or why not

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Promissory Estoppel Consideration: • In the 1861 Group , LLC v. Wild Oats Markets , Inc., 728 F.Supp.2d. 1052, 1059 (E.D.Mo. 2010), if the amount of damages claimed by the plaintiff had been reduced to $5,000 instead of the alleged $1,350,000 the outcome would have been the same because the elements for promissory estoppel are still present. The reduced damages amount only impacts the amount of the award that could be granted. • The defendant made a clear and definite promise that the plaintiff justifiably relied to their detriment and justice could only be served by enforcing the promise to the extent of the damages incurred. If the defendant would incur costs in excess of the $5,000 in damages to keep the promise, then promissory estoppel would not apply. • The plaintiff would still be entitled to an award of damages; however the promise would not be enforced to the detriment of the defendant if it gives the defendant an undue burden. • The court would decide an amount that would constitute and undue burden. If it cost the defendant more than twice the damages alleged by the plaintiff, then it is likely that the court will not enforce the promise.

Q 4

QUESTION WITH SAMPLE ANSWER: Preexisting Duty. Bernstein owns a lot and wants to build a house according to a particular set of plans and specifications. She solicits bids from building contractors and receives three bids: one from Carlton for $160,000, one from Friend for $158,000, and one from Shade for $153,000. She accepts Shade's bid. One month after beginning construction of the house, Shade contacts Bernstein and informs her that because of inflation and a recent price hike for materials, he will not finish the house unless Bernstein agrees to pay an extra $13,000. Bernstein reluctantly agrees to pay the additional sum. After the house is finished, however, Bernstein refuses to pay the extra $13,000. Discuss whether Bernstein is legally required to pay this additional amount.

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Q 5

Consideration Daniel, a recent college graduate, is on his way home for the Christmas holidays from his new job. He gets caught in a snowstorm and is taken in by an elderly couple, who provide him with food and shelter. After the snowplows have cleared the road, Daniel proceeds home. Daniel's father, Fred, is most appreciative of the elderly couple's action and in a letter promises to pay them $500. The elderly couple, in need of funds, accept Fred's offer. Then, because of a dispute between Daniel and Fred, Fred refuses to pay the elderly couple the $500. Discuss whether the couple can hold Fred liable in contract for the services rendered to Daniel.

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Q 6

Illusory Promises Costello hired Sagan to drive his racing car in a race. Sagan's friend Gideon promised to pay Sagan $3,000 if she won the race. Sagan won the race, but Gideon refused to pay the $3,000. Gideon contended that no legally binding contract had been formed because he had received no consideration from Sagan in exchange for his promise to pay. Sagan sued Gideon for breach of contract, arguing that winning the race was the consideration given in exchange for Gideon's promise to pay. What rule of law discussed in this chapter supports Gideon's claim

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Q 7

Accord and Satisfaction Merrick grows and sells blueberries. Maine Wild Blueberry Co. agreed to buy all of Merrick's crop under a contract that left the price unliquidated. Merrick delivered the berries, but a dispute arose over the price. Maine Wild sent Merrick a check with a letter stating that the check was the "final settlement." Merrick cashed the check but filed a suit for breach of contract, claiming that he was owed more. What will the court likely decide in this case Why

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Q 8

Consideration In 1995, Helikon Furniture Co. appointed Tom Gaede as an independent sales agent for the sale of its products in parts of Texas. The parties signed a one-year contract that specified, among other things, the commissions that Gaede would receive. More than a year later, although the parties had not signed a new contract, Gaede was still representing Helikon when it was acquired by a third party. Helikon's new management allowed Gaede to continue to perform for the same commissions and sent him a letter stating that it would make no changes in its sales representatives "for at least the next year." Three months later, in December 1997, the new managers sent Gaede a letter proposing new terms for a contract. Gaede continued to sell Helikon products until May 1997, when he received a letter effectively reducing the amount of his commissions. Gaede filed a suit in a Texas state court against Helikon, alleging breach of contract. Helikon argued, in part, that there was no contract because there was no consideration. In whose favor should the court rule, and why [ Gaede v. SK investments, Inc., 38 S.W.3d 753 (Tex.App.-Houston [14 Dist.] 2001)]

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Q 9

Settlement of Claims Shoreline Towers Condominium Owners Association in Gulf Shores, Alabama, authorized Resort Development, Inc. (RDI), to manage Shoreline's property. On Shoreline's behalf, RDI obtained a property insurance policy from Zurich American Insurance Co. In October 1995, Hurricane Opal struck Gulf Shores. RDI filed claims with Zurich regarding damage to Shoreline's property. Zurich determined that the cost of the damage was $334,901. Zurich then subtracted an applicable $40,000 deductible and sent checks to RDI totaling $294,901. RDI disputed the amount. Zurich eventually agreed to issue a check for an additional $86,000 in return for RDI's signing a "Release of All Claims." Later, contending that the deductible had been incorrectly applied and that this was a breach of contract, among other things, Shoreline filed a suit against Zurich in a federal district court. How, if at all, should the agreement reached by RDI and Zurich affect Shoreline's claim Explain. [ Shoreline Towers Condominium Owners Association, Inc. v. Zurich American Insurance Co., 196 F.Supp.2d 1210 (S.D.Ala. 2002)]

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Q 10

CASE PROBLEM WITH SAMPLE ANSWER: Adequacy of Consideration. As a child, Martha Carr once-visited her mother's 108-acre tract of unimproved land in Richland County, South Carolina. In 1968, Betty and Raymond Campbell leased the land. Carr, a resident of New York, was diagnosed as having schizophrenia and depression in 1986, was hospitalized five or six times, and subsequently took prescription drugs for the illnesses. In 1996, Carr inherited the Richland property and, two years later, contacted the Campbells about selling the land. Carr asked Betty about the value of the land, and Betty said that the county tax assessor had determined that the land's agricultural value was $54,000. The Campbells knew at the time that the county had assessed the total property value at $103,700 for tax purposes. A real estate appraiser found that the real market value of the property was $162,000. On August 6, Carr signed a contract to sell the land to the Campbells for $54,000. Believing the price to be unfair, however, Carr did not deliver the deed. The Campbells filed a suit in a South Carolina state court against Carr, seeking specific performance of the contract. At trial , an expert real estate appraiser testified that the real market value of the property was $162,000 at the time of the contract. Under what circumstances will a court examine the adequacy of consideration Are those circumstances present in this case Should the court enforce the contract between Carr and the Campbells Explain. [ Campbell v. Carr, 361 S.C. 258, 603 S.E.2d 625 (S.C.App. 2004)]

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Q 11

Rescission In 2002, Farrokh and Scheherezade Sharabianlou were looking for a location for a printing business. They signed a purchase agreement to buy a building owned by Berenstein Associates for $2 million and deposited $115,000 in escrow until the time of the final purchase. The agreement contained a clause requiring an environmental assessment of the property. This study indicated the presence of tricholoroethene and other chemicals used in dry cleaning, and it recommended further study of the contamination. Because of this issue, the bank would not provide financing for the purchase. When the deal fell apart, the Berensteins sued for breach of contract. The Sharabianlous sought the return of their $115,000 deposit and rescission of the contract. The trial court awarded the Berensteins $428,660 in damages due to the reduced value of their property when it was later sold to another party at a lower price. The Sharabianlous appealed. Do they have a good argument for rescission Explain your answer. [ Sharabianlou v. Karp, 181 Cal.App.4th 1133, 105 Cal. Rptr.3d 300 (1st Dist. 2010)]

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Q 12

A QUESTION OF ETHICS: Promissory Estoppel. John Sasson and Emily Springer met in January 2002. John worked for the U.S. Army as an engineer. Emily was an attorney with a law firm. Six months later, John bought a townhouse in Randolph, New Jersey, and asked Emily to live with him. She agreed but retained the ownership of her home in Monmouth Beach. John paid the mortgage and the other expenses on the townhouse. He urged Emily to quit her job and work from "our house." In May 2003, Emily took John's advice and started her own law practice. In December, John made her the beneficiary of his $150,000 individual retirement account (IRA) and said that he would give her his 2002 BMW M3 car before the end of the next year. He proposed to her in September 2004, giving her a diamond engagement ring and promising to "take care of her" for the rest of her life. Less than a month later, John was critically injured by an accidental blow to his head during a basketball game and died. On behalf of John's estate, which was valued at $1.1 million, his brother Steven filed a complaint in a New Jersey state court to have Emily evicted from the townhouse. Given these facts, consider the following questions. [In re Estate of Sasson, 387 N.J.Super. 459, 904 A.2d 769 (App.Div. 2006)] (a) Based on John's promise to "take care of her" for the rest of her life, Emily claimed that she was entitled to the townhouse, the BMW, and an additional portion of John's estate. Under what circumstances would such a promise constitute a valid, enforceable contract Does John's promise meet these requirements Why or why not (b) Whether or not John's promise is legally binding, is there an ethical basis on which it should be enforced Is there an ethical basis for not enforcing it Are there any circumstances under which a promise of support should be-or should not be- enforced Discuss.

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