Contracts Class Notes 10/17/03


Restatement Second § 74


This section is on settling legal claims as a basis for consideration.


If someone asserts a claim against you, one way to get out of trouble is to agree to settle the claim.  Dropping the lawsuit could be consideration for the promise of money to settle, as long as the lawsuit is valid.  In that case, there is a detriment to the promisee and a benefit to the promisor.  That’s eazy.


What about when the surrendered claim was invalid?  Why would we allow the surrender of nothing to amount to consideration?  If you have a legitimate settlement of a dispute, we have an agreement that we want to enforce as a matter of policy.


On the other hand, if the claim is more or less extortionary, we’re not going to enforce an agreement to settle it.


So surrendering a claim is not consideration unless:


·        The claim was doubtful because of uncertainty as to law or fact, or

·        The claimant who is going to drop the suit thinks that they have a good claim (i.e. they’re not an extortionist).


In Duncan, even if you have an honest belief in the claim, it won’t be consideration because it was not, in fact, doubtful.  We have moved from this tougher test to one (in the Restatement) that protects the freedom to contract more at the expense of enforcing particular unjust settlements.


The second bit of the Restatement § 74 says if you actually write down your promise to drop your claim then this writing makes for valid consideration if that writing was bargained for.


This is often about title claims to real estate.  If you believe you own a piece of land free and clear, you might want to get somebody to sign a piece of paper that says that “yeah, the land is yours”.  What we can do is get that somebody to sign a “quit-claim deed” that says as much.  If we promise to pay that person for this deed, we can be held to it because the quit-claim deed is valid consideration.


So somebody might say, “Please sign a paper that says you won’t bug me anymore.”  If they promise money in exchange for such a paper, that promise will be enforced.


The volunteer and quasi-contracts


Beth Brat comes and paints the house numbers on your curbstone.  After she’s done this, she comes to your house and asks you to pay $25.  You don’t have to pay.


There is no ground for requiring payment for services you didn’t ask for.


On what bases might we require payment?


·        If you expressly promised to pay for a service, you’ll have to pay.

·        If you have a contract implied-in-fact, like hailing a cab, you’ll have to pay.  The promise to pay is implicit in the circumstances.  You know, or certainly should know that you’re asking for a service from someone who is in the business of charging for that service.


In the hypothetical above, there was no contract implied-in-fact.  We might call Beth a “volunteer” or “officious intermeddler”.  She goes “wee wee wee all the way home”.  There’s nothing doing for her.


However, we will impose quasi-contracts when someone is unjustly enriched.  In the case of Beth, the homeowner is not unjustly enriched.


If the rule were otherwise, we would just go around heaping benefits on people and then send them a bill.


You don’t have to change many of the facts before you’re going to have to pay.  Let’s say you see Beth start to paint the number on your curbside.  If you know she’s there and don’t tell her to stop, you’re going to have to pay her.  If you know it’s going on and have the chance to say “cut that out”, you have to do so or else there will be a contract implied-in-fact.


When we imply a contract in fact, the promise implied is for a reasonable charge.  There may be some variations as to the definition of a “reasonable charge”, but we’ll accept the regular charge of the provider of the service as long as it’s not way out of line.


“Cleaning up other people’s messes is what lawyers do.”


Martin v. Little, Brown & Co.


Stuff like this happens all the time to any sizable business enterprise.  They’ll say stuff like “I can tell you how to make more money.”  Big companies try to make it very clear that they won’t take any unsolicited suggestions and they won’t compensate for them.  If you make an unsolicited suggestion, you’ll be told to “mind your own business and stop being an officious intermeddler”.


This case has some good stuff about contracts implied-in-fact and quasi-contracts.


Collins v. Lewis


The deputy sheriff seized some cows that belonged to Kinne.  Kinne said that he didn’t own the cows.  The deputy sheriff realized his error and found that they belonged to the defendant.  The defendant didn’t have room to keep the cows.  The defendant was told that the plaintiff would keep the cows for him at the defendant’s expense.  The plaintiff in fact kept the cows for 38 days until the defendant sold them.  It was held that there was a quasi-contract under which the defendant owed the plaintiff for boarding the cows.


If the defendant here had totally abandoned the cows (surrendered ownership) and decided to have nothing more to do with them, there would not have been a quasi-contract and the defendant wouldn’t have owed the plaintiff anything.


Say the defendant said that he would not pay the plaintiff, but then later the defendant recovered the cows by replevin and sold them to a third party.  Does the defendant have to pay the plaintiff’s expenses?  If the defendant gets the benefit of the cows having been kept, we might find that the defendant has been unjustly enriched.  We may say that the defendant’s conduct speaks louder than his words.


A hypothetical on promises grounded in the past


Say you were walking by a river and you saw a drowning man.  The man couldn’t swim, but you could.  You pull the man out of the river and save his life.  You discover that his name is Dr. Moneybags and he is rich, rich, rich!  You figure out what his projected future earnings would be and you realize that you’re responsible in some sense for his future earnings.  If you send Dr. M a bill for $7 million, does his have to pay?  Was anything traded for something else?  Not really.  For there to be a consideration, what needs to happen?  You would have to bargain while he’s drowning.[1]  That didn’t happen.


This is what we call past consideration.  The first thing to notice about past consideration is that it isn’t consideration.  There is no trade or exchange in the cases that follow.  In the Restatement, when you look at the material on consideration, it goes over both contracts with consideration and contracts lacking consideration.


In Restatement § 86, they say we will sometimes enforce a promise on the basis of a benefit previously received.


The thing about the hypothetical above is that Dr. Moneybags didn’t promise you any money!  We know, therefore, that we cannot recover on the basis of an express contract.  Can we recover on the basis of a contract implied-in-fact?  Is there any way to infer a promise on his part?  Is there any unjust enrichment?  There’s enrichment, but it’s not unjust at all.  I’m a Good Samaritan, an altruist, but also a volunteer and an officious intermeddler who doesn’t deserve to get anything.


Distinguish this case from the one mentioned in “Case 3” on p. 113 in Dawson.  Dr. Smith treats Jay Walker, who was hit by a car and never regained consciousness before he died.  There is no express promise to pay Smith for his services, however, there is a contract implied-in-fact because Jay Walker has been unjustly enriched and his estate must make restitution to Dr. Smith.


The difference here is that a doctor charges for his services; that’s the expectation.  Also, there is a public policy consideration: we want doctors and hospitals to render these services when they are needed, so we allow them to get paid, even out of the estate of the deceased.


Say Dr. Moneybags, just after you drag him out of the river, says “next week, I’ll pay you a million dollars.”  Now we do have a promise.  If we go and sue him next week for the $1 million, will we be able to recover?  There is no “garden-variety” consideration here.  If we’re going to recover, it will have to be on a different theory.


It is very rare that we will enforce a promise based on moral obligation without any valid consideration.


Mills v. Wyman


Here, there was no enforcement.  The Restatement § 86 says that the result in this case was right.


One thing here that pushes against enforcement is the fact that the promisor got no benefit.  The benefit went to the son, but the father was the promisor.  Also, it was a good benefit, but the son’s life was not saved.  It’s not as big as the benefit of having your life saved in Moneybags and Webb.


In Mills, the promise was what we might call a “bereavement” promise, made pretty much right after the father found out that his son had died.  This is a circumstance in which we will tend to allow people to change their minds.


Webb v. McGowin


This is the “human rudder” case.  Webb was injured.


In both Webb and the Moneybags, the promisor got a big benefit by having his life saved.  That pushes toward enforcement.


Here, there was enforcement and the Restatement § 86 affirms that this was right, too.


This case is very strong on its facts for enforcement.  The promisor performed his promise for eight years and the performance stopped only upon the promisor’s death.  The heirs decided to stop performing, and they were held liable.


In this case, the promise was made 28 days after the life-saving event.  This was enough time to ponder the surrounding facts and make this a deliberate promise.  In Moneybags, the promise is made very shortly after the doctor’s life is saved.


Webb is full of facts that push toward enforcement, but you don’t have to change a heck of a lot of facts to get a different result.


In Harrington v. Taylor, the defendant was attacked by his wife with an ax and the plaintiff saved his life.  The defendant promised to pay the plaintiff, and paid a little but not more.


Should these promisors be allowed to change their mind?


Next Wednesday, we’ll look at Kirksey.  How would it be decided today based on the Restatement of Contracts?


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[1] “Glug, glug.”