Sarah\'s House Caught on Fire,

¶ … Sarah's house caught on fire, her neighbor Odessa helped extinguish the fire. Sarah promised to pay Odessa $1,000. Odessa cannot enforce this promise if Sarah fails to pay. Sarah's promise to pay was given after Odessa extinguished the fire; therefore there was no consideration for the promise. Consideration is the price to obtain a promise and past performance does not constitute consideration in an uncomplicated transaction.

Bogart applied to a bank for a loan to pay debts, which he owed to the bank. The bank's employee told Bogart that he would have something for him in a couple of days. Bogart's application was denied. The bank sued Bogart for his debts and Bogart filed a promissory estoppel counterclaim, on the grounds that the bank broke its contract to make him a loan. Bogart's counterclaim was invalid. It was clear that Bogart and the bank's employee (who was acting as the bank's agent) did not have a meeting of the minds regarding the terms of their oral agreement. The employee was referring to the fact that Bogart would have a decision in a couple of days, but Bogart believed he would receive the loan in a couple of days. Absent a meeting of the minds, there is no contract.

13. After their mother's death, the Smith children gave their father their interest in the mother's estate in return for $1 each and his promise to leave the property to them upon his death. He died and his second wife refused to turn over the property, claiming the agreement was invalid due to lack of consideration. However, there was sufficient consideration to make the agreement binding. At the time of the contract, the children and the father could have ascertained the exact dollar amount of the property in question, which the consideration, both from the children and from the father, a non-trivial amount and validated the contract.

14. A radio station promised to give any listener who noticed that it failed to play 3 songs in a row $25,000. Jennings noticed it play only two songs in a row and sought the money. The station was not liable for the amount, despite its offer, because Jennings offered no consideration for their bargain. Merely listening to a radio station was not sufficient to constitute consideration for a $25,000 playoff.

Chapter 16

7. Siddle bought fireworks from Red Devil. Both parties were aware that because Siddle did not have a license, the sale was illegal. Siddle did not pay for the fireworks and Red Devil sued for the cost. Siddle's defense was that the contract was illegal. Siddle's defense was invalid. One who seeks to invalidate a contract on the grounds that the bargain was illegal can not have been a willing participant in the illegality.

11. Vodra signed a 3-year non-compete agreement when he went to work with American Security Services. Vodra left ASS and began soliciting ASS's customers, which directly violated the terms of the agreement. ASS sued to enforce the restrictive covenant and Vodra resisted on the grounds that the agreement was illegal. Vodra was incorrect. Non-competition agreements are legal and Vodra received consideration (obtaining employment) in return for signing the non-competition agreement.

Chapter 17

2. Martin entered into an oral contract with Cresheim to work as its manager for two years. Cresheim wrote a letter outlining the terms of the parties' agreement. Cresheim refused to recognize the contract and Martin sued for breach of contract. The contract was binding. In order to constitute the writing necessary to prove a contract, a writing merely has to describe the terms of an agreement between the parties and be signed by the party against whom enforcement is sought.

14. At a golf tournament, a car dealership offered a car as a prize to anyone making a hole-in-one on the 8th hole. The golf course only had 9 holes, so an 18 round game consisted of playing the holes twice, but with different tees or locations for the second go-round. Grove made a hole-in-one on the 8th hole, the second time through. The dealership refused to give him the car. Judgment should be for the dealership because the prize was offered as consideration for a hole-in-one on the 8th hole. The offer was to be interpreted according to the common usage of the terms, and playing 18 holes on a 9-hole course, all golfers would be aware that the second 8th hole was actually the 16th hole. Furthermore, conditions for the hole materially changed between rounds, which meant that the consideration given by Grove (hitting a hole-in-one from a certain location) materially differed from the terms of the dealership's offer.

Chapter 18

6. Washington bought a car from Smithville, who assigned its interest to Rustic. The car was a lemon and Washington sought to cancel the contract. Rustic refused payment, stating it had not been at fault. However, as Smithville's assignee, Rustic was responsible for Smithville's liabilities, as well as being entitled to the benefit of Smithville's prior contracts. Washington should be able to recover from Rustic.

8. Lone Star agreed to loan money to a land company whenever the land company requested, to pay off the land company's short-term debts. The land company never requested the money and one of its short-term creditors, Exchange Bank, sued Lone Star for breach of its promise on the grounds that Exchange Bank was a third-party beneficiary. Exchange Bank was incorrect. In order for a third-party beneficiary to be able to sue for breach of contract, the contract had to have been entered into specifically to benefit the third-party; knowledge that a third party would benefit is not sufficient.

10. Zoya rented property from Peerless. A condition of the lease was that Zoya maintain liability insurance. Caswell was injured on the property and threatened to sue Zoya and Peerless on the theory that she was a third-party beneficiary of the lease requirement. Caswell was incorrect. The insurance lease requirement was to protect Caswell from defending against tort lawsuits while Zoya leased the property. Caswell could recover from the parties under tort law, but not in a contract lawsuit.

Chapter 19

2. Grattan contracted to build a $250,000 house and garage for Boris. Grattan did not build a tool shed, as specified in the contract, and Boris refused to pay him. Grattan sued for breach and Boris defended on the grounds that performance was incomplete. Boris was incorrect. For performance to be considered complete, a court looks to whether a party substantially performed the terms of the contract. Compared to the construction of a house and garage, the construction of the tool shed was not a material term of the contract and Grattan's failure to construct it did not free Boris of his contractual liability. However, Boris could sue Grattan for breach and receive the part of the $250,000 that was allocated to the tool shed.

4. Metalcrafters entered into a contract with Lamar for the design of a new product. Metalcrafters' head of research, Samet, died after the contract was formed and Metalcrafters failed to deliver the product. Lamar sued for breach and Metalcrafters defense was that the contract was discharged by Samet's death. Metalcrafters was incomplete. Contracts can be discharged by the death of a party, but Samet was not a party to the contract. Therefore, unless Samet's participation in the production of the product was a specific term of the contract, the contract could not be discharged by his death.

Bloom received a scholarship from the Dept. Of Health to increase the number of doctors serving rural area. In return, Bloom was to practice for four years in a rural area. Bloom disliked his assignment and asked the Dept. Of health for a repayment schedule. When one was not provided, Bloom tendered two checks, totaling $15,500 and marked "final payment." The Dept. did not cash either check and sued Bloom for $480,000, the value of the assistance provided. Bloom claimed that the liability had been discharged by an accord and satisfaction. Bloom was wrong on several counts. First, marking a check "final payment" is not sufficient to discharge on of one's obligations to another. Second, even if it were, the Dept. did not cash the check.

13. Ellen signed promissory note one when she borrowed money from the bank. Ellen defaulted on her obligations under note one. The bank paid note one and entered into a second promissory note with Ellen. Ellen defaulted under note two and the bank brought suit under note one. Ellen's defense was that her obligations under note one had been discharged. Judgment should have been for Ellen. By paying the debt due under note one, the bank satisfied Ellen's obligations under that note. A debt, once discharged, cannot be revived. The bank had a remedy against Ellen, but that remedy was under the note two.