Signature Supply Agreement Made Easy

Signature supply agreement

our next issue then is consideration and so once we have found there's offer and acceptance also known as mutual assent the question will be whether or not the court will enforce this because we need to have a bargain for exchange under the doctrine of consideration to constitute consideration a performance or return promise must be bargained for and now we talked about bargain for does not necessarily mean there was a bargaining that happened that we you know haggled it's not haggling it's that we are getting something in return and so this very simple chart is meant to illustrate the idea that the promise is made to receive the consideration the consideration is given to receive the promise and so this is an exchange of value such that the parties intend to be bound by terms of this agreement so bargain for means sought by the promise or in exchange for the promise given by the promisee in exchange to that promise and we have this circular or cyclical concept here with consideration being bargained for by the way what is it means a bargain for performance performance as an act other than a promise it includes a forbearance a not doing something or the creation modification or destruction of a legal relation and so let's say you are we've been talking about selling my car for quite some time now and you're in possession of the car and you actually have the keys you've been driving the car and I say are you enjoying the car would you like to buy it yes I'd like to buy the car for ten thousand dollars all right so what can I do to actually effectuate that I can then give title right and so there I've modified the legal relationship I've given up the ownership of the car and and that can constitute a performance another thing to remember about consideration it can flow to a third party a third party beneficiary is a is a valid recipient of consideration and so we have a case for that we also need to remember that it doesn't matter if consideration is the only motivation for engaging in a bargain it simply needs to be a motivation for engaging in the bargain so the fact that what is bargained for does not itself only by itself induce the making of a does not prevent it from being consideration likewise the promise does not have to be given solely to get the consideration and so all we need is that the consideration and the promise our motive a motive or an inducing cause of each other does not have to be the sole motive or soul inducing cause on either and our we saw the bargain Theory play out in the case of United States versus matters and in short the way this case played out Betty Mathers signed a guarantee to a loan agreement even though she didn't have to she signed even though she shouldn't have to because she had gotten married to mr. Meadors Melton Mathers Mountain Meadows after he had already secured a loan from from Barger's Bill Bank who was later backed by the SBA that's how they came into the picture here but she signed a contract even though she didn't need to and in fact that signature was not bargained for and so there was not consideration because it did not induce the SBA to guarantee the loan or the original bank to lend the money they were going to do that anyway and since they're gonna do it anyway it was of no moment that she signed or didn't sign and so accordingly that was not consideration it was not bargained for on the other side it was gratuitous and therefore it is not enforceable against her we also saw in bear for pen O text kind of a definition of the bargaining process and the court kind of has also paraphrased some of the things I've spoken about here in this case bear least some gas stations to a guy named Kemp and Kemp then tried to then Kemp purchased a company called Webb oil from pano Tex and now owes a bunch of money to pen attacks and in the process is unable to meet his obligations to bear and so allegedly Penna Texans lured a bear saying we're gonna help Kemp pay you the problem is that bear didn't offer anything in return for that and he didn't even ask Penta text for that guarantee they sort of offer that gratuitously he claimed that he did not sue Kemp which I guess would have been a problem for Penn attacks because of this promise but in fact there was no evidence that that was ever discussed that there was ever any consideration for that promise the promise not the suit camp was never made to pen attacks it was never bargained for requested by pen attacks and therefore it did not constitute consideration for the promise such that there was one of pen attacks to pay Kemp's bill Monica gets the concept of whether a third party can receive the consideration and yes a third party can Janis loaned her daughter and nephew $90,000 and secured it by a mortgage on property owned by their company later the company owned by the daughter and the nephew needed more money so they went to Northwest bank and Northwest Bank said we will only give you more money if we can have priority on that loan and so Janice had to then subordinate her rights to the loan she signed a subordination agreement my Nicci Northwest then provided the the money to the nephew and the daughter and and she claimed that there was no consideration because she didn't receive any benefit but we're not going to apply the benefit detriment test we're going to look at there is a bargain for exchange and yes there was a bargain for exchange Janis promised a subordinator loan in return for the bank promising to lend money to her daughter and nephew and although that consideration flowed to a third party and not to Janis directly she did bargain for it and consideration to a third party is good and valid consideration what is not good invalid consideration however his nominal consideration and in the case of schnell versus now we have a case of nominal consideration Theresa schnell died without owning any property in her own name and her will therefore was ineffective because she had no property to bequest but her loving husband agreed to pay the beneficiaries $200 each one of those being now and other named parties in the case so he promised to do this and in order to make it binding the beneficiaries had a return promised to pay the husband one cent and so effectively it looked like this their promise was to pay $200 on the one hand their promise to pay one cent on the other is the penny consideration no this was not intended to be consideration the Court sees this as a sham this is mere nominal consideration and so it does not count the other thing the parties tried to raise is that the consideration that mr. schnell gave was the love and affection he bore his deceased wife and this was not consideration either because here that was not bargained for by the beneficiaries it was not for any value received again it was merely a gratuitous promise in this case which leads us then to our common problems with consideration we have several five in fact common problems that come up in consideration those are conditional gifts which we see in Section 71 illusory promises section 77 worthless settlement agreements 74 contract modifications 73 and 273 and discharge of duties so I'll go through all of those a conditional gift is an action or forbearance that is not sought in exchange it is a mere requirement to obtain this gift and the famous example here is Williston and the and so Williston the famous law professor has this example that a benevolent man sees a on the corner and says if you go to the store on the corner you may buy a coat on my credit now is going to the store going to be consideration by the and the answer is no because the benevolent man is not looking for the to take a walk but rather is looking to give a gift in order to get that gift he simply has to go to the store and so we distinguish between conditional gifts and and promises supported by consideration in this way we have a more complicated case in our gravel-pit case Tomic sac versus coochie king county highway department and here we have some neighbors in this community in northern minnesota who are near a gravel pit which is filling with water and they ask the city to help the city says we will furnish a pit a pump to pump water out of the pit if you promise to maintain it and fuel it now they remove the pump at some point and then the gravel pit proceeded to overflow and damage the property of the Tom sacks and the Tom sacks then sue saying this was a promise supported by consideration the question is was it the answer is no the court found that the providing gas and fuel to the pump was simply a condition needed to get the benefit of the pump it was not possible to provide the pump and the oil so the city provided the pump gratuitously and for the pump to function they had to provide the oil and this was a closed case than I think you could see reasons why a county would not want a gravel pit to overflow and flood and damage property and property values but here the court found that there was no consideration or at least there was not necessarily consideration for this case and so it could not proceed at the summary judgment phase the problems to furnish the pump was it supported by I promise to waive liability was it supported by problems to fuel the pump we're gonna have to punt that back to a jury to see whether or not that's the case it was not necessarily the case there's at least an open question of whether or not that was a gratuitous promise our conditional a conditional promise we then looked at pennsie supply versus American Ashby cycling so a school district entered into a construction contract they want to pave a road and they're going to get this material called treated ash aggregate or AG right which is made out of hazardous waste and so a company is agreeing to remove the hazardous waste on the one hand and then to and to deliver it and so the question here is whether or not the per the removal of hazardous waste is going to be simply a condition for getting the AG right or something more and here the court seems to come out that it should be remanded for further proceedings because the promise to haul away the AG right was not necessarily unsupported by consideration either American ash had excess material it was probably not giving that material away as a gift but rather in return for having it hauled away in fact we might not even call this a good we could call it a bad it had negative value so the removal of that could be consideration for the provision of it and what's important here as we'll see next semester is this would create a contract for a sale of goods sales of goods have implied warranties of merchantability and here the asphalt cracked and so the contract was very important even though it was not for value now that warranty of merchantability meant that if this was in fact a contract nc would have some recourse our next situation where we have a lack of consideration is illusory promises these are words of promise which by their terms make the promises performance entirely optional and this came up in the quest our case and quest star we have a contract to install flooring and it had this cancellation clause and so the court says well okay how about the cancellation clause does that mean if I can cancel at any time for any reason or no reason do we really have a contract at all and the answer is in short yes because the contract is subject to a duty of good faith and so once we find a contract was formed the parties have a duty of good faith to each other you cannot cancel in bad faith so there was some limitations on cancellation and therefore there was in fact an agreement to pay on the one hand and to install carpet on the other that was not illusory settlement of claims is our fifth our third issue where consideration is sketchy and this is when claims are doubtful because of uncertainty in the law in which case the settlement of that claim will be enforceable as consideration or if the surrendering party believes the claim to be valid even when it is not the Restatement is pretty liberal about this and so in general settlements are enforceable so long as either the claim is potential under the law not really a good claim but not a total loser or the party really believes that they have a claim and in those cases the settlement will be enforceable and we have an illustration where we have a will calm the whiny son and he promises not to sue his dad for not giving him money and his dad doesn't like the whiny son and so he's giving you no gifts to the other children the Hwanhee son says I'm gonna sue you dad for not giving me gifts now the question is whether or not the whiny son actually believes he has basis for a lawsuit if in fact he knows that he can't sue his father for not giving him a gift and he knows he has no basis for this lawsuit then he's not going to actually have a promised a return promised from his father is not going to be consideration for his promise not to sue he's not really giving up anything and he knows it all right in national and diverse national byproducts we have a settlement because an individual lost their right leg and a job-related accident and then there is a promise you employ Dyer the person who lost their leg for life in exchange for promised not to sue for the injury now as a legal matter this claim turned out to be completely invalid and so the question is going to be whether or not he can prevail it is in fact a completely invalid claim he had no rights to damages for this claim now we have two different viewpoints one from Corbin giving a subjective view and Corbin says that giving up an unfounded claim counts as consideration so long as the claimant asserts that in good faith that accords with the Restatement williston who takes the objective view and does not accord the Restatement set in this case where Behrens from a suit that is clearly invalid will not constitute consideration so into whether or not Dyer will prevail in receiving this you know promise to be enforceable will depend on either there has to be a basis for the lawsuit or he has to have a good faith belief that this suit is enforceable and being a Corbin jurisdiction not a Williston jurisdiction which hopefully for us is a restatement jurisdiction okay fourth topic is contract modification contracts can be modified at any time and they do need to be supported by new consideration when they are modified however the Restatement has loosened up on this a little bit and said that a contract can be a promise modifying a contract is binding if the modification is fair and equitable and/or if it was provided as something that can be modified by statute you can look at the UCC for areas that can be modified by statute or if the modification is fair or equitable so we see that the second Restatement has made it a little easier to modify contracts than just a strict rule that says they always need consideration so sometimes a modification without consideration is enforceable look at section 89 for modification we should be concerned about modification because of the economic concept of a holdup problem once the parties are already in a contractual relationship one party can effectively hold up the other because they are in a power or a dynamic position where they have them quote unquote over a barrel and we saw that in Alaska Packers it's an image of the Alaska Packers Association 21 seamen contracted to sail with Alaska Packers to work as fishermen well when they arrive if they all colluded and agreed to demand double their money and at that point it's a short season if you don't sail you lose everything and so the Alaska Packers are domenico you know who was going to manage the the boat was going to be completely out he had no choice he was over a barrel they held him up he made this modification it was not fair and reasonable was not justified it was not in good faith and it was therefore not enforceable all right angel versus Murray got into the pre-existing duty rule and in angel vs. Murray we had a contract for garbage collection and this is similar to the alaska packers case except there were changed circumstances the cost of collecting this garbage increased by unforeseen circumstances unforeseen to both parties because the number of houses to be collected from went up dramatically much more than was predicted and if they predicted twenty additional homes and instead there were four hundred additional homes so what we see here is that courts will sometimes permit the modification of a contract they will be soft about the pre-existing duty rule persistent or pursuant to Restatement section eighty nine when it's fair and reasonable and the UCC goes even farther and in to 209 says a contract does not need consideration to be modified it can be modified so long as it was modified in good faith and what does that mean well fair and efficient modification our factors are going to look at unanticipated difficulties voluntary agreement on both sides and the lack of coercion we're trying to avoid this holdup problem when you have sown over a barrel right and then they're forced into a situation so when the contract modification is voluntary will usually be enforced and finally and similarly we have the concept of discharge of Duty where the obligor does not have to perform they essentially tear up the contract and so we saw that there are five of those forms of discharge substitute perform and substitute contract Novation according satisfaction and rescission going through those briefly so a substitute performance as one party offers a different performance from the original one substitute contract is an entirely different contract with the same parties an ovation is going to be a contract that included one party will substitute a different party a third party a contract of rescission then would then be a agreement in the future to discharge a contract and accordance satisfaction is the concept that a prior contract will be enforceable until the new contract is performed and bird solver saucier came up with the came to the idea of whether or not something was a substitute performance or an accord and satisfaction and here I think the court once again got it wrong because they did not seem to understand that there's a concept of time value of money but effectively a party agreed to take less money because of the concept of time value of money although it was more upfront and the court found that this was a substitute performance although I think the better interpretation on that one was it was an accord and satisfaction so briefly looking at the chart that we've put together for this you can use this as a reference of whether or not as you can see consideration is required in all these cases how we categorize it depends on what's discharged when those duties are discharged and whether or not we have third parties and so that rounds out consideration