Business Law Chapter 9 Homework Oil Citation The Court Us Oil Adopted

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*** Chapter Outcome ***

List the essential elements of a contract.

C. REQUIREMENTS OF A CONTRACT

1. Mutual assent — The parties must show by words or conduct that they

have agreed to enter into a contract. The usual method of showing mutual

assent is by offer and acceptance.

2. Consideration — Each party to a contract must intentionally exchange a

legal benefit or incur a legal detriment as an inducement to the other party

to make a return exchange.

3. Legality of object — The purpose must not be criminal, tortious, or

against public policy.

D. CLASSIFICATION OF CONTRACTS

Contracts can be classified according to various characteristics, such as their

method of formation, their content, and their legal effect. These

classifications of contracts are not mutually exclusive.

*** Chapter Outcome ***

Distinguish among (a) express and implied contract, (b) unilateral and bilateral

contracts,

(d) executed and executory contracts

Express and Implied Contracts

Parties may indicate their willingness to enter into a contract either in words

(express) or by conduct implying such willingness (implied in fact). Both

are contracts, equally enforceable. The difference between them is merely

the manner in which the parties manifest their assent.

Bilateral and Unilateral Contracts

Valid, Void, Voidable, and Unenforceable Contracts

By definition a valid contract is one that meets all of the requirements of a

binding contract.

A void contract is an agreement that does not meet all of the requirements

of a binding contract; it is not actually a contract but merely a promise or

agreement with no legal effect.

A voidable contract, on the other hand, is a contract, but because of the

way it was formed, the law permits one or more of the parties to avoid the

legal duties created, making the contract unenforceable.

An unenforceable contract is a contract, but is unenforceable as there is no

remedy for a breach.

Executed and Executory Contracts

Where performance has been fully completed by all parties, the contract is

said to be executed. Executory contracts are those where performance

has only been partially completed or not begun. Thus, every contract that is

completely performed will have an executory and executed phase.

Formal and Informal Contracts

A formal contract is an agreement that is legally binding because of its

particular form or mode of expression. Informal contracts include all

contracts other than formal contracts.

*** Chapter Outcome ***

Explain the doctrine of promissory estoppel.

E. PROMISSORY ESTOPPEL

As a general rule, promises are not enforceable if they do not meet all of the

requirements of a contract. One exception is promissory estoppel.

Noncontractual promises are enforced under the doctrine of promissory

estoppel in order to avoid injustice, when the promise is made under

circumstances that should lead the promisor reasonably to expect that the

promisee would take a definite and substantial action or forbearance in

reliance on the promise and the promisee takes such action or forbearance.

NOTE: See Figure 9-4: Contracts, Promissory Estoppel, and Quasi-Contracts

CASE 9-3

SKEBBA v. KASCH

Court of Appeals of Wisconsin, 2006

2006 WI App 232, 724 N.W.2d 408; review denied, 2007 WI 59

http://scholar.google.com/scholar_case?

q=724+N.W.2d+408&hl=en&as_sdt=2,34&case=17278464423229519438&scilh=0

Kessler, J.

Skebba, a salesman, worked for many years for a company that

eventually experienced serious financial di0culties. Kasch, with his

brother, owned M.W. Kasch Co. Kasch hired Skebba as a sales

representative, and I over the years promoted him first to account

manager, then to customer service manager, field sales manager, vice

president of sales, senior vice president of sales and purchasing and

finally to vice president of sales. Kasch’s father was the original owner of

the business, and had hired Skebba’s father. Skebba’s father mentored

Kasch.

When M.W. Kasch Co. experienced serious financial problems in 1993,

Skebba was solicited by another company to leave Kasch and work for

them. When Skebba told Kasch he was accepting the new opportunity,

Kasch asked what it would take to get him to stay, and noted that

Skebba’s leaving at this time would be viewed very negatively within the

Over the years, Skebba repeatedly asked Kasch for a written summary

of this agreement; however, none was forthcoming. Eventually, Kasch

sold the business. Kasch received $5.1 million dollars for his fifty–one

percent share of the business when it was sold. Upon the sale of the

business, Skebba asked Kasch for the $250,000 Kasch had previously

promised to him, but Kasch refused, and denied ever having made such

an agreement. Instead, Kasch gave Skebba a severance agreement which

had been drafted by Kasch’s lawyers in 1993. This agreement promised

two years of salary continuation on the sale of the company, but only if

Skebba was not hired by the successor company and the severance

agreement required a set-off against the salary continuation of any sums

Skebba earned from any activity during the two years of the severance

agreement. Skebba sued, alleging breach of contract and promissory

estoppel.

The jury found there was no contract, but that Kasch had made a

promise upon which Skebba relied to his detriment, that the reliance was

foreseeable, and that Skebba was damaged in the amount of $250,000.

The trial court concluded that, based on its reading of applicable case

Kasch did not promise to pay Skebba more than Skebba would have

earned at the job Skebba turned down. Kasch did not promise that total

income to Skebba would be greater than in the turned-down job, no

matter how long he remained with Kasch. Kasch only promised that if

Skebba stayed, Kasch would pay Skebba $250,000 (the sum Skebba

wanted for his retirement), at the earliest of (1) Kasch selling the

business, (2) Skebba retiring, or (3) Skebba being lawfully terminated.

Skebba stayed. Kasch sold the business while Skebba was still employed

by Kasch. Kasch refused to pay as promised.

The purpose of promissory estoppel is to enforce promises where the

failure to do so is unjust. U.S. Oil Co., Inc. v. Midwest Auto Care Servs.,

1. Was the promise one which the promisor should reasonably expect

to induce action or forbearance of a definite and substantial character

on the part of the promisee?

2. Did the promise induce such action or forbearance?

3. Can injustice be avoided only by enforcement of the promise?

[Citation.]

The Ho#man court explains that the first two of these requirements

are facts to be found by a jury or other fact-finder, while the third is a

policy decision to be made by the court. [Citations.] In making this policy

decision, a court must consider a number of factors in determining

whether injustice can only be avoided by enforcement of the promise.

U.S. Oil, [citation]. The court in U.S. Oil adopted those considerations set

forth in the Restatement (Second) of Contracts §139(2), (1981):

(a) the availability and adequacy of other remedies, particularly

cancellation and restitution;

[Citation.]

The record does not indicate that the trial court here applied the

considerations our supreme court announced in U.S. Oil. Instead, the trial

court apparently relied on the Ho#man court’s discussion of various

damage theories that the court explained might be appropriate once the

determination had been made to enforce the promise by application of

promissory estoppel. * * *

* * *

A court, in fashioning a remedy, can consider any equitable or legal

remedy which will “prevent injustice.” * * *

As later commentators have noted, Wisconsin, with its landmark

[Citation.] In this case, Skebba performed—he remained at M.W. Kasch—

in reliance on Kasch’s promise to pay $250,000 to him if one of three

conditions occurred. Kasch enjoyed the fruits of Skebba’s reliance—he

kept on a top salesperson to help the company through tough financial

times and he avoided the damage that he believed Skebba’s leaving

could have had on M.W. Kasch’s reputation in the industry. Accordingly, to

prevent injustice, the equitable remedy for Skebba to receive is Kasch’s

specific performance promised payment of the $250,000.

The record in this case, considered in light of the U.S. Oil tests and the

jury’s findings, compels specific performance of the promise because

otherwise Kasch will enjoy all of the benefits of induced reliance while

Skebba will be deprived of that which he was promised, with no other

available remedy to substitute fairly for the promised reward. * * * In

short, every factor this court requires to be considered supports

* * * In this case, specific performance is the necessary enforcement

mechanism to prevent injustice for Skebba’s reliance on the promise the

jury found Kasch had made to him.

Accordingly, we conclude that the trial court erred in holding that

specific performance was not available on this promissory estoppel claim.

*** Chapter Outcome ***

Identify the three elements of an enforceable quasi contract and explain how it differs

from a contract.

F. QUASI CONTRACTS

A quasi contract is not actually a contract because it is based neither on an

express nor on an implied promise. The law imposes a quasi-contractual

CASE 9-4

JASDIP PROPERTIES SC, LLC v. ESTATE OF

RICHARDSON

Court of Appeals of South Carolina, 2011

395 S.C. 633, 720 S.E.2D 485

http://scholar.google.com/scholar_case?

q=720+S.E.2D+485&hl=en&as_sdt=2,34&case=460584843454513831&scilh=0

Konduros, J.

[On May 5, 2006, Stewart Richardson (Seller) and JASDIP Properties SC,

LLC (Buyer) entered into an agreement for the purchase of certain

property in Georgetown, South Carolina. The purchase price for the

property was to be $537,000. The buyer paid an initial earnest money

deposit of $10,000. The balance was due at the closing scheduled for no

later than July 28, 2006. Subsequently the seller granted the buyer

extensions to the closing date in return for additional payments of

$175,000 and $25,000, each to be applied to the purchase price. The

buyer was unable to close in a timely fashion, and the seller rescinded

the contract.

Thereafter, the buyer brought suit against the seller (1) contending

that the seller would be unjustly enriched if allowed to keep the money

paid despite the rescission of the agreement and (2) requesting

$210,000. The $210,000 consisted of the $10,000 earnest money deposit

and $200,000 in subsequent payments. The buyer later filed an amended

all the evidence presented at trial, as well as the jury’s verdict, supports

a finding that the agreement was rescinded or abandoned and that this

requires restitution of $205,000 to the buyer.]

“Restitution is a remedy designed to prevent unjust enrichment.”

[Citation.] (“Unjust enrichment is an equitable doctrine, akin to

restitution, which permits the recovery of that amount the defendant has

been unjustly enriched at the expense of the plaintiff.”). “The terms

“Implied in law or quasi-contract are not considered contracts at all,

but are akin to restitution which permits recovery of that amount the

defendant has been benefitted at the expense of the plaintiff in order to

preclude unjust enrichment.” [Citation.] * * *

“To recover on a theory of restitution, the plaintiff must show (1) that

he conferred a non-gratuitous benefit on the defendant; (2) that the

defendant realized some value from the benefit; and (3) that it would be

inequitable for the defendant to retain the benefit without paying the

Buyer seeks the $175,000 and $25,000 payments as well as the

$10,000 in earnest money * * * Additionally, in its amended complaint,

Buyer states that under the Agreement, Seller can only keep half of the

$10,000 in earnest money and only requests a total of $205,000. An

issue conceded in the trial court cannot be argued on appeal. [Citation.]

Therefore, Buyer is bound by that concession and entitled to $5,000 of

the earnest money at most.

and the sale did not go through despite the fact that neither party

breached; (2) Seller kept the $205,000 although he also retained the

Property; and (3) Seller keeping the $205,000 is inequitable because the

Seller still has the Property, the jury found neither party breached, and

the evidence supports that Buyer intended to go forward with the