§ 1391. Venue generally
How Current is This?
(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in
(1) a judicial district where any defendant resides, if all defendants reside in the same State,
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or
(3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in
(1) a judicial district where any defendant resides, if all defendants reside in the same State,
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or
(3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
(c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. In a State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district, the corporation shall be deemed to reside in the district within which it has the most significant contacts.
(d) An alien may be sued in any district.
(e) A civil action in which a defendant is an officer or employee of the United States or any agency thereof acting in his official capacity or under color of legal authority, or an agency of the United States, or the United States, may, except as otherwise provided by law, be brought in any judicial district in which
(1) a defendant in the action resides,
(2) a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or
(3) the plaintiff resides if no real property is involved in the action. Additional persons may be joined as parties to any such action in accordance with the Federal Rules of Civil Procedure and with such other venue requirements as would be applicable if the United States or one of its officers, employees, or agencies were not a party.
The summons and complaint in such an action shall be served as provided by the Federal Rules of Civil Procedure except that the delivery of the summons and complaint to the officer or agency as required by the rules may be made by certified mail beyond the territorial limits of the district in which the action is brought.
(f) A civil action against a foreign state as defined in section 1603 (a) of this title may be brought—
(1) in any judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated;
(2) in any judicial district in which the vessel or cargo of a foreign state is situated, if the claim is asserted under section 1605 (b) of this title;
(3) in any judicial district in which the agency or instrumentality is licensed to do business or is doing business, if the action is brought against an agency or instrumentality of a foreign state as defined in section 1603 (b) of this title; or
(4) in the United States District Court for the District of Columbia if the action is brought against a foreign state or political subdivision thereof.
(g) A civil action in which jurisdiction of the district court is based upon section 1369 of this title may be brought in any district in which any defendant resides or in which a substantial part of the accident giving rise to the action took place.
Wednesday, October 27, 2010
Saturday, October 23, 2010
Carol Grenall et al., as Administrators, etc., v. United of Omaha Life Insurance Company
Carol Grenall et al., as Administrators, etc., v. United of Omaha Life Insurance Company
25 July 2008; In the Court of Appeal of the State of California
A118823 (Marin County Super. Ct. No. CV050180)
Erroneous Belief Cannot Rescind Life Annuity Contract
Inherent risk of death is assumed, decedent bore the risk of mistake
Jean M. Simes purchased an annuity that will provide for monthly benefit payments as long as she lives, from the United of Omaha Life Insurance Company. She submitted her application and paid the single premium.
United issued a policy, the copy of which was received by Simes six weeks after her application. The policy contains the following provisions, among others: “If you are not satisfied with your policy, return it to us or our agent within 30 days after you receive it. We will refund the single premium and cancel the policy as of its date of issue.”
After the third benefit payment, Simes was diagnosed with ovarian cancer. Nearly a week later, she died. United stopped making payments.
Sime’s Estate filed suit against United alleging two causes of action:
1. breach of contract
2. declaratory relief
On the breach of contract, the Estate argues that United had refused payments under the terms of the annuity “until the sum of the benefit payments equals the single premium.”
The declaratory relief seeks resolution of the dispute between the parties as to their respective rights under the annuity policy.
United moved for summary judgment; answers, the terms of the contract provided for a life annuity and did not require a refund of the premium to the Estate.
The motion for summary judgment on the breach of contract was granted by the trial court saying that the undisputed facts showed that United had not breached the payment option to which the parties agreed, as the contract required monthly benefit payments only during Sime’s lifetime.
The motion for summary judgment on declaratory relief was also granted but only after United renewed its motion saying that there was no evidence of a mistake by Simes or of what was in her mind when she purchased the annuity.
The lone issue presented by the Sime’s Estate upon appeal is whether the facts provide a legal basis for rescission of the life annuity contract based on a mistake of fact.
The Court of Appeal holds that as a matter of law, the facts do not provide a legal basis for rescission.
To prevail at the trial, the Court said that the Estate would have been required to prove the following:
1. Simes was mistaken regarding a basic assumption upon which she made the contract
2. the mistakes materially affected the agreed exchange of performance in a way that was adverse to Simes
3. Simes did not bear the risk of the mistake
4. the effect of the mistake was such that enforcement of the contract would be unconscionable.
The Court of Appeal concluded that the Estate cannot establish the third of these elements. As a matter of law, Simes bore the risk of the mistake. A contracting party bears the risk of mistake when the agreement so provides or when the party is aware of having only limited knowledge of the facts relating to the mistake but treats this limited knowledge as sufficient.
Although the contract in this case does not expressly assign the risk of the alleged mistake, the parties who contract for “life contingent” benefits necessarily do so based on limited knowledge of the very facts about which Simes was mistaken.
Citing several jurisprudences, the Court of Appeal said California courts have rejected challenges to such contracts on the ground that death came unexpectedly early and holds that based on authorities, Simes bore the risk of the alleged mistake regarding her health and life expectancy at the time of the annuity contract.
As the Estate cannot establish an essential element of its rescission claim, summary judgment is deemed proper by the Court. Thus, it affirmed the decision of the trial court.
25 July 2008; In the Court of Appeal of the State of California
A118823 (Marin County Super. Ct. No. CV050180)
Erroneous Belief Cannot Rescind Life Annuity Contract
Inherent risk of death is assumed, decedent bore the risk of mistake
Jean M. Simes purchased an annuity that will provide for monthly benefit payments as long as she lives, from the United of Omaha Life Insurance Company. She submitted her application and paid the single premium.
United issued a policy, the copy of which was received by Simes six weeks after her application. The policy contains the following provisions, among others: “If you are not satisfied with your policy, return it to us or our agent within 30 days after you receive it. We will refund the single premium and cancel the policy as of its date of issue.”
After the third benefit payment, Simes was diagnosed with ovarian cancer. Nearly a week later, she died. United stopped making payments.
Sime’s Estate filed suit against United alleging two causes of action:
1. breach of contract
2. declaratory relief
On the breach of contract, the Estate argues that United had refused payments under the terms of the annuity “until the sum of the benefit payments equals the single premium.”
The declaratory relief seeks resolution of the dispute between the parties as to their respective rights under the annuity policy.
United moved for summary judgment; answers, the terms of the contract provided for a life annuity and did not require a refund of the premium to the Estate.
The motion for summary judgment on the breach of contract was granted by the trial court saying that the undisputed facts showed that United had not breached the payment option to which the parties agreed, as the contract required monthly benefit payments only during Sime’s lifetime.
The motion for summary judgment on declaratory relief was also granted but only after United renewed its motion saying that there was no evidence of a mistake by Simes or of what was in her mind when she purchased the annuity.
The lone issue presented by the Sime’s Estate upon appeal is whether the facts provide a legal basis for rescission of the life annuity contract based on a mistake of fact.
The Court of Appeal holds that as a matter of law, the facts do not provide a legal basis for rescission.
To prevail at the trial, the Court said that the Estate would have been required to prove the following:
1. Simes was mistaken regarding a basic assumption upon which she made the contract
2. the mistakes materially affected the agreed exchange of performance in a way that was adverse to Simes
3. Simes did not bear the risk of the mistake
4. the effect of the mistake was such that enforcement of the contract would be unconscionable.
The Court of Appeal concluded that the Estate cannot establish the third of these elements. As a matter of law, Simes bore the risk of the mistake. A contracting party bears the risk of mistake when the agreement so provides or when the party is aware of having only limited knowledge of the facts relating to the mistake but treats this limited knowledge as sufficient.
Although the contract in this case does not expressly assign the risk of the alleged mistake, the parties who contract for “life contingent” benefits necessarily do so based on limited knowledge of the very facts about which Simes was mistaken.
Citing several jurisprudences, the Court of Appeal said California courts have rejected challenges to such contracts on the ground that death came unexpectedly early and holds that based on authorities, Simes bore the risk of the alleged mistake regarding her health and life expectancy at the time of the annuity contract.
As the Estate cannot establish an essential element of its rescission claim, summary judgment is deemed proper by the Court. Thus, it affirmed the decision of the trial court.
Thursday, October 21, 2010
Summary of Wood v. Lucy, Lady Duff-Gordon
Summary of Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917).
Facts
Lady Duff-Gordon (D) contracted to give Wood (P) an exclusive right to market and license all of her designs and to endorse designs with her name. The exclusive contract required that they split all profits from Wood’s sales evenly but there was no express clause that stated that he would perform. Lucy placed endorsements on clothes without Wood’s knowledge and in violation of the contract and Wood sued.
The trial court denied Lady Duff-Gordon’s motion for a judgment on the pleadings. The intermediate appellate court reversed on the grounds that the contract lacked mutuality because Wood never promised to do anything. Wood appealed the dismissal of the complaint.
Issues
1) May a promise to use reasonable efforts be implied from the entire circumstances of a contract? 2) Can an implied promise to use best efforts be considered valuable consideration? 3) Can the duty of good faith compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties?
Holding and Rule (Cardozo)
1) Yes. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. 2) Yes. An implied promise to use best efforts in contract performance can be considered valuable consideration. 3) The duty of good faith can compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties.
A contract may lack an explicit promise to further its goals. The acceptance of the exclusive agency meant that Wood had accepted the duties of that agency. Because Lady Duff-Gordon’s sole compensation was a split of the profits, there would be no efficacy to the transaction unless there was an implied promise to use best efforts.
The court held that it was clear from the terms and recitals and duties under the contract that both parties intended to do what was reasonably necessary to make it a success so that would be profits to divide. Wood’s promise to pay Lady Duff-Gordon one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly demonstrated that he had some obligations under the contract, and there was a promise to use reasonable efforts to bring profits and revenues into existence.
Disposition
Reversed.
Notes
This case is an example of the court imposing a duty of good faith on a party to perform an implied promise. Cardozo dispensed with formalism to enforce a promise that was implied when viewed in the context of numerous aspects of the agreement. An implied promise is sufficient to constitute consideration.
Facts
Lady Duff-Gordon (D) contracted to give Wood (P) an exclusive right to market and license all of her designs and to endorse designs with her name. The exclusive contract required that they split all profits from Wood’s sales evenly but there was no express clause that stated that he would perform. Lucy placed endorsements on clothes without Wood’s knowledge and in violation of the contract and Wood sued.
The trial court denied Lady Duff-Gordon’s motion for a judgment on the pleadings. The intermediate appellate court reversed on the grounds that the contract lacked mutuality because Wood never promised to do anything. Wood appealed the dismissal of the complaint.
Issues
1) May a promise to use reasonable efforts be implied from the entire circumstances of a contract? 2) Can an implied promise to use best efforts be considered valuable consideration? 3) Can the duty of good faith compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties?
Holding and Rule (Cardozo)
1) Yes. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. 2) Yes. An implied promise to use best efforts in contract performance can be considered valuable consideration. 3) The duty of good faith can compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties.
A contract may lack an explicit promise to further its goals. The acceptance of the exclusive agency meant that Wood had accepted the duties of that agency. Because Lady Duff-Gordon’s sole compensation was a split of the profits, there would be no efficacy to the transaction unless there was an implied promise to use best efforts.
The court held that it was clear from the terms and recitals and duties under the contract that both parties intended to do what was reasonably necessary to make it a success so that would be profits to divide. Wood’s promise to pay Lady Duff-Gordon one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly demonstrated that he had some obligations under the contract, and there was a promise to use reasonable efforts to bring profits and revenues into existence.
Disposition
Reversed.
Notes
This case is an example of the court imposing a duty of good faith on a party to perform an implied promise. Cardozo dispensed with formalism to enforce a promise that was implied when viewed in the context of numerous aspects of the agreement. An implied promise is sufficient to constitute consideration.
Wednesday, October 20, 2010
Gibbons v. Brown
Gibbons v. Brown
716 So.2d 868 (Fl. Dist. Ct. App. 1998)
Yeazell, pp. 192-193
Facts: Brown and her husband got into an accident with Gibbons. Brown’s husband was driving, and Gibbons allegedly gave him bad directions, causing the accident. Gibbons, a Texas resident, sued Mr. Brown in Florida. Two years later, Mrs. Brown sues Gibbons in Florida, alleging that Gibbons is subject to jurisdiction in Florida because of the suit she filed there earlier on the same subject matter.
Issue: Does the Florida “Long-Arm” statute give the state jurisdiction over Gibbons?
Rule: Florida shall have jurisdiction over a defendant who is “engaged in substantial and not isolated activity” in Florida. This is construed to be a higher standard than the federal constitutional one.
Analysis: The court assumes that the first lawsuit is over, and thus finds that Gibbons is not currently engaged in any activities in Florida. The court says that brining a lawsuit in Florida shouldn’t hang over your head for the rest of your life.
Conclusion: The court dismisses Mrs. Brown’s lawsuit.
Notes and Problems
1. The court doesn’t address the constitutional test, but rather just the Florida statutory test which has a higher threshold for jurisdiction.
a. Ms. Gibbons’s activity doesn’t satisfy the Florida statute because she is not currently engaged in any activities in Florida.
a. Assuming that purposeful availment doesn’t have a time limit, Florida would have jurisdiction if it had a statute like that of California. You could employ the five factor test from World-Wide and say that though the contacts may be small, fair play is satisfied. Hanson gives us the “purposeful availment” test mentioned above.
b. Gibbons is distinguishable from this case based on the Florida statute involved. If California had the same statute back then as it does now, there would be no problem of state law to overcome in order for California to get the maximum possible jurisdiction allowed by the Constitution.
2.
a. In order to make the statute the same as the due process clause, you would get rid of the words “tortious act”, because presumably you can get jurisdiction over a contract breaker as well. You would get rid of “injury” and “within the state”, as well as “regularly” and “in the state”…well, basically, you would have to change the whole thing.
b. If you interpret the words “person or property within the state” to include persons domiciled in the state of New York but who are out of the state, for example, to see a doctor, then there’s jurisdiction. But it seems that the court interpreted the statute as meaning the person must have been physically in the state of New York when the injury occurred.
3.
a. The state test is always a threshold test that you do before you even look at the Constitution.
b. It could be good for business for a state to restrict its jurisdiction. Companies might like doing business there better if they know they are less likely to have to defend themselves in that forum.
c. Even if the statute is written one way, it may be interpreted more broadly.
4. The Florida long-arm statute would apply in a federal district court in Florida, but not in a federal court in Texas.
5.
a. Since notice is a necessary but not sufficient condition for personal jurisdiction, there’s no problem constitutionally, unless I misunderstand and Steve Y. is telling me that notice has been construed to be sufficient for personal jurisdiction. In either case, federal courts might sometimes serve notice but subsequently find that there is no personal jurisdiction.
b. The problem here is that there’s a lack of notice to the defendant that he could be subject to personal jurisdiction on a state claim, contrary to the clear language of the statute. It is the right result as far as efficiency goes, I suppose
716 So.2d 868 (Fl. Dist. Ct. App. 1998)
Yeazell, pp. 192-193
Facts: Brown and her husband got into an accident with Gibbons. Brown’s husband was driving, and Gibbons allegedly gave him bad directions, causing the accident. Gibbons, a Texas resident, sued Mr. Brown in Florida. Two years later, Mrs. Brown sues Gibbons in Florida, alleging that Gibbons is subject to jurisdiction in Florida because of the suit she filed there earlier on the same subject matter.
Issue: Does the Florida “Long-Arm” statute give the state jurisdiction over Gibbons?
Rule: Florida shall have jurisdiction over a defendant who is “engaged in substantial and not isolated activity” in Florida. This is construed to be a higher standard than the federal constitutional one.
Analysis: The court assumes that the first lawsuit is over, and thus finds that Gibbons is not currently engaged in any activities in Florida. The court says that brining a lawsuit in Florida shouldn’t hang over your head for the rest of your life.
Conclusion: The court dismisses Mrs. Brown’s lawsuit.
Notes and Problems
1. The court doesn’t address the constitutional test, but rather just the Florida statutory test which has a higher threshold for jurisdiction.
a. Ms. Gibbons’s activity doesn’t satisfy the Florida statute because she is not currently engaged in any activities in Florida.
a. Assuming that purposeful availment doesn’t have a time limit, Florida would have jurisdiction if it had a statute like that of California. You could employ the five factor test from World-Wide and say that though the contacts may be small, fair play is satisfied. Hanson gives us the “purposeful availment” test mentioned above.
b. Gibbons is distinguishable from this case based on the Florida statute involved. If California had the same statute back then as it does now, there would be no problem of state law to overcome in order for California to get the maximum possible jurisdiction allowed by the Constitution.
2.
a. In order to make the statute the same as the due process clause, you would get rid of the words “tortious act”, because presumably you can get jurisdiction over a contract breaker as well. You would get rid of “injury” and “within the state”, as well as “regularly” and “in the state”…well, basically, you would have to change the whole thing.
b. If you interpret the words “person or property within the state” to include persons domiciled in the state of New York but who are out of the state, for example, to see a doctor, then there’s jurisdiction. But it seems that the court interpreted the statute as meaning the person must have been physically in the state of New York when the injury occurred.
3.
a. The state test is always a threshold test that you do before you even look at the Constitution.
b. It could be good for business for a state to restrict its jurisdiction. Companies might like doing business there better if they know they are less likely to have to defend themselves in that forum.
c. Even if the statute is written one way, it may be interpreted more broadly.
4. The Florida long-arm statute would apply in a federal district court in Florida, but not in a federal court in Texas.
5.
a. Since notice is a necessary but not sufficient condition for personal jurisdiction, there’s no problem constitutionally, unless I misunderstand and Steve Y. is telling me that notice has been construed to be sufficient for personal jurisdiction. In either case, federal courts might sometimes serve notice but subsequently find that there is no personal jurisdiction.
b. The problem here is that there’s a lack of notice to the defendant that he could be subject to personal jurisdiction on a state claim, contrary to the clear language of the statute. It is the right result as far as efficiency goes, I suppose
Summary of Mullane v. Central Hanover Bank & Trust Co.
Summary of Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950).
Facts
Central Hanover Bank (P) was the trustee of a common trust fund formed by pooling the assets of a number of smaller trusts. Central Hanover Bank petitioned to the New York Surrogate’s Court for a judicial settlement of the trust. The only notice provided to beneficiaries was via publication in a newspaper. Mullane (D) was appointed attorney and special guardian for a number of beneficiaries who either were unknown or did not appear.
Procedural History
Mullane objected to the statutory provision for notice by publication, arguing that it was unconstitutional for lack of due process under the Fourteenth Amendment. The Surrogate’s Court overruled Mullane’s objection and the ruling was affirmed on appeal to the New York Supreme Court Appellate Division and the New York Court of Appeals. The United States Supreme Court granted cert.
Issue
Is notice given to out of state parties by publication in a newspaper, when the parties’ addresses were known, constitutional in light of the Due Process Clause of the Fourteenth Amendment?
Holding and Rule
No. Notice given to out of state parties by publication in a newspaper, when the parties’ addresses were known, is unconstitutional in light of the Due Process Clause of the Fourteenth Amendment.
Notice must be reasonably calculated to inform known parties affected by the proceedings. However, constructive notice by publication was acceptable with regard to missing or unknown parties or for those whose whereabouts could not be ascertained by due diligence or for whom future interests were too conjectural to be known with certainty.
Disposition
Judgment reversed.
See Pennoyer v. Neff for a law school civil procedure case brief in which publication of notice in a newspaper was ineffective to establish personal jurisdiction over the defendant.
Facts
Central Hanover Bank (P) was the trustee of a common trust fund formed by pooling the assets of a number of smaller trusts. Central Hanover Bank petitioned to the New York Surrogate’s Court for a judicial settlement of the trust. The only notice provided to beneficiaries was via publication in a newspaper. Mullane (D) was appointed attorney and special guardian for a number of beneficiaries who either were unknown or did not appear.
Procedural History
Mullane objected to the statutory provision for notice by publication, arguing that it was unconstitutional for lack of due process under the Fourteenth Amendment. The Surrogate’s Court overruled Mullane’s objection and the ruling was affirmed on appeal to the New York Supreme Court Appellate Division and the New York Court of Appeals. The United States Supreme Court granted cert.
Issue
Is notice given to out of state parties by publication in a newspaper, when the parties’ addresses were known, constitutional in light of the Due Process Clause of the Fourteenth Amendment?
Holding and Rule
No. Notice given to out of state parties by publication in a newspaper, when the parties’ addresses were known, is unconstitutional in light of the Due Process Clause of the Fourteenth Amendment.
Notice must be reasonably calculated to inform known parties affected by the proceedings. However, constructive notice by publication was acceptable with regard to missing or unknown parties or for those whose whereabouts could not be ascertained by due diligence or for whom future interests were too conjectural to be known with certainty.
Disposition
Judgment reversed.
See Pennoyer v. Neff for a law school civil procedure case brief in which publication of notice in a newspaper was ineffective to establish personal jurisdiction over the defendant.
Tuesday, October 19, 2010
hamer v sidway
Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 (N.Y. 1891).
Facts: William E. Story and his nephew, William E. Story II, agreed that the uncle would pay his nephew $5000 if the nephew would refrain from drinking, using tobacco, swearing, and playing cards and billiards for money until he turned 21. When the nephew turned 21 his uncle sent him a letter that indicated that the nephew had earned the $5000 and that he would hold the money with interest until the nephew became capable of taking care of it responsibly. The nephew accepted the terms. The uncle died twelve years later without having transferred the funds to his nephew.
The nephew assigned the funds to Louisa Hamer (P) who brought suit against the executor of the uncle’s estate, Franklin Sidway (D). At trial judgment was entered in Hamer’s favor which was reversed on appeal in Sidway’s favor. Hamer appealed.
Issue: Is forbearance from permissible legal conduct sufficient consideration to create a valid and enforceable contract?
Holding and Rule: Yes. The mere abstention from a permissible legal conduct is sufficient consideration to make a promise based on that forbearance a valid contract. Consideration is not measured as a benefit to the promisor. When an offer is ambiguous regarding whether acceptance shall be in the form of performance or an exchange of promises, determining if the offeror was indifferent to whether acceptance be by performance or promise is accomplished by interpreting the language of the offer under the circumstances in which it was made. The court held that in this case, the language of the offer made it clear that the uncle sought acceptance by performance and not by a promise to perform.
D contended that the contract was invalid because it lacked consideration and that there is no consideration unless the promisor is benefited. The court stated that consideration may consist in either a some right, interest, profit, or benefit to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. It is immaterial whether the consideration does in fact benefit the promisee or a third party or is of substantial value to anyone. Refraining from something that one is entitled to do is a sufficient detriment to create an enforceable contract.
Disposition: Reversed in favor of Hamer (P).
Note: Under Restatement 2nd 32 if an offer is ambiguous it can be accepted by a promise or actual performance. If acceptance is through performance the contract is unilateral, if through promise the contract is bilateral.
This case is often cited incorrectly as Hammer v. Sidway.
Facts: William E. Story and his nephew, William E. Story II, agreed that the uncle would pay his nephew $5000 if the nephew would refrain from drinking, using tobacco, swearing, and playing cards and billiards for money until he turned 21. When the nephew turned 21 his uncle sent him a letter that indicated that the nephew had earned the $5000 and that he would hold the money with interest until the nephew became capable of taking care of it responsibly. The nephew accepted the terms. The uncle died twelve years later without having transferred the funds to his nephew.
The nephew assigned the funds to Louisa Hamer (P) who brought suit against the executor of the uncle’s estate, Franklin Sidway (D). At trial judgment was entered in Hamer’s favor which was reversed on appeal in Sidway’s favor. Hamer appealed.
Issue: Is forbearance from permissible legal conduct sufficient consideration to create a valid and enforceable contract?
Holding and Rule: Yes. The mere abstention from a permissible legal conduct is sufficient consideration to make a promise based on that forbearance a valid contract. Consideration is not measured as a benefit to the promisor. When an offer is ambiguous regarding whether acceptance shall be in the form of performance or an exchange of promises, determining if the offeror was indifferent to whether acceptance be by performance or promise is accomplished by interpreting the language of the offer under the circumstances in which it was made. The court held that in this case, the language of the offer made it clear that the uncle sought acceptance by performance and not by a promise to perform.
D contended that the contract was invalid because it lacked consideration and that there is no consideration unless the promisor is benefited. The court stated that consideration may consist in either a some right, interest, profit, or benefit to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. It is immaterial whether the consideration does in fact benefit the promisee or a third party or is of substantial value to anyone. Refraining from something that one is entitled to do is a sufficient detriment to create an enforceable contract.
Disposition: Reversed in favor of Hamer (P).
Note: Under Restatement 2nd 32 if an offer is ambiguous it can be accepted by a promise or actual performance. If acceptance is through performance the contract is unilateral, if through promise the contract is bilateral.
This case is often cited incorrectly as Hammer v. Sidway.
Kirksey v. Kirksey
Kirksey v. Kirksey, 8 Ala. 131 (1845).
Facts
Kirksey (D) was the brother of Antillico Kirksey’s (P) deceased husband. The defendant offered Kirksey a home on his property and Kirksey accepted. She moved sixty miles and lived in the defendant’s home for two years. He later forced her to relocate to a remote location on the property and eventually demanded that she leave altogether.
Kirksey sued for breach of contract on the grounds that her costs in relocating to the defendant’s property were sufficient consideration to enforce his promise to provide her with a home. The court entered a judgment in favor of the plaintiff for $200 and defendant appealed.
Issue
Is a gratuitous promise enforceable where a party has reasonably relied on that promise and has suffered loss and inconvenience?
Holding and Rule
No. A gratuitous promise is not enforceable even if a party has reasonably relied on that promise and has suffered loss and inconvenience.
The court held that the promise was a mere gratuity and not enforceable for lack of consideration.
Disposition
Judgment reversed.
Dissent (Ormond)
Kirksey’s loss and inconvenience were sufficient consideration to render the defendant’s promise enforceable.
Notes
Contract offers are to be interpreted according to a manifestation of contractual intent. This is determined by considering what a reasonable person standing in the promisee’s shoes would perceive to have been said. Today, the doctrine of promissory estoppel would allow enforcement of the contract because Kirksey reasonably relied upon defendant’s promise to her detriment. Promissory estoppel is a consideration substitute and is not consideration; it must therefore be considered only when consideration is not present.
Facts
Kirksey (D) was the brother of Antillico Kirksey’s (P) deceased husband. The defendant offered Kirksey a home on his property and Kirksey accepted. She moved sixty miles and lived in the defendant’s home for two years. He later forced her to relocate to a remote location on the property and eventually demanded that she leave altogether.
Kirksey sued for breach of contract on the grounds that her costs in relocating to the defendant’s property were sufficient consideration to enforce his promise to provide her with a home. The court entered a judgment in favor of the plaintiff for $200 and defendant appealed.
Issue
Is a gratuitous promise enforceable where a party has reasonably relied on that promise and has suffered loss and inconvenience?
Holding and Rule
No. A gratuitous promise is not enforceable even if a party has reasonably relied on that promise and has suffered loss and inconvenience.
The court held that the promise was a mere gratuity and not enforceable for lack of consideration.
Disposition
Judgment reversed.
Dissent (Ormond)
Kirksey’s loss and inconvenience were sufficient consideration to render the defendant’s promise enforceable.
Notes
Contract offers are to be interpreted according to a manifestation of contractual intent. This is determined by considering what a reasonable person standing in the promisee’s shoes would perceive to have been said. Today, the doctrine of promissory estoppel would allow enforcement of the contract because Kirksey reasonably relied upon defendant’s promise to her detriment. Promissory estoppel is a consideration substitute and is not consideration; it must therefore be considered only when consideration is not present.
Monday, October 18, 2010
Restatement 71 of contracts
§71. REQUIREMENT OF EXCHANGE; TYPES OF EXCHANGE
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person.
It may be given by the promisee or by some other person.
Comments:
b. "Bargained for." In the typical bargain, the consideration and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of the consideration. Here, as in the matter of mutual assent, the law is concerned with the external manifestation rather than the undisclosed mental state: it is enough that one party manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement....But it is not enough that the promise induces the conduct of the promisee or that the conduct of the promisee induces the making of the promise; both elements must be present, or there is no bargain. Moreover, a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration and the promise is enforced, if at all, as a promise binding without consideration under §§82-94.
c. Mixture of bargain and gift. In most commercial bargains there is a rough equivalence between the value promised and the value received as consideration. But the social functions of bargains include the provision of opportunity for free individual action and exercise of judgment and the fixing of values by private action, either generally or for purposes of the particular transaction.
Those functions would be impaired by judicial review of the values so fixed. Ordinarily, therefore, courts do not inquire into the adequacy of consideration, particularly where one or both of the values exchanged are difficult to measure. See §79.....
d. Types of consideration....Though a promise is itself an act, it is treated separately from other acts.
http://www.lexinter.net/LOTWVers4/exchange.htm#§71._REQUIREMENT_OF_EXCHANGE;
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person.
It may be given by the promisee or by some other person.
Comments:
b. "Bargained for." In the typical bargain, the consideration and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of the consideration. Here, as in the matter of mutual assent, the law is concerned with the external manifestation rather than the undisclosed mental state: it is enough that one party manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement....But it is not enough that the promise induces the conduct of the promisee or that the conduct of the promisee induces the making of the promise; both elements must be present, or there is no bargain. Moreover, a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration and the promise is enforced, if at all, as a promise binding without consideration under §§82-94.
c. Mixture of bargain and gift. In most commercial bargains there is a rough equivalence between the value promised and the value received as consideration. But the social functions of bargains include the provision of opportunity for free individual action and exercise of judgment and the fixing of values by private action, either generally or for purposes of the particular transaction.
Those functions would be impaired by judicial review of the values so fixed. Ordinarily, therefore, courts do not inquire into the adequacy of consideration, particularly where one or both of the values exchanged are difficult to measure. See §79.....
d. Types of consideration....Though a promise is itself an act, it is treated separately from other acts.
http://www.lexinter.net/LOTWVers4/exchange.htm#§71._REQUIREMENT_OF_EXCHANGE;
Contracts Mattei v. Hopper
Mattei v. Hopper, 51 Cal. 2d 119, 330 P.2d 625 (Cal. 1958).
Facts: Mattei (P), a real estate developer, sought to purchase property owned by Hopper (D) for a new shopping center. After lengthy negotiations Mattei accepted Hopper’s offer to sell for $57,500. Under the agreement Mattei was required to deposit $1,000 with the real estate agent and had 120 days to examine the title and consummate the purchase, at which time the balance of the purchase price was due. The agreement also contained a personal satisfaction clause whereby Mattei was excused from performance if he was unable to arrange satisfactory leases of space in the shopping center.
Before the 120 days had elapsed, Hopper’s attorney notified Mattei that she would not sell her land under the terms of the agreement. Hopper refused to complete the transaction and Mattei sued for breach of contract. The trial court entered judgment for Hopper and Mattei appealed.
Issues: 1) Does a personal satisfaction clause necessarily render a contract illusory or void for lack of consideration or mutuality? 2) If a party does not assume a legal duty in making a promise, is the agreement binding as a bilateral contract? 3) Where a contract consists of an exchange of promises, must the promises be mutual in obligation?
Holding and Rule: 1) No. A personal satisfaction clause does not necessarily render a contract illusory or void it for lack of consideration or mutuality. 2) No. If a party is not assuming a legal duty in making a promise, the agreement is not binding as a bilateral contract. 3) Yes. When the parties attempt to make a contract where promises are exchanged as the consideration, the promises must be mutual in obligation.
An agreement that lacks mutuality of obligation lacks consideration and is unenforceable. Mutuality of obligation exists when both parties have assumed some legal obligation. If the agreement leaves one party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is illusory and lacks consideration.
Satisfaction clauses are divided into two primary categories that are treated differently by the courts:
1) In those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously. The standard of a reasonable person is used in determining whether satisfaction has been received.
2) In contracts where the issue of satisfaction involves fancy, taste, or judgment, the promissor’s good faith determination that he is not satisfied is a defense to breach of contract. The requirement to act in good faith prevents constitutes consideration and the contract is enforceable. The party is not released from the agreement merely because he has become dissatisfied with the contract itself. He must have a genuine, good faith dissatisfaction with the performance.
This case falls into the second category because the factors involved in determining whether a lease is satisfactory to the lessor are too numerous and varied to permit the application of a reasonable man standard. The contract was neither illusory nor lacking in mutuality of obligation.
Disposition: Reversed.
http://www.lawnix.com/cases/mattei-hopper.html
Facts: Mattei (P), a real estate developer, sought to purchase property owned by Hopper (D) for a new shopping center. After lengthy negotiations Mattei accepted Hopper’s offer to sell for $57,500. Under the agreement Mattei was required to deposit $1,000 with the real estate agent and had 120 days to examine the title and consummate the purchase, at which time the balance of the purchase price was due. The agreement also contained a personal satisfaction clause whereby Mattei was excused from performance if he was unable to arrange satisfactory leases of space in the shopping center.
Before the 120 days had elapsed, Hopper’s attorney notified Mattei that she would not sell her land under the terms of the agreement. Hopper refused to complete the transaction and Mattei sued for breach of contract. The trial court entered judgment for Hopper and Mattei appealed.
Issues: 1) Does a personal satisfaction clause necessarily render a contract illusory or void for lack of consideration or mutuality? 2) If a party does not assume a legal duty in making a promise, is the agreement binding as a bilateral contract? 3) Where a contract consists of an exchange of promises, must the promises be mutual in obligation?
Holding and Rule: 1) No. A personal satisfaction clause does not necessarily render a contract illusory or void it for lack of consideration or mutuality. 2) No. If a party is not assuming a legal duty in making a promise, the agreement is not binding as a bilateral contract. 3) Yes. When the parties attempt to make a contract where promises are exchanged as the consideration, the promises must be mutual in obligation.
An agreement that lacks mutuality of obligation lacks consideration and is unenforceable. Mutuality of obligation exists when both parties have assumed some legal obligation. If the agreement leaves one party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is illusory and lacks consideration.
Satisfaction clauses are divided into two primary categories that are treated differently by the courts:
1) In those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously. The standard of a reasonable person is used in determining whether satisfaction has been received.
2) In contracts where the issue of satisfaction involves fancy, taste, or judgment, the promissor’s good faith determination that he is not satisfied is a defense to breach of contract. The requirement to act in good faith prevents constitutes consideration and the contract is enforceable. The party is not released from the agreement merely because he has become dissatisfied with the contract itself. He must have a genuine, good faith dissatisfaction with the performance.
This case falls into the second category because the factors involved in determining whether a lease is satisfactory to the lessor are too numerous and varied to permit the application of a reasonable man standard. The contract was neither illusory nor lacking in mutuality of obligation.
Disposition: Reversed.
http://www.lawnix.com/cases/mattei-hopper.html
Subscribe to:
Posts (Atom)