EXAM 2 CASES- EC410
Case Presentation 17: Bargain Theory--Hamer v. Sidway (1890)
o “established that forbearance of legal rights (voluntarily abstaining from one's legal
rights) on promises of future benefit made by other parties can constitute
valid consideration (the element of exchange...
exam 2 cases ec410 case presentation 17 bargain theory hamer v sidway 1890 o “established that forbearance of legal rights voluntarily abstaining f
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EXAM 2 CASES- EC410
Case Presentation 17: Bargain Theory--Hamer v. Sidway (1890)
o “established that forbearance of legal rights (voluntarily abstaining from one's legal
rights) on promises of future benefit made by other parties can constitute
valid consideration (the element of exchange generally needed to establish a contract's
enforceability in common lawsystems).”
o Hamer sued Sidway (in charge of Story I’s estate) for $5000. Story II (son) was promised
this money if he abstained from drinking swearing etc until he reached 21. He fulfilled
this and Story I said he would pay him the money at a later date, but he died before that
could happen.
o Story II transferred the money to his wife who transferred it to Hamer (plaintiff).
o Sidway said there was not a valid contract because of a lack of consideration
o Result: Hamer was granted the money because the court found the contract had valid
consideration, and was legally binding.
o According to the "bargain theory," a typical contract must consist of a bargained-for
exchange where the consideration offered by one party (promisee) induces the making
of a promise by another party (promisor), and the promisee, having been induced by the
promise, gives this consideration.
Case Presentation 18: Bargain Theory--Allegheny College v. National Chautauqua Bank
o The Defendant, National Chautauqua County Bank of Jamestown (Defendant), promised
to pay Plaintiff, Allegheny College (Plaintiff), $5,000 for a scholarship fund in
Defendant’s name. Plaintiff accepted part payment ($1,000) and held the money for the
fund. Defendant refused to pay the remaining balance of the $5,000.
o Rule of Law. An assumption of duty to promise whatever was necessary to carry out the
conditions of her gift is valid consideration.
o When the college accepted the $1,000 there was an assumption of duty to maintain the
memorial and name. This duty (to perpetuate the name of the founder in the memorial)
acts as the consideration resulting in a bilateral agreement, implied in fact by the
conduct of the plaintiff.
o No grounds for promissory estoppel: serves as a “consideration substitute” in contract
law that renders certain promises otherwise lacking in consideration binding and
enforceable.
Case Presentation 19: Contract Formation--Lucy v. Zehmer (196 Va. 493) 1954
o One evening in December 1952 after several drinks, Zehmer (D) wrote a contract on a
restaurant bill in which he agreed to sell his farm to Lucy (P) for $50,000. Zehmer later
insisted that he had been intoxicated and thought the matter was a joke, not realizing
that Lucy had been serious.
o Lucy claimed that he was not intoxicated and believed that Zehmer was also sober.
Zehmer testified that he was already “high as a Georgia pine” when he began drinking
with Lucy. He claimed that he was merely bluffing to try to get Lucy to admit that he did
not actually have $50,000.
o Lucy brought suit for specific performance when Zehmer refused to complete the
transaction. The trial court ruled for Zehmer holding that Lucy had not established a
right to specific performance.
o Supreme court: specific performance
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, o In determining whether a party has made a valid offer, the words and actions of the
party are interpreted according to a reasonable person standard
Case 20 Hadley v. Baxendale
o Hadley owns mill and Baxendale is the transport company
o Hadley’s crank shaft for his mill was the only one and Baxendale had to get to shaft
maker before they could make new one. Hadley could not operate mill while it shaft was
gone.
o Sued for profits lost from late delivery. Was granted those profits
o Baxendale appealed and said he didn’t know Hadley would lose money if late delivery
o Court ruled for Baxendale saying that they could only be liable for forseeable losses or if
had specified circumstances in advance,
o This is expectation damages and information case
Case Presentation 21: Optimal Reliance--Security Stove & Mfg. Co. v. American Ry. Express Co
o P manufactured a furnace equipped with a special combination oil and gas burner. P
wanted to show their new product at a trade show in NJ.
o P wrote D and told them they had engaged a booth for exhibition purposes and that they
needed the furnace to be there no later than October 8. D agreed to transport the
furnace.
o The shipment contained 21 packages. D failed to deliver one of the packages, the one
containing the new innovation.
o P sued D for breach, asked for reliance damages for expenses incurred for attempting to
show the product in NJ.
o Result: found for Plaintiff and awarded damages for expenses
o Issue: What kind of damages is an aggrieved party entitled to when damages from lost
profits are impossible to calculate?
o Holding: If damages from lost profits are impossible to calculate, the aggrieved party
may be entitled to recover reliance expenditures
Case Presentation 23: Optimal Reliance and Promissory Estoppel--Hoffman v. Red Owl Stores,
Inc – Lauren
o Plaintiff: Joseph Hoffman
o Defendant: Red Owl Stores, Inc.
o Circuit Court for Outgaimie County (Wisconsin) instant appeal and cross appeal
retrial Supreme Court of Wisconsin
o Hoffman put in a ton of money into a new franchise for Red Owl Stores. Red Owl kept
changing the amount of money he needed to put up. Hoffman had enough after Red Owl
wanted to get his relative involved. Jury said Hoffman should get damages due to
promissory estoppel but judge didn’t think one of the damages was an appropriate
amount due to inaccurate market value, so retrial ordered. Optimal reliance and Pareto
efficiency if both parties had stuck with original agreement. New court agreed with
lower court but gave 2/3 of the damage in question. Coase Theorem/private bargaining
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