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15-2 Chapter 15 Case Hypothetical and Ethical Dilemma Elizabeth Tate is eighty-six years old and in failing health. A widow, Elizabeth is fast losing the ability to successfully live alone and take care of herself. Last Tuesday, the elderly lady’s grandson, forty-five-year-old Joseph (“Joe”) Boatwright, said he would come today and pick her up, take her to his house, and allow her to live in his spare bedroom for as long as she needed. Elizabeth eagerly consented to the arrangement. Today has come and gone, with Joe a “no-show.” Elizabeth is upset and angry with her grandson. When he was a child, Joe’s father had left when he was a baby and his mother became an alcoholic, neglecting Joe to the point that Social Services had investigated on several occasions. Elizabeth had come to her grandson’s rescue, taking legal custody of Joe, and rendering to him the precious care of a loving, doting grandmother from the time he was four years old until he reached the age of eighteen. Has Joseph Boatwright breached a contractual obligation owed to his grandmother, Elizabeth Tate?

15-3 Chapter 15 Case Hypothetical Seattle Shoestring Sales, Inc. arranged to sell shoestrings to Victory, Inc., a tennis shoe manufacturer. According to the terms of the deal, Seattle Shoestring Sales committed to sell Victory whatever number of shoestrings it will produce next year, at seventy-five cents per pair. Since entering into their agreement, the price of cotton has skyrocketed five hundred percent. To produce shoestrings, Seattle Shoestring Sales’ cost alone will be approximately $1.50 per pair. Seattle Shoestring Sales has informed Victory that it cannot and will not honor the deal. Is there an enforceable contract between Seattle Shoestring Sales, Inc. and Victory, Inc.? Is the failure to include a quantity term in the agreement fatal to its enforceability? What about the fact that the price of cotton dramatically increased after the companies reached their agreement? Should a court or other arbiter increase the per-pair contract price to account for the increase in the price of cotton, and then enforce the agreement?

15-4 Chapter 15 Case Hypothetical and Ethical Dilemma John Harrington, Jr. (“Junior”) is a 24-year-old, 3-pack-per-day smoker. John Harrington, Sr. (“Senior”) is a very concerned parent. On January 1, father announces to son, “Junior, if you will stop smoking for the entire year, I will pay you $5,000.” Senior believes that if Junior will stop smoking for one year, he will “kick the habit.” Junior reluctantly accepts his father’s terms, and extinguishes his half-smoked cigarette with the heel of his boot. On January 1 of the following year, Junior approaches Senior and says “Dad, time to pay up.” Senior has no reason to doubt that Junior has refrained from smoking for an entire year, but states “Son, this was for your benefit. The gift I have given you is the gift of life, and you are now likely to enjoy that gift longer, because you are now much less likely to contract cancer. Health statistics show that non- smokers live ten years longer than smokers. Enjoy your newfound life, but I will not pay you the $5,000.” Does Senior owe Junior the $5,000? Is there an enforceable contract between father and son? If there is not an enforceable contract, does Junior have any other legal or equitable theory of recovery? Is Senior ethically obligated to pay Junior the $5,000?

Consideration (Definition): Something of value, given in exchange for something else of value, that is the product of a mutually bargained-for exchange 15-5

15-6 Examples of Consideration Exhibit 15-1 Benefit to promisee Benefit to promisee Detriment to promisor Detriment to promisor Promise to do something Promise to do something Promise to refrain from doing something Promise to refrain from doing something

15-7 Rules of Consideration For a promise to be enforced legally, there must be consideration For a promise to be enforced legally, there must be consideration Exception—Promissory Estoppel: Exception—Promissory Estoppel: One party makes promise knowing other party will rely on it One party makes promise knowing other party will rely on it Other party relies on promise (“actual reliance”) Other party relies on promise (“actual reliance”) Justice dictates enforcement of promise, even though it is not supported by consideration Justice dictates enforcement of promise, even though it is not supported by consideration Court rarely considers adequacy of consideration Court rarely considers adequacy of consideration Illusory promise does not constitute consideration Illusory promise does not constitute consideration Past consideration does not constitute consideration for purposes of present contract Past consideration does not constitute consideration for purposes of present contract Promise to do something you are already legally obligated to do is not valid consideration (“Pre-existing duty rule”) Promise to do something you are already legally obligated to do is not valid consideration (“Pre-existing duty rule”)

15-8 Partial Payment of Debt Liquidated Debt: No dispute as to amount of money owed Liquidated Debt: No dispute as to amount of money owed Unliquidated Debt: Parties either (in good faith) dispute fact money owed, or dispute amount of money owed Unliquidated Debt: Parties either (in good faith) dispute fact money owed, or dispute amount of money owed “Accord and Satisfaction” Requirements (“Accord” represents agreement, “satisfaction” represents payment; accord and satisfaction means partial payment of disputed debt discharges remaining balance allegedly owed): “Accord and Satisfaction” Requirements (“Accord” represents agreement, “satisfaction” represents payment; accord and satisfaction means partial payment of disputed debt discharges remaining balance allegedly owed): Unliquidated debt Unliquidated debt Creditor agrees to accept, as full payment, less than creditor claims owed Creditor agrees to accept, as full payment, less than creditor claims owed Debtor pays agreed-upon amount Debtor pays agreed-upon amount