130 MODULE 23 CONTRACTS

l. Output contract
(1) If one party agrees to sell all hislher output to another, agreement is supported by considera-
tion because slhe gives up right to sell that output to another

(a) Law requires good faith of parties on performance

(b) However, illusory contracts are not supported by consideration (e.g., party agrees to sell
all slhe wishes)

m. Best-efforts contracts are contacts which parties are to use best efforts to complete contract's
objectives

n. Promissory estoppel may act as substitute for consideration and renders promise enforceable-
promisor is estoppel from asserting lack of consideration

(1) Elements
(a) Detrimental reliance on promise .
(b) Reliance is reasonable and foreseeable
(c) Damage results (injustice) if promise is not enforced
(2) Usually applied to gratuitous promises but trend is to apply to commercial transactions. At
least recovery of expenses is allowed.

EXAMPLE: A wealthy man in the community promises to pay for a new church if it is built. The church
committee reasonably (and in goodfaith) relies on the promise and incurs the expenses.

o. Mutuality of obligation-means both parties must be bound or neither is bound

(1) Both parties must give consideration by paying or promising to pay for the act, promise, or
forbearance of the other with something of legal value

p. Promise to donate to charity is enforceable based on public policy reasons

4. Legal Capacity
a.An agreement between parties in which one or both lack the capacity to contract is void or, in
some cases, voidable

b.Minors (persons under age eighteen or twenty-one)

(1) A minor may contract, but agreement is voidable by minor
(a) Adult is held to contract unless minor
disaffirms
(2) If minor has purchased nonnecessaries, when minor disaffirms, s/he is required to give back
any part s/he still has

(a) Minor may recover all of consideration given

(b) In most courts, minor need not pay for what slhe cannot return
(3) Minor is liable for reasonable value of necessaries furnished to himlher

(a) Minor may disaffirm contract if it is executory (i.e., not completed)

(b) Necessaries include food, clothing, shelter, education, etc., considering hislher age and po-
sition in life
(c) Many states have passed laws which make certain contracts enforceable against minors
such as contracts which involve

1] Medical care
2] Life insurance
3] Psychological care
4] Loans for education
(4) Minor may disaffirm contract at any time until a reasonable time after reaching majority age
(a) Failure to disaffirm within reasonable time after reaching majority acts as ratification
(e.g., one year is too long in the absence of very special circumstances such as being out
of the country)

(5) Minor may choose to ratify within a reasonable time after reaching age of majority