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De Los Santos v. Great Western Sugar Co.-Nebraska, 1984

The document discusses three court cases related to mutuality of obligation in contracts: 1) De Los Santos v. Great Western Sugar Co. found no mutual obligation where one party's services depended entirely on the discretion of the other party to provide work. 2) Wood v. Lucy, Lady Duff-Gordon found an implied obligation even where none was specified, based on the relationship between the parties. 3) Weiner v. McGraw-Hill, Inc. found consideration and a binding contract even where obligations were not constant over the life of the contract, so long as consideration was provided at formation.

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303 views3 pages

De Los Santos v. Great Western Sugar Co.-Nebraska, 1984

The document discusses three court cases related to mutuality of obligation in contracts: 1) De Los Santos v. Great Western Sugar Co. found no mutual obligation where one party's services depended entirely on the discretion of the other party to provide work. 2) Wood v. Lucy, Lady Duff-Gordon found an implied obligation even where none was specified, based on the relationship between the parties. 3) Weiner v. McGraw-Hill, Inc. found consideration and a binding contract even where obligations were not constant over the life of the contract, so long as consideration was provided at formation.

Uploaded by

Jay Hauser
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Illusory Promises

Contracts require mutuality of obligation. While some courts


address this very formally, only looking at the words of the contract,
others consider the relationship of the parties to see if there was an
implied promise. Promises can be fulfilled at different times
throughout the life of the contract and the contract is still valid. You
test for consideration at the time of formation.

De Los Santos v. Great Western Sugar Co.- Nebraska, 1984


Important Facts/Procedural History
P was contracted by D to transport beets from one location to another over a period of months.
The agreement specified that P would transfer the beets D gives P.
However, the contract did not specify and number of beets D gives P
To do this, P had to take on expenses like insurance and labor.
P also hired other truckers to do this.
Eventually, before the end of the period of months, D stopped using P’s services although there
were still beets to transfer.
P sued for breach of contract.
Takeaways
Mutuality of obligation is required in a valid contract.
If only one party is obligated to provide services at the discretion of the other party, there is no
mutual obligation. Thus, it is not an enforceable contract.
Reasoning
In this case, because P’s services were based on the number of beets D wanted them to transport,
there was no mutual obligation. D could theoretically have offered them no beets from the
beginning and still fulfill their end of the bargain.
Comments
Since this is about transportation of goods rather than goods themselves, this is not a UCC case
P wants you to think that there is an implicit promise because the contract has a term of time, P
gets paid, and P obtains all of the materials and labor required of him.
However, P knows that D’s relationship with P is not exclusive

Wood v. Lucy, Lady Duff-Gordon- New York, 1917


Important Facts/Procedural History
D, a fashion influencer whose endorsement adds value to a product, set up an agreement with P
where P would have the exclusive right to grant her endorsement, sell her designs, or license
others to do so. In return, D would have half of all profits.
D, outside of the agreement, endorsed products without P’s knowledge and withheld the profits
from P.
In the agreement, P doesn’t actually promise to do anything
Takeaways
A contract may lack a specified return promise, but can still be valid if the return promise is
implied from the parties’ relationship.
Reasoning
D’s argument that, in the agreement, P takes on no obligation, is incorrect. While the obligation
is not specifically mentioned, it is implied that P assumes duties based on his grant of exclusive
right. If P failed to act on his responsibilities to D’s business, then P would get no value from
agreeing to the contract.
Formality in contracting is no longer as necessary, as a promise can be implied, coming from the
parties’ relationship.
Comments
Different result from De Los Santos, because the court in De Los Santos looked at the contract
itself while the court in Wood looked also at the relationship of the parties.

Weiner v. McGraw-Hill, Inc.- New York, 1982


Important Facts/Procedural History
P, upon being hired by D, rejected a raise by his previous company. P took a job with D with a
guarantee of job security (at the expense of salary and benefits), with employees only being let
go with just cause. However, he was still an at-will employee
8 years and several promotions later, D suddenly fired P for “lack of application”
Takeaways
Mutuality is not required for a binding contract when the promisor receives other valid forms of
consideration
When an employer promises payment and a definite or indefinite length of the job, the
employment is no longer “at-will” if the employee has begun to provide their services or some
other form of consideration
Mutuality of exchange does not require constant obligation from both parties throughout the life
of the contract. Instead, you test for consideration at the time of formation.
Reasoning
There was consideration because P began to provide his services to D, giving up his old job.
When D promised P that he would only be terminated with just cause, D contracted out of their
rights as an at-will employer. P did not surrender his rights as at at will-employee.
Comments
Here

Restatements
Here

UCC Provisions
§ 1-304. Obligation of Good Faith.
Every contract or duty within the Uniform Commercial Code imposes an obligation of good
faith in its performance and enforcement.

§ 2-306. Output, Requirements and Exclusive Dealings.


(1) A term which measures the quantity by the output of the seller or the requirements of
the buyer means such actual output or requirements as may occur in good faith, except that no
quantity unreasonably disproportionate to any stated estimate or in the absence of a stated
estimate to any normal or otherwise comparable prior output or requirements may be tendered or
demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind
of goods concerned imposes unless otherwise agreed an obligation by the seller to use best
efforts to supply the goods and by the buyer to use best efforts to promote their sale.

Policy Considerations
Here

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