Contracts 1 Outline

Another law school course outline brought to you by:
The Internet Legal Research Group ILRG Law School Course Outlines Archive LawRunner: A Legal Research Tool http://www.ilrg.com http://outlines.ilrg.com http://www.lawrunner.com
OUTLI ! "!TAILS: Author: Anon#mous School: "u$e Law School Course: Contracts %ear: Spring& '(() *ro+essor: Sal,man Te-t: *ro.lems in Contract Law: Cases / 0aterials 1)th e2.& '((34 Te-t Authors: 5napp& Cr#stal& an2 *rince
OTIC!: This outline is copyright 2005 by the Internet Legal Research Group, a property of Maximilian entures, LL!, a "ela#are corporation$ This outline, in #hole or in part, may not be repro%uce% or re%istribute% #ithout the #ritten permission of the copyright hol%er$ & limite% license for personal aca%emic use is permitte%, as %escribe% belo#$ This outline may not be poste% on any other #eb site #ithout permission$ ILRG reser'es the exclusi'e right to %istribute this outline$ T(I) *+TLI,- I) )+./-!T T* &""ITI*,&L T-RM) &," !*,"ITI*,) L*!&T-" &T0 http://www.ilrg.com/terms$ USAG! OTIC! A " "ISCLAI0!R: &lthough the Internet Legal Research Group has trie% to assemble the best possible outlines, 1- M&2,* 1&RR&,TI-) &) T* T(- &!!+R&!3 *4 T(- I,4*RM&TI*, T(I) *+TLI,- !*,T&I,)$ T(I) *+TLI,- I) 5R* I"-" T* 3*+ &)6I)$ +)- IT &T 3*+R *1, RI)2, &," "* ,*T R-L3 *, IT 4*R L-G&L &" I!-$ I4 3*+ ,--" L-G&L (-L5, 5L-&)- !*,T&!T & 7+&LI4I-" &TT*R,-3 I, 3*+R /+RI)"I!TI*,$ &s this outline has been #ritten by a la# stu%ent, it may contain inaccurate information$ 4urthermore, some la# schools ha'e policies that permit la# stu%ents to ta8e outlines into final exams so long as the stu%ent actually #rote the outline$ If your la# school has such a policy, you are expressly prohibite% from representing any of the outlines containe% in this archi'e as your o#n$ If you are not sure of your la# school9s policy, you shoul% contact the appropriate staff at your school$ *ther#ise, the Internet Legal Research Group genuinely hopes you %eri'e benefit from this outline$
I$
! T!RI G I TO A CO TRACT: &$ *ffer0 :$ May be re'o8e% at any time prior to acceptance$ a$ b$ c$ 2$ a$ Limite% ho#e'er by promissory estoppel an% statutory limitations 2no#n as po#er of re'ocation !an result if offeree ta8es action that can be interprete% as a re;ection <e$g$0 counteroffer= Restatement 6'7: Restatement *ffer "efine% i$ b$ &n offer is the manifestation of #illingness to enter into a bargain, so ma%e as to ;ustify another person in un%erstan%ing that his assent to that bargain is in'ite% an% #ill conclu%e it$ Restatement 6'8: 5reliminary ,egotiations i$ & manifestation of #illingness to enter into a bargain is not an offer if the person to #hom it is a%%resse% 8no#s or has reason to 8no# that the person ma8ing it %oes not inten% to conclu%e a bargain until he has ma%e a further manifestation of assent$ c$ Restatement 683: Time 1hen &cceptance Ta8es -ffect i$ +nless the offer pro'i%es other#ise0 <a= an acceptance ma%e in a manner an% by a me%ium in'ite% by an offer is operati'e an% completes the manifestation of mutual assent as soon as put out of the offeree9s possession, #ithout regar% to #hether it e'er reaches the offeror> but <b= an acceptance un%er an option contract is not operati'e until recei'e% by the offeror$ ?$ .in%ing nature of offer0 a$ /o8ing0 no contract only if other party a#are, or shoul% reasonably be a#are, that offeror is ;esting$ *ther#ise enforceable$ i$ Lucy '$ @ehmer <:A5B=0 " offere% to sell farm to 5 for C50,000$ " claime% #as %run8, 8i%%ing an% 5 8ne# that$ !ourt uphel% offer as 5 reasonably belie'e% ", the con%itions #ere not unreasonable an% 5 ma%e serious effort in reliance on the offer$ 4ault on offeror$ B$ Getting to an offer0 a$ b$ In'itation to an offer0 <e$g$0 for sale at a price not belo# C:00= 4airmount Glass 1or8s '$ Grun%en6Martin 1oo%en#are <:DAA=0 i$ ii$ iii$ c$ ReEueste% Euote on glass ;ars$ " sent telegram #ith pricing an% stating Ffor imme%iate acceptanceG$ !oul% not %eli'er #hen or%er place%$ !ourt hel% that Euote specifying for imme%iate acceptance #as an offer as it #as accepte% imme%iately$ ,ormally, a Euotation or price sheet is treate% li8e an in'itation to an offer I #ith seller retaining right to accept or re;ect buyerHs offer$ Lef8o#itI '$ Great Minneapolis )urplus )tore <:A5J=0 a%'ertisement offering stole for C: to first customer in line %eman%e% specific performance an% thus #as an offer$ i$ .$ &cceptance0 :$ 2$ Restatement 69:0 manifestation of mutual assent a$ a$ ?$ This may entail a #ritten %ocument, oral agreement or commencement of performance$ 5eerless case <:ADA=0 !onfusion o'er #hich 5eerless ship #as referre% to in contract$ ,o contract as there #as no meeting of the min%s$ Re'o8ing an offer0 a$ Must occur before acceptance$ ,o meeting of the min%s0 (o#e'er, a%'ertisements usually are not offers$
Restatement La#0
http://outlines.ilrg.com
b$ B$ a$ b$ 5$
*fferor sets rules for form an% manner of acceptance$ UCC ';'(80 a purchase or%er can be couple% by any reasonable me%ium inclu%ing performance$ Restatement 663' an2 8'0 performance is a reasonable #ay to accept a contract$ )tarting such performance bin%s not only offeror but also the offeree$
Metho%s of acceptance0
*ffer #Ko a time limit stays opene% for a reasonable time$ a$ -'er6Tite Roofing !orp$ '$ Green <:A55=0 a roofer #aite% for a #ee8 to complete a cre%it chec8 before accepting "Hs offer$ Then, sent truc8 only to fin% another !o$ on the ;ob$ !ourt hel% that roofer ha% accepte% the offer in reasonable time <no time6limit= an% starte% performance by sen%ing the truc8$ b$ Rule is no# home repair customer must act before cre%it chec8 is complete to re'o8e offer$ Restatement 67)0 i$ ii$ b$ !ommencement of performance creates an option contract in offeree$ 4ree to complete #or8 but not boun% to %o so$
L$
+nilateral !ontracts0 a$
!oo8 '$ !ol%#ell .an8er <:AAD=0 " announce% a bonus sales program that #oul% re#ar% great sales #ith bonuses pai% out at en% of program$ " trie% to argue that offer #as re'o8e% #hen she left firm66that intention of program #as to re#ar% loyalty$ !ourt hel% that a unilateral contract is bin%ing on offeror once substantial performance has occurre%$
!$
&%%itional !aseboo8 !ase La#0 :$ )t$ Lan%ry Loan !o$ '$ &'ie <=0 )ol%ier nee%e% an en%orser to get a loan, so he got his illiterate el%er father6in6 la# to cosign$ 1hen sol%ier %efaulte%, ban8 came after the ol% man$ .an8 claims they explaine% e'erything to him, #hich he %enie%$ !ourt hel% for 5 un%er Fignorantia non excusatG an% there #as no e'i%ence of foul play$ 2$ Ray '$ 1illiam *$ -urice .orthers <:A52=0 & %e'eloper signe% a contract #ithout rea%ing it an% later trie% to get out of the special %eman%s the property o#ner ha% ma%e$ !ourt hel% that the stan%ar% for e'aluating a contract is ob;ecti'e$ FMeeting of the min%sG$ &bsent frau%, %uress or mutual mista8e, signing is bin%ing$ ?$ Lonergan '$ )colnic8 <:A5B=0 5 respon%s to an a% in paper for lan% in /oshua Tree place% by "$ " sent a form letter in response$ 5 belie'e% that there ha% been an offer an% acceptance$ !ourt hol%s that the form letter #as merely an in'itation to an offer$ B$ ,ormile '$ Miller <:AD5=0 " put house up for sale$ 5 ma%e an offer, " ma%e counter6offer as8ing for more money$ 1hile 5 #as %eci%ing, " tol% them the offer #as gone as she ha% sol% to someone else$ 5 claims there #as a contract or at least a first option$ !ourt hel% that "9s counter6offer #as a re;ection of 5Hs offer$ The Mne#H offer #as rescin%e% prior to 5 accepting$
"$
Re'ocation an% !ounteroffer0 :$ & promise to 8eep an offer open is not bin%ing$ a$ "ic8inson '$ "o%%s <:DJL=0 offer to sell real estate at a fixe% price #ith offer hel% open until set %ate$ " sol% lan% to another an% refuse% acceptance from 5$ !ourt hel% this offer #as not firm an% coul% be re'o8e%$ b$ 2$ ?$ Reasoning in'ol'es a lac8 of consi%eration on offereeHs part$ ,o %uty in return for option to buy$ *nce an offer is re'o8e%, notice must be promptly gi'en to offeree to pre'ent his further #asteful efforts$ )tating that offer is re'o8e% before it is accepte% terminates offer$ a$ 5etterson '$ 5attberg <:A2D=0 " offere% to %iscount 5Ms mortgage if pai% in full by certain %ate$ " sol% mortgage prior to another party$ 1hen 5 arri'e% at %oor, " refuse% to accept payment stating that offer #as re'o8e%$ !ourt uphel%$ B$ 4irm offers0 a$ & firm offer can, ho#e'er, be ma%e0
i$
Restatement 870 *ption !ontract <a= &n offer is bin%ing as an option contract if it <:= is in #riting an% signe% by the offeror, recites a purporte% consi%eration for the ma8ing of the offer, an% proposes an exchange on fair terms #ithin a reasonable time> or <2= is ma%e irre'ocable <b= &n offer #hich the offeror shoul% reasonably expect to in%uce action or forbearance of a substantial character on the part of the offeree before acceptance an% #hich %oes in%uce such action or forbearance is bin%ing as an option contract to the extent necessary to a'oi% in;ustice$
ii$ iii$ i'$
Restatement 6<(0 #a'es nee% for consi%eration to ma8e a subcontractorHs bi% a bin%ing promise$ UCC ';'()0 firm offer nee%s no consi%eration as long as such intent is clear an% the time is not unreasonable$ -'olution of the !ase La#0 <a= )ee "rennan '$ )tar 5a'ing !o$ <:A5D=0 5 #on contract from school to buil% base% in part on Euote from "$ " then state% that ma%e error an% coul% not perform N attempt to #K%ra# offer$ !ourt hel% that offer by subcontractor inclu%es Fsubsi%iary pro'ision to accept if contractor #ins bi%, %espite loc8 of con'entional consi%eration$ <b= .ut contrast #ith, /ames .air% !o$ '$ Gimbel .ros$ <:A??=0 /u%ge Learne% (an% hel% that subcontractor #as not boun% as he recei'e% no promise in return, an% contractor #as free to renegotiate$ 4urthermore, promissory estoppel #as aime% at %onati'e cases not offers of ser'ice or sale$
'$ 5$ a$
!ontractor un%er current la# is boun% by its o#n bi% to the subcontractor if he #ins the bi%$
FIn%uce% RelianceG0 (offman '$ Re% *#l )tores <:AL5=0 5 relie% to his %etriment on "Hs representation about ability to get a grocery store franchise$ 1hen " su%%enly raise% capital in'estment reEuirement, 5 sue%$ !ourt grante% 5 reliance %amages %ue to "Hs Fpromissory representationsG$ ,o expectation %amages #oul% be a'ailable as " ne'er offere% him a franchise$ b$ 5opHs !ones, Inc$ '$ Resorts International (otel <:AAD=0 5 #as in exten%e% an% prolonge% negotiations #ith " to open a T!.3 franchise at "9s hotel$ 1hen 5 ha% to ma8e %ecision about their present lease, " informally tol% them that their %eal #as as goo% as complete$ Relying on this 5 %i% not rene#$ " then %i% not %eli'er a contract$ !ourt hol%s that promissory estoppel applies$ c$ If party reasonably relies on offerorHs pre6contract representations to his great %etriment, reliance %amages may be gi'en un%er promissory estoppel$
L$
Mirror Image Rule0 a$ b$ c$ %$ &n acceptance that a%%s con%itions or Eualifications is not an acceptance but a counteroffer$ <!ommon La#= Restatement 6)<0 acceptance must be a mirror image of offer$ -'en minor changes ma8e if a counteroffer$ Restatement 63<0 a counteroffer functions as a re;ection an% terminates offer, unless offeree manifests a contrary intent$ Minneapolis O )t Louis Rail#ay !o$ '$ !olumbus Rolling6Mill !o$ <:DDL=0 5 reEueste% Euote for 2000 to 5000 tons rails an% recei'e% price of C5B$ ReEueste% :200 rails at C5B an% #as tol% %eli'ery coul%
not be ma%e at that price$ Resent or%er at 2000$ " state% offer #as terminate% as counteroffer at :200 #as a re;ection$ <5rice ha% gone up to CL0=$ !ourt uphel%$ e$ 5oel '$ .runs#ic86.al8e6!ollen%er <=0 5 thought they ha% contracte% #ith " to sell some rubber$ 5 sent an offer, " respon%e% #ith a counter offer, an% then " contacte% them #ith recission, claiming their agent ha% no authority to ma8e it$ !ourt hel% that there #as ne'er any acceptance because "9s counter offer #as not an acceptance$ J$ .attle of the 4orms0 a$ b$ Routine merchan%ise transactions occur on stan%ar% forms that may ha'e conflicting or %ifferent information$ UCC ';'(: 1940 i$ )upplierHs ac8no#le%gement of purchaserHs offer is an acceptance rather than counteroffer e'en though it inclu%es a%%itional or %ifferent terms from purchaserHs or%er form, unless supplier expressly con%itions acceptance on purchasers assent to those terms, an% thus there is a contract un%er the terms of purchaserHs offer$ ii$ If no agreement #as reache% that coul% constitute a contract, but goo%s #ere or%ere%, shippe% an% pai% for before %ispute arose, a contract is presume% #K terms being those in common on both forms$ ,either time %ominates$ c$ UCC ';'(: 1'40 if supplierHs form contains a%%itional terms <not conflicting=, these are treate% as proposals$ )uch proposals are consi%ere% a%opte% by purchaser unless0 i$ ii$ iii$ %$ e$ 5urchaser expressly limits offer to o#n terms &%%itional terms are ob;ecte% to by offeror Fmaterially alterG contract
"ifferent terms0 may be resol'e% in fa'or of purchaser or be %roppe% un%er the 8noc86out rule, #ith terms supplie% from the +!!$ Roto6Lith, Lt%$ '$ 4$5$ .artlett O !o$ <:AL2=0 %isclaimer of #arranty on sellerHs ac8no#le%gement of buyerHs offer treate% as counteroffer not proposal$ This is in conflict #K mo%ern application of 2620J$ 1arranty %isclaimers must no# be explicitly agree% to by the buyer$
f$
.ro#n Machine '$ (ercules <=0 5 sol% a machine to "$ )eller9s forms inclu%e% in%emnification, but buyerHs forms %i% not$ !ourt hel% that buyer ma%e the offer an% seller9s response #as an acceptance$ The ne# terms, thus, #ere merely proposals that " ne'er explicitly accepte%$ )ince buyer %i%n9t expressly consent to in%emnification, it9s not part of the contract$
D$
&greement to &greeK)tatute of 4rau%s0 a$ b$ !ontracts #ith terms that are uncertain may not be enforce% unless court fin%s it can clearly establish the intent of the parties$ 1al8er '$ 2eith <:ALB=0 5 an% " #ere parties to a lease$ Lease ha% an option to exten% for an a%%itional :0 years un%er same terms except for rent, #hich #oul% be set to price agree% upon by parties base% on comparison #ith rental 'alues an% comparati'e business con%itions$ !ourt hel% that an agreement to agree must be sufficiently %efinite to enable a court to gi'e it exact meaning or it #on9t be bin%ing$ (ere, this agreement ga'e no in%ication of a meeting of the min%s an% no #ay to %etermine a rental price$ c$ !rabtree '$ -liIabeth &r%en <:A5?=0 5 negotiate% #ith "9s representati'es$ /ust one %ocument #as %ra#n up <specifie% salary an% ma%e ambiguous reference to length of employment=$ 5 claime% he only got half of the raise he #as suppose% to get$ !ourt hel% that piecing together time car%s an% another %ocument to pro'e there #as a contract an% using parol e'i%ence to explain ambiguities %i% not 'iolate the )tatute of 4rau%s$
-$
!onsi%eration0 :$ 2$ ?$ B$ 5$ Def: receipt by promisor of something of 'alue by promisee Restatement 69:0 except #here special rules apply, a contract reEuires a bargain to #hich the parties assent an% a consi%eration #hich can ta8e the form of a return promise or performance$ Bilateral Contracts: an exchange of promises Unilateral contracts: exchange of promise for performance Nature of a Promise: nee% not be #ritten$ Maybe expresse% by #or% or action, such as commencement of performance$ a$ Maybe limite% by the )tatute of 4rau%s0 forbi%s enforcement of certain classes of contracts unless e'i%ence% by #ritten memoran%um <sale of lan%, ser'ice contracts not to be complete% #Kin one year= b$ L$ a$ UCC ';'(90 similar restriction for sale of goo%s o'er C500$ "onati'e 5romises0 i$ ii$ In general, a promise to gi'e a gift in the future is unenforceable$ 5ure gift0 <a= "ougherty '$ )alt <:A:A=0 &unt #rites note promising nephe# C?000 at her %eath$ !ourt hel% that there #as no contract as there #as no consi%eration$ 5 ga'e up nothing 6 there #as no con%ition$ Intent of grantor is not enforceable$ iii$ "eman% of specific con%uct0 <a= (amer '$ )i%#ay <:DA:=0 promise of C5,000 to Euit %rin8ing an% smo8ing$ <b= !ourt hel% that forbearing from exercising a legal right constitutes a consi%er action an% thus creates a bin%ing contract$ <c= )ummary0 a promise of a gift ma%e as part of a %eal an% for a nontri'ial amount may be enforceable$ i'$ Reliance on a 5romise% Gift0 <a= Ric8etts '$ )cothorn <:DAD=0 promise by gran%father to gi'e gran%%aughter a %eman% note for C2000 to allo# her to Euit her miserable ;ob if she chose$ "aughter Euit ;ob$ <b= !ourt hel% that if %onee, in reasonable reliance on the gift, incurs %ebt, expense or significant change in con%ition, %onor may be estoppe% from re'o8ing the promise on groun%s of lac8 of consi%eration$ <:= !onsi%eration reEuirement may also be circum'ente% by recital of nominal consi%eration$ b$ 5romissory estoppel0 i$ Restatement 6<(0 a promise expecte% by promisor to cause promisee to ta8e or forbear some action, an% in%uces such action, is enforceable if necessary to a'oi% in;ustice$ Reme%y may be limite% as ;ustice reEuires$ ii$ -ast 5ro'i%ence !re%it +nion '$ Geremia <:ALD=0 <a= !ar purchase loan to %efen%ants, reEuire% acci%ent insurance, ban8 #arne% that they #ill get insurance an% bill %efen%ants, car #rec8e%, but ban8 %i% not buy insurance$ <b= !ourt rule% that .an8Hs #arning #as a promise on #hich "Hs reasonably relie% an% thus .an8 #as liable un%er promissory estoppel$ iii$ &llegheny !ollege '$ ,ational !hautauEua !ounty .an8 <:A2J=0 1oman promise% to lea'e money to college upon her %eath$ )he calle% it a gift, but instructe% that the money be Situations when consideration does not apply or is modified:
use% to create a fun% in her name$ /ustice !ar%oIo #rites cle'er opinion that hol%s the promise enforceable on either promissory estoppel or tra%itional consi%eration <college agree% to name it after her=$ 1hen one argument gets #ea8, he goes to other$ c$ 5ure promise #ithout consi%eration0 i$ .aehr '$ 5enn6*6Tex *il !orp$ <:AL0=0 5 #as o#e% money by a thir% party$ Thir% party claime% that " ha% all of its assets tie% up$ 5 contacte% ", see8ing its money$ " sai% they #oul% see to it that 5 got money$ !ourt hel% that this #as not enough to constitute consi%eration, %espite 5Hs assertion that he %elaying legal action in exchange for the promise$ ii$ Restatement 6:90 ReEuirement of -xchange> Types of -xchange <a= To constitute consi%eration, a performance or a return promise must be bargaine% for$ <b= & performance or return promise is bargaine% for if it is sought by the promisor in exchange for his promise an% is gi'en by the promisee in exchange for that promise$ <c= The performance may consist of <:= an act other than a promise, or <2= a forbearance, or <?= the creation, mo%ification, or %estruction of a legal relation$ <%= The performance or return promise may be gi'en to the promisor or to some other person$ It may be gi'en by the promisee or by some other person$ ii$ Restatement 6:<0 &%eEuacy of !onsi%eration> Mutuality of *bligation <a= If the reEuirement of consi%eration is met, there is no a%%itional reEuirement of <:= a gain, a%'antage, or benefit to the promisor or a loss, %isa%'antage, or %etriment to the promisee> or <2= eEui'alence in the 'alues exchange%> or <?= Pmutuality of obligation$P %$ Illusory 5romise0 i$ ii$ Def: a promise that %oes not bin% promisor to any affirmati'e action or forbearance an% thus is not a consi%eration$ 5romise must be ma%e an% execute% in Fgoo% faith$G <a= Mattei '$ (opper <:A5D=0 <:= "e'eloper agree% to buy lan% #Kin :20 %ays sub;ect to obtaining satisfactory leases for pro;ecte% shopping center$ <2= !ourt hel% that a Fgoo% faithG effort to obtain satisfactory leases #as a promise <non6illusory= an% thus #as sufficient to create a contract$ e$ Moral obligations an% 5ast !onsi%eration0 i$ ii$ iii$ i'$ 1ebb '$ McGo#in <:A?5=0 promisor sa'e% by employee #ho #as hurt in process of sa'ing him, promise% C:5 per t#o #ee8s for life$ !ourt hel% that past consi%eration suffice%$ Mills '$ 1yman <:D25=0 no legal consi%eration to father by care gi'en to his a%ult son by promisee$ ,o contract$ )tan%ar%0 a promise maybe uphel% base% on past consi%eration if the promisor himself recei'e% a personal benefit for #hich promisee coul% ;ustly %eman% compensation$ Restatement 6=80 a promise ma%e in recognition of a benefit pre'iously recei'e% is bin%ing to the extent necessary to a'oi% in;ustice, unless the benefit #as a gift or for other reasons the promisor #as not un;ustly enriche%$
II$
LI0ITATIO S O CO TRACT T!R0S: &$ +nfairness an% +nconscionability0 :$ Minority an% Mental Incapacity0 a$ "o%son '$ )hra%er <:AA2=0 5, :L years ol%, bought a truc8 from "s$ ,ine months later, the truc8 starte% ha'ing problems$ 5 ha% no money to fix it, so he %ro'e it until it ble# up$ 5 attempte% to 'oi% contract an% get money bac8 because he is a minor$ !ourt hol%s that in contract enter into by a minor, if such contract #as not unreasonable, no un%ue influence #as use%, the minor purchase% an% pai% for the pro%uct, an% use% it for a perio% of time, the pro%uct may be returne% but the purchase price can be %iscounte% by the use an% %amage to the item$ b$ *rtelere '$ Teacher9s Retirement .oar% <=0 5 #as mentally unstable an% ha% been a#ay from teaching for about a year$ The "Hs 8ne# that, but 5 ha% sent them an articulate, #ell6reasone% letter about pensions$ )he su%%enly #ent in an% %ramatically change% her retirement plan to gi'e her the maximum imme%iate payout #ith no payments after her %eath$ )he soon %ie%, lea'ing her unemploye% husban% #ith nothing$ !ourt hel% that she #oul% not ha'e entere% this contract but for her mental %ifficulties$ Important issue is <:= presence of incapacity an% <2= "Hs 8no#le%ge of such incapacity$ 2$ "uress a$ Restatement 69:70 1hen "uress by 5hysical !ompulsion 5re'ents 4ormation of a !ontract0 If con%uct that appears to be a manifestation of assent by a party #ho %oes not inten% to engage in that con%uct is physically compelle% by %uress, the con%uct is not effecti'e as a manifestation of assent$ b$ Restatement 69:70 1hen "uress by Threat Ma8es a !ontract oi%able i$ ii$ If a partyHs manifestation of assent is in%uce% by an improper threat by the other party that lea'es the 'ictim no reasonable alternati'e, the contract is 'oi%able by the 'ictim$ If a partyHs manifestation of assent is in%uce% by one is not a party to the transaction, the contract is 'oi%able by the 'ictim unless the other party to the transaction in goo% faith an% #ithout reason to 8no# of the %uress either gi'es 'alue or relies materially on the transaction$ c$ %$ 5hysical 'iolence of threat thereof N 'oi% per se -conomic %uress N 'oi%able at 'ictimHs option i$ Mo%ification of existing contract <a= ReEuires ne# consi%eration <b= 5erformance of %uties alrea%y contracte% for cannot be a ne# consi%eration$ )ee &las8a 5ac8ers <:A02= O Restatement 6:3$ <c= Restatement 6=<0 mo%ification may he enforceable if it is fair an% eEuitable in 'ie# of circumstances not 8no#n by parties at signing$ <%= UCC ';'(<0 <:= Mo%ification enforceable if ma%e in goo% faith an% for legitimate commercial reasons$ <2= !hange in mar8et con%itions resulting in loss may he goo% faith reason, %espite this being an actionable breach$ <?= 5 then can choose bK# claiming %amages or renegotiating for performance$ <e= &ustin Instrument !o$ '$ Loral !orp$ <:AJ:=0 %eman% by 5 to increase price pai% for components by " an% to exten% contract #as consi%ere% %uress an% unenforceable, %ispute %issent arguing that it #as a legitimate a%;ustment to a change% commercial situation$
<f=
2elsey6(ayes !o$ '$ Galatco Re%la# !astings !orp$ <:AA0=0 " #as in a three year agreement #ith 5 to supply castings that 5 use% to ma8e bra8es for ma;or auto companies$ Threatene% to Euit %eli'ery if " %i% not increase price$ !ourt hel% a contract is 'oi%able if assent is in%uce% by a threat that lea'es no economically 'iable alternati'e$ Threat %oes not ha'e to be illegal> ;ust #rongful$
e$
+n%ue Influence0 i$ *%oriIIi '$ .loomfiel% )chool "istrict <:ALL=0 5 #as interrogate% by police for B0 hours for suspecte% homosexual acti'ity$ (e #as then approache% by "Hs, a%ministrators at his school, #ho encourage% him to resign an% to %o so Euic8ly, not to contact a la#yer$ If he %i%n9t, they #oul% suspen% him an% publiciIe e'erything$ !ourt hel% that there #as un%ue influence base% on 5Hs physical an% mental con%ition, the "Hs superior po#er, an% the pressure applie% on him at the time$
?$
Misrepresentation O !oncealment0 a$ b$ Representations of fact, e'en if %one in goo% faith, that are false, upon #hich 5 relie% to his %etriment, oblige representor to restore party to prior con%ition$ ,on6%isclosure0 i$ ii$ In past, no %uty or liability for non6%isclosure$ )ee )#inton '$ 1hitins'ille )a'ings .an8 <:AB2= <termite %amage=$ Mo%ern la# is changing0 <a= Restatement 69890 non6%isclosure eEui'alent to misrepresentation #here non6 %isclosure concerns Fbasic assumptionG an% %emonstrates lac8 of goo% faith$ <b= This %oes not ho#e'er affect cases #here 8no#le%ge #as obtaine% as a pro%uct of research or special expertise$ <geologist not re'ealing possibility of mineral %eposits un%er lan%$= iii$ (ill '$ /ones <:ADL=0 5 an% " entere% into contract to purchase a house$ 5, on one inspection of the house, sa# a ripple in the #oo% floor an% as8e% if it #as from termite %amage$ " sai% it #as #ater %amage$ 5 as8e% for termite inspection, but " strategically arrange% furniture to hi%e termite %amage so inspector %i%n9t see it$ 5 mo'e% in an% foun% a pamphlet Ptermites0 the silent saboteursP an% learne% that there #as extensi'e termite %amage$ !ourt hel% that parol e'i%ence is a%missible to pro'e frau% an% that " ha% a %uty to %isclose termite %amage$
B$
)tan%ar%iIe% 4orms O +nconscionability0 a$ b$ !ontract of a%herence0 buyer has no option but to a%here as no other choice is a'ailable$ (enningsen '$ .loomfiel% Motors, Inc$ <:AL0=0 !ontract that %isclaime% all liability except for replacement of faulty parts <no liability for in;ury #hen steering #heel fell off= #as unconscionable as buyer ha% no choice but to agree to the terms as ADQ of cars sol% ha% same pro'ision$ c$ 1illiams '$ 1al8er6Thomas 4urniture !o$ <:AL5=0 cross6collateral pro'ision of contract that allo#e% " to repossess all of 5Hs purchases #as unconscionable$ i$ +nconscionability0 Fsubstanti'e fairness <a= &bsence of meaningful choice on buyerHs part <:= Inclu%es manner in #hich contract #as entere% into, especially relati'e li8elihoo% that parties coul% un%erstan% the pro'isions$ <b= 5resence of con%itions Funreasonably fa'orableG to seller %$ !ooper '$ MRM In'estments <2002=0 5 #as an employee at a 24! franchise o#ne% by "Hs$ 5rior to employment, 5 signe% a contract that containe% a bin%ing arbitration agreement that she #oul% ha'e to pay for$ !t fin%s that this is a contract of a%hesion, an% that no one #oul% sign it if they
un%erstoo% #hat rights they #ere foregoing an% ha% a choice$ &lthough " has no# offere% to pay for the arbitration, court hol%s this contract unconscionable as <:= %isparity in bargaining position an% <2= lac8 of clear notice$ e$ UCC states that a contract entere% into by competent a%ults is 'ali% regar%less of fairness unless one party %i% not, or coul% not, comprehen% the meaning of the contract$ In that e'ent court may use its ;u%gment$ f$ )upplemental !ase La# on !ontracts of &%hesion in )oft#areKInternet Mar8et0 i$ 5ro!" '$ @ei%enberg <=0 " bought a copyrighte% telephone %irectory program #ith a shrin86 #rap license$ " then opene% his o#n business selling the information containe% in the %irectory, in 'iolation of the shrin86#rap license$ !ourt hel% that such agreements are analogous to tic8ets to theatres$ &s theaters cannot put full contract on a tic8et, soft#are %ealers cannot put full contract on box$ "oes not create right to 'iolate license$ ii$ !ompuser'e '$ 5atterson <=0 " coul% in fact consent to ;uris%iction in a foreign forum simply by typing PagreeP as he uploa%e% share#are to !ompuser'e ser'ers$ In or%er to %o so, he nee%e% to consent to the Pshare#are registration agreementP, #hich the court hel% to be a 'ali% contract$ iii$ In re Real,et#or8s <=0 arbitration agreements in license agreements for soft#are are 'ali%66this one #as plainly in the text in the same siIe un%er the hea%ing miscellaneous$ Moreo'er, license agreements that are sa'e% to the computer are P#ritten agreementsP e'en #hen you %on9t ha'e the option of imme%iately printing them 'ia a conspicuous button$ ,ot in fine print, an% no limitation on time to re'ie# ma8es this enforceable$ i'$ Tic8etmaster '$ Tic8ets$com <=0 5 tries to en;oin " from P%eep lin8ingP %irectly to embe%%e% sites on groun%s that %oing so is in 'iolation of their license agreement, a passi'e bloc8 of text at the bottom of their main page$ !ourt says that small text, stuc8 at the bottom of a page that sits passi'ely %oes not necessarily create a contract #ith anyone using the site$ III$ CO TRACT I T!R*R!TATIO / *!R>OR0A C! &$ Interpretation0 :$ Meaning of terms #ithin a contract0 a$ Restatement 6'(90 1hose Meaning 5re'ails i$ ii$ 1here the parties ha'e attache% the same meaning to a promise or agreement or a term thereof, it is interprete% in accor%ance #ith that meaning$ 1here the parties ha'e attache% %ifferent meanings to a promise or agreement or a term thereof, it is interprete% in accor%ance #ith the meaning attache% by one of them if at the time the agreement #as ma%e <a= that party %i% not 8no# of any %ifferent meaning attache% by the other, an% the other 8ne# the meaning attache% by the first party> or <b= that party ha% no reason to 8no# of any %ifferent meaning attache% by the other, an% the other ha% reason to 8no# the meaning attache% by the first party$ iii$ b$ -xcept as state% in this )ection, neither party is boun% by the meaning attache% by the other, e'en though the result may be a failure of mutual assent$ 4rigaliment Importing !o$ '$ .$,$)$ International )ales !orp$ <:AL0=0 &s buyer an% seller ha% %ifferent un%erstan%ing of #hat a chic8en #as, contract #as nullifie%$ .ase% on lac8 of mutual assent resulting in Ffailure of consensusG$ c$
/oyner '$ &%ams <:ADJ=0 5 an% " %ispute o'er #hat the term P%e'elopmentP means$ 5 hire% " to P%e'elopP lan%$ If they #ere late, there #as a penalty$ 5 argue% that %e'elopment means to be
:0
rea%y to begin construction on all planne% buil%ings$ " says it means only sub%i'i%ing the lots$ " ha% complete% all sub%i'ision an% all buil%ing sa'e one buil%ing$ 5 says they shoul% be penaliIe%$ .oth parties submitte% e'i%ence to bac8 up their interpretation$ !ourt hel% if there #as no meeting of the min%s, the pro'ision is unenforceable$ .ut, if one party 8ne# or ha% reason to 8no# of the other9s interpretation, they are boun% by it$ %$ Tra%e usage or prior course of %ealing 0 i$ ii$ 2$ a$ b$ c$ !ourts may supply missing element to allo# contract to be preser'e% is such element can be reasonably inferre% from common tra%e usage or from partiesH prior course of %ealings$ )upporte% by both UCC an% Restatements$ 5arole -'i%ence Rule0 "ef0 ren%ers unenforceable any oral agreements entere% into prior to a%option of the #ritten contract$ Restatement 6'930 a #ritten agreement that is in itself Fcompletely integrate%G effecti'ely %ischarges any prior agreement in its scope$ The 'arying case la#0 i$ Mitchill '$ Lath <:A2D=0 oral agreement to remo'e ice house as part of sale of lan% #as barre% un%er parole e'i%ence as the contract #as hel% to be completely integrate%$ To be enforce%0 <a= Must be collateral in form <capable of being a separate agreement= an% %oes not contra%ict terms of #ritten, an% <b= 1ritten contract fails to fully integrate$ <c= Rule: prior oral agreements only enforceable if ha'e separate consideration. ii$ Thompson '$ Libby <:DD5=0 !lassical approach to 5arol -'i%ence Rule$ 5 an% " contract for logs$ 5 sues to get payment$ " claims there #as a 'erbal #arranty for the Euality of the logs$ !ourt says that if contract is complete as #ritten court #ill assume that #as all parties inten%e%$ !ollateral exception #ill not help here because a #arranty is a material, not collateral, term of sale$ iii$ Masterson '$ )ine <:ALD=0 !ourt allo#e% parole e'i%ence that contract inclu%e% a non6 assignability clause #ith regar%s to right to repurchase property #Kin :0 years$ <a= If e'i%ence of prior agreement #as cre%ible, then #ritten contract coul% not be consi%ere% fully integrate%$ i'$ Taylor '$ )tate 4arm Insurance <:AA?=0 5 sues " for ba% faith in their %efense of him after a three 'ehicle acci%ent$ " settle% case on behalf of 5 for C2 million in excess of his insurance policy$ 5 #ants to intro%uce parol e'i%ence to clarify something his attorney %i%$ !ourt ta8es the !orbin 'ie#66the ;u%ge shoul% loo8 at a contract an% the parol e'i%ence rule to %etermine if text is clear$ If the text alone is clear, fact6fin%er %oes not get parol e'i%ence$ %$ !urrent tren%0 i$ ii$ iii$ i'$ Masterson is the ma;ority approach$ -xplicit merger clauses ha'e become more common$ FTrue intentG is touchstone for court$ +!! an% Restatements state that parole rule #ill not bar e'i%ence of tra%e usage or prior course of %ealings$ .oth may be use% to explain or supplement #ritten contract, but may not contra%ict express #ritten con%itions$ )ee !olumbia ,itrogen <:AJ:=0 !ourt uphel% a%missibility of tra%e usage to establish right to renegotiate contract #here precipitous change in price of phosphate occurre%$ e$
,o application to oral agreements ma%e after contract$
::
?$
-xclusi'e "ealings !ontracts0 a$ Inclu%es %istributorships an% licensing agreement$ i$ ii$ b$ i$ ii$ Right to sell is exclusi'e$ "istributor agrees to use FbestG or FreasonableG efforts 4ully committe% party <manufacturer= %epen%s on licenseeHs best efforts$ These are the consi%er attain offere% in exchange fn exclusi'ity, 1oo% '$ Lucy, La%y "uff6Gor%on <:A:J=0 5laintiffHs Fbest effortsG to mar8et "Hs name an% pro%ucts #as consi%eration an% boun% " not to license her name outsi%e of the agreement$ iii$ i'$ UCC ';3(81'40 %istributor must perform in Fgoo% faithG by exerting Fbest effortsG to promote sales$ Liebel '$ Raynor Manufacturing !o$ <=0 5 an% " contract #as a %istribution agreement$ 5 incurre% substantial expenses in fulfilling his obligation as %istributor, but sales #ere not goo%$ " %eci%e% to terminate the oral agreement$ 5 sai% that there #as an implie% term of reasonable notice$ !ourt hel% that %istribution agreements are co'ere% by +!! an% thus ha'e a built in reEuirement of reasonable notice un%er ';'(<$ '$ Loc8e '$ 1arner .ros <=0 5 #as in'ol'e% #ith !lint -ast#oo%$ &s part of their separation, he got her a %e'elopment %eal #ith "$ 5 conten%e% that the %eal #as a sham, as " %i% not exercise goo% faith$ " state% that contract ga'e them unbri%le% %iscretion to re;ect anything$ !ourt hol%s that %iscretionary po#er affecting rights of others must be exercise% #ith goo% faith$ 'i$ .loor '$ 4alstaff .re#ing !o$ <:AJA=0 " %i% not ma8e best efforts to mar8et 5Hs beer thereby breaching agreement for %istribution$ Moti'ation #as generation of better profits by mar8eting alternate pro%ucts$ <a= !annot aban%on obligation #hen better opportunity arises$ <b= !ontinue to promote pro%uct as long as promiseeHs profits excee% promisorHs losses$ <5romisee can then reimburse promisor an% still ha'e tangible profit left$=
Goo% 4aith as !onsi%eration0
B$
ReEuirements an% *utput !ontracts0 a$ b$ c$ -stablish maximum an% minimum Euantities of goo%s to be refuse% or pro%uce%$ 1here contractual limitations are not expresse%, +!! 26?0L<:= #hich sets a Fgoo% faithG stan%ar% on minimums an% maximums except #here limite% or excee%e% base% on prior tra%e$ 4el% '$ (enry )$ Le'y O )ons, Inc$ <:AJ5=0 contract for purchase of brea% crumbs #as breeche% #hen " shut %o#n his brea% crumb o'en an% relie% on contract language stating Fall pro%uce%G to terminate contract$ !ourt hel% that this #as not inG goo% faithG$
.$
5erformance O .reach0 :$ 2$ Must perform in Fgoo% faithG but there is no greater %uty to cooperate then bet#een anonymous buyers an% sellers on commo%ity exchange$ )ee Iron Tra%e 5ro%ucts !o$ '$ 1il8off !o$ <relaying rails=$ -xpress !on%itions0 a$ Types0 i$ ii$ !on%ition prece%ent0 an e'ent #hich must ta8e place before a party to a contract must perform or %o their part !on%ition subseEuent0 a happening #hich terminates the %uty of a party to perform or %o hisKher part$
:2
iii$
1here there is %oubt if it is a con%ition prece%ent, an% the promisee has substantially relie% on expectation of agreement, courts see8 to interpret in such a #ay as to minimiIe promiseeHs loss$ )ee Restatement 6'':$
b$
!ase La#0 i$ (o#ar% '$ 4e%eral !rop Ins$ !o$ <:AJL=0 Insurance con%ition that %amage% tobacco crop may not be %estroye% prior to inspection #as hel% not to be a con%ition prece%ent, barring any reco'ery, but rather might affect amount of reco'ery itself$ ii$ iii$ Gibson '$ !ranage <:DJD=0 "Hs personal satisfaction in picture #as con%ition prece%ent to his paying$ 5 too8 a %eliberate business ris8 an% lost$ 5eacoc8 !onstruction !o$ '$ Mo%ern &ir !on%itioning, Inc$ <:AJJ=0 lac8 of payment to subcontractor on basis that o#ner faile% to pay contractor an% contract state% payment %ue after o#ner pays is a breach$ ,ot a con%ition subseEuent but simply a metho% to sche%ule payment$ i'$ *ppenheimer O !o$ '$ *ppenheim <=0 5 %eci%e% to mo'e to a ne# office$ *#ner of the ne# buil%ing in%emnifie% them for ol% lease if they coul%n9t sublease$ 5 foun% subleasee<"= #ho agree% to ta8e lease if lan%lor% consente% in #riting to their ta8ing the lease an% to some buil%ing alterations$ *ne of these obtaine% orally only$ 5 claime% they substantially fulfille% the terms of the contract$ " state% that it #as an express con%ition$ !ourt hel% that contract #as explicit, an% this #as an express con%ition$ '$ /, Realty '$ !ross .ay !helsea <=0 !ontract state% that if " #ante% to rene# the lease, they nee%e% to contact 5 six months before en% of the lease$ 5 #as in habit of remin%ing " about bills, but %i% not remin% them of the rene#al %ate$ " misse% %ea%line, an% 5 sue% for possession$ !ourt hel% that " shoul% not be punishe% for a Pmere 'enial inattention$P !ourt compare% the gra'ity of harm an% fault an% too8 into account "Hs substantial impro'ements to the property in hol%ing con%ition to not be a con%ition subseEuent$
c$
!on%ition, or %uty, or both i$ ii$ !on%ition prece%ent0 failure to occur %ischarges promisor from performance obligations but creates no claim for %amages$ 5romise0 failure to fulfill is a breach$ <a= -ntitle% to %amages <b= ,ot excuse% from performance unless breach is FmaterialG an% breaching party fails to FcureG in a timely fashion$ iii$ 5romissory con%ition0 <a= !on%ition prece%ent an% a promise together <b= 4ailure to perform %ischarges in;ure% party from performance an% entitles to %amage$ i'$ Internatio6Rotter%am, Inc$ '$ Ri'er .ran% Rice Mills, Inc$ <:A5D=0 !ontract reEuire% %estination information t#o #ee8s prior to %eli'ery %ate #ith %eli'ery in "ecember$ 5 faile% to %o so until "ec$ :Dth, thereby ma8ing %eli'ery in "ec$ contractually impossible$ <a= !ourt hel% that the notification %ate #as 'ital to the contract an% thus a promissory con%ition$ <b= 5 entitle% to not %eli'er rice in "ecember an% sue for conseEuential %amages from %elay$ <c= 5 ho#e'er not free from contractual obligation to %eli'er pac8ets as " ha% promptly attempte% to cure$
%$
*ral mo%ification an% #ai'er0
:?
i$ ii$
5arties are free to mo%ify agreements by future oral agreements %espite no6mo%ification clauses$ +ni'ersal .uil%ers, Inc$ '$ Moon Motor Lo%ge <:ALD=0 a contract baring a%%itional #or8 #Ko #ritten authoriIation %i% not pre'ent "Hs agent from orally agreeing to onsite a%%itions$ <a= & no6oral mo%ification clause can be %efeate% by claim of #ai'er, but <b= .uil%er must sho# that he recei'e% oral authoriIation an% incurre% extra costs$
?$
5roblems of 5erformance0 a$ -xchange of 5erformance i$ 2ingston '$ 5reston <:JJ?=0 !ontract ma%e on basis of exchange of promises reEuires exchange of performance$ <a= T#o classes0 <:= )imultaneous exchange0 buying an item at a store <2= 5erformance by one party in a%'ance of the other0 buil%ing contract ii$ )te#art '$ ,e#bury <:A:J=0 contract entere% into for exca'ation an% concrete #or8 on a mill$ 5 reEueste% payment on Fusual termsG$ Later claime% this meant on a monthly basis$ " contemplate% payment upon completion$ !ourt hel% that payment #as not %ue until #or8 #as substantially complete%$ iii$ Restatement 6'371'40 #hen one partyHs performance refuses a perio% of time, that pitman is %ue earlier than that of the other party unless contract or other circumstances %ictate %ifferently$ b$ )ubstantial 5erformance0 i$ /acob O 3oung '$ 2ent <:A2:=0 Re%%ing pipe case <a= ,ot a material breach <b= )ubstantial performance complete% except for a minorKtri'ial fault <c= .reach #as unintentional an% ina%'ertent <%= "ifferent stan%ar% for small chattels an% buil%ings or s8yscrapers ii$ 5lante '$ /acobs <:AL0=0 <a= !heap suburban home built not Euite to specifications$ Li'ing room #all off by : foot$ <b= ,ot consi%ere% material in a cheap house <c= .reach #as thus reme%ie% solely by change in mar8et 'alue of house$ c$ +!! Reme%ies for .uyers0 )ales of Goo%s an% 5erfect Ten%er0 i$ ii$ !ommon La#0 buyer of goo%s is entitle% to insist upon perfect ten%er, i$e$0 exactly the same goo% he belie'e% he #as purchasing$ +n%er UCC ';8('1940 <a= .uyer may re;ect any goo%s that %o not in any respect conform to the contract$ <b= Must, ho#e'er, seasonably notify seller of hisKher intent <c= UCC ';)(=194 allo#s seller opportunity to ma8e a timely cure$ <%= 4ailure to re;ect after reasonable opportunity for inspection is consi%ere% acceptance$ <e= UCC ';8(=194, ho#e'er, allo#s a buyer to re'o8e such acceptance if0 <:= ,on6conformity substantially impairs its 'alue to him, an% <2= -ither he ha% reason to belie'e non6conformity #oul% be cure% by seller or %efect coul% not be %isco'ere% on initial inspection$ <?= )uch re;ection must occur a reasonable time after the %efect is or shoul% be %isco'ere% an% must occur prior to any alteration to the goo%s other than that resulting from their o#n %efect$
:B
<f=
"espite losing right to re;ect after these reme%ies are expire%, still can sue for %amages un%er express #arranty for %ifference in 'alue of goo%s in contract an% goo%s recei'e%$ UCC ';:9)$
%$
Material .reach i$ Restatement 6'3) pro'i%es that an in;ure% party has absolute right to treat FanyG non6 performance as a breach, but0 <a= If the breach is not Fmaterial,G must continue o#n performance but may sue for %amages on completion$ <b= Restatement 66'') an2 '3: pro'i%e that, if the breach is Fmaterial,G in;ure% party may treat breach as non6occurrence of con%ition an% either suspen% o#n performance or consi%er %uty %ischarge%, %epen%ing on circumstances$ <:= If it is reasonable to expect breaching party #ill cure in a timely fashion, then performance shoul% be suspen%e% <2= .ut if no cure is possible or affecte% then the partyHs %uties are %ischarge% an% the in;ury party is entitle% to %amages for total breach$ ii$ 2 O G !onstruction !o$ '$ (arris <:AL0=0 contract #ith company to %o exca'ation #or8 #ith monthly payments$ !ontractor %amage% house #ith bull%oIer$ Insurance refuse% to pay for %amage$ " refuse% to resume payments until %amage #as fixe%$ !ontractor continue% to #or8 for t#o months #ithout payment an% then suspen%e% performance$ !ourt hel% that unfixe% in;ury to "Hs house #as a material breach an% #hen the 5 left #or8 t#o months later the partial material breach became a total breach$ iii$ 1al8er O !o$ '$ (arrison <:A5J=0 &%'ertising sign #as not promptly enough maintaine% by pro'i%er$ " cease% to pay payments, an% %espite 5 reme%ying the situation refuse% to resume payments, hol%ing that 5 ha% materially breache%$ <a= !ourt state% that the breach #as not material base% on criteria in Restatement 6'79$ <:= The extent to #hich the in;ure% party #ill be %epri'e% of the benefit #hich he reasonably expecte%> <2= The extent to #hich the in;ure% party can be a%eEuately compensate% for the part of that benefit of #hich he #ill be %epri'e%> <?= The extent to #hich the party failing to perform or to offer to perform #ill suffer forfeiture> <B= The li8elihoo% that the party failing to perform or to offer to perform #ill cure his failure, ta8ing account of all the circumstances inclu%ing any reasonable assurances> <5= The extent to #hich the beha'ior of the party failing to perform or to offer to perform comports #ith the stan%ar%s of goo% faith an% fair %ealing$ <b= (ere, as there #as no breach, material or other#ise, " breache% by refusing payment an% #as liable to 5 for total breach$ i'$ )ac8ett '$ )pin%ler <:ALJ=0 5 agree% to buy ne#spaper stoc8 from "$ They set up payment sche%ule$ " 8ept offering to sell it, but ha% to continue exten%ing the %ue %ate$ " finally communicate% that the %eal is off$ 5 calle% an% offere% to pay e'erything imme%iately through trust> " state% that they #oul% only ta8e cash$ !ourt hel% that, as it #as extremely uncertain that 5 e'er inten%e% to fulfill %uties, this constitute% total breach an% " #as %ischarge% from responsibility$
:5
e$
&nticipatory .reach0 i$ ii$ iii$ Restatement 6')30 anticipatory repu%iation of a promise to perform, no less than a failure to perform at the time performance is %ue, may constitute a total breach$ (ochster '$ "e La Tour <:D5?=0 messenger boy let go before ? month employment contract #as to begin allo#e% to sue for breach$ *lofsson '$ !oomer <:AJ?=0 grain %ealer breache% in /une on a grain %eli'ery for *ctober$ 5 #aite% until *ctober to replace the grain or%er at a price about C0$20 higher than #hat #as a'ailable at time of breach$ !ourt hel% that at the time of breach, the 5 #as responsible to mitigate the %amages an% replace the grain or%er at the price then a'ailable, rather than the price in *ctober$ i'$ 4latt '$ )chupf <:AA5=0 5 #as going to buy lan% from " for a certain price if " coul% get lan% reIone%$ It %i%n9t happen, 5 as8e% " to re%uce price if Ioning coul% not be change%, but this #as not accepte%$ 5 #rote again saying they #oul% ta8e it for original price$ " respon%e% by saying that they thought 5 repu%iate% contract #hen the Ioning fell through$ !ourt hel% that anticipatory breach reEuire% a clear manifestation of intent not to perform$ Repu%iation can be retracte% if %one before %ue %ate for performance an% if other party hasn9t materially change% their position or communicate% that they consi%er repu%iation final$ !ourt hel% for 5$
f$
"eman% for &ssurance0 i$ Restatement 6')9 an% UCC ';8(< state that a promise #ho has reasonable groun%s to belie'e that the contract #ill be breache% may %eman% a%eEuate assurance of %ue performance from promissor an% suspen% o#n performance until such assurance is recei'e%$ 4ailure to %o so constitutes repu%iation$ N becomes total breach$ ii$ (ornell .re#ing !o$ '$ )pry <:AAJ=0 5 grante% " rights to %istribute &riIona Ice% tea in !ana%a$ 5 terminate% this agreement after " faile% to ma8e payments an% sales #ere much lo#er than expectations$ !ourt hel% that 5, after getting ba% chec8s, ha% reasonable groun%s to be insecure$ *nce " faile% to respon% to %eman% for assurance, 5 coul% treat this as repu%iation an% #as entitle% to suspen% performance$ iii$ .ut see 5ittsburgh6"es Moines )teel !o$ '$ .roo8ha'en Manor 1ater !o$ <:AJL=0 refuse% to buil% #ater tan8 unless gi'en further security$ !ourt hel% that unless there #as a change in "Hs financial situation since time of contract a reEuest for assurance #as improper an% pro'i%e% no %efense to 5Hs breach$
I $ 0ISTA5! A " I0*OSSI?ILIT%: &$ Mista8e0 :$ Mutual Mista8e a$ )her#oo% '$ 1al8er <:DDJ=0 sale of co# that #as suppose% to be sterile but turne% out to be fertile an% thus rose :0 times in 'alue$ !ourt ren%ere% sales contract 'oi% on theory of mutual mista8e as to the pro%uct in Euestion FbarrenH 's$ Ffallo#G co#$ b$ Lana#ee !ounty .oar% of (ealth '$ Messerly <=0 5 bought lan% from ", but it #as soon shut %o#n as unfit for human habitation as a result of septic tan8 %isaster$ )eptic tan8 ha% been improperly installe% by prece%ing o#ners <before "=$ 5 trie% to 'oi% contract for mutual mista8e$ !ourt loo8e% at the t#o innocent parties to %etermine #ho contracte% to ta8e on the ris8$ (ere, the Pas isP clause of the contract suggeste% that the purchasers #ere assuming the ris8 inherent in collateral mista8es$ c$
Restatement 69)'0 contract base% on mutual mista8e is 'oi%able unless the a%'ersely affecte% party bears the ris8 of mista8e un%er a reasonable 'ie# of the circumstances$
:L
i$ ii$
-$g$0 seller is a professional %ealer an% buyer is a no'ice$ May also apply #hen a %ealer sells to a %ealer as in .eachcomber !oins <:AJA=0 %ealer sol% fa8e coin to another %ealer$ !ontract #as 'oi%e% on fin%ing that the coin #as fa8e %espite both being experience% in the area$
2$
+nilateral Mista8e0 a$ b$ c$ %$ e$ May be a %efense #hen the result is unconscionable an% the cause is a clerical mista8e, arithmetical blun%er, misi%entification or such$ ,ot a %efense if it #as simply a ba% %ecision$ ,ot a %efense in sale of real estate to a person #ho has in'este% time in learning the 'alue of the lan% an% gets a benefit for his labors$ <his research an% expertise are treate% as property=$ !urrently courts create this rather artificial %istinction by utiliIing the assumption of ris8 %efense$ Restatement 69)30 1hen Mista8e of *ne 5arty Ma8es a !ontract oi%able i$ 1here a mista8e of one party at the time a contract #as ma%e as to the basic assumption on #hich he ma%e the contract has a material effect on the agree% exchange of performances that is a%'erse to him, the contract is 'oi%able by him if he %oes not bear the ris8 of the mista8e un%er the rule state% in 69)7, an% <a= the effect of the mista8e is such that enforcement of the contract #oul% be unconscionable, or <b= the other party ha% reason to 8no# of the mista8e or his fault cause% the mista8e$ f$ Restatement 69)70 1hen a 5arty .ears the Ris8 of a Mista8e: & party bears the ris8 of a mista8e #hen i$ ii$ iii$ the ris8 is allocate% to him by agreement of the parties, or he is a#are, at the time the contract is ma%e, that he has only limite% 8no#le%ge #ith respect to the facts to #hich the mista8e relates but treats his limite% 8no#le%ge as sufficient, or the ris8 is allocate% to him by the court on the groun% that it is reasonable in the circumstances to %o so$
.$
Impossibility an% 4rustration :$ Impossibility a$ Taylor '$ !al%#ell <:DL?=0 performer rente% )urrey Gar%ens for four %ays, spent money on a%'ertising, only to fin% the gar%ens ha'e burne% %o#n$ !ourt hel% that the contract coul% not be fulfille% %ue to impossibility an% thus no liability #as tie% to %efen%ant$ b$ 3oung '$ !ity of !hicopee <:A0B=0 5 #as hire% to buil% bri%ge for city$ 5urchase% har%#are an% left at site of bri%ge at "Hs insistence to hasten #or8$ )oon after #or8 starte% bri%ge burne% %o#n an% %estroye% 5Hs supplies$ !ourt hel% that the contract #as %ischarge% as no bri%ge remaine% an% thus performance #as impossible$ ,o liability to "$ c$ 2arl 1en%t '$ International (ar'ester <=0 5 entere% contract #ith " to become a %istributor of his pro%ucts$ " negotiate% to sell out to a competitor, #ho %i% not ta8e on all of the %istributors$ " claime% it #as impossible for them to honor the agreement #ith 5 because the recession #as putting them out of business$ !ourt hel% that the mere lac8 of profit is not enough to satisfy a %efense of impossibility$ The unforeseen circumstance %i% not frustrate the primary purpose of the contract$ 2$ ImpracticabilityK4rustration of 5urpose0 a$ 2rell '$ (enry <:A0B=0 rental of room for coronation para%e that #as %elaye%$ !ourt hel% that contract #as 'oi% as the purpose of the rental #as to #atch the para%e$ &s the para%e #oul% not occur, the contract essentially #as 'oi%$ b$ )upporte% by Restatement 6'8), as the %octrine of Fsuper'ening frustrationG$
:J
c$
Transatlantic 4inancing !orporation '$ +nite% )tates <:AJJ=0 bloc8age of )ueI canal %ue to #ar in -gypt cause% a ?000 mile %elay in transit for ship of 5 carrying grain to Iran on contract for +)$ 5 claime% impossibility by 'irtue of closing of the canal an% #ante% payment for the a%%itional time an% miles reEuire%$ i$ !ourt state% that impossibility reEuire%0 <a= +nexpecte% occurrence <b= 4ailure to ha'e allocate% ris8 of occurrence by agreement or custom <c= F!ommercial impracticabilityG #ith respect to performance of 5Hs obligations$ ii$ (ere, the court hel% that there #as no failure to allocate ris8 an% that the transit, #hile less profitable, #as still profitable to the shipper$ Thus no impossibility an% no %amages$
?$
oi% for 5ublic 5olicy0 a$ alley Me%ical )pecialists '$ 4arber <:AAA=0 ", a %octor, use% to #or8 for M)$ " is a specialist #hose treatments patients nee% to recei'e once e'ery six months$ " signe% an employment agreement #ith a restricti'e co'enant that limite% #here he coul% practice shoul% he lea'e$ (e left, an% 5 sought to enforce agreement$ !ourt hel% that the restricti'e co'enant is 'oi% on public policy %espite the fact that 5 has a legitimate interest in guar%ing its customer base, as there existe% a special relationship bet#een %octors an% patients an% %ue to the extremely broa% nature, length an% scope of the co'enant$ b$ .orelli '$ .russeau <:AA?=0 (usban% ha% stro8e an% agree% to lea'e #ife certain property if she #oul% care for him at home$ )he %i% her part, but he left e'erything to %aughter$ !ourt hel% that the contract #as unenforceable for lac8 of consi%eration <she ha% fi%uciary %uty to him any#ay= an% because it 'iolate% public policy <such agreements are antithetical to marriage as legislature has %efine% it=$ c$ .aby M <=0 5arties contracte% for a surrogate mother to carry to term a baby for another couple$ !ourt loo8e% past the form of the contract an% hel% that it #as 'oi% as being too close to 'iolating state a%option la#$
R!0!"I!S: &$ -xpectation "amages0 :$ )tan%ar% 4ormula0 a$ b$ c$ %$ "amage reco'er is eEual to loss by reason of other partyHs %efault plus expenses incurre% in fulfilling o#n obligations$ UCC ';:9'0 buyer may co'er failure of seller by purchasing goo%s at mar8et price, an% seller #ill be responsible for price %ifference if such purchase is ma%e reasonably promptly an% in goo% faith$ UCC ';:(80 seller may sell goo%s to an alternate purchase if buyer breaches an% buyer is responsible for price %ifference$ Restatement 637:0 Measure of "amages in General i$ )ub;ect to the limitations state% in ?5065?, the in;ure% party has a right to %amages base% on his expectation interest as measure% by <a= the loss in the 'alue to him of the other partyHs performance cause% by its failure or %eficiency, plus <b= any other loss, inclu%ing inci%ental or conseEuential loss, cause% by the breach, less <c= any cost or other loss that he has a'oi%e% by not ha'ing to perform$ 2$ General !ase La#0 a$ 2emp '$ Gannett <=0 5 contractor agree% to list house #ith " <realtor= on con%ition that if house %i% not sell in A0 %ays, " #oul% buy it$ " breache%$ 5 sol% the house a year later$ !ourt hel% that 5 #as entitle% to %ifference bet#een contract price an% the mar8et 'alue on %ate of breach$ 5 shoul% be in
:D
same position he #oul% ha'e been #Ko breach$ 5 also reco'ere% for taxes an% utilities cause% by %elay of sale <reliance=$ b$ (an%icappe% !hil%renHs -%ucation .oar% '$ Lu8asIe#s8i <:AD?=0 ", a teacher, breache% her contract #ith .oar%$ " #as force% to fin% a replacement$ The only choice #as a more Eualifie% can%i%ate #hom they ha% to pay more$ !ourt hel% that .oar% is able to reco'er the %ifference in price of the contracts because 5 breache%66her breach force% them to hire #hoe'er #as a'ailable$ ?$ )pecific 5erformance a$ Restatement 63)<0 -ffect of &%eEuacy of "amages i$ ii$ )pecific performance or an in;unction #ill not be or%ere% if %amages #oul% be a%eEuate to protect the expectation interest of the in;ure% party$ The a%eEuacy of the %amage reme%y for failure to ren%er one part of the performance %ue %oes not preclu%e specific performance or in;unction as to the contract as a #hole$ )pecific performance or an in;unction #ill not be refuse% merely because there is a reme%y for breach other than %amages, but such a reme%y may be consi%ere% in exercising %iscretion un%er the rule state% in 63):$ b$ Restatement 63870 -ffect of +nfairness i$ )pecific performance or an in;unction #ill be refuse% if such relief #oul% be unfair because <a= the contract #as in%uce% by mista8e or by unfair practices, <b= the relief #oul% cause unreasonable har%ship or loss to the party in breach or to thir% persons, or <c= the exchange is grossly ina%eEuate or the terms of the contract are other#ise unfair$ ii$ )pecific performance or an in;unction #ill be grante%, in spite of a term of the agreement, if %enial of such relief #oul% be unfair because it #oul% cause unreasonable har%ship or loss to the party see8ing relief or to thir% persons$ c$ Restatement 638:0 !ontracts for 5ersonal )er'ice or )uper'ision i$ ii$ & promise to ren%er personal ser'ice #ill not be specifically enforce%$ & promise to ren%er personal ser'ice exclusi'ely for one employer #ill not be enforce% by an in;unction against ser'ing another if its probable result #ill be to compel a performance in'ol'ing personal relations the enforce% continuance of #hich is un%esirable or #ill be to lea'e the employee #ithout other reasonable means of ma8ing a li'ing$ %$ e$ f$ Relati'ely rare, though occurs in real estate an% may be more common un%er Restatements an% +!!$ Typically money %amages are preferre% <efficiency argument= 1algreen !o$ '$ )ara !ree8 5roperties !o$ <:AA2=0 " breache% contract to not place another pharmacy in shopping center for :0 years$ &%mitte% breach, but hel% that shoul% only pay %amages base% on loss of profits$ !ourt grante% an in;unction barring rental to the ne# pharmacy$ g$ !ity )tores '$ &mmerman <:ALJ=0 "Hs promise% to offer 5s a lease as a ma;or tenant if 5 supporte% their Ioning bi% to get the shopping center appro'e%$ "Hs ne'er negotiate% specifics an% claime% there #as no contract$ !ourt hel% there #as, an% that it #oul% be impossible to %etermine expectation %amages to 5$ .ecause of the uniEue nature of the contract, the only feasible reme%y #as specific performance$ !onsi%ers limitations to specific performance inclu%ing fairness, har%ship an% %ifficulty in enforcement$ h$ &.! '$ 1olf <:AD:=0 " 'iolate% his employment contract #ith 5 by ma8ing an agreement #ith other T stations$ 5 trie% to en;oin him from going on the air$ !ourt says that %espite "Hs ser'ices being uniEue specific performance #ill not be grante% as his contract #ith 5 is o'er an% no co'enant to not compete #as signe%$
:A
B$
UCC 6';:(=0 )ellerHs "amages for ,on6acceptance or Repu%iation a$ )ub;ect to subsection <b= an% to the pro'isions of this &rticle #ith respect to proof of mar8et price <6'; :'3=0 i$ the measure of %amages for non6acceptance by the buyer is the %ifference bet#een the contract price an% the mar8et price at the time an% place for ten%er together #ith any inci%ental or conseEuential %amages pro'i%e% in this &rticle <6';:9(=, but less expenses sa'e% in conseEuences of the buyerHs breach> an% ii$ the measure of %amages for repu%iation by the buyer is the %ifference bet#een the contract price an% the mar8et price at the place for ten%er at he expiration of a commercially reasonable time after the seller learne% of the repu%iation, but no later than the time state% in paragraph <a=, together #ith any inci%ental or conseEuential %amages pro'i%e% in this &rticle <6';:9(=, or less expenses sa'e% in conseEuence of the buyerHs breach$ iii$ If the measure of %amages pro'i%e% in subsection <i= or in 6';:(8 is ina%eEuate to put the seller is as goo% a position as performance #oul% ha'e %one then the measure of %amages is the profit <inclu%ing reasonable o'erhea%= #hich the seller #oul% ha'e ma%e from full performance by the buyer, together #ith any inci%ental or conseEuential %amages pro'i%e% in this &rticle <6';:9(=$
5$
Limitations0 a$ &'oi%ability an% Mitigation0 i$ Restatement 63)(0 &'oi%ability as a Limitation on "amages <a= -xcept as state% in )ubsection <b=, %amages are not reco'erable for loss that the in;ure% party coul% ha'e a'oi%e% #ithout un%ue ris8, bur%en or humiliation$ <b= The in;ure% party is not preclu%e% from reco'ery by the rule state% in )ubsection <a= to the extent that he has ma%e reasonable but unsuccessful efforts to a'oi% loss$ ii$ Restatement 63)30 Loss "ue to -motional "isturbance <a= Reco'ery for emotional %isturbance #ill be exclu%e% unless the breach also cause% bo%ily harm or the contract or the breach is of such a 8in% that serious emotional %isturbance #as a particularly li8ely result$ iii$ Restatement 63))0 5uniti'e "amages <a= 5uniti'e %amages are not reco'erable for a breach of contract unless the con%uct constituting the breach is also a tort for #hich puniti'e %amages are reco'erable$ i'$ '$ ,on6breaching party is expecte% to terminate o#n performance to limit reliance %amages an% to mitigate loss of profit so as to %ecrease expectation %amages$ !ase La#0 <a= Roc8ingham !ounty '$ Lunten .ri%ge !o$ <:A2A=0 " faile% to stop construction on bri%ge after recei'ing a termination reEuest from the countyHs ne# <Euestionably legal= boar%$ !ontinue% construction an% sue% for expectation %amages$ !ourt hel% that shoul% ha'e suspen%e% performance at time of notice an% allo#e% only payment for #or8 complete% until time of notice$ <b= .oehm '$ &.! <:AA:=0 5 #as fire% by &.! ra%io an% imme%iately offere% a ne# ;ob for same rate of compensation but at a lo#er le'el$ 5 refuse% to ta8e ;ob an% sue% &.! for breach$ &.! claime% he ha% %uty to mitigate by ta8ing the ne# ;ob$ !ourt hel% that only to be true if the ;obs #ere Psubstantially the same,P #hich is an issue of fact, the bur%en of proof of #hich lies #ith the employer$ <c= 5ar8er '$ T#entieth !entury 4ox 4ilm !orp$ <:AJ0=0 " faile% to ma8e musical for #hich they ha% contracte% )hirley MacLaine for CJ50,000$ *ffere% instea% a role
20
in a #estern$ !ourt hel% that, #hile MacLaine ha% %uty to mitigate, she %i% not ha'e to accept inferior employment simply to mitigate$ <:= ,ormally, expecte% to attempt to get or accept position to mitigate %amages, but such position nee% not be inferior to the one lost$ <%= Gro'es '$ /ohn 1on%er !o$ <:A?A=0 " lease% property from 5 for a flat fee #ith contractual promise to re6gra%e lan% at en% of lease$ Returne% lan% in un6gra%e% con%ition$ "ifference in 'alue #as C:2,000$ !ost to complete #as CL0,000$ &rgue% that substantial performance %octrine shoul% allo# him to simply pay %iminution in 'alue$ !ourt hel% that a #illful or %eliberate breach is not sub;ect to substantial performance$ Responsibility is to fulfill contract$ <e= &merican )tan%ar% '$ )chechtman <:AD:=0 5 employe% " to clear property, inclu%ing gra%ing$ " breache%$ 5 sue% for cost6to6complete <C::0,000=, " argue% for %iminution in 'alue <C?000=$ !ourt hel% that %iminution is only applicable #here contract #as substantially complete%, the breach #as unintentional, the conseEuences of breach are tri'ial, an% the cost to complete is grossly out of proportion$ (ere court a#ar%e% cost6to6complete$ <f= .ut )ee 5ee'yhouse '$ Garlan% !oal O Mining !ompany <=0 " agree% to restore 59s lan% after to original con%ition on completion of mining$ " breache%$ 5 sue% for cost to complete repairs <C?0,000=, but court only a#ar%e% %iminution in 'alue <C?00=$ b$ Lost6 olume )eller -xception0 i$ UCC ';:(=1'40 if the stan%ar% %amage measure %oes not put in;ure% party in as goo% a position as performance %ue to lost sales, then the %amages shall be eEual to the lost profit on the transaction$ ii$ ,eri '$ Retail Marine !orp$ <:AJ2=0 5 or%ere% a boat from "$ 5lace% %eposit then cancelle% or%er after " ha% alrea%y submitte% or%er to factory$ 5 #ishe% to retrie'e %eposit as boat sol% to %ifferent buyer for same price later$ !ourt hel% that un%er the Lost6 olume exception " #as entitle% to %amages in the amount of lost profit$ iii$ i'$ c$ i$ +sually applies eEually to ser'ice contracts$ "oes not ho#e'er apply to employment or personal ser'ice contracts$ Restatement 63)90 +nforeseeability an% Relate% Limitations on "amages <a= "amages are not reco'erable for loss that the party in breach %i% not ha'e reason to foresee as a probable result of the breach #hen the contract #as ma%e$ <b= Loss may be foreseeable as a probable result of a breach because it follo#s from the breach0 <:= in the or%inary course of e'ents, or <2= as a result of special circumstances, beyon% the or%inary course of e'ents, that the party in breach ha% reason to 8no#$ <c= & court may limit %amages for foreseeable loss by exclu%ing reco'ery for loss of profits, by allo#ing reco'ery only for loss incurre% in reliance, or other#ise if it conclu%es that in the circumstances ;ustice so reEuires in or%er to a'oi% %isproportionate compensation$ ii$ (a%ley '$ .axen%ale <:D5B=0 %amages for %elaye% shipment of mill shaft #ere limite% to foreseeable costs by " rather than the fi'e %ays of lost profit from the mill being shut %o#n$
4oreseeability0
2:
<a= "amages not reco'erable for loss that #as not reasonable foreseeable$ <must ma8e special circumstances 8no# in a%'ance to reco'er$= N implicit %uty to pre6mitigate <pre'ent extensi'e harm through preparation or communication= iii$ 4lorafax International, Inc$ '$ GT- Mar8et Resources, Inc$ <:AAJ=0 5 hire% " to help han%le increase% or%ers$ " starte% losing money an% breache%$ 5 lost its contract #ith :6D006 4L*1-R) as a result$ !ourt a#ar%s lost profits an% cost to set up internal system because the loss #as in contemplation of parties at time of the contract, it flo#s %irectly from the breach, an% the loss #as capable of reasonably accurate measurement$ %$ !ertainty0 i$ ii$ iii$ "amages for breach are only reco'erable to the extent that they are reasonably certain$ Reasonable %oubts li8ely resol'e% against party in breach$ 4era '$ illage 5laIa, Inc$ <:AJL=0 la#suit arose out of a breach of rental contract for mall space$ 5 allege% loss of profits for :0 year %uration of rental$ Grante% C200,000 by ;ury$ +phel%$ !ertainty an% mathematical precision not necessary$ )imply must be reasonable$ .$ Reliance an% Restitution0 :$ Reliance "amages0 a$ b$ !o'ers expen%itures ma%e in reliance upon a contract an% reco'ers F%etrimentsG to be put bac8 in position before breach occurre%$ Restatement 637<0 "amages .ase% on Reliance Interest i$ &s an alternati'e to the measure of %amages state% in 637:, the in;ure% party has a right to %amages base% on his reliance interest, inclu%ing expen%itures ma%e in preparation for performance or in performance, less any loss that the party in breach can pro'e #ith reasonable certainty the in;ure% party #oul% ha'e suffere% ha% the contract been performe%$ c$ )ulli'an '$ *H!onnor <:AJ?=0 case #as against physician un%er me%ical malpractice on breach of contract for failing to impro'e 5Hs nose after three separate surgeries, pain an% suffering, an% in fact causing significant #orsening of the appearance of the nose$ Malpractice suit thro#n out %ue to lac8 of negligence, but contract claim uphel% on groun%s that physician contracte% to impro'e patientHs appearance but faile%$ "amages a#ar%e% in reliance for outlay plus %ecrease% appearance %ue to #orsening of nose plus pain an% suffering$ ,o expectation %amages a#ar%e% as such coul% not be sho#n$ %$ 1artIman '$ (ighto#er 5ro%uctions, Lt%$ <:AD?=0 (ighto#er hire% 5 to help them sell stoc8 in a company eager to set P#orl% flagpole sittingP recor%$ 5 la# firm scre#e% up the legal reEuirements, an% (ighto#er #as out a great %eal of money$ !ourt hel% that #here anticipate% profits are too speculati'e to be %etermine%, 5 can reco'er for reliance %amages$ e$ 1asler '$ Toyota Motor )ales, +)&, Inc$ <:AAB=0 5 approache% " #ith offer to open a %ealership$ " le% 5 to belie'e there #as a %eal, relying on #hich the 5 bought lan%$ 5 #as only able to reco'er %ifference in #hat he pai% an% #hat lan% #as #orth$ !ourt hel% that %amages in promissory estoppel actions can be limite% as ;ustice reEuires$ 2$ Restitution "amages0 a$ b$ !laim base% solely on un;ust enrichment to the breaching party$ <price pai% for item ne'er recei'e%= Restatement 63:3: Restitution 1hen *ther 5arty Is In .reach i$ )ub;ect to the rule state% in )ubsection <ii=, on a breach by non6performance that gi'es rise to a claim for %amages for total breach or on repu%iation, the in;ure% party is entitle% to restitution for any benefit that he has conferre% on the other party by #ay of part performance or reliance$
22
ii$
The in;ure% party has no right to restitution if he has performe% all of his %uties un%er the contract an% no performance by the other party remains %ue other than payment of a %efinite sum of money for that performance$
c$
entura '$ Titan )ports, Inc$ <:AA5=0 /esse entura sue% for 'i%eo tape royalties$ !ourt hel% that he #ai'e% rights to royalties as a #restler> not as a commentator$ &lso, a secon% contract that #ai'e% all rights to royalties #as unenforceable because it #as entere% by frau%$ Restitution is only proper theory for reco'ery$
%$
.reaching 5laintiff0 i$ ii$ & partyHs right to restitution may sur'i'e his o#n performance %eficiency$ .ritton '$ Turner <:D?B=0 laborer agree% to #or8 for one year for payment of C:20 payable at the en% of the year$ 7uit after AR months an% sue% #hen employer refuse% to pay prorate% salary$ !ourt grante% reme%y un%er theory of restitution in amount of AR months of salary as laborers #or8e% enriche% the "$ " of course coul% sue for breach an% any expectation %amages he amy ha'e suffere%$ <a= )uit #as in Euantum meruit an% thus ;ury coul% ha'e assigne% %amages less than full salary as only reEuirement is that they be reasonable$ <b= 7uantum meruit0 latin for Pas much as he %eser'e%,P the actual 'alue of ser'ices performe%$ 7uantum meruit %etermines the amount to be pai% for ser'ices #hen no contract exists or #hen there is %oubt as to the amount %ue for the #or8 performe% but %one un%er circumstances #hen payment coul% be expecte%$ iii$ Restatement 63:7: Restitution in 4a'or of 5arty in .reach <a= )ub;ect to the rule state% in )ubsection <b=, if a party ;ustifiably refuses to perform on the groun% that his remaining %uties of performance ha'e been %ischarge% by the other partyHs breach, the party in breach is entitle% to restitution for any benefit that he has conferre% by #ay of part performance or reliance in excess of the loss that he has cause% by his o#n breach$ <b= To the extent that, un%er the manifeste% assent of the parties, a partyHs performances is to be retaine% in the case of the breach, that party is not entitle% to restitution if the 'alue of the performance as liEui%ate% %amages is reasonable in the light of the anticipate% or actual loss cause% by the breach an% the %ifficulties of proof of loss$
e$
Losing !ontracts0 i$ 7uestion of ho# to han%le restitution %amages #hen the non6breaching party alrea%y #as losing money on the contract an%, at time of breach ha% alrea%y expen%e% more in costs than the contract #as #orth$ <a= +) ex rel$ !oastal )teel -rectors, Inc$ '$ &lgernon .lair, Inc$ <:AJ?=0 " entere% into contract #ith +) to buil% a na'al hospital an% hire% 5 to %o some steel #or8$ 5 rente% a crane an% began #or8$ " refuse% to pay for crane rental an% 5 stoppe% performance$ !t hol%s that 5 may reco'er in Euantum meruit e'en if they #oul% ha'e lost money ha% they complete% the full contract$ <b= 2ehoe '$ Rutherfor% <:DA?=0 5 completes L0Q of #or8 at C?000 cost, but contract only #orth C2J00$ !ity breaches #ith C2000 more left for 5 to complete an% a contemplate% loss of C2?00 on his part$ <c= *ption S:0 Restatement 63:3 supports reco'ery by buil%er of full 'alue of his #or8 un%er restitution theory at time of breach <pre'ent un;ust enrichment= an% thus C?000, C?00 more than the contract #as #orth$
2?
<:= May be limite% to not excee% 'alue of contract itself0 Fconstraine% restitution$G <2= -ncourages breach at earliest possible %ate$ <%= *ption S20 !ontract "amages <:= +n%er Restatement 637<, in;ure% party may reco'er reliance %amages less any loss that party #oul% ha'e suffere%$ <2= C?000 minus expecte% loss of C2?00$ <?= .uil%er is encourage% to ma8e a more careful estimate$ <e= *ption S?0 Loss )haring <:= &llo#s reco'ery of portion of original contract price commensurate to percentage of #or8 accomplishe%, i$e$0 L0Q <2= Results in split of the loss bet#een 5 an% "$ <?= *nly use in 2ehoe case$ !$ LiEui%ate% "amages0 :$ 2$ ?$ Restatement 63)81940 %amages may be pre6%etermine% by contract so long as those %amages %o not excee% a figure that is reasonable in light of the loss cause% by the breach an% %ifficulty in pro'ing such loss$ -xcessi'e %amages become a penalty an% are barre% un%er contract la#$ La8e Ri'er !orp$ '$ !arborun%um !o$ <:AD5=0 three6year contract for %istribution of abrasi'e po#%er pro%uce% by " #ith guarantee% minimum sale of 22,500 tons$ LiEui%ate% %amages in amount of sale price of unsol% pro%uct to be pai% by !arborun%um$ (el% to be excessi'e as %i% not ta8e into account the costs La8e Ri'er #oul% incur #hile processing the po#%er for sale$ B$ !olonial at Lynnfiel% '$ )loan <=0 5 #as trying to sell a BAQ interest in its business to alle'iate financial #oes$ They contracte% to sell to "$ !ontract inclu%e% a liEui%ate% %amages clause for C200,000$ )ale fell through, but 5 #as able to sell to thir% party for C?00,000 more than agreement #ith "$ !ourt hel% that they shoul% loo8 retrospecti'ely at liEui%ate% %amages an% that here they are unenforceable because 5 actually ma%e money #hen price %ifference is compare% to #hat it cost them in interest$ I$ T(IR" 5&RT3 .-,-4I!I&RI-)0 &$ !re%itor beneficiaries ha'e ?r% party stan%ing0 see La#rence '$ 4ox <:D5A=0 4ox borro#e% C?00 from (olly$ (olly o#e% C?00 to La#rence$ 4ox promise% (olly that he #ill pay C?00 to La#rence thus settling both %ebts$ 4ox refuse% to pay La#rence claiming they ha% no contract$ !ourt hel% that La#rence ha% right to claim as an inten%e% ?r% party recipient$ .$ "onee beneficiaries ha'e ?r% party stan%ing0 see )ea'er '$ Ransom <:A:D=0 &unt #ishes to lea'e her property to niece, but husban% as8s her on her %eathbe% to gi'e it to him then to charity$ 1ife agrees on husban%Hs solemn oath to gi'e eEui'alent amount to niece on his %eath in his o#n #ill$ .oth %ie$ (usban% %oes not lea'e #ill$ !ourt establishes ?r% party right for %onee to enforce oral contract bet#een #ife an% husban%$ !$ 4urther expan%e% to inclu%e any inten%e% ?r% party beneficiary :$ 2$ "$ Restatement 63(' %efines an inten%e% beneficiary as anyone inten%e% by the promisee to be benefite% by promisorHs performance$ &s oppose% to inci%ental beneficiary$ Restatement 63(7 creates an enforceable %uty on promissor to inten%e% beneficiary$ )eptemberti%e '$ )tein O "ay <:ADA=0 &uthor sol% rights to boo8 to publishing firm in return for a cash a%'ance% an% 2K? royalties on sale of his paperbac8s$ 5ublishing firm then sol% the paperbac8 rights to another publisher$ Later, to get security for a loan, it assigne% all its contracts to a ?r% company$ The ?r% company #as una#are of authorHs 2K? interest in paperbac8 sale an% sue% for full amount of contract from 2n% publishing firm$ &uthor, not part of any of the contracts, sue% an obtaine% thir% party stan%ing to reco'er his proper royalties$ -$ 5romisor can assert any %efenses against a ?r% party beneficiary that he coul% assert against the promisee$
2B
4$
5ost6contract mo%ification0 ?r% parties benefit may be re'o8e% by original contractors by changing their agreement$ (o#e'er, a ?r% party beneficiary #ho is a#are of the agreement an% in reliance on the agreement substantially changes his position, mo%ification or %ischarge #ithout his consent may be preclu%e%$
G$
ogan '$ (ayes &ppraisal <=0 " <(ayes= #as hire% by ban8 to monitor progress of ne# home construction before ban8 #oul% %istribute fun%s to buil%er$ " %i% a ba% ;ob an% fun%s #ere mismanage%$ 5 < ogan= #as the buyer of home #ho contracte% only #ith the ban8$ "espite lac8 of pri'ity, !ourt ga'e 5 stan%ing as contract bet#een .an8 an% (ayes #as inten%e% to benefit 5$
($
@igas '$ )uperior !ourt <=0 5laintiffs #ere tenants at an apartment buil%ing finance% #ith a loan from the go'ernment$ " #as the lan%lor% #ho ha% not follo#e% rent control stipulations of the act un%er #hich he got the loan$ !ourt hel% that tenants #ere clearly the class !ongress #ante% to protect in this la#, as they are the ones harme% by the .reach an% thus are %irect beneficiaries an% ha'e ?r% party stan%ing$
I$
(erIog '$ Irace <=0 5 sue% a former patient9s la# firm because they faile% to pay him after patient assigne% to 5 his rights to a settlement$ " claime% that the patient ha% tol% them later not to release the fun%s$ !ourt hel% that the assignment #as clear, an% that la# firm #as not preclu%e% by a fi%uciary %uty to #ithhol% fun%s once they ha% been 'ali%ly assigne%$
/$
.ut see )ally .eauty '$ ,exxus 5ro%ucts <=0 ,exxus cancelle% its %istribution agreement #ith )ally .eauty #hen )ally .eauty #as acEuire% by a competitor$ !ourt hel% that you cannot %elegate a %istribution agreement to a competitor in the mar8etplace #ithout manufacturerHs consent$
II$ OT@!R TO*ICS: &$ )#eepsta8es0 :$ .arnes '$ Mc"onal%s <=0 5 recei'e% a miss cut monopoly priIe stic8er at Mc"onal%Hs$ *fficial rules sai% e'erything thing #as sub;ect to "9s re'ie#, an% that mista8es #oul% ma8e stic8ers 'oi%$ !ourt hel% that full rules %o not nee% to be on each game piece as long as easily a'ailable, promotion #as a unilateral contract #hich 5 coul% not complete an% thus %i% not accept$ 2$ Giunto '$ !oca6!ola <=0 5 ha% opportunity to ta8e a shot at a 'ery small hoc8ey goal$ *fficial rules #ere conflicting <one sai% puc8 must go into an% through, another sai% completely through=$ 59s shot #ent partially in$ !ontest ;u%ge sai% it #as no goo%$ !ourt hel% that 5 agree% to be boun% by ;u%ge9s %etermination$ ?$ /ohnson '$ .5 <=0 " ran a promotion that offere% a ne# .M1 to anyone #ho ha% matching license plate numbers$ 5 foun% the number, #ent an% foun% the guy #ith that license plate, an% bought the car from him #Ko %isclosing his reasons$ " refuse% to honor the priIe, claiming 5 got the car illegitimately$ !ourt hel% that official rules #ere not 'iolate%, an% that " #as acting in ba% faith$ .$ !onTorts0 :$ Implie% #arranty of habitability in ne# homes0 a$ !acei '$ "i !anio !onstruction !orp <:ADD=0 " built house for 5 on %ecomposing tress$ (ouse ha% all sorts of problems$ !ontract sai% #arranties on house #ere limite% to repair by "$ !ourt hel% that the implie% #arranty of habitability existe% as buil%er is party best suite% to %eal #ith potential problems$ b$ Mc"onal% '$ Mianec8i <=0 " built house for 5, an% 5 notice% that something #as #rong #ith #ater <it #as bro#n=$ 5roblems continue% after 5 mo'e% in$ !ourt hel% that, as buil%ers an% buyers are not on eEual footing, an implie% #arranty is necessary$ 2$ .loo% 5ro%ucts0 a$ "oe '$ Tra'enol Labs <=0 5, a hemophiliac, got &I") from a bloo% transfusion$ (e sue% for breach of implie% #arranty$ !ourt hel% that statute calls bloo% a ser'ice an% not a pro%uct, thus not co'ere% by implie% #arranty$ If courts #ere to go aroun% bloo% shiel% la#s, it coul% put bloo% companies out of business, an% thus pre'ent people from getting bloo% they nee%$ ?$
UCC ';397: Implie% 1arranty0 Merchantability> +sage of Tra%e
25
a$
Mc!abe '$ Liggett "rug <=0 59s frien% bought her the "9s coffeema8er from a %rug store$ It #or8e% #ell a fe# times, an% then explo%e%$ !ourt hel% that this thing 'iolate% the implie% #arranty of merchantability$
B$
)ee UCC ';39): Implie% 1arranty0 4itness for 5articular 5urpose a$ "enny '$ 4or% Motor !ompany <=0 5 #as ba%ly in;ure% #hen her 4or% .ronco rolle% o'er$ )he claime% that there #as a %esign fla#$ 4or% countere% that it #as not %esigne% for street use <off6roa%=$ 5 countere% #ith mar8eting materials sho#ing it being use% in e'ery%ay situations$ !ourt hel% that the pro%uct #as not %efecti'e, but rather faile% the implie% #arranty of suitability for the particular purpose represente% by 4or%$
5$
ReEuirement for pri'ityKphysical in;ury for pure economic loss a$ !asa !lara !on%o '$ Toppino <=0 5s bought their homes an% foun%ations starte% crumbling because faulty concrete #as use%$ &ttempte% to sue manufacturer of concrete$ !ourt %ismisse% for lac8 of pri'ity66concrete #as purchase% by people other than the con%o o#ners, an% they can9t bring a torts claim because no one has been in;ure% yet <pure economic loss rule=$ To reco'er pure economic loss they #oul% nee% to use contract la#$
L$
UCC ';398: -xclusion or Mo%ification of 1arranties a$ (ulsey '$ -lsinore 5arachute !enter <=0 5 signe% release forms before going on a parachute ;ump$ (e #as unable to control it, an% ha% a ba% lan%ing <but only bro8e #rist=$ !ourt hel% that "9s contractual release of liability #as 'ali% because it conforme% to public policy, its meaning #as clear, it #as conspicuous, there #as meaningful consent an% comprehension, an% it #as conscionable$ )8y %i'ing, #hile %angerous, is not ultra6haIar%ous$
J$
Tortious Interference #ith a !ontract0 a$ Texaco '$ 5ennIoil <:ADJ=0 Texaco #as in negotiations to buy Getty$ They signe% a memoran%um of agreement an% release% info to press$ Mean#hile, Getty continue% to solicit offers$ 5ennIoil got in'ol'e%, strategically targete% 'arious sharehol%ers, an% #ere able to buy Getty, agreeing to in%emnify them against Texaco$ !ourt rule% that this tortious interference #ith a contract %i% not reEuire malice but simply 8no#le%ge of contract$ !ourt a#ar%e% C:0 billion$
2L

Contracts 1 Outline

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Contracts 1 Outline

Uploaded by

Copyright:

Available Formats

Another law school course outline brought to you by:

ii$ iii$ i'$

,o application to oral agreements ma%e after contract$

Goo% 4aith as !onsi%eration0

*ral mo%ification an% #ai'er0

UCC ';397: Implie% 1arranty0 Merchantability> +sage of Tra%e

You might also like