First Question: UCC?
> ▪ Mailbox Rule
□ §2-102 Limits application to sale of goods
□ §2-105 Goods: tangible, moveable property
▪ Predominant Purpose Test
▪ Princess Cruises looked at:
□ Language of the contract
□ The nature of the business
□ Intrinsic worth of materials
▪ Janusch pred. purp. for trailer, equip., supplies
▪ Leibel v.Raynor dlrshp. K for sale of goods=UCC
FORMATION
□ Offer?
▪ RS §24
□ Promissory Statement (conditional promise)
□ Invites Assent
▪RS § 33
□ Sufficiently definite/terms reasonably
certain
□ Objective Standard: would reasonable person
und. offer? See Izadi, Pepsi, Lucy v. Zehmer
▪ UCC §2-204 Formation in General
□ (1)Any manner sufficient to show agreement
□ Incl. conduct by both parties recognizes
existence of K
▪ Usually rep. and ongoing conduct or
established course of dealing (Eaton)
□ (2) Moment of making can be undetermined
□ (3) K does not fail for indef. if int. to make K
& reasonable cert. basis for remedy
▪Janusch conduct indicated agrmnt. to terms,
missing IRS info not essential term
Beware!
□ Preliminary Neg./Invitations to Make an Offer
▪ RS §26
□ No offer if promisee knows promisor did not
intend to conclude a bargain until promisor
made further expression of assent
▪ Longernan
□ Advertisements
□ Cmnt. B RS §26: Not ord. und. as offers
▪Unless:
□ Invite accept. w/o further comm.
□ Clear, define, express and uncond. lang.
□ Izadi, objectively an offer viewed as whole
□ Longernan newspaper ad was not offer
□ Agreements to Agree
▪ Not K unless sufficiently def. to be K 1st time
▪ Determine mtrl. terms with certainty (Walker v. K)
▪ Formula, Arbitrator, Range of values (some cts.)
▪ Walker v. Keith no K with lease-renewal b/c no way
to determine rent (mtrl. term) w/ “comparative
basis…of comp. conds.”
▪ UCC Open Price Term §2-305
□ If parties intend, can conclude sale even though
price not settl’d
<cont.
□ Promissory Estoppel
□ Price Quotes
▪ Usually invitations to make an offer (Eaton)
□ Statements of Present Intent
▪ “I intend to buy a car today.”
▪ “Every effort will be made to keep tuition
down.”
□ Use of word “offer”
□ Longernan use of offer does not make offer
□ Is the offer still open?
□ Has the offer been revoked?
▪ RS §43
□ Definite action to terminate (incons. w/
int. to enter K)
□ Rec’d reliable info.
▪ RS § 39 Counteroffer
□ Terminates power of acc. of orig. offer
▪ Normile v. Miller changes in fin. terms
c/offer, agent informs of sale to 3rd party, can’t
accept after offer revoked
□ Can it be revoked?
□ Option K (NOT RS)
□ Explicit promise to hold an offer open
□ Supported by consideration
▪ Normile v. Miller not option K
□ Unilateral K
□ RS §45 can’t revoke after begin perf.
□ UCC Firm Offer §2-205
□ Offer by a merchant
□ To buy or sell goods
□ In signed writing
□ Which gives assurance will be held open
▪ Not revocable for lack of consid. during time
state or if none state for a reason. time (not
longer than 3 months)
□ Acceptance
▪ In general:
□ “I accept”(return promise) RS §32
□ By requested performance RS §32
▪Performed subst. (more than prelim. steps)
□ RS §58 Accep. must comply w/ req. of offer
▪ Silence: Where offerree “takes the benefit of
services,” k they were offered with expect. of
compensation or offerror has stated that assent
may be manifested by silence. RS §69
▪ Unilateral K
▪ RS §45
□ Invites acceptance by rendering performance
□ Not rev. once “tenders or beg. invited perf.”
□ Full performance = full acceptance
▪ Classical theory revoke @ any time Petterson v.
Pattberg (cash @ door for mortgage)
□ Modern theory Cook v. Coldwell Banker
□ RS §63 acceptance as soon as dispatched
▪ Offer and rev. must be commun. in order to be
effective
□ Counteroffers
□ RS §59 “purported acceptance” with different or
additional terms is a counteroffer (Mirror-Image
Rule)
□ RS §39(2) Power of acceptance is terminated by
counteroffer unless manifested contrary
intention
□ UCC 2-207 See chart
ENFORCEABILITY
□ Consideration
▪Classical View - Benefit/Detriment
▪Hamer v. Sidway- consideration means limit
freedom as inducement for prom. “Detriment”
does not mean harmed, but give something up.
▪ Modern Theory - “bargained-for exchange”
▪ Allows enforce. of purely executor agrmts.
□ RS §71 prom. or perf. must be bargained-for
□ RS §71(2) perf. or prom. bargained-for if
sought by promisor/given by promis’e in
exchange for his prom.
▪Pennsy v. American Ash - there can be a
bargain even if we don’t see negotiation
□ Rest. § 79 consideration does not require
equivalence or “mutuality of obligation.”
▪ Mere inadequacy does not void
consideration – peppercorn.
□ Batsakis v. Demotsis (bad exch. still cons.)
□ NOT CONSIDERATION
▪ Satisfaction of conditions is not consideration
(tramp hypo). (gratuitous/gift promises).
□ Plowman v. Indian Refining Co. picking up
checks cond. of gratuitous promise
▪ Recital to consideration is not consideration.
□ Dougherty v. Salt (value received)
▪ Past consideration is not consideration.
□ Plowman v. Indian Refining Co. – workers
years of good service not consideration for
pensions.
▪ Exception: settlements
▪ Moral obligations do not create consideration.
▪ Illusory promises are not consideration, even if
bargained for.
▪ Ex: makes future action subj. of own will
□ RS §77
▪ Not consideration if reserves choice of alt.
promises. Unless exceptions
▪Enforces promises not supported by consideration
▪§90(1) – Elements
□ 1. Promise
▪ Creates expect. in someone else you are
going to do something, can be impl. by
conduct
□ 2. Promisor reasonably foresees detrimental
reliance by promisee.
□ 3. Actual detrimental reliance.
□ 4. Enforcement nec. to prevent injustice.
▪ Kirksey v. Kirksey pre-promissory estoppel
Promises can be enforced even if not an express
promise, but impl. promise was gratuitous.
▪ Harvey v. Dow parents helping daughter build
house on land implied promise (by actions and gen.
statements) they would give her the deed.
□ Special Cases – Subcontractors
Using subcontractors bid does not = acceptance of
that offer. Acceptance comes upon award of gen
contract. Can use promissory estoppel though.
▪ Baird/Hand – minority, no promise.
□ Drennan/Trayner – majority, implied promise from
fact that when D put in bid they were seeking to be
used as subcon.
▪ No bid shopping and re-opening of negotiations
after gen. contr. awarded K
▪ Can K around default rule
▪ Notice Wil-Fred’s was different b/c muni. promised
to use lowest bid
□ Charitable Subscriptions
▪ Minority View §90(2) binding without
reliance/consideration
□ Majority View King v. Trustees of BU charitable
subscriptions enforceable if supported by
consideration/reliance
□ LIMITS ON ENFORCEABILITY
□ Duress
▪ RS §174 Duress by phys. compulsion makes K void
▪ Subjective std. incl. phobia
▪ RS §175 Assent compelled by improper threat is
not assent. Can be eco. threat.
▪ Remedy = voidable
□ 1. Wrongful/Improper Threat §176
▪ Improper threat: crimes, torts, crim. pros.,
use of civil process in bad faith, “breach of
duty of good faith & fair dealing”
□ 2. Lack of reasonable alternative
▪ Possible reasonable alternatives – legal
action, other sources, tolerance. But if delay
involved in pursuing alternative would cause
immediate/irreparable loss, don’t have to
pursue. Austin Instrument
□ 3. Actual inducement of the K by threat.
▪ Totem Marine v. Alyeska Pipeline Service
▪ Batsakis = no, 3rd party caused the duress,
so fails on element 3.
▪ Cts. disagree who has to cause eco. duress (Posner
view cause by thrtn. party)
□ Undue Influence
▪ RS §177 unfair persuasion of party under
domination of other.
▪ Remedy = voidable
▪ Smell-test factors, not elements. Distinguish
legitimate persuasion from excessive pressure.
▪ Odorizzi v. Bloomfield School District (tchr)
□ Disc. at inapp./unusual time, unusual
place, insistent demand business be
finished at once, extreme emphasis on
consequences of delay, multiple
persuaders, absence of 3rd party advisors
for sub. party, no time to consult advisors
□ Unconscionability
□ RS §208 A ct. may refuse to enforce for uncons.
▪ Remedy = void clause
▪Must have both:
□Proced. uncon. (lack of choice/defect in barg.)
□ Williams v. Walker-Thomas Look for 1-sided
barg. as evi. of ineq. in barg. power
□ Examine circum. when K was made, incl.
commercial background/needs of trade
□ Higgins, ≠ barg. positions, factors of surprise
□ Substantive uncon. (fairness of resulting barg.)
□ Higgins v. LA County (1 sided arb. clause)
▪ Some juris. give special scrutiny to certain types,
like K of adhesion (CA)
□ Impt. Policy Arg: Institutional Competence for
solving consumer K issues – legislature or ct?
▪ UCC§2-302 if court finds clause uncon. at time
made, court may not enforce k, not enforce clause,
limit app. of clause
□ Misrepresentation
1. Fraud/classic misrepresentation
▪ RS §164(1) voidable if:
□ Assent induced
□ By fraudulent or material representation of
the other party upon
▪ RS §162 fraudulent or material repr. =
□ Maker intends his assert. to induce AND
□ Maker knows/believes assertion is not
factual,
□ Maker does not have confidence he
states/implies truth, OR
□ Maker knows no basis for statement.
□ Which the recipient is justified in relying.
▪Syester v. Banta dance case – court held was
misrepresentation because they knew facts were
false (scienter) and had intent to deceive; P bel. &
relied upon to enter into K and was dmgd.
2. Nondisclosure
▪ Classical view: Laidlaw buyer was aware was
ending would incr. prices, seller asked & buyer was
silent, but buyer has no liability
▪ Fact spec. inquiry, keep eco./fairness in mind
▪ Elements:
□ Other party entitled to material facts
▪ affect value of transaction, inquiry by
injured party
□ Needed to correct basic assumption upon
which K was made
□ Hill v. Jones (termites) when seller K facts
materially affecting value of res. prop. not read.
observ./k to buyer, duty to disclose
▪ RS §161: When non-disclosure is equivalent to an
assertion
□ (b) D knows discl. would correct mistake as to
basic assumption made by P
▪ Has to be knowing (knew or should have
known) but not nec. intentional.
3. Fraud in the execution
▪ Exception to rule that you are bound even if did
not read (Ray v. Eurice)
□ One party deliberately AND
□ In bad faith misrepresented the nature of the
document the party was signing.
▪ Park Investors v. Kartes
□ material misrepresentation □ false
□ K it was false □reliance □ caused injury
▪ inq. into use of ord. care, diligence for reliance
▪ RS §166
□ Assent induced by fraudulent
misrepresentation
□ As to the contents or effect of a wrtg.
□ Court may reform the writing to express the
terms as asserted…if the recipient was justified
in relying.
□ Public Policy
▪ Restrictive Covenants (RC)
▪ RC will not be enforced if greater than nec. to
protect employer’s leg. int., or if hardship to
employee/injury to pub. Outweigh
▪ Freedom of K v. unrestrained trade
▪ Cts. will more likely enforce RC rel. to sale of
business to protect goodwill
▪ Blue Pencil rule – line out certain terms,
courts split
▪ RS § 188 When agreement in restraint of trade
is unenforc.
□ Valley Medical Specialists v. Farber Look @
interests of:
1. Employer
□ Has legit. int. in prevent. skilled employ.
from using skills lrnd. From employment
(trade sec.)
□ Int. in protecting customer based until
empl. repl’d.
2. Employee
□ Int. in being able to work
3. Public
□ Then look at if rest. Overly broad in scope of
emp., geo. location, duration
▪ Surrogacy Agreements/Life/Bodily Integrity
▪ Can’t sell babies, sex, yourself into slavery,
organs, etc.
▪ RR v. MH, Baby M case – surrogacy agmts. only
enforceable if pay for preg. related exp. only, no
pymt. for adoptions to avoid pres. on eco.
vulnerable persons
INTERPRETATION & SUPP’L
Interpretation
▪ Historical Approach
▪ No K if parties had diff. mngs.
▪Peerless from Bombay
□ Modern approach- Modified Objective Theory
▪ §201 (appl’d in Joyner)
□ (1) Was there a mtg. of minds @ formation?
□ If Y, this mng. cntrls.
▪ If no, some cts. will look at plain mng.
□ (2) Did either party K or HRTK other’s mng. ?
□ If Y, K construed against
▪ If the mngs. differ (as in Frigaliment)
□ Plain mng. of word, is word ambiguous?
□ Intrinsic evidence
□ Extrinsic evidence
▪ Under mdrn. PER, PE can be used to
interpret & suppl.
□ Maxims
▪ contra proferentum ambiguity resolved
against drafter
▪ Accrd. to ct. in Joyner apply in K of
adhesion or stronger party & rcrd. shows
form of expr. chosen by one
▪ expressio unis anything not in the list is excl.
▪ Joyner Crt. fnd. no mtg. of the mind over
“developed” & remanded to figure out if one party K
or HRTK other mng.
▪ Frigaliment Ct. looked at:
▪ Pln. mng. – “chicken” is ambiguous
▪ Intr. evid. – Incorporated regs. by reference
▪ Extr. evid. – negotiating history, trade usage
(must be v. strong evid.), price
<cont.>
Parole Evidence Rule
□ Writing
□ Final & Integrated Agreement?
▪ Complete integration
▪ Int. to be final & exclusive expression
▪ Partial Integration
▪ Int. to be final, but not complete
▪ How to determine:
□ Four Corners
▪ Applied in Thompson v. Libby
□ Looks @ agreement on its face
□ Corbin
□ Allows any extrinsic evidence (EE)
▪ Applied in Taylor v. State Farm
▪ RS §210(3) Cmt. A writing can’t prove
own completeness
□ Merger clause = evidence, not dispositive
□ Can EE vary, contradict, [or supplement] terms?
□ Thompson fully integrated; EE cannot vary,
contradict, or supplement
□ Taylor partial; cannot vary or contradict
▪ Mod. can suppl. fully int. w/ cons. add’l terms
□ Is this an exception to the PER? Then, allow all EE.
▪ Interpretation
□ “Plain Meaning” view ct. would allow EE
interpret only if finding some lang. ambiguous
(no pln. & unambiguous mng. w/i 4 corners)
□ Taylor allows EE is language is “reasonably
susceptible” (no need for prelim. find. amb.)
▪ Fraud, duress, lack of consideration etc.
▪ Collateral agreements (related to but sep.
from)
□ Thompson warranty was not collat. but one
of terms of sale when incl.
▪ Right to equitable remedy
▪ Thompson v. Libby P claimed breach of warranty.
Warranty was not in writing. Based on 4 Crnrs.
writing was complete. Ct. reasoned warranty was
not collat. but one of terms of sale when incl.
▪ Taylor v. State Farm Trial ct. properly considered
and admitted EE to interp. if K incl. bad faith claim.
Implied Terms
▪ Cts. will promises to makeK enforceable if possible
□ Wood v. Lucy Lady-Duff Gordon ct. implied
promise to use reas. efforts in order to prevent
promise from being illusory, give bus. efficacy
▪ UCC § 2-306(2)
□ Implies a best efforts obligation in cases
where the K for sale calls for exclusive dealing
▪ UCC § 2-309 “Gap Filler” Notice of Termination
□ Termination of agrmt. requires reas.
notification be rec’d by the other party, except
upon agreed on event (unless that time frame
for seeking alt. is unconscionable)
□ Leibel v. Raynor Possible factors in
determining if notification was reas. incl. need
to sell of inventory, amt. of unrecouped
investment, time to min. losses, indust. stds.
▪ Default rules that parties can K around
▪ Economic efficiency
Obligation of Good Faith
▪ “Neither party shall do anything which shall
destroy right of other to rec. fruits of contract.”
▪ Implied at law in every K, but will not conflict w/
express term (doesn’t apply to term. of at-will emp.)
□ RS §205 good faith and fair dealing every K
□ UCC §1-304 good faith in perf. and enforc.
▪ Common Applications
▪ Necessary to protect parties’ expect.
□ Seidenburg v. Summit Bank P’s expected
that D would make reasonable efforts to
promote business and relied on this in selling
their company.
□ Satisfaction Clauses
□ Obj. std. applies when contract involves
commercial qlty., fitness
□ Morin Possner looked at function (can it
be judged by satis. commercial qlty.) and
cost to det. what cat. bldg. fit in
□ Std. of good faith (honest satis.) when
contract involves personal aesthetics
□ Locke v. WB WB acted in bad faith by
deny. opp. to have films consid. on merits
□ RS §228 obj. std. pref. w/ excep.
□ Employment At-Will Contract
▪ Good faith applies to K terms that exist
beyond employ. at-will rel.
▪ Some cts. will enforce employ. handbk.
▪ Donahue v. FedEx Ways to recover for
termination of at-will employment
□ Public policy (legal precedent or
statute)
□ Additional consideration to prove
not at-will
□ Prove terms beyond at-will rel.
Warranties
▪ Classical View – caveat emptor
▪ Caveat emptor grew out of laissez-faire, Indus.
Rev. and mass-prod. goods relaxed it, court
continued it by adopting “Housing Merchant”
warranty
▪ Caceci v. Di Canio Construction Corp
□ Implied Warranty of Habitability in Residential
Leases now recognized in majority of states.
Why? Parties don’t bargain as equals. Purchaser
has no choice but to rely on builder.
□ Skillful manner free of mtrl. defects
▪ Can be modified or discl.
**Bayliner Marine Corp v. Crow
§2-313 Express Warranties
□ 1. Affirmation/Promise/Description
▪ Seller not req. to have intent to create or
even use words “warranty” or “guarantee”
▪ Puffery/Opinion does NOT make ex. war.
□ 2. Part of the basis of the bargain
▪ Used to require reliance. Now, 3 views: 1.
Dispensed w/reliance completely 2. Require P to
prove reliance 3. Create rebuttable presumption
** Prop matrixes were not descript. of same
type of boat; brochure was mfg.’s opinion
▪ Disclaimer of Express Warranties
▪ UCC §2-316(1)
□ Must be consistent w/ any exp. war. given
▪PER determines if written disc. will overcome
any oral warranties, but some courts have
found grounds to rule otherwise
▪ ”As-is”, “with all faults” –warranties
disclaimed, unless circumstances indicate
otherwise
§2-314 Implied Warranty of Merchantability
▪ Applies to transactions from merchants
□ 1. Pass w/o obj. in the trade (would sig. seg. of
buying public object?)
□ 2. Be of avg. qual. w/in the description
□ 3. Fit for ordinary purpose (reas. capable of
perf. their ord. functions)
▪Complaining party must establish std. of
merchantability w/in the trade
** No evid. public would obj. to purchase
boat w/ these char.
▪ Disclaimers of Imp. Warranty of Merchantability
▪ UCC §2-316(2)
□ conspicuous, mention merchantability
□ MUST be in writing
▪ Some juris. do not allow
<cont.>
§2-315 Implied Warranty of Fitness for a Par. Purp.
▪ Does not have to be merchant
▪ Does not req. to show goods defective
□ 1. Seller K or HRTK of a par. purpose for the
goods
□ 2. Buyer relies on seller’s skill or judgment
▪ Elements judged from obj. std.
▪ Disclaimers of Imp. Warr. of Fitness for a Par. Purp
▪ UCC §2-316(3)
□ Conspicuous, can be broad/less specific than
disc. for imp. warr. of merch.
□ MUST be in writing
▪ Some juris. do not allow
** Crow did not make K his precise reqs.
BREACH
▪ Always entitled to dmgs., may be negligible
□ Not Material (substantial performance)
▪ Always Partial
□ J&Y Cardozo reasoned that pipes were insign.
in rel. to proj. and did not frustrate purpose, still
got “value of the bargain”
▪ Remedy: Can claim comp. for loss suffered
▪ Parties can K around by making X express. cond.
on Y
□ Material
□ RS S241 Signific. cicrum. to det. if material
▪ Ext. to which injured party will be
deprived the benefit (reas.) expected
▪ Balance comp. of injured party with
forfeiture of other
▪ Likelihood of cure
▪ If behavior of breaching party is in good
faith and fair dealing (Δ from willful RS
§275)
□ Total
□ RS §242 Signific. cicrum. to det. if material:
▪ §241
▪ Extent to which further delay likely to
prev./hinder making of sub. arrang.
▪ Degree of imp. the terms of agree. attach.
to perf. w/o delay
▪ Time is of the essence when K was
made
▪ Remedy: RS § 243 full damages (actual
+fut.), withhold perf., repudiate the K,
terminate
□ Sackett v. Spindler mtrl. breach b/c
performance was extr. uncertain and failure to
perf. negl./willfull (used test from old RS §275)
□ Partial
▪ Remedy: Can claim comp. for loss suffered
or susp. perf., await cure
▪ UCC §2-601 Perfect Tender Rule
▪ Requires exact good
EXCUSES □ Remedy = Rescission Unilateral Mistake
▪ Ct. will be reluctant to grant equitable remedy to ▪ Williston: mtrl. mistake so palpable, party not in
party that turns out better off error on notice of existence
Mistake ▪ Other approach: allowed for mistake of fact but no
□ RS §151 belief not in accord w/ facts mistake of judg.
▪ RS §153
Mutual Mistake □ A mistake of one party…
□ Remedy = Rescission □ At the time K was made, mtrl. effect on agrd.
▪ RS §152 exchange of performance, voidable, unless bears
□ Mistake of both parties risk of mistake AND
□ At the time K was made □ Enforce. would be unconscion. OR
□ Mtrl. effect on agrd. exchange of performance ▪ unconscion. = enough to cause subs. loss
▪ §154(2) to det. mtrl. effect acct. is taken of □ The other part has reason to know of mistake
relief by reformation etc. or his fault caused mistake
▪ Scrivner’s error  reformation
□ Voidable, unless bears risk of mistake ▪ Wil-Fred’s Inc v. Metropolitian Sanitary Dist.
Contractor was awarded bid and tried to withdraw
▪ RS § 154 Party bears risk of mistake when… b/c of mistake of subcontractor about equip.
□ Risk is allocated by agrmt. of parties, or ▪Elements:
□ Aware @ time K is made of lmtd. knowl. about □ Rel. to material feature of K
facts rel. to mistake but treats as sufficient, or ▪ Large part of the value of the K
▪ Conscious ignorance □ Occurred notwithstanding reas. care
▪ Aware estate might contain fine art but did □ Of grave conseq., enforce. would be
not employ expert, oops! That was worth $$$ unconscion.
□ By court ▪ Contractor would have had to pay a lot more
on bonds. Subcontror would have gone out of
□ Lenawee Co. Brd. Health v. Messerly (adopted RS business.
approach) court didn’t grant rescission b/c buyers □ Other party can be placed in status quo
assumed risk with “as is” clause.
▪ Old rule: Impossibility
▪ A&M Land Develop. No rescission for mistake ▪ Actual impossibility (rare) RS §262, 263,264; UCC
in value of K §2-613 (destruct. of goods)
▪ Sherwood v. Walker (Barren Cow Case) ▪ Impracticability RS §261 (effects perf.)
Rescission for mistake about the character an □ Made impracticable w/o his fault
essence of consideration ▪ Cmt. D Δ in the degree of difficult, profits,
or expenses of performance is not impr.
(appl’d in Int’l Harvester)
□ Occ. of event non-occur. of was basic
assumpt.
▪ Cmt. B existing market conditions and
financial situation of one of the parties are
normally not such (basic) assumptions
□ Unless K language has not allocated risk of
loss otherwise.
□ Karl-Went Farm Equip. Co. v. Int’l Harv.
▪Theories of common law development of rules
□ Older formulistic approach v. new functionalist approach
▪Theories for enforcing promises
□ Moral obligation to keep a promise v. K a tool for promoting an efficient economy.
▪Theories for promoting a transactional economy
□ Connection between private disputes to public mechanisms for resolution.
▪Theories for ensuring basic fairness in autonomy and distributive justice in human interactions
▪Connection private disputes to public mechanisms for resolution
▪ Frustration RS §265
▪ Information forcing rule
□ After a contract is made
□ A party’s principal purpose is substantially
frustrated
▪Must render the value of K almost totally
worthless
▪ Cmt. A w/o it the transaction would make
little sense.
▪ Basic assumption can’t be “mutual
profitability” Karl-Wendt (applying §261)
□ W/o his fault
□ Occ. of event non-occur. of was basic
assumpt.
▪ Cts. split about forseeable (event like this)
□ Unless K language has not allocated risk of
loss otherwise.
□ Mel-Frank Toll & Supply v. DI-Chem Principal
purpose of K was storage of chemicals, D could still
use space for storage.
REMEDIES
□ Formula (§347/Farnsworth) expect. dmgs =
Loss in value (promise-received)
+Other loss (incidental +consequential)
-Any cost or loss P avoided)
▪Disclaimers: You CAN disclaim consequential
damages (but could still be unconsc.)
□ RS §352: Harm must be measured with
reasonable certainty (i.e. can’t be speculative)
□ Hadley v. Baxendale: Must be reasonably
foreseeable (i.e. breaching party had to have reason
to foresee the harm as a probably result at the time
of the K.)
▪ Must be forseeable (objective std.)
▪ Type of loss, not manner it occurs.
Loss in Value
▪ Promise = Terms of the K
▪ Received = What P ended up getting (mkt. value
in real estate)
□ Loss in value is calculated as the loss in value
of their bargain, not the value of what they
actually rec’d (Handicapped Children’s)
▪ Real Estate
▪ Loss in Value = agrd. upon purch. price – fair
mkt. val.
□ Crabby v. Hamilton where buyers reneged
and court used resale price (after 13 months).
▪ Fair mkt value?
□ Resale within a reasonable time when
buyer is under no compulsion (sale under
duress, period of great mkt. fluctuation)
▪Also use experts and similar prop.
▪ Construction: “cost to complete”
▪ Not mkt. value (unless like J&Y)
□ Am. Standard v. Shectman Ct. held that just
b/c mkt. value didn’t go down much doesn’t
get D off the hook for cost of complet. Unlike
Jacob & Young, D didn’t try to perform
▪ EXCEPTION:
□ K has been subs. performed in good faith
and cost of completion would involve eco.
waste (like J&Y)
□ Breach was incidental to the main
purpose of the K and the cost of completion
would be disproportionately costly (see
Peevey House)
Other Loss
▪ Incidental damages = Actual harm. Bills,
“general damages” that “arise naturally”
▪ Consequential Damages = indirect harm (like
lost profits) not attorney fees. “special damages”
▪ Loss profits on K Sued on (as long as
foreseeable “fairly and reasonably arise
naturally from breach”)
▪ Lost profits on collateral K
□ Hadley v. Baxendale must k that late
delivery would shut factory down.
▪Must have been specifically known and
contemplated by the parties @ time K
made
▪ Price of K may reflect what parties
contemplated @ time
□ Florafax Where the nature of the business
makes it reasonable for D to have known
that P had collateral agr. w/ other parties.
▪ RS §351(2)(b) approach says if party had
reason to know it falls under fors. category
▪ Cost avoided = Things P would have had to do
under the K
□ Duty to mitigate damages (you can’t continue
performance): Rockingham Co. v. Luten Bridge
▪Breached party must have made reasonable
efforts to get another deal.
□ HCB where P made reasonable efforts to
find replacement, so D teacher had to pay
▪ RS §350 dmgs. not recover. for loss could
have avoided w/o undue burden etc.
□UCC §2-2708 (1): Dif. btw. mkt price and the K
price of goods.