Contracts Outline

8/29/22, 9:53 PM View Document
Contracts - Kindred
Posting created by Leonardo Benavides on 9/19/2017 at 04:34:03
(Edited 9/19/2017 at 04:34:03)
Print

Attached file: Contracts Spring 2016 Outline 2.docx

Download / Download HTML Version
Contracts Spring 2016 Outline

I. Introduction to Contract Law
a. Uniform Commercial Code – Focus on Article 2 -sale of goods
i. Works in conjunctions and sometimes in lieu of common law doctrine.
ii. Restatement (Second) of Contracts
1. Persuasive secondary source but not binding
b. Bargaining – The parties on Both sides are weighing their risks entailed of party’s
failure in light of what they’re getting for giving up.
i. Reflect preferences of parties at particular point of time.
ii. At time of assent, each party values preference over what they will receive
over value of what they will give up.
iii. At point of breach, one party no longer values what they receive more than
they have to give up to get in.
c. Contract – A promise or a set of promises for the breach of which the law
gives a remedy, or the performance of which the law in some way recognizes
as a duty.
i. Elements to form a contract
1. Mutual Assent = Offer + Acceptance
2. Consideration
ii. Promises – A manifestation of intention to act or refrain from acting in a
specified way, so made as to justify a promise in understand that a
commitment has been made.
1. Guarantee – Definite promise with respect to outcome
2. Guarantee Warranty – Indemnifying promise that if loss occurs, the fact
that I proved unwarranted, and it’s true, I’m libel
3. Implied promise – Saying that in regard to manifestation of intention
based on outward conduct, drawing inference from what is said and
done.
4. Express – stated or written guaranteed promise
a. No difference in legal effect express and implied promise.
5. Special Contract – express or explicit contract, legal term of art, leads
court to believe plaintiff is suing under express contract
iii. Bilateral – Promise in exchange for a promise, most contracts
1. At moment of reciprocal promise, you have a contract.
2. Promise for promise gives both sides certainty, both sides are
bound.
https://lawschool.westlaw.com/DocForums/ViewSingleDocument.aspx?postingID=14020956&courseID=230050&forumDBID=1111289 1/49
iv. Unilateral – Acceptance for performance
1. Offer invites acceptance by performance of some act
d. Shaheen v. Knight – Example of theory v. Policy
i. P suing D after sterilization procedure because had another child with wife.
ii. Guarantee promise at heart of lawsuit
1. Warranty of Cure – Unless doctor makes specific guarantee, can’t hold
him to outcome.
a. Court won’t infer because things can happen beyond doctor’s
control.
b. Public Policy – Don’t want to discourage doctor’s from practicing
certain operations.
c. Also concerned from patient’s point of view that if implied
warranty of curse, then doctor won’t share all information for
informed consent.
i. Doctor could then take less risky procedures for guarantee
that may be more conservative.
2. P need to prove express guarantee. P actually alleges negligence but
this is contract case, not tort case.
3. Complaint deceit (tort) not assumpsit (contract).
iii. Virtual Unanimity: Concern about consistency across cases. Overriding policy
of wanting people to hold up the obligations they made.
1. Court only reverses contract for public policy reason if there is universal
unanimity.
iv. If you’re going to get the benefit (in this case child), you should take the
burden (cost of child), otherwise would be unjust, unfair.
1. P has obligation to plead and prove the breach and harm arising from
the breach.
2. P has to mitigate damages. In this case, P didn’t, saw it as a net benefit.
II. Mutual Assent = Offer + Acceptance
a. Offer – Manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his assent to that bargain is invited and will
conclude it.
b. Reaching an Agreement
i. Objective Standard: Would a reasonable person believe an offer was made?
1. Lucy v. Zehmer: Courts must rely on objective intent to determine if
mutual assent took place; outward actions manifest objective intent
a. Note: Reasonable impression created in the mind of the offeree
by the words used and conduct engaged by the offeror. (Embry v.
Hagardine, McKittrick)
ii. Subjective Standard: Does the offeree believe an offer was made?
1. Leonard v. Pepsico: Offers that are clearly made in jest (such as a
humorous ad) do not satisfy the objective standard; regardless if the
offeree satisfies the subjective standard
2. Nebraska See Co. v. Harsh – D’s letter could not be construed as a
complete contract. It was more of advertisement in which the language
lacked specifics and was general.
iii. Outward manifestations determine whether there is liability for promise over
inward subjective intent if there is a conflict.
1. Creates power of acceptance in person that receives it
2. Creates understanding in recipient that there is an acceptance.
iv. UCC – Trying to create general rule that protects parties and create
efficiencies and security (General and Fair while facilitating commerce)
1. Sometimes codifies common law, sometimes modifies
2. §2-204 Formation in General (Pg. 291) – Modified by UCC as (3)
makes it a little bit more loose, only slightly
a. Needs reasonably certain basis for there to be remedy
3. §2-309 (Pg. 292) – Also modifies reasonable time provisions
a. Designed to address specific instance that have occurred over
time
v. Written Memorial Contemplated
1. Agreement in Principle – General terms worked out but not details for
evidentiary record. Need contrary expression from one party to show no
contract was formed as party was not bound.
a. Empro Manufacturing Co. v. Ball-Co Manufacturing, Inc. – Not
reasonable for one party to bound and another not when
bargaining at arm’s length.
b. Texaco v. Pennzoil – Both parties had bound self with overt
manifestations shown to public, partial performance such as joint
press release, evidence sides reached agreement
2. Letter of intent shows good intentions of both parties for them to go
forward and hash out details.
3. Court must be mindful whether parties want to enter relationship or not.
a. Court needs to be more cautious on formation aspect.
b. Courts’ role is constrained at this stage of law
vi. Revoking an Offer
1. Restatement §36 – Methods of Termination of the Power of
Acceptance
a. An offeree’s power of acceptance may be terminated by
i. Rejection or counter-offer by the offeree
ii. Lapse of Time
iii. Revocation by the offeror
iv. Death or incapacity of the offeror or offeree.
2. Power of Revocation
a. Offeror – Can revoke any time before acceptance
i. As long as its communicated
ii. Dickinson v. Dodds – Offeror may revoke offer without an
express or actual statement of revocation communicated to
offerree provided there was been no meeting of the minds
and the offeree is aware of conduct by the offeror
demonstrating intent to revoke offer
1. Dickinson argued his exclusive right to accept offer
until Friday Morning.
2. But heard about it being sold to someone else, which
was CONTRARY MANIFESTATION
3. Dodd shouldn’t be constrained to his property until
Dickinson makes up his mind.
4. If limiting power to make decision, limits notion of
freedom of contraction and facilitation of commerce.
5. This has NO consideration BUT HAS mutual assent.
6. Not all promises are legally enforceable, not all
promises are contracts.
iii. §25 – Option Contract – A promise which meets the
requirements for the formation of a contract and limits the
promisor’s power to revoke an offer.
1. In Dickinson - Option of a dollar makes it a legally
binding contract because there is quid pro quo.
b. Offeree – Can decline or accept offer. Continuing power to
complete manifestation, accept the offer, or conclude the deal
(revoke).
i. But can’t conclude the contract if it has been revoked.
3. UCC §2-205 – Firm Offer Rule – Modifies
a. Offer made by merchant selling goods
i. UCC Merchant by UCC definition
ii. Experience in understanding how transaction works
iii. Power to keep offer open.
iv. ONLY in this context consideration has been replaced.
b. In writing
c. That provides offer held open without revoking
d. Even without consideration, for the period stated
e. If no period stated, not to exceed 3 months
c. Acceptance -Manifestation of assent, objectively determined to be bound by terms
of the offer
i. What constitutes valid acceptance?
1. A valid acceptance that is capable of forming a valid contract must be
definite and unequivocal and must not impose additional conditions or
limitations on the offer, unless such conditional language is clearly
independent of the actual acceptance.
a. Ardente v. Horan – P’s request of furniture and furnishings along
with check for apartment was a conditional offer, or counteroffer,
which D’s didn’t accept so no contract formed.
2. Need for definite and unequivocal acceptance – Mirror Image Rule
a. Parties need to agree to same thing
b. Offeror crafts offer based on assumptions he/she is willing to
make
c. Once Offer out there, all power in hands of offeree
d. Offeror would be liable for things he didn’t foresee or bargain for if
offeree changed terms of deal
i. Makes sense offeror would know what he’s legally
responsible for
ii. Otherwise would bind offeror to deal he didn’t initially offer.
e. No contract until acceptance mirrors offer.
i. Exception: Person believe it mirrors?
ii. Assuming find existence of a contract, have to figure what
it’s terms are. Can be fuzzy.
3. UCC §2-207 changed mirror image rule by eliminating last shot, would
be unfair to bind buyer by seller’s last term.
a. Provides any “expression of acceptance” or “written confirmation”
will act as an acceptance even if terms are “additional or different
from” those contained in the offer unless “acceptance is expressly
made conditional on assent to” those terms.
b. The additional terms are to be construed as proposals for addition
to the contract. Between merchants such terms become part of
the contract unless:
i. The offer expressly limits acceptance to the terms of the
offer;
ii. They materially alter; or
iii. Notification of objection to them has already been given or
is given within a reasonable time after notice of them is
received
c. Conduct by both parties which recognized the existence of a
contract is sufficient to establish a contract for sale although the
writings of the parties do not otherwise establish a contract. In
such case the terms of the particular contract consist of those
terms on which writings of the parties agree, together with any
supplementary terms incorporated under any other provisions of
this Act.
ii. The Mailbox Rule – Offer considered accepted at the time that the acceptance
is mailed by offeree
1. Assent is permitted by correspondence, by mail (etc.) when acceptance
is not immediate
a. For correspondence of parties not dealing face to face
b. Manifestation complete upon dispatch
c. Rationale: offeree needs dependable way to know if has a deal or
in fact has completed deal
d. Protects party most at risk – Offeree
i. Offeror has complete control, can change the rules before
sending out
2. Offeror may specify the manner and meeting by which the medium is to
be communicated but doesn’t have to.
a. Does offeror invite particular medium of acceptance? What type
of act constitutes acceptance? Promise or performance?
b. If none, application of mailbox rule: Offeror makes a promise by
letter in mail.
c. Appropriate manner one used by offeror or customary standard
d. If reciprocal promise, creating bilateral contract
3. Exception – Option Contract – Acceptance upon receipt by the offeror
iii. Unilateral Contract – Acceptance for Performance
1. Offer invites acceptance by performance of some act
a. Carlill v. Carbolic Smoke Ball Co. – A general advertisement of an
award constitutes an offer that is capable of being accepted and
binding the offeror in a valid contract, provided at least
contemporaneous notice and some consideration are present
b. Manifestation of intent, reasonable to infer Carbolic serious about
claim
i. Contract only forms when people fulfill conditions.
Constitutes acceptance by performance.
c. Offeror Needs to know when performance is completed – Here
notification only after conditions have been fulfilled, when infected
by flu even after using product and P knows it and notifies D.
i. Notification is needed to get reward, if she never comes
forward, obligation discharged.
d. Leonard v. Pepsico (part 2) – Directions that P needs to collect
point and see catalog
i. Not as definitive as Carbolic.
e. White v. Corlies & Tifft – To form a binding contract, acceptance
by performance must be sufficient to manifest or communicate
the acceptance to the offeror.
i. Did communication give right to commence job and if it
could be accepted by commencing job?
ii. Letter construed as continuing negotiations.
iii. Offer because already negotiated on term
iv. Not reasonable to buy lumber, “upon agreement to finish in
two weeks”
v. Can be read as promise for a promise, not promise for
performance
vi. Lumber bought by P could have been for any job, as it’s
what he P does
vii. Ambiguous – not reasonable to reach conclusion. Since
performing from distance, makes sense D wants promise.
2. You can begin a performance and not finish, thus why bilateral are more
common.
a. Petterson v. Pattberg – Any offer to enter into a unilateral contract
may be withdrawn before the act requested to be done has been
performed.
b. If offeror sees offeree coming and intend to accept (this case full
mortgage payment by P for $780 reprieve), can revoke before
offer is accepted or tendered.
i. Majority – Have to be proffering (handing over money)
ii. Dissent – Offer to pay constituted beginning of offered
performance
1. Issue – Inducement by itself is not enough,
structured as unilateral contract to be accepted once
payoff of mortgage made.
2. Could have structured as value for value or promise
for promise: “I’ll have your money in 3 days, please
don’t sell it” “okay”
3. Then condition to 3rd party would have been

discharged.
c. IF performance instead of promise, some time that offeree is
vulnerable.
d. Looking for contrary manifestation of intent from offeror (refusal
here)
e. Option would limit offeror’s power to revoke before expiration
f. Gift of a promise – Not binding, he can take it back
g. Restatement
i. §45 – Offeror tells you what he wants as acceptance
1. Assuming the risk of him accepting by performing
and never finishing
ii. §62 – Offeror lets you choose
1. If choose performance, need more protection
2. Such an acceptance operates as a promise to render
complete performance.
h. Completion of the performance is the acceptance
i. Can walk away before finishing, and not be in breach
iv. Acceptance by Silence
1. Conduct which looks like acceptance is acceptance
a. Hobbs v. Massasoit Whip Co. – D kept eel skins P shipped to
him without notifying if it accepted and agree to pay. Prior history
of P shipping skins in same manner 4 or 5 times each accepted
and paid for by D.
i. Wasn’t contract as soon as skins sent, but D had duty to
act upon when received
ii. When didn’t, seen as acceptance, because kept skins for
while without saying anything.
8/29/22, 9:53 PM y gView Document
y g
iii. Silence is acceptance because manifestation of intent was
keeping.
iv. Prior dealings between two parties made it reasonable to
infer as acceptance by P.
v. NO contrary manifestations by D, had duty to do
vi. Subjectively, D maybe didn’t want it, but objectively, P can
infer acceptance because of silence and lack of action
2. Don’t force people into contract unless they want one.
v. E-Commerce and Mutual Assent
1. Specht v. Netscape Communications
a. An offeree, regardless of apparent manifestation of his consent, is
not bound by or charged with having “inquiry notice” of
inconspicuous contractual provisions of which he is unaware,
displaced in a format whose contractual nature is not obvious
when judged according to a “reasonably prudent offeree”
standard
b. Objective, maybe don’t know, no unambiguous manifestation of
intent.
i. Program Free, adds ambiguity, reasonable to think no
further obligation
ii. Also able to download from other sites
iii. Netscape has clickwrap on two other products, but not on
this product
c. No Inquiry notice or constructive Notice
i. Not like signing paper contract, you may not know what
you’re signing, but you know you’re agreeing to something
ii. With paper, expect other side to want something in return.
iii. Here customer does need to click on agreement
(clickwrap), agreement would have to be found.
iv. Not in obvious place, no conspicuous language
2. Register.com v. Verio
a. When a benefit is offered subject to stated conditions, and the
offeree accepts the benefit with knowledge of the terms, the
taking constitutes a binding acceptance of the terms.
b. In this case, notice for Verio to stop spamming registrants of
Register.com
d. Discerning the Agreement – What did we agree to? What did we mean?
i. Interpreting the Meaning of the Terms – Courts approach with objectivity
1. Ambiguous – Terms with more than one equally used meaning.
a. No contract if there is mutual misunderstanding by both parties as
to the meaning of a term of an agreement.
i. Raffles v. Wichelhaus – Confusion over two ships named
Peerless, one shipment leaving in October, other in
December
1. D – Not liable, meant Oct. Peerless
a. P saying which shipment immaterial, only
named ship in contract to determine who bears
risk of loss.
b. Court ruled for D
2. P – Not liable, meant Dec. Peerless
a. What mattered was what was manifest, not
secret intent.
ii. Both meanings equally reasonable
iii. No Ambiguity if you have another reason to know what
other party wants
iv. Restatement §201 Page 383 – Whose meaning prevails
1. Where the parties have same meaning, interpreted in
agreement
2. Where the parties have different meanings.
Interpreted with meaning attached by one at time of
agreement:
a. That party did not know of any different
meaning attached by the 1st party; or
b. That party had no reason to know of any
different meaning attached by the other, and
the other had reason to know the meaning
attached by the 1st party.
3. Except as stated in this Section, neither party is
bound by the meaning attached by the other, even
though the result may be failure of mutual assent.
b. If terms are ambiguous there is no contract unless one party
knew of the other’s understanding or, even if there is knowledge
of the other’s understanding, there will be no contract if the court
can find no sensible reason to choose between the two conflicting
understandings
i. Oswald v. Allen – Ambiguity created by two separate
collections, P sees “Swiss Coins” from both.
1. Label could apply to both or to “Swiss Coin
Collection” only and not “Rarity”
2. Confusion amplified by working with separate agent
because P doesn’t speak English.
3. Subjectively, talking about different things
4. Objectively, because ambiguous can mean multiple
things, clear they didn’t think the same thing.
ii. Both meanings equally reasonable
1. Court has no principle basis to choose one meaning
over the other. Contract must fail, not mutual assent.
iii. Objective ambiguity is fact
1. Lack of shared subjective understanding, and in
context of facts, not objective meaning
2. Court doesn’t want to substitute its interpretation of
the meaning for that of the parties.
a. Doesn’t have basis to impose one party’s will
on another.
b. Doesn’t follow basic principle of autonomy in
contracts (freedom of contract) of parties
deciding if they want to enter a contract.
c. At this point, both think they are in a contract.
2. Vagueness – Whether term they used includes a particular object or
meaning.
a. A contract will not be enforced when terms of the contract at
issue are vague
i. Weinberg v. Edelstein – P has restrictive covenant that
allows him to sell dresses. D is aware of covenant when
entering lease, is authorized to sell (among other things)
blouses and skirts but not dresses.
ii. What constitutes dress? Matching blouse and skirt?
iii. Dictionary definition won’t help because of common place
meanings to dress
iv. Court turned to ladies’ garment industry to see if objective
meaning to dress.
v. P should have known and protected self.
vi. Court found objective meaning of the word “dress”
consistent with D’s definition.
b. When the parties contract subjectively, but in good faith, construe
an ambiguous term differently, courts may look to external factors
to determine the proper interpretation of the term.
i. Frigaliment Importing v. B.N.S. – Vagueness to term of
chicken and how it’s used with mixed information from
industry standards.
ii. D – chicken says anything we say it means. To contract
specifications.
1. P wasn’t happy with 1st shipment, said so in cable

gram
2. D ready to ship 2nd shipment, asked P if still wanted,

P said yes and threatened to go after them if didn’t.
3. D can think either P is waiving objection, or never
had problem.
iii. P had burden of showing term used in particular way and
narrower than how industry is using it so other side
understands.
iv. D’s definition coincides with most of evidence, opposite for
P
ii. Filling Gaps in the Terms – Indefiniteness
1. Agreements to Agree
a. All Manifestations of assent may contain some gaps. What should
courts do?
i. Can refuse to enforce the contract because can’t know
intention every time.
ii. If provide terms to fill the gaps, might be inconsistent with
principle of contract
iii. If took absolutist on gap-filling, would call into question
every contract agreement and all subject to being non-
enforceable.
iv. IF try to fill to best to agreement, how to justify?
b. Sun Printing v. Remington Paper – to constitute a binding
contract, the terms of each element of the contract must be
sufficiently specific.
i. Agreement as to one was insufficient to another
1. Period of time price was to govern was important
2. Not clear what either party contracted for, just that
they agree to agree
3. P gets to decide price – made so not to be at mercy
of market
4. P had burden to show it was a non-fluctuating price
5. Indefinite is question of fact here.
ii. Did not mutually assent when contract formed
1. Court not concerned with motive what matters is
what assent was manifested.
2. Structure of agreement implies there is a fluctuation.
Question of fact, so court doesn’t assume.
iii. Court not responsible for filling necessary part of contract –
against underlying freedom of contract
1. Thus court does not impost reasonable period
2. Court trying to interpret contract, not rewrite
iii. Illusory Promises – promise that is unenforceable to due indefiniteness or
lack of mutuality, where only one side bound to perform.
1. NY Central Iron Works v. U.S. Radiator – Definite terms will not be
implied when a contract does not expressly contain them, but each
party to a contract is required to perform under the contract in good faith
and reasonably
a. Mutual mistake not appropriate because D is suggesting mistake
about quantity, saying court should rewrite the contract for implied
understanding when no suggestion both had mistaken
impression.
b. Need is determined by good faith, implied duty of good faith and
fair dealing.
c. Reasonable P want to take favorable advantage of deal it made
to make a profit. Not concerned P is buying some degree of iron
beyond what it needs to resell.
i. As long as doesn’t hoard, will let benefit from market
ii. If market was going other way, would still be held to
agreement
d. Contract law isn’t there to save parties from bad deal
i. Assume if bargaining at arm’s length and good faith, leave
it up to parties to do risk assessment.
ii. Taking advantage of good deal in current market is okay
iii. Could swing another way too before end of terms of
agreement
2. Eastern Air Lines v. Gulf Oil – Under Section 2-615 of the UCC, a mere
showing of unprofitability, without more, will not excuse performance of
a contract.
a. Even though nothing specific about amount, not indefinite
because requirements can be determined.
i. Gulf has to sell what Eastern needs, Eastern has to buy it
from Gulf.
b. Objective evidence of assent: Continuing communications during
course of performance, extension of contract, 15 years of history
(established course of performing and dealing)
c. Unlike Sun-Printing – court has clear extended period of history to
determine what reasonable requirements mean and everything
points to good faith dealing on part of buyer
d. UCC §2-306(1) – Preference for stated estimated, in absences,
look for normal or comparable requirement
i. Clarifies common law to address problem of indefiniteness,
via metrics of output
ii. Enhances mutuality of obligation by imposing on party
whose requirements are outputs in questions an obligation
to run its business that is consistent with the normal volume
of business it has.
3. Wood v. Lucy, Lady Duff-Gordon – A contract may be enforced when
there is no evidence of a promise, exchanged as consideration, in the
explicit terms of the contract. A promise to use reasonable efforts may
be implied from the entire circumstances of a contract.
a. D argued lacked mutuality of obligation and illusory.
b. Judge, it’s not illusory promise, it’s implied, P is using reasonable
efforts on her behalf to make profits.
i. Found factual basis for implied promise.
ii. P is exclusive agent for Defendant
iii. P responsible for keeping track of profits, and getting her
50%, and acquire patents and copyrights
c. Difference from Sun Printing – Intended to negotiate more, not
enough to see principled way to draw inference to what they
agreed to
i. Can’t just imply a promise, there has to be a factual basis
to support it.
d. UCC §2-306 – Codifies Wood v. Lucy, increases rebuttal
presumption, eliminates need of court to assume.
i. It must be intentions of parties to use best efforts.
ii. Parties need to do so clearly with express terms to the
contrary.
iv. Identifying The Terms of Agreement
1. Form Contracts or “Contracts of Adhesion”
a. Carnival Cruise Lines v. Shute – A forum selection clause is not
fundamentally unfair solely because the clause was not
negotiated
i. Place of business in Florida, and most ports in Florida.
b. Have to look at if fundamentally fair and reasonable
i. Is there a reason for it or making it more difficult to bring
litigation against you?
c. Advantages that outweigh disadvantages of Standard Form
Clauses:
i. Predictability of business
ii. Reduce transaction costs for business
iii. Also efficiency for consumer
iv. More economical use of scarce resources (judicial
resources)
v. Facilitates flow of commerce
vi. Limit Liability and cost of litigating
d. Efficiency comes at price of bargaining and negotiating
e. Checks to Combat:
i. Increased judicial scrutiny
ii. Consistency in industry
iii. Federal Statutes for consumer protection
f. Caspi v. Microsoft Network – A court will invalidate a forum
selection clause that parties have been given reasonable notice
of only if the clause is a result of fraud or overweening bargaining
power, enforcement of the clause would violate public policy, or
enforcement of the clause would seriously inconvenience trial.
2. Which Terms were Agreed to?
a. Step-Saver Date v. Wyse – Under UCC, additional terms that
materially alter an agreement must be assented to by both parties
in order to be binding, and a unilateral course of conduct is not
sufficient to establish both parties’ assent to the additional terms.
i. License is written confirmation so §2-207 applied looking at
external actions of parties to determine intention.
b. TSL makes indefinites argument, that box top license is a
completion and final expression of agreement, before that,
essential issues missing. TSL made conditional offer, final
condition was acceptance of product. Step-saver accepted
product and kept ordering thus they knew about the warranties.
c. UCC
i. §2-202 permits the parties to reduce an oral agreement to
writing (Also Parol Evidence below)
ii. §2-209 permits the parties to modify an existing contract
without additional consideration, a writing will be a final
expression of, or a binding modification to, an earlier
agreement only if the parties so intend.
3. Terms that Follow Later
a. ProCD v. Zeidenberg – Shrinkwrap licenses included within a
product’s packaging are enforceable unless their terms are
objectionable on grounds applicable to contracts in general, such
as violating a positive rule of law or being unconscionable
b. Hill v. Gateway 2000 – Under UCC §2-207(2), a purchaser may
be bound to terms included in product packaging if the purchaser
has an opportunity to review the agreement and reject it by
returning the product
III. Written Manifestations of Assent
a. Interpreting a Writing – The Parol Evidence Rule
i. Parol Evidence – Circumstantial or extrinsic evidence used to prove the
contents of a written instrument
1. Default Rule
2. Thompson v. Libby – when written agreement is intended to be the
entire agreement, parol evidence cannot be introduced to establish
whether or not the contract is intended to be the entire agreement
a. In this case written contract did not provide warranty, trial court
should not have allowed Libby to introduce testimony for purpose
of providing verbal warranty.
b. Parol evidence is not admissible to contradict or change the
terms of a valid, written contract.
3. Brown v. Oliver – When a contract is only partially integrated, parol
evidence may be considered to determine whether the parties intended
a disputed subject not mentioned in the contract to be included in the
written document memorializing the transaction. (Professor Likes)
a. Written contract does not mention furniture, so parol evidence
applied.
b. Courts must find what writing was intended to be, thus what
evidence can be admitted.
i. Look at surrounding circumstances to determine intent.
ii. IE language or parties or conduct of parties
4. Restatements § on page 466.
a. §209 covers Integrated Agreements
i. Writing constituting final expression determined by court as
preliminary determination of a question of interpretation of
parol evidence rule.
ii. When writing in its completeness reasonably appears to be
a complete agreement, it is integrated established by other
evidence that the writing is not a final expression.
b. §210 cover Completely and Partially Integrated Agreements
i. Agreement other than completely integrated agreement
c. §213 Parol Evidence Rule
i. Binding integrated agreement discharges prior agreements
to the extent that its inconsistent with them.
ii. Binding completely integrated agreement discharges prior
agreements to the extent that they are within its scope
5. UCC §2-202 (Page 467) Final Written Expression: Parol Or Extrinsic
Evidence – Adds more flexibility in what can be considered
a. May not be contradicted but by evidence of any prior agreement
or of a contemporaneous oral agreement.
b. Wants to facilitate flow of commerce but may be explained or
supplement
i. By course of dealing or usage of trade or by course of
performance; and
ii. By evidence of consistent additional terms unless the court
finds the writing to have been intended also as a complete
and exclusive statement of the terms of the agreement.
6. Pacific Gas & Electric Co. V. G.W. Thomas Drayage – If a preliminary
consideration of all credible evidence offered to prove the intent of the
parties still leaves contractual terms fairly susceptible to at least two
rational interpretations, extrinsic evidence relevant to prove either of
these meanings is admissible.
a. Evidence suggests, past dealing, and employee testimony
b. Test of admissibility of extrinsic evidence to explain the meaning
of a written instrument is not whether it appears to the court to be
plain and unambiguous on its face, but whether the offered
evidence is relevant to prove a meaning to which the language of
the instrument is reasonably susceptible . . .
7. Trident Center v. Connecticut General Life Insurance Co. – Under
California law, a contract must be interpreted in light of any relevant
evidence of the parties’ intent, including evidence extrinsic to the written
agreement itself, even if the agreement is clear and unambiguous on its
face.
a. Court - Because of PG & E, no matter who well contract is
written, extrinsic evidence must be considered. Objective,
concern with bigger application.
b. But in PG &E it was when REASONABLY SUSCEPTIBLE from
different interpretations. Have to subjectively assert what they
intended.
c. Tension between subjective intention and objective
manifestations.
ii. Merger Clause – A clause in a contract stating that the written agreement
represents the complete agreement between the parties
1. Use to show intention, to protect against parol evidence.
b. Reforming a Writing – Mistakes in Integration
i. Travelers Insurance Co. v. Bailey – Where there has been established beyond
a reasonable doubt a specific contractual agreement between parties, and a
subsequent erroneous rendition of the terms of the agreement, the party
penalized by the error is entitled to reformation, if there has been no
prejudicial change of position by the other party while ignorant of the mistake.
1. Person for reformation has to prove understanding between parties,
prove there was agreement, what terms of agreement where, and what
the writing reflected.
a. Mistake in integration is different from misunderstanding in that
there is subjective agreement so assent is not accurately
reflected in writing.
b. Misunderstanding has no one clear objective meaning that favors
either party and subjective is different.
2. Using extrinsic evidence outside of contract to impeach completely
integrated agreement
a. Limited exception to parol evidence rule, still gives effect to
what parties intended.
b. Parties intend control, intended written documents to express
that, but it doesn’t.
c. Here not to use extrinsic evidence to contradict intention, but to
validate intention.
ii. High Burden of Proof of what True Agreement was
1. Show there was agreement
2. Show what terms of agreement where
iii. Have to show mistake, error, in making assent
iv. Other party can change position before mistake has been discovered
1. P wasn’t prejudiced in Bailey by changing contract back to original
terms
c. Requiring a Writing – The Statute of Frauds
i. History
1. Statute of Frauds specifies which type of contracts have to be written
contracts in order to have judicial enforcement.
a. Before rise of assumpsit, only contracts that were certain to
enforcement were written contracts. Under enforcement
b. After rise, oral contracts could be defended by oral with expanded
enforcement of informal contracts. Over enforcement.
c. Statute of Frauds in place to balance tension of over enforcement
vs. under enforcement.
i. Even if prima facie met, some contracts still unenforceable
because not in writing
ii. Now not necessary for every contract to be in writing
ii. Restatement §110 – Classes of Contracts Covered
1. Contract of an executor or administrator to answer for a duty of
his decedent
2. Contract to answer for the duty of another (suretyship)
3. Contract upon consideration of marriage
4. Contract for the sale or an interest in land
5. Contract not be performed within one year
6. UCC – sales of goods over $500, sale of securities, sale of
personal property not otherwise covered, extend of enforcement
beyond 5k
iii. The Statute and its Exceptions
1. Boone v. Coe – Damages cannot be recovered for breach of a contract
within the statute of frauds if no benefit is conferred on the breaching
party.
a. Reliance Interest – damages from out of pocket lost
b. Fits two categories under statute of frauds, land and can’t be
performed under a year.
c. Restatement §125 (Pg. 488) modified, back then any lease
i. A promise to transfer any interest in land
ii. Promise to buy interest in land
iii. When transfer made, promise to pay, if originally within
Statute of Frauds, ceases to be within it unless the
promised price is itself in whole or in part an interest in land
iv. Short term leases and contracts to lease of less than one
year exempt in most states
d. Writing is proof in statute in frauds
2. Serves as a cautionary function, makes parties think about what they
are doing
a. Serve as a channeling function, we assume when set in writing,
talking about it and negotiated in those terms.
b. Benefits outweighs disadvantages
3. Exception
a. Where services are actually rendered, or defendant unjustly
enriched
b. Purchase of land has made or improvement on land (example)
c. Trying to avoid unjustly enriching that person.
4. Riley v. Capital Airlines, Inc. – The statute of frauds will void a contract
that has not been reduced to writing if it cannot, by its terms, be
performed within one year.
iv. Satisfying the Requirement of a Writing
1. Schwedes v. Romain – A real estate contract cannot be enforced when
it has not been reduced to writing and when the party seeking
performance has not partially performed.
a. Unenforceable because didn’t try to put in writing
b. Contact for sale of real estate unless note, writing or
memorandum, binding of the parties
i. Letter doesn’t bind Schwedes to buy property so doesn’t
satisfy statute of frauds
c. Lawyer’s Code of Conduct – Didn’t make it clear to P that he only
represented D, not both parties. He is implying that he is working
for both sides.
i. P would have performed to degree of exception but for
actions of attorney.
d. Partial performance – doing something of substantial reliance of
agreement
i. If paid full price, then other party would understand they
weren’t getting money as a gift.
ii. Would be unjust for them to retain it if they give nothing
back in return
iii. Bid is an invitation to negotiate
iv. Don’t get partial performance from other party because no
reliance, or unjust benefit conferred by action of other party,
could have been for other reason.
2. UCC §2-201 (Pg. 492) – Writing doesn’t have to have a particular form,
can be a memo
3. Restatement §131 (Pg. 499) – Memorandum
a. Contract within Statute of Fraud is enforceable by any writing,
signed by or on behalf of the party to be charged, which
i. Reasonably identifies the subject matter
ii. Is sufficient to indicate that a contract with respect thereto
has been made the parties or offered by the signer to the
other party and
iii. States with reasonably certainly the essential terms of the
unperformed promises in the contract
b. Letter is more an invitation to negotiate, not unqualified offer
v. Satisfying the Requirement of a Signature
1. Cloud Corp. v. Hasbro, Inc. – A writing modifying the quantity of a
contract for goods can be enforceable if there are sufficient writings
evidencing the contract, when the seller of specially manufactured
goods has partially preformed, or when there is sufficient confirmation
of a contract.
IV. Damages for Breach of Contract
a. Provide Relief to promises to provide redress for injury
i. An award of money damages is an attempt to quantify loss or harm
ii. Contracts reflect preferences of parties at particular point of time
1. Preferences are not always reliable
2. Stated preference – what we say we prefer, rarely reliable, even when
sincerely made.
3. Even if can’t measure value, bargain constitutes preference
iii. At point of breach, one party no longer values what they receive more than
what they give up
1. Non-breaching party is denied their preference without their input.
2. Thus money damages, but imperfect
iv. Money damages measured by expectancy
1. Market price at time of breach represent how other people view that
choice at that particular time.
2. Foreseeability, law willing to adjust damages upward
b. Restatement §347 – Measure of Damages in General
i. Expectation (General Measure) = Loss in Value + Other Loss – Cost
Avoided – Loss Avoided
ii. Expectation interest – give injured party benefit of bargain they made in
the first place. Normal measure for monetary damages.
1. Calculated by figuring position would have been if contract had been
fulfilled by performance.
2. Not subjective
3. Hawkins v. McGee – When one party breaches a contract, the non-
breaching party may recover damages based on the different between
the value of the contract as fully performed and the actual value of the
non-breaching party’s present condition, plus any incidental damages
reasonably foreseeable to all parties at the time of contract formation.
a. D makes “one hundred percent” guarantee in regards to P’s hand
b. Statement insufficient for implied warranty for damages for extra
days in hospital, law doesn’t imply warranty
c. Too many variables beyond doctor’s control, he can’t control
outcome
d. Social policy – not in interest to impose liability on implied
promise to chill opinions and not perform risky procedures
because they would be held liable.
e. However, if expressly make one, will hold them to it such as this
case
f. Damage based on what hand should have been like if perfect, but
instead damaged
g. Goal should be based on what his hand was, but what he
expected his hand to be based on doctor’s expressed promise
i. Instruction of “positive ill effects” is which operation made it
worse
ii. Prejudices P’s recovery
iii. Jury instruction of “pain and suffering” which contracts don’t
take into account. Take into account the harm for breach of
promise.
h. Both sides take into consideration in bargaining: assumption of
risks, possible foreseen harms, value to both sides
i. True measure of damages; expectation, benefit of bargain,
different to P between value between perfect hand and the hand
he got
j. Court said amount awarded excessive, new trial ordered
k. Expectation, not restitution: “based upon what the D should have
given the P, not what the P has given the D or otherwise
expended”
i. Otherwise expended = reliance cost
ii. Reliance = the cost plaintiff paid
iii. Reliance = can include expenditure by the promise that
don’t directly benefit the promisor (other costs)
iv. Reliance = detriment to
l. In this case, P was in line of expectancy interest
4. J.O. Hooker & Sons v. Roberts Cabinet Co. – The law for determining
the appropriate award for mixed services and goods is based upon the
primary subject of the contract and, when the primary subject is
services, the appropriate award is expectation damages.
a. Storage costs not given because would have paid for space
anyway, contract law is not in a better position than you would be
b. Administrative costs different because employee had amount of
time set aside for this contract/client that could have gone to
another contract/client.
c. Lost profits – Not the amount of profit Roberts would have been
able to make in the 4 days that the factory was shut down, but
rather the amount of profit it would have been able to make on
the deal as a whole had the contract not been breached by
Hooker.
d. 26% profit wasn’t too high because D didn’t really prove it was
wrong. He has burden of proof but he didn’t show only testified to
own experience as a general contractor, not a
manufacturer/subcontractor like P.
e. Didn’t know total value of contract, where contractor would have
been able to mitigate cost. This dispute only about particular
aspects.
5. Tongish v. Thomas – The appropriate remedy for a seller’s failure to
deliver contract goods is the difference between the contract price and
the market price, even where this measure of damages exceeds the
buyer’s actual loss
a. Buyer thought measure of damages that was appropriate was
UCC §2-713, difference between contract price and market
price
b. §1-106 is now §1-306: general provision to damages
c. Tongish said it’s not specific, and it should be him in the position it
would have put him if he had no breach contract.
d. Trial court choose to limit to actual loss (1-106); overturned by
Appellate who chose §2-713.
e. If two remedies, try to harmonize the two first, then look for
general rule, then specific rule, what legislative intent was meant
to be
f. Basic rule of statutory construction – specific controls general
g. §2-713 disparages breach of contract, don’t want to incentivize
type of behavior where people would breach contract because of
rising market to take advantage.
h. Remedy acts like a penalty, contrary to contract damages to
make parties whole, not punitive
i. Not unfair, because simply getting contract would not have Coop
in position it would have been, still has obligation to Bambino for
sunflower seeds. Still need to contract with someone else for
sunflower seeds at current higher market. Thus market price
would not unjustly enrich them.
j. Can still harmonize both of them, because still put buyer where
he would have been had contract been fulfilled.
k. Lost profit measure looks at after the fact. Reflecting completed
exchange. Actual harm incurred.
6. If seller breaches, means market has shifted in his favor, thus why UCC
modifies common law rule in respect to damages.
a. With goods, there are market fluctuations, that might be frequent
and regular.
b. It’s not unjust enrichment by benefit conferred on defendant by
plaintiff but in this case didn’t receive benefit.
c. Expectancy is the normal, puts them where there would have
been if there was full performance.
7. Will more often give you more than what it cost you. Bigger recovery
Put you where you would have had you gotten what you bargained for.
8. Public Policy: Discourages people from breaching contracts, encourage
people to rely on promises voluntarily made encourage commerce
a. Avoids overcompensation and undercompensation
b. Limits recovery because don’t to put better position than had
contract been fulfilled. Contract damages aren’t designed to save
from bad deal. Notion of fairness and balance of deal between
parties.
iii. Reliance Interest – A non-breaching party’s claim for being place in a
position similar to the one he would have been in if the breach had not
occurred, such as through the recovery of out-of-pocket expenses
iv. Restitution Interest – Compensation granted to remedy the d’s unjust
enrichment that occurred at the P’s expense
c. Three Limitations on Damage
i. Remoteness or Foreseeability of Harm
1. Hadley v. Baxendale – When one party breaches a contract, the other
party may recover all damages that are reasonably foreseeable to both
parties at the time of making the contract, as well as damages
stemming from any special circumstances, provided those
circumstances were communicated to and known by all parties at
contract formation.
a. Initially P claimed there was a breached of an express contract
that was withdrawn
i. Now breach of implied promise to use due in delivering
shaft.
ii. Only way to recover is if there an express promise or of
there was fraud.
iii. If you know about special circumstances, they are
foreseeable, and can arise
b. D not liable for full amount of loss, because it was not foreseeable
that they would lose profits from broken shaft.
i. Could have been another scenario, D could have seen P
had another shaft, not reasonable to think only it would be
shut down
c. Liable for damages that occurred that were foreseeable because
ordinary normal course or it didn’t usually happen but has been
put on notice for special circumstances that resort in more than
normal damages.
d. Must have been foreseen at mutual assent (formation), part of
assessment parties would make. So they know costs if they don’t
perform. It’s foreseeable that you assented to that extent of
liability.
e. Foreseeability defines extent of liability
i. Foreseeability an objective test, what a reasonable person
in that situation would have presumed to have understood.
ii. In the absence of any express agreement, then the
boundaries of your liability are those that are the normal
consequences of your breach.
f. A reasonable person would not be able to presume that clerk is
assenting to liability when saying that can be delivered next day
when it’s a low-level clerk, who has no control over the rest of the
shipping process.
g. It’s not reasonable that I’m going to assent to expended liability
unless I’m getting something in return.
2. Hector Martinez and Co. v. Southern Pacific Transportation Co. – An
innocent party will be awarded foreseeable losses, but special damages
also if he has given the D actual notice of the possibility of injury.
a. When delay in shipping machinery, lost rental value often more
appropriate than market value to compensate loss.
ii. Certainty of Harm
1. Chicago Coliseum Club v. Dempsey – In an action for breach of
contract, a party can recover only on damages which naturally flow from
and are the result of breach.
a. Speculative damages not recoverable
i. Can’t recover loss of profits that might have been obtained
if fight happened. No way to ascertain how many
spectators would have shown up.
ii. Can’t recover for expenses incurred prior to signing
agreement. Expenses from Will’s contract were
independent and did not flow from Dempsey’s breach.
iii. Can’t recover from expenses after Dempsey breached.
Non-breaching party has duty to mitigate the damages.
b. Limited to what was paid to Dempsey and to stadium architect as
well as incidental expenses in attempt to furnish insurance
examination, and incidental damages after contract but before
breach.
2. Subjectivity of value implicit in foreseeability limitation
iii. Avoidability of Harm
1. Rockingham County v. Luten Bridge Co. – When a non-breaching party
in a contract for services receives notice of another party’s breach, the
non-breaching party must treat the contract as broken when notice is
received, cease performance, and sue for losses sustained from the
breach as well as profits that would have been realized upon
performance.
a. After Luten received notice of County’s refusal to go forward with
contract, they kept building the bridge finishing it.
b. Luten can continue piling up damages if allowed to recover for
damages after breach of contract.
c. Would have avoided more costs if stopped at repudiation (breach
of contract) plus profit.
2. Losses up to breach, D is responsible because it’s their harm from their
failure to agree.
3. IF P keeps performing, those additional losses are caused by P
continuing to perform, not from D’s value.
4. At point where breach is clear, any loss incurred beyond that is
consequence of P’s own action.
5. Not fair to impose breach of full to D.
6. Once contrary intention from original manifestation, that no longer value
what I have to give to you for what I’m getting.
7. Parker v. Twentieth Century-Fox Film Corp. – The measure of recovery
by a wrongfully discharged employee is the amount of salary agreed
upon, less the amount which the employee has earned or with
reasonable effort might have earned from substantially similar
employment.
a. Studio argued that they offered role for same amount of money
and she unreasonably refused to accept. Deliberately failed to
mitigate damages.
b. Had to be substantially similar
8. Must look at reasonableness of employee’s efforts, tempered by
comparability (substantially similar) of offer
a. Look at what bargain was and its substitution
9. P’s refusal can’t be used to substitute if not comparable
a. Salary the same, but benefits lost that can’t be quantified,
different value for Parker in new value
b. She bargained for it, but didn’t consent to give it up when studio
gave contact of same monetary value with other benefits
removed.
c. Got to look from her perspective, looking for what she bargained
for
10. Neri v. Retail Marine Corp. – If a buyer repudiates a contract with a lost
volume seller, the seller is entitled to the profit the seller would have
made from full performance by the buyer, plus reasonable incidental
damages associate with resale.
a. Retail entitle to lost profits plus incidental damages associated
with resale.
b. UCC §2-708 – codifies
c. Lost volume seller – one, who had there been no breach by the
buyer, could and would have had the benefit of both the original
contract and the resale contract.
d. Liquidated Damages – An amount of damages expressly provided for by contract
that is intended to represent the parties’ reasonable estimation of damages in the
event of a breach.
i. Kemble v. Farren – Parties may contract for liquidated damages, but the
agreement must be clear that they are liquidated damages and not intended
as a penalty.
ii. Wassenaar v. Towne Hotel – A liquidated damages clause is enforceable
when it is reasonable under the totality of circumstance and a non-breaching
party is not required to mitigate damages.
1. Breaching party has the burden of proving a contract clause is not
enforceable.
2. Factors:
a. Was the award under the clause intended as damages or
penalty?
b. Would it be difficult to calculate the award at the time of breach?
c. Is the amount of damages stipulated a reasonable prediction of
the injury caused by the breach?
3. Under first two factors, award provided in the clause cannot be “grossly
disproportionate” to the injury actually suffered.
4. Policy – Balancing between respecting the bargain the parties strike
and preventing abuse
V. Other Remedies and Causes of Action
a. Specific Performance and Injunctions
i. Contracts for Land – Land has been presumed to be unique, so in land sales
contracts, the presumption actually shifts in favor of specific performance.
1. Loveless v. Diehl – Equity courts should award specific performance “as
a matter of course” and especially when the subject of the contract is
real property or an interest in real property
a. Buyer’s had perfect right to resell land if they wanted to
b. It’s theirs to keep and sell.
c. With viable option, they have right to sell it anytime.
2. Land is unique, one of a kind, couldn’t find another parcel exactly like it.
Thus why specific performance for land. “Complete and perfect relief”
3. Money damages would be inadequate
4. The presumptive relief is specific performance, they can do what they
want with the land because it’s theirs.
5. Burden to rebut that presumption on defendant.
6. Dissent Harris
a. Focused more on Diehl’s intention willing to sell land for less than
improvement costs.
b. Focused on 3rd party decision that’s not relevant. Breach is

between parties on land.
7. Before option, own right to acquire, so selling to Hart and paying
Loveless would put parties back in from they were before. How they get
money isn’t relevant.
8. Loveless interfering is breaching of contract when he claimed he
wouldn’t sell property.
a. It was clear and unequivocal. Contrary manifestation to term of
agreement. IE Anticipatory Repudiation.
9. Reflecting notion of subjectivity of value.
10. Don’t want to undercut this presumption and avoid chilling effect of land
value of this type.
ii. Contracts for Goods
1. Cumbest v. Harris – Specific Performance is generally not awarded
when the subject of the agreement is person property, but there are
three exceptions to the general rule:
a. When a damage award would not be an adequate remedy
b. When the personal property has “peculiar, sentimental or unique
value”
c. When such person property is not easily obtainable because it is
rare
2. Burden on P to show it’s one of those 3 elements because presumption
is money.
a. Here Cumbest showed stereo unique because put together over
15 years with parts hard to find or he made them.
b. Exercise option was breached, not a sale, thus why court uses
common law rule and not UCC.
3. UCC §2-716 rule is more open than common law rule, opens it up with
“other proper circumstances”
a. Section 3 discusses replevin and right for good identified to the
contract.
4. Scholl v. Hartzell – In a replevin action under section §2-716 of the
UCC, an injured party does not have an “exclusive and immediate right”
to property for which he has only paid a deposit because the contract is
still executory.
a. Court dismissed replevin action of corvette, but gave P leave to
amend to complaints for money
b. Contract is still executory, both parties still have performance they
haven’t completed.
i. Only paid deposit for car
c. Here car is also not unique or of a kind or scarcity established
d. No rational for equitable remedy
e. Fails to rebut presumption that he should get equitable relief
5. Sedmak v. Charlie’s Chevrolet – specific performance can be awarded
for the sale of a limited edition vehicle if the injured party can establish
that it is unique or other proper circumstances exist.
a. Expansion of notion of uniqueness is seen here for scarcity
b. In notion of fairness, both entered agreement and assumption
you can take that money and get it anyways, shouldn’t be able to
use strategic behavior and get that item.
6. Money damages are presumptive norm for relief, especially for goods.
iii. Contracts for Personal Services
1. Lumley v. Wagner – Even where there is no adequate remedy at law, a
court of equity will generally not specifically enforce a person services
contract.
a. Court can’t force Wagner to sing for Lumley but can enjoin her
from providing services to another party.
b. Wagner signed non-performance clause to perform exclusively at
Lumley.
c. She then entered contract to perform for a competing theater.
d. D argued, it’s an employment contract, damages are the
adequate remedy.
e. P isn’t asking for specific performance, but that negative covenant
be enforced.
f. Not reasonable to assume an injunction can be forced by fine or
jail time.
i. Not reasonable to assume she assented to that form of
consequence for breach.
2. Duff v. Russell – A party breaching a contract for personal services may
be enjoined from providing like services under another contract, even
when there is no explicit language to enjoin such future agreements.
a. Here seven performances a week in contract make performing for
another company impossible unless Russell violates contract.
b. Tights defense disingenuous because of ask for increased
payment to perform with same tights on.
3. Dallas Cowboys Football Club v. Harris – A clause in a contract
enjoining a party from performing for others will be enforced if the
breaching party possess “exceptional and unique knowledge, skill and
ability in performing the service called for in the contract.
a. Uniqueness is broader than the strict dictionary definition
requiring that there be only one, with unparalleled abilities.
b. Breaching party possess “unique knowledge” when it would be
difficult to obtain the same service from others.
b. Restitution – Damage Interest and Cause of Action
i. Restitution for Breach of Contract – Remedy for breach. Sometimes
given restitution based remedy can be given to person who commits
breach. Or when no contract all. Can provide independent cause of
action separate from contract law.
1. Bush v. Canfield – When a party pays an advance under a contract for
the delivery of goods, the proper measure of damages in the event of
breach is to refund the advance.
2. Normal measure of recovery is expectancy, in this case, value of barrels
of superfine wheat flour that day.
a. IF P had paid full contract price before breach, then they would
have gotten expectancy.
b. If under agreement and P had not paid anything before breach,
they would get nominal damages acknowledging the breach.
c. Here P paid 5k in advance so gets that back and interest.
3. Dissent:
a. P getting windfall, more than they would have gotten with
performance.
b. Have contract which can calculate damages clearly.
c. Different cause of action, P should have rescinded contract to get
money payment, setting aside contract instead of enforcing
contract.
4. Majority – Exception to rule of expectancy recovery in order to put P
back where they would have been if full performance. If rescinded,
putting parties in position in which there was no contract.
a. P had performed everything he was required to do up until breach
while D performed nothing.
b. Nothing to be gained from another trial – balancing fairness
(elevating form over substance) with judicial efficiency.
c. Don’t want to award D the money for doing nothing.
5. Policy: Want people to enter contracts and rely on contracts and
performed as agreed to.
6. No longer make Ps file different actions for restitution and expectancy
a. If making P file for different action, burdening him to get to the
same place while rewarding D at same time for behavior we don’t
want to encourage.
7. Failure of Consideration – You didn’t get what you bargained for
a. Affirmative Defense – Failure of Consideration, Fraud, Unilateral
Mistake
ii. Restitution to the Party in Breach
1. Britton v. Turner – Where an employee voluntarily breaches a contract
for labor by failing to continue the agreed employment, the employee is
entitled under quantum meruit to the reasonable value of the services
provided, unless the contract specifically provides otherwise.
a. Restitution is being brought by party in breach, not victim
b. In this case, no damage caused when P left.
c. P is not entitled to recover on contract itself because he never
fully performed
i. But he is recovering in restitution, he gave something of
value to D, and there was no harm caused by his breach
from departing.
2. Quantum meruit – A remedy entitling the provider of services to be
compensated for the value thereof.
3. Breacher who walks away at partial performance would be worse off
than a breach who didn’t’ perform at all.
a. In this case breacher performed 9 months of labor before leaving.
4. Both breachers are liable and the who left at the beginning is in a better
shape because he is going to be liable only for damage caused by
breach while person who leaves at month 9 is liable for both damaged
caused by breach and lost time in performing for 9 months.
a. Now this way, all breachers treated the same
5. Non-breaching party received benefit from 9 months of breaching
party’s work.
6. Policy: Want people to rely on contract, or discourage people from
breaching. Can still recover in this case because not public policy, but
balancing fairness. Notion of presumed intent.
7. IF wanted to make all or nothing contract, then can say so.
a. Doesn’t mean courts will always enforce stipulation
8. Makes sense to give breaching party the value of benefits he conferred
before breaching.
9. Vines v. Orchard Hills, Inc. – A buyer of property whose breach is not
willful has a restitution claim to recover monies paid that unjustly enrich
the seller at the time of the breach.
a. Contemporary application of default rule in Britton.
b. This case deals with express liquidated damages provision
c. Breacher – Claims no damage because can sell condo for more
now during trial. And by keeping down payment, non-breaching
party is better off.
d. Issue – No proof of actual harm, burden of proof that clause isn’t
enforceable in this theory of recovery for restitution and that there
was no un-just enrichment.
e. Relevant time for determination of damages is the time of breach,
so rising property value after that could not be used to determine
damages for non-breaching party.
10. Restatement §374 (Pg. 240) – Party in breach entitled to restitution for
any benefit it has conferred by way of part performance or reliance in
excess of the loss it has cause by own breach.
a. Breaching party not entitled to restitution if the value of its
performance as liquidated damages is reasonable in the light of
the anticipated or actual loss cause by the breach.
iii. Restitution and “Quasi-Contract”
1. Cotnam v. Wisdom – When there is no agreement on which the court
may enforce a contract between the parties, as where physicians
render services to persons who are unable to contract due to their
condition, the court may the legal fiction of a quasi-contract to require
payment for those services.
a. D argued Decedent couldn’t have possibly assented
(unconscious)
b. Court uses implication of law known as quasi-contract
c. Court remanding because information on estate or on relatives
irrelevant
2. Quasi-contract: legal fiction, implied contract of law
a. Implied in law promise where court says promise or contract
implied by law
b. Different from implied in fact contract in which those infer intent
from conduct of parties (non-verbal)
c. Measure of recovery is reasonable or normal fees to avoid
unfairness or inequity.
d. Because it’s value of their service, expectancy if where a
contract, if that’s what the D could have consented to the service,
that’s why they would have charged
e. Law won’t imply guarantee of cure like Shaheen v. Kinght for
public policy reason.
f. This is restitution instead of expectancy because court is
instituting because the whole thing is fiction.
g. Expectation gives you the benefit of the bargain. Expressed
i. Here, all fiction, no actual expressed amount since no
actual contract.
h. Service of value has normal measurable value
i. All matter of law, the court has created, thus no fact, just how
much P would normally charge.
3. Value conferred as restitution acting as cause of action. Only need to
prove what you normally received in compensation for those services.
VI. Consideration – Something given, whether money, a return promise, or
forbearance, by a promise to a promisor
a. The Bargain Theory of Consideration
i. Looking for manifestation for a bargain for exchange
1. Helps distinguish between enforceable and non-enforceable promises.
2. Presence or absence of consideration that determines legal
enforceability
3. Consider when promise is made was made as part of a bargain
ii. Modern theory of consideration is bargain theory
1. Promisee received something or promised something in exchange
a. Hamer v. Sidway – Adequate consideration sufficient to form a
valid and enforceable contract may consist of either a right,
interest, profit, or benefit accrued to one party, or some
forbearance, detriment, loss, or responsibility given, suffered, or
undertaken by the other.
i. D estate – no consideration, because no benefit to uncle
and nephew benefitted as it was in his interest to not
smoke/drink/gamble
ii. P – gave up legal rights
iii. Uncle made promise to induce performance from P
b. Looking if there is a performance induced by promised.
c. In context of bargain, even if extended in terms of time, assuming
that party who is making promise that they are assessing the
value of the transaction, weighing risk to themselves if they don’t
perform as agreed, and determine if this is a deal worth entering.
d. Satisfied if parties assent because they what they get is worth
more than what they are giving up.
e. Looking at promise to see if promisor intended to be legally
bound
2. Bargaining – Proxy for intent
a. Serves evidentiary function, channeling functions, cautionary
function
i. Expecting to see something on each side of negotiation
ii. Consideration makes it clear to other side what
expectations are
iii. Assume where bargain, sides thought about it enough, to
know it has consequences
3. Looking for mutual inducement – motive on both sides
a. Gets more complicated with family members
b. If risks increases, then more likely to induce behavior.
c. The more benefit we see for the side of the promisor, the more
likely it is inducing.
4. Looking for consideration which is identified with bargain for exchange
a. Consideration requires a bargain for a promise. Looking for a
presence of a bargain. Were we see a bargain, easy to presume
parties intended to be bounded.
5. Need mutual assent and consider to make contract enforceable in
modern contract law.
iii. Unenforceable – Presumption of enforceability can be rebutted.
1. Gift promise is unenforceable promise – made gratuitously, even if
made based on some condition or contingency other party has to make
2. Promises for benefit already received, not part of normal bargain for
exchange
a. Past consideration is not a basis to enforce a promise.
b. Moore v. Elmer – Past consideration is not sufficient for
enforcement of a contract unless the parties agreed prior to
performing that compensation therefore would be provided at a
later time.
i. No implied promise to pay
ii. No allegation that writing was accepted and fulfilled
iii. Past Consideration – whatever exchange was to happen
already happened.
c. Restatement §86
i. Promise made in recognition of a benefit previously
received by the promisor from the promise is binding to the
extent necessary to prevent injustice.
ii. A promise is not binding in Subsection (1)
1. If the promisee conferred the benefit as a gift or for
other reasons the promisor has not been unjustly
enriched; or
2. To the extent that its value is disproportionate to the
breach
d. Restatement §82-85 have few exceptions
i. 82 Promise to pay Indebtedness
ii. 83 Promise to pay Indebtedness Discharged in Bankruptcy
iii. 84 Promise to Perform a Duty in Spite of Non-Occurrence
of a Condition
iv. 85 Promise to Perform a Voidable Duty
3. Promises made out of ethical or moral duty lack valid consideration.
4. Johnson v. Otterbein University – A contract promising to pay a sum of
money to the promisee and instructing the promisee to use the money
in a particular way is unenforceable for lack of consideration.
a. D – Pledge that lacks consideration
i. Not a promise for a promise because university has pre-
existing obligation
ii. His promise didn’t cause University to induce a new
obligation in response to his promise.
b. Benefit/Detriment analysis when we see benefit on one side,
detriment on the other side
c. When one person giving up something to that other person’s
benefit, seeing what they give up. Looking for indicia of bargain.
i. The college’s promise to use the money to pay off the debt
isn’t good consideration, it wasn’t bargained for.
ii. Johnson’s promise didn’t induce them an obligation to pay
the debt.
iii. And their obligation to pay the money didn’t induce
Johnson to give the money.
d. Gift only effective upon delivery. Can revoke anytime or decline to
pay and university can’t do anything about it.
iv. Moral Consideration
1. Mills v. Wyman – A promise based on a moral obligation but made
without legal consideration does not constitute an enforceable contract
unless it is tied to a preexisting legal obligation.
a. D argued moral obligation for a parent of a child to pay is
consideration
b. Here child not a minor, so no legal obligation
c. It wasn’t this promise by the father that induced the good
Samaritans to act. They did it out of kindness, not out legal
obligation.
d. Doesn’t fit into any exception, and no bargain for consideration.
e. Benefit was to Mr. Wyman’s son, not Mr. Wyman.
f. No meeting of the minds, father presenting as a gift, not
enforceable.
g. Benefit previously received by son, not by person making
promise?
h. Why different from prior case with doctors? Because of public
policy with doctors?
2. Webb v. McGowin
a. Appeal – When a promise confers upon a deceased promisor a
benefit that is material and substantial, and is conveyed upon the
person of the promisor and not merely his estate, the promise is
entitled to recognition and compensation from the promisor’s
estate either by an executed payment or an executory promise to
pay
b. Supreme – A moral obligation is sufficient consideration to
support a subsequent promise to pay where the promisor has
received a material and substantial benefit.
c. Promise made by person who gained benefit.
d. Similar to Cotnam v. Wilson (physician on unconscious patient)
e. Exception to Bargain Theory
i. Because see substantial benefit to one side and detriment
to one side.
ii. Real harm to recipient of promise. Real benefit to promisor.
No one unjustly enriched.
f. Even though P wasn’t induced by promise, happened in past, but
reconcile it anyway, presume in legal fiction that there was
previous request for service.
g. Promisor lived long enough to show he took it seriously
h. Promisee had increase in risk as opposed to doctors in Cotnam v.
Wilson.
i. To reconcile with Mills v. Wyman, the value of benefit is so
substantial, you can’t put a price on it.
3. Material Benefit Rule –Restatement §86 - A promise made in
recognition of a benefit previously received by the promisor from the
promise is binding to the extent necessary to prevent injustice.
a. A promise is not binding, however if the promise conferred the
benefit as a gift or for other reason, the promisor has not been
unjustly enriched;
b. or to the extent the value of the promise is disproportional to the
benefit.
b. Contract Modification and the Pre-Existing Duty Rule
i. Stilk v. Myrick – A contract for services cannot be modified without the
payment of additional consideration
1. D ARGUED – Can’t enforce promises in these circumstances as it
would lead crews in similar situations
2. P ARGUED – Captain made offer ashore with no pressing danger.
Sailor wasn’t forcing concession. Voluntarily accepted so they would do
the extra work.
3. If captain had created situation by firing two crew members instead of
them deserting, it would constitute a new consideration. Arbitrary and
not foreseeable that he would act that way. Then not implied that there
will be extra work. Assumption of risk has changed.
4. An emergency created by death or desertion is foreseeable. Then
implied promise of extra work.
5. Sales performance wasn’t bargained here by promisor because it was
already due to promisor.
6. Restatement §89. Modification of Executory Contract
a. A promise modifying a duty under a contract not fully performed
on either side is binding
i. If the modification is fair and equitable in view of
circumstances not anticipated by the parties when the
contract was made; or
ii. To the extent provided by statute; or
iii. To the extent that justice requires enforcement in view of
material change of position in reliance on the promise
ii. Alaska Packers’ Ass’n v. Domenico – Where parties enter a new agreement
under which one party agrees to do no more than he was already obligated to
do under an existing contract, the new agreement is unenforceable for lack of
consideration
1. D’s stopped working when they arrived because argued nets kept
degrading.
2. Problem with finding of trial court – people who had ability to make
agreement weren’t there. Captain didn’t have right.
3. Reversed for lack of Consideration. P’s had agreed to do the services
they had already agreed to do.
4. Stilk case prior to this one more justifiable because that didn’t seem like
a clear bad faith breach like here. Sailors actually had to do more work
there.
5. Consideration doctrine doesn’t save you from bad deal.
a. If nets truly were in poor condition, that might make less than
anticipated, but they’re free to make a bad deal.
6. Issues applying bargain theory of contract modification and the
preexisting duty rule
a. Concern with new obligation is more apparent with one side
b. Assumptions made at formation difficult applying at this stage
c. Both parties are bargaining in good faith but have change now
that could be opportunistic or coercive
d. Equal bargaining power is absent. Both parties can’t walk away at
this stage.
7. P committed willful breach. Even if right, committed a breach.
a. Looks like opportunistic coercive behavior here.
b. Pre-existing duty still viable, but justice might still require
enforcement of the promise.
iii. Brian Construction & Development Co. v. Brighenti – When an unforeseen,
burdensome condition arises during the performance of a contract, the
promise of additional compensation in return for the promise to do the
additional work is a separate, valid, agreement.
1. Unforeseeable event to both parties that caused more and time for D.
2. NO assumption of the risk, so not opportunistic.
3. Contractor showed good faith and subcontractor relied on that.
a. D’s reliance is reasonable
4. It’s a new bargain with new obligations on both sides
5. Pre-existing duty doctrine would be poor method to show defense
6. Person who asserts defense has burden of proof to show defense.
iv. Bargain Theory Ineffectiveness to police some opportunistic cases
1. At this state, may see bargain, but not free exchange. Voluntariness is
not as apparent. May be tied down at this state. Notions of assent aren’t
as completely valid as formation stage.
a. Heightened risk of under enforcement at this stage or promises
sincerely taken.
2. Normally value is subjective, bargain says you decided and assumed
the risk.
a. At this stage, harder to make assumption without questioning the
value of exchange. Puts us in a position of having to assess
value of exchange that law doesn’t like to do.
3. UCC §2-209 – eliminated modifications in terms of goods.
a. Statute defines goods as “honesty in fact.”
c. Adequacy of Consideration
i. Dyer v. National By-Products, Inc. – Forbearance from filing an unmeritorious
legal claim that the party in good faith believes is valid constitutes sufficient
consideration for a settlement agreement.
1. Whether commitments not only need to be bargained for, but
exchanges must be fair and equal.
2. The value of what he got, greatly exceeds the value of he didn’t do.
a. In Good faith, he forbore the claim.
b. They made the promise, he made the decision not to press
charges in good faith.
3. Adequacy called into question.
4. Failure of Consideration, where you bargained for something, and never
got what you bargained for.
5. Adequacy is subjective, in the minds of the party.
6. Doesn’t have disparity in gross faith of value.
VII. The Doctrine of Promissory Estoppel – Doctrine that make enforceable a
definite promise that is not otherwise enforceable under contract law
a. Promissory Estoppel as a Substitute for Consideration
i. Enforcement is based on the idea that the promise that was made could
reasonably and foreseeably induced a particular response by the promise.
1. Degree of Reliance does not always seem sufficiently substantial.
2. Protecting detrimental reliance
3. Substitute for the bargained for theory.
b. Family Promise
i. Ricketts v. Scothorn – promissory estoppel prevents a promisor from revoking
an otherwise unenforceable gratuitous promise if the promise foreseeably and
reasonably relied on the promise to her detriment.
1. She said his promise and annual interest induced her performance to
give up job as bookkeeper.
a. Grandfather’s promissory note is a statement of future intention,
not a statement of existing fact.
2. She wasn’t obligated to leave her job. She didn’t have to do anything.
Quitting her job wasn’t induced by the exchange.
3. If one side of bargain is missing, it’s not a bargain.
4. Grandfather’s promise – gratuitous promise or gift.
5. Court applies promissory estoppel. Claim meets elements.
a. There is a promise
b. There is intention to induce reliance
c. Her reliance was reasonably foreseeable
d. She did rely on her promise.
i. Grandfather intentionally influenced her to quit her job
6. Court actually recognized promissory estoppel, but referred to it at
equitable estoppel. Elements Page 699
a. Here, no inducement on misstatement of existing fact, but future
fact.
7. Reliance is a factual question.
8. Equitable Estoppel has no promise, in elements in page 699.
9. What looks like a bargained exchange, even if promisor has secret
intention, objectively it seems to be evidence of promisor’s intent.
10. Promissory estoppel wants to see same kinds of functions served as
bargain in order to act as substitute.
a. Serves cautionary function – took time to write note, deliberate on
it, serious and committed to it.
b. Channeling function – clear intention of what he committed
i. Acted consistently after presenting promise.
ii. If concerned with giving effect to his intent we need not to
worry about that in this case.
c. Missing Here – No notion of unjust enrichment, just reliance
i. This is the kind of promise her grandfather was committed
to.
11. If promise being enforced on its terms, then measure of recovery is
expectancy. What the promisee would have gotten if the promise has
been received.
c. Promises to Convey Land
i. Greiner v. Greiner – A contract is formed when one promises to convey a
specific tract of land and another is induced by the promise to substantially act
or forbear.
1. D – Future intention IE gift so no consideration IE not a bargain
2. Mother did many things to show manifestation to convey land and
induce him to move back.
3. Her promise wasn’t to induce move, but give 2k, he wanted her land.
4. But argue not manifestation on her behalf to be legally bound.
5. Unlike previous case, she’s still alive so it seems like a weaker case for
promise.
6. She never executed the deed, contrary manifestation.
7. In a way, STRONGER case for promise than Ricketts because of
reliance.
8. Objectively – what a reasonable person in Frank’s position would think.
a. Reasonable for Frank to think she’s assenting, and she’s bound
by that.
b. Foreseeable on her part, reasonable on his part.
d. Construction Bids
i. James Baird Co. v. Gimbel Bros., Inc.
1. The doctrine of promissory estoppel cannot be asserted to compel
performance when the promise has not provided consideration to the
promisor.
a. Offer withdrawn before acceptance, acceptance came too late
b. P – Offer became irrevocable, if he acted on it by using D’s offer
on his own bid.
i. Not logical argument, sent out to multiple people, can’t be
acceptance since wasn’t offer.
c. P – D’s message is an option. Option is its own contract. Created
by “absolutely guaranteed” language. That they relied on it, was
detriment to them, thus “promissory estoppel”.
i. Inducing very expected response from Baird, it would be
unjust not to enforce that promise.
2. Court – Options normally bargained for, this wasn’t bargained for.
a. It’s not reasonable.
b. Unwilling to recognize implied in fact bargain.
3. Options always one sides
ii. Drennan v. Star Paving – An offer which the offeror should reasonably expect
to induce definite and substantial reliance by the offeree, and which does
induce such reliance is binding on the offeror and enforceable even without
consideration if enforcement is necessary to prevent injustice to offeree.
1. Different result than James Baird
2. Star should have reasonably expected their bid to induce definite and
substantial reliance by the offeree.
3. Enforcement is necessary to prevent injustice to the offeree.
4. Star had duty to exercise reasonable care in bid preparations.
5. Drennan could not have reasonably known Star made an erroneous
bid.
e. Charitable Subscriptions
i. Allegheny College v. Nat’l Chautauqua Count Bank – To constitute an
enforceable promise, the promise and the consideration must be the motives
for each other.
1. Not gift because College subjected itself to a legal detriment in duty to
perpetuate Johnston’s name through the fund as a result of initial down
payment of 1k.
2. Johnson then had obligation to fulfill her other part of bargain as she
was not free to gain the benefit of her name being published as the
founder of the fund then renege on delivering remaining 4k.
VIII. Promissory Estoppel as an Alternative to Breach of Contract
a. Goodman v. Dicker - A misrepresentation by a party which induces detrimental
reliance by another party subjects the deceptive party to damages in the amount
necessary to maintain justice.
i. D misrepresented to P it would grant franchise.
ii. In reliance, P incurred various expenses in preparation.
iii. Reliance damages awarded., loss of profits not appropriate.
b. Hoffman v. Red Owl Stores, Inc. – A promise may give rise to an action for
promissory estoppel even if it does not contain all essential details of a proposed
transaction and is incapable of resulting in a binding contract so long as the promise
was one which the promisor should have reasonably expected to induce action or
forbearance of a definite and substantial character on the part of the promise, the
promise actually induced such action or forbearance, and injustice can only be
avoided by enforcement of the promise.
i. Deal between Hoffman and Red Owl does not contain all essential terms to
give rise to an enforceable contract, but may still be enforced under doctrine
of promissory estoppel.
ii. Red Owl and Luowitz could have reasonably expected their statements to
induce reliance by Hoffman.
iii. Hoffman incurred significant expenses and trouble by selling grocery stores
and bakery, and moving across country among others.
iv. Injustice avoided by providing Hoffman with some relief.
v. Restatement §90 (Pg. 743) same as case takeaway
c. Establishing the “Elements” of Promissory Estoppel
i. Promise
1. Blatt v. University of Southern California – A promisee cannot enforce a
promise when the induced action or forbearance was not substantial
and definite and benefited only the promisee.
a. Substantial and definite action or forbearance exists when there
is actual detriment to the promise.
i. IE refusing other employment opportunities
b. A contract can be formed even when unilateral, in that it does not
result in benefit to the promisor, but again action or forbearance
must be substantial and definite.
c. Here, Blatt’s law school studies benefitted only him and weren’t
substantial acts.
d. Plus school only said he would “be eligible”, not promise
membership, so did not sufficiently plead a breach of contract
claim.
2. Spooner v. Reserve Life Ins. – A promise that is not definite and
evidences that performance is optional and within the discretion of the
promisor is not enforceable.
a. Promise is merely supposed or illusory than no contract formed.
b. Illusory – so indefinite it is incapable of enforcement.
c. Or terms of promise effectively make its performance optional or
entirely within the discretion of the promisor.
d. In this case language permitted Reserve to withhold bonus.

IX. The Conditions – Limitations that condition performance in one way or
another
a. The Effects of a Condition: Triggers that can be necessary to perform
i. Or lack thereof can cause failure
ii. Can be express, implied-in-fact, or implied in law (constructive condition)
iii. Inman v. Clyde Hall Drilling Co. – A contractual provision requiring notice as a
condition precedent to recovery is not contrary to public policy.
1. P argued – 30 day notice violated public policy and filing of claim gave
company actual notice which should be enough
2. Court, a contractual provision requiring notice as a condition precedent
to recovery is not contrary to public policy. In this case can bar all of his
contractual remedies.
3. Traditional view of strict compliance here. Order performance
obligations under agreement.
a. Perhaps other remedy, but not contractual remedy.
4. Court hesitant, on context of freedom of contract principle, no evidence
of negative process, to set aside express agreement
5. Condition precedent – triggers obligation of performance on other side
a. Condition precedent for Inman to plead and prove breach of
contract
6. Condition subsequent – discharges obligation that’s already arisen
a. For company to plead and prove affirmative defense it did not.
7. Restatement §227 (Pg. 849) abandons conditions precedent and
subsequent and just calls condition precedent a condition.
8. When there is not an express provision, it’s not as easy to tell, and
courts are not inclined to read a result where result can be as hash as
this.
iv. Carbolic Smoke Ball Problem Revisited
1. Contract formed when bought, used as directed, caught flu
2. Condition Precedent, when caught flu
3. Condition Subsequent, when she notified Carbolic in reasonable time
b. What Events are Conditions?
i. Is the Event a Condition, a Promise, or Both?
1. Howard v. FCIC – The distinction between a promise and a condition
precedent is that a promise requires nothing not to be done, while a
condition precedent requires that something is to be done, prior to the
other party performing.
a. Whether terms providing crops not to be destroyed was
precedent for insurance to pay.
b. Court says it’s promise
i. Where ambiguity, courts interpret as promise
c. Where there is ambiguity, do things we all normally do. One
condition says it’s a condition. And there’s fairly related provisions
that doesn’t include that language.
i. Inclusion of one thing is exclusion of another, so ambiguity
d. Public policy against forfeitures, where ambiguity will lead to
promise.
e. To protect exchange principle, bargain for exchange, benefit of
bargain notion
i. Reasonable person would not perceive the failure to
comply with this particular provision would lose their right to
recover under their agreement.
f. Court implies promise, agreement is still ongoing and viable, with
breach, potential of recovery for both sides.
2. If an event is a condition, not a promise, can result in no duty to
perform, and liable for damage either.
3. If promise, not a condition, breach of promise for famers but can
still recover, because may still have to perform.
4. If condition met, client has to perform. If not met, don’t have to
perform.
5. Sometimes an event is simply an event.
ii. Is the Event a Condition, a Promise, or Neither?
1. Chrichella v. Erwin – The specification of the date of closing in a real
estate contract is not a condition precedent.
a. Language of date, just means intention of closing to happen
around that time, but talking about reasonable time.
b. Time isn’t in parties’ control. Condition must be something in their
control. Looking for something more than mere passage of time.
c. Looking for interpretations of intent.
d. Want something that triggers or starts the duty.
e. Express Conditions – When courts see that, they honor it.
i. In Howard v. FCIC, intent is less clear.
f. Court interpret in ways that protect reliance interest.
X. Breach
a. Constructive Conditions- A condition imposed by law as a matter of justice.
i. Jacob & Youngs v. Kent – A party who substantially performs its obligations
under a contract is entitled to expectation damages based on full of the
contract, minus an offset for defects in the party’s performance.
1. Substantial Performance Doctrine is Constructive Condition
2. Question of value, what did you get? Different between what you got
and what you bargained for?
a. In this case nothing.
3. Pipes used as good as the ones D asked for.
4. Contractor has to pay damages because it’s a breach (trivial or not), but
owner still has to pay.
5. Mr. Kent has duty to pay since his conditions been basically satisfied.
6. Purpose of contract is to build a home.
7. Court – Harm by breach is trivial and innocent
a. Looked at whether willful or bad-faith breach in order to oppose
litigation
b. If bad-faith breach, don’t get benefit of this doctrine.
c. Bad-faith goes against freedom of bargain. Act intentionally
overriding intent of other party. Intentional disregard for other
party’s intent. Willful intent, don’t feel compelled to impose
equitable doctrine that is supposed to bring justice between
parties.
8. Innocent breach, disproportionality is the same, but substantial
performance, IE, heart of deal, so reasonably person wouldn’t foresee
that the pipe would be a forfeiture of his expectancy when already
substantially giving what bargained for.
9. Material breach will justify cancellation of contract
a. Non-material breach (not central to purpose of contract) then
presumably there has been substantial performance, and
cancellation is not satisfied.
10. Mr. Kent should have made express condition in terms of pipe.
11. Dissent – Ought to get cost of replacement because there is a breach.
a. Normal circumstances, it’s fair to replace
b. Here costly and labor intensive, disproportionate to what was
done.
b. Prospective Nonperformance
i. Anticipatory Repudiation – Consider contract breached by other party
before party’s performance has arrived. Can consider contract at an
end.
1. Anticipatory breach – A breach of contract caused by the breaching
party’s repudiation of its contractual obligations prior to the time of
performance. Clear enough unequivocal renunciation of the promise.
IE, clear contrary manifestation.
2. Albert Hochster v. Edgar De La Tour – When on party to an agreement
is informed by another party to the agreement that the second party
intends to breach the agreement, the first party has an option to file suit
for damages immediately in anticipation of the breach, or to wait until
the act was supposed to be done.
a. When agreement is to be done in future, and before that time the
promisor repudiates, then the promisor is immediately liable for
breach.
b. Allows P to mitigate damages
c. Before time for performance arrive, neither party is to undermine
the other parties interest otherwise is it inconsistent with the
relationship.
i. Parties relying on each other’s implied promise.
d. Once contrary manifestation shows itself, the other party is free to
consider themselves released from obligation.
e. This case established rule of anticipatory repudiation.
f. Injured party gets to decide to sue now or later
i. Still allows other party time to retract repudiation
ii. Gives injured party time to get performance if preference
iii. Interest in future performance
g. Codified in UCC §2-610 (Pg. 884)
i. When clear there is a repudiation, aggrieved party has
many options, such as possibility to encourage other party
to reaffirm intention to pursue.
h. UCC §2-611 – Retraction of Anticipatory Repudiation
i. Looking for clear objective manifestation of reaffirmation.
3. Material Breach – Injures interest in present performance and in future
performance.
4. Rescission requires mutual assent
5. Cancellation can be done unilaterally.
ii. Adequate Assurances of Performance
1. Scott v. Crown – A party has a right to demand an assurance of
performance under the contract when he has reasonable grounds to do
so, but his request must be adequate.
a. Court applies UCC §2-609
i. Obligation to not impair other party’s expectation of
performance.
ii. Party demanding assurance may, if commercially
reasonable, suspend performance if assurances are not
provided.
iii. Assurance must be in writing.
b. Seller makes oral, not written request to trucker who isn’t party.
i. Not clear demand of assurance.
ii. Seller’s failure to properly seek assurance put seller in
breach
c. Wasn’t demand for insurance, request to modify contract
i. Trying to unilaterally modify contract
d. Not reasonably clear person would interpret this way, buy hadn’t
done anything wrong. But inability to not communicate with seller
make it reasonable seller needed assurances.
2. Failure to provide clear demand of reassurance can lead to breach.
3. Once clear demand received, failure to provide adequate assurance, in
breach.
iii. Material Breach
1. Lane Enterprises, Inc. v. L.B. Foster Co. – A party commits anticipatory
breach of a contract by failing to provide requested adequate
assurances.
a. Restatement §241 (Pg. 897) factors for material breach
i. Extent injured party will be deprived of benefit it reasonably
expected.
ii. Extent injured party can be adequately compensated for
that deprived benefit
iii. Extent party failing to perform or to offer to perform will
suffer forfeiture
iv. Likelihood party failing to perform or offer to perform will
cure his failure, taking account of all circumstances
including reasonable assurances
v. Extent which behavior of failing party performs components
with standards of good faith and fair dealing
b. Lower courts find it to be breach, not material
i. Only 5%
c. Foster logically prudent to ask if Lane can perform 2nd contract
d. Absence of assurance, reasonably for court to look at
cancellation after stage 1 and before stage 2.
i. Doubt whether Lane can perform, Foster needing
assurance, but need more.
ii. Not only justified in concern of future performance, but also
cancelling contract, was material breach
e. Foster is choosing cancellation, suspension of own performance,
but fulfilling its own obligation to mitigate harm.
f. Lane is responsible for market price and cost to cover
g. Finding breach is material doesn’t mean there are no damages
i. In most cases, cost of measure
ii. If cost of completion is grossly disproportionate to good that
is to be maintained, court would use.
2. Only material breach entitles party to suspend its own performance or
cancel contract. IE discharge own obligations as a result.
c. Cost of Completion v. Diminution in Value: The Expectation Interest Revisited
i. Groves v. John Wunder Co. – Damages for willful breach of a construction
contract, even where there has been substantial performance, are awarded
as the cost of completing the failed performance.
1. Court finds cost of completion appropriate measure here because D’s
breach is willful. Don’t want to reward for willful performance essentially
with an alternative measure, bad public policy.
2. Not fair to give D benefit of their bargain simply because property is at a
low value.
3. No unjust enrichment if simply enforcing the promise and giving P what
they bargain for.
4. D argues replacement effort will cause economic waste.
5. Here just asking D to return land to condition it promised in the first
place. Economic waste has nothing to do with value of land.
6. Dissent – Should be using alternative measure, not much value in
ungraded land.
7. Both cites to Jacob & Youngs
8. Majority correct, this is really more to central of bargain for Groves as
opposed to the pipes for Kents in Jacob & Youngs
9. P gets payment of rental, and grading of property (which they didn’t get)
ii. Diminution in Value – A measure of contract damages reflecting the
different in value of an item before the breach and its value following
breach
iii. Peevyhouse v. Garland Coal Mining Co. – Professor doesn’t like
1. Regardless of any agreement of the parties, damages awarded for
breach of an agreement to perform remedial work on property should
normally be measured by the reasonable cost of performance of the
work;
2. but, when the contract provision breached is merely incidental to the
main purpose in view and where the economic benefit which would
result to the owner from full performance is grossly disproportionate to
the cost of performance, damages should instead be limited to the
diminution in value resulting to the premises because of the non-
performance.
3. D failed to do restorative and remedial work of property.
4. Here court used diminution of value. Used concept of economic waste.
5. If party had performed, land value wouldn’t be much different now.
a. Only rise in value of $300
b. Would have cost 25k
6. Here have deliberate breach, breacher getting full benefit of its bargain
a. Party understood what cost was going to be
7. Injured party not getting something central to what they bargained for.
a. Here regrading is clearly central to this case.
8. Breachers got full benefit of exchange. Professor says more than
Groves.
9. Restatement §348 Page 923.
a. Recover by diminution of market price or
b. reasonable cost of completing performance that is not clearly
disproportionate to probable loss
XI. Defenses to Contractual Obligations
a. Introduction – rebuts presumption of prima facie of usual assumptions we make of
manifestations of assent. 3 Categories of Contract Defenses
i. We assume each person entering into contract has knowledge of his own
needs and interests.
ii. Normally both parties determined to make deal to their own interest.
iii. When assent motivated by force or misrepresentation, not valid
iv. Judgment based on impaired information.
v. Or don’t actually received performance based on expectation.
b. Lack of Contractual Capacity/Diminished Capacity – status defense, shielding
people in the following classes from unwise bargains.
i. Immaturity Infancy (arbitrary standard) what we presume to be true of
people under a certain age. Age of majority in most states is 18 years.
1. One who is a minor lacks contractual capacity
2. Voidable status - Contracts made by minor is voidable by minor
a. Means it’s valid if not action taken by minor.
b. Minor can avoid contract even if performed by both sides
c. Protection only for minor, not for other party in transaction.
d. Not voidable at other party’s request
e. If no action taken by minor to void, than legal contract.
f. Power to void is Disaffirmance.
g. Minor can disaffirm before or after reaching age of majority
h. Not acting on this power is ratification.
i. Effective ratification can only be made after reaching age of
majority
j. Exception due to moral obligation.
3. If services rather than goods, minor is not accountable if contract set
aside
4. Exceptions:
a. Doctrine of Necessaries – Minor is accountable for reasonable
amount of necessaries he receives (food, clothing, shelter)
i. What’s necessary treated as question of fact.
b. Minor Misrepresentation of Age
i. If used to induce other party to enter into contract, it can’t
be avoided (trust in most states
ii. Minor can be liable in tort for fraud.
ii. Mental Incompetency – some commonalities with infancy, but more narrowly
available
1. Cases recognized though mental defects or deficiency
a. At time agreement was made
2. Mental issue isn’t enough to establish defense in of itself
a. Traditional test is capacitive (understand nature and
consequences)
3. Principal challenges with respect to people who understand
consequences but lack ability to control behavior (bipolar)
a. Contemporary courts have added volition to that kind of mental
infirmary.
b. Such are in Ortelere, test applied
i. Relief only if other party had reason to know of that
particular mental illness
4. Power of avoidance is to person of incompetence (or their heirs, estate,
guardian)
a. Where contract made in fair terms and other party didn’t have
reason to know of person’s diminished mental capacity, the power
of avoidance terminates to the extent that there has been reliance
on the contract.
b. Court won’t necessarily terminate contract in full, but to extent.
c. Balance of protecting vulnerable person and expectation of good
faith contractor
c. Obtaining assent through improper means
i. Two most common are misrepresentation and duress
1. Concern with defects or abuses of bargain process
2. Not concerned with substance of actual bargain or if it was fair
3. Requires Assertion not in accordance with the fact at the time of
bargain
ii. Misrepresentation
1. Contract is avoidable if parties assent was induced by fraudulent or
material mistake of fact
2. Vokes – P induced by D’s repeated misrepresentation of P’s dance
which she relied to keep taking classes
3. Silence or concealment of material fact can also be misrepresentation
a. Person who has made statement or assertion of fact at time they
believe to be true but later learned additional information that has
bearing on what they said earlier makes it no longer true
b. Created false impression unintentionally so have duty to speak
up, failure to do so can be misrepresentation.
4. Fraudulent if consciously false and intend to deceive to induce
5. Voidable if misrepresentation of mater but not fraudulent
a. Halpert – Seller’s RE agent stated there were no termites in the
house, no evidence they made knowingly false statement. But a
misstatement of material fact. Reasonable buyer relied on it.
b. Unqualified assertion by person who should know, even if
innocent, of material fact
c. To be material – if it would be likely to induce a reasonable
person to manifest their assent or
d. The maker knows this particular promise is especially vulnerable
to this statement
6. Can be used as shield (breach) or sword (rescission)
7. Restatement §162 – if maker doesn’t have basis for assertion, can be
material misrepresentation
iii. Duress – Improper threat under circumstances where party has no choice but
to assent
1. Economic duress is most common context
2. Restatement §175 (Pg. 995)
3. Now Duress only needs to be an improper threat
a. Improper if threat resulted the receipt of property, criminal
prosecution
b. Not on fair terms, and harms recipient
4. Threat of party to not perform contract is not by itself an improper threat
5. Threat is improper if it amounts to breach of good faith and dealing
(Austin)
a. Austin – Loral under duress because meet contract with Navy
and have no alternative option and had to succumb to Austin’s
demand to raise prices of all components.
b. Loral uses defense for their breach because of all these factors.
6. Manifestation of assent must be induced by threat
a. Subjective test
b. Court look at totality of circumstances
7. Inexperienced person might be more vulnerable than experienced,
repeat player who can take advantage
8. Threat doesn’t amount to duress if party has reasonable alternative and
doesn’t have to succumb to it
9. Where there is threat, don’t assume you have knowledge to weigh
transaction, capitulate to offer for other reasons
iv. Undue Influence – improper or unfair persuasion (difficult to prove)
1. Unfair persuasion of a party who is under domination of the party
2. Hard defense to prove
3. Odorizzi case – relationship in particular circumstances. P subjected to
undue influence by employer at moment of vulnerability. After arrest and
20 hours of not sleeping. Threaten consequences if he doesn’t act
immediately and acting like they’re looking out for his welfare
a. Good opinion to read to see comparison between defenses
b. Some hallmarks of improper threat and misrepresentation
4. Normally must be in relationships of trust and confidence
5. Question of fact
a. If relationship gives rise to undue weight
b. And reliance on particular circumstances that don’t always exist
6. When present, contract voidable by victim if induced by this unfair
persuasion.
7. High pressure that works on weakness of on victim and approach the
boundaries of coercion but don’t quite become an improper threat.
8. Taking unfair advantage of another’s weakness in context of the
situation.
9. Discussion takes place at an unusual or improper time (Odorizzi at
night)
a. Or unusual place
10. Difficult defense to assert successfully, particularly if falls outside of
relationship of trust and confidence.
v. Unconscionability – also difficult to prove
1. One of the most vague terms in contract law
2. Restatement and UCC page 1014 – neither define, describe effect on
Ds
3. Made in setting, term, and purpose of agreement, with great disparity
between parties
a. One sided contract isn’t in itself enough
b. Facts need to suggest defects or weaknesses to each other, but
have contractual capacity
4. Williams v. Walker-Thomas Furniture – Seminal Case – Vendor leasing
furniture takes back all previous purchases if consumer defaults on
latest purchase, overturned
a. Gross disparity in contract
b. Policy concern of protecting consumers in contract
c. Now have statutes to protect consumer
d. Court take prevailing approach, two components must be
present:
i. Unfair surprise – whether weaker party had fair notice to
understand particular term or consequence
ii. Unreasonably one sided in terms as a result – disparity in
bargaining power, disparity in results, absence of any
meaningful choice, overall effect of contract was oppressive
5. Depends on accumulation of extreme circumstances
d. Failure of Basic Assumption
i. Introduction
1. Based on mistake, impracticably, or frustration when one party is
seeking to be excused from performing because assumption made at
point of formation turned out to be correct
a. Mistakes dealing with specific facts central to transaction at time
contract is made
b. Incorrect assumptions about circumstances that were expected to
occur
c. Erroneous perception by party of fact in existence at time of
formation.
d. Belief not in accord of facts – Restatement
e. Does not refer to mistake of knowledge of law
f. Not misprediction about the future, or future value
2. Parties make assumptions in contemplating contracts, some of
assumptions relate to fact that exist at time contract is being made
3. Misperception must be to existing fact central to transaction
ii. Mutual Mistake – Both parties share same erroneous perception
1. Contract may be voidable by adversely affected party unless bears risk
2. Goes to basic assumption of why contract was made and not one for
which parties bear risk
3. Has to reach heart of transaction (its purpose)
4. Fact existed at time of contract formation
5. Sherwood v. Walker – Seminal Mutual Mistake case – contract for sale
of cow (rose) mistake that the cow is barren, so price is $80, tenth of
what she would have been valued as a breeding cow. Seller discovers
Rose has calf when they make contract which neither had known. Seller
tries to aside contract. Court says contract can be void if both parties
assumed cow was barren.
a. Buyer thought Rose could be changed to breed but at time of
contract, believe it was barren, thus didn’t change knowledge
b. Contract would not have been made the way it was but for a
shared mistake.
iii. Unilateral Mistake – Only one party has erroneous mistake about facts
1. Courts reluctant to set aside when only one party made mistake
2. Much harder to get
3. Even if shows effect is severe, where there has been reliance, court will
let law lie
iv. Impracticability – Where because of unanticipated event, cost of
performance to promisor has been greatly increase.
1. Occurrence must make performance extremely difficult
2. Unforeseen circumstances beyond control
3. Supervening Event/Cause/Legality
a. Like death of promisor or (painter who loses eyesight before
painting portrait)
b. Destruction of thing at heart of contract (Taylor v. Caldwell –
Theater burned down where concert was to be performed.
Recovered costs of advertising)
c. War/Embargo/Unexpected shortages
4. Focus on increase burden for party to perform
5. Increase costs alone isn’t enough to excuse performance unless
increase in case due to contingency that alter essential value of
contract
a. Rise and fall of market prices isn’t enough
b. Kind of cost you couldn’t have reasonably anticipated when
contract formed.
v. Frustration – Related to impracticability, because of unanticipated event,
frustrates purpose of contract.
1. Duty discharged if condition no longer exists
2. Krell v. Henry – D leased room during dates of King’s coronation for that
purpose. After contract is formed, coronation is postponed due to King’s
illness, so no reason for leasing rooms on those days. Only reason
either of them were doing this was for coronation.
3. Both parties could still perform but that not the point.
4. Neither party bore the risk.
5. Neither has increased cost of performance, but central purpose no
longer exists.
6. For Defense, desired object for one purpose has to be frustrated, must
be for both.
7. If frustrating event was foreseeable or controlling by either party, then
precluded from defense.
HTML Translation provided by Oracle's Outside In® HTML Export software. TWEN®

Contracts Outline

Uploaded by

Document Information

Original Title

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 Outline

Uploaded by

Copyright:

Available Formats

8/29/22, 9:53 PM View Document

Attached file: Contracts Spring 2016 Outline 2.docx

Contracts Spring 2016 Outline

3. Then condition to 3rd party would have been

1. P wasn’t happy with 1st shipment, said so in cable

2. D ready to ship 2nd shipment, asked P if still wanted,

b. Focused on 3rd party decision that’s not relevant. Breach is

c. Foster logically prudent to ask if Lane can perform 2nd contract

You might also like