Ras Attack Outline

IS THERE AN AGREEMENT?

Ask: UCC or Common Law

 UCC – movable goods
 Common law – sale of land and services
 Statute of frauds? (land, goods >$500 [price not value], contract > 1 year)

1. OFFER AT COMMON LAW

 Elements: §24 Offer Defined
 Objective theory of contracts – would a reasonable person believe this is an
offer?
 Communicated?
 Directed at a person?
 Confers power of acceptance?
 Certain definite terms?
 Making an offer v. Inviting an offer
 Advertisements
 Ads ≠ offer (EXCEPT if clear, explicit definite, i.e. Carbolic Smoke Ball,
Lefkowitz)
 Reasonable consumers expect limited quantities
 Price Quotes / Request for Bids
 Price quotes ≠ offer (EXCEPT if directed at a specific buyer for a specific
price and quantity)
 Proposals
 Proposal ≠ offer (if the proposal states an intent not to be bound OR
there are missing material terms)
 Rewards
 If reward is known and induces performance = offer
 Uncertainty about offer:
 Statement of Opinion – can’t be held liable if your opinion is wrong
 Statement of Fact  Warranty
 Can be held liable for breach of warranty
 Malleable, what is opinion v. fact?
 If outside the contract but is determined to be a warranty  Parol Evidence
 If not incorporated into contract but should have been and can’t get in
through parol/ induced person to enter into the contract 
misrepresentation
2. OFFER UNDER UCC
 UCC will find an offer sooner than common law
  § 2-205 Firm Offer: Offer made by merchant, signed, and in writing, that assures the
offer will be held open and is not revocable for lack of consideration during the time
stated or a reasonable time (but not longer than 3 mo.)
 No consideration needed
 § 2-204: If the parties intended there to be a contract we will enforce it so long as we
can figure out damages. Terms can be filled in with gap fillers (so long as not material)
3. Option Contract?
 Offeror loses the power to revoke
 Created by UCC § 2-205 Firm Offer?
 § 87(1) Option Contract:
 Signed, in writing, with purported (actual not needed) consideration? Fair terms,
reasonable time?
 § 45 Option by Part Performance in unilateral K?
 Must tender / begin performance
 § 87(2) Option by Reliance
 Must be reliance reasonably induced by the offer, and must be invoked to avoid
injustice
 Ex. general and sub bid
 Party reasonably relies on representations or assurances to their detriment
 Most courts wouldn’t follow (Ex. Red Owl)
4. Termination of offer?
 Usual rule: offeror can terminate anytime before acceptance
 Four Ways To Terminate:
 Rejection or Counteroffer by offeree
 Revocation by offeror
o Direct or Indirect (through reliable third party)
 Lapse of time (reasonable time, depends on circumstances)
 Death or incapacity of either party
 EXCEPTION: Option Contracts

5. Acceptance
 Did offeree have knowledge of offer?
 Did offeree intend to accept?
 Did offeree change behavior to accept performance i.e. hole-in-one on purpose?
 Mirror image of offer? If not = counter-offer
 Was acceptance in form authorized by offer?
 If method of acceptance not specified in bilateral contract…
 Acceptance by return promise is not effective until communicated to offeror
 Acceptance by performance generally does not require the offeree to give notice
to the offeror
 Generally, silence ≠ acceptance (unless contracted around)
 Or, employee handbook example (good change, continuing to perform =
acceptance, but not if bad change)
6. Mutual Assent
  Mutual understanding on material terms of the contract
 § 20 No meeting of the minds, no mutual assent
 Latent Ambiguity: both parties attached reasonably different meanings to the same
term = no contract
 Parties can introduce trade usage to show one party should have known 
COURTS ARE SPLIT  do both parties have to be experienced in the trade?
 Patent Ambiguity: ambiguous on its face  written = judge, oral = jury if a
disagreement but always a contract bc they agreed it was ambiguous
 Default Rules: can be used to fill in immaterial gaps

7. Clickthrough v. Browsewrap
 Buy now, terms later
 Seller is master. You can return, but if you keep the good you accept the terms.
Doesn’t matter if you didn’t read them. (ex. Carnival Cruise)
 Minority rule: not enforceable bc buyer is not merchant and did not explicitly
agree (BTF)
 Clickthrough  always enforceable
 Browsewrap
 Would a reasonably prudent user have notice of the terms?
 Put the hyperlink in a different color, near a button they have to push, not on a
crowded page  better argument they had notice
 Policy: Are either of these really mutual assent in any meaningful way?

IS THERE A LEGALLY ENFORCEABLE CONTRACT?

1. Not an issue in the UCC; don’t need consideration under UCC 2-205
2. Consideration
 Something given IN EXCHANGE for the promise THAT IS BARGAINED FOR (§ 71)
 Bargaining to have someone come to a place is enough
 Legal benefit to the promisor or detriment to the promisee? Some courts
 Can you refrain from something illegal?
 Argue: no detriment because already not allowed to do it
 Argue: yes detriment because still have the power to do it
 Promise must induce the consideration
 Courts don’t care about the adequacy or fairness of consideration, just care that it exists
 Feelings are not consideration, need something else that is bargained for
 Bilateral = parties promises are consideration (§ 75)
 Unilateral = parties performance is consideration (§ 72)
 Consideration is malleable, courts bend when they want a promise enforced
 § 81: Consideration can be incidental
 Promisor may have more than one motive in a deal, and their main motive does
not have to be the consideration
 Ex. main goal is family unity but bargaining for daughter to come over  bargain
for them to go somewhere is consideration
  Conditional / Gratuitous Promise
 Not consideration UNLESS you can show it was bargained for
 Ex. come to my house and I’ll give you a ring ≠ consideration
 Ex. come to my house and I’ll give you a ring but really want them to
come over so we can reconcile = consideration
 Bargained for exchange = expectation damages
3. Nominal Consideration: courts are split
 Argue: YES we should let people be bound when they want to be
 1st restatement
 Argue: NO we shouldn’t spend societal resources on this
 2nd restatement
4. “Consideration” Based on Past Acts
 Normally unenforceable for lack of consideration EXCEPT:
 Promise to pay past debt that would’ve been enforceable If not for SOL
 Only the new promise is enforceable; only enforceable up to original promise
 Promise to pay a debt discharged by bankruptcy
 Promise to perform a previously voidable obligation – i.e. contract as a minor
5. Material Benefit?
 Past consideration for a previously received benefit – courts are split
 Webb – enforced for saving his life (guy died without rescinding)
 If promisee was not the one who benefited  unenforceable (Mills)
 § 86: promise made because of previous material benefit from promisee is binding to
extent necessary to prevent injustice
6. Illusory Promise?
 Has one party promised so little that they haven’t promised at all? → NO
CONSIDERATION
 Parties are free to structure future obligations BUT actually have to promise
something for it to be enforceable
 Are any parties actually bound?
 Illusory promise = promisor retains FULL discretion
 No one is really bound
 i.e. “Yeah, if I feel like it…”
 i.e. “Payment remains entirely in our discretion”
 BUT: If party limits itself in some way, maybe not illusory, of it has good faith duty to
carry out obligation
 i.e. “I’ll pay if I am satisfied”
 “I’ll buy all the sweaters I need from you”
 Court can also imply promises
 Lady Duff
7. Promissory Estoppel (§ 90)
 Substitute for consideration
 Elements
 Clear and definite promise
  Promise reasonably expected to induce action / forbearance (detrimental
reliance)
 Actually does induce detrimental reliance
 Injustice can only be avoided by enforcing the promise
 § 90(2) - Charitable gifts that are relied on without reliance action?
 Courts are split
 Allegheny College / DeLeo
 § 139: reliance taking you out of the need SoF?
 Courts are split (ex. oral promise to gift land, P relies and makes improvements)
 Argue both (if they allow reliance to exit SoF, if they don’t allow)
 Damages: Split
 Williston: enforce to expectation or not at all (most courts are here)
 Corbin: this is about reliance  reliance damages  implies PE is independent
theory from contracts
8. Pre-existing duty / Renegotiation
 Is the new promise supported by new consideration?  golden
 § 89: is the renegotiation result of unforeseen changed circumstance and in good faith?
 will enforce EVEN WITHOUT consideration
 BUT: if renegotiation is opportunistic taking advantage of a party without reasonable
alternative  no good faith  unenforceable for economic duress
 § 2-209: UCC agreement modifying contract is enforceable without new consideration
so long as it is in good faith
9. Type I v. Type II?
 Type I
 Basically have a deal
 Agreement on all material terms but just haven’t memorialized it to writing yet
 Binding as an enforceable contract
 Type II: NOTE: not all jurisdictions allow enforcement of these contracts
 Agreement to have fully formed contract
 Agreement on some material terms, others left open
 Bound to negotiate open terms in good faith
 Can have partial performance
 Good faith negotiations = no damages if it doesn’t work out
 Bad faith negotiations ONLY = reliance damages
 Bad faith negotiations + there would have been mutual assent if there had
been good faith negotiations = expectation damages

Do We Need a Signed Writing?

1. Statute of Frauds
a. Sale of land; transactions that by their terms extend beyond a year; and under
UCC sale of goods over $500; 2-201
 b. What happens if there is an oral promise that was supposed to be in writing but
it wasn’t but it was relied upon - § 139 – courts can enforce based off that
reliance – courts are split if they would use this
i. We have an agreement, have a basis to enforce it, but the agreement
was just supposed to be in writing
ii. SEPARATE § 90 AND § 139 – because not all courts will follow
1. Two different inquiries
2. Yes you have reliance BUT can you get out of statute of frauds
with it

What are the Terms of the Agreement?

1. Ambiguities
 Ambiguous on its face OR after looking at outside evidence?
 Course of Performance RS + UCC
 Course of Dealing RS + UCC
 Trade Usage RS + UCC
 Negotiation History
 Common Sense
 *First 3 are hierarchy, rest as needed
 IF A CONTRACT ON IT’S FACE IS AMBIGUOUS  introduce ALL evidence
 Language is inherently ambiguous: plain meaning v. purpose of language – courts are
split
 Plain meaning: dictionary definition
 Purpose: look at what the contract intended and interpret the term in that way
 Contract is silent on terms?  Gap fillers
 UCC Gap Fillers:
 NO GAP FILLER FOR Q, NEED QUANTITY
 2-308: place of delivery → seller’s residence or place of business
 2-309: time for performance? → reasonable time
 2-305: price? -> reasonable price (ONLY if there is a well-established mkt
price)
 2-314: implied warranty of merchantability
2. Parol Evidence Rule:
 UCC § 2-202; RS § 209 - § 216
 Going to strike out some evidence in order to privilege the writing – but the question is
how much
 Only applies to agreements reached before or contemporaneously with the original
contract
 Does NOT bar evidence to interpret ambiguities
 Does NOT bar evidence to introduce fraud or mistake
 STEPS
 Is the writing integrated?
 If No  all evidence comes in
  Is it completely or partially integrated? To decide –
 Williston: four corners – privilege the writing - does the writing appear
complete? (NY is here)
 Corbin: look at ALL evidence to determine intentions – does it appear
complete? (UCC/RS are here)
 If Partially Integrated
 Introduce all consistent terms (not contradictory)
 If Completely Integrated
 Only outside evidence you can introduce is collateral (outside scope)
 Integration / Merger Clauses: helpful evidence if you are trying to prove this is a
completely integrated contract
 SPLIT: if follow Williston  conclusive; if follow Corbin  creates a presumption
it is complete but still look at evidence to make sure
3. Battle of the Forms
 STEP 1: is there an agreement
 Objective theory
 Can have differing terms, UNLESS the terms were conditional
 If second form is silent on an issue, first form WINS
 STEP 2: Are there DIFFERING TERMS? If so,
 White: Majority Rule:
 terms cancel each other out; use gap fillers or ignore
 Summers: Minority:
 First form controls
 STEP 3: Is there an ADDITIONAL Term? If so,
 Both parties are Merchants: automatically becomes part of contract if not
objected to UNLESS it materially changes the contract
 Not Merchants: party who’s form was silent has to explicitly agree in order for it
to become part of the contract
4. Duty of Good Faith
 Before the contract: you just can’t lie (hard balling is ok)
 You don’t have to put the other sides interests over your own BUT can’t advance your
own interests by throwing them under the bus
 Market Street: specifically not mentioning the paragraph v. saying “pursuant to our
lease”  argue good and bad faith
 Once you have a contract  try in good faith to perform
 The standard of good faith is ambiguous in contract law, but often based on a set of
facts you can argue one way or another
5. Statement of Opinion v. Statement of Fact
 UCC 2-313: statements of facts about the goods, description of goods, sample of goods
= express warranties  turns out false  can sue for expectation damages
(misrepresentation)
 Common Law: statements of facts can become express warranties  if not incorporated
into the contract use parol evidence  can sue for misrepresentation if found false
 § 168: Statements of opinions are generally not warranties
 Do We Respect the Bargaining Process

1. Fraud? (Duty to Disclose)

 Generally no duty to disclose
 EXCEPTIONS:
 Can’t lie or fraudulently misrepresent  contract void
 Ex. Laidlaw v. Organ; depends on whether he said he didn’t know (void) OR just
didn’t say anything (ok)
 Statement true at the time that they later find out was wrong  don’t correct, treated
as a warranty that it is true  contract can be voided
 Disclosure would correct a basic assumption on which the other party is making the
contract (ex. Termites) + bad faith
 LOOK AT ability to find out about the thing in question – conscious ignorance will not get
you out of the deal
 When there is a special relationship (remedy = recission)
2. Misrepresentation?
 ASK: what remedy is the client seeking?
 Misrepresentation that renders the contract voidable ( RS § 159 – 173)
 Remedy is recission  only recover under restitution
 Stated facts they knew were untrue to induce mutual assent?
 Didn’t have confidence that facts were true but pretended to?
 Statement that induce reliance of a reasonable person + material?
 Confidential relationship?
 Tort of misrepresentation?
 Get reliance damages
 Breach of warranty
 Remedy is expectation damages
 Treating a statement of fact as a promise to be enforced
 § 2-313: affirmation of fact or description of goods = warranty
 General Rule: cannot recover for statements of opinions
 Johnson v. Healy: “best material” = opinion; “nothing wrong with it” = opinion or
statement of fact  argue both
 NOTE: pick which type of recovery your client wants and argue for that remedy
3. Duress?
 Was the compulsion to enter the deal created by an improper threat?
 Improper threat + made by the counterparty + no meaningful alternative
 So long as you are not the one causing the duress you can drive a hard bargain
1. Sale of painting during war time  Nazi’s causing duress, not buyers
 no duress
 Threat is improper if:
 Crime or tort
 Threatening criminal prosecution
 Threatening civil suit in bad faith
  Breach of duty of good faith
 Undue Influence? (Waters case)
 Economic Duress (Coercive Renegotiation)  contract void
 Opportunistic taking advantage? Or Good Faith?
 Change in circumstances?
 Does the party arguing duress have a reasonable alternative?
 Consideration is no longer a factor
 Ex. Alaska Packers
4. Mutual Mistake?
 Both parties are under the same mistaken impression (Ex. Sherwood)
 (1) Mutual mistake + (2) basic assumption of the deal + (3) material effect + (4) doesn’t
bear the risk = contract voidable
 Ask: does the party trying to get out of the deal bear the risk of mistake? RS § 154
 (a) Risk allocated to him by agreement?
 (b) Conscious Ignorance: Aware of limited knowledge but treats it as sufficient?
 (c) If the court thinks it is reasonable:
1. Kull: Never allocate risk, leave things where they were when we
discovered the mistake (don’t waste resources)
a. Ex. who has possession of the cow when they found out she
was pregnant  leave her there
2. Posner: risk placed on person most likely to know the true state of
affairs (control over the thing; usually the seller)  most courts are
here
5. Unilateral Mistake
 (1) Mistake on basic assumption
 (2) has material effect?
 (3) does not bear risk
 PLUS
 (4) enforcing the contract would be unconscionable OR other party had reason to know
of the mistake but took advantage
 Common case: miscalculation in general / sub bid
6. Unconscionability [LAST RESORT]
 Absence of meaningful choice on the part of one of the party PLUS terms unreasonably
favorable to other party
 Gross disparity in consideration
 High pressure sales tactics + misrepresentation
 Unfair surprise
 SLIDING SCALE: Procedural v. Substantive Unconscionability
 Procedural:
 Negotiated in unfair way
 Oppression (unequal bargaining power) and surprise (challenged terms
are hidden)
 Substantive
 Significantly unfair terms in favor of the stronger party w/out justification
 IS A PARTY RELIEVED OF ITS OBLIGATIONS UNDER THE CONTRACT?
What happens during the course of performance that can relieve a party of its obligations?

1. Performing the Promise:

 Independent v. Dependent Promises
 DEPENDENT: you can only seek to recover what the other side promised you if
you are willing and able to do what you promised the other side; dependent
promises are conditioned on each other (Kingston v. Preston; selling business)
 INDEPENDENT: not conditioned on each other (implied by circumstances) 
Price v. Van Lint (deed coming back from overseas)
 If contract is silent on performances, and if you look at the circumstances and can’t
decide  default rules
 § 234 if parties can perform simultaneously then the must, BUT
1. When one parties performance takes time, the person who’s
performance takes time goes first
 § 238: When promises are due simultaneously, it is a CONDITION of each parties duties
that the other will perform, and if one does not or cannot, neither have to perform.
2. Uncured Material Failure v. Substantial Performance (common law)
 WHAT HAPPENS when one party partially fails to perform and the contract does not
state what the effect should be?
 Any non-performance of a duty under a contract is breach
 Substantial performance = non material breach
 ONLY material breach excuses future performance
 If there has been a breach, decide if that breach is a material failure (use § 241 factors
test)
 Was injured party deprived of reasonably expected benefit?
 Can party be adequately compensated for part of benefit deprived?
 Will breaching party suffer forfeiture?
 Will breaching party cure his failure?
 Good faith and fair dealing?
 IF NOT MATERIAL = substantial performance
 Parties continue to perform + damages for non-breaching party
 If material, must give opportunity to cure
 Partial Material Breach: there is an opportunity for cure and once cured both
parties continue under the contract
1. Non-breaching party can recover damages for the breach
 Total Material Breach: uncured material breach OR no opportunity for cure
1. Discharges all duties under the contract and non-breaching party can
stop performance
2. BUT – non-breaching party is taking a risk if they stop performance bc
the court has the discretion to say whether or not there was an
opportunity for cure and if there was  party who ceased
performance materially breached first
 3. Breaching party can recover under restitution (if any benefit
conferred)
4. Non-breaching party recovers full damages
3. Lack of Perfect Tender (UCC)
 No doctrine of substantial performance in the UCC
 BEFORE ACCEPTANCE, buyer can reject within the following parameters:
 If a party receives goods and those goods do not comport with the contract in ANY way,
no matter how trivial, the buyer has the RIGHT to reject the goods in good faith (UCC §
2-601)
 Rejection must be within a reasonable time of receiving the goods and must include
notifying the seller (UCC § 2-602)
 Also, you MUST tell the seller why you are rejecting the goods within reasonable time
or else you cannot rely on that rejection (UCC § 2-605)
 If the goods are rejected, the seller has a right to cure (UCC § 2-508)
 If the time has not run on the contract → pure right to cure
 If the time has run → reasonable time to cure UNLESS the good is extremely time
sensitive
 Acceptance: you accept the goods when you don’t make an effective objection within a
reasonable time (UCC § 2-606)
 Implied Warranty of Merchantability: You can always recover under warranty action if
the goods don’t conform to the contract  keep the goods but recover difference
 Recover the difference between the value of the goods received and the value of
the goods as warranted (UCC § 2-714)
 In order to revoke an acceptance (void contract) you must prove: (UCC § 2-608)
 That the buyer did not know about the defect upon acceptance,
 Could not have found out about it with a better inspection at acceptance, and
 The defect substantially impairs its value to the buyer 
1. Then cover under (UCC § 2-713)
4. Impracticability
 Three Narrow Exceptions where courts will discharge remaining duties under a contract
for Impracticability:
 Death of a party necessary to the contract (§ 262)
 Law or regulation by government prevents performance (§ 264)
 Destruction of an item or structure necessary to performance of the contract
without fault of either party (§ 263)
 § 261: unforeseeable occurrence, the non-occurrence of which was a basic assumption
of the contract  now performance is impracticable
 Foreseeability is measured by whether a reasonable person would plan for it
 EXCEPTION: Force Majeure Clauses: can relieve a party of contractual obligations
outside the above parameters if an event outside their control occurs HOWEVER can
relieve the counterparty of its obligations as well
 No more contract, remedies = restitution
 if one side does not have to perform obligations going forward, you don’t have to
pay
5. Frustration of Purpose
 HIGH BURDEN: you can perform but the reason for the contact has disappeared
 Need total frustration (things change, doesn’t get you out of your obligations)
 § 265: unexpected occurrence + non-occurrence was basic assumption + substantially
frustrated performance without party’s fault
 Krell = total frustration; WWII new car lot = no total frustration (you took the
risk)
 no more contract; remedies = restitution
 if one side does not have to perform obligations going forward, you don’t have to
pay
6. Non-Occurrence of a Condition
 Failure to satisfy a condition = material failure & contract is void - no ability to sue on
the contract
 If, only if, provided that, so long as, subject to, in the event that, unless, when, on
 § 227: we have a preference for treating ambiguous language as NOT a condition
 Conditions are harsh; no doctrine of substantial performance
 §227: want to interpret terms in ways that will reduce the risk of forfeiture
 If they don’t state they want the non-occurrence of this term to void the
contract  likely not a condition
 Rather interpret things as promises or timing mechanisms and then sue for breach if not
satisfied
 Smuckers lease: interpret as a promise  breach but substantial performance &
probably no damages because didn’t hurt lessor; interpret as condition &
contract is voided
 Relieving Harshness of Conditions:
 § 245 Doctrine of Prevention
1. can’t materially contribute to non-occurrence of a condition
 § 271 Doctrine of Impracticability
1. civil war cases  material condition or not will determine if
impracticability applies
 § 229: Disproportionate Forfeiture:
1. Courts are split
2. Get rid of condition if it will result in disproportionate forfeiture and if
it is NOT material (Craven)
 Waiver or Estoppel (or both)
1. Waiver: knowing relinquishment
a. Can retract a waiver up until original condition time frame BUT
you have to worry about estoppel
2. Estoppel : reliance
7. Anticipatory Repudiation
 § 250 Repudiation occurs when, before a party’s performance is due, they make a
statement or take affirmative actions indicating they will commit a total breach 
remedy is full damages
 Must be ABSOLUTELY CLEAR they are repudiating
  “I don’t know if I can perform” is NOT a repudiation
 If you don’t know if the counterparty can perform, when can you get out of the
contract?
 Doctrine of Adequate Assurances (§ 251): when a party has reasonable grounds to be
insecure about the other parties performance they have a RIGHT to request adequate
assurances
 if the party does not receive assurances, that is grounds for anticipatory
repudiation (not performing your promise because the other side can’t perform)
 Party giving assurances has “reasonable time” to provide
 PROBLEM: subjective; what is an assurance?
1. “I’ll do my best”  reasonable courts could differ
 UCC 2-609: request for assurances must be in writing and if assurance is not received
within 30 days  grounds for anticipatory repudiation
 § 253: Repudiation = total breach
 Non-breaching party off the hook for obligations AND can sue for full damages
under the contract
 § 268 Failure Justified by Impracticability or Frustration – if the party clearly says they
are not performing because it is impossible you can still use § 251 and be excused from
your performance (but can’t sue under § 253 because not a breach)

Damages?

1. Buyer’s Damages (UCC)

 UCC §2-715(1): Incidental damages include expenses incurred from inspection, receipt,
transportation/care/custody of goods rejected, and expenses from cover or delay
 UCC §2-715(2): consequential damages are losses resulting from the breach that the
seller HAD REASON TO KNOW and which could not have been prevented
 Buyer covered? 2-712
 = (Cost of Cover – K) + (Incidental + Consequential) – (Expenses Avoided)
 Can cover in any reasonable manner (does not have to be the best deal; does not
have to deal with breaching seller even if offers lowest)  good faith is the test
1. NO DUTY to mitigate losses
 Buyer didn’t cover? 2-713
 = (Market Price– K) + (Incidental + Consequential) – (Expenses Avoided)
1. (1) Day of repudiation (2) Day party learned of repudiation (3)
Commercially reasonable time (4) Day of intended delivery
 Implied Warranty of Merchantability 2-714
 = (Value of goods as warranted) – (Value as accepted)
 Seller withholds b/c of buyer’s breach? 2-718(2)
 Buyer entitled to restitution if:
1. Buyer’s payment: any value exceeding > 20% of value OR, $500,
whichever is smaller
2. Seller’s Damages (UCC)
 Seller resells? 2-706
  = (K – Resale Price) + (Incidental) – (Expenses Avoided)
 Seller doesn’t re-sell? 2-708(1)
 = (Unpaid K Price – Market Price) + (Incidental) – (Expenses Avoided)
 Lost-volume seller? 2-708(2)
 = (Lost Profit on Breached Sale) + (Incidental)
 Buyer refuses/fails to pay? 2-709
 = (Price of goods accepted) + (Incidental)
 Possible Market Prices to Use:
 Market value after a commercially reasonable time to wait after the repudiation
occurred  Ras says this is best (middle ground)
3. Expectation Damages (Common Law)
 § 347: Put the non-breaching party in as good a position if the contract had been
performed without breach  make the party “whole”
 (value of contract fully performed) – (value of contract in present condition), or
1. (loss in value of performance) + (incidental losses) + (consequential
losses) – (expenses avoided by breach)
 § 348(2): Defective or Unfinished Construction
 Diminution of Market Value (FLOOR)
1. Low personal value
 Cost of Completion (CEILING)
1. High personal value
2. Subjective value of non-breaching party must have been CLEAR
 Non-breaching party can choose UNLESS the cost of completion is clearly
disproportionate to the value of full performance (both actual loss and
subjective loss)
 Lost Profits?
 Profits + fixed costs + sunk costs
 P+f=K–v
1. Speculative?
a. Must be able to prove lost profits to a reasonable certainty
b. Reasonable courts differ on what is certain (Dempsey v. Fera)
c. In a case of anticipatory repudiation, the non-breaching party
needs to recover both its expected profits + the fixed costs
that it was going to recover through its contract.
i. Said alternatively, it can recover the contract price
minus the costs saved from the breach
2. HYPO - In Rockingham County, assume that Luten Bridge makes a
10% profit on each dollar. Assume further that its costs are 30%
variable, 60% fixed. In calculating lost profits,
a. Money that it spent up into repudiation + lost profits on the
entire contract
b. Variable - these you can mitigate by stopping performance -
costs you can SAVE so you don't earn those back
c. Fixed - can't mitigate, are going to incur no matter what
 d. THUS, they should recover 70% of contract price
 Lost volume seller?
 Can recover profits
 Must prove you could have done BOTH contracts (ex. make both sales)
4. Reliance Damages
 Put injured party in as good a position as if they had never made the contract
 Recovery for losses relying on contract but no more
 Used as an alternative to expectation damages when lost profits are difficult /
impossible to measure
 EXPECTATION CAPS RELIANCE: if reliance is higher  only can recover up to
expectation if you can prove expectation
 If plaintiff chooses reliance but defendant believes expectation is less  burden
is on them to prove there would have been losses had the contract been
performed
 Non-breaching party has to show some connection between reliance damages claimed
and the breach
 Then burden shifts to breaching party to show there would have been loss EVEN
IF there was no breach and thus their expectation damages are going to CAP that
reliance
 Damages must be reasonably foreseeable
 Recovery for expenses incurred prior to contract signing?
 Courts are split (Dempsey)
 Damages = (expenses incurred in reliance on performance) – (any loss breaching party
can prove injured party would have suffered)
5. Restitution
 § 370 Restitution = benefit conferred onto other party
 off contract  can recover under restitution even if there was never an enforceable
contract
 When do we see restitution come into play?
 When the underlying contract is unenforceable
 When it is difficult to prove expectation and reliance
 When the non-breaching party had a losing contract
 Opportunistic breach (§ 39)
 When the party seeking damages is in material breach
 Non-breaching party can recover restitution for benefit conferred, measured by:
 Market value of service OR
 Increase in other party’s wealth (value)
 Losing Contract (for non-breaching party only): Four Ways to Calculate Restitution
 Full value of benefit conferred (full value of performance)
 Capped at contract price
 Capped at expectation damages
 Loss sharing  (contract price) x (percentage of work completed)
1. Percentage of work completed = ($ spent so far / $ expected to
spend)
  All questions of apportioning loss
 Opportunistic Breach (§ 39) – Non-breaching party ONLY
 Very controversial – courts are split
 Breaching party is better off for their breach AND damages available to non-
breaching party are inadequate
 Expanding the notion of “benefit”
 Restitution for the party in breach
 Entitled to benefits conferred on non-breaching party (has to realize the benefit,
If the tear down the incomplete house  no benefit
 HOWEVER: When you are the party in breach and sue in restitution - if the party
not in breach would be left with LESS than expectation damages - then we can
adjust 2-718(3)
6. Can’t Recover for Avoidable Losses
 § 350 Could have avoided the loss without undue risk, burden, or humiliation? 
unrecoverable
 When do other opportunities count as lowering the damages that the non-breaching
party can receive
 Reasonableness depends on the facts
 Substantially similar offers will count against you EVEN IF YOU TURN THEM
DOWN
 Has the party made reasonable, unsuccessful efforts to avoid loss / get replacement
job?  can still recover
 Reasonableness is determined by a jury
 Substantially similar substitute?  materially inferior, you don’t have to take it
 Can argue both ways
 UCC incorporates same principles in their damages
7. Consequential Damages
 Hadley Principle: Special or consequential damages are recoverable when they are
foreseeably probable as a result of the breach at the time the contract was made such
that the party in breach had reason to know they may occur (§ 351; UCC 2-715) (but
don’t flow naturally – you get those as general damages) (limitation on Hadley)
 Foreseeability means you knew an event was likely to occur
1. Need more than just a possibility
2. "Would a reasonable person with this knowledge have understood
that this was likely to occur"
 Tacit Agreement Test (rejected by RS/UCC): party in breach must have agreed to be
liable for consequential damages (Globe Refining)
 § 351(3): answer to tacit agreement / cabby hypo: court may limit these damages in
order to avoid grossly disproportionate compensation
8. Emotional Damages
 Not recoverable under § 353 unless for serious emotional disturbance (i.e. dead bodies)
9. Punitive Damages
 Not recoverable unless the conduct constituting breach is also a tort
10. Liquidated Damages Clauses
  Contracting around our default damages
 § 356 Reasonable estimate at the time it was made AND actual loss  all courts will
enforce
 If you are in a market when it is really easy to determine damages, courts will
not enforce liquidated damages clauses
 If you are in a market when it is really hard to determine damages, courts will
give you a little more wiggle room on liquidated damages
 If not reasonable at the time but turns out due to a fluke it is close to the actual loss -->
some enforce, some strike it down
 Reasonable at time of the contract but no there was no actual loss --> some enforce,
some strike it down
 Penalty (unreasonably large damages to try and stop you from breaching) are not
enforceable (§ 356)
 CAN YOU HAVE LIQUIDATED DAMAGES CLAUSES FOR EMOTIONAL DISTRESS: are we
allowed to contract it in?
 The harder damages are to determine, the more likely courts are to accept these
types of clauses ESPECIALLY if they don’t explicitly state it’s for emotional distress
 IF YOU THINK: we only don’t allow damages for emotional distress because we
don't want a jury to decide them --> might allow these clause
 IF YOU THINK as a matter of policy we should NEVER accept damages for
emotional distress no matter what in contract cases --> strike these clauses
down
 Limiting Damages (Contracting Down)
 Test is unconscionability [UCC 719(1)(a)]
11. Specific Performance
 Very discretionary; LOOK AT DAMAGES FIRST and if they are adequate don’t look here
 ASK: is the good unique AND are damages hard to calculate/ money damages not
enough to compensate?
 Land; Rothko painting
 Do we think as a practicable matter money damages will make the non-breaching party
whole?
 If yes  no specific performance
 If no  maybe specific performance
 ARGUE BOTH WAYS
 § 367(1) GENERAL RULE: When you have a personal service contract, the court is NOT
going to order someone to perform
 Negative injunction - when you can't order specific performance (ex. in a personal
service contract), you can try and prevent them from performing the duties for
someone else in the hope that it will induce them to honor their contract
 Lumley v. Wagner
 Relieves the party of any duties they have to the party they were going to
perform for after breaching the contract
 §367(2): Not going to allow this if it will really harm the party (i.e. not letting
Michael have a nurse and die)