Contracts I Bishop (Fall 2005)

1. Was there an Agreement?

Was there an Oer or a !romise?
*O"#ecti$e %heor& o 's: whether a reasonable person would have believed the other party intended to be bound
A. Oer: a manifestation of willingness to enter into a bargain leading another to understand that his assent to the bargain is
invited and will conclude it. 24 (Note: cu offer ma!es no unconditional commitment absent acceptance" its not a promise#
$. !romise: a manifestation of intention to act or refrain from acting in a specified way" so made as to justify a promisee in
understanding that a commitment has been made. 2
%. 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 recognies as a duty.
&. Content o oer or promise: essential terms ' missing terms (price" description" (uantity# though may be o! under )%%
*. +ffers or ,romises:
a. )nilateral: -./0 discount on mortgage if paid by a certain date (Petterson#
b. 1orebearance: -/"000 to forebear in use of tobacco" alcohol until 2* (Sidway#
c. +ral: ,rovide annual bonus in 2arch for sales agents ma!ing over -20"000 (Cook#
d. 3mplied: ,rovide child support after acting as father ' guardian for *0 years (Wright#
2. Not +ffers or ,romises:
a. 2ere 3nvitation to 2a!e an +ffer: 440 acres" need cash5 (Lonergan#
b. Newspaper Advertisement: 46ruc! for -7"000 and e8change5 (Izadi#
9. Conte(t o oer or promise: setting" method" relationship (board room" party" ad" family" business#:
*A promise may be oral" written" or wholly'partly inferred from conduct 4
*. +ffers or ,romises:
a. 1ormal subcontracting bid submitted by fa8 (rennan#
b. ;ritten offer of 2 year employment and pay raises (Crabtree#
2. Not +ffers or ,romises
a. Newspaper ad (mere invitation to ma!e offer" Lonergan# unless bait < switch (Izadi#
b. 1amily gift of -7"000 from aunt to nephew (gratuitous promise" ougherty#
Was the Oer or !romise %erminate) in *ome Wa&?
A. +etho)s o %ermination: re=ection" counter>offer" time lapse" revocation" death" or incapacity. 7?
*. Co,nter-Oer. proposing a substituted bargain differing from that proposed by the original offer.
3t terminates the offeree@s power of acceptance (7A# such as in case of additional or different terms /A
a. %ounter +ffer to buy car for -B00 after 9pstein offered it to me for -*"000
b. %onditional Acceptance to buy car for -*"000 on condition that 9pstein puts new tires on it
c. Additional 6erms to lease apartment if 3 can !eep a dog in the apartment
*2irror image %'C rule: not acceptance" but counter>offer if any material terms changed
*)%% 2>20. rule: additional terms o!ay if e8pressly assented to or performance !noc!s them out
2. /e$ocation. the une(uivocal renunciation of the offer through conduct or action by the offeror
a. &irect telling prospective buyer during negotiations 3 sold my house to another (!ormile# or telling
debtor that 3 sold off his mortgage and the discount@s off (Petterson#
b. 3ndirect Awareness ,acino wanted 9pstein@s car" but learns from Dtone that Dtone bought it
c. )naware (not sufficient# 3 announce in the shower that 3@m revo!ing my offer to sell my car
$. 0on-/e$oca"le Oers
*. Option Contract: an offer and an additional promise to hold the promise open for which there is some payment
for that additional promise.
a. ,rospective car buyer gives seller -/0 for one wee! to thin! about buying the car for -*"000
b. ,rospective real estate buyer gives seller a down payment as an option on a house
2. Firm oer r,le ()%% 2.20/#: sale of goods in which a merchant e8pressly promises in a signed writing not to
revo!e offer gives assurances that it will be held open" but no longer than 7 months (no consideration needed#.
7. /easona"le an) Foreseea"le /eliance
a. Dub contractor@s bid irrevocable once received and used in prime contract (rennan#
4. !erormance Beg,n in 1nilateral Contract: re(uires performance as only method of acceptance" but damages
are limited to reliance (not e8pectancy#
a. 9sptein offers me -*"000 to paint his house and 3 begin to paint his house (chec! this:#
b. Dales agent stays on for several months to get bonus orally promised by employer (Cook#
Was the Oer or !romise Accepte)?
A. Who can accept an oer? +nly the party to whom the offer was made
$. 2o3 can an oer "e accepte)?
*. &efault rule: any reasonable method
2. Eestrictions: an offer can specify certain means of acceptance (e.g. by mail" telephone" by a certain date#
7. Dtart of ,erformance: o!ay for bilateral contracts" not enough for unilateral contracts
a. $ilateral rule: implies acceptance and a promise to perform" thereby creating a bilateral conract
b. )nilateral rule: not enough to constitute acceptance and does not create a unilateral contract
i. 9pstein offers me -*"000 to paint his house and 3 simply start painting (chec! this:#
4. 2ailbo8 rule: an acceptance is effective when it is sent (all other communications only when received#
%. When can an oer "e accepte)?
*. 0ot Ater Co,nter-Oer. proposing a substituted bargain differing from that proposed by the original offer terminates
the offeree@s power of acceptance (7A# such as in case of additional or different terms /A
a. %ounter +ffer to buy car for -B00 after 9pstein offered it to me for -*"000
b. %onditional Acceptance to buy car for -*"000 on condition that 9pstein puts new tries on it
c. Additional 6erms to lease apartment if 3 can !eep a dog in the apartment
2. 0ot Ater /e$ocation. une(uivocally renouncing the availability of an offer through conduct or action
a. &irect telling prospective buyer during negotiations 3 sold my house to another (!ormile# or telling debtor that 3
sold off his mortgage and the discount@s off (Petterson#
b. 3ndirect Awareness ,acino wanted 9pstein@s car" but learns from Dtone that Dtone bought it
c. )naware (not sufficient# 3 announce in the shower that 3@m revo!ing my offer to sell my car
7. 1n)er 1CC
a. 1irm offer rule ()%% 2.20/#: sale of goods in which a merchant (business# e8pressly promises in writing not to
revo!e the offer gives assurances that it will be held open" but no longer than 7 months.
b. Farying terms rule ()%% 2.20.#: allows non>matching communications for non>material terms or so long as the
parties e8pressly get the other parties@ acceptance of such terms ("rown #achine$ %orning#
c. Gnoc!out rule ()%% 2.20.#: !noc!s non>common material terms out of contract ("rown #achine#
&'ample: , wants A"$"% and & wants A"$"1. 1inal contract is A and $ (% and 1 !noc!ed out# (%H9%G:#
4. 1n)er Common 4a3
a. 2irror image rule: not acceptance" but counter>offer if any material terms changed
b. Cast shot rule: silence interpreted as acceptance of last form if performance follows (Princess Cruises#
Was there Consi)eration?
A. Consi)eration 5eine). a bargained for e8change including acts" forebearance" promises" or other rights .*
*. 6,estions. &id A as! for anything in e8change for $@s promise: &id $ give up the thing A as!ed for:
2. Consi)eration
a. Agreement to pay for goods or services paying for house construction (&urice ( "ros#
b. 1orebearance giving up li(uor and tobacco for a few years in e8change for -/"000 (%amer#
c. +ption contract paying -*0 to !eep chance to sell land open for *20 days ("erryman#
d. Ade(uacy irrelevant see!ing loan of -2/ and agreeing to repay it with -2"000 ("atsakis#
e. %onditional promise: enforceable even if remote contingency (e.g. if I% wins the bid" sub will be used#
7. 0o Consi)eration
a. )nsought forebearance delay suit for convenience < not as product of negotiations ("aehr#
b. Iratuitous promise offer nephew -7"000 in note w'o anything sought in return (ougherty#
c. ,ast performance offer lifetime pension for past services rendered by wor!ers (Plowman#
d. %ondition subse(uent pic!ing up pension chec! for past services rendered (Plowman#
e. %haritable gift pledge to pay -/"000 to charity without negotiating conditions ()llegheny#
f. 3llusory promise designer retains right not to use celebrity@s endorsement at all (Wood#
g. 1alse recital of consideration: note referring to made up 4valuable consideration5 (ougherty#
h. ,re>e8isting legal duty
4. Consi)eration 0ot 0ee)e). Antece)ent Consi)eration78nrichment an) a Fresh !romise
*1resh promise waives promisor@s intent to use the legal defense rather than operating as a new promise
unsupported by consideration" so the past consideration is sufficient
a. Eenewed ,romise to ,ay &ebts After Dtatue of Cimitation (B2#
b. Eenewed ,romise to ,ay &ebts After $an!ruptcy (B7#
c. Eenewed ,romise After Foidable &uty (B/#
d. ,romise for $enefit Eeceived to the e8tent its necessary to prevent in=ustice (B?#
i. 9nforceable: -70 a month promise by boss whose life had been saved #c*owin
ii. )nenforceable: &ad@s promise to pay debt to man who cared for his dying son #ills
2. Was there /eliance or 1n#,st 8nrichment?
A. !romissor& 8stoppel 5eine): a promise that is relied on" that the promise ma!er should have reasonably e8pected to be relied on"
and for which in=ustice can be avoided only by enforcement. A0
$: /ole o /eliance
*. 9nforcing a contract without consideration (%h 2#
2. 9nforcing a contract without acceptance (%h 7# (pre>contractual reliance#
7. ,reventing the assertion of a Dtatute of 1rauds defense (%h 4# (post>contractual reliance#
%. 'e& 6,estions:
*. ;hat did the relying party do differently: (e.g. gave up a =ob" sold a house" moved states#
a. Don gave up his home" moved his family" and improved the home his mom promised him (*reiner#
b. 2om gave up career < search for birth father cu boyfriend supported child for years (family" Wright#
c. $) hired professional staff to inde8 and care for Ging@s collection (charitable gift" +ing#
d. Daleswoman stayed with employer for several months get bonus (oral promise" Cook#
e. 1ranchise didn@t renew current lease on assurances that new one would be ironed out (Pop,s Cone#
2. &id or should the promise ma!er have !nown that his actions would reasonably induce the other party@s reliance:
a. Dubcontractor !new the I% would rely on its bid to ma!e and win the prime contract (rennan#
b. $an! li!ely !new homeowner wouldn@t pursue insurance when ban! said it would (Shoemaker#
c. $oss e8pected employee would rely on pension offer in decision to retire (commercial conte8t" +atz#
&. Amo,nt o /eliance 0ee)e) an) 5amages
*. A0: binding but limited as =ustice re(uires (e.g. bilateral G under which party could have =ust accepted to bind the offeror#
2. 4/: little reliance needed (start'tender performance# (e.g. unilateral G under which parties can recover for lost profits#
7. B.: re(uires substantial reliance (e.g. general contractor@s reliance on a sub>contractor#
4. *2A: specific enforcement of land Gs to overcome D+1 writing re(uirement
/. *7A: enforceable but limited as =ustice re(uires (e.g. reliance overcomes D+1 writing re(uirement based on listed factors#
9. /estit,tion 5eine)
1. 'e& 6,estions
*. ;as any promise involved:
2. ;as a benefit conferred:
a. 6hrust upon party without re(uest (officious#: (e.g. man shovels wal! w'o as!ing then demands -20#
b. Eeasonable e8pectation of repayment: (e.g. emergency services (yes#J birthday gift (no##
I. 9lements of )n=ust 9nrichment: , conferred benefit on &J & had !nowledge of the benefitJ & accepted or retained the benefit
conferredJ it would be ine(uitable for & to retain the benefit without giving compensation
H. /estit,tion
*. $oyfriend un=ustly enriched by -*.* million wealth increase since wife gave up career to care for !ids (Watts#
3. 0o /estit,tion
*. Hospital provided services to man involuntarily committed for bipolar disorder (Pelo#
2. $uilding that paid general contractor not un=ustly enriched when I% didn@t pay sub>contractor (Commerce#
K. !romissor& /estit,tion. 98press promise to pay for services but only after the benefits are received (enforceable if not gratuitous
or officious and only to the e8tent =ustice re(uires B?#
*. 1ather@s promise to pay stranger who previously too! care of his dying son not enforceable (7
rd
party" #ills#
2. $oss@s promise to pay employee disabled because he saved boss from fatal accident enforceable (Webb#
9. An& Other /eason this Agreement *ho,l)n:t "e 8norce)?
A. 4ac; o Capacit&: each party must have the legal capacity to contract (under *B" mental limitations" into8icated#
$. &ealings of the parties
*. 5,ress< 1n),e Inl,ence< +isrepresentation< 0on-)isclos,re
a. Deller threatens to shoot buyer@s dog if he doesn@t enter the agreement (physical threat of duress#
b. Deller refuses to deliver goods buyer is relying on for business until he reorders (economic duress#
c. Deller believed house had no termites and told buyer that" but it turns out it does (misrepresentation#
a. Deller !new house had coc!roaches" but purposely didn@t disclose the information (non>disclosure#
%. ,roblems in the substance of the deal
*. Illegalit&< Contra$enes !,"lic !olic&< 1nconsciona"ilit&
a. A deal to !ill people (illegality#
b. A deal to prohibit tavern owner from ever opening another tavern (unfair restraint on right to contract# c. A deal
whose terms were oppressive at the time the contract was formed (unconscionability#
&. +ista;e (parties@ beliefs#: a party on its own mista!enly reaches a wrong idea or conclusion
*. Eule: where there is a mutual" material mista!e it is grounds for not enforcing a deal
a. $uyer and seller independently reached wrong assumption that a cow they were e8changing was barren
9. Am"ig,it& in the agreement
*. Ee(uirements: term w' at least 2 reasonable meanings" each party w' a different one in mind" < neither party w' any reason
to !now the other party has a different one in mind (if only * party" court might enforce on its terms as the only innocent#
a. ,urchase agreement derailed by 2 sailings (+ct < &ec# which the parties weren@t aware of (,eerless#
1. +issing %erms in the agreement
*. !ostpone) Bargaining. %he =Agreement to Agree>: certain terms postponed for later decision
a. Gey: whether either party !new or had reason to !now meaning attached to G by other (if so" bound#
b. )%% 204>7: a contract doesn@t fail for indefiniteness if parties have intended to ma!e a contract and there@s a
reasonably certain basis for giving an appropriate remedy.
c. 6o avoid being bound during negotiations: ma!e intent not to be bound crystal clear until final G@s signed
d. Gey 6erms Needed: *0 year additional lease w'o mutually fi8ed price (no contract" Walker# (may be o! under
)%% so long as seriously intended and a wor!able formula is included in the deal#
1. *tat,te o Fra,)s
*;as contract within the statute of frauds: Les D+1 applies" if over * year" sale of goods over -/00" etc.
*;as there a writing that satisfies the D+1: Les" if there are writings signed by & which would satisfy.
*3f not" any other reason why D+1 doesn@t apply: Les if part performance (*2A# or promissory estoppel (*7A#
*. $asic 3dea: forbid enforcement unless there@s a writing signed by & with the material terms
2. Eationale: to prevent fraud out of a concern that parties will allege there was an agreement when there wasn@t
7. Big 9 *tat,te o Fra,) areas 7 4ittle 9 *tat,te o Fra,) areas
a. Dale of goods for -/00 or more or lease of goods for over -*"000
b. 6ransfer of interest in real estate (no * year re(uirement according to $ishop e.g. ? month lease is o!ay#
c. Dervices contracts not capable of being performed within * year of date of the contract
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
d. ,romises to a 7
rd
party to answer for the debts of another
e. ,romises in consideration of marriage
f. ,romises by an estate representative
4. Within *tat,te o Fra,)s
a. Agreement to sell property for -400: selling property is forever and -/00 is a separate category
b. An easement for 2 years: e8ceeds * year re(uirement
c. An agreement to wor! for 2 years: e8ceeds * year re(uirement ()laska emocratic Party#
d. 1uture deal over * year away: e8ceeds * year re(uirement (e.g. 7 hour lecture *? months from now#
/. 0ot Within *tat,te o Fra,)s
a. * year lease not within D+1 because it doesn@t e8ceed * year re(uirement
b. Cifetime deals: not within D+1 because you could die tomorrow
c. 6as! completion: not within D+1 because always possible to complete in * year w' unlimited resources
?. Writing /e?,irement (satisfying the D+1#
a. Writing signe) "& 5: must be a writing signed by the party against whom enforcement is sought
b. +,ltiple 3ritings o;a&. separate letters offering 2 year term with raises every ? months (Crabtree#
c. All material terms in 3riting: who is ma!ing the agreement and what each person is agreeing to do
i. $oston Eed Do8 agree to employ ,edro 2artine as a pitcher for -20 million a year for * year.
*& need not have signed the writing intending to meet the D+1" the writing need not have been given to ," the
writing can be from after the formation of the contract
.. !artial or F,ll !erormance A"sent Writing
a. Eeal estate: an oral agreement will satisfy D+1 if 2 of the 7 are met (%H9%G 6H3D:#
i. $uyer@s payment in full or in part
ii. $uyer@s possession of the land
iii. $uyer@s improvements to the land
*+nly specific performance can be sought" not monetary damages (lease reneged" Winternitz#
b. Dervices: part performance never enough to satisfy D+1 (oral agreement to wor! *7 months" . done#
B. 1CC 8(ceptions that %a;e Contract O,t o the *tat,te o Fra,)s (D+1 cannot be asserted#
a. ,art performance: payment or goods delivered < accepted (orally purchased barns delivered" "uffaloe#
b. 2erchants e8ception: buyer through un(ualified ob=ection must repudiate agreement sent by seller w'in *0 days
in writing (purchase orders sent and !ept without ob=ection satisfy D+1 even absent seller@s signature" "azak#
*Dtill re(uires evidence of a deal to ensure unsolicited ' fabricated purchase orders aren@t deemed binding
c. Dpecial manufacture < substantial beginning of manufacture: since goods aren@t suitable for sale to others
A. *OF /eliance. remedy limited based on the following criteria
a. the availability'ade(uacy of other remedies" particularly cancellation and restitutionJ
b. the definite and substantial character of the action or forbearance in relation to the remedy soughtJ
c. the e8tent to which the reliance corroborates evidence of the ma!ing and terms of the promiseJ
d. the reasonableness of the action or forbearanceJ
e. the e8tent to which the action or forbearance was foreseeable by the promisor
@. What are the %erms o the Agreement?
*Agreement" $argain" %ontract (from most inclusive to least inclusive#
*. 1n)er 1CC
a. 1irm offer rule ()%% 2.20/#: sale of goods in which a merchant (business# e8pressly promises in writing not to
revo!e the offer gives assurances that it will be held open" but no longer than 7 months.
b. Farying terms rule ()%% 2.20.#: allows non>matching communications for non>material terms or so long as the
parties e8pressly get the other parties@ acceptance of such terms ("rown #achine$ %orning#
c. Gnoc!out rule ()%% 2.20.#: !noc!s non>common material terms out of contract ("rown #achine#
&'ample: , wants A"$"% and & wants A"$"1. 1inal contract is A and $ (% and 1 !noc!ed out# (%H9%G:#
d. 3mplied ;arranty of 2erchantability ()%% 2>7*4#: goods are fit for ordinary uses.
&'ample- breach if restaurant serves contaminated food cu its business is selling food (but not church#
2. 1n)er Common 4a3
a. 2irror image rule: not acceptance" but counter>offer if any material terms changed
b. Cast shot rule: silence interpreted as acceptance of last form if performance follows (Princess Cruises#
7. %railing %erms: terms sent after purchase" such as in shrin!>wrap with a computer
a. 2erchant>to>merchant (2>20.#: additional terms become part of G if immaterial or w' e8press assent
b. 2erchant>to>consumer (2>20.#: no additional terms become part of G absent e8press assent (+locek#
c. 2ar!et efficiency: consumer bound by computer@s 70 day accept>or>return policy (%ill#
4. !arol 8$i)ence /,le. a written version of a deal controls anything that came before because it@s more reliable
a. ;holly 3ntegrated: a written agreement the court decides was meant to be the final version of the deal (merger
clause suggests its wholly integrates" though not *00M determinative#
b. ,artially 3ntegrated: a written agreement the court decides doesn@t include all the deal@s terms
c. ,arol 9vidence: a statement by * or both parties made before they entered the integrated agreement
d. Ieneral ,arol 9vidence Eule: do not even admit or loo! at parol evidence to change a later writing.
i. 98ceptions: in which parol evidence is always admitted
i. Ambiguous term: admissible to e8plain term (e.g. what 4chic!en5 means .rigaliment#
ii. %onsistent additional term to a partially integrated agreement: admissible to add terms (e.g. how
chic!ens were to be wrapped in an agreement that doesn@t specify#
iii. 9stablishing a defense: admissible to get out of G completely because of a defense such as the
other party@s misrepresentation or an unwritten condition (e.g. getting financing from the ban!
before moving ahead with the contract#
*Note: you cannot use parol evidence to change a term of an agreement
ii. 1actors to weigh: merger clause (presumption of integration#" e8tent of prior revisions'past negotiations
/. /oles o A,)ge an) A,r&
a. 3nterpretation: =udge interprets whether there@s ambiguity" =ury decides whose meaning wins
i. 6raditional means: plain meaning rule (e.g. ambiguity on its face#
ii. 2odern use of e8trinsic evidence to establish conte8tual interpretation
b. 3ntegration: =udge determines whether writing is partially or fully integrated =ury decides if < only if consistent
additional terms were made
i. 6raditional means: / corners rule (e.g. merger clause#
ii. 2odern use of e8trinisic evidence: trade usage" testimony" preliminary negotiations" reference to an
e8ternal standard" course of performance
iii. 3ntermediate rule: patent (4 corners rule# vs. latent (e8trinsic 7
rd
party evidence#
?. !art& /esponsi"le or Am"ig,it&
a. $oth N both parties !new or should have !nown about the other@s understanding" but proceeded without correcting
the mis>impression
b. Neither N neither party !new about the other@s meaning
c. +nly innocent N only * party did not !now and should not have !nown about the other party@s understanding
(other party proceeded w'o correcting mis>impression# N this is the only way to win P has to prove that other
party knew or should have known about Ps meaning
.. 2a8ims
a. %onsistent
b. Ambiguity against the drafter
c. 98pression of one e8cludes the other (e.g. listing dogs and cats e8cludes rabbits#
d. +f the same !ind or class
e. Dpecific over general
f. Negotiated terms over boilerplate terms
g. %onsistent with public interest
B. Not ,arol 9vidence if term is ambiguous (e.g. can be brought in#
a. %ourse of performance ()%% 2>20B#
b. %ourse of dealing ()%% 2>20/#
c. )sage of trade ()%% 2>20/#
d. %ollateral agreement
A. Implie) %erms
a. Iood 1aith ' 1air &ealing: an obligation for what a reasonable party would do with respect to e8press terms
i. 98clusivity: seller@s implied reasonable efforts to ensure profits on endorsed clothing (Wood#
ii. &iscretion: movie company@s bad faith in not producing any of Coc!e@s proposed movies (Locke#
iii. Ee(uirements ' +utput: can buy more'less than G if in good faith but not from another seller (&mpire#
iv. At>;ill 9mployment: good faith doesn@t apply since it negates e8press termination term (onahue#
*Note: a company will be held to its own policy manual procedures" but that@s it
b. Notice of 6ermination: reasonable notice re(uired to terminate oral agreement for sale of goods (Leibel#
*Note: a reseller of goods ()%% applies# but bro!er who merely provides distribution service ()%% doesn@t apply#
*Additional consideration: a boss says there@ll always be a place at our bi if you@d be willing to file these papers
(this may be enough to overcome the at>will employment presumption#
c. 2utuality of +bligations: unless both parties are bound under the agreement" neither party is bound
10. Warranties
a. ;arranty &efinition: any promise related to the sale of any item (usually the (uality of it#
b. 98press ;arranties (2>7*7#: by words" description" sample" or model
i. &istinguish between factual representations (e.g. fastest in its class# < mere puffery (e.g. best in its class#
c. 3mplied ;arranty of 2erchantability ()%% 2>7*4#: goods would pass without ob=ection in the trade (are of good
(uality# and are fit for the ordinary purposes for which such goods are used (defect issue#. Ee(uires the seller to be a
merchant of goods of that !ind.
i. %an be e8cluded'modified by a seller so long as it is e8plicitly stated (e.g. AD 3D#
d. 3mplied ;arranty of 1itness for a ,articular ,urpose ()%% 2>7*/#: created only when the buyer relies on the
seller@s s!ill or =udgment to select suitable goods and the seller has reason to !now of this reliance. Ee(uires a
showing that the goods are not fit for the buyer@s particular purpose which the seller !new (almost impossible to
argue against a manufacturer since manufacturer wouldn@t !now specific purpose "ayliner#
i. %an be e8cluded'modified by a seller so long as it is in writing and e8plicitly stated (e.g. AD 3D#
e. 3mplied ;arranty of Habitability: there may be an implied warranty of s!illful construction in the sale of a newly
constructed home (Caceci#
f. 2erger clauses: a merger clause does not negate an implied warranty unless e8plicitly stated (e.g. AD 3D#
g. 3nconsistent disclaimers: have no effect on a warranty (e8press or implied#
5. 4egal Conse?,ences or Breaching an Agreement (e.g. reme)ies)?
A. !re-/e?,isites: there was an agreement and there was no e8cuse for its breach.
$. *peciic !erormance: re(uiring the party to do what she agreed to do
*. Eeal estate deals: buyer can always get specific performance (each piece of real estate is uni(ue#
2. Dervices contract: can never get specific performance (maybe injunctive relief#
7. Dale of goods: can get specific performance only if goods are uni0ue (e.g. a ,icasso" special widget#
%. +one& 5amages
*. ,unitive damages: generally not recoverable in contract law
2. Ci(uidated damages: a provision that sets the amount of damages will be deemed valid only if its tied to
compensating the non>breaching party rather than punishing the breaching party
a. Det sum li!e -*0"000: li!ely to be punitive (invalid#
b. 1le8ible approach li!e -*"000 a day each day late: li!ely to be compensatory (valid#
7. 98pectation 3nterest: putting non>breaching party in same economic position as if G@d been performed.
a. &'ample- Homeowner contracts with a guy to have her home painted for -/00. ,ainter doesn@t do it.
,ainter has to pay someone else -?00 to do it. &amages: -*00.
4. Eeliance 3nterest: putting non>breaching party in the same economic position as if there had never been a contract.
a. &'ample: 3n reliance on starting a 2c&onalds franchise" 3 spend -."000 to build a golden arch.
2c&onald@s breaches. &amages: 2c&onald@s owes me -."000.
/. Cimitations on 2oney &amages
a. Eeasonable %ertainty rule: , must prove money damages with reasonable certainty.
b. Avoidable &amages rule: , cannot recover for damages she could have avoided.
c. 1oreseeability Cimitation rule: , cannot recover for conse(uential damages unless the damages were
foreseeable by the defendant at the time the contract was entered into.
i. %onse(uential damages: special$ uni0ue to a particular plaintiff and you can only recover if the
defendant was aware of ,@s circumstances.
ii. &'ample: +wner of beach house tells painter it needs to be done by Dunday to rent it for a
wedding (special circumstances#. 3f painter breaches" owner can get conse(uential damages.