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CONTRACTS OUTLINE

Professor Jason Johnston

FALL 2013
UNIVERSITY OF VIRGINIA SCHOOL OF LAW
North

TERMS DEFINED
AGREEMENT, BARGAIN, AND CONTRACT
1. There is an AGREEMENT IF
a. There is a manifestation of mutual assent on the part of two or more persons.
2. There is a BARGAIN IF
a. There is a manifestation of mutual assent on the part of two or more persons
b. to exchange promise for promise, promise for performance, OR performance for performance.
3. There is a CONTRACT IF
a. There is a manifestation of mutual assent on the part of two or more persons
b. to exchange promise for promise, promise for performance, OR performance for performance
AND
c. consideration.

PROMISE
1. A PROMISE is
a. EITHER an undertaking to act OR to refrain from acting
b. In a specified way
c. At some future time.

CONDITION
1. A CONDITION is
a. an event not certain to occur,
b. which must occur,
i. UNLESS non-occurrence is excused
c. before performance under a contract becomes due.

VOIDABLE, VOID, AND UNENFORCEABLE CONTRACTS
1. A contract is VOIDABLE IF
a. One or more of the parties have the power (though they are not compelled to exercise that
power) to avoid the legal relations created by the contract.
2. A contract is VOID IF
a. The law neither gives remedy for breach nor recognizes a duty of performance.
i. NOTE: Such a promise was never, technically, a contract at all.
3. A contract is UNENFORCEABLE IF

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AGENCY
1. AGENCY (which can be DISCLOSED or UNDISCLOSED) occurs when
a. A PRINCILPE manifests consent that an AGENT is to act BOTH on his behalf AND subject to
his control, AND
b. The AGENT consents to so act.
2. An Agent may possess one of following types of AUTHORITY
a. ACTUAL Authority; OR
i. An Agent has Actual Authority IF
1. The PRINCIPLE‟S words or actions would lead a REASONABLE PERSON in
the AGENT‟S POSITION to believe he had been so authorized to act.
a. Consider:
i. Words used,
ii. customs, AND
iii. relations of the parties.
b. APPARENT Authority; OR
i. An Agent has Apparent Authority IF
1. The PRINCIPLE‟S words or actions would lead a REASONABLE PERSON in
the THIRD PARTY‟S POSITION to believe the agent had been so authorized to
act.
a. NOTE: Principal may have placed non-apparent RESTRICTIONS on the
Agent‟s Authority.
c. INHERENT Authority.
i. An Agent has Inherent Authority IF
1. The COMMUNITY REASONABLY ASSOCIATES a degree of Authority with
the AGENT‟S POSITION, even if there is no Actual Authority.
a. NOTE: Inherent Authority is not recognized in all jurisdictions.
ii. PRO: Principals benefit from having agents work on their behalf, so they should also be
liable for the excesses and failures to act carefully of agents.
iii. CON: We want liability based on agency to result from authority, not from mere
relationship.

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CAPACITY TO CONTRACT
CAPACITY TO CONTRACT
1. A person has the capacity to incur at contractual obligations UNLESS
a. he is under GUARDIANSHIP, or
i. A person is under guardianship IF his property is under guardianship by reason of
adjudication of mental illness or defect.
b. he is a MINOR, or
i. In which case he has capacity to incur ONLY voidable contracts until he turns 18.
c. he is MENTALLY ILL or DEFECTIVE, or
i. In which case IF he is unable to reasonably understand the nature and consequences of
the transaction OR is unable to act reasonably in relation to the transaction THEN he has
capacity to incur ONLY VOIDABLE contracts. (Additional rules in RST §15(2))
d. he is INTOXICATED.
i. In which case IF the other party knows or should know that he is (1) unable to reasonably
understand the nature and consequences of the transaction OR is (2) unable to act
reasonably in relation to the transaction THEN he has capacity to incur ONLY
VOIDABLE contracts.

Case Law – Capacity to Contract
Zehmer
Δ argued that he was too drunk when he entered into the contract with Π, so that the contract should be
voidable. HELD, he wasn‟t too (1.d.i) drunk because he was able to write out a very detailed contract
for sale and otherwise acted reasonably, thus the contract was valid.

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OFFER (Formation needs Offer, Acceptance & Consideration)
NOTE: AN Ω MAY REVOKE HIS OFFER AT ANY TIME, LIMIT THE PERSONS WHO MAY ACCEPT, AND STIPULATE THE FORM OF ACCEPTANCE.

1. A communication (whether words or conduct) is an offer IF
a. Another would REASONABLY UNDERSTAND (held to professional standard of
reasonableness if it‟s a sophisticated business exchange) that the communication IS EACH
i. A manifestation of willingness to enter into a bargain AND
ii. That assent to that bargain is invited and will conclude it AND
iii. The terms of the contract are REASONABLY DEFINITE. (Zehmer)
1. Terms are reasonably certain IF they provide a basis for BOTH determining the
existence of a breach AND an appropriate remedy.
2. INDEFINITE TIME OF PERFORMANCE: Contract can still be valid.
“Reasonable time” for performance is assumed. See class notes and RST §33.
3. INDEFINITE PRICE: Contract can still be valid UNLESS parties manifested an
intention not to be bound without a fixed or agreed to payment. The price
assumed is then a “reasonable price.” See class notes and RST §33.
b. UNLESS the person communicated to knows or should know that the communicator does not
intend to conclude the bargain until he has made a further manifestation of assent (e.g. an
advertisement).
i. UNLESS the advertisement is clear, definite, and leaves nothing open to negotiation.
(Lefkowitz)
ii. NOTE: Lack of definiteness of terms is another reason advertisements are often not held
to be offers.
c. NOTE: IF there is sufficient mutual assent, THEN it is not invalidating that the parties intend to
put the contract into writing UNLESS circumstances show that the agreements are but
preliminary negotiations.
2. IF an offer does not require acceptance in a specific form (or if there is doubt as to the form required),
THEN the Θ may choose to accept by EITHER promising to perform what the offer requests OR by
rendering that performance.
3. An offer may propose a single contract or a number of contracts. See RST §31.

WAS THE OFFER TERMINATED?
1. An offer may be terminated by
a. Rejection by Θ, OR
i. UNLESS the Ω has indicated that such action will NOT terminate the power of
acceptance.
ii. Termination goes into effect upon receipt of the communication.
b. or counter-offer by Θ, OR
i. UNLESS the Ω has indicated that such action will NOT terminate the power of
acceptance.
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5 . If an offer is made in a public manner (e. Termination goes into effect upon receipt of the communication.a) reasonable person would have thought the commercial was a serious offer. and left nothing open to negotiation. f. because it (1. and because no (1. because that‟s (1.a and 1.g. UNLESS the Θ has indicated that his counter-offer will NOT constitute a rejection of the original offer. but later claimed that he meant it only as a joke. the revocation must be made in an equally public manner.a) constituted an offer. e. Thus. OPTION CONTRACT BY PART PERFORMANCE (GTM’s Artiste Example) 1.b. d. Case Law – Offer Zehmer (Objective Theory of Assent) Δ entered into a contract for the sale of land to Π. ii. Leonard (Objective Theory of Assent) Π bought enough Pepsi points to „purchase‟ a Harrier Jet for the price displayed on Pepsi‟s TV commercial. the advertisement was a valid contract. conduct that indicates revocation counts) ii. OR Non-occurrence of any conditions of acceptance required by the offer.i-iii) actions and words would have indicated to a reasonable person that the contract was serious.c. the contract was valid. OR i. Court was very textual.b) was based on an advertisement. iv. HELD. Revocation need not be direct (e.i) the advertisement was clear.” HELD. Π argued that there was a contract formed when Δ wrote “I am asking 23 cents per pound for the seeds” and Π responded “I accept your offer. the contract was not valid.a. An offer is revocable even if the Ω says it isn‟t in the offer.. there was no contract formed. after Δ mailed Π a letter quoting prices for jars that included the phrase “for immediate acceptance” which Π accepted. HELD. Courteen Seed Δ was sued by Π after Δ refused to ship clover seeds to Π. thus the contract was valid. a newspaper ad). Death or incapacity of Ω or Θ. HELD. because (1. iii. Thus. iii. Power of acceptance is terminated when Θ receives the revocation. definite. Δ‟s communication was (1. THEN an option contract is formed when the Θ begins the invited performance. Revocation by Ω. IF an offer invites acceptance by performance (NOT a promise). OR i. Δ‟s communication (1.b) not how contracts are usually formed. Lefkowitz Π sued because Δ put out an advertisement saying that the first person to show up to the store with $1 would get a brand new coat worth $149..g. What constitutes a “reasonable time” is a question of fact. Δ‟s (1.b) not an offer because it ASKED for a price per pound. Lapse of specified (or reasonable. Fairmount Glass Π sued Δ because. if none is specified) time. not OFFERED one. Δ refused to deliver the jars because it was out of stock. HELD.

Acceptance & Consideration) 1. ACCEPTANCE (Formation needs Offer. but chose instead to let P discover it manually. Case Law – Acceptance Ever-Tite Acceptance by performance begins upon leaving: P attempts to accept by commencing performance. 1. this is an offer for the first to show up. Is made in the manner invited or required (this is malleable. An offer can only be accepted by the person from whom the offer invites acceptance. i. When P shows up. Another would REASONABLY UNDERSTAND that the communication IS EACH i. AND the offer is accepted within a reasonable period of time. Offeror gives reason to understand that assent may be given this way AND the offeree intends to accept by remaining silent. A manifestation of assent by promise or performance to the terms made in the offer AND ii. b. as written in the contract. Acceptance by PROMISE must be communicated to the offeror. 3. b. Part performance rendered before offeree knew about the offer can still count as acceptance upon completion 2. 6 .” Because the issue of insufficient quantity has been solved. THEN his partial performance does not constitute an acceptance IF he notifies the offeror of non-acceptance in a reasonable time. IF offeree renders partial performance and then decides not to accept after all. can argue it was merely a suggestion) by the offer. This is largely because P was acting on the contract within a reasonable timeframe. IF offeror invites acceptance by performance. (See Option Contract by Part Performance Section above) a. and D could have canceled by phone very easily. A communication is an acceptance IF a. b.Binding advertisement: store has an early bird advertisement which proclaims: “first come first served. Court holds that when P left is commencement of acceptance. Acceptance by PERFORMANCE requires that AT LEAST part of what the offer requests be performed. Acceptance can occur by SILENCE IF (§69) a. except as noted in §69. c. D says they canceled. 2. then offeree does not need to notify the offeror of acceptance by performance UNLESS offeror requests such notification. Further rules: See §54. c. Previous dealings make it reasonable to do so. P does this within a reasonable timeframe. Offeree takes benefit of the offered services despite reasonable time to reject them AND reason to know they were offered non-gratuitously.

Gateway (+ ProCD. Δ noted on forms that terms became binding if product was not returned in 30 days (Offer: SPECIFIED FORM OF ACCEPTANCE).Hill v. the forms were binding because they afforded Π the opportunity to return the product free of charge if they found they did not agree to the terms they found inside. except it was a shrink-wrap license in that case) Π‟s sued to get out of an arbitration clause because it was included on forms INSIDE the box. HELD. 7 .

mutuality of obligation. A promise/performance is bargained for IF the promise/performance is SOUGHT by the promisor IN EXCHANGE for his promise AND is given by the promise IN EXCHANGE for that promise. ii. UNLESS the promise is conditional and the promisor knows at the time of making that the condition cannot occur. 6. A performance may consist of an act other than a promise. Δ argued that not smoking as not a detriment so as to constitute consideration – in fact it was good for him. or benefit to the promisor. There was consideration ONLY IF a performance or return promise was BARGAINED FOR.a) Δ‟s promise was gratuitous. Kirksey Δ wrote to Π to say that if she were to come to see him. b. 2. UNLESS each of the alternative performances would have been consideration if it alone had been bargained for. advantage. i. a. or detriment to the promise. Although there was no benefit to the uncle. he would let her have a place to raise her family. there was a detriment. a gain. 3. THEN there is no additional requirement of a. Case Law – Consideration Hamer Δ promised Π that he would give Π $5000 if Π refrained from smoking or drinking for a period of years. even if better off: uncle promises money to nephew if he forbears from vice. Δ eventually ordered her to leave. 5. A bargained for promise is consideration IF AND ONLY IF the promised performance would be consideration. consideration was NOT VALID because Π‟s packing up and moving was merely a CONDITION TO RECEIVE A GIFT. OR the creation/modification/destruction of a legal relation. or a loss. HELD that. disadvantage. UNLESS the court determines (employing discretion) that the consideration is NOMINAL. a. Π packed her belongings and moved to Δ‟s land where she was housed for a period.a) forbore his LEGAL right to drink and smoke. because Π (3. UNLESS the forbearing/surrendering party BELIEVES in good faith that the claim may fairly be determined to be valid. Π sued for breach. UNLESS the performance is the forbearance/surrender of a legal claim which proves to be invalid. UNLESS the promisor reserves a right of alternative performance a. 4. HELD. See §76 for more. Acceptance & Consideration) 1. not bargained for. See §77 for more. OR c. equivalence in the values exchanged. and therefore there was consideration. UNLESS that performance is a legal duty owed to the promisor. There was no contract because (1. because the nephew forbore from exercising a legal right. 7. 8 . IF there is consideration. Forbearance of right. c. OR a forbearance. Π did refrain from doing so and sued for the promised sum. UNLESS there is good faith doubt as to whether the claim is in fact invalid. Any performance is consideration IF it is bargained for. OR b.CONSIDERATION (Formation needs Offer. there was VALID consideration for the agreement.

Wolford Δ promised to pay Π some $10. “good and valuable consideration. Batsakis Π and Δ contracted to exchange an amount in Greek Drachmae equal to $25 USD for $2. even if it wasn‟t a Contract.000 per month for her life. Π sued to recover on its loan to Δ. thus. the terms of the offer are a ploy to generate traffic.000 plus interest. a Binding Contract. No sham consideration: exchange of gifts for $1. Insufficient (non-nominal) consideration does not invalidate a contract. release of fake claims) Δ formally contracted with Π to provide her with $1. 9 . (6. Δ refused to pay. HELD. Moreover. HELD (relevant to promissory estoppel).a) acted in accordance with the demands of Δ‟s unilateral contract. and because (6. in its discretion. which required presentation within three minutes of wining. among other expensive things. and because saying you mean to make a valid agreement means nothing. Inadequacy of consideration will not void consideration. on which Δ was likely paying interest. Π did so name the child. Slight forbearance or benefit enough: Theatre promises money to those who loiter. and that constituted valid consideration and. so long as it is what both parties bargained for. that Π‟s CONSIDERATION WAS VALID. Π sued to recover on the agreement. the recited consideration was (7) consideration in name only and meant to take advantage of what was interpreted to be the formalistic nature of the consideration doctrine. HELD. because the court determined that. the statement “other good and valuable consideration. Traveling is a condition of the gratuitous promise. HELD.” and the release of all legal claims. because Π (1. East Providence Credit Union After a bunch of complicated loan/insurance finagling. the contract would be upheld.Condition of gratuitous promise: promise to support family is not binding – gratuitous promise. Π sued for breach of contract. Unequal terms irrelevant: man gave loan to woman in wartime for exorbitant payback. HELD. Adequacy of consideration is not to be questioned. that consideration was NOT VALID and the contract was unenforceable. HELD. but it constitutes a detriment.a-c) where there was no fraud and Δ got everything he contracted for. and she had no legal claims against him. so there is a benefit to the promisor as well. The contract also stated that it was intended to be valid. Π ended up gratuitously promising to pay Δ‟s car insurance premium. Court finds no consideration because $1 is nominal in value.a-c) no inquiry is to be made by courts into the values of furnished consideration. Courts will respect value parties attached to the transaction. Do not judge adequacy: promisor offers money in exchange for child to be namesake. Peter Π registered for a drawing. Detriment is extremely slight. The consideration furnished by Π was said to have been: one dollar. at Δ‟s business. The car got totaled and the insurance company refused to pay. Π could not recover because Π was adding the balance of the payments to Δ‟s loan principal. Δ argued that there was no consideration.a-c) the $25 USD in Drachmae constituted valid consideration for the agreement. Π didn‟t pay it and the insurance on the car lapsed. (6. St. so it does not constitute performance. In Re Greene (Nominal Consideration. Π won the drawing and presented herself accordingly (after a mix up that was the fault of Δ‟s agent).” and release of claims. “good and valuable consideration” is meaningless.000 if Π would name their child after him. Π sued for the money.

10 .it was promissory estoppel because Δ had relied upon Π‟s promise in that they forbore their right to procure their own insurance.

and the vagueness of the term of „employment‟ meant the arrangement was likely terminable at will. P failed to work at a certain point. but there was no way to compute that for bonuses and therefore the contract was void for indefiniteness. Under the UCC (maybe CL?). Because there was an external reference point. ii. the market. v. Price (unfixed by fault of party) Other party sets reasonable price OR voidable. Quantity Pretty sure this kills it. HELD. Price Reasonable price fixed by parties (or court). Timeframe for Performance Reasonable timeframe. a. Corthell Computable remedy + intent to be bound: promise to employee of reasonable recognition for inventions.i) the UCC provides default terms. Ditmars Uncomputable remedy: where D told P he would give him a “fair share” of his profits if he kept up the good work. sued for prorated partial recovery. recover under unjust enrichment. the contract was still enforceable because (1. Varney could. impossible to determine. this contract was valid and the ambiguous term was clarified by the courts. the following things can be worked around if left open: i.REQUIREMENT OF DEFINITENESS 1. THEN it‟s not binding.a. sumptuous living is (1) too vague to be enforceable. iv. IF the contract isn‟t definite enough. Term of Contract Until either party withdraws and gives reasonable notice vi. HELD. iii. however. Time of Payment Due at time and place buyer receives goods. “Fair share” often means market value. 11 . Wagner Excello Foods (UCC) Π and Δ did not include a price term in their agreement. Case Law – Requirement of Definiteness Trimmer (COMMON LAW) Π claimed that Δ agreed to “provide Π a lifetime of sumptuous living” if he were to devote all his time and attention to her.

and lending contracts. real estate contracts. Nature of supplier‟s business 3. 1. CONSIDER: Everything other than goods. Goods are defined as moveable things. Determine which (goods or services) is the predominant purpose of the contract. 1. THEN i. A purported acceptance with DIFFERENT or ADDITIONAL TERMS than the offer is a rejection and counteroffer UNLESS a. including service contracts. IF both parties performed. whereby the terms of the final document exchanged before performance becomes binding.COMMON LAW BATTLE OF THE FORMS NOTE: See “UCC §2-207: Battle of the Forms” for method of determining whether a contract is for goods (UCC) or services (CL). The Last Shot Rule applies. forming a contract. Language of the contract 2. Intrinsic worth of materials 12 . UCC MIXED COMMON LAW Applies to goods only. except money For mixed contracts for both goods and serviced.

etc.e.UCC §2-207: BATTLE OF THE FORMS FORK: If you try to apply this to a situation that resembles a traditional contract (i. .. then counter that THAT‟S NOT WHAT 2-207 ID FOR! This is where court screwed up in Step-Sav You have to say pretty much EXACTLY this in the form for this to apply. OR 13 Surprise – non-modifying party would not have reasonably known of/expected the alteration. FORK: Disclaimer of implied warranty or merchantability is a material alteration. NUT everyone disclaims warranty! SO how is that a surprise or hardship? Argue that shit.) . Step-Saver MATERIAL ALTERATION: Hardship – alteration shifts risks in a significant way. Ionics MERCHANT: “A person who deals in goods. bargaining for the terms. or by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction in question.

b. Whether the agreement at issue is the type of contract that is usually committed to writing 2. Settlement agreements ARE the sort of contract that is put into writing. The Court determines that it is a Type I agreement after considering the following four factors: i. Whether there is an expressed reservation of the right not to be bound in the absence of a writing. iii. AND v. Context was a project that was uncertain to succeed. Type II (SUCCESSFUL) a. Type I (UNSUCCESSFUL) a. The Court determines that it is a Type II agreement after considering the following five factors: i. All the terms were NOT agreed upon in the MOU. The necessity of putting the agreement in final form. 1.” d. but seemed like a promise to work together. 14 . b. Partial performance. ii. POLICY PRO: Preserve agreements intended as binding despite need for further negotiation and documentation. e. as indicated by the customary form of such transactions. 2. and Type II agreements offer a nice middle ground. There WAS an express reservation in the settlement agreement that it was not effective until signed by both parties. NO explicit reservation in the MOU. A preliminary agreement is binding as to the ULTIMATE CONTRACTUAL OBJECTIVE (Type I) IF a. Π HAD partially performed by working on rezoning. iv. AND iv. c. Π HAD partially performed by working on rezoning. There WERE open terms in the MOU. The existence of open terms. Future formal contracts were CUSTOMARY and the MOU contemplated them. Whether the intent to be bound is revealed by the agreement. That all the terms had NOT been agreed to. d. despite Δ‟s attorney saying that “they had a deal. c. Type I (UNSUCCESSFUL) a. Brown 1.BINDING PRELIMINARY AGREEMENTS These are somewhere in between a Contract (enforceable) and an Agreement to Agree (not enforceable). There was NOT partial performance. iii. b. d. Whether there has been partial performance of the contract. Case Law – Binding Preliminary Agreements Ciaramella 1. The context of the negotiations. A preliminary agreement is binding as to an obligation to NEGOTIATE the open terms IN GOOD FAITH in an attempt to reach the ultimate objective (Type II) IF a. Long-term business developments ARE the sort of contract that is put into writing. c. not necessarily to reach it. ii. Language revealed an INTENT to be bound to work towards the goal. and THUS not suited to binding contract. Whether all of the terms of the alleged contract have been agreed upon. POLICY PRO: We want to avoid trapping parties in surprise contracts.

Promissory Estoppel can be claimed IF EACH a. To answer for the duty of a dead person. The following types of contract fall under the Statute of Frauds: 1. 3) did not reasonably expect reliance. Availability and adequacy of other remedies (e. Reasonableness of the action or forbearance. 4. AND. 3. no expectation: widow promises to pay someone b/c of husband‟s wishes. Ricketts. that. Objective Standard) promise. AND b. The promise DOES induce such action or forbearance. because (c) Δ had not in any way relied upon the promise AND there was no past consideration to speak of. The requirement of a written memorial is satisfied IF i. Made in consideration of marriage. THEN the contract must be in writing.PROMISSORY ESTOPPEL (No Consideration) 1. EPCU. iv. AND v. A writing actually exists. restitution. To answer for the debt of another. AND c. HELD. 2. Feinberg. 15 . In this situation. iii. the court specifically considers: i. Extent to which the action or forbearance tracked to the promise. Injustice can be avoided only by enforcing the promise (at the court‟s discretion). then promise unenforceable. Promisor makes a (reasonably definite. 5. a. ii.g. 4) promise was not formal. OR 6. Red Owl) d. Signed by party charged with enforcement. ii. Interplay with the Statute of Frauds 2.000. 1) there was a promise. the promise could NOT be enforced on a theory of promissory estoppel. Contracts that cannot be performed within a year of making. Hayes. b. IF the contract is of the type that falls in to the Statute of Frauds. subject of K. AND iii. i. Exactly how “definite and substantial” the action or forbearance in question was. It contains the essential terms of the agreement (parties. terms of promises with reasonable certainty). For sale of interest in land. Extent to which that action or forbearance was foreseeable to the promisor. For sale of goods costing $500 or more. No reliance. 2) there was no reliance induced. 3. SQUIB ON THE STATUTE OF FRAUDS a. AND (Haase. Promisor should REASONABLY EXPECT that promise to induce the promisee to engage in an action or forbearance of a definite and substantial character. cancellation). Case Law – Promissory Estoppel Haase Π sued to collect on a consideration-less promise by Δ to pay $13. Promissory Estoppel can circumvent a violation of the Statute of Frauds IF BOTH the other requirements (a-c) are met AND the court (d) determines that injustice can be avoided only by enforcing the contract.

HELD. 2) grantee relies detrimentally on that promise by retiring (unable to find new job now). it was promissory estoppel because Δ had (c) relied upon Π‟s promise in that they forbore their right to procure their own insurance. HELD. that Π‟s (d) 17 day wait and missed opportunity to bid on two 16 . Π didn‟t pay it and the insurance on the car lapsed. the promise COULD be enforced on a theory of promissory estoppel. HELD. HELD (relevant to consideration). Π could not recover because Π was adding the balance of the payments to Δ‟s loan principal. 4) written on a note. Δ promised Π one week before Π was to retire that Π would be “taken care of. a Binding Contract. HELD. and that constituted valid consideration and. No inducement. then promise enforceable. wherein Π missed two opportunities to bid on other contracts. that. 2) with no formality. Enforceable promise. Π does so and eventually sues to collect on the promise. on which Δ was likely paying interest. 3) reliance was reasonable given formality. where employee showed uncertainty over whether the money would come (not reasonable to rely). the promise could NOT be enforced on a theory of promissory estoppel. 2) granddaughter quits. that. Perfect example: 1) employer calls a board meeting to formally make resolution to pay for retirement. Δ backed out after 17 days. Hayes (Employment) Π was a long-time employee of Δ company. because the promise (a) did not state the amount to be paid. East Providence Credit Union (Insurance) After a bunch of complicated loan/insurance finagling. Perfect example: 1) grandfather promises $ if granddaughter quits job. and because Π (c) had already decided to retire before the promise was made (and thus couldn‟t have relied upon it in making that decision). the promise COULD be enforced on a theory of promissory estoppel. thus.Ricketts Δ gratuitously promised Π a sum of money to stop working. 3) he intended for her to do so. that. not reasonable to rely: Promise given 1) to someone already retiring (no inducement). Feinberg (Employment) Δ promised to pay Π pension benefits for life were she to retire. Π ended up gratuitously promising to pay Δ‟s car insurance premium. where it was abnormal to get money for retirement. HELD. not enforceable promise. Π sued Δ under a theory of promissory estoppel. Coley (Preliminary Negotiations) Π and Δ both signed a “letter agreement” setting forth an agreement for Π to buy Δ‟s company. because Π had (c) quit her job because of the promise. and because Π would (d) be worse off for having quit if Δ didn‟t hold up his end. Π sued to recover on its loan to Δ.” Π sued to collect on the promise. The car got totaled and the insurance company refused to pay. because Π (c) did retire and because the court found as a question of fact that Π had relied on Δ‟s promise in deciding to (d) give up her employment. even if it wasn‟t a Contract.

(2. 17 . they would build a Red Owl store for Π to manage.” (2.contracts did NOT constitute a situation where injustice could be avoided only by enforcing the contract. POLICY CON: On the other side it can be argued that promissory estoppel is deliberately open-ended. and forwent other employment opportunities because of the promise.iv) moving there was not unreasonable given the contract.200 miles to Hawaii. recovery on a theory of Promissory Estoppel was ALLOWED.a. thus the contract could not be enforced on a theory of promissory estoppel. HELD. Thus. Π moved 2. because (2. the statute of frauds should be no less applicable than if the contract were supported by consideration or a seal rather than by promissory estoppel.a. and should therefore remain available to overcome.a. bought land. (2.a. Red Owl (Preliminary Negotiations) Δ‟s promised Π that. and (2. possible rigidities in the statute of frauds. and sold inventory/fixtures. in appropriate cases.i) no other remedy was adequate.ii) moving across the country is very “definite and substantial.a. Δ (c) induced Π to act to its detriment based on its promises because they sold their store.iii) moving to Hawaii was consistent with the promise of a job in Hawaii.v) moving to take the job was foreseeable by the promisor. McIntosh (Interplay with Statute of Frauds) Π sought relief for breach of a 1-year oral employment contract with Δ. Δ‟s continuously increased the price agreed upon to the point where Π had to sell inventory and fixtures on the promise that they‟d be in the new Red Owl in a few months. POLICY PRO: Since promissory estoppel is a method of establishing contractual liability. leased an apartment there. for a sum of money to be paid later. Monetti (Interplay with Statute of Frauds) Can promissory estoppel be used to avoid the limitations that the statute of frauds places on the enforcement of oral promises? POLICY PRO: A party to a contract for the sale of goods should not be allowed to get around the statute of frauds merely by alleging promissory estoppel and using partial performance to establish the necessary reliance in circumstances in which the requirements for the exception in the statute of frauds for partial performance would for one reason or another not be satisfied. and Π (d) would suffer injustice if the promise were not enforced. HELD that. Π sued on a theory of promissory estoppel. recovery on a theory of Promissory Estoppel was ALLOWED. Δ backed out. sold his belongings. After Π sold their grocery store and purchased a new plot of land.

The promise was made in recognition of a benefit previously received. Π did not expect to get compensation from Δ when he initially started caring for the son and no huge benefit/detriment. Employer then promises to provide financial support. (1. D then promises to reimburse P then reneges. It wasn‟t a gift. No expectation or huge benefit/detriment: P cares for D‟s son. Δ promised to pay Π for her expenses. (1.PAST CONSIDERATION (Consideration rendered before Promise made) 1. HELD. Case Law – Past Consideration Webb Π once saved Δ‟s life from a falling pine block and was seriously injured in the process. Because 1) P did not expect to get compensation from D when he initially started caring for the son. After it happened.b) injustice could only be avoided by enforcing the promise. Δ argued that there was no valid consideration. and 2) no huge benefit/detriment. HELD. A claim under Past Consideration can be brought IF EACH a. promise unenforceable. Π sued to collect. 18 . Δ promised to pay Π a monthly allowance for life. Enforcement is necessary to prevent INJUSTICE. AND c. Π sued to recover on that promise. promise unenforceable. Mills Π provided housing and care for Δ‟s son before the son died. Huge benefit/detriment + promise: employee attempts to save employer. b. Thus. and is crippled for life. D‟s son dies.a-c) not good enough.

and whom D did not intend to pay for. then this is satisfied. a. 1. Case Law – Unjust Enrichment Bailey Officious intermeddler: P takes in lame horse whose ownership was disputed. 2.R. 19 . Δ used Π‟s equipment to continue work. because then P could have claimed that D had the “last clear chance” to avoid causing P‟s economic loss. i. 2. NOTE: The remedy for Unjust Enrichment is Quantum Meruit (market value of services rendered). Π sued under a theory of quasi-contract for unjust enrichment (the value of the work performed). Π sued under a theory of quasi-contract for unjust enrichment (the cost of work performed and the rental value of the equipment Δ used). b. Π (met bar) satisfied the elements for a claim for unjust enrichment. Δ was enriched IF 1.E. It would be UNJUST for Δ to keep it. EVEN THOUGH THERE WASN‟T REALLY A CONTRACT. Π could (met bar) recover under unjust enrichment MINUS the (you can countersue for U. The recipient of the enrichment could be REASONABLY EXPECT to be charged for the services. Δ receives ANY economic benefit. CAN BE CLAIMED IF A BENEFIT HAS BEEN CONFERRED ON Δ IN CIRCUMSTANCES WHERE IT WOULD BE UNFAIR FOR Δ TO RETAIN IT WITHOUT PAYMENT. Zara Π was discharged from its sub-contract with Δ when it did not complete work because of unforeseen soil conditions. AND a. P is acting as an “officious intermeddler. Would have stood a better chance if D had not immediately returned the bills and denied owning the horse. HELD. Unjust Enrichment can be claimed (under quasi-contract) IF BOTH a. Δ was ENRICHED. AND i. even when you breach) damages awarded Δ for Π‟s breach of contract. HELD. BUT sometimes Δ can be indirectly enriched by a benefit conferred on a third party. Usually benefit passes directly from benefactor to beneficiary.” No quasi contract. If the services are provided by a professional. Enrichment is UNJUST WHEN BOTH 1.UNJUST ENRICHMENT (Neither promise nor consideration) NO CONTRACT AT ALL? HOW ABOUT UNJUST ENRICHMENT? U.E. The services were NOT IMPOSED on the recipient. COURTS CREATED THE LEGAL FICTION “QUASI-CONTRACT” TO ALLOW Π TO BRING CLAIM FOR U. a. Britton Π broke a 1-year employment contract after working for a portion of the period. This is satisfied if the services were directly requested OR there was a good reason for providing them.

Surrogacy is fine: women who enter into surrogacy agreements know what they‟re getting into. Δ for violating a covenant not to compete because Δ had practiced medicine in the area designated as off limits. 2) it doesn‟t take into account best interests of child (public policy). Δ (professional bookie) sued Π (casual gambler) for the winnings he paid to Π. and because (1. Calvert Π father and mother entered into a gestational surrogacy contract with Δ. Π‟s claim is VALID and Δ‟s claim is NOT VALID. The contract is unenforceable for Subject Matter Limitation IF EITHER a. In determining whether a contract is unenforceable for public policy reasons.i. HELD. courts consider: 1. 2.a) paying money for a child was illegal.b) NOT violate public policy. Mother later changes mind and wants to keep baby.SUBJECT MATTER LIMITATION (Defense against admitted Contract) 1. the contract did (1. The protection of the Public Interest and Welfare.b. 20 . Parties‟ freedom to contract. Court found that (1. Π sued for enforcement. To say otherwise is to disrespect the entire feminist movement. contract was UNENFORCEABLE because (1.a) casual gambling is NOT illegal and professional gambling IS illegal. The subject matter of the contract violates a law. The subject matter of the contract violates public policy i.b) violated public policy. Desire to avoid injustice.a) NOT illegal. Surrogacy conflicts with policy: couple contracts with woman to be surrogate mother.b) contractually abandoning parental rights was against public policy.3) there was great public interest in the ability of the physician to practice. HELD. 3) providing money for children reeks of selling lives and slavery (public policy). because surrogacy agreements provide a necessary and important service. AND 3. Valley Med. Π sued Dr. because (1. Δ later decided she didn‟t want to give up the baby. Δ later decided she didn‟t want to give up the baby. HELD. OR b. and was (1. the covenant not to compete was unenforceable because it (1. Case Law – Subject Matter Limitation Watts Π (causal gambler) sued Δ (professional bookie) for the money he lost. In Re Baby M Π father entered into a traditional surrogacy contract with Δ. Π sued for a determination that they were the natural parents of the child. HELD. Courts find contract invalid because 1) it presumes the mother can fully know how bad it will be to part with child (paternalistic).

There was a manifestation of intent to inflict loss or harm to another. Δ could not recover on the contract as the contract was voidable because Δ had put Π under DURESS by wrongfully threatening economic harm. Δ told Π that. but instead kept the deposit and sold the house to someone else. The party was physically compelled to assent when he otherwise would not have. Austin Instrument After Δ entered into a contract with Π. AND a. There is a wrongful threat. 4. Case Law – Duress Wolf Δ demanded that the contract for sale of a house with Π be terminated and their deposit returned. FORK: This didn‟t happen in Wolf. Selling to whomever desired is legal. There was an wrongful threat IF EACH 1. Π had made out a classic case of economic duress and could recover. but later sued for damaged for economic duress. and because Π faced substantial loss of business if it didn‟t receive Δ‟s delivery. i. Bringing suit is an alternative: suing is usually a valid means of avoiding duress. b. HELD. damages would have been an insufficient remedy. Point to that if this isn‟t satisfied in the fact pattern. 21 . Malicious but legal threat: Potential buyers of house threatened to sell house to someone unpleasant if they could not get their deposit back. Π did not acquiesce. because Π was faced with an emergency situation and deprived of free will. AND 3. i. which would inflict economic harm upon the Π. The threatened behavior EITHER goes beyond the legitimate rights of the party applying the pressure OR constitutes an abuse of those rights. AND 2. Π was unable to find another supplier and so agreed to pay more. 5. Δ threatened to breach the contract unless Π agreed to pay more money. but in this case it would have damaged Loral‟s relationship with the government. There is physical compulsion IF 1. Tried all alternatives: subcontracting company made threat to large company. OR i. HELD. held hostage all shipments currently under production unless awarded a second contract. The party felt it had no reasonable alternative. There is physical compulsion. they would go through with the purchase BUT THEN sell the house to an “undesirable” purchaser. could not and therefore agreed to the contract.e. The threat was sufficiently grave to justify the victim in succumbing. Δ sued to recover its deposit because Π had breached the contract by selling the house to someone else. A contract is avoidable for DURESS IF EITHER a. large company tried all available means to find another manufacturer. but the threat was made for purely malicious and unconscionable reasons so it qualified as duress. The party was induced by the threat to enter into the contract. if they weren‟t allowed to do that. which is unquantifiable.DURESS (Defense against admitted Contract) 1. and because Π proved it had no alternative supplier.

from whom Π had purchased a building. because Π signed a contract saying that it was not relying on oral representations. Δ told Π that they had been making “good money” when in fact they had lost money in every year of operation. could not be heard to complain about relying upon them. Danann Realty Π sought damages for fraud against Δ. there is fraud. That person IS INDUCED to act in reliance on it to his detriment. Dissent: all inclusive specific = general: throwing everything but the kitchen sink at something isn‟t a specific clause – it‟s general. 1. Δ also withheld the business‟ accounting records from the buyer. NOTE: A bad motive is NOT necessary to commit fraud. then the court would hear evidence of the misrepresentations.FRAUD (Defense against admitted Contract) YOU CAN ALWAYS INTRODUCE PAROL EVIDENCE TO PROVE FRAUD. Besides that. FORK: The defrauded person does not have to go crazy investigating claims to be able to claim there was fraud. 3. A party makes a FALSE REPRESENTATION of present or past fact. A contract is avoidable for fraud IF a. 22 . and 4) the buyers relied because of their inexperience. HELD. Dissent: the buyers should have insisted on seeing the books. (Spiess) (Contrast with Danann) Case Law – Fraud Spiess Π bought a business from Δ. d. AND b. thus. BUT Π had signed a contract stating Δ disclaimed such oral representations. Even if that‟s true it doesn‟t matter because they have general and specific integration clauses that say no representations were made as to operating costs + specified a duty to investigate. 2. Fraudulent representation: 1) sellers of a resort said they were making “good money. he‟s justified in relying on its truth. KNOWING that is was false (or not knowing whether it was true or false). that‟s fraud. 3) wouldn‟t let the buyers see their books. Court also noted that Π DID NOT (FORK 3) exercise ordinary intelligence in assessing the truthfulness of Δ‟s claims and. HELD. With the INTENTION TO INDUCE the person to whom it is made to act in reliance on it. Specific Merger clauses and fraud: P claims D lied about operating costs in oral negotiations.” 2) but they were actually posting losses. AND c. Π could NOT (1. General merger clauses and fraud: The court notes that if there were only a general merger clause and not a specific merger clause.d) have been induced to act by those representations. Π claimed that Δ‟s ORAL representations of the operating costs of the facility did not match the actual operating costs. cannot K around fraud. AND. even though there was no bad motive and even though Π could have investigated more.

FAILURE TO DISCLOSE (Defense against admitted Contract) NOTE: THIS MORE OR LESS REPLACES (1. CLAIMING FAILURE TO DISCLOSE IS STILL UNDER THE FRAUD UMBRELLA. Not reasonable to discover: seller took steps to actively conceal that there were murders. HELD.a.A) AND (1.B) IN FRAUD.a. A contract may be voided for failure to disclose IF a. Non-disclosure would violate the duty of good faith and fair dealing.g. health. OR a. 23 . HELD. Consider how readily obtainable the concealed information is AND whether the concealed information was worked for (e. very improbable for buyer to ask about. market research) 3.i. Reed Π sued Δ when Π discovered that Δ had failed to disclose that a multiple murder had occurred in the home Π purchased from Δ.1-2) dangerous to the property. ii. There is a duty to disclose information IF 1. Undiscoverable concealment: 1) seller should have known termites were still there. Psychological reasons: damages which are psychological only can be grounds for fraud – consider the effect on market value. UNLESS the other party could have reasonably discovered the defect. 2) a careful investigation would not have found termites. Case Law – Failure to Disclose Obde Π sued Δ when Π discovered that Δ had failed to disclose that the home Π purchased from Δ had been infested and was likely still infested with termites. YOU CAN ALWAYS INTRODUCE PAROL EVIDENCE TO PROVE FRAUD. because 3) seller had destroyed traces. or life of Π and because Π (1.i. defect had material impact upon value of the house.a. There is a duty to disclose the information.FRAUD.ii) could not have reasonably discovered the defect on his own. i. OR 2. the fact that the murders had occurred in the house would (1. The non-disclosing party knows that disclosure is necessary to correct the other party‟s BASIC ASSUMTION of the contract.1-3) have a quantifiable impact on the market value of the house and was thus MATERIAL to the contract. 1. Δ had a duty to disclose because the concealed defect was (1. The non-disclosing party knows that disclosure of the fact is necessary to correct a previous assertion.

}Dissent: The promisee knew that he was never paying on time. the promisor had NO INTENTION of carrying out the promise. AND b. Proved promissory fraud only because of evidence of internal procedure which showed that the promisor had absolutely no intention of paying on time. Instead made the promise with the intent to deceive. {Probably has to be something like an official procedure that directs an employee to affirmatively not do something. 2. 1. so how could the reliance be reasonable? 24 .PROMISSORY FRAUD (Defense against admitted Contract) YOU CAN ALWAYS INTRODUCE PAROL EVIDENCE TO PROVE FRAUD. At the time the promise was made. The alleged fraud is predicated on a promise to perform or abstain from some act in the future. Case Law – Promissory Fraud Hanners Π met the burden for showing promissory fraud in this case. AND c. UNLESS Π blindly trusted where he should not have AND did not exercise ordinary diligence. Laid out (1.a-c) rule and (2) exception. A contract is voidable for Promissory Fraud IF EACH a.

because (1. Made a mistake as to a BASIC ASSUMTION on which the contract was made. and thus significantly more valuable. A contract can be voided by the adversely affected party for Bilateral Mistake IF BOTH PARTIES a. The mistake has a MATERIAL EFFECT on the agreed exchange of performances.a-b) the mistake as to the cow‟s barrenness went to a BASIC ASSUMTION of the contract and had a MATERIAL EFFECT (in that Δ would be getting a windfall). AND b. a. Contract rescinded. The risk was allocated to him by the agreement. 2. UNLESS the adversely affected party bore the risk of the mistake. HELD. OR ii. He knew he had limited knowledge with respect to the facts upon which the mistake rests but proceeded anyway. This mistake goes directly to the nature of the trade. the contract was voidable by Π. It was later learned that the cow was actually pregnant. The adversely affected party bore the risk of the mistake IF EITHER i.BILATERAL MISTAKE (Defense against admitted Contract) 1. 25 . OR Case Law – Bilateral Mistake Sherwood Π and Δ exchanged a cow that they both believed was barren. Seller wasn‟t bearer of the risk (no good way to test for ability to give birth). Mutual mistake: seller and buyer both believe cow to be barren – mutual mistake of fact.

ii) Π had exercised poor diligence in ascertaining the readily accessible facts concerning whether the dredge would work for him. The effect of the mistake is such that enforcement of the contract would be unconscionable. A contract can be voided by the adversely affected party for Unilateral Mistake IF ONE PARTY a. AND c. The adversely affected party bore the risk of the mistake IF EITHER i. no mistake. HELD. Rely on limited knowledge. Made a mistake as to a BASIC ASSUMTION on which the contract was made. (Anderson) Case Law – Unilateral Mistake Anderson Bros. The mistake has a MATERIAL EFFECT on the agreed exchange of performances. He knew he had limited knowledge with respect to the facts upon which the mistake rests but proceeded anyway. 2. bear risk: buyer of drill is aware of limited knowledge and relies on it anyway. Π can‟t recover because (1. Π attempted to claim unilateral mistake because the dredge he purchased wasn‟t actually suited to perform the work Π intended to use it for. OR ii. OR ii.UNILATERAL MISTAKE (Defense against admitted Contract) 1. AND b. a. therefore he bears the risk. 26 . UNLESS the adversely affected party bore the risk of the mistake. EITHER i. The risk was allocated to him by the agreement.a. The OTHER PARTY had reason to know of the mistake OR caused the mistake. because the buyer did not seek all information.

i. had not read the contract. it is procedurally unconscionable. which said that her tenancy was to begin on a certain date unless the building‟s construction was not completed before then (in which case. or unduly favorable to one of the parties OR a party was unfairly persuaded to enter into an otherwise fair contract that he DID NOT want to enter into. A contract (or contract term) may be voidable for unconscionability IF BOTH a. Cross-collateral clause is substantively unconscionable. she was to move in after its completion). however.UNCONSCIONABLILTY (Defense against admitted Contract) 1. There is Procedural Unconscionability IF a party abused its power to impose its will on the other party. and because (1. and Π had to find other housing.i) procedural unconscionability because Π did not even read the contract. Is one party deprived of all the benefits of the agreement or left without remedy for the other party‟s breach? 2.b. unfair. Disp Barg power + substantive: when seller sells good to stupid/poor people with terms in fine print. Walker-Thomas I & II Δ sold furniture on credit to low income buyers.i) the leasing company was knowledgeable about residential leases and had buried the term in a series of complex clauses. There is evidence of Procedural Unconscionability (unfair bargaining). HELD. Seabrook Π sued to get out of her lease with Δ.a. Unequal bargaining power? 3. Lack of opportunity to study the contract and inquire about the terms? 4.i) it was unfair to the tenant to require her to move in whenever the building was done with no limit on how long that would take. 27 . So. Laid out rules for Unconscionability. the terms of the contract were unconscionable because (1. AND i.i) substantive unconscionability. or unduly favorable to Δ. that‟s on him. The building was finished four months late. but the record did not contain enough information to make a determination. HELD.b. There is evidence of Substantive Unconscionability (unfair contract terms). unfair. although there was (1. Was there an absence of meaningful choice? 2. CONSIDER (not exclusive): 1. There is Substantive Unconscionability IF EITHER contract‟s terms are harsh. HELD.a. Π. Δ could repossess not only the defaulted item but ALL the furniture ever purchased from the company. Is there a large disparity between the market price and the contract price? Case Law – Unconscionability Merit Music Π sued to void his contract with Δ. Δ structured the contracts so that. Non-negotiable terms? b. which contained terms that were harsh. there was NOT (1. this might have been unconscionable. CONSIDER (not exclusive): 1. if a customer missed a payment.

b.i) Π had no real choice but to accept the term as all car manufacturers had that term in their contracts.) Π sued to be released from an FORUM SELECTION CLAUSE because it was unconscionable. even though the court imputes “reasonable” into move in time. The clause required them to bring their claim in Florida instead of Π‟s home state. The contract contained a term limiting warranty to the replacement of parts (as in they wouldn‟t replace the malfunctioning car). 28 . Clause requiring move in whenever construction completed is substantively unconscionable.i) it unfairly barred class action and precluded Δ of liability for a broad range of conduct.a. Henningsen Π was injured when the car they bought from Δ malfunctioned.i) the term was unfair. including intentional wrongs. so procedurally unconscionable. and it is in the consumer‟s interest to fix this. Adhesion contract + beneficial forum selection clause: forum selection clause in an adhesion contract not substantively unconscionable because it passes on savings to customers. Adhesion contract + liability disclaimer + consumer interest: ~87% of industry offers same bargain. that term was unconscionable because (1. and is not located in a position strategically chosen to discourage lawsuits. CL. Ticket with print on back not procedurally unconscionable because they could choose not to use service. and because there was no bad motive on Δ‟s part. Carnival Cruise (ALTERNATIVE CONSIDERATIONS FOR COUNTERARGUMENT/FORUM SEL.Fine print + bad term: clause hidden in 4 pages of fine print that are 50 pages regular size. and because (1. Washington.i) because Π‟s had notice of the clause.b. HELD. It did not matter that Π had NOT READ the contract. the Arbitration Clause was NOT unfair (1. because little is given in return for the taking away of the usual product warranty. Onus should be on landlord to create that. HELD. the ARBITRATION CLAUSE was unconscionable because (1. because Δ‟s principal place of business was in Florida. HELD. Cingular Wireless (ARBITRATION CLAUSE) Π sued Δ and Δ sought to enforce an ARBITRATION CLAUSE contained in the contract. procedurally unconscionable. Car company barring recovery for injury is substantively unconscionable.b.

STATUTE OF FRAUDS 1. AND iii. a. b. Signed by party charged with enforcement. 29 . It contains the essential terms of the agreement (parties. The requirement of a written memorial is satisfied IF i. terms of promises with reasonable certainty). For sale of interest in land. Contracts that cannot be performed within a year of making. OR vi. The following types of contract fall under the Statute of Frauds: i. v. A writing actually exists. THEN the contract must be in writing. To answer for the debt of another. To answer for the duty of a dead person. ii. For sale of goods costing $500 or more. iv. ii. AND. iii. Made in consideration of marriage. IF the contract is of the type that falls in to the Statute of Frauds. subject of K.

30 . we‟ve got to hear what people were thinking.) Is it an Integration? (the final expression of the party’s agreement to AT LEAST ONE term) Is it a COMPLETE Integration? (final and exclusive statement of ALL the terms of the agreement. The judge believes that the term it is PLAUSIBLE (reliable/credible) that they had this additional term and didn‟t put it into the writing. Parol Evidence ALLOWED. Old 4-Corners Rule (Mitchill): Look only at the writing. Then you‟ve got to persuade the jury. provided that: 1. It’s the entire contract. FORK: Modern Rule (Masterson): Parol evidence can always come in to help decide these questions. unilateral mistake. Is the party seeking to introduce evidence of a subsequent agreement? Is the party seeking to introduce evidence of a condition precedent? (one of the parties conditioned its performance on the happening of an uncertain future event. duress. bilateral mistake. promissory fraud.PAROL EVIDENCE RULE (When you‟re trying to prove something that‟s NOT in the Contract) Is there a writing? Is the party seeking to introduce evidence of a separate agreement? Parol Evidence Rule doesn‟t apply. 2. or unconscionability? Is it a PARTIAL Integration? Parol Evidence NOT ALLOWED. Is the party seeking to introduce evidence of a lack of consideration.) Check for MERGER CLAUSE – move to next page. failure to disclose. subject matter limitation. fraud. Parol evidence admissible. We‟ve got to hear the context. Does it SEEM like an integration? Does it seem like a complete/partial integration? Does the judge think he would have included some other stuff in the writing? It doesn‟t contradict a term in the integration.

31 .

parol evidence was not allowed. the parol evidence cannot be allowed. As a condition to the purchase. When it can be used is parol evidence. 32 . however. Δ did not remove the icehouse. Dissent: the original sales contract says nothing regarding assignability. therefore the evidence is allowed in. HELD. inconsistency requires contradiction or negation of a term of the writing. 1) Consistent (deed silent on assignability). evidence proffered by family members is tainted by bias. it was a complete integration and even if it was a partial integration it wasn‟t plausible that this term wasn‟t included. When the agreement was put into writing. Π sued for performance on the oral agreement.Case Law – Parol Evidence Rule Mitchill (Four Corners Rule) Π contracted to purchase a farm from Δ. and 2) would not naturally have included unforeseeable occurrence of bankruptcy/selling the buyback option. parol evidence of that additional term was not admissible. Court holds that a limiting term is not inconsistent. which meant that the contract was a complete integration and . Furthermore. Danann Realty YOU CAN ALWAYS INTRODUCE PAROL EVIDENCE TO SHOW FRAUD. the oral agreement to remove the icehouse was not included. 1) Because tearing it down is something expected to be in writing. YOU CAN ALWAYS INTRODUCE PAROL EVIDENCE TO SHOW FRAUD. and 2) possibly because it contradicts the terms of the contract by adding a requirement. EMPLOYING THE OLD FOUR-CORNERS RULE. Term expected to be written: Contract to buy land and parol evidence to tear down an icehouse across the street. Δ‟s agreed to remove an icehouse on the land. and to limit it is to contradict its terms. Thus. Hunt Foods Limiting =/= contradicting: K with sophisticated parties includes option clause but doesn‟t limit the point at which it can be used. Traynor allows it in to see if agreement integrated. PE about assignability. Masterson (Modern Rule. UAW-GM The writing had a merger clause. Traynor) Term not expected to be in: seller sells land to family member with option to buy back. thus.

33 . Danaan Realty Specific Merger clauses and fraud: P claims D lied about operating costs in oral negotiations.MERGER CLAUSES (Effect on Parol Evidence) Does the Integration contain a merger clause? (a statement that the document is a complete and exclusive representation of the terms of the parties agreement) UAW-GM Majority Opinion UAW-GM Dissent You CANNOT introduce any evidence at all regarding the completeness of the integration. Besides that. Court holds that where the merger clause is valid. not just boilerplate). Dissent: a writing cannot prove its own completeness – this is backed by much authority. Even if that‟s true it doesn‟t matter because they have general and specific integration clauses that say no representations were made as to operating costs + specified a duty to investigate. and needs a binding merger clause for protection.e. This is especially the case where D assumed responsibilities of another. cannot K around fraud. Dissent: all inclusive specific = general: throwing everything but the kitchen sink at something isn‟t a specific clause – it‟s general. Case Law – Merger Clauses (Effect on Parol Evidence) UAW-GM Merger clauses and parol evidence for full integration: P contends D agreed to have a union staffed hotel – this is not in the contract and the contract has a merger clause. General merger clauses and fraud: The court notes that if there were only a general merger clause and not a specific merger clause. then the court would hear evidence of the misrepresentations. parol evidence cannot be admitted to deduce purpose. You ARE able to admit parol evidence to show whether the merger clause was consciously included in the contract (i.

the court can supply a term that seems reasonable. the court must decide if the offered evidence is relevant to prove a meaning that the language of the contract is “reasonable susceptible” to. exclusion alterius: Is there a specific list of items without being followed by a general term? If so. Essential Omitted Terms? 1.INTERPRETING CONTRACT LANGUAGE (when you‟re trying to prove an interpretation of something WRITTEN in the contract) ARE DISPUTING THE MEANING OF A TERM IN THEIR CONTRACT – IF THERE‟S VAGUENESS OR AMBIGUITY? IF SO. After considering the evidence. 1. Does evidence from prior deals help interpret the ambiguous language? iii. THE COURT MAY BE CALLED ON TO INTERPRET THE AGREEMENT. no plain meanings) i. IF YES. b. THEN continue. 34 . If the term is ambiguous because the parties left out some other term that has turned out to be important. FORK: Textualist (plain meaning) i. Have the parties begun performance of the contract? If they have. Trade Usage? 1. Hierarchy of Interpretation of Parol Evidence: i. Is there a common way of interpreting this sort of term in the trade the parties are members of? iv. Ejusdem generis: The general words are limited by the specific ones so that it means only things of the same kind (think §1964(a) from LRW). Course of Performance? 1. The meaning of terms in the contract must be interpreted without resort to external evidence. vi. All relevant parol evidence is admissible on the issue of meaning of contract terms. IF we‟re dealing with a contract that falls under the COMMON LAW (not UCC). the court may imply general standards of good faith and reasonableness. In resolving the ambiguity. Expressio unius. 1. but only by consulting the contract itself. General standards of Reasonableness and Good Faith? 1. Course of Dealing? 1. b. a. The general rules are: a. then the implication is that all other things of the same kind are excluded. THEN continue a. FORK: Contextualist (all language is ambiguous. General Rules of Construction 1. ii. then their conduct in performing may provide evidence of what they intended by the ambiguous language. v.

to show the ridiculousness of Pacific Gas. he was a bigamist (illegal). other people use “chicken” to mean “fowl. So.” gives “fowl. Official comments vii. Is there a common way of interpreting this sort of term in the trade the parties are members of? a.” can look to everything to determine what “chicken” is. 35 . Express contract terms? 1. Course of Dealing? 1. look to everything: K between sophisticated party and newcomer. Can the intent of the parties be determined from the express terms of the agreement? If so.” Frigaliment In event of ambiguity. Allowed. noting that D was a newcomer. ie he must prove that chicken usually means “broiler. What if the person entering into the contract was new to the trade? v. courts went outside of the text to deal with that.” and maker tries to prepay anyway. Course of Performance? 1. the form of the contract is classically the kind that only indemnifies damage to 3rd parties. Contextually. Plain meaning indemnifies P against everything. and it must be proven he knew the usage of trade. there are times when you‟d not use the theory. IF we‟re dealing with a contract that falls under THE UCC (not Common Law). ii. Context wins. THEN continue a. “[no] contract can be rendered impervious to attack by parol evidence. Have the parties begun performance of the contract? If they have. E. Does evidence from prior deals help interpret the ambiguous language? iv. the express language controls. Statutory (or administrative law) language and definitions vi.g..” case is one of mistake. UCC provides a hierarchy for interpretation of parol evidence: i. Even if you‟re a Textualist. then their conduct in performing may provide evidence of what they intended by the ambiguous language. Legislative history Case Law – Interpreting Contract Language Pacific Gas (Traynor) Contextual: D signs contract agreeing to indemnify P against all injuries from fixing turbine. iii.” Court rejected P‟s usage of trade argument. newcomer sells “chicken. Judicial interpretation viii. Commentators and experts ix. Trade Usage? 1. Trident (Kozinski) Plain Meaning: there‟s an option clause between 2 sophisticated parties that says “maker shall not prepay principal amount in whole/part for the first 12 years. which means P has burden of proving that the burden wasn‟t on him to avoid it. and it could be construed that the contract only meant to indemnify against third parties. Price for chicken was too low to be “broiler” quality. 2. the case where the guy took out a life insurance policy and named as the beneficiary “his wife.1. but says they only covered damage to 3rd parties.” Well.

a. Held to be unenforceable. Common standards of decency. A party acts in a way CONTRARY to: 1.b). YOLO. FORK: SOUTER Test i. AND 2. and reasonableness. Angel Good faith modification: size of garbage collector‟s route increases unexpectedly. 36 . To recapture the unstated economic opportunities that the party bargained away as a cost of performance. c. FORK: Burton Test i. fairness. Complicated facts. Modification resulting from good faith (increase in cost by other party) is enforceable.c). The discretionary behavior of a party is INCONSISTENT with BOTH 1. then demanded a pay raise.a) and (1. nor change in position due to unforeseen circumstances. You‟re better off. The obligation of Good Faith Performance is BREACHED (Bad Faith) IF a. An approximation of the terms the parties would have negotiated had they foreseen the circumstances that gave rise to their dispute. Market Street Lays out (1. The parties‟ agreed-upon common purposes and justified expectations. Assumes that nobody would have entered into a contract if they figured the other party would take advantage of them. he asks for a pay raise to compensate. b. Alaska Packers Opportunistic modification: fishermen waited until boat owner could no longer hire another crew. The discretionary behavior of a party is INTENDED: 1. because no new consideration. FORK: POSNER TEST i. Case Law – Good Faith Centronics Lays out (1. Complicated facts.GOOD FAITH (Filling gaps in vague/incomplete contracts) 1.

His potato crop is devastated by disease. his potatoes.IMPOSSIBILITY (Implied Condition Excusing Breach) 1. and existence of that particular concert hall was an implied precondition of the contract and vital to it. so the contract is excused. 2. very specifically. If the contract had been for just any potatoes. Him being diabetic made amputation foreseeable. something over which he has no control. It is ABSOLUTELY IMPOSSIBLE for the party to perform as required by the contract. A party can excuse breach for IMPOSSIBILITY IF a. not just any potatoes. therefore no excuse. the farmer would have had to cover. Both parties excused from performing. UNLESS it‟s the party seeking to be excused‟s fault. 37 .Impossibility Caldwell Unforeseen implied condition: Concert hall burns down. Burning down of concert hall was unforeseen. Case Law . Mark-O-Lite Foreseeability voids impossibility: one of the key workers necessary for performance has his leg amputated because he‟s diabetic. Coupland Unforeseen specific condition: farmer contracts to sell.

That was the ONLY acceptable performance according to the agreement. ii. IF another option for performance is available. This belies the profitability of the part of the contract they wish to keep. P attempts to recover unjust enrichment for the additional length traveled. b. THEN the excuse cannot be claimed.IMPRACTICABILITY (Implied Condition Excusing Breach) 1. Necessary Person: Parties assumed that a person necessary for performance would neither die nor be incapacitated before the time of performance. AND d. UNLESS the party seeking to be excused ASSUMED THE RISK of the likelihood of impracticability. iii. Case Law . Impracticability requires more: contract made during a period of violence. AND i. IF this is the case. NOTE: Increased costs do not count as impracticability. AND i. THEN (REQUIRED) 1. 3. Eastern Airlines Must be positively unjust. Government Act: Parties assumed that the government would not directly intervene and prevent performance 2. THEN proceed. IF the impracticability EXISTED at the tie of contract. Bound to supply oil according to index. 2. THEN proceed. energy crisis was foreseeable.Impracticability Transatlantic Financing. c. iv. The cause of the impracticability was UNFORSEEABLE. added costs were ~15% of contract price. Performance “as agreed” is impracticable. close of Suez Canal made performance more expensive. the court does not grant their request. UNLESS the risk of the cause of the impracticability was WITHIN the party seeking to be excused‟s CONTROL. Since that leads to the inference the contract was not commercially impracticable. The party seeking to be excused MUST SHOW that it neither knew nor should have known that performance was impracticable at the time of contracting. rather than for the whole contract.price index which was tied to factors affected by energy crisis. UNLESS the party seeking to be excused made an UNQUALIFIED PROMISE to perform. The party seeking to be excuse is NOT AT FAULT for the impracticability. EXAMPLES OF RECOGIZED IMPRACTICABILITY: 1. 4. 38 . A party can excuse breach for IMPRACTICABILITY IF EACH a. index fails. Held that in addition to being unforeseeable. Necessary Thing: Parties assumed that a thing necessary for performance would remain in existence and in such condition that performance could occur. 3. IF the impracticability SUPERVENED after contracting.

Usage of trade indicates that risk was allocated. 39 . ii. i. AND a. Lloyd Foreseeable + value remains: D leased land for a selling new cars and gasoline. An event is SUPERVENING IF 1. A party can excuse breach for FRUSTRATION of purpose IF BOTH a. Deposit not refunded: Court does not refund deposit though. if you will. AND a. UNLESS the party seeking to be excused ASSUMED THE RISK of the frustration. Because some cars were still being sold and gas was still being sold. If there is a way to benefit. Court allows in parol evidence to determine purpose. UNLESS the frustration is the FAULT of the party seeking to be excused. Is the frustration TOTAL or NEARLY TOTAL. which is thought to be an implied condition for the deal. Coronation does not occur. Party can‟t claim a secret purpose was frustrated. ii. a. 2. the value must be nearly totally destroyed. There is an UNFORSEEABLE supervening event that SUBSTANTIALLY frustrates the party‟s PRINCIPAL PURPOSE in forming the contract. then there‟s still a purpose for the party to perform – even if it‟s not the benefit he anticipated. The parties allocated the risk in the contract. The Principal Purpose was known to both parties at the time of contract. To get out of a contract due to frustration. A party‟s principal purpose is substantially frustrated IF 1.FRUSTRATION (Implied Condition Excusing Breach) 1. There is NO REMAINING BENEFIT to be had by the party. the court holds that there would not be frustration even if it was unforeseeable. 3. Case Law – Frustration Krell Purpose read in: man rents room which is good for seeing a coronation (although the purpose is not in the contract). a. It‟s not enough that a contract expected to be profitable has turned out to be a losing contract. It was a basic assumption of the contract that the event would not occur. Risk was assumed IF: i. 3. iii. 2. Contract frustrated. and this can be seen to be a way the court allocated the risk of nonperformance for the parties – the non-refunded deposit is the price of the option. Car selling diminished by the prohibitions of war (court holds that this was foreseeable). The supervening event was reasonably foreseeable.

(REQUIRES AT LEAST SUBSTANTIAL PERFORMANCE) i. A condition is a condition SUBSEQUENT IF a. UNLESS non-occurrence is excused c. i...” “if. 1. THEN I will purchase the land. A condition is a condition PRECEDENT IF a.CONDITIONS 1.. IF the zoning permit is granted.” “subject to. The condition must be satisfied AFTER performance is due.. A CONSTRUCTIVE (implied in law) Condition. An EXPRESS Condition. which must occur. OR i. E. E. 40 . IF the zoning permit is granted..g. before performance under a contract becomes due. and that condition is dependent on the first.) b. E. CONDITION PRECEDENT 1.” “provided that. b. A CONDITION is EACH a. AND may be found as EITHER a. 2. The condition must be satisfied BEFORE the performance subject to that condition becomes due. A condition is a condition CONCURRENT IF a.g. Circumstantial evidence (think PAROL EVIDENCE) indicates that such a condition was INTENDED. the parties would REASONABLY have INTENDED the condition to be part of the contract had they thought to discuss its inclusion. To the BOTH PARTIES performance. 1. IF the condition is not met and relates to both parties‟ performance.g. i. IF the condition is not met and relates only to one party‟s performance. i. SO THEY CONSTRUE THEM AS PROMISES.” etc. E. An IMPLIED IN FACT Condition. c. IF the zoning permit is granted.. AND may relate EITHER a. Court will construe a condition despite its NOT being in the contract IF 1. E. I’ll give you the money IF AND ONLY IF you give me the land. THEN I will purchase the land. b. 1. THEN we will exchange land for money. i. 3. THEN the exchange of money for land (which already happened) remains in effect. Condition spelled out in contract (e. CONDITION SUBSEQUENT COURTS DON‟T LIKE TO ENFORCE THESE AS CONDITIONS BECAUSE IT TENDS CAUSE FORFEITURE. “on condition that.g. OR (REQUIRES STRICT COMPLIANCE) i. The condition is dependent on another condition. THEN that party may still choose to go through with the exchange even if the condition is not met.g. Court may INFER from the contract/circumstances to find implied conditions IF 1. an event not certain to occur. OR (REQUIRES STRICT COMPLIANCE) i. i. THEN neither party may demand performance and neither can unilaterally waive it. IF the zoning permit is granted. CONDITION CONCURRENT 2. To ONE PARTY‟s performance.g.

41 .1. NOTE: This example is of a promissory condition concurrent. b. The parties INTEND that one party is responsible for that event‟s occurrence. A PROMISE is a. AND c. an event not certain to occur. PROMISE vs. i. PROMISSORY CONDITION 1. EITHER an undertaking to act OR to refrain from acting b. UNLESS non-occurrence is excused c. A PROMISSORY CONDITION is an event a. CONDITION 1. AND b. PROMISSORY CONDITION PROMISE 1. which must occur. At some future time. The parties INTEND a performance to be excused if the event does not occur. A CONDITION is a. CONDITION vs. In a specified way c. before performance under a contract becomes due. that that party would be liable for breach if it doesn‟t occur.

THEN the assessment of satisfaction must be REASONABLE and made in GOOD FAITH. 4. a. Of great import is the fact that the disking of the crops was did not show bad faith. In which case. Because condition not written on that section of contract.” 2. THEN the assessment of satisfaction is that of a “REASONABLE PERSON. and will not be given effect unless established by clear and unequivocal language. 3. Conditions precedent must be proven by the party wishing them to pay. a. IF a condition is NOT STRICTLY MET. IF SUBJECTIVE (where an individual‟s taste or personal judgment is involved) 1.” is not sufficiently definite to constitute a condition precedent. UNLESS the condition is WAIVED by the party by the party whose performance was conditional.” i. Elder Lack of chronology re: conditions = concurrent: where chronological order of performance is not specified. a.Conditions Federal Crop No explicit condition + no bad faith: Question was whether or not crops had to be inspected as condition of payment. Excuse of condition by the court functions the same as satisfaction of the condition – the court essentially changes the condition into a promise and thus substitutes the requirement of strict compliance with that of substantial performance. Such constructions are “not favored. burden of proof: in bonds to pay with a condition not to pay (condition subsequent). UNLESS the condition is EXCUSED by the court to do justice. condition held not to be written in. Printz Services Corporation Conditions must be explicit: “provided like payment shall have been made by owner to contractor. they who wish not to pay must prove the condition occurred before they don‟t pay. the performances are to be carried out simultaneously. and damages assessed for breach of disking crops. UNLESS the condition is one of a party‟s subjective OR objective “satisfaction. UNLESS the condition was a CONSTRUCTIVE CONDITION. This policy was enacted to prevent economic waste due to hooking up water to a house not to be occupied. Case Law . Waiver of condition functions the same as satisfaction of the condition. Therefore payment given.EFFECT OF CONDITIONS 1.” Gardner Conditions subsequent. IF OBJECTIVE 1. substantial compliance may be all that‟s required. Main Electric v. THEN the party subject to that condition has no obligation to perform. and written elsewhere. a. ii. 42 .

then Plaintiff should have to pay difference in market value. 43 .Jacob & Young Good faith breach + economic waste: Held that where 1) the difference in market value was slight. 3) cost of correction was significant and would result in economic waste. 2) breach was in good faith.

Haymore What is satisfactory completion: Plaintiff builds house subject to satisfactory completion. otherwise there is a strong incentive to hold the other party hostage and keep milking them for their sunk cost. Done so in the sense that the defect is not pervasive.W. the contractor must have: Intended to comply with contract in good faith. Defects are not so substantial that the purpose of the parties cannot be resolved by remedying them without substantial difficulty. Breach Occurs when a promise is not performed or incomplete or defective performance is rendered. and there is no substantial performance. a. and it would result in economic waste to tear down and rebuild. UNLESS there is substantial performance. 44 . Case Law – Breach & Substantial Performance O.BREACH 1. Grun Substantial performance: to constitute substantial performance. defendant keeps asking for more work to be done. Court holds that such questions are to be judged objectively. court decided that central purpose was not to have that wall there because it was a stock plan. Here. the purpose of the contract could have been to have a uniformly colored roof (homeowner preference being important). never appearing satisfied. One wall was located slightly off. Defects are not a deviation from the general plan. Plante Purpose unproven + economic waste: Seller built a stock floor plan house for buyer.

45 . A party has done something which makes is ACTUALLY or APPARANTLY IMPOSSIBLE for him to perform. i. UNLESS the non-repudiating party communicated to the repudiating party that the repudiation was final. UNLESS the repudiating party RETRACTS repudiation AND informs the other party. OR b. and UNEQUIVOCAL refusal to perform. Retraction before reliance or notice: Moreover the ambiguous repudiation was retracted before notice of acceptance of repudiation was given. instead waiting for the ground to dry. Other party treats this as repudiation. even though it was very late. the party must take steps to MITIGATE its damages resulting from the repudiation. Contrasted to Wholesale Sand. The other party will then assure performance OR repudiate. told seller he‟d “get right on it. P sues. i. ii. THEN the aggrieved party MUST DEMAND ASSURANCES either in writing (preferred) or orally.ANTICIPATORY REPUDIATION 1. This lets people mitigate. THEN the aggrieved party may treat it as repudiation. NOTE: If the non-repudiating party does NOT bring suit for breach immediately. the contract was not breached. Because his efforts did not appear to be a good faith attempt to do work. Anticipatory Repudiation (expressed intent not to perform before performance is due) occurs allowing the non-repudiating party to immediately claim breach IF there is EITHER an a. IMPLIED Repudiation. Because the defendant could still perform the contract. D tells P he no longer wants him. a. Johnston Unequivocal repudiation requirement: implied repudiation requires conduct equivalent to an equivocal refusal to perform. b. OR i. POSITIVE. 3. A party expresses a CLEAR. Truman Flatt Clarity of repudiation: party sends another party request to modify contract due to changed circumstances. if contract is certainly breached. IF there is NO RESPONSE within a REASONABLE TIME. UNLESS the non-repudiating party has already ACTED IN RELIANCE on the repudiation. Case Law – Anticipatory Repudiation Hochster Breach before contract begins: P engaged to accompany D on a tour.” but never did anything. 2. the plaintiff was justified in considering this an anticipatory repudiation. Court requires repudiation to be clear and definite. or the party materially changed their position in reliance upon the repudiation. Builder intended to do so. IF there is DOUBT that the other party will perform. Possible to sue for breach of repudiated contract before breach has actually occurred. which requires the promisor to put it out of his power to perform. EXPRESS Repudiation. although there was no explicit repudiation. Wholesale Sand & Gravel Lack of good faith effort: buyer contracted with builder to pave driveway. c.

since it was enormously speculative. Expenses incurred in dealing with the breach (the costs of taking whatever reasonable action is needed to protect and enforce Π‟s rights under the contract). OR b. The costs that would have been occurred by performing our end of the bargain. PLUS a. Non-breaching party can recover the DIFFERENCE IN VALUE between what was promised and what was received. Case Law – Expectation Damages Freund Expectation cannot make plaintiff better off: royalty damages were rejected out of hand. b. 3. AND c. Lost Profits. and gaining such damages would put him in a better position. 2. because he‟d get the full royalties rather than 10%. Damages beyond those which generally arise from such a breach that were foreseeable at the time of contracting. THEN CONSIDER EITHER a. MINUS a. The amount of losses can be established with REASONABLE CERTAINTY. The non-breaching party made reasonable efforts to MITIGATE DAMAGES after being informed of breach. IF the breaching party breached by rendering INCOMPLETE or DEFECTIVE BUT SUBSTANTIAL performance. Consequential Damages i. OR c. b.EXPECTATION DAMAGES (assuming breach) EXPECTATION DAMAGES PUT NON-BREACHING PARTY IN AS GOOD A POSITION AS HE WOULD HAVE BEEN IN HAD THE CONTRACT NOT BEEN BREACHED. 4. The losses caused by the breach were REASONABLY FORSEEABLE. 1. THEN a. Cost of publishing was rejected because this is not what the plaintiff contracted for. and plaintiff had gotten back rights to the book. Market Price of breached performance. 46 . CALCULATION OF EXPECTATION DAMAGES 1. IF the breaching party breached by NOT performing. The DIFFERENCE between the Contract Price and the SUBSTITUTE PERFORMANCE. AND b. Incidental Damages i. A non-breaching party can claim EXPECTATION damages IF EACH a. Fixed or overhead costs that would have to have been paid regardless of breach.

Dissent: breach was willful and not in good faith. diminution in value should be awarded. Peevyhouse Diminution in value: cost to restore property after coal mining was 29k. Held that damages to the moment of repudiation were valid. Finished anyway and sued for breach. then Plaintiff should have to pay difference in market value. and cost of performing could have been forecast ex ante. Dissent: wanted her to mitigate by taking another job. and it‟s the owners wish). 47 . Spang Loss at a later date: parties agree to set the date of performance at a later date. long vacations.Jacob & Young Good faith breach + economic waste: Held that where 1) the difference in market value was slight. and D agreed to the timing. anything after was on the plaintiff. Luten Bridge Piling up Damages: plaintiff received notice of repudiation from a diminished board that it was to stop building. restoration work was incidental to the contract. Held that it is not necessary in employment to take lesser work. Hadley Other party must foresee: unable to recover for lost profits from mill shutdown because this potential for loss was unforeseen by the other party. Other side strategically attempted to get her to mitigate. Schectman Cost of completion: 1) the grade is of central important to contract. D still liable for breach from failing to deliver at that later event because the loss was foreseen when the date was set. Parker (Bloomer Girl) Substantially similar work: Other side canceled movie. Moreover. Kearsage Computers Mitigation offset: only that which was gained only because there was a breach is allowable as an offset. therefore cost of completion should be awarded. then cost of completion is proper. like in Jacobs. and diminution in value was much less. 3) cost of correction was significant and would result in economic waste. This prevents economic waste. Therefore. 2) breach was in good faith. 2) not grading is intentional and reeks of strategic behavior. 3) would not be any unreasonable economic waste (no tearing down.

48 . 1. 3.RELIANCE DAMAGES (assuming breach) RELIANCE DAMAGES RETURN THE NON-BREACHING PARTY TO ITS STATUS QUO BEFORE THE CONTRACT. The non-breaching party changed his position to his detriment in reliance on the contract. EXPENDITURES made in preparation for performance or in performance 2. A non-breaching party can claim RELIANCE Damages IF a. MINUS any expenditure that breaching party can prove with reasonable certainty that the non-breaching party would have suffered even if the contract had been performed. Case Law – Reliance Damages Sullivan Reliance where expectation unclear: Reliance damages best suited because 1) court could not establish expectation damages of a good nose. 2) plaintiff did not successfully prove expectation damages. CALCULATION OF RESTITUION DAMAGES 1. NOT EXCEEDING the contract price.

THEN i. a. 1. Π can recover the MARKET VALUE of that service. AND b. CON: That‟s a legal fiction. FORK: If this is higher/lower than the contract price. a. It would be unjust for the recipient to retain that benefit without compensating the other party. CALCULATION OF RESTITUTION DAMAGES 1. PRO: Restitution assumes the contract never existed. b. argue for that. A non-breaching (OR BREACHING) party can claim RESTITUTION damages IF a. 1. 49 .RESTITUTION DAMAGES (assuming breach) RESTITUTION DAMAGES RETURN TO THE NON-BREACHING PARTY THE VALUE OF THE BENEFITS CONFERRED ON THE BREACHING PARTY. Π can recover the NET GAIN conferred on the breaching party (or unjustly enriched party). so the contract price shouldn‟t matter anymore. IF the benefit conferred was a SERVICE. The breaching (or non-breaching) party has obtained a benefit at the non-breaching (or breaching) party‟s expense.

and cost of doing so would have to be estimated by courts. unique things like land. NO SUBSTITUTE performance is available. and court does not grant specific performance (market is thick)..SPECIFIC PERFORMANCE (assuming breach) 1. AND i. AND c. b. or art. A non-breaching party may claim SPECIFIC PERFORMANCE IF EACH a.g. King Aircraft Court orders monetary specific performance where difficult to replace good is sold to another higher bidder. 50 . Discourages opportunistic use of efficient breach. seller intentionally breaches. AND d. The contract is NOT for PERSONAL SERVICE. E. Specific performance appropriate because finding substitute is hard to do. patents. Klein Legal Remedy adequate: buyer attempts to buy plane from seller. which was impossible.\ Case Law – Specific Performance Sedmak Legal Remedy inadequate: Car sold to buyer. Enforcement is FEASIBLE. Contract terms are DEFINITE and CERTAIN. seller rescinds after contract formed. Buyer bids on two other jets of similar variety.

The amount set by the parties is REASONABLE in light of the anticipated or actual loss caused by the breach. CALCULATION OF LIQUIDATED DAMAGES 1. Terms reflected the idea that it was to cover cost. AND 2. 1. and 2) because the loss was far less than it was thought it would be. but close scrutiny uncovered that it overpaid significantly. Not enforceable. IF the above tests are met. both parties must pay their damages. The reasonableness of the estimated amount of loss. NOTE: IF (b) is NOT met. The parties included a liquidated damages provision in the contract.LIQUIDATED DAMAGES (assuming breach) LIQUIDATED DAMAGES IS THE REMEDY AGREED ON BY THE PARTIES WHEN FORMING THE CONTRACT. A party can claim LIQUIDATED damages IF BOTH a. CONSIDER: 1. invoking the liquidated damages would pay more than actual damages. THEN the provision may be found UNENFORCEABLE for being punitive OR unnecessary. Sun Ship Reasonable at time: One party claims it should be excused 1) because the other party was late. so it is enforced. i. Court holds 1) that in a case of two parties breaching. AND b. and at any point in the contract. Difficulty of proving the loss (this difficulty is a reason why Liquidated Damages provisions are used). 51 . ii. Case Law – Liquidated Damages Carborundum Punitive damages: poorly written liquidated damages. THEN you get the amount provided for in the contract. and 2) the loss was reasonable at the time of bargaining.