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? I. Theories of Promissory Liability 1. Mutual promises are not enforceable unless consideration for them is present. (Best v. Southland) II. Promises that Lack Commitment 1. Conditional and Illusory Promises i. When a promisor aggress to purchase services from a promisee on a per unit basis but the agreement specifies no quantity and the parties did not intend that the promisor should take all of his needs from the promisee there is no enforceable agreement. (De Los Santos v. Great Western Sugar) 1. as may be loaded ii. Satisfaction clauses do not render a contract illusory or raise problems of mutuality of performance. (Mattei v. Hopper) iii. In agreements which seem to reserve the right to cancel at any time it is reasonable through interpretation to take the position that notice of cancellation is required and even though notice may be given at any time it constitutes a detriment, hence, is valid consideration. (Sylvan Crest) 1. The government s obligation to give delivery instructions or notice of cancellation within a reasonable amount of time constituted consideration. Then Sylvan s promise to deliver in accordance with the instructions is consideration. Thus the contract is valid. iv. While an express promise may be lacking the whole writing may be instinct with obligation- an implied promise- imperfectly expressed so as to form a valid contract. (Lady Duff) v. Every contract has some degree of indefiniteness and while there must be mutual assent as to the essential terms, parties should be held to their promises and courts should not become petty or over particular in interpreting contract terms. -Sloan p.47 (Angelou) 2. Context That Suggests No Commitment- Fun and Games i. If neither party to a contract intends it to be binding then it is unenforceable and no contract is deemed to exist. (Keller v. Holderman- $15 watch for $300) ii. Where a party has no expectation that his remarks will be taken as legally binding no contract exists. (Brown v. Finney- bushels of coal) III. Interpretation of Vague and Indefinite Promises 1. Words are Ambiguous i. The party who seeks to interpret the terms of a contract in a sense narrower than their everyday use there is the burden of persuasion to show, and if that party fails to support its burden it faces dismissal of its complaint. (Frigailment v. BNS- Chicken case) 1. 2. THIS WILL BE ON THE FINAL 2. 3. 4. 5. 6. 7. 8. 9. No Contract is Complete Intention is a Fiction Objective Manifestation of Assent Also is Fiction Time Washes Away All Things Many Contracts are Best Left Incomplete Deliberately GO TO P. 70 for RULES b-h The Lawyer as Interpreter Positive Law Sometimes Determines Meaning Constructing a Coherent, Persuasive Interpretation
i. Extrinsic evidence regarding the circumstances of making the contract is admissible to ascertain the intent of the parties whether or not there is ambiguity on the face of the agreement. (Berg v. Hudesman- 99 year ground lease) Chapter 2: Remedies How the Law Enforces Promises I. Punitive Sanctions ii. Damages may be awarded for inconvenience for breach of contract, but no punitive damages by be awarded. NO PUNITIVE DAMAGES IN CONTRACTS CASES. (White v. Benkowski-Neighbors that were supposed to supply water to their house) A. Specific Performance i. Courts of equity will not issue decrees of specific performance where such orders would require extensive supervision by the court. (Northern Delaware v. EW Bliss-300 Men and a mill) ii. Negative enforcement of an employment contract may only be granted, once the contract is terminated, to prevent injury from unfair competition or to enforce an express and valid anticompetitive covenant (ABC v Wolf) 1. You can get an injunction when: y Unfair competition y Trade secrets y Services are unique B. Compensatory Damages (RESTATEMENT 334 and 347) a. The Financial Equivalent of Performance A. Expectation Interest 1. The Main Point of Expectation Damages: to simulate as closely as possible the plaintiffs economic situation in the absence of breach; compare what the plaintiff had the right to expect and what she actually got. 2. FORMULA
DAMAGES= PLAINTIFFS LOSS IN VALUE caused by the defendants non-performance + (PLUS)
ANY OTHER LOSS (this includes consequential and incidental damages) i. (MINUS)
ANY COST OR LOSS THE PLAINTIFF AVOIDED by not having to perform
ii. When a breach of a contract occurs, the law attempts to secure to the injured party the benefit of his bargain, subject to the limitation that the injury was foreseeable, and that the amount of damages claimed be measurable with a reasonable degree of certainty and adequately proven (Freund v Washington Square Press-the book that never got published) iii. Where an offer promises to enhance physical beauty, breach of h the K would permit recovery for pain and suffering, mental distress and worsening of the condition (Sullivan v O Connor-plastic surgery case) B. Reliance Interest
i. In a breach of K action, wasted expenditure can be recovered when it is wasted by reason of the defendants breach of K (Anglia Television v ReedBrady Bunch Dad) ii. When a court grants restitution for breach, the party in breach is required to acct for a benefit that has been conferred on him by the injured party C. Restitution Interest iv. A court may award restitution damages in an attempt to return the injured party any value that it may have conferred on the breaching party b. Avoidable Consequences (Corbin on Contracts § 1095 and UCC§ 2708) i. When a notice of cancellation is received while a K is still executor, the party cannot complete it and claim the K price (Luten Bridge Co.) ii. Where an employment for a specified time period is wrongfully terminated, the employee may sue for the wage due under the remainder of the K less any amounts he earned during the period or could have earned through reasonable diligence (Southerland v Wyer the guy fired from the play) 1. EMPLOYMENT CONTRACT FORMULA AMOUNT OF REMAINDER OF THE CONTRACT i. (MINUS) AMOUNT EARNED OR COULD HAVED EARNED THROUGH REASONABLE CIRCUMSTANCE iii. A party need not accept an inferior job in order to avoid loss of damages for failure to mitigate resulting from a breach of an employment K 1. You always have a duty to mitigate but that does not mean you have to accept an inferior job just means an equivalent job . C. Foreseeability: Consequential Damages and the Effect of Procedural Rules on Contract Damages (UCC § 2.715) (UCC §2.708) i. UCC 2-708: permits the seller to recover as damages the difference between market price and contract price plus any incidental damages incurred, but minus any expenses avoided, as long as this amount is sufficient to place the seller in as good a position as performance would have done; otherwise, the lesller may recover his lost profit pulse any incidental damages and reasonable costs (Neri v Retail Marine Corp- one boat, two boats) ii. In injured party may recover those damages as may reasonably be considered 1. arising naturally from the breach itself, and 2. damages as may reasonably be supposed to have been in contemplation of the parties, at the time of the contract, as the probable result of a breach of it (Hadley v Baxendale) 3. how to determine the scope of consequential damages arising from a breach of contract: one is liable for all
losses that ought to have been in the contemplation of the contracting parties (Hadley v Baxendale) iii. TACIT AGREEEMENT TEST: for the buyer to give notice to the seller of the special circumstances is notice itself sufficient. It must be mentioned in the K inorder to be recoverable .that is, to get damages the Plaintiff must proved that the defendant knew about the risk and assumed the risk (Globe Refining v Landa Cotton Oil Co-they were supposed to get oil at a spec. price) iv. A lost future profit award to a franchisor may be awarded only where lost future profits are proximately caused by the franchisee s breach and where such an award is neither excessive, oppressive, [nor] disproportionate to the loss suffered by the franchisor (PIP Printing Case) v. In complicated or technical cases, an experts testimony should be cleansed of insupportable assumptions or clear errors which have less than the minimum probative value That is: experts ought to be a beacon of truth (Eastern Airlines v. Mc Donnell Douglas- supposed to deliver 90 airplanes) Chapter 3: Countervailing Influences on Contract Remedies I. Restitution as an Alternative Contract Remedy (Restatement § 370, 371, 373, 374) BUILT AGAINST UNJUST ENRICHMENT i. If the Plaintiff is wrongfully discharged, thus being prevented from completing performance, he may recover the value of the material and labor already supplied (Mooney v York Iron Co) If the employer terminates at no fault of the employee , employee may sue upon the k for damages OR may sue upon Quantum Meruit for what the serviced already done are worth An employee may recover NOT on the value of the work and labor itself, but on the worth of the product the work and labor produced iii. Unjust enrichment exists where the defendant has received a benefit from the plaintiff, which the plaintiff has not provide gratuitously, and it would be inequitable for the defendant to retain the benefit without compensating the plaintiff for its value (Sparks v. Gustafson dad died but his friend had done handy work on dads ppty, he sues son for the value of his work on the ppty) 1. This was a plain old unjust enrichment case, because for a QM case, you need a contract) iv. Where a party retains the benefits from the labor of another he must pay for the value of such services less any damages sustained from the breach of the contract (Britton v Turner) 1. How to measure unjust enrichment 1. What did the non-breaching party receive? 2. What did the breaching party receive? v. The breaching party cannot recover under a quasi-contract principles if recovery would cause the innocent party to pay more than the contract price itself (US v. Cal State Electric) vi. No award of profits can be rendered in an action in quantum meruit (Petropoulos v Lubienski)
vii. A person who procures an ongoing business relationship is entitled to commissions for a reasonable time after termination under the doctrine of Quantum Meruit (Watson v. Wood Dimension, Inc- the guy who was hired to get an acct, after he got the acct. he was fired) Tort as an Alternative to Contract Remedies i. It does not follow that because acts constituted a breach of K they cannot also give rise to liability in tort (Oki Nursery-bad seeds case) ii. a tort claim can rise from a contract when (decker browning-trash collectors fired) 1. extensive personal injury 2. moral quality in contract is outlandish 3. outrageous conduct on behalf of the defendant 4. special relationship (ASK SLOAN WHAT KIND OF SPECIAL RELATIONSHIP) 5. presence of insurance 6. GET THIS LIST FROM SOMEONE .WITNEY AND JENN WERE TALKING TOO LOUD!!!! SOMETHING LIKE COURTS NO WILLING TO EXPED????????? iii. Recover will be allowed for disappointment and loss of entertainment for breach of warranty or misrepresentations concerning a vacation (Swain Tours) Limitations on Recovery Set by the Parties in Their Contract i. A minimum quantity supply K may not liquidate damages without estimating the likely damages of a breach (lake river corp) ii. A liquidated damages provision agreed to by sophisticated parties in reasonable anticipation of what actual damages would be in case of breach will not be invalidated simply because actual damages proved to be much lower (Hawaiian Sugar Co.) add UCC 2-718 Arbitration i. A court may not set aside an arbitrators award (sims v siegelson) ii. If parties agree contractually to subject an award to expanded judicial review, federal arbitration policy requires the court to conduct its review in compliance with the K s terms (Kyocera Corp) **Arbitration v litigation Arb. is cheaper No media attn Rules of evidence don t apply to arbitration Rough justice Prevents big class action suits Afraid of juries big verdicts Another reason you would want arbitration: you can use it to slow things up
Chapter 4: Societally Imposed Limits on Promise I. Positive Law as a Limit on Contract i. A party will be denied recover even on a K valid on its face if he has resorted to gravely immoral and illegal conduct in accomplishing its performance (McConnel v. Commonwealth Pictures) ii. Spousal support waivers in Pre nuptial agreements are not in violation of public policy and are not per se unenforceable (Pendleton v Fireman) II. Relationships That Limit and Give Meaning to Promises i. An explicit agreement or other extrinsic evidence of the existence of a binding agreement is required before promises between family members will be enforced (Woods-mom promised to take care of her son and she died and he sued )
The law does not authorize contractual modification of the conjugal association except in relation to property (Favrot the wife to wanted to have sexual relations too often) iii. Unmarried cohabitants may raise claims based upon unjust enrichment following the termination of their relationships where one of the parties attempts to retain un unreasonable amount of the ppty acquired through the efforts of both (Watts v Watts) iv. Recovery in Quantum Meruit is measured by the reasonable value of services rendered to the benefiting party (Mag Light Case) Societal Regulation of Lawyer-Client Contracts (§6147, 6148) i. An attny is entitled to reasonable compensation for services rendered up to the time of termination of the attorney client relationship ii. Attorneys are limited to quantum meruit recover for the value of their services when the client discharges the attorney iii. A special non refundable retainer fee agreement is per se in violation of public policy because it compromises the clients absolute right to terminate the attorney client relationship
Chapter 5: Promises Tainted by Failures of Voluntary Assent I. Lack of Capacity (Restatement § 12, 15) i. A contract is voidable if 1. One party is mentally ill 2. The illness renders him incapable of acting in a reasonable manner 3. The other party knows or has reason to know of the condition Teacher case iii. An illiterate person signing an instrument without request that it be read to him is chargeable with negligence for which the law affords him no redress, unless he has been lulled into security or thrown off his guard and deceived (Ellis v Mullen) II. Duress (Restatement § 175, 176) i. A party may recover money paid to another under a situation where he has no liability, but because of business compulsion he has no other choice or speedy remedy (Kudra) ii. the mere stress of financial conditions will not constitute duress sufficient to void a contract iii. a contract may be voiced for duress if a party s manifestation of assent is induced by an improper threat, leaving the victim no reasonable alternative (the guy with the knee surgery) III. Contracts of Adhesion and Unjust Terms i. Where in light of the general commercial background of a particular case, it appears that gross inequality of bargaining power between the parties has led to the formation of a contract on terms to which one part has had no meaningful choice, a court should refuse to enforce such a contract on the ground that it its unconscionable (furniture company that repo d the sofa) ii. an adhesion contract, which is one entered into between parties with unequal bargaining power, is not automatically void, but the courts will usually utilize a variety of pretests to disregard any part thereof that it finds unfair and unreasonable (LSAT case) iii. an arbitration clause need not be enforced where a party with a superior bargaining power uses that power to cause the weaker party to sign a one sided arbitration clause that seeks to maximize the risks of arbitration (nurses case)
Nondisclosure by the seller of facts solely within its knowledge and undiscoverable by a prudent buyer constitutes a basis for rescission of the K Fraud and Misrepresentation i. WHEN A HOME SELLER DISCLOSES ONLY A PORTION OF THE INFORMATION HE HAS BUT LEADS THE BUYER TO BELIEVE HE HAS MADE A FULL DISCLOSURE, HE WILL BE LIABLE IF THE BUYER ASTS IN RELIANCE ON THAT PARITIAL DISCLOSURE (haunted house) Misunderstanding and Mistake (Restatement §20, 201) i. A party who misleads another is stopped from claiming that the K is anything but what the other is led to believe (lying wife, silent husband) ii. Where neither party knows or has reason to know of the ambiguity, or where both know or have reason to know , the ambiguity is given the meaning that each party intended it to have. (ship Peerless) iii. A mutual mistake as to a basic assumption on which the K was made provides a basis for rescission of the K for mutual mistake of fact (coin purchase) iv. A court need not grand rescission in every case in which there is a mutual mistake that relates to a basic assumption of the parties upon which the K was make and which materially affects the agreed performance of the parties (pickles septic tank case) Release (§ 1541, 1542) i. An agreement releasing a party from liability for negligence is not void against public policy if the interest is not implicated, and the parties may shift the allocation of risk between themselves differently than allocated by law (olsen) ii. An exculpatory clause in unenforceable if it is not distinguishable from other sections of a K, but is placed in other test so that it does not attract attention and is difficult to find (Leon v. Family Fitness Center)
Chapter 6: Consideration: Bargains and Action in Reliance I. Bargain and Exchange i. II. Bargain Promises v. Gift Promises (§ 7, 18) i. Samuel Williston CB 463: If you go around the corner to the clothing shop there, you may purchase an overcoat on my credit ii. GMC v. Michigan Dept. of Treasury: goodwill adjustment policy iv. While forbearance to bring suit is deemed consideration, there must be some showing that forbearance was bargained for and was not merely conveniently granted unilaterally by one party. (E.J. Baehr v. Penn-O-Tex Oil) 1. No consideration because neither party took defendant s assurances seriously or acted upon them in any way therefore there was no consideration and the promise did not amount to a contract. III. Adequacy of Consideration (UCC §2306) i. Restatement § 79, Second Contracts CB 480 ii. What was the value of Best s promise of reciprocity to Southland? iii. Recall: Keller v. Holderman CB 54 and Brown v. Finney CB 55 i. Consideration must have value to the buyer; however, there is no requirement than an idea used as consideration must have novelty. (Apfel v. Prudential-Bache Securities- Software to see bonds; Sale Of Goods) a. Idea had value to the buyer and thus constitutes valid consideration b. Lack of novelty does NOT demonstrate lack of value. Buyer can still reap benefits from contract.
Settlement of an unfounded claim asserted in good faith constitutes valuable consideration for settlement agreements (Dyer v. National By-Productsemployment contract; employee looses foot @ work then gets fired later) a. Good faith? b. Corbin on Contracts § 140, CB 486 c. Restatement § 74, CB 487 d. Williston on Contracts § 135, CB 487 e. Good Faith Requirement, CB 489 f. UCC § 2306 Output, Requirements and Exclusive Dealings, CB 489 iii. Output contracts are valid and any indefiniteness or mutuality is supplied by a good faith requirement implied by the UCC into such contracts. (Feld v. Henry S. Levy & Sons, Inc.- bread crumbs) a. Applied UCC § 2306, must act with good faith iv. A buyer may vary its requirements pursuant to a requirements contract, so long as he does so in good faith. (Technical Assistance International, Inc. v. U.S.- army cars; we hold that the only limitation upon the government s ability to vary its requirements under a requirements contract is that it must do so in good faith. TAI didn t show that the gov t had altered its requirements in bad faith) Past Consideration- Moral Obligation (Restatement § 86, Civ Code §1606, NY Law § 5-1105 i. Past consideration in not sufficient to support a contract. (Passante v. McWilliam- Upper Deck baseball cards; Passante violated ethical duty as a lawyer. 1. Inchoate gift ? ii. A moral obligation is insufficient as consideration for a promise. (Mills v. Wyman- 4 paid med bills for ( s son; 1. no consideration because nothing was bargained for??? iii. A moral obligation is sufficient consideration to support a subsequent promise to pay where the promissory has received material benefit. (Webb v. McGowin- 4 falls with block to deflect it from hitting his boss, 4 sues boss will executor for $$$$). 1. Saving someone s life = s consideration???? 2. Moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a amterial benefit, althought there was no original duty or liability resting on the promisor CB 509 3. Restatement § 86 promise for Benefit Received CB 511 4. CA Civ Code § 1606, CB 512 5. NY Law §5-1105, CB 512 Preexisting Duty a. Modification of an Ongoing Contract (UCC § 2209, Restatement § 89, CA Civ. Code § 1697, 1698) i. Where a contract is mutually rescinded and a new contract is entered into by the parties, it is valid and deemed supported by consideration (Schwartzreich v. Bauman-Basch- employment agreement about designing coats; gimmick =3 contracts old contract, cancelled contract, new contract. Consideration for cancelled contract is that each party releases the opposite party from the contract. ii. A modification made to meet the reasonable needs of standard and ethical practices of men in their business dealings with each other operates as a partial rescission of a prior contract and is thus enforceable since supported by consideration. (Watkins & Sons, Inc. v. Carrig- construction contract w/
digging out of cellar finds rock and homeowner agrees to pay 9x s contract price; gimmick = gift promise the gift here was not of the promise to pay more, but of release of the 4 s duty to work for less. CB 521.) iii. An oral modification is enforceable, even if the contract prohibits oral modifications, if the modification is supported by consideration and the party seeking enforcement relied on the modification. (Autorol Corp. v. Continental Water Systems Corp- pattern of conduct can be a modification.) 1. UCC 2209 Modification, Rescission and Waiver, CB 527 2. Restatement § 89 Modifications of Executory Contract, CB 527 3. CAL Civ Code § 1697, CB 528 4. CAL Civ Code § 1698, CB 528 5. Article 29, CB 528 b. Settlements of Liquidated debts and Check-Cashing Rules (Restatement § 74, §281, 279) i. Restatement § 74 Settlement of Claims, CB 529 ii. Restatement § 281 Accord and Satisfaction, CB 531-532 iii. § 279 Substituted Contract, CB 533 iv. A compromise agreement that requires future performance in satisfaction of the claim is an executory accord, upon the breach of which the nonbreaching party may sue on either the original or the compromise agreement. (Johnson v. Utile) v. NOM Clause, no oral modification UCC 2209 ?????(IFC Credit Corp. v. Bulk Petroleum Corp) Action in Reliance (Restatement § 90) i. Restatement § 90 Promise Reasonably Inducing Action of Forbearance, CB 543 ii. When the payee changes her position to her disadvantage, in reliance on a promise, a right of action on the promise arises. (Ricketts v. Scothorn) 1. Equittable estopple CB 546 iii. Charitable situations CB 547-548- There is no room in such a situation for the doctrine of promissory estopple year=1933 iv. A contract is not valid merely because it lacks mutuality of obligations Detrimental reliance may constitute valid consideration to support it. (Clausen & Sons v. Theo. Hamm Brewing CB 550- 1st bargained for reliance (substitute for consideration). reliance and action on such a waiver should be treated as sufficient consideration.) Form and Enforceability a. The Seal b. Formal Writing as a Basis for Enforceability i. § 218 Untrue recitals; Evidence of Consideration, CB 555 c. The Statute of Frauds (Cal. Civ. Code § 1624, § 2201) i. CAL Civ Code § 1624 Statute of Frauds ii. § 2201 Formal Requirements; Statute of Frauds iii. While an oral employment contract for more than a year violates the Statute of Frauds, either part performance or equitable estopple may render the contract enforceable. (McIntosh v. Murphy) d. The Parole Evidence Rule (UCC § 2202)
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