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1. What is a Contract? a. A contract is formed in any transaction in which one or both parties make a legally enforceable promise. A promise is legally enforceable where it: (3) i. Was made as part of a bargain for valid consideration; ii. Reasonably induced the promisee to rely on the promise to his detriment; (or) iii. Is deemed enforceable by a statute despite the lack of consideration. 2. Requirements of a Contract: O + A + C + (-Misc.) = K a. Consideration – “the glue that holds the contract together” / A promise (+)… i. Requires a bargained exchange in which each party incurs a legal detriment. b. Misc – A Contract MUST be in absence of a Statute / Rule which voids the transaction (a contract is made, but it is not enforceable because it violates a Statute / Rule) c. O + A = mutual assent 3. Intent to Contract – The willful or purposeful desire to enter into a contract. a. Outward Expressions of Intent – b. Law will impute (attribute / ascribe) intent that corresponds with a person’s words or acts (Ob Test) c. Secret undisclosed intent is irrelevant - Unless one knows the other had no intent to contract 4. Types of Contracts (2) a. Formal – enforced because “particular formalities” were observed i. K’s Under Seal – Sealed with person’s authorization (rubber stamp / signature) ii. Recognizance – Promise made in open court iii. Negotiable Instrument – “Checks, etc.” b. Informal – are enforced because people have expressed their intent to act or not act. i. Express – an agreement manifested by words – spoken or written – Definite O and A, ii. Implied 1. Implied in Fact – an agreement manifested by conduct 2. Implied in Law (“quasi-contract”) – not a true contract, but an obligation imposed by a court, to avoid an injustice or “unjust enrichment” 5. Mutual Assent – The intent of two parties to be contractually bound to each other a. To determine MA – use the Objective test (view manifested intentions) i. What would a reasonable person to whom an expression – words or conduct – has been addressed understand the expression to mean. Social Contracts – The existence of a familial relationship may affect the ability to create an enforceable contract. Generally – social promises do not result in contracts. Sources of Contract Law a. Common Law – IS LAW. In most jurisdictions, contract law is not codified, and thus the primary source of general contract law is case law b. Uniform Commercial Code (UCC) – IS LAW. i. UCC Applies to Goods. 1
Contracts ii. Common Law encompasses everything else (real estate, services, etc. - unless coded) 1. Goods – (Article 2, UCC) – All things which are moveable at the time of identification at the time of contracting. (Crops are Goods) 2. Except Auctions – Everything falls under UCC in an auction. (Services, Real Estate) iii. Gap Fillers in UCC – If contract is missing minor details Gap Filler preserves the contract. 1. We are responsible to know 3 of them a. No Price – Reasonable Price b. No Location – Pickup will be at the seller’s location. c. No Time – Reasonable Time. 8. Contract Formation a. Offer (I) – An offer is a yesable proposition that is definite in its terms, committed to its terms, and communicated to the other party so that only agreement is necessary from the propositioned party. i. Made by Offeror 1. Committed – The offeror must have a commitment to contract. 2. Definite – The terms of the O must be strictly defined 3. Communicated – a. Verbally (Orally or Written) b. Conduct – Implied in Fact – Conduct implies intent to be contractually bound c. or BOTH b. Acceptance (II) – An acceptance is an affirmative answer communicated to the offeror, which is responsive in matching the terms of the offer, and is absolute and unequivocal in that it leaves no doubt that the offeree intends to be bound to the terms of the offer. i. Made by offeree 1. Responsive – Must meet the conditions of the offer 2. Absolute / Unequivocal – Must be absolute and firm in its acceptance 3. Communicated – The O/ee makes it clear to O/or willing to and agreeing to enter K c. Consideration – A valuable consideration, in the sense of the law, may consist of a right, interest, profit or benefit accruing to the one party / (or) some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. d. Promissory Estoppel – A legal theory designed to prevent injustice, under which a promise may be enforced, even in the lack of C, where one party makes a promise knowing that it is likely to induce reliance by another party, and it does in fact induce reliance by the other party to his or her detriment e. Moral Obligation – A legal theory under which a court will enforce a promise made subsequent to an expired statute of limitations, bankruptcy, infancy or in the case where, absent legal duty, one party has received a material benefit. f. Termination (III) – Terminating the power of Acceptance make K invalid i. Revocation ii. Rejection iii. Lapse of Time iv. Death / Incapacity v. Counter Offer vi. Battle of the Forms vii. Indefiniteness 2
Auctioneer makes the Offer. even if claimant had no idea that the reward was being offered. Offer to buy and sell goods must be Commitment. Hold an Offer Open (3 ways) a. Advertisements – Typically not considered an O unless the ad is very specific about the quantity of items. ii. Bidder makes the Offer – Each bid is an offer ii. If Option K was in writing. 4. 2-205) – (O + M + /s/w + Assurance = FO) i. Private Reward – You must be aware of the offer prior to your actions. Except for Free Samples and Things sent by charities Knowledge of the Offer – (Private vs. a. (O + M + /s/w + Assurance = FO) 1. Government Rewards) a. Firm offer does not require Consideration. If you want to hold an offer open for 4 months. you will have to pay for it in an Option iii. Auctions with Reserve – Auctioneer can take item of block until certain $ is reached i. Option Contract – (CL) Paying to keep a K open for the time stated i. A bidder may always withdraw his offer before the fall of the hammer. No time/reasonable time BUT no longer than 3M ii. If nothing is said – It is presumed to be an Auction with Reserve 3. payment does not need to have been tendered.Communicated) 1. Auctioneer has power of acceptance (Until A he can take it off the block any time) iii. Definite. 5.Too Little Quantity. Statements by Doctors / Attorneys – Not offer unless “I guarantee!” Unsolicited Mailings – The mailing of unordered merchandise will be considered a gift.Any citizen who performs the requested service is entitled to the reward. In a signed (/s/) writing (any intentional reduction to a tangible form) 4. will be held open. b.) 2. and specific time frames. i.Bidder has power of acceptance – Each bid is an Acceptance iii. Typically regarded as an “Invitation to deal” a. Auctions without Reserve – Auctioneer cannot take item off the block. 2-328 Apply to Everything with Auctions – goods. real estate. i. may be considered an O. Police officers cannot accept ANY rewards. will not be changed. Communicated 2. Gives assurances (O will not be revoked. services) a. etc. c. Rewards are offers – calling for an Act for acceptance. Firm Offer – (UCC. ii. iv. b. Other side can revoke option at any time. b. Problems with Ad – If you can get around these. i. Option – (CL) If you buy within this time frame – you can get it at this price.Contracts I. 3 . i. ii. Too Many Offerees. b. who is eligible. By a merchant (who deals in the kind of goods in offer) 3. Auctions – (UCC. This offer is irrevocable for the time stated. OFFER (Committed – Definite .Government Reward .
Once Act has begun. Both sides have to make a promise. Both – See above. Knowing that the other party expects to be paid 3. O/EE can begin the act. but now it can be treated either way. Once the promise is returned by the O/EE – BOTH are BOUND to the contract c. SLOWER than the way you received it – No MBR unless otherwise accepted by O/OR e. Rejection occurs when received by O/OR i. Preparation to Perform – does not count. Whichever one is received first is the binding agreement. (4) Ways to Accept an Offer a. A Promise – See Above c. Then O/EE must follow through on their end ii. and quit halfway through because they never gave a promise. 2. ii. If an O/EE sends more than one response to an offer: 1. O/EE sends a Rejection (BY MAIL).. and he can say what he demands as a response to his offer. Once the O/EE begins the act – the O/OR is BOUND to the offer. the O/OR has to give a reasonable amount of time to complete act. (And) had a reasonable opportunity to object The Mailbox Rule (MBR) a. b. You have to actually begin the act.The Offeror does not make desired acceptance clear (Act or Promise) i. a. a. and O/EE remains silent = K i. 2. Exercise of Dominion – Acceptance can be imposed when a party stands by in silence. c.Course of Performance – The way a party has acted during this particular performance iii. Course of Dealing – Previous deals lead one to believe it is understood ii. (Common Law) Bilateral contract (two sided). In the past this was treated as a bilateral contract.Option K or Firm Offer – the A has to be received prior to the end of the option period! 3. and. (This is very common) the offer can be completed by either an act or a promise. Sees a valuable service rendered to his benefit 2. • His demand can be as ridiculous as he wants it to be. Silence – If the O/OR states that Assent can be made by silence. Ambiguous . Only one side has to make a promise. (Common Law) Unilateral contract (one sided). 1. 4 . 1. An Act / Performance – See Above. 1. Acceptance occurs when O/EE deposits into the mail b. An Act / Performance – The Offeror is asking that you COMPLETE an act in order to express A i. b. FASTER than the way you received it – MBR Applies d. Promise – The Offeror is asking for a PROMISE that the Offeree will perform an Act i. and later sends an A – It is a race to the mailbox. 1.Contracts II. ACCEPTANCE (Responsive – Absolute/Unequivocal – Communicated) (3) ways an Offeror can Request an Offeree to Accept his Offer • Note: Offeror is the “Master of his offer”. When does MBR not apply? i. under ambiguous d. When the O/OR specifies that A is Effective upon receipt ii.
Direct . Reliance on Rejection – The reasonable belief that an O has been rejected . face to face) . (7) Revocation – The O is pulled off the table by the O/OR before O/EE can accept a. See below. A lapse of time will destroy the power of acceptance. When it is delivered at the business where it was made iii. b. Death terminates the offer without notice. The above exception (Option Contract and Firm Offer) does not apply to incompetency. The moment of acceptance fixes the terms of the contract to those agreed upon in the offer. Typically you must accept within 3 months. O will live on. . Restatement 2 (68) i. and begin the count from the following day – until midnight of the final day Death or Incapacity – a. unless something is said which indicates that the offer should survive the communication. UCC 1-201 (26) i. a. 3. 2. Oral offer (telephone. When it comes to the attention of the O/OR ii. 4. 5 2. If held by Firm Offer – you have met the requirements of a statute. Incapacity / Incompetency – If a person loses capacity to contract – Terminates without notice i. or too unfixed to be enforceable. When it is received by a person authorized by the O/OR iii.the courts will often forgive any breach for reasonable reliance. Counting days (see handout) –Always eliminate the first day on which you receive the offer. but only by agreement by both parties. Counter Offer – A Counter-Offer automatically terminates the original offer. The span of this is typically to be determined by a jury. c.O/EE learns from credible third party that O is revoked Rejection – The O/EE turns down the offer a.Lapses at the end of the conversation. 1. 5. b. When it is delivered to a place O/OR holds for receiving such communications Acceptance must be made in Reasonable Time – a. An Acceptance is effective if: a. 5. b. Lapse of Time – O/OR is the master of his O and can set a time limit. b. 6. Indirect .O is revoked directly from the O/OR b. When it is deposited in a place where the O/OR has authorized communications b. Once a Contract is Formed – Neither party may unilaterally change the contract. TERMINATION 1. Option Contract – you paid for it – you can still exercise it.Contracts 4. i. The O lapses at the time stated a. Indefiniteness – The terms of a contract are too different. III. The contract can be amended. When it comes into the possession of the O/OR ii. 6. Exception – Unless the offer is held open by option contract or firm offer.
7. b. The term will automatically become part of the contract – UNLESS – Any of the following are present: a. That is not one of the accepted “dickered terms” 2. If Yes – then YOU HAVE A CONTRACT! 2.” It will only be effective if the Offeror specifically agrees to it. If the contract was between Merchants: i. If Return Document contained an “Additional or Different Terms” – you have an “ACCEPTANCE” .go to paragraph 2 1. Often. and then terminates the original O c. The UCC Rule – (2-207) NO “mirror image” concept. “Stock” forms – Sent with every transaction. 2-305 – If the Price is not agreed – then a reasonable price b. but the additional or different term will be thrown out (the “Knock-Out Rule”) b. If No – then you do not have a contract . Dickered Term – A change to the Price or Quantity b. 6 . 2-308 – If the Place is not agreed – pickup will be at the seller’s place c. The offer is limited to its terms ii. When you receive a return document – the first thing to ask yourself is where / how is the offer changed? i. Different Term – a change to a term (cannot be minor) a. Does the conduct of the party indicate that there is a K? 1. 2-309 – If the Time frame is not agreed – then a reasonable time 3. Proviso Language – Specific condition that the other party insists is agreed on ii. If the Contract was not between merchants: i. If any of the above were present – you do have a K. Additional Term – adding a term to the offer a. Common Law – Mirror Image Rule – offer must be the same. There is an objection in a reasonable time c. You have a contract – however the additional or different term will be considered a “proposal for an addition to the contract. i. parties do not read other party’s form.you have a counter offer iii.go to paragraph 3 a. If Return Document contained a “Dickered Term” or “Proviso Language” you may have a “COUNTER OFFER” .Contracts Battle of the Forms a. The terms that do not agree will be fixed by the UCC “Gap Fillers” a. If the response changes the terms – it is a Counter-Offer. b. The Additional or Different term materially alters the contract.
Forbearance of prosecution is illegal 7 2. Adequacy of C – Refers to the quantity of the amounts exchanged 1. suffered or undertaken by the other. 2. Sufficiency of C – The C offered must be something that has value in the eyes of the law iii. profit or benefit accruing to the one party / (or) some forbearance. iv. $1 for $500 – it is like fungible . i. loss or responsibility given. Forbearance of an invalid claim if honestly and reasonably believes to be a valid 4. As general principal – courts do not inquire into adequacy of consideration. but was not bargained for b. Promissory Estoppel and Moral Obligation) a. If K involved fungible for like fungible. A/P – Act/Promise requested in return? 3. Forbearing on a submitting a claim which proves to be invalid is not C unless: 1. Moral Obligation Consideration (Actual. Forbearance. Venerating someone’s memory 5. B4 – Bargained for? 4.Contracts IV. Consideration .A valuable consideration. Forbearance – The act of refraining from enforcing a right. Before a court will force someone to deed over real estate – they may look at the adequacy of consideration. obligation or debt i. Nominal Consideration – has value. 1. Promise may ONLY be consideration if the performance (act) of that promise would iii. Consideration Requires: 1. If there is honest and reasonable belief that claim is valid ii. Promissory Estoppel -ORiii. V – Value? ii. CONSIDERATION 1. i. Explicitly Bargained for Benefit to the Promisor (OR) 2. What does it take to make Mutual Assent (O + A) / A Contract Enforceable? a. P – Promise sought? 2. . b. Consideration -ORii. i. At Equity – Suing for equity. “Quid Pro Quo” – Something for Something. Conjuring Magic 3. Explicitly Bargained for Detriment to the Promisee v. Performance of obvious ideas 4. detriment. Forbearance of a legal right 3. What Does NOT have Value? 1. may consist of a right. An item that would be exchangeable on the market 2. O/OR must be seeking what he or she is asking for (bargaining for) ii. A “glue” – a reason that this contract / promise should be upheld. Love / Affection 2. (4) Questions to Always Ask! 1. Two Exceptions: a. What has Value? 1. in the sense of the law. interest. At Law – Suing for money damages.inadequate.
Agreement of continued orders. I promise to buy all that I want / desire / wish iii. iv. I promise to buy all that I require / need / use iii. ii. Moral Obligation. Output Contracts (ALL OUTPUT) – Promising to buy all output from a distributor i. Illusory Promises i. Purchaser = O/OR ii. If not stated – the obligation to promote product will be implied (Lady Duff Gordon).Contracts c. A promise only has value if the performance of the promise has value. A promise which is entirely discretionary on part of the promisor. Implies “Best Efforts” to sell (this has value) 1. Continuing Offer K’s are revocable by distributor unless: Held open by an option K or FO iv. Requirement Contracts (All I Require) i. but not bound for all orders to come from one distributor 1. If the promisor HAS NOT restricted future actions then illusory promise and not enforceable. Promissory Estoppel 2. e. iii. Past Due Debts (Accord and Satisfaction (or) A&S by Instrument (check) 4. Continuing Offer Contracts (All I Want) i. Exclusive Dealing Contracts (2-306) i. Gratuitous promise – Promise given without any expectation of anything in return (NO C) d. Requirement K is kept from being illusory because of the good faith to do business with only the one source and words of obligation 1. Supplier = O/OR ii. 8 . Past consideration is generally not consideration. If one party can “opt out” at any time – the contract is illusory f. A promise to give consideration “after” the benefiting condition has already occurred. Each order will be a mini-contract h. Pre-existing Duty 3. Mutuality of Obligation – both parties must be bound for contract to exist 1. except when it involves: 1. If offeree says “I accept” – both parties are bound. g. ii. ii. Requirement K’s are not revocable. Past Consideration i.
Determination of Damages a. A promise ii. Adds that the remedy for the breach may be limited as justice requires. iii. Damages should not exceed the loss. para 2) 1. Adds. Add something new to BOTH sides of a contract. Cannot demand extra C for something already under contract to perform iii. So just because the general uses the sub’s bid that does not mean he accepted 2. Person C . Promising to do what you are already obligated to do has no value / is not valid consideration ii. even in the lack of C. Restatement 2 Same as Restatement 1 Except: a. Will allow reliance by a third party b.A legal theory designed to prevent injustice. If you make a promise to a charity in this country – it is going to be enforceable. 2.gives money because other people are giving money. If there is only one promise – it won’t work. Rescind the contract and enter Substitute Contract. Pre-Existing Duty (Usually about Services) i. Limitations to Promissory Estoppel. under which a promise may be enforced. Put a person back where they were – not in a better place (Lost profits not generally granted) b. where one party makes a promise knowing that it is likely to induce reliance by another party. (Majority) If a sub sends a bid (here he would be the promisor) and the general relies on it. The remedy of promissory estoppel should only be enforced for valuable items. (section 90. Promissory Estoppel is only relevant to the extent of damages actually suffered. 2. 2. Promissory Estoppel . (Minority) When the sub-contractor makes his bid to the general it is an offer. a. para 1) iv. c. i. it would seem to fit all 3 elements of PE e. paragraph 2 – A charitable subscription is binding under Subsection 1 without proof that the promise induced reliance. Common Law a. b. c. i. There must be a legitimate commercial reason. Promissory Estoppel without Reliance (section 90. and offers can be revoked at any time before acceptance. Reasonable Reliance on the Promise is Foreseeable (and Actually Occurs) iii. How can you get around pre-existing duty rule? 1. Promise Money In Return for Doing Something (Naming Building) ii. Modification must be in good faith. 1. Modification of a contract for the sale of goods needs no C. Courts are split on whether or not to apply PE in this setting1. b. Charitable Donations – To what extent are charitable donations enforceable? i. d. Promissory Estoppel with Reliance.Contracts 3. UCC – 2-209(1) a. i. 9 . Injustice can only be avoided with Enforcement of the Promise iv. Remedy can be Limited (as required) a. and it does in fact induce reliance by the other party to his or her detriment. General/Sub Contractor Context – Promissory Est. Drops that the forbearance be of a “definite and substantial character” c. Must have at least two promises. Differences between First & Second Restatement on Promissory Est. 1. action or forbearance. b. Cannot collect Lost Profits under Promissory Estoppel!!! d. Interlocking promises.
If you pay before the dispute is legally resolved – you have done something to your detriment. Satisfaction – Carrying out the accord. Repay the check writer within 90 days b. Debts Barred by the Statute of Limitations – (Has to be in writing) ii.Contracts f. A debt that a person enters into before they are of the age of the majority is nonbinding – unless they acknowledge and promise to pay the debt after they reach the age of majority. 3. You cannot dispute the entire bill on a credit card statement – just because you dispute one item. Executory period – The time between the agreement and when the satisfaction is completed iv. 1. Moral Obligation – A legal theory under which a court will enforce a promise made subsequent to an expired statute of limitations. 2. iv. b.Two parties decide to modify contract on debt. bankruptcy. A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit – although there was no original duty or liability resting on the promisor. Received material benefit b. A & S by Use of Instrument / “Paid in Full Checks” (UCC 3-311) 1. Past Due Debts – Accord & Satisfaction . which is the consideration for the new agreement. Effective Accord & Satisfaction – where accord will be enforced – you have to have consideration (on both sides). You are still liable for the rest of the bill. ii. Under circumstances to create obligation c. iii. a. but you can hold on payment of the disputed debt. a. Subsequent promise to pay’ 10 2. The following acts will undo the A&S: a. No more debt is owed. A promise to pay after the fact with no consideration is generally not viewed as enforceable b. absent legal duty. Debts Incurred by infants (minors) – 1. infancy or in the case where. a. Accord – Agreement where one party agrees to give – and the other party agrees to accept something other than originally agreed upon. Debts declared after Bankruptcy – iii. Doing what they said they would do. If a question does not tell you – always assume it is a good faith debt. “paid in full” (payment must be made in good faith) – and the other party cashes the check – the dispute is resolved. 2. a. 1. UCC 3-311 gives creditor some protection. in case the check was cashed by accident. Where you have a good faith dispute – a party is not legally obligated to pay anything until that dispute is legally resolved by suit. The debtor has tendered a check of early payment. one party has received a material benefit. i. If we have a check – with a disputed debt – and it is clearly marked. Executory Accord – An agreement bargaining for the future discharge of an existing claim by performance. If you are a corporation – and you have sent out clear notice that any disputed debt payments are to go to a specified address. . Material Benefit 1. Exceptions – If you make a subsequent promise to pay one of the following – it will be enforceable: i.
Any other reasonable expenses incident to the delay or other breach. so we extract this benefit back from him. Expectation Damages . Expectancy Interest (Lost profit) – What you expected to make out of the contract i. Injunction – Order by Court that a Person not do something. and how much you actually paid iii. Restitution Interest (2) – D has been unjustly enriched. Law Courts and Courts of Equity used to be separated.Can recover all three of the interests (expectancy. Incidental Damages . Any difference in the amount you thought you would pay. Objective – to put the P in as good a position as he was before the breach. 3. Any profits expected ii. Now the courts are merged. Objective – the prevention of unfair gain by the breacher 1. Damages which naturally and proximately flow from the breach f. c. DAMAGES 1. In Torts law – the injured party usually asks for enough damages to return to the pre-injury position e. At Equity – Specific Relief i. Lost Profits – Awards damages for the difference in what was contracted for and what was gotten i. Sometimes required by the contract / sometimes not.Specific Performance – Asking for the contract to be enforced as written c. (Gives the person the “benefit of the broken bargain”) 2. Objective – To put the P in as good a position as he would have been had D performed b. At Equity a. ALL DAMAGES MUST BE PROVEN WITH CERTAINTY a. In Contracts law – the injured party asks for damages to be put in as good a position as if the other party had fully performed. d. or cease doing something ii. b. g. i. e. 11 . At Law – Money b. restitution) although not all reliance and restitution will be recoverable c. i. reliance. Courts generally hold that you would use Cost of Performance as a measure of damages – Unless enforced by COP there would be economic waste. Reliance Interest (3) (Lost Expenses) – Losses occurred by P reliance on K i. Can also use diminution in value if you can show that the breach was minor / incidental to the contract as a whole. It is unfair for someone to keep a benefit which they do not deserve. Remedies for Breach of Contract At Law v. Expenses (out of pocket – to 3rd party) which the P has incurred in reliance on promise ii. ii. Loss of Secondary Profits – The sales of other products has suffered as a result of the breach i. a.Contracts V. Consequential Damages – Any loss resulting from general or particular requirements and needs of which the seller had reason to know and which could not reasonably be prevented to cover. Loss of Primary Profits – Difference between what buyer would have earned from reselling the goods in question had there been no breach – and what was earned after the breach occurred. iii. Interests – What a person is interested in being able to collect. When the primary product does not conform to the warranty – it is foreseeable that there will be a loss in other sales. Diminution in Value (Cost of Performance) i. If you had to spend a higher amount to get a replacement – the difference you had to pay is also considered a (primary) lost profit d.
2. you cannot collect certain consequential. You have benefited the breacher.Secondary / Special Damages – You MUST establish foreseeability ◦ (4) Lost Secondary Profits ▪ Profits you have lost with third parties because of the breach (but were not profits directly contemplated under contract). Reliance NRE: 1. Salvage ii. In restitution.Primary / General Damages ◦ (1) Lost Primary Profits – ▪ What did the non-breacher think he was going to get out of the contract. Survey fee 2. Then subtract any monies paid from breacher to non-breacher (limited losses avoided) ii. Restitution Damages – Can recover one interest . • • • Notes on How to Read the Pink Handout Row 1 – Expectation Interest – If it involves lost profits – it goes to the top field (Expectation) Row 3 – Restitution Interest – If it involves the breacher – it goes to the bottom field (Restitution) ◦ If the part performance (item) is in the physical control of the breacher it goes to restitution. Money paid To the non-breacher FROM the breacher 4. reliance. • Column 2 . 12 • . you add boxes 8 and 3. required by contract ◦ (3) Restitution – Any Items: ▪ Paid to breacher ▪ Given to breacher ▪ Done on breacher’s land (where he has control of the part performance) Column 3 . or the difference in what he expected to pay. and how much more he had to pay to get a replacement ◦ (2) Primary Reliance Damages – ▪ Non-Breacher’s out of pocket expenses to third parties. NRE’s – Not Recoverable with Expectation . then that amount will be deducted from the total amount of the damages. This can be money paid to the breacher or items given to the breacher. Losses Avoided – In all of the above damages scenarios – if the non-breaching party has avoided some of the damages. Row 2 – Reliance Interest – Everything else – goes in the middle field (Reliance) ◦ If the part performance (item) is in the physical control of the non-breacher it goes to reliance.Contracts h. Architect plan for boathouse i. or restitution damages – because they are costs that you bargained to assume i. All reliance and restitution will be recoverable j. Reliance Damages – Can recover two interests (reliance. 1. ▪ Can be shown by either actual lost profits. The main two we are concerned with are: i. Mortgage fee 3. and allowing them to keep the benefit would be unfair. YOU DO NOT COLLECT SALVAGE IN RESTITUTION k. restitution) i.(Assumed Costs) With Expectation Damages.all restitution will be recoverable i.
Only recoverable when: ▪ Physical Injury results from distress ▪ The harm is of a kind from which serious emotional distress was likely to result ▪ Secondary Reliance Damages (subject to foreseeability) • Things which you expended as a consequence of the contract. ▪ Other Direct Losses (subject to foreseeability) – Anything else… • Column 1 . the breacher gets to keep his fee. Pain and Suffering that non-breacher was aware would occur prior to contracting for surgery ◦ Reliance Damages (subject to foreseeability) ▪ Ex. ▪ Loss of Goodwill – Loss of future customers ◦ (5) Recoverable with expectation ▪ Secondary Consequential Damages (subject to foreseeability) • They would not have occurred but for the breach. ▪ If the non-breacher is made whole. although not directly a contemplated factor under the contract ◦ In problem A – you went out and purchased an option for the lot next door for 1K (to build a parking lot to the building which was the actual contemplation of the contract).Contracts ▪ You don’t have to show with absolute mathematical precision. ▪ Generic building plans –not designed specifically for contract – which can be used again. ▪ Mortgage Application Fee – you know that you will have to pay a fee when you attempt to borrow money for a loan ◦ Other Direct Losses (subject to foreseeability) – Anything else… ◦ (8) ▪ ▪ ▪ Non-Recoverable with expectation (were bargained for with expectation) Restitution – Benefits given to breacher First operation Cost The reason that we would place an item in box 8 instead of box 3 depends on whether or not a person could be made “whole” under expectation. and then the deal falls through. ▪ Incidental Damages (subject to foreseeability) • Consequential Damages incurred in ascertaining and trying to prevent the breach. you were willing to contract with these as consideration) ◦ Consequential Damages (subject to foreseeability) ▪ Ex. but necessary to fix injury ◦ Embarrassment from having a hairy hand ◦ Severe Emotional Distress . 13 . • Examples ◦ Pain and suffering from second operation – not originally contemplated.Unlabeled (not recoverable with expectancy damages) ◦ (7) Non-Recoverable w/ expectation (were bargained for with expectation) ▪ Expenses which you assumed as a part of the contract you entered into (because you were expecting to get something back. If a person has the value of the harry hand + the value in the difference between a good hand and a harry hand – we have made them whole – with where they expected to be. but you have to make a diligent effort at accuracy. Getting a 10K property survey on a lot.
1. If plane crashed – could the courier service have foreseen the economic damage that would occur to the sender because a package on the plane did not get delivered? b. Hadley v. iii. How can one show “lost profits” on a new business? Comparative market scenarios with similar industries.The limitation of certainty involves 2 things you must demonstrate with your evidence to deny that damages are too speculative i. 1. When you can’t prove any damages – the court gives you nominal damages. Palsgraf? 2. You have to put a dollar amount on it. Torts – Looks to see if harmful action were foreseeable. Baxendale – known for coming up with the test when it is foreseeable i. Causation – show that the breach actually caused the damage. a.Losses Avoided ◦ (6) Losses Avoided ▪ Salvage – The amount that you can sell the item to another party ▪ Money paid TO non-breacher FROM breacher ◦ Limited Losses Avoided ▪ This occurs in a “losing contract” • Take the amt. Opposite from Torts!! 1. Would it be foreseeable at the time of contracting that these damages would occur because of the breach? 14 . Foreseeability i. v. a. Doesn’t matter if primary or secondary. iv. even nominal damages – that may still entitle you to attorneys fees paid by the other side. ii. If a new business (or company beginning a new leg of business) can provide enough evidence to give an accurate measurement to what their profits would have been – then they are admittable and recoverable. Could station have foreseen the scales crashing on Ms. Held – must be in contemplation of both parties. Certainty . h. Then compare to restitution. that the non-breacher would have lost on the contract if full performance – and deduct that from the reliance damages. ▪ You do not calculate salvage on a losing contract. a.Contracts • Column 4 . What is the benefit of getting nominal damages? Under some statutes – if you win the case and get damages. If you can’t show causation & you cannot introduce evidence to a specific amount of how much you were damaged – then it is too speculative – you won’t get it. 1. 1. The “new business rule” is not a hard fast rule. to show that the breach caused “this amount” of damages. Limitation on Recovery (3) g. All damages must be proven. Contracts – Looks to see if Results / Damages (from some harmful action) were foreseeable.
Must perform an act that staves off future damages ii. Damages will be figured for the difference in the item you contracted for. although parties did not have any solid data to go on iii.not usually awarded unless the breach also caused bodily harm – or.Contracts c. . Obligation to “Re-Sell” – 1. If buyer defaults. seller is required to attempt to re-sell the goods to another party (even if at a reduced price). then that is penalty clause b. courts find penalty and strike out the clause i. H v. not damages under liquidated clause c. B . Agreement in contract to pay damages if contract breached / Cannot represent a penalty a.without unreasonable delay. If seller defaults. Obligation to “Cover” – 1. e. Claim of damages for secondary lost profits – must be foreseeable to the breacher at the time of contracting. Must show need for clause (parties expected damages could arise if contract breached) ii. The situations that cause the specific breach themselves DO NOT have to be foreseeable. Penalty Clause) 1. Damages will be figured for the difference in the amt. When doubt as to classification as liquidated or penalty. to seek out any reasonable good faith substitute. Liquidated Damages Clauses – (i. d. you were to get under the contract. and the amt.the breach is of such a kind that serious emotional disturbance was a particularly likely result: i. Finding of penalty clause does not prohibit recovery – must simply seek to recover actual damages. In Terroreum – if the language is there to terrify someone. Avoidability / Mitigation of Damages i.e. The non-breaching party has a duty to mitigate their damages 1. Emotional distress . a.Now it only has to be foreseeable by ONE party. Reasonable estimate of damages at the time of the contract. Exception – construction contracts (courts will generally enforce liquidated damages clause under construction contracts) Employment Contracts 15 iv. buyer (not just merchants) is required .No longer the rule . Elements Necessary for Valid Liquidated Damages Clause: i. What must be foreseeable is that: if there is a breach – what are the consequences to the non-breacher? ii. you were actually able to sell for. and the item you ended up having to settle for iii. a. v.
Quantum Meruit – the value of services rendered to another i. Allows recovery for the value of the beneficial services. mistake. If you are suing as the non-breacher – you are suing for the value that the other person has received. i. 2. f. What is the difference between quantum meruit and implied contracts? The overlap is fuzzy. Not required to accept different or inferior employment g. Can recover the value of the salary for their position. ii. or incapacity j. Implied in Fact Contract – A contract is intended by the parties even though none of its terms are expressly agreed upon. Employee must mitigate damages by searching for and accepting employment of same “type” a.the measure of damages by a wrongfully discharged employee is the amount agreed upon minus the amount that the employer can affirmatively prove that the employee has obtained elsewhere (by mitigating) a. a. then payment on the contract price may be ordered – and the amount expended will not be a factor. If the contract is completed. k. i. What was the “going rate” on this kind of labor? g. NOT the value by which someone benefits from those services. Quantum Valebant – the value of property delivered to another d. They both involve the court attempting to “do right” and prevent unjust enrichment. Unemployment compensation NOT deducted from damages 2. impossibility. Restitution i. Generally – it is a defense to a quasi-contract claim if one party had communicated to the other party that they did not want the benefit b. (Quantum Meruit). l. c. Money Had and Received – money held by one person but belonging to another e. Quantum meruit is more tied to benefits conferred where implied contracts look at some implied agreement. Restitution used by Non-Breacher a. General Rule . 16 . Generally intent interpreted to exist out of conduct and working history between two parties. Recovery method when a contract is unenforceable because of some defect such as lack of a requisite writing (Statute of Frauds problem). Implied in Law Contract . 1. Cannot recover monies earned by employer as a result of person’s work. The standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the plaintiff’s position at the time and place the services were rendered.Quasi Contract (Action in Restitution) – Imposed upon the parties irrespective of their intent when court thinks there should be a remedy (avoid unjust enrichment of one side).Contracts 1. NO RESTITUTION IF THE CONTRACT IS COMPLETE i.
Calculating Damages on a Losing Contract 1. there are times when a court will refuse specific performance because the party was the seller. and you take the higher amount. Basic Standard – are Damages Inadequate? a. a. Specific Performance – ordering the promisor to perform on a contract on penalty of being found in contempt of court 1. The amount he can sue for is the reasonable worth. However. a) DO NOT FIGURE SALVAGE IN RELIANCE DAMAGES ON A LOSING CONTRACT! (or restitution – as usual) b) From the non-breacher’s position. he can recover is what he would have gotten under the contract (limited to contract price). b. You then compare this amount to the total a party could get under restitution. However. Why would someone sell a 500K farm for $10? 2. 3. Should a court order specific performance if the seller has already sold the property or item to someone else? a. Restatement says that willfulness is only a factor to be considered as to whether a breacher may use restitution. damages are the remedy for “goods” because goods are not so unique that they cannot be replaced. Equitable Remedies j. iii. Before enforcing contract – court may look into adequacy of consideration. but the maximum amt. there are times when a court will order specific performance because acquisition of a good faith substitute good is not possible. i.” 17 . In common law – if the breach were willful – you could not get restitution.Contracts b. i. Restitution used by the Breacher a. i. ii. Quid Pro Quo / Something for Something / Fungible for Fungible. i. i. You figure the Reliance Damages. monetary damages are not sufficient k. Most often. Sometimes in the case of a breach. ii. a) Reliance Damages – $ Lost on Contract = Reduced Reliance Damages 2. If you know about the other contract – your hands are “dirty. the breacher can sue for restitution. m. restitution is not limited to the price of the contract. the non-breacher would have expended more than they would have gained. “Losing Contract” – one in which if it had been fulfilled. and then deduct the amount that would have been lost on the contract. h. Most often specific performance is used as a remedy in real estate because land is so unique. you do not deduct salvage as a “loss avoided” – salvage is a gift to the non-breacher. In figuring damages on a losing contract. and was only seeking to get money from the sale anyway – therefore damages are adequate. If the non-breacher has obtained a benefit.
Market Price – Contract Price = Damages (UCC 2-713) Seller’s Remedies (UCC) 1. This is often dangerous tromping grounds. a court will issue an injunction on contracts of a personal nature. If a contract is broken. (UCC 2-712) i. Purpose is punishment. j. Mutuality of Remedy should be limited to special instances where a vendor will otherwise suffer an economic injury for which his damage remedy at law will not be adequate. Ex. If seller breaches a contract – what is buyer supposed to do? a. for which punitive damages are recoverable. d. Normally a court does not grant specific performance on a contract of a personal nature. the measure of damages should be the same. Contract Price – Market Price = Damages (UCC 2-708) n. This may allow for punitive damages. The fact that the remedy of specific enforcement is available to one party to a contract is not in itself a sufficient reason for making the remedy available to the other. a. 1. a. b. This is the person the court wants. If you cannot Re-Sell: a. At least (4) situations in contracts where you can get PD (or something similar to PD) i. You would get damages. In the past. b. m. a. Contract Price – Resale Price = Damages. Normally cannot get in contracts. Resale price must be lower than contract price (UCC 2-706) 2. (it is like involuntary servitude). (BFP w/o Notice). 18 . l. Hands are “dirty” when you knew about the other party at the time that you entered your contract.Contracts i. Bona Fide (Good faith) purchaser without Notice. Then deduct contract price. courts would not enforce a remedy unless the remedy is available to both sides. b. Cover price has to be higher than contract price to have damages. To deter them from doing whatever they did again. Where breach is accompanied by malicious tort. Generally the court will not grant specific performance to a requesting party who’s hands are dirty. They do a forcible unauthorized entry.OR ii. a. Cover – good faith substitute. 4. 1. More modern courts say that remedy does not have to be exactly mutual (mirror each other). Tort of forcible entry by landlord into your apartment. Generally – punitive damages are handled in torts. 2. b. Mutuality of Remedy – Older legal theory. Buyer’s Remedies (UCC) 1. Re-sell. whatever the cause of the breach. c. Lease says landlord may only enter with your permission. 1. Punitive Damages a. However.
If you violate a consumer protection statute – you can get treble (triple) damages. Within the Statute of Frauds NOT ENFORCEABLE UNLESS IN WRITING c. waiver or equitable estoppel may prevent SOF from operating. but NEVER expectation interest h. Bad faith of ins. Statute of Frauds a. 2. the contract will remain enforceable despite the statute of frauds. It merely means that enforcement may be unavailable if one of the parties refuses to fulfill their obligations. Modifications to Contracts i. 19 . Normally limited – breach of an insurance contract a. In some instances. do you waive your SOF defense? 1. Out of the Statute of Frauds ENFORCEABLE EVEN WITHOUT WRITING b. Club wrongfully expels a club member. Ex. Modification to contract that was not within SOF must be in writing if it brings the contract into the SOF g. Modification to contract within SOF may have to be in writing ii. then it does not have to be in writing. D will say that the contract is not binding because the law requires it to be in writing. (pg. a party may still recover restitution interest i. The SOF does not of itself render a contract void. SOF is a Defense to an alleged contract. P takes D to court to sue for breach of contract. a. like an attorney – not supposed to steal your client’s money). i. If all parties agree that they are bound by the contract. On occasion can also recover reliance interest. Co. k. It is possible to have a perfectly valid oral contract. to settle a claim. in the event that the party does not wish to follow through on the agreement. i. d. UCC – If you admit to goods. part performance. e. If you demur to the complaint. If a contract is unenforceable under SOF. SOF does not mean that oral agreements within the scope of the Statute cannot be made and performed or that they are illegal. Demurrer – Admit everything that is in the complaint but contend that it still doesn’t state a cause of action i. Law treats these relationships very seriously. The statute of frauds makes certain contracts "voidable" by one of the parties. f. States differ under common law 2.Contracts ii. 1. Requires certain contracts to be in writing to be enforceable. iii. 1. Where breach violates a fiduciary relationship (relationship of trust in confidence. Where breach is of obligation of good faith and fair dealing. 722) iv. 1.
A quantity 2. Specially manufactured goods not suitable in the ordinary course of business for resale. 2-201 (para 2) 1. Kinds of Contracts within the scope of the Statute of Frauds (Not enforceable without writing) i. and payable out of the executor’s own personal assets generally must be in writing. Three situations where you do not need the writing under the SOF (despite not having a writing. 2-201 (para 1) . but only for that part paid or for that part performed b. that other merchant has 10 days to object to the terms of the writing. The Writing / UCC 2-201 i.and that writing is sent to the other merchant (confirming agreement). (4) Executor. 1. the contract is formed as indicated by the terms in the writing. ii.A contract for the sale of goods for the price of $500 or more must be in writing. Be signed by the “party to be charged” 2. A promise to “Pay the Debt of Another” is not enforceable without a writing. ii. (6) Suretyship. If an agreement is made and later reduced to writing . The writing must contain: 1. The Writing / Common Law i. Answering machine can qualify. Indicate that a contract has been made (or is being offered) 3. A “writing” is any reduction to tangible form. k. Identifies parties to the contract 4.Contracts i. 20 . An indication that contract has been made 3. MYLEGS: (1) Marriage. 2-201 (para 3) 1. After 10 days. (3) Land. c. or otherwise in court that the contract exists i. Reasonably describes the subject matter of the contract 5. (2) Year or more. This is ONLY with goods. The Writing Must: 1. iii. the contract will be enforceable) a. Signature can be any symbol executed by a party with present intent to authenticate a writing (Letterhead can be signature) b. Executor / Administrator Contracts – a. testimony. States the essential terms of the contract j. Part payment or part performance. i. Does not apply to real estate. (5) Goods. Between Merchants: (Confirmation) a. Signed by “the party to be charged” a. A party admits in pleading. sale of + $500. Contracts by an executor to answer for the debts of a decedent.
July 1 (12:00am) – June 30 (11:59pm/midnight) b.) 1. A promise of payment or performance if another fails to pay or perform b. iii. Contract made 11/30. If contract is to run one year. The promise must be made to the creditor (or at least the creditor must be aware of the promise) d. 1. Contract is to begin 12/1/07. 2. and begin counting from 12/1/07 at 12:00am. If Mark promised that he would give $1000 to charity if I would marry him – this would not be a legally enforceable promise. you cross off the first day that contract was made. 1. Most surety agreements require that a person looking to the surety (asking for payment) must first attempt to collect or obtain performance from the responsible person or entity. b. iv. Does not include mutual promises to marry. This contract directly matches the one year SOF – so it passes the test. December 1 (12:00am) – November 30 (11:59pm/midnight) 2. v.Contracts b. In counting one year under SOF. Requirements for a contract to “Pay the Debt of Another” to fall under SOF a. A promise which cannot be performed within a period of one year from the date of making is not enforceable without a writing. Promises to pay “out of the estate” do not have to be in writing. A promise made in contemplation of marriage is not enforceable without a writing. it would stretch from 12/1/07 at 12:00am to 11/30/08 at 11:59pm/midnight. Surety Contracts – a. Levy orally contracts with Bill to work for one year. A Year Runs: a. Ex. 2. and not within SOF. There must be a principal debt owed to someone else b. so cross that off. etc. / Must not be “primarily liable party” i. c. The promise must be a “promise to pay the debt of another” and may not be an original promise. unless in writing. Ex. i. 21 . employment. If main purpose of making the promise was for benefiting himself. A promise for the Sale of an Interest in Land is not enforceable without a writing. Contract entered into on 11/30/ 07. Aunt tells store to let nephew charge what he wants and bill her. (includes services. it is NOT considered a promise to pay the debt of another. a. The promise must pass the “Main Purpose Rule” i. Anniversary of contract will be 11/30/08 at 11:59pm/midnight ii. 3.
Ex.” i. Knowing of Bill’s bad health. I could return in one month. Levy orally offers to employ Bill for “life. Anniversary of contract will be 11/30/08 at 11:59pm ii. The fact that a contract is not completed within one year does not mean that it is voidable under a statute of frauds. that “could” happen within one year – the contract will not need to be in writing. Levy orally offers to employ Bill for a five year period. the actual terms of the contract must make it impossible for performance to be completed within one year. For the statute to apply. b. If contract is to run one year and one day. Contract is to begin 12/1/07. There is no way that 5 years can be performed in 1 year.the contract does not have to be in writing under SOF. 2. i. Similarly. 1. 3. you cross off the first day that contract was made. I could return in 2 years. Ex. However. 4. Bill could die in the first year – and therefore could fully perform the contract. it would stretch from 12/1/07 at 12:00am to 12/1/08 at 11:59pm. If Levy orally offers to employ Bill for a five year period – this would need to be in writing. if he lives so long. Contract made 11/30.Contracts 3. Ex. There is no time requirement of when full performance will be met. 12/1/08 is one day over the 11/30/08 limit – and therefore this contract does not pass the test and would have to be in writing. a. 2007. 22 . Deal to house sit until I return from sabbatical is made on June 25. Because the actual terms are not fixed – and the actual terms have not made it impossible for performance to be completed within one year . so cross that off. Bill could die in the first year – and therefore could fully perform the contract. 1. Levy orally contracts with Bill to work for one year and one day. b. 2. Ex. i. i. Ex. a. 1. knowing of Bill’s bad health. ii. Contract entered into on 11/30/ 07. In counting one year under SOF. and begin counting from 12/1/07 at 12:00am. if a contract allows for another way for the contract to be completed. a.
1. Detrimental Reliance 23 . Misrepresented that a writing would be executed c. UCC – Goods under the SOF 1. A party may be stopped from asserting the defense of SOF when the elements of equitable estoppel are present. There must be some misrepresentation a. Misrepresented that a writing was necessary (or not) b. 2.Contracts vi. Misrepresented that a writing had already been executed 2. A promise for the sale of Personal Property other than goods for the price of $5000 or more is not enforceable without a writing. A promise for the sale of goods for price of $500 or more is not enforceable without a writing. etc…) l. (Intellectual Property. Equitable Estoppel under the SOF – i.
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