Contracts II Outline Damages §347: Formula for computing Ps expectation damages: General Measure = loss in value + other loss

– cost avoided – loss avoided Only the first 2 terms apply in a partial breach. Loss in value: the value to the injured party of the goods that were to have been tendered Other loss: Incidental damages: additional costs incurred after the breach in a reasonable attempt to avoid loss, even if unsuccessful. Consequential damages: injury to person or property caused by the breach. Cost avoided: Breach may have had a beneficial effect on the “injured” party by saving further expenditures that would have otherwise been incurred. Loss avoided: Beneficial effect by allowing the party to avoid some loss by salvaging and reallocating some or all of the resources that otherwise is would have had to devote to performance of the contract. (Leftover materials) Hypo: Contract to sell computer for $450. Computer is delivered, no payment is made. $450 will be given to the seller. Payment is made, computer is not delivered. Value of the computer + (any other loss) Market value is higher than contract price. Entitled to get the market value. Payment is not made at the time of the seller’s breach. Difference between the market value of the computer and the contract price. (Value – savings) Turner v. Benson (Tennessee 1984)

Ps entered into a contract to sell their house that was used for a daycare for $75, D failed to show up at the closing. Ps sued for specific performance filed, house sold to a 3rd party for $76T. The proper amount of damages for a breach of contract in a real estate contract is the difference between the contract price and the fair market value at the time of the breach. Any other damages must have been within the contemplation of the parties at the time the contract was formed. General Damages: difference between the contract price and the fair market value. Special Damages: other losses. UCC 2-708: Seller’s damages are for the difference between the market price and the contract price together with incidental damages (2-710), but less the expenses saved from the breach. UCC 2-713: Buyer’s damages are for the difference between the market price and the contract price together with any incidental and consequential damages (2-715), but less expenses saved. UCC 2-706 (1): Seller’s resale: Damages measured by difference between contract price and resale price. UCC 2-712 (1): Buyer to “cover” her loss by purchasing substitute goods and to measure her damages by the difference between that price and the contract price. Cover allows for a more concrete idea of what the value of the substitute is. Must be bought in good faith and in a reasonable manner, does not matter if in hindsight the purchase was the cheapest. Handicapped Children’s Education Board v. Lukaszewski D worked for the P for 10,760, she then took a job closer to home for 13T, P refused to let the D out of her contract. D then had health problems because of it. D left, Ps had to hire another person for about 1T more and sued for damages. Non-breaching party is entitled to full compensation for the loss of their bargain. As long as the damages were within contemplation of the parties at the time of the contract formation. American Standard, Inc. v. Schectman Ps hired the Ds to complete grading of land and to take down certain foundations. Ds did not do this and claim that the proper value of damages is the difference in price between the property value and the fair market value without the completion. Where the contractor’s performance has been defective or incomplete, the reasonable cost of replacement or completion is the measure. §346. When there has been substantial performance of the contract made in food faith, but defects exist, which would result in economic waste, the damages should be measured as the value of the property as constructed and the value if performance has been properly completed. Must be in good faith.

and not the manner in which the loss occurs. Either must arise naturally from such breach of the contract itself.Factors: for determining cost to complete or difference in value. (lost profits. 4.) Consequential Damages: Damages that flow specially. There must be a preponderance of the evidence to suggest that such damages were actually suffered. Baxendale Ps broke one of their crank shafts. Only necessary that the type of loss be foreseeable. at the time they made the contract. Deliberateness of the Breach 3. Must be foreseeable and probable in case of a breach. 1. is the measure of damages if the contract is broken. GTE Market Resources. Inc. v. .” Based upon the breacher’s knowledge and foreseeability. General Damages: Damages that occur naturally as a result of the breach. injury to person or property. or such as may reasonably be supposed to have been in the contemplation of both parties.) §351 and UCC §2-715(2) Recoverability of consequential damages depends on whether such damages were in the contemplation of the parties at the time they made the contract. §348(2): If the loss in value to the injured party is not proved with sufficient certainty. damages may be measured by either (a) the diminution in market value or (b) by the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him. The amount which would have been received if the contract had been kept. FORESEEABILITY Hadley v. Economic Waste Practicability of repairing. (Difference in contract price and fair market value. Whether the breach was incidental. Must have a “reason to know. P is suing for lost profits. D did not deliver immediately. 2. Florafax International. Idiosyncratic Value More value cuts in favor of awarding cost to complete damages. employed the D to get them a new one and told them they needed it immediately. etc. etc. Inc.

Expenses incurred at the time of breach is $120. Can B sue A for $300? B should not be able to “pile on” damages. What damages can he get from the school district? B will argue that the position offered us a substantially similar situation. C offers $1000 for the computer. but B continues to work and completes it. After the breach of a contract. A will argue that the jobs were dissimilar and would therefore be entitled to $18T is damages. A would then get $3T in damages. DUTY TO MITIGATE Rockingham County v. . HYPO: A is employed by B as a bus driver under a 1 year contract for $36T. the non-breaching party has a duty to mitigate damages. Hypo: A and B enter into a contract for B to paint As house for $300. EFFICIENT BREACH Hypo: A to sell computer to B for $450. §350: Damages are not recoverable for loss that the injured party could have avoided without undue risk. Cover price $600. Boehm v. P changed their minds. or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation. 6 months into the contract B fires A without justification. B will only get the expenses incurred up to the breach and the profit he would have realized. Luten Bridge Co. by allowing recovery only for loss incurred in reliance. After a week a rich man offers him a job to work as a chauffer job for a salary of $30T per year. burden. P and D entered into a contract to build a bridge. but the Ds continued to build the bridge and sued for breach and damages incurred even after the contract was breached. shortly after construction. or humiliation.§351(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits. $180. American Broadcasting Co An employer can cut off their liability if they unconditionally offer the same or a comparable job to the P and the P rejects it. instead of continuing the contract. A turns that job down.

Coastal terminated performance after 28% was done. Where the other party has repudiated or breached.000 production is suspended. Moved to NY and incurred expenses. rel. Supplier will have to make arrangements with other suppliers to complete the transaction. then the non-breaching party can either sue in restitution or for total breach of the contract. A would still get $850 from the second contract. Seller would not be compensated for any further work through the mitigation of damages. Blair hired a new subcontractor to finish the job. Supplier is notified before he has begun the grinding of the other 90. then there is no expectation damages. Damages in a promissory estoppel claim will be limited to out of pocket expenses incurred. USA. Inc.000. Can she sue them for breach of contract? If her job is an at will employment contract.000. P was told that he was formally approved. v. Hypo: A is offered a job by B. Mistake was made and letter was not approved. shows up on the first day of work only to be told that the law firm no longer can hire her. Inc. $400 more than the original contract. Hypo: I order 100. He intends to continue the grinding. Starting date 1-1. my machine collapses. A subcontractor who justifiably stops work on a contract may recover under quantum meruit.000 widgets ordered. after 50. She moves to NY. After I get 10. Toyota Motor Sales. P was the open a car dealership and entered into negotiations.B should be able to get $150 from A. Algernon Blair. Would waste resources. Subject to: . Inc Blair entered into a contract with the USA to build a naval hospital. Coastal Steel Erectors. Hypo: 100. United States ex. Blair hired Coastal Steel as a subcontractor. §373: 1. She would need to sue based on reliance. RELIANCE AND RESTITUTION Walser v.000 widgets to be custom ground. P then sued under promissory estopple. I insist that the original supplier complete his performance. finds an apartment.

The decree for specific performance may include such terms and conditions as to payment of the price. The rule that contracts are void when material details are lacking does not apply to options. the market price for steel triples. An option for a construction contract is specifically enforceable where damages would be inadequate or impracticable. and the promise that he would own and operate the business. Thomas P agreed to buy a business and equipment from the D for $25T payable on signing. D got the permit. UCC 2-716: Buyer’s right to specific performance or replevin: 1. Party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. There is a way to determine damages. The party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach 2.2. Can buyer get specific performance on these facts? Most likely will not be decreed. and the harm to the P were specific performance be denied outweighs an equity court’s traditional reluctance to supervise the construction of buildings. A defaulting purchaser of a business who has also entered into a related lease for the property can recover part of his payments made prior to the breach under §374. Seller repudiates the contract. but took Sears instead because it was a better offer. May recover if he cannot “cover” his purchase in a reasonable fashion. After the contract is executed. Lancellotti v. §367: . The option in a binding contract. SPECIFIC PERFORMANCE City Stores v. Suppose it was a 10 year output contract for steel. damages. and would build an addition 16x16 for at least $15T. P sued for specific performance. D is suing. §374: 1. or other relief as the court may deem just. 2. P was unable to get the permit to build it and did not pay rent for one of the months. The injured party cannot sue in restitution if its performance under the contract is complete and the only thing left to do is collect monetary compensation. Specific performance may be decreed where the goods are unique or in other proper circumstances. but before delivery. 3. It would be difficult to estimate damages with a reasonable amount of certainty. Hypo: Contract between a buyer and seller of steel. Seller to sell 5 tons to buyer for $500 per ton. Ammerman D was the promoter of a shopping center opening and told the P that he would enter into a contract with them if he got the permit.

Is the clause enforceable? Concern with a clause like this is mitigation. Township of Middleton P had leased municipally owned commercial property for 25 years before selling its business. the court will enforce the contract in accordance with the innocent parties’ meaning. Generally. If the judge took the view that issuing the negative injunction would force the employee to work for the employer. then the court will not issue the negative injunction. jointly with P. Adams Contract stated that certain rents would continue to increase. seeking a declaration of invalidity of that part of the cancellation clause that required the D to pay as damages 25% of the lessees gross receipts and value of improvements. v. sued for breach of contract. D counterclaimed. The rents were increased and the P filed suit. except for one that did not have a building on it. §201: Modified Objective Approach . §356: Damages can be liquidated but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. Contract provides that the truck will be rented for 1 year. Where one party knows or had reason to know what the other party means by certain language and the other party does not know or have reason to know of the meaning attached to the disputed language by the first party.Personal service contracts will not be specifically enforced. When the D canceled the lease. Argument would also be that other damages may be suffered. and if the plots to be developed were not developed in a specific amount of time. All of the lots were developed and ready for lease. resulting in loss. Hypo: B rents a truck from A. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty. The liquidated damages clause that says if B cancels the lease. liquidated damages provisions are prima facie valid. A will be entitled to 100% of the rent that would have been due. LIQUIDATED DAMAGES Wasserman’s Inc. Contract broken 4 months in. and the party challenging the contract carries with it the burden of proving that the stipulated amount of damages is grossly disproportionate to the actual harm. INTERPRETATION OF CONTRACT TERMS Joyner v. Argument would be that the liquidated damages clause is not enforceable because it does not take into account mitigation. the new owners were forced to vacate the premises and they. seeking in part damages under the terms of the lease. and thus unreasonable.

International Sale Corp. it is interpreted in accordance with that meaning. . K negotiations 3. Court would likely find that the house in Evanston would be more reasonable because A would have likely reason to know of the mistake. 2. that party had no reason to know of any different meaning attached by the other. P and D entered into contracts for the sale of “chicken. or: B. Where the parties have attached the same meaning to a promise or agreement or a term thereof. Course of Conduct. Except as stated in this Section. while painter thinks it is for a house in Evanston. while the D claimed that he read the contract to mean “US Fresh Frozen Chicken. but the P did not do this. Hypo: Contract for $300 to paint “my house. and the other knew the meaning attached by the first party. P has the burden of proving that the term chicken was to be used in the narrower sense. 2. making that size appropriate. 4 Factors in Determining Interpretation: 1. A certain quantity has been delivered and Banks only pays $45 per ton because the scraps contain 49. Grade A. neither party is bound by the meaning attached by the other. or $45 a ton if the scraps contain <50% protein. and the other had reason to know that meaning attached by the first party.5% protein. Government Inspected. Frigaliment Importing Co. Trade Usage 4. of Agriculture. v.” According to the US Dept. Where the parties have attached different meanings to a promise or agreement or a term thereof.” P claimed the chickens called for were to be young. 3. even though the result may be a failure of mutual assent.1. that party did not know of any different meaning attached by the other. (FRIGAILMENT) Latent Ambiguity: Arises from extraneous or collateral facts Hypo: Sims is selling Banks horsemeat scraps for $50 a ton. his acceptance of the standard must be made to appear by proving either that he had actual knowledge of the usage or that the usage is so generally known in the community that his actual individual knowledge of it may be inferred. it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made: A. When one party is not a member of the trade or other circle. Patent Ambiguity: appears on the face of the instrument. Express contract language.” A thinks house means vacation home in WI.

Falling outside the scope of the writing. made after the execution of the writing. PER does not apply to evidence offered to explain the meaning of the agreement. PER does not apply to evidence introduced to establish a “collateral” agreement between the parties. PER does not apply to evidence that is offered to establish a right to an “equitable” remedy. Conditioned on financing. agreed to for separate consideration. §213: PER 1. or . Entire contract will not come into existence until a specified event. courts have established an exception for this situation. undue influence. To what extent should it be permissible to introduce evidence that makes this term ambiguous? Court allowed the evidence of trade usage to be introduced. An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. Sims submits evidence that in the horsemeat trade it is typical to round up. whether oral or written. incapacity. even though not binding. PAROL EVIDENCE RULE Operates to exclude evidence. such as “reformation” of the contract. Complete integration: A writing that is intended to be a final and exclusive expression of the agreement of the parties. PER does not apply to evidence offered to show that the agreement is invalid for any reason. PER does not apply to evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent. But an integrated agreement. Partial integration: A writing that is intended to be final but not complete because it deals with some but not all aspects of a transaction between the parties. 3. for example. preventing one party from introducing into court extrinsic evidence (or collateral). A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. §216: Consistent Additional Terms: 1.Literal language suggests that he should only pay $45 per ton. A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. Normally would fall within the PER. An agreement is not completely integrated if the writing omits a consistent additional agreed term which is: A. 2. mistake. may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated. duress. PER does not apply to agreements. such as fraud. or illegality. 2. Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated.

then the writing wins. ALL AGREEMENTS /\ Integrated Not Integrated /\| Complete Partial No Restrictions /| Cannot Supplement Cannot Contradict If it contradicts. If you’re talking about supplementing. Where the oral promise fills a gap in the writing. R2d§216. Can B hold A to the stereo? Would PER bar evidence of this promise? What is the effect of the statement made? Contradict or supplement? Supplementing in this situation. if the court finds that the parties intended to include. During negotiations. such a term as in the circumstances might naturally be omitted from the writing. Classical Modern Whether integrated Look to 4 corners R2d §214 . What did the written contract say? Was there a list of fixtures? Completely or partially integrated? There is no clear test. B has an interest in a stereo system that is set up in the apartment and asks whether the stereo will be included. There is no mention in the contract to the stereo system.B. that is another situation where it is reasonable to incorporate the verbal promise into the writing. then §216 would deem this to be separately enforced. A says that it will be. Merger clause: Shows that the contract is integrated and shows the entire agreement of the parties. Hypo: A to sell B an apartment for 100T. If at the time the conversation took place B agreed to pay and extra $400 for the stereo.

if he or she finds that the contract language is “reasonably susceptible” to the interpretation offered by the proponent. P sued to recover the value of work completed to date under quantum meruit. Nanakuli Paving & Rock Co. P contended that the D told him there were 25. The work was going to greatly exceed the 25. were to be sold for $10 per 1000 feet. A written contract may be altered only by a subsequent contract in writing or by an executed oral agreement. which was admitted over the objection of the P (the contract was in writing). v.Completely Interpretation Plain meaning rule Taylor→ Exclude unless ambiguous Allow unless It contradicts. Inc. Libby Parties entered into a contract for the sale of logs.C. the D then pleaded a warranty of the quality of the logs. Morrison-Knudsen Co. P and the D were under 2 long term supply contracts from 1963-1974.” Original action was brought for the purchase money. .000 cubic yards of excavation. a general contractor.000 cubic yards. the evidence is admissible to determine the meaning intended by the parties. Thompson v. Provided that “all logs marked H.A. Trade custom and usage and past course dealings may establish contract terms. P is suing for breach of the 1969 contract by failing to price protect the P on 7200 tons of asphalt and raising the price from $44 to $76. Shell Oil Co. Sherrodd. v. P sued the D claiming that the D did not settle within the policy limits and for bad faith. alleged to have been made at the time of sale. Parol evidence may not be introduced when the court finds as a matter of law that the entire contract was committed to paper. State Farm Insurance Co P was insured by the D and was involved in a car accident. A judge must first consider the offered evidence and. D claimed that the P relinquished his claims against the D through a written release and $15T in uninsured motorist coverage. Taylor v. Good Faith in Setting Price: D could not have exercised good faith in carrying out its 1969 contract with the P when it raised its price by $32 Universal practice of notice in the asphalt trade. P was a subcontractor of the D. P also alleged both actual and contractive fraud and breach of the covenant of good faith and fair dealing. D offered oral testimony. and cut in the winters of 1882 and 1883.

. D agreed to buy all of the propane they would need for 4 years from the P. Empire Gas Corp. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith. Requirements and Exclusive Dealings: 1. Federal Express Corp P was an employee of D for 18 years. during which time he questioned numerous company practices which he claimed to be improper. v. While the contract did not expressly state that the P would use reasonable efforts to place the endorsement and market her designs.Merchant must observe commercially reasonable standards of fair dealing. Lucy. Used the standard of what a competent brewer was doing in that situation. IMPLIED TERMS Wood v. B sued F for breach of the obligation of using best efforts. D continued to use her name without sharing the profits. but they did have to protect B. so long as the buyer acts in good faith. Bs sales fell much more dramatically than other brands. Court said that because of the contractual obligation to make reasonable effort that B did not plummet in its sales. Soon after. American Bakeries Co. He then filed suit for wrongful termination. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. A buyer in a requirements contract may decide to buy less than the contract estimate. UCC §2-306: Output. or even buy nothing. F then slashed the advertising for B to 1/10 of what it originally was. Hypo: Contract between Ballantine beer and Falstaff beer for B to sell most their assets in the business for $4M plus a royalty of 50 cents per barrel that was sold between 1972 and 1978. Lady Duff-Gordon Employed the P to help her to turn her name into profit by giving him the exclusive rights to her indorsements of clothing. the contract also had an express condition in the contract that F would have to use best efforts to market the B beer. but good faith requires more than mere second thoughts about the terms of the contract. Donahue v. in addition. D decided not to convert its trucks to propane and cancelled the agreement due to second thoughts. F did not have to go into bankruptcy. such a promise can be implied otherwise he would not have made any money. D gave no notice. P sued. except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

the breach is considered to be trivial and innocent. If B never shows up to do the work. Almost a year after completion. and the obligation to pay is not discharged. Where the significance of the default or omission is grievously out of proportion to the oppression of the forfeiture. P refused to pay for the rest of the contract. Inc. Kent P built a country home. No term or clause. Hypo: A to paint Bs house for $300. If this does not happen. MATERIAL BREACH Jacob & Youngs. but looks like a tort behavior. Can be satisfied even if the condition is substantially performed. D discovered that not all pipe in the home was of Reading manufacture as specified in the contract. then there must be good faith. maintain an action for the breach of an implied duty of good faith and fair dealing insofar as the underlying claim is for the termination of an at-will employment relationship. Constructive Condition: One that a court will read into the contract if it is not expressly stated. as a matter of law. and B is discharged from paying the contract. then it is an at-will relationship.An employee cannot. Unless the contract specifies a term. B never shows up. A should not have to pay. or states that the employee can only be let go for cause. Express Conditions: . What if A breaches in a way that the court finds there was no substantial performance. Is A completely out of luck? Sue under restitution. Limitations: For a term Express terms Reliance Public Policy Fraud/Conduct that may not be governed by a statute. v. Should A have to pay her $100? Should not have to pay because A’s performance is excused because payment is constructively conditioned on B fulfilling her end of the bargain. then the buyer is excused from the contract. (Does the job without enthusiasm) A hires B to baby sit her son. Hypo: Buyer’s obligation to buy a house is conditioned on getting financing at 6% interest. $100 if B stays for 10 hours.

P sued for breach. D took the offer off the table. contingent upon rezoning of the property. or changed his position in reliance on the repudiation. P tried to accept the original offer. UCC §2-609: A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance. Definite and unequivocal = Standard of law. Spindler D was the owner and majority stock holder of S & S newspapers. D went to sell the stock to the P. failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract. Language has to be clear that the party is not going to perform the contract for it to be a repudiating. Delivery is to be on the 5th of each month. v. was given none. Spry D was granted the exclusive right to purchase Ps beverages. Schupf P had contracted with D to purchase some land for $160T. the other may demand in a record adequate assurance of due performance and until the party receives the assurance may if commercially reasonable suspend any performance for which it has not already received the agreed return. Ps request was denied and he contacted the D offering a lower price for the land. An anticipatory repudiation may be retracted by the repudiating party unless the other party has. v. the reasonableness of ground for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards. On April 1st.Strictly construed. Hornell Brewing Co. If reasonable grounds for insecurity arise with respect to the performance of either party. Can Banks treat that as a repudiation? . Flatt & Sons Co. Hypo: Sims to sell Banks his extra bread crumbs for 6 months. A party may repudiate a contract when the other party has materially breached the contract. Between merchants. P tried to pay. payments went wrong. Sims’ bread crumb machine breaks down and anticipates some production delays. P requested assurances. manifested an election to rescind the contract. Offer not accepted. Entire condition must be met until the party because obligated under the contract. ANTICIPATORY REPUDIATION Truman L. entitling the other party to suspend performance and terminate the agreement. before the withdrawal. D failed to pay for some shipments. Sackett v. After receipt of a justified demand. One party’s failure to respond to a request for adequate assurance of due performance constitutes a breach of the agreement.

P entered into a conditional letter agreement with D to sublease Ps former office space. Can she get out of the condition? Non-occurrence may be excused and B is still on the hook. then it can be treated as a repudiation of the contract. Appel. B goes to the architect and says “do not issue the certificate. If the deadline for the occurrence of the condition has already passed. A agrees to build a house for B.This is not a definite statement of intent Banks can ask for assurance of due performance. Waiver of a condition: A to sell real estate to B. v. Constructive conditions can be met if substantial performance is present. Inc. If it is not supported by separate consideration or reliance. B would be able to invoke the non-occurrence. After receipt. v. Cannot retract if the other party has relied to their detriment on it. In order for the waiver to be enforceable. B is told she can get the financing for 7%. J. Ambiguities: courts typically construe as constructive conditions. Conditions were not met. EXPRESS CONDITIONS Oppenheimer & Co. Express conditions are strictly construed and have to be satisfied. then the waiver may not be enforceable if for a material condition. Realty Corp.A. May still be obligated to pay. Under certain circumstances the waiver may be retracted. and will pay subject to the architect issuing a certificate of completion.N. Prevention of Condition: A condition is excused if the promisor wrongfully hinders or prevents the condition from occurring. it must be of a non-material condition. . if Sims does not provide the goods in a reasonable amount of time. Subject to B obtaining loan financing at 6% or lower. Oppenheim. B decides to wave the non-occurrence of the condition and go ahead with the contract.” B is still on the hook to pay. Dixon & Co. Cross Bay Chelsea. A to sell real estate to B for $100T. B has to get the loan at 6%. Substantial performance is not applicable to excuse the nonoccurrence of an express condition precedent. B does nothing (eats chocolates and doesn’t apply for the loan). Agreement provided that the proposed sublease would be executed only upon the satisfaction of certain conditions.

Hypo: A sets up an easel on Michigan Ave and offers to pain portraits. D sued because they had put $15T into the building. What standard to be held? This would be a reasonableness standard. Moren Building Products Co. $4 a pound. 5/1 comes and goes. It was an express condition. an objective. P sued. Buyer liable? Buyer is not liable because the agreement was conditioned on the zoning requirement. Courts will imply into satisfaction conditions good faith on the obligator. . Equity will protect a tenant who negligently fails to exercise a renewal option if failure to do so will result in forfeiture. Before delivery the price falls to $2 a pound. Hypo: Seller agrees to sell Buyer for $65T conditioned on “zoning clearance” for the sale to go through. A to sell grocery store tomatoes to the store’s satisfaction subject to payment. D subcontracted with the P to install aluminum siding as part of a construction project. Portrait is painted. Seller sells proper to a third party for $60T. Hypo: Contract between A and B to sell an option for $. reasonable person standard will be used in determining whether performance was adequate. Store rejects the tomatoes. B walks by and agrees to have her portrait painted for $20. v.P and D’s lease terms were amended to provide for a 24-year renewal option on six-month notice by D. if not then the standard is good faith. The majority rule is that where the contract in question involves performance of commercial quality. 6 months approached. Inc. D had another do the job and refused to pay the P. it does not involve aesthetics. then satisfaction should be determined by reasonable satisfaction. only money stuff. satisfaction guaranteed. General Motor’s agent rejected the siding due to its appearance. Baystone Construction. Can she turn around and say that the nonoccurrence of the condition should be excused and she should be able to buy the apartment? The buyer in this case has not put the same reliance in on the space and the nature of the forfeiture is not great. must be exercised by 5/1. B does not exercise her option. P did not remind of the renewal requirement and entered into negotiations with another. A cannot recover the $20. Can A hold B to an obligation for the portrait? Since to condition was not met. B doesn’t like it. Buyer does not get the zoning clearance. (Must act reasonably) R2d§228: Satisfaction Condition: Practicable to determine what a reasonable person would do.

Seller sells for $75T. Buyer requests that closing take place on June 15th. Karl Wendt Farm Equipment Co. Is anyone liable to anyone? If it is a condition only to Buyer’s obligation to buy. If a party obstructs or is in active in achieving the condition. The competitor had many franchises in areas also served by D franchises. Seller is liable for their bad faith. Before the date of the festival. D claimed impracticability. R2d: “Where performance has been made impracticable due to the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made. is given a bunch of other documents. D sold its unprofitable farm equipment division to a competitor. Buyer enters into an agreement to sell the property for $75T. Performance is excused when someone dies. then Buyer could waive the condition and be free to buy the property from Seller. v. Buyer liable? Buyer is liable. performance may be excused. gets a set of applications. During an economic downturn. Buyer applies. Seller sells to third party for $60T. the music hall was consumed by fire. Comments B and D show that the discontinuance of existing market conditions is not an event of this kind. the nonoccurrence of which was a basic assumption. Seller tells Buyer the closing will not take place. Third party seems to have acted in bad faith by going behind the Buyer’s back. Seller should still be on the hook to sell for $60T. Harvester Co. destroyed.Buyer makes application. Under the doctrine of prevention (condition is in control of the buyer. Non-occurrence of the condition is excused. then it constitutes a breach by not making reasonable efforts. closing to take place in late June conditioned on Seller selling to Buyer. but never completes them. or damaged. P was the Ds franchise in such an area. Intl.” §261. IMPRACTICABILITY AND FRUSTRATION Taylor v Caldwell. Tells Seller that he was denied. Seller sells to the third party for $70T. D leased a music hall and surrounding gardens to P for $100 a day for four days for a festival. must make a good faith effort). §261: Impracticability: Substantial reduction of the value of the contract Because of the occurrence of the event. The application is denied. Seller is a neighbor and makes a complaint. and when the competitor decided not to do business with him. Through the letter. he had no supplier. it seems that Buyer waived the condition to Seller. Seems that Buyer went forward on the original terms. buyer files them. . is incapacitated. or where the principal purpose of a contract is frustrated by such an event. P sued D. Application is denied in early May. Is Seller liable? This is the prevention doctrine again. one of the forms is a sheet for neighbors to fill out.

Inc. Banks to sell them to a restaurant. Have to look at the foreseeability and foreshadowing to determine whether the parties contracted around that event as part of their understanding. THIRD PARTY RIGHTS Vogan v. then the paying party might be able to argue. Unless the language or the circumstances indicated in the contrary. Lessor sued. Hayes Appraisal Associates. Party should not bear the risk. Mel Frank Tool & Supply. A’s crop is destroyed by drought. Sims sells breadcrumbs to Banks. then he is on the hook. D was a distributor of chemicals. After the contract is entered into. Frustration: Purpose of a contract is substantially frustrated. his remaining duties to render performance are discharged unless the language of the circumstances indicate the contrary. Related to a basic assumption of the contract. Inc. Specified would be a basis for excuse. Should the drought excuse A’s obligation? Would depend on whether the tomatoes were specific tomatoes on this part of the land. or just tomatoes. §265: After a contract is made. implicitly. .Without the party’s fault Party seeking relief does not bear the risk of that occurrence. v. Hypos: A enters into a contract with B (grocery) to deliver tomatoes for payment. Di-Chem Co. then he is excused. Banks cannot deliver. Foreseeability: The more foreseeable it is. If not. ordinance passed by the city outlawing certain hazardous materials. D stopped using the leased space claiming frustration. the parties might have contracted around it. Sims breaks down. a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made.: He should bear the risk or a fluctuating market price. If Banks was going to sell from specifically Sims. Market price changes.

Hughes gives $100 to Fehl and tells her just to promise to pay the $100 to Lash directly. sues to enforce. In the absence of such a term. §302: A party will be found to be an intended beneficiary if: 1. R2d §313: . The question is therefore whether the Ps are intended to be beneficiaries. the third party may not so enforce the contract. Intended ones are vested with the ability to bring suit. Parties intended to benefit lash in this situation. Zigas v. Landlords did not adhere to this and the tenants filed suit. Hypo: Lash lends $100 to Hughes. she would be able to bring suit against Fehl. Where the benefits are incidental. Hughes then tells Fehl to pay him instead and not Lash. There is a recognized right of standing to effectuate the intention of the promisor and promisee. Creditor Beneficiary: Make a promise to another. There is an intention to confer a benefit on the beneficiary.D was hired by a bank to monitor the progress of a new home construction for the Ps who had obtained a construction loan from the bank. The reports were wrong and the Ps sued for breach under a third party claim. or manifests assent to it by request of the promisor or promisee. No privity of contract between Lash and Fehl. Superior Court HUD helped finance certain apartments. A week later. Incidental Beneficiary: Not intended to be a beneficiary. the landlords contracted that they would adhere to certain rent schedules. 2. unless: Beneficiary relies. §311: Variation of a duty to a beneficiary. A benefit was to be conferred on Lash. There was an intent to benefit the Ps in this case and the D had reason to know that they were being benefited. Cannot modify the duty if the contract does not allow the parties to do so. the promisor and promisee are then able to modify as the would like. In exchange.

proper language must be used. Forrest’s right is the extinguished. Forrest would still be liable if he delegated his duty and they breached. Hypo: Ice cream Co. Was this a valid assignment? Must the I Co. Hypo: Grocery to buy tomatoes from Forrest. Unless the assignment will have a material adverse effect on the obligor. The letter directing payment to be made directly to P clearly and unequivocally demonstrated Jones’ intent to relinquish his control over any money received for his personal injury claim. Fire hydrant is not working properly. but before the contract was up. the IC Co. Hypo: Water Co. This is a claim for consequential damages and therefore the Water Co. Cross’ house burns to the ground. enters into contract with town to provide water in exchange for payment. told his lawyers to pay the doctor. then the right assigned is to get payment.Promisor who contracts with the government to render services to the public is not subject to liability to a member of the public for consequential damages unless the contract provides for it. perform? . Doctor sued lawyers. “I hereby assign…”f Restrictions on Assignment: Language in an original contract cannot be assigned. §317. Irace Jones who was injured in a motorcycle accident hired Irace and Lowry (Ds) to represent him in a personal injury action. the obligor will remain liable under the contract if the Grocery pays Forrest and not the bank. If the obligor receives notice that the right has been assigned. Could not pay his bills. Water Co. (Passing a football) Delegation of a duty is like catching a cold. and the duty would be to sell tomatoes. In order for the assignment to be effective. merged into Hagendas. ASSIGNMENT AND DELEGATION Herzog v. Ds were duly notified of this assignment and therefore the settlement money should have been paid to P. After contract was concluded. Must manifest “present transfer” of the right. If Forrest assigns. entered into a 3 year requirements contract with an Ice Supplier in exchange for payment. does not maintain the water level at the level called for in the contract. Eg. will not be held liable for the damages as long as there is no language of it in the K. Forrest then assigns his right to payment to the bank to secure a loan. then told them to pay him.

Sally Beauty Co. or The obligee has a substantial interest in having the original person do it. a bargain to which he did not agree. Banks can sue Sims for breach. Can Banks sue Sims for breach of the duty? Sims is the obligor. P sued. Duty is not extinguished in Sims.Buyer cannot balloon its requirements. Sims is then not liable. JB is delegate. for the latter to serve as exclusive distribution agent for D product in most of the TX market. Banks is obligee. A contractual right may be assigned except where the obligee has a substantial interest in having his original promisor perform or control the acts pertaining to the contract. Sometime later Sims sells the business to JB and assigning the contracts that Sims is a party to. a direct competitor. via delegation. Can Banks sue JB? He can sue by stating that he is the intended beneficiary of the contract between Sims and JB. No issue as to whether this duty can be delegated. Hypo: Sims to sell Banks bread crumbs. Must be made in good faith. JB screws up and breaches. Nexxus Products Co. and D abrogated the contract. . If it is done in pursuance of an express assumption of duties. A distribution agreement may be abrogated by the manufacturer if the distributor is purchased by a direct competitor or the manufacturer. Duty can be delegated unless: Language of the contract is specifically limiting it. Essentially an oblige should not have to accept. (Rights and duties). Novation: Banks expressly releases Sims to take JB. D contracted with Best Barber & Beauty Supply Co. UCC §2-210: 1. v. BB&BS was purchased by P.

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