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– objective standard, not subjective intent (Meeting of Minds), when agreed in writing to clearly expressed unambiguous intent to the contrary (MA). Parol can’t affect MA. Contract rejects parties intent… contract an obligation based on words the law understands … exception is mutual mistake. ii) Personal intent only important so far as volition is considered – intent to do act of writing. Absent duress/fraud, signature binding if capable of understanding terms b) Offer and Acceptance i) Bilateral Contract (definition) (1) 24: “Offer is manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Elements of an Offer: 1) Essential Terms (what’s bought/sold, price, quantity, date of payment/delivery) 2) Indicates the willingness to enter into a bargain, merely by the other person accepting the bargain intent of finality, binding effect … 2nd to last step before being bound –24 3) Identification of specific individual/group (to know whose bound). Ad is not an offer partly b/c missing Essential Terms. (2) Ad is the mere request for an offer, not an offer – usually don’t meet standards b/c unmanageable if too many people reply (a) Exception: Ad is an offer if Bait & Switch tactics (if ad contains misleading terms). Binding contract understood holistically, emphasizing each conflicting provision … Must take words in context. Binding offer may be implied simply b/c misleading advertising intentionally leads reader to conclude such (Corbin 64) (i) Offer exists if there is language of commitment or an invitation to take action without further communication (26) (3) Counter-Offer – rejection of original offer, forms new offer; if sign C/O and send, not exercising Power of Acceptance b/c it’s “Qualified acceptance” – rejects offer as it ends Power of Acceptance (39) (a) Offer and acceptance: Offeror’s offer creates Power of Acceptance in offeree which deadline controls (35); offeree’s rejection of offer terminates Power of Acceptance (36); Acceptance must be unequivocal and unqualified to form contract (57, 58) (i) Offeror is master of offer b/c can 1) revoke before acceptance and 2) dictate what’s required for acceptance (b) Direct Revocation (42): D tells P “I’m revoking” (i) Indirect Revocation (43): D acts inconsistent w/ offer and P learns of it. ii) Unilateral Contract (definition) (1) Classical: offer revocable until offeree’s full performance of act materializes (2) 45 when offeree tenders or begins requested performance under Unilateral Contract, offeror bound so long as offeree completes offer according to terms. Same rule as in Option Contract but not itself an Option Contract b/c offeror hasn’t expressly promised to hold offer open for period of time. (a) Substantial performance 45.1 Can’t revoke after part performance – creates “Option Contract” where offer must remain open for reasonable time to allow for completion. 2) Consideration (Given in exchange for or in reliance upon a promise; each promise is consideration) Something (such as an act, a forbearance, or a return promise) bargained for and received by a
promisor from a promisee; that which motivates a person to do something, esp. to engage in a legal act. • Consideration, or a substitute such as promissory estoppel, is necessary for an agreement to be enforceable. a) Benefit/Detriment test: Promisor enjoys benefit in relation to promise OR promisee suffers detriment in relation to promise. Calculation by one/both parties a good ingredient to see if consideration exists. i) Benefit/Detriment test’s purpose is to ID calculation so seriousness met – personal choice is an objective basis for the court to decide; waiving any legal right at request of another party is consideration for promise (suffers a detriment). (1) §60: If promisor made promise, and it induced a detriment– the detriment must be seen as the “price” of the promise. If promisor made a promise without requiring the promisee to suffer a detriment to get gift/benefit, the detriment is incidental/conditional to promisee’s receipt of the benefit. Promisor not seeking a detriment in exchange for a promise. b) Bargain Theory: 71(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. Treats the issue of incidental detriment, not treated by the benefit-detriment test. If I am promised a trip, and there is no consideration other than the “detriment” of getting my passport, that does not count as adequate consideration. Getting my passport was not bargained for as part of the deal, and rather, is an incidental detriment. i) Gift vs. promise (1) Consideration vs. condition: If a condition set by the promisor would benefit the promisor, then it probably constitutes adequate consideration. If a condition doesn’t benefit the promisor, but simply enables the promisee to receive a gift, then the event on which the promise is conditioned, though brought about by the promisee in reliance on the promise, is not consideration. (2) Consideration insures a promise gets enforced b/c a contract is not accidental/gratuitous occurrence. Rather, it is uttered intentionally through deliberation, manifested by reciprocal bargaining or negotiation. (3) A Gift promise is unenforceable even if promisor writes that consideration has been given. c) Inadequate consideration doesn’t void a contract. Court will investigate sufficiency of consideration, not inadequacy. (79 – no requirement of “equivalence in the values exchanged”) i) Duress: 1) threat, 2) that is improper, 3) leaves victim with no reasonable alternative, 4) induces assent. d) Consideration requires inducement of current performance – past performance cannot be used as consideration e) An Offer for an exchange is not a promise until consideration has been given; 35: Usually offer can be withdrawn before acceptance. Promissory Estoppel doesn’t render offer irrevocable even if there is detrimental reliance i) Exception: 90: If the promisor makes a promise he reasonably expects will cause the promisee to act in reliance, to his detriment, and it causes action or forbearance, you may be bound to that promise if necessary to avoid injustice. 45, b/c ref. 90, an “Option Contract” is created if there is reliance on an offer and work has begun; lack of consideration doesn’t mean promise unenforceable (1) §87.2 (An offer is binding if there has been nominal consideration or simply to avoid injustice. used for offers only – e.g. contracting) preparing to perform vs. 45 (Option Contract due to part performance or tender) beginning performance (2) §87.2 Promissory Estoppel criteria is applied to offers, not promises – creates binding Option Contract … only for contractors
ii) As policy, Drennan rules that for Promissory Estoppel, offer = promise. Baird said Promissory Estoppel can’t apply in offer. (1) Unilateral Contract: consideration through reliance exists when act begins (2) Bilateral Contract: a promise for a promise (no effort – even if you do research before making a return promise, you do it at your own risk), so no consideration through reliance/Promissory Estoppel (Baird’s view). (a) Drennan says that in Unilateral Contracts, §45 creates an “Option Contract” if there is reliance on the offer and work has begun. In a bilateral contract, sometimes reliance on an offer exists … offeror wants that reliance to do business. Contractor relying on sub-contractor to make bid is necessary ingredient to how contractor works (w/out reliance, can’t do job). (b) While Promissory Estoppel is based on a promise, here there’s an offer. So Promissory Estoppel, as matter of policy, addresses the gap in Bilateral Contracts when dealing with contractors. Promissory estoppel must only be used if there is no consideration. Drennan effectively overruled James Baird Co. v. Gimbel Bros. Inc. and is the seminal case for the modern approach to applying promissory estoppel in the context of subcontractor bidding disputes based on mistake.
Promissory Estoppel For Promissory Estoppel to be used as a theory of liability, as an alternative to contract proper, there needs to be: 1) §90 – Promise Reasonably Inducing Action or Forbearance 1) clear and definite promise by the promisor 2) Promisor reasonably expected promisee to rely on the promise, 3) Promisee reasonably relied on promise, 4) Refusal to enforce promise must result in injustice. The remedy granted for breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. PE: “consideration substitute” renders certain promises otherwise lacking consideration to be binding. Promisee’s reliance sufficient for enforcement. f) Proxy for Consideration: Option Contract must have consideration to be binding; otherwise offer revocable up to acceptance. i) If the option is conditioned on performance, such acts can become consideration – but promisor must benefit from, or impose, such acts. Otherwise, the Promisor couldn’t reasonably expect irrelevant acts be used in reliance on promise ii) Promissory Estoppel’s real source, while it can come from weaknesses in contract-proper (Mutual Assent, Bilateral Contract), is weaknesses in consideration (1) Consideration distinguishes binding from non-binding promises – use Benefit/Detriment, Bargain Theory. Bargain Theory solves incidental reliance problem (no Liability under K-proper just b/c promisee of a trip got his passport). BUT there is a gap in the Bargain Theory b/c people still rely on the promise, even when there is no consideration (Dougherty v. Salt – if nephew didn’t work (gave something up) b/c of grandmother’s promise, he relied) g) Assurances in Negotiations: As a Question of Law, a “clear and definite” promise is unnecessary in the context of negotiation. An assurance is considered a promise when injustice must be avoided (if promisee is seeking a remedy to get back to point where contract never made) i) The standard for a promise depends on what remedy is being sought. “Clear and definite” promise is necessary when seeking all damages (expectation…) . If only reliance damages are being sought, the promise standards are relaxed (e.g. Assurance = Promise).
h) Family Promises: A gratuitous promise is unenforceable, b/c there is no consideration, where party reasonably relied on promise and suffered loss and inconvenience. (Note: Modern day courts could decide cases like Kirksey under promissory estoppel and find that the promise induced reliance and should be enforceable. i) Counter: Relocation of a party in reliance on a promise is sufficient “consideration” to make promise enforceable. ii) Child support: If promise of parental support made and detrimentally relied upon, it is enforceable under Promissory Estoppel. Reliance only needs to be reasonable – P doesn’t need to exhaust all means of obtaining benefit the promise intended to provide before that promise becomes enforceable (PE) i) Pension: Promissory Estoppel enforces pensions, especially when Plaintiff is fired, and has not accepted a pension i) Promissory Estoppel is a consideration substitute, not consideration; It is entertained only absent consideration; Promissory Estoppel is generally applicable only when no valid consideration; but also used to remove contracts from Statute of Frauds even where other valid consideration exits Structure of analysis ← Contract proper • Mutual assent • Consideration o Promissory Estoppel Proxy for consideration Reliance on offer §87(e) ← Pop’s conessome courts will recognize promissory estoppel where assurance is made in the context of negotiation. Promise Promisor could reasonably expect action or forbearance The promise must actually induce such action or forbearance Justice cries out • Restitution o Non-Promissory o Promissory Material Benefit Rule (§86)
Restitution Unlike Promissory Estoppel, Restitution is not predicated on accountability for promise. Rather, its usefulness is greatest when no promise has been made. Its purpose is the restoration of an unfair gain. Focus is on cases in which one party has obtained a benefit at the expense of another under circumstances that make it unfair for the recipient to retain the benefit without paying for it. 1) §1 Person unjustly enriched at expense of another must make restitution a) Person who received benefits w/ knowledge that he reasonably expects to pay for them must pay for them b) Note: Not L b/c signed contract or promise exists; can’t say no benefit if fail at saving life … still reasonable value in service
2) §116 Preservation of Life and Health a) a) A person who has supplied things or services to another, although acting without the other's knowledge or consent, is entitled to restitution therefor from the other IF i) he acted un-officiously and with intent to charge, AND ii) the things or services were necessary to prevent harm or suffering, AND iii) the person supplying them had no reason to know that the other would not consent if mentally competent, AND iv) it was impossible for the other to give consent or the consent would have been immaterial (extreme youth or mental impairment) b) b) mentally ill/unconscious person (don’t need consent) – need to compensate c) Non-Promisory Restitution: Defendant’s liability arises under quasi-K (implied in law) – e.g. Dr. renders valuable services w/out request, but accept benefits … not enough for Mutual Assent i) Implied in fact (K-P) (contract proper) – e.g. going to Dr., must pay even if not stated b/c of conduct and requested service non-promissory restitution: based on the idea that under certain circumstances, it’s unfair for one person to be benefited at the expense of another. (unjust enrichment) This is called an “implied-in-law” contract or a “quasi-contract”. Elements of a Quasi-Contract: not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties. 1. Plaintiff furnished / rendered valuable goods / services to Defendant with a reasonable expectation of being compensated; 2. Defendant knowingly accepted the benefits of the goods / services; and 3. Defendant would be unfairly benefited by the services / receiving the goods if no compensation were paid to the Plaintiff This is in contrast to an “implied-in-fact” contract, where conduct implies promise to pay for something. Elements of Non-Promissory Restitution: 1) Party conferred benefit to other person (beneficiary) 2) Party not acting officiously e.g. benefit rendered with reasonable expectation for payment NOTE: benefit cannot be thrust upon someone unless in dire medical situation or of unsound mind as a life-saving measure 3) Promisory Restitution: §86 Promise for Benefit Received a) (1) A Promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice i) (2) Promise is not binding under subsection (1) if (1) (a) promisee conferred the benefit as a gift or for other reasons the promisor hasn’t been unjustly enriched or; (skip to (b)) (a) Gift: 1) When person gets nothing back for what they give (would support D) OR 2) When intention exists to give away something w/out getting something in return (would support P). Would attack (1) by saying too broad – many situations that aren’t considered “gifts” would become gifts (e.g. doctor helping out sick person). Would undermine Material Benefit rule. Would support (2) by saying it demonstrates deliberate decision to give something for free which is important for Restitution and purpose of MB rule. Show why interpretation best serves underlying rule
and preserves property of promisor. • Cautionary functionrather than making it so that there is an enforceable agreement whenever words are exchanged. Life has monetary value (doctors.g. so saving it creates consideration (b) Under non-Promisory Restitution. then promises. sufficient consideration exists for promisor’s agreement to pay for service b/c of material benefit received – subsequent promise = previous request : Rstmt: §86 – a promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. 2) debts kids incur. we ask a different kind of question: Should there be the requirement of a writing in order to enforce an agreement? ← Should the law require a writing as a prerequisite to the enforcement of an agreement? ← ← The statute of frauds is a formal requirement. . binding b/c at one time were seeking action (MA & consideration) … promise renews what was sought. torts). Statute of Frauds ← What’s attached to a contract is agreement. ← If that’s the case. (a) Moral consideration creates an enforceable promise. if promisor has received a Material Benefit (valid consideration for promise). not necessarily writing. it gives people the chance to really think things over by drafting a document. there is no recovery when the defendant should not reasonably expect to pay. i) Moral obligation forms consideration for express promise if: 1) debts SoL bars. SoL barring debt collection) to revive effective promise. ← ← Why impose legal formalities? • Evidentiary function gives evidence of the contract’s existence. though w/out his request. gift is intention to give away (1) Emergency situation not gift b/c no time to think of intention (2) Material Benefit rule: Where promisee cares for.(2) (b) to the extent that its value is disproportionate to the benefit ii) 86(2) Promise not-binding if gift. insurance. improves. but need preexisting obligation which “positive law” voided (e. Original obligation had consideration. Despite this lack of Liability under non-Promissory Restitution. a subsequent promise made by the benefitee of the service provided becomes binding under Promissory Restitution because of the Material Benefit rule b) Moral Obligation: sufficient consideration for promise. 3) debts bankruptcy previously discharged (1) If Debtor doesn’t pay b/c SoL expires.
has to be signed by the party against whom enforcement is sought. ← ← You don’t want to impose the writing requirement in every situation because there is a risk attached to it. That’s useful because a court can use the channel to understand a background to a contract. So. • ANALYSIS STRUCTURE Is this contract covered? o One-year provision (If the contract can be performed within a year. and that they think should be binding. if people want to get to the point of an enforceable contract they have to channel ideas in a certain way.• ← Channeling functionwhat’s being channeled is a party’s behavior. ← • . what the law does is carve out situations where writing is necessary. ← ← Question: what kind of writing is necessary for the enforceability of the contract? ← Questions to ask: • Is the agreement covered by the statute of frauds? • Has the statute of frauds been satisfied? o What kind of writing is necessary to satisfy it? See § 131 enforceability if it is evidenced by any writing that reasonably id’s the subject matter of the contract. ← Problem: there are a lot of oral contracts that people rely on. ← ← So. states with reasonable certainty the essential terms. then it is not subject to the statute of frauds it has to not be completable within a year to be covered) o Contract for the sale of an interest in land o UCC sale of goods with contract price of more than 500$ o A contract upon consideration of marriage If covered by the statute. has the statute of frauds been satisfied? o Writing(s) o sufficient to indicate that a contract has been made.
More than one document may be linked expressly or by subject matter/occasion to satisfy SoF. when it establishes a relation b/w signed/unsigned documents a) Statute of Frauds is usually a defense against contract enforceability. may be raised against a party who has claimed breach of contract. 1) 130.• o With essential terms (quantity…) o And a signature by the party against whom enforcement is sought. but the statute is not satisfied. look at the terms. and so admitting. 131 “Unless additional requirements are prescribed by the particular statute. assess if K exists. all that is necessary is that the writing be a memorandum thereof. there needs to be reliance as evidencing the making and terms of the contract. If the contract is within the statute of frauds. (1) Only the following is required in the writing: (a) Identity of the parties to the transaction (b) Nature and subject matter of the contract (c) Essential terms of the unperformed promises in the agreement. b) (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party. Notwithstanding the statute of frauds. signed by or on behalf of party charged. This is the final step in the statute of frauds analysis. a contract within the Statute of Frauds is enforceable if it is evidenced by any writing. if available. and the required writing is absent or deficient. the following memoranda have been held to satisfy the writing requirement i) A letter from one of the parties to a third party describing the agreement ii) The written offer. (d) Signature Enforcement where the statute of frauds is not satisfied . the agreement. The defense is available to the breaching party when the transaction in question falls within one of the categories governed by the Statute of Frauds. ← In the absence of a writing requirement. Rather. the statute of frauds is a defense which. and iii) A letter from one of the parties to the other party repudiating. which: a) (a) reasonably identifies the subject matter of the contract. which can be prepared before. elements of the writing… b) There is no requirement that the parties put their actual agreement in writing. Under the common law. acceptance of which formed the contract. during or after contract formation. and c) (c) states with reasonable certainty the Essential Terms of the unperformed promises are in the contract 2) Oral testimony can satisfy the Statute of Frauds. A promise has to be shown by clear and convincing evidence Promisor has to reasonable expect action or forbearance Promise actually induces an action or forbearance Justice cries out Note: In the context of litigation. the party seeking to enforce the contract will have to use another theory of enforcement such as promissory estoppel or restitution in order to protect its interests. can you use promissory estoppel to establish liability? o You can apply a ramped-up version of promissory estoppel.
(4) (d) the reasonableness of the action or forbearance. or the making and terms are otherwise established by clear and convincing evidence. what evidence is admissible. Parol Evidence Rule ← Parol Evidence rule: assume there’s a contract. (5) (e) the extent to which the action or forbearance was foreseeable by the promisor. Court then says 3 other PE criteria met. so as to not allow parties to escape obligations. such as clear and convincing evidence of a promise(1st PE criteria – promise). then Reasonable Person understanding becomes irrelevant b) 2) if different meanings. (3) (c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise. but the statute is not satisfied because the breaching party never signed a written document.If the contract is within the statute of frauds. b) An Oral employment contract be removed from Statute of Frauds limitations via Promissory Estoppel i) The Statute of Frauds prevents fraud by requiring contracts to be in writing. (2) (b) the definite and substantial character of the action or forbearance in relation to the remedy sought. i) (2) In determining whether injustice can be avoided only by enforcement of the promise: (1) (a) the availability and adequacy of other remedies. ii) Promissory Estoppel can be used as a basis for the Statute of Frauds instead of Contract proper. focuses on 4) injustice. particularly cancellation and restitution. the aggrieved party may nevertheless be able to secure some protection for his interests via an action for restitution or promissory estoppel USING Promissory Estoppel: 3) §139. Enforcement By Virtue Of Action In Reliance a) (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. that party’s meaning wins if other party knew or should know i) (b) Often ask if 1 party knew/should know meaning other understood – if so. no contract (no MOM) 2) Parol: doesn’t define what evidence admissible … excludes evidence otherwise admissible to prove fact at issue which supplements/contradicts writing STRUCTURE OF ANALYSIS . party having knowledge bound (Innocent Party Meaning) c) 3) if 2 diff meanings and neither had reason to know other’s meaning. The element of “Risk” is overridden by heightened criteria for promissory estoppel. The remedy granted for breach is to be limited as justice requires. and what evidence has to be excluded? (rule of evidence) 1) 201 a) 1) If both parties consent to meaning.
o Do we have the kind of writing that implicates the parol evidence rule? The writing needs to be at least partially integrated. and therefore disregards evidence of prior oral and written things. If we conclude it’s a partial integration? If there is something supplementing the writing. there is no point to attributing a quality of integration to it. providing an additional term.• • • Does the situation involve the kind of evidence potentially subject to the parol evidence rule? If you have a writing that is integrated. Let’s assume you cannot admit the evidence to explain the writing. There is still one more exception.. The exception to evidence which is not subject to the parol evidence rule is contemporaneous writing and all subsequent negotiations. The parol evidence rule is defending the authority of the final writing. It permits oral testimony. mistake. o To determine whether there is a latent ambiguity. There are a few situations where evidence is admissible notwithstanding this analysis: • If evidence doesn’t contradict but explains the writing. we look at the writing. What if mutual assent was not voluntarily given? o If someone is tricked into a writing. but we are not restricted to the writing. o If there is latent ambiguity (this is the approach the court takes in Taylor). the court looks at the evidence and decides whether it contradicts the writing. it doesn’t mean it will be believed by the fact-finder. deciding whether it is partially or completely integrated. does the court impose conditions on this rule? (Taylor v. Courts take 2 different types of approaches in making the determination of whether the writing is integrated 4-corners approach: look only at the writing itself. If evidence is admissible. Figure out what the implications are. undue influence. written communications. can any prior oral or written evidence be introduced? NO. • . duress. Prior to that writing. the court has to hear everything that happened. o You can admit evidence to establish an invalidating cause such as fraud. then that’s admissible. o Judges undergo this process in closed chambers to consider admitting evidence: Is this a writing that is susceptible to competing interpretations? Does the evidence support one of the competing interpretations? If it does. so the court has to operationalize that rule without contradicting the parol evidence rule.. Contextual approach (Corbin): In determining that. it might be completely or partially integrated. State Farm) Under what circumstances can you admit evidence to explain a writing? o If the writing is ambiguous on its face. What’s not admissible is anything prior that contradicts the writing. We look at many factors to decide whether the writing was intended to be final. there have been oral. If we conclude that it’s complete integration.
generally speaking. because as long as you put a merger clause. if performance consistent w/ express terms of written agreement iii) Course of dealing: Reflects intentions during prior negotiations – Course of Performance informs about the Course of dealing. However. any statement to trick person into writing b) Trade usage – Commercial agreement which is broader than a written agreement. However. This is an issue.• Fraud: as a general rule. when you have evidence of fraud. the court may supply a term which is reasonable under the circumstances.. Can the court admit evidence of fraud? o Not in a situation where it would contradict an express term of the writing. must be careful.  Omitted Terms Where a contract is sufficiently defined but omits an essential term. it will be admissible notwithstanding the parol evidence rule. even add terms. Locality trumps if conflicts w/ vocation standard. Morrison-Knudsen. Some courts may choose to look at these. you immunize yourself against all the fraud you’ve made in the past. courts will usually uphold the writing anyways. even if fraud Two types of Fraud: (1) Fraud in Execution: someone tries to fool another about contents of what’s signed (2) Fraud in Inducement: broader. See Sherrod v. [Restatement § 204] 3) Implied Terms . its observance is part of the UCC good faith requirement c) Course of performance – conduct which informs a court about the terms of the original agreement i) Course of Performance evidence cannot act as a Waiver to the agreement in the final writing –doesn’t establish agreement’s terms ii) Course of Performance evidence can supplement. the problem arises if the evidence contradicts something explicitly stated in the writing Consistent additional terms to a partial integration may be established by evidence of: a) Fraud i) Merger Clause: clause itself shows that the writing is completely integrated so no contradictory evidence is admissible. General trade usage rules: General trade usage rules apply to business localities or to types of vocations. someone can admit evidence in order to establish fraud (even prior evidence to the writing) but not all courts would admit that writing. But. ← ← So. to the written agreement. Locality arises if reasonable to know standard (1) General trade usage: reasonable standard for fair dealing. as opposed to specific trade usage. It derives its meaning from language and parties' actions i) Parol Evidence Rule accepts such evidence of a trade usage because it reflects the original agreement’s intent to include everyday practice ii) Specific v.
but are imposed b/c of justice i) Even if express terms are observed. or willful/Negligent damage to good sold while in minor’s possession – absent any overreaching. a contract can be violated if disregard is shown for “implied covenant of good faith and fair dealing” – You cannot prevent someone from receiving the fruits of a contract Restatement § 205: Duty of Good Faith and Fair Dealing (used in Locke) c) Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement • Avoiding Enforcement DEFENSES OUTLINE: o Is there a defense that P is a minor? (R § 14) o Is there a defense for mental incapacity? (R § 15) Cognitive Test Volitional Test o Is there a defense of misrepresentation here? (R § 162) Material or Fraudulent Justifiable Reliance o Is there a defense for duress? (R §§ 174. Protects minors from crafty adults b) Use Rule: Not full refund for rescission: seller gets setoff (reasonable compensation) for use/benefit of.” b) Implied-in-law term: may not reflect parties intent.a) Implied-in-fact term: The logic of the agreement means a term exists. 2) Minority Doctrine: Minors can rescind/void K before majority or reasonably after majority i) Burden shifting. . then an express promise to “use best efforts to perform that task” is unnecessary if the writing is“instinct with an obligation. 175. seller less responsibility to ensure not selling to minor. unfair advantage. 176) Improper threat Inducement No reasonable alternative o Is there a defense of unconscionability? (UCC 2-302) Procedural unconscionability Substantive unconscionability o Is there a defense for undue influence? (R § 177) Excessive Pressure • Odorizzi’s 7 factors Undue Susceptibility or Confidential Relationship o Was there a defense of nondisclosure here? (R § 161) o Is there a defense of public policy? (R §§ 178. 188) Rescission 1) General idea: to get P and D back to same position before contract was made. fraud. depreciation. deterrence: if burden on buyer. reflect parties’ intent (1) Lady Duff-Gordon: If someone is given exclusive rights to sell/market a product.
clothing. If allow minor’s too much leniency. When Duress by Threat Makes a Contract Voidable .i) If good totally consumed/destroyed. In such a case a court may grant relief as justice requires GENERAL RULE: The unadjudicated mental incompetence of one of the parties is NOT a sufficient reason to set aside an executive contract if the parties cannot be restored to their original positions. can sue minor iii) Emancipated Minor – married young. such as food. ii) (2) Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect. Mental Illness or Defect i) (1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect (1) (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction. Kobe Bryant 3) Mental Incapacitation a) § 15. and shelter are NOT voidable b/c we want adults to make these types of contracts w/ minors (1) Minor only liable for reasonable value of necessities though e) Resuscitation at Age 18 i) Minors presumptively affirm contracts when they reach the age of 18 unless they expressly disaffirm them ii) Sometimes misrepresentation of (age) – party suffers tort. if the contract was made in good faith for a fair consideration. the power of avoidance under Subsection (1) terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. or (2) (b) he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition. and without knowledge of incompetence 4) Duress o 3 Duress Requirements: (1) An improper threat • Crime or tort • Breach of good faith (used in Totem) (2) An inducement (3) No reasonable alternative o Restatement § 174: When Duress by Physical Compulsion Prevents Formation of a Contract If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress. the conduct is NOT effective as a manifestation of assent § 175. setoff could be partly/completely voiding merchant’s Liability ii) Protects minor against injustice and fair to bona fide merchant. breeds corruption iii) Minors still liable for reasonable value of “necessaries” c) No rescission if: d) Necessities Exception i) A minor’s contracts for necessities.
3) No reasonable alternative. ii) (2) A threat is improper if the resulting exchange is not on fair terms. and (1) (a) the threatened act would harm the recipient and would not significantly benefit the party making the threat. (3) (c) what is threatened is the use of civil process and the threat is made in bad faith. When a Threat Is Improper i) (1) A threat is improper if (1) (a) what is threatened is a crime or a tort. the contract is voidable by the victim UNLESS the other party to the . or (3) (c) What is threatened is otherwise a use of power for illegitimate ends. circumstances that lead to “induced assent” ii) (2) If a party's manifestation of assent is induced by one who is not a party to the transaction. 5) Undue Influence 6) Undue Influence Rules a) 2 Undue Influence Requirements i) (1) Excessive Pressure (1) (a) Discussion of the transaction at an unusual or inappropriate time (2) (b) Consummation of the transaction in an usual place (3) (c) Insistent demand that the business be finished at once (4) (d) Extreme emphasis on untoward consequences of delay (5) (e) Use of multiple persuaders by the dominant side against a single servient part (6) (f) Absence of 3rd party advisers to the servient party (7) (g) Statements that there is no time to consult financial advisers or attorneys ii) (2) Undue Susceptibility (lack of full vigor / extreme youth. (2) (b) what is threatened is a criminal prosecution. or the threat itself would be a crime or a tort if it resulted in obtaining property. 5) Selmer: Extent threatening party responsible for constraining econ.i) (1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative. (2) (b) the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat. the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction b) § 176. 2) Improper. age or sickness) (1) OR iii) (2) A Confidential Relationship 7) Restatement § 177: When Undue Influence Makes a Contract Voidable (Used in Odiorizzi) a) (1) Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion OR who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare b) (2) If a party’s manifestation of assent is induced by undue influence by the other party. (a) 1) Threat. 4) threat induced assent. the contract is voidable by the victim. the contract is voidable by the victim c) (3) If a party’s manifestation of assent is induced by one who is NOT a party to the transaction. or (4) (d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.
and A thinks there is 100 elk in the cave. c) §164: When a Misrepresentation Makes a Contract Voidable i) (1) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying. unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction. 6) P not having advocate. 3) Over-persuasion i) Over-persuasion (1) Location: 1) discussion of transaction at unusual time. or if the maker knows that it would be likely to induce the recipient to do so. the contract is voidable by the recipient. confidential/fiduciary relationship (lawyer/client or trustee/beneficiary) – now extended 1) Dominant pressurizes subservient. 4) extreme stress on consequences of delay (3) Isolation: 5) multiple persuaders.transaction in good faith and without reason to know of the undue influence wither gives value or relies materially on the transaction Equitable doctrine b/w family members. but there are really only 90 • Fraudulent Representation that is consciously false and intended to mislead • Ex: A intentionally and knowingly induces B to buy a cave by telling him that there were 100 running elk in the cave. even though there are only 90 o Justifiable Reliance Not just at the margins a) §159 Misrepresentation Defined: assertion that is not in accord with the facts. or (b) (b) does not have the confidence that he states or implies in the truth of the assertion. the contract is voidable by the recipient. or (c) (c) knows that he does not have the basis that he states or implies for the assertion ii) (2) A Misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent. 2) Dominant’s pressure induces subservient’s pressure. 2) consummation of transaction unusual place (2) Hurry: 3) demand for immediate completion. d) §167: When Misrepresentation Induces Assent . b) §162: When a Misrepresentation is Fraudulent or Material i) (1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker (a) (a) knows or believes that the assertion is not in accord with the facts. 7) stating no time to consult adviser/attorney 8) Misrepresentation • Misrepresentation Requirements o A Material or Fraudulent Misrepresentation • Material Representation that is pivotal / makes up the party’s mind • Ex: A intentional and knowingly induces B to buy a cave by saying there were 100 running elk in the cave. ii) (2) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon whom the recipient is justified in relying. independent judgment compromised.
i) Statement substantially contributes to assent e) §§168. unconscionable? (See Williams. Unconscionability • Unconscionability Outline o Is the contract. 169: Justifiable Reliance i) Can be reasonable reliance based on relationship of trust ii) Can be reasonable reliance based on belief of (D)'s special skill/knowledge iii) P particularly susceptible to type of misrepresentation involved f) Synthesis (1) Misrepresentation (159) – assertion (161) (2) Fraudulent or material (162) (3) Fraudulent Misrepresentation Induces assent (167) (4) Misrepresentation under which recipient justified in relying (168. . 169) 7. such as quasi-fraud or quasi-duress o Substantive Unconscionability • Relates to the fairness of the terms of the resulting bargain You need both procedural and substantive unconscionability for rescission. R § 208 / UCC 2-302) • Most courts require BOTH: • Procedural Unconsiconability A effect in bargaining process / lack of meaningful choice or “unfair surprise” (UCC) • Substantive Unconscionability Terms that are unfair or oppressive • Recurring example Arbitrary provisions • In order to find unconscionability. a court must find BOTH: o Procedural Unconscionability • Either a lack of choice by one party or some defect in the bargaining process / the way the contract was negotiated or devised. or a term.
• ← Terms) Williams v. However. a retail furniture store.procedural: absence of meaningful choice o look to differences in bargaining power (factors:) education financial ability social status sophistication o Look to reasonable opportunity to understand terms o Did one party have an advisor? o Fine print/complicated terms o Take it or leave it (time constraint) o No time to decide o Quasi-fraud o Quasi-duress o Quasi-undue influence ← You have to take all these factors together to make a strong case for procedural unconscionability. because procedural unconscionability without substantive unconscionability is insufficient. Relevant case: Williams v. resulting in unreasonable favorable terms in the contract o Procedural Unconscionability D knows P has meager income / sale took place at her home / terms were hidden in a printed form contract o Substantive Unconscionability D can take everything away for one default • • 8. you have to move on to substantive unconscionability. Walker (Furniture co that leases property to consumers. Public Policy . was liquidated / P purchased a stereo while had balance of $164 still owed on prior purchases / P defaulted on payment and D sought to replevy all goods previously sold to D Issue: Are the bargaining process and resulting terms of the contract so unfair that enforcement should be withheld? Holding: The defense of unconscionability to action on a contract is judicially recognizable when the contracting party lacks meaningful choice in the bargaining process. ← A weaker case is between two businesspeople. ← stronger cases for procedural unconscionability are between savvy business people against consumers. • Facts: D. the effect of which was to keep balance due on EVERY item purchased until balance due on ALL items. Rent to own situation.) • Substantive Unconscionability: terms are unfair o Gut check o Compare these terms to comparable situations in the industry—refer to standard business moraes and practice. Choice / Unreason Fav. sold furniture to P under a printed form contract containing an “add-on” clause. Walker-Thomas Furniture(Unconscionable=Lack of Mean. consumer cannot pay off items unless all the items purchased are paid for in full. whenever purchased. even if you have a strong case.
but only ONE party must be mistaken. AND that party must show: • (1) That enforcement would be unconscionable or • (2) That the other party knew of the mistake or caused the mistake NOTE: Mistake often raises issue of disclosure o o • • Important Terms o “Basic assumption” Something that would unsettle the agreement completely if untrue / fundamental in character o “Materially affecting the agreed performance” One party is much worse off and one party is much better off Mutual Mistake (R § 152) o (1) BOTH parties are mistaken o (2) Under R § 152. you have a combination of the last two points. the contract doesn’t violate the law.H.R. ← Often. • If a contract actually violates a law. M.idea that the contents of the contract are so outrageous that they should be void. it is void • More commonly. but violates the underlying purposes of a statute. • Offends our fundamental values. v. So. ← Relevant case: R. if the contract is in tension with the underlying purposes of a particular law. the mutual mistake has to relate to a basic assumption of the contract AND it must have a material effect on the performances § 152(1) Where a mistake of BOTH parties at the time a contract was made as to a BASIC ASSUMPTION on which the contract was made has a MATERIAL EFFECT on the agreed exchange of performances. and Another surrogate baby MISTAKE o Was there a mutual mistake? (R § 152) Requirements: • (1) Both parties must be mistaken • (2) Mistake must be about a basic assumption and have a material effect on exchange of performances • (3) Party seeking to void contract must not bear the risk When does one wary bear the risk? (R § 154) • (1) When the risk is allocated to him by agreement (Lenawee County) • (2) He’s consciously ignorant • (3) Risk is allocated by the court (b/c he’s best positioned to avoid mistake or insure against it) Was there at least unilateral mistake? (R § 153) Same basic requires. the contract is voidable by the adversely affected .
but was not. the party seeking to avoid the obligation can NOT be the party bearing the risk. a party seeking to avoid the obligation must show that enforcement would be UNCONSCIONABLE or that the other party KNEW OF or CAUSED the mistake • MUTUAL MISTAKE Lenawee case: property with sceptic tank problems. . the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in Section § 154 o (3) Under R §§ 153(1)(a) & (b). the unilateral mistake is about something that is a basic assumption of the contract AND must have a material effect on the performances R § 153 (1) Where a mistake of ONE party at the time a contract was made as to a BASIC ASSUMPTION on which he made the contract has a MATERIAL EFFECT on the agreed exchange of performance that is adverse to him. the party seeking to avoid the obligation can NOT be a party who has assumed the risk. which both purchaser and seller thought was income-producing.o party unless he bears the risk of the mistake under the rule stated in Restatement § 154 (3) Under R § 154. such as… (1) Where the risk is allocated by the agreement itself (2) When a person is aware that they have limited knowledge and act regardless (3) The risk gets allocated by the court by deciding who was in the best position to avoid a mistake or ensure against it The DISTINCTION Between Unilateral and Mutual Mistakes o Under unilateral mistake. a party who wants to show a unilateral mistake has to show: The result was unconscionable OR • (a) the effect of the mistake is such that enforcement of the contract would be unconscionable (b) That the other party had reason to know of the mistake or his fault caused the mistake o (4) Under R § 154. such as… (1) Where the risk is allocated by the agreement itself (2) When a person is aware that he has limited knowledge and acts regardless (3) The risk gets allocated by the court by deciding who was in the best position to avoid a mistake or ensure against it • Unilateral Mistake (R § 153) o (1) ONE party is mistaken o (2) Under R § 153.
walker). fertile Sherwood v. ← More modern tests. Modern Test: (applied by Lenawee) Restatement §151 and following. This by itself isn’t enough. Ciaglo’s mistake has to do with a wrong assessment of its costs. . it can be rescinded. ← Traditional test: If the substance of the whole consideration is affected.) ← In the case. ← we’re looking for a situation where one or both parties have a belief that’s not in accordance with the facts of the world at the time of contract. Because that would mean that the mutual assent wasn’t really assent. ← look for an “as-is” clause. more stringent (ex Illinois): • Mistake relates to the material aspect of the contract • Mistake occurred notwithstanding exercise of reasonable care by the party seeking rescission. then the contract is voidable UNLESS the party seeking rescission bears the risk of the mistake. Now. ← The next thing you need is to find that this is a situation where that kind of mistake could be grounds for rescission. UNILATERAL MISTAKE ← relevant case: Wil-Freds (Wil-Fred’s mistake was reliance on Ciaglo’s bid. (See the cow case…barren v. Start with the definitional provision: ← 1. since it goes to a mistake over the very thing they were bargaining over. ← “unconscionable” seems to mean merely severe enough to cause substantial loss. ← if you have these. Relief on grouds of unilateral mistake required that the mistake be palpable: so obvious that the other party in the circumstances either knew or should have known that mistake had been made. Look at traditional. you look at §154: We’re wondering whether the party seeking rescission bears the risk of mistake.← The first thing you have to find is that there exists the right kind of mistake. and modern approaches. • Of such great consequence that enforcement is unconscionable • The other party can be placed in status quo ← ← Restatement: §153 of the restatement permits avoidance of a contract for “mistake of one party” if either a) the mistake be such that the enforcement of the contract would be unconscionable or b) that the other party have reason to know of or be responsible for causing the mistake. Mistake (151) • of both parties • at the time the contract is made • as to a basic assumption on which the contract was made • a material effect on the agreed exchanges. 2.
that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made (2) Supervening death or disability of a person necessary for performance • BUT. if someone else could easily step in. his death or such incapacity as makes performance impracticable is an event the nonoccurrence of which was a basic assumption on which the contract was made (3) The destruction. then impossibility would not be a good defense • R § 262: If the existence of a particular person is necessary for the performance of a duty. IMPRACTICABILITY AND FRUSTRATION • Justifications: Impracticability & Frustration Outline o Was performance impracticable? (R § 261 / Transatlantic / Karl Wendt) (1) If there has been an unexpected and important event (“basic assumption”) (2) That the event is not the party’s fault (3) That the risk of the event has not been allocated to her by the contract or by the circumstances and (4) That the event makes performance substantially more difficult or expensive (“impracticable) o Has the contract been frustrated? (R § 265 / Karl Wendt / Mel Frank) (1) If there has been an unexpected and important event (“basic assumption”) (2) That the event is not the party’s fault (3) That the risk of the event has not been allocated to her by the contract or by the circumstances and (4) The event has almost completely destroyed the value of performance • That is. deterioration or failure to come into existence of a thing necessary for performance • . that the “principal purpose” is substantially frustrated Impossibility (VERY hard to establish this defense) o Must show: (1) Supervening legislation prohibiting the activity in the contract • R § 264: If the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order.CHANGED CIRCUMSTANCES: IMPOSSIBILITY.
unless the language or the circumstances indicate the contrary Frustration of Purpose o Applies to a situation in which circumstances arise that destroy the value of the other person’s performance Ex: Renting a room to overlook a coronation ceremony • Defendant was able to get out of the contract when the ceremony was cancelled because the purpose of the contract had been frustrated / had no reason to be there anymore o Party asserting frustration of purpose defense needs to show: An unexpected or important event The event is NOT his fault The risk has NOT been allocated to him The event has to almost completely devalue or destroy the performance o R § 265: Where. unless the language or the circumstances indicate the contrary • . its failure to come into existence.• • Ex: A music hall burns down o Therefore. a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made. the nonoccurrence of which was a basic assumption on which the contract was made. his remaining duties to render a performance are discharged. a party’s performance is made impracticable without his fault by the occurrence of an event. but it no longer makes sense to enforce performance Like a qualified impossibility defense The impracticability defense has to relate to a basic assumption of the contract o Party asserting impracticability defense needs to show: An unexpected or important event The event is NOT his fault The risk was NOT allocated to him The event makes performance substantially more expensive or difficult o R § 261: Where. a contract for performance at that music hall is impossible because the venue no longer exists R § 263: If the existence of a specific thing is necessary for the performance of a duty. after a contract is made. his duty to render that performance is discharged. after a contract is made. or such deterioration as makes performance impracticable is an event the non-occurrence of which was a basic assumption on which the contract was made • Impracticability o Applies to a situation in which performance is NOT impossible. destruction.
• Contract liability is STRICT liability o The obligor is therefore liable in damages for the breach of a contract. even if he or she is without fault and even if circumstances have made the contract more burdensome or less desirable than anticipated A court may grant relief where extraordinary circumstances may make performance so vitally different from what was reasonably to be expected as to alter the essential nature of the performance Impossibility. Impracticability and Frustration Diagram o (1) Is there an unexpected event? (basic assumption) NO claim goes away YES (2) Was it the fault of one of the parties? • YES claim goes away • NO (3) Is the risk allocated to the party complaining? o YES claim goes away o NO (4)(a) Substantially more expensive? • NO claim goes away • YES Impossibility / Impracticability o NOI (4)(b) Substantially destroy performance? YES Frustration of purpose • .
← Owner of a music hall rents out the hall. Supervening contingency: performance was possible at the time of contracting. doctrine of frustration of purpose is unavailable ← ← Impracticability ← When circumstances change so that it’s much more difficult. performance was excused. . and objective impossibility occurs when the performance under the contract becomes literally impossible because of circumstances beyond the control of the parties. but afterward a contingency occurs and renders performance impossible. .The occurrence of the contingency cannot be known to the parties at the time of contracting. The owner was excused from performance of the contract. (Increased cost alone is insufficient) .Performance has to objectively be impossible. i. When that was no longer a possibility. even if the performance is possible. and both parties recognized that. So.And the increase in the cost of performance would be far beyond what either party anticipated. ← Much narrower set of circumstances applicable here. Existing contingency: contingency existed at time of contracting but was unknown to both parties Exceptions: When parties have allocated the risk of contingency. Rule: . the principal purpose of the contract was to view the coronation. ← Modern test: party’s obligations are discharged when 3 conditions are met: (a) Party’s principal purpose in entering the contract is frustrated (frustration of incidental or non-material purposes do not qualify) (b) There is a substantial frustration (partial is insufficient) (c) Non-occurrence of the event precipitating the frustration was a basic assumption of the contract. or ii. Caldwell. much more burdensome. Note: where the parties contractually allocate the risk of the non-occurrence of the event. it burns down. ← Krell case: D agrees to let the defendant use a room overlooking the coronation of King Edward.The impracticability of the performance was caused by some unforeseen contingency. The following elements are required to show Impracticability: . ← Frustration of purpose ← Next step: recognition that in some situations.Impossibility ← One of the first cases that recognized impossibility as a changing circumstance excusing the contract is Tayler v.The risk was neither assumed nor allocated by the parties . If performance only temporarily impossible. but before the performance. doing so has no point anymore. so what’s the point. Doctrine of impossibility excuses both parties from their obligations under a contract if the performance has been rendered impossible by events occurring after the contract was formed. But the coronation was cancelled.
This test applies even to contracts that have consideration. Cannot be deemed consideration because there is already an obligation to perform. A promisor cannot provide consideration where that consideration is a duty the promisor is already obligated to perform.both parties agree to a performance that is different from the one required by the original contract. . Common law rule: Preexisting Duty Rule (Alaska Packers v. but also that there is another factor. Intl. After the fishing season. the non-occurrence of which was a basic assumption on which that contract was made. The fishermen refuse to work. beyond the party’s control. was an unanticipated market shift. and . ← ← MODIFICATION • Modification Outline o If under common law. and failure to do so renders them unenforceable. not only of nonprofitability. Harvester (farming equipment market unexpectedly tanked) ← Important: What was at the root of the sale. they were paid only the original 50$. Modification under the UCC Modifications must meet good faith test. ← The stability of the market was a basic assumption.Mutual modification: a promise to increase compensation under an existing contract is enforceable as a mutual modification of the contract if: . but party claiming duress MUST have protested o Is there a NOM? Modification of a valid contract is very burdensome. is there an exceptional reason permitting modification? Under R § 89. This is known as preexisting duty.Unforeseen Circumstances: Where promise of increased compensation is given in exchange for a performance. since they want an increase of 100$.) A promise to increase compensation under an existing contract would be an unenforceable modification to an existing contract because there is no consideration offered for the modification. requires consideration to be binding UNLESS • (1) It is fair and equitable in light of unexpected events or • (2) It is relied upon o If under the UCC. then the preexisting duty rule does not apply. Exceptions to the Rule . and that performance is rendered substantially more burdensome than reasonably anticipated by the parties when they entered the contract. This is approved. . Domenico: Original agreement: fishermen get 50$ +2 cents for every red salmon they catch. is there an exceptional reason against modification? No consideration required. Someone has to make the argument. That there was the occurrence of an event.Relevant Case: Karl Wendt v. but needs good faith • Must be sought for a valid commercial reason and not by means of threatened breach Duress is a defense under both UCC and common law.the difference in performance is not a mere pretense of a newly formed bargain. but the person approving was not authorized to give them that increase.
when the contract is in flux. (4) Forfeiture: only time Substantial Performance excuses Express Condition nonperformance (a) Denial of compensation resulting when obligee loses right to agreed exchange after substantially relying. 2nd conceptualization . you have to show reliance. But. and there is a modification at some point. b) § 235(2). before performance under the contract becomes due.g. unless its nonoccurrence is excused. any nonperformance is a breach. So. promise to buy and promise to get written confirmation). no consideration for modification is necessary. Promissory condition (e. and applies the same themes as contract proper. Considering materiality voids parties’ clear intent. i) Pure condition (e. Effect of Nonperformance as Breach When performance of duty under a contract is due. Effects of the Non-Occurrence of a Condition (1) Performance of a duty subject to a condition cannot become due unless the condition occurs or its non-occurrence is excused. not certain to occur. promise to purchase if find financing – haven’t promised to get financing) vs. 3 conceptualizations: 1st conceptualization . that party takes certain actions that makes it difficult for the other party to satisfy the conditions. the court views the modification as a mini-contract. Condition Defined: A condition is an event.g. you don’t have to show that it’s a nonmaterial part of the deal.Even when parties agree to a modification. The way courts decide to regulate that modification is through such concepts as good faith 3rd conceptualization: concept of good faith . (2) (2) Unless it has been excused. It prevents a person who is worried about a duty becoming due and not being able to perform that duty. the non-occurrence of a condition discharges the duty when the condition can no longer occur. If promissory condition fails. as long as it was made in good faith. Excuse of a Condition to Avoid Forfeiture . to allocate/manage risk. c) § 225. as by preparation/performance on expectation of that exchange (b) § 229. a) § 224. Duress and Mid-Term Modification A party who agrees to a contractual modification in commercially extortionate circumstances may also be able to raise the defense of duress. CONDITIONS 0) Express Conditions The use of express conditions are ways of managing the risk of nonperformance. which must occur. absolves other party from performance of subsequent duty and failing party has also breached (1) Substantial Performance (Materiality of non-occurrence) doesn’t excuse Express Condition nonperformance. (3) Estoppel: Compared to waiver. Strict performance is required for an express condition conflicts w/ strict performance protecting party whose taken precaution of making its duty expressly conditional.in the sale of items.A bargained-for modification is unenforceable under the UCC if the appearance of the mutual bargain is merely a pretext to hide a bad faith change of terms. (3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the condition occur ii) Excused Nonperformance (1) Prevention: (ex: giving wrong address to send confirmation) has to do with a situation where the party who has the obligation that is conditioned. (2) Waiver: only for non-material part of deal.
the desire to be gratified. (c) To satisfy Constructive Condition. Express Condition’s validity is based on parties manifested intent. extent behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing (ii) Cardozo Test: “weigh the purpose to be served. Substantial Performance is required. the excuse for deviation from the letter. How an Event May Be Made a Condition Note: A promise by itself is not an express condition. then other party’s performance is still due (c) It’s still a breach however (Substantial Performance not perfect performance) occurred b/c constructive condition a promissory condition. where literal compliance required. So. (d) How do you measure damages? Expectation: Cost to complete. it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time. extent injured party can be adequately compensated for the part of that benefit of which he will be deprived c. extent party failing to perform or to offer to perform will suffer forfeiture d. or that if the parties had addressed the issue. so D has action for damages. DISPROPORTIONATE: Extent of the obligee’s forfeiture vs. A condition has to lead to some obligation. §237. taking account of all the circumstances including any reasonable assurances e. if willfulness not to fully comply. they reasonably would have intended it to be part of the contract. the question is whether or not there has been a material failure… e) What constitutes substantial performance? Is there substantial performance here? (see §237) Restatement §241: specifies what constitutes material. i) Either by the agreement of the parties or by a term supplied by the court (1) Express Condition: agreed to and imposed by parties – has to be literally and completely performed. (2) Constructive Condition of Exchange (implied in law) (a) P’s performance is implied condition of D’s performance (b) Courts impose constructive conditions when they conclude that the condition should exist as a matter of policy. a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange 1. so same sanctity as promise itself. EFFECT ON OTHER PARTY’S DUTIES OF A FAILURE TO RENDER PERFORMANCE: Except as stated in §240. b. SO. Unlike Express Conditions. (b) If there is Substantial Performance of constructive condition. Difference in Value . importance to obligor of risk from which he sought to be protected and degree that protection is lost if nonoccurrence of the condition is excused to the extent required to prevent forfeiture d) § 226. likelihood that the party failing to perform or to offer to perform will cure his failure. there cannot be substantial performance (bad faith = voids substantial performance). Gives significant factors: (i) 241: What is Material Failure: In determining whether nonperformance is material: a. the cruelty of enforced adherence” … willful transgression voids Substantial Performance What Cardozo does is make the willfulness a prevention to substantial performance. extent injured party will be deprived of the benefit which he reasonably expected.(i) To the extent that the non-occurrence of a condition would cause disproportionate forfeiture.
or. nonbreaching party. f) §242 Totality – in determining time after which party’s uncured Material Failure to render or offer performance discharges other party’s remaining duties to perform under 237 & 238. Estoppel iv.Total Breach v. that means the other. is not released from its obligations. indicate that performance or an offer to perform by that day is important. However. including the language of the agreement. Defining the issue: question of does the breach by one party justify nonperformance by the other? 2. in which “the willful transgressor gets nothing. you apply: under the facts. Forfeiture (229) ii. Partial Breach: In a total breach situation. ANSWER STRUCTURE 1. and make reference to all the elements) The difference is that the presence or absence of good faith is just one element among others for the restatement. (1) Extent reasonably appears to the injured party that delay may prevent or hinder him in making reasonable substitute arrangements. It’s about the basic structure of the exchange. i. if it’s a partial breach. It is possible that you could have an express condition that expresses this particular question. What substantial performance means is that the constructive condition was satisfied. Prevention 3. it discharges the aggrieved party of any obligation. Once you recognize the rule. If you have such an express condition: a. If we do not have an express condition that addresses the issue? a. as opposed to the Cardozo test. Even if you don’t have literal compliance. What does it take to fulfill an express condition? Literal compliance is necessary. 3. (2) Extent agreement provides for performance without delay. even though the . 4. What happens is that the court imposes the appropriate constructive condition of exchange. It needs to lead to something else happening. 2. substantial performance means there has still been a breach of a promise. By definition. As a matter of law. 2 (b). no uncured material failure. What does it take to satisfy this constructive condition? 1. Instead they can suspend performance and wait a reasonable time. but Material Failure to perform or to offer to perform on a stated day does not of itself discharge the other party’s remaining duties unless the circumstances. what does that mean? Go to the original issue of does breach by one party justify nonperformance by the other.” c. in addition to 241. the deal cannot be treated as over. Substantial performance is insufficient for an express condition. was there substantial performance (no uncured material failure)? See Cardozo test or restatement (start with §241. the answer is substantial performance. It not only has to be written out. in the language of the restatement. b. What has happened historically is that courts have answered the question by way of a metaphor of a condition. What makes a condition express? It describes an event which must occur before the event becomes due. but it also needs to be a condition. Partial breaches can become total breach. has the non-occurrence of the express condition been excused? i. If the constructive condition is satisfied. Waiver iii. If there was substantial performance. b.
or (b) Result of special circumstances. How much would it have cost vs. 3) focus on foreseeability of breaching party more than . not when breach occurs. o You give the aggrieved party to get done what wasn’t done (that’s called cost to complete). not MANNER. What did I do after breach that reduced loss? 2) Parties’ expectations are what dictate damages – full compensation for loss of bargain. o However. beyond loss in value. or otherwise if it concludes that in the circumstances justice so requires in avoiding disproportionate compensation. by allowing recovery only for loss incurred in reliance. It’s not about the objective value P received but what was bargained for. 2) TYPE. If the cost of getting it done is unreasonable. and whether there has been bad faith. c) Cost Avoided: Savings injured party gets by not incurring further expenditures of performance by terminating K. • • Reliance Restitution DAMAGES EXPECTATION DAMAGES 1) Loss in Value + Other Loss – Cost Avoided – Loss Avoided a) Loss in Value: Value to injured party of failed performance vs. the aggrieved party has a right to be put in the position where they would have been. limitations such as unforeseeability. i) Incidental damages: additional costs and expenses incurred by the victim of a breach in attempting to deal with it and in taking action to seek a substitute transaction or to curtail losses. UNFORESEEABILITY AND RELATED LIMITATIONS ON DAMAGES (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. damages in the difference in the value of what was bargained for versus the value of what was received is awarded to the damaged party. What that breach means is that the aggrieved party has an action for damages.← ← ← constructive condition has been met. ii) Consequential damages: Losses suffered by the victim of a breach going beyond the mere loss in value of the promised performance (direct damages). 4. b) Other Losses: Losses breach caused. value of what actually was received. The rule in deciding between both theories is whether the costs would be too high. How do you measure the damages here? • Expectation damages: Theory is that when someone breaches a contract. and resulting from the impact of the breach on other transactions or endeavors dependent on the contract. sometimes the court uses an alternative way of measuring expectation damages: difference in value. losses flowing from breach proven to a reasonable certainty and within parties’ contemplation when K made. beyond the ordinary course of events. Baxendale a) §351. (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) ordinary course of events. had there not been a breach. of loss must be foreseeable. 3) Limitations (to other loss) By Hadley v. Most important thing is that the loss has to be in contemplation of both parties. that the party in breach had reason to know. ii) 351 Foreseeability: 1) w/in contemplation at time of contracting. how much it did cost d) Loss Avoided: Value of the resources injured party salvages and reallocates by terminating K – resources otherwise would have been devoted to performance of K.
not just necessary/inevitable … but also doesn’t extend to remote losses b) § 348. (3) If a breach is of a promise conditioned on a fortuitous event and it is uncertain whether the event would have occurred had there been no breach. or (b) 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. Alternatives to Loss in Value of Performance (1) If a breach delays the use of property and the loss in value to the injured party is not proven with reasonable certainty. qualificationexpectation damages only recoverable as far as they were foreseen by both parties (Hadley Rule) ← Florafax (reasonable certainty) ← ← Certain types of damages may not be recoverable ← Damages for Emotional Distress (Erlich v. Menezes) Generally. moneys spent in part performance or in preparation for performing the contract are recoverable BUT.both parties. ← There is an obligation to reasonably mitigate costs. there is an obligation to reasonably avoid losses. no inclusion of lost profits here! o BUT. (2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty. he may recover damages based on (a) the diminution in the market price of the property caused by the breach. immediate damages 2nd ruleOther loss: recoverable only if it was under contemplation of both parties at the time the contract was made. 4) loss is “probable” result of breach. (Luten Bridge case) ← Also. courts will not allow punitive damages for breach of contract ← • RELIANCE DAMAGES Reliance Damages ( R § 349) o An alternative to expectation damages If anticipated profits / expectation damages are too speculative to be determined w/ reasonable certainty. he may recover damages based on the rental value of the property or on interest on the value of the property. reliance damages can be limited if it can be shown that full performance would have resulted in a loss It is the responsibility of the BREACHING party to show that performance of the contract would have resulted in a net loss o Restatement § 349: Damages Based on Reliance Interest . the injured party may recover damages based on the value of the conditional right at the time of breach Hadley v. Baxendale Rule the court comes up with: 1st ruleDirect. natural. (Handicapped Childrens educ. Board) ← ← However.
but the court limited P’s recover to out-of-pocket expenses / P appealed o Issue: What is the right measure of damages in promissory estoppel cases? • . a corporate promotional venture in which an entertainer would live in a mobile perch to establish the world record for flagpole sitting. a party can recover damages based upon his reliance interest on the contract. Hightower Productions (Reliance Damages as Fallback when Expect. including expenditures made in preparation for performance or in performance. LESS any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed • Wartzman v. Damag. Toyota Motor Sales.000.A. D told P that it was structured incorrectly and needed to hire a securities attorney for $15. but refused to pay for it / P’s stockholders decided to discontinue project b/c of added costs / P sued D for failure to create a corporation authorized to issue stock o Issue: Where a breach has prevented an anticipated gain and proof of loss is difficult to ascertain. As an alternative to the measure of damages stated in § 347. o Facts: P was negotiating w/ D for a Lexus dealership and was told that a letter of intent had been formally approved by Lexis management / in reliance on that statement. less any loss that can be proven that the injured party would have suffered if the contract were performed D couldn’t meet the burden of showing that performance of the contract would have resulted in a net loss b/c the project could only have worked if stock had been sold to raise money P was not required to mitigate by hiring securities attorney b/c a duty to mitigate only requires reasonable efforts. the injured party has a right to damages based on his RELIANCE interest. hired D. and requiring someone to spend a lot of money when they have none creates undue risk and burden • Minority Rule Equal Opportunity Doctrine of mitigation does not apply when both parties could have mitigated Walser v. U. P sued D for breach of contract under promissory estoppel. to incorporate it so they could sell stock to raise money for venture / later. Inc (Reliance Damages under a Promissory Estoppel Claim). a law firm.S. P’s father agreed to purchase property for the proposed Lexus dealership / when informed that Lexus would NOT be issuing the letter of intent to him. Uncertain) o Facts: P. can a party recover damages based on his reliance on the contract? o Holding: Where a breach has prevented an anticipated gain and proof of loss is difficult to ascertain.
then the parties should have the benefit of the bargain (2) Approach #2: Always limit the party to RELIANCE damages • Promissory is a separate basis for recovery than contract theory / should be limited • Expectation damages might undercompensate b/c lost opportunity hard to show (3) Approach #3: Its in the discretion of the COURT to decide whether to award reliance damages or expectation damages or a mix of each in promissory estoppel cases • Under R § 90. then the non-breaching party can seek restitution damages. thereafter the COURT is given discretion of which is the appropriate measurement of damages Here. the district court did NOT abuse its discretion in limiting the award of damages to out-of-pocket expenses b/c negotiations were still in preliminary stages / P relied on promise for short period of time / promise on which they relied was not a guarantee Restitution ← • Unjust enrichment at the expense of another…. or something less. P gets to decide whether to seek reliance or expectation damages. this approach is BEST / court uses this approach Holding: In determining damages on a promissory estoppel claim for breach. whether to charge full contract damages.o (1) Approach #1: Always allow the party to recover EXPECTATION damages • An agreement is an agreement! • If reliance is a substitute for consideration. is a matter of discretion delegated to district courts Under the Restatements. even if those damages would exceed expectation damages According to R § 371. Restitution Damages o If the non-reaching party has conferred a benefit on the breaching party. reliance damages can be measured by: • (1) Market Value (majority view / used in US Coastal) o The standard of measuring the reasonable value of 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 • (2) The extent to which the other party has been benefited o Ex: Increase in value of other party’s property • (3) The contract price o Use the contract price as a way to get at the value of the party’s services .
Non-Occurrence of Condition or Disclaimer by Beneficiary • A party whose duty of performance does not arise or is discharged as a result of impracticability of performance. frustration of purpose.e. mistake. statute of frauds. etc. impracticability. undue influence.) (but NOT intentional nonperformance or intentional variance) R § 375: Restitution When Contract is Within Statute of Frauds • A party who would otherwise have a claim in restitution under a contract is not barred from restitution for the reason that the contract is unenforceable by him because of the Statute of Frauds unless the Statute provides otherwise or its purpose would be frustrated by allowing restitution R § 376: Restitution When Contract is Voidable • A party who has avoided a contract on the ground of lack of capacity. we CAN protect the expectation interest and eliminate the court’s having to figure out these nasty restitution damages The election to seek restitution can ONLY be made when there is a total breach or a repudiation of the contract by the other party • No recourse to restitution damages when there is a PARTIAL breach by the other party Restitution damages can be recovered where a contract is unenforceable or voidable based on a contract defense (i. duress. the injured party has NO right to restitution damages / only expectation damages • Rationale In this situation.o o Often leads to a smaller amount / pro-rata contract price reduces damages rewards Limitations on Restitution Damages R § 373(2)’s “FULL PERFORMANCE” • R § 373(2) The injured party has NO right to restitution if he has performed ALL of his duties under the contract and NO performance by the other party remains due other than payment of a definite sum of money for that performance • If the only thing remaining under the contract was the paying of this money . Frustration. misrepresentation. or abuse of a fiduciary relation is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance R § 377: Restitution in Case of Impracticability. non-occurrence of a condition or disclaimer by a beneficiary is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance o .
expectation damages do not make sense for them. 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 Lancellotti v. the party in breach IS entitled to get back get back benefits it has conferred through party performance / may be entitled to restitution to prevent forfeiture The purpose of contract law is NOT to punish and this rule prevents a windfall by the non-breaching party • .000 / problems arose regarding construction and P became disinterested in operated the business. They would have lost money had the contract been fully performed. Thomas (Breaching Party Can Recover in Restitution Damages / R § 374(1)) o Facts: P contracted to buy D’s business. market value) as the measure of restitution damages under R § 371 • Restatement § 374: Restitution in Favor of Party in Breach (Used in Lancelloti) o (1) If a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach.can he recover for the value of labor and equipment already supplied? Holding: A subcontractor who justifiably ceases work under a contract can recover the value of labor and equipment already furnished pursuant to the contract irrespective of whether he would have been entitled to recover in a suit on the contract The non-breaching party can in fact recover the reasonable value of its services. . Damage / R § 371) The problem is that this was actually a losing contract for Coastal. i.S. Inc. Coastal Steel Erectors.• U. So. Algernon Blair. eventually abandoning the business / P sued for a return of the $25.e.000 / D argued that breaching P was NOT entitled to restitution o Issue: May a party breaching a contract be entitled to restitution to prevent forfeiture? o Holding: Under R § 374. labor and equipment furnished Issue: When a subcontractor justifiably ceases work b/c of the general contractors breach. ex rel.e. even if the value of those services exceed what expectation damages would have rewarded if full performance had been rendered Here. v. paying $25. Inc. the court followed the MAJORITY rule (i. o o o Facts: D was acting as general contractor in constructing a naval base and subcontracted certain work to P / P stopped performance 28% through because of a material breach by D / another subcontractor was hired to finish the job / P brought an action to recover for value of work rendered. (Market Value Restit.
Move toward discarding the distinction between willful. an equitable remedy. There are still concerns: ← • Principled concern: we shouldn’t force people to do something they don’t want to do (especially in service contracts where the services are unique) • Practical concerns: o Drafting an order specific enough that the parties know exactly what to do o Difficulty of supervising • Equitable concerns: o Doctrine of clean hands: the person seeking equity cannot be a wrongdoer in any sense. should also worry about the nonbreaching party having difficulty evidencing damages he suffered • Can a breaching party get restitutionary damages? • The traditional approach: nothing for the breaching party • 1st restatement: Allows breaching party restitution as long as the breach was not willful 2nd restatement: Breaching party still has an action for unjust enrichment. and recovery is possible. will NOT be ordered unless expectation damages are unavailable or clearly inadequate (R § 359(1)) Specific performance or an injunction will NOT be ordered if damages would be adequate to protect the expectation interest of the injured party o To get specific performance. and not willful breaches. Courts will generally still not order performance. o Concern about third parties: we don’t want to hurt a stranger to the transaction • Specific Performance o Specific performance. Does not care whether or not breach was willful. and allowing the breaching party to recover restitutionary damages Specific Performance ← Let’s say the remedy is inadequate.• BUT. a P must show: (1) Damages are going to be INADEQUATE because it is difficult to evidence them w/ reasonable certainty OR the subject of the contract is UNIQUE and P can NOT get an adequate substitute • R § 359: Effect of Adequacy of Damages o (2) The adequacy of the damage remedy for failure to render one part of the performance due does not preclude specific performance or injunction as to the contract as a whole .
or causes too much hardship to D or the interest of third parties • R § 364: Effect of Unfairness o (1) Specific performance or an injunction will be refused if such relief would be unfair because (a) the contract was induced by mistake or by unfair practices (b) the relief would cause unreasonable hardship or loss to the party in breach or to third persons or o . inequitable. but such a remedy may be considered in exercising discretion under rule stated in § 357 • R § 360: Factors Affecting Adequacy of Damages o In determining whether the remedy in damages would be adequate. the following circumstances are significant: (a) the difficulty of proving damages with reasonable certainty. (3) Specific performance of an injunction will not be refused merely because there is a remedy for breach other than damages. even more certain than they have to be in a general contract • R § 362: Effect of Uncertainty of Terms o Specific performance or an injunction will NOT be granted unless the terms of the contract are sufficiently certain to provide a basis for an appropriate order (3) It will NOT be too hard to supervise the execution of specific performance • R § 366: Effect of Difficulty in Enforcement or Supervision o A promise will NOT be specifically enforced if the character and magnitude of the performance would impose on the court burdens in enforcement or supervision that are disproportionate to the advantages to be gained from enforcement and to the harm to be suffered from its denial (4) Specific performance will NOT be issued if to painful. (b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages. then it is a prime candidate for specific performance b/c hard to imagine a substitute performance is available (c) the likelihood that an award of damages could not be collected (2) The terms are CERTAIN. contracts involving specific land). and • If subject of the contract is unique (i.e.
Ammerman (Specific performance granted under R § 359.o (c) the exchange is grossly inadequate or the terms of the contract are otherwise unfair o (2) Specific performance or an injunction will be granted in spite of a term of the agreement if denial of such relief would be unfair because it would cause unreasonable hardship or loss to the party seeking relief or to third persons Specific performance after the breach of an employment contract is VERY difficult to get If the employee’s performance is NOT unique (i. 363. D agreed to accept P as a tenant on the rental and terms equal to that of the other stores in the center / later. 360. promoter of a proposed suburban shopping center. R § 367(2) says if the result is to compel performance and limits the person’s ability to find gainful employment to the same effect. a professor). it seems that specific performance is going to be denied because the employer can recover money damages and just can go out and get a new employee • R § 367: Contracts for Personal Service or Supervision o (1) A promise to render personal service will not be specifically enforced If the employees’ performance IS unique (i. D refused to accept P’s offer when Sears offered it better terms / P sued for specific performance o Issue: May an option contract involving further negotiations on details and construction of a building be specifically enforced? . there are other problems to deal with. v. a letter expressing its preference for the project over D’s competitor / in return.e. including: • Employee might be difficult to supervise • We don’t want to force people to do things against their will Employer MIGHT obtain a negative injunction that limits the breaching party’s options • This was the focus of the Wolf case • BUT. the courts will NOT issue / enforce a negative injunction o R § 367(2) A promise to render personal service exclusively for one employer will NOT be enforced by an injunction against serving another if its probable result will be to compel a performance involving personal relations the enforced continuance of which is undesirable or will be to leave the employee without other reasonable means of making a living This would causes someone to do directly what the law says we can’t do indirectly • City Stores Co. secured from P. portrait painter). a department store.e. & 364) o Facts: D.
) o Facts: D. seeking an injunction against D form beginning employment w/ CBS o Issue: Will an employment contract be specifically enforced. in order to enjoin the employee from competing • Although D breached the good-faith standard to negotiate in good faith when he negotiated w/ CBS prior to the effective period. (2) the terms of the contract were definite (since based off other stores’ terms). and the importance of specific performance to the P outweighs the difficulties of supervision Since (1) money damages would NOT compensate P for its loss of the right to participate in the shopping center. BUT saying it had to be kept upon until day following first refusal period / when P became aware of agreement. and a negative injunction saying you can NOT work for the competitor is allowed. D entered into negotiations w/ competitor CBS. such as disclosing trade secrets. tentatively agreeing to their offer of employment. the option will be specifically enforced • American Broadcasting Co. D did NOT expressly agree not to compete after contract termination. the employee has to EXPRESSLY agree not to compete OR engage in badfaith conduct. after its termination. a popular NY sportscaster.o Holding: An option involving further negotiations on details and construction of a building MAY be specifically enforced where damages would be inadequate or impracticable. and (4) the difficulties of supervision are minimal because the court can look to other leases the promoters have made for guidance. (3) there will be no undue hardship on D by granting specific performance besides making less money. sued. once the contract has terminated. which is unique special interest in land w/out substitute. v. through injunction? o Holding: Negative enforcement of an employment contract may ONLY be granted. to prevent injury from unfair competition or to enforce an EXPRESS and valid anti-competitive covenant During the contract term. BUT after the contract terminates. there is an implied covenant not to compete. not did he engage in bad-faith behavior such as theft of trade secrets or customer lists . but biased in employm. Wolf (R §367 Negative injunctions available. entered into an employment contract w/ P whereby he agreed to enter into good faith negotiations during 90 days preceding contract’s terminating regarding an extension period / he further agreed that for the first ½ of that period he would NOT negotiate w/ any other company / if negotiations did not prove fruitful. allowing them to match that offer (right of first refusal) Approximately 150 prior to contract’s termination. D was required to submit any offer accepted during 90 day period subsequent to contract’s termination to P.
-> Reasonable Forecast? / R § 356) o Facts: P and D entered into a commercial lease for a tract of municipallyowned property / agreement contained clause that if D cancelled lease. Are the stipulated damages a reasonable forecast of the actual harm caused by the breach? • Liquidated Damages o The parties are providing in the agreement what damages would be in the event of a breach Seems appealing. but historically. Township of Middletown (Liquidated Dam. Is the injury caused by the breach difficult to estimate at time of contract? ← 3. damages for breach by either party may be liquidated in the agreement 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 Also under R § 356(1). Did the parties intend to provide for damages or penalties? ← 2. it would pay P a prorate reimbursement for any improvement costs and damages of 25% of P’s average gross receipts for 1 • . v. a term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty • BUT.Agreed Remedies: Liquidated Damages and Penalty Causes ← Test: ← 1. it doesn’t address a liquidated damages clause that is too small may just be tough luck o Basic Inquiry: Does this operate as a penalty? Other Factors a Court Looks To: • (1) Uncertainty and difficulty in anticipating damages o Liquidated damages provision must be reasonable in light of ACTUAL or ANTICIPATED loss • (2) The parties’ intent o Did the parties intend the liquidated damages provision as a penalty or as a damages clause? • (3) The amount of reasonableness as a forecast of future harm flowing from the breach o Is the amount fixed a reasonable forecast of just compensation for the harm that is caused by the breach? Wasserman’s Inc. there is somewhat of a resistance to liquidated damages Modern courts also resist liquidated damages provisions o Under R § 356(1).
D forced new owners to vacate premises and P sued for breach under the terms of the lease. including the liquidated damages clause Issue: Is a provision in a termination clause providing for damages based on the lessee’s gross receipts an enforceable liquidated damages provision or an unenforceable penalty clause? Holding: Provisions for liquidated damages are enforceable only if “the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach” The Court also instructed the trial court to consider the reasonable of the damages clause in light of its opinion.o o year / when D canceled lease over 25 yrs later. including: • The reasonableness of the use of gross receipts as the measure of damages no matter when the cancellation occurs • The significance of the award of damages based on only one year’s average gross receipts. rather than some other basis • The lessee’s duty to mitigate damages • The reasoning of the parties • The fair market value and availability of replacement space .
• Historically traditional version: gift promise…you have detrimental reliance on a gift promise (expectation damages) • Assurances (like pop’s cones): promises made…there has been reliance (reliance damages) ← ← NOTE: you don’t necessarily have a single end point. . that’s being offered. No P. So. (some restitutions have use rules for example). You have a contract that has been breached: then you’re in the area of damages.Framework of analysis (end points) no K proper. in some situations. The BREACHING party could also get restitutionary damages. is the non-occurrence of a condition excused or not? (waiver. Note: there is no breach here. forfeiture etc…) There is a contract. You have a P. but it is voidable. What goes along with this is that once you void a contract. reliance damages are more appropriate). no Restitution Express condition that isn’t satisfied and whose nonoccurrence is not excused. you have to make sure what kind of restitution is applied.E case: The measure of damages will often depend on the kind of case for P. in some cases.. question first to ask is. The question here is that of a defense to a contract. (ex: where a losing contract was breached). (norm is expectation damages…however. Also.E. It’s just that the contract is voided. the aggrieved party could be allowed an action for restitution off the contract.E.
Don’t use stuff we haven’t covered. (examine whether each element is satisfied) (Hamer v. Classical contract doctrine says there can be revocation at any time before completion. P). It’s about what is the mode of acceptance specified by the offer. (Pennsy supply) Some courts apply one or the other.5 hour exam Stick to provisions of the restatement that we’ve talked about. Sidway) Bargain theory: P-or has to be seeking some performance or return-promise in exchange for a promise. Builders for the house and disagreement. there will be a bargain (Lonergan) Offer is revocable any time prior to acceptance.Review Session Office hours: Dec 13 @ 1:00 Dec 15 @ 1:00 3. directed to identifiable group. Because the parties went through the process of contracting. Eurice: how does a court go by determining mutual assent. Objective theory of contracts used. giving the offeree enough time to complete the act of acceptance. Sometimes. Acceptance: Consideration Benefit-Detriment test: P-or has to enjoy a benefit in relation to a promise. Btwn 3 and 6 questions Grounds of liability K proper Mutual Assent Offer: has to be specific. Coldwell). performance is done over a period of time. or both. or the promisee has to suffer a detriment in relation to the promise. You focus on the manifestations of intent. not the state of mind. and vice versa. it was found there was a contract. . modern contract doctrine sees some unfairness (Cook v. other party has reason to know that if they assent. However. and limits the offeror’s right to revoke the offer. Ray v. Miller) Offeror can specify how the offeree would go about accepting the offer: Return Promise (Bilateral Contract) Performance (Unilateral Contract) Think about distinction between both. Unilateral Contract: defining the performance requested (P v. (Normille v.
there was consideration. The court rejects that argument. ads don’t constitute an offer. But the mere recital of consideration is not sufficient. Cook v. Benefit-Detriment test. and the offeree starts out on performance. Mortgagor goes to doorstep. what are its terms? So. Even though the explicit terms of the deal didn’t deal with that. Offeror was not ready to be bound. Peterson v. separate questions: is there an offer? If yes. Pattberg: Defining the performance requested. the court applies section 45. if there is an offer. The court rejects the idea that you gauge consideration based on its adequacy. A. and the making of a counter-offer. It tested whether under the bargain theory. Batsakis v. Demotsis: Inflated price for Drachma. So. question is. Hamer v. Sidway: Uncle offers money to nephew. because A. What they really were deciding. he did not tender. and then substitute it for a new one? Classical contract doctrine says yes. Miller: Contract is changed. was seeking the performance of taking the agg-rite away in exchange for the promise. Coldwell Banker: Change in terms of a bonus agreement. that if an offeree changes the terms of the offer. . She wrote a note. Estate argues that it wasn’t a detriment to give up drinking and smoking. so he did not do the act of getting the money into the hands of the offeror. The court ruled that there was cause of action. Pennsy Supply v. You have to focus on the fact that the promisee gave something up. No requisite intent that you would need for an offer. Can the offeror reject an offer. doing so binds the offeror to a promise to hold the offer open for a reasonable time so that the offeree can complete the performance. offers money. Did the offeree do the act that was requested? Even though he was at the doorstep. They are an invitation to make an offer. that if you have a unilateral contract. In the meanwhile. it is the general outcome that has to be looked at. BUT. Classical contract doctrine says. agent had to show up at the banquet. property is sold before buyer has chance to accept. Mortgagee offers to give mortgageor a discount if pays in full by certain date. American Ash: Agg-rite for free given by American Ash. says Pennsy can’t sue. which suggested a 3000-dollar credit. Machado: Car dealership ad. Past consideration doesn’t count. here. it was specific to certain cars. in exchange for nephew giving up stuff till 21. However. Q should have been: does this ad constitute an offer? Generally. there was some bait and switch. Scolnick: “Act fast cause we expect to have a buyer in a week”…court holds this is not an offer. Nephew argues he suffered a detriment in order to get the money. Izadi v. sent back. because she had not fully completed acceptance.A. It was defective. You look simply at whether there was or was not consideration. and there was nothing for nephew to do in the future. what constitutes a detriment? For the estate. what are its terms? Normille v. To be eligible. but the court looked at the implied terms of the deal that would make it logical to take away the agg-rite. because there was no contract…it was a gift. Dougherty v. But if you read fine print.Lonergan v. Salt: (gift-promise situation) Aunt promises to give 3000 to her nephew upon death. it constitutes the rejection of the original offer.A.
Performs a function parallel to §45. but do something in reliance on the offer. Each element of p. should we give contractor some relief? P. a bilateral contract situation doesn’t make the offeree vulnerable. §87(2) generalizes this principle to apply to many similar compelling circumstances. contractor. They don’t yet promise. Newman: Child support. Court sets out elements of p. and take care of child till majority. Estoppel can be used. However. after giving bid. Think about distinction between B-D test and bargain theory. company is not bargaining to watch workers show up. . Greiner v. General classical contract rule would allow him to revoke. Subcontractor. The company didn’t get anything out of the fact that the workers showed up…saved the postage.Plowman v.estoppel. Kirksey. not willing to apply p. promise is not merely a promise to put name on birth certificate. developer/subcontractor. Pop’s Cones: resort negotiates with yoghurt place. This court was willing to use assurances that weren’t really formal promises as basis for consideration. but that was never paid. estoppel. So. However. However. Greiner v. Tries to revoke the offer to the contractor. Reliance on an offer. Kirksey v. realizes he made a mistake. but person that receives gift has to do something to get it. because the subcontractor wanted the contractor to rely. they don’t necessarily think they will be bound. But you need separate consideration for the option. says that the conduct was the equivalent to a promise. investors were sought. All they have to do is pick up checks.estoppel is searched/analyzed. Outcome: holds subcontractor to a promise to hold the offer open. court treats the offer as a promise. gift. P. the offeree was to pay 10 dollars. Promise P-or reasonably expects action or forebearance There is action or forebearance Justice cries out Historically original version: gift-promise (kirksey v. and the offeree has to promise. As consideration. When people negociate. there are some situations where we want to give some relief to the offeree. In general. Estoppel: research was done. promise to hold offer open for certain period of time. Greiner: Court finds there was consideration where the son travels and gives up stuff. Kmoch: Someone offers to sell land. Greiner) Baird: Owner-developer. Berryman v. Then they said they can’t afford the half pension. Estoppel Bilateral contract: someone makes an offer. Kmoch has to rely on the promise to hold the offer open. So. Wright v. However. Most courts would reject this argument. But the contractor is now in an awkward situation. Kirksey: Court didn’t find consideration. They lessen the standard for whether there was a promise. P. people do rely on promises or assurances. Indian refining: Laid off workers offered half their pensions.
they subsequently promise to compensate the other person for that benefit they received. Employee is injured. that in a situation where someone receives a material benefit and promises to compensate for the benefit received. Does that mean the promise should be enforceable? (Mills v. what kind of action or forebearance is proper? Court says that as long as there is reliance on a promise. What emerges is this separate theory of liability. that promise can be enforceable. but then goes back on it. Consideration? Perhaps…P. Father subsequently promises to compensate. McGowin: Employee diverts a block from hitting a person beneath. Statute of Frauds Is a writing required to enforce a contract? Not necessarily. after the person receives the benefit. the president doesn’t want to pay the pension. Then says: no compensation if the material benefit is rendered as a gift. Promissory Restitution: Material benefit Rule (§86). estoppel because Katz didn’t lose anything he was owed. Original version: (Pelo) Situation where someone is unjustly enriched at the expense of another. Is that promise enforceable? Material benefit rule (promissory restitution). Pelo argues he wasn’t enriched. RELIANCE on the promise is the focus of P. McGowin Mills v. Wyman) Material benefit rule: Webb v. Subsequent promise doesn’t matter because no consideration. Webb v. Persident wants him to resign. Pelo received benefits.Estoppel? D. Benefit Enrichment Unjust At the expense of another Pelo: Receives services at the hospital. Then. That would negate the subsequent promise. Certain categories of contract where the absence of a writing may provide a party with an affirmative defense against the enforcement of a contract. Person promises to compensate the good Samaritan by paying a pension. Danny Dare: Robbery of the company. employee gets hit in the head. in exchange for a pension. Wyman: Mills helps out defendant’s son. Statute of frauds is a threshold requirement that renders a contract unenforceable in the absence of a writing Is the contract covered? Cannot be performed within less than a year Contracts involving the conveyance of land Has the statute been satisfied? . Dare says there’s no case for p.E. that is enough for P. it’s unjust that he not pay. refuses to pay. §86: States the general rule. So. In a situation where one party has benefited at the expense of another.Katz v. Restitution Non-promissory Restitution.E.
2. You have to make sure there was a real promise etc… The way you analyze whether justice cries out is very thorough: you try to see whether or not the reliance is such that it corroborates the existence and the terms of a contract. Arden refuses to give him a pay increase. You can use P. Party v. If it is 2-year K. Complete ii. Is this the kind of writing that is subject to the Parol Evidence Rule? a. can you use Promissory Estoppel to circumvent the statute of frauds? Political worker is offered a job. it is covered. Question was what was the meaning of that clause? Interpretation of contract language: One consideration the court looks at is an inter-subjective element: what did one party understand or have reason to know or understand that the other party had a different interpretation of the term in question. we first have to see if it satisfies the statute. So. Rice: Let’s say you have an oral agreement. understandings. Crabtree v. El.Writing/writings sufficient to indicate a contract or an offer has been made. negociations. Rent escalation clause so that if the builder did not finish on time. Inter-subjective element. Adams: Terms of an agreement. Partial . and interpretation of ambiguous terms. he was retroactively responsible for rent. c. Claims that it’s a 2-year contract. Assuming there is a 2-year contract.E.. Arden. K to develop some property. Has to be integrated writing i. but using a ramped-up version of the statute of frauds. El. moves to Alaska to take it. Parol Evidence Rule Rule that governs the admissibility of evidence and works to protect the integrity of an integrated writing. you’re trying to make the reliance the element the statute of frauds serves. §139(2) lists the elements to consider in terms of whether justice cries out: Availability and adequacy of other remedies Definite and substantial character of the action or forbearance in relation to the remedy sought Extent to which action or forbearance corroborates evidence of the making and terms of the promise Reasonableness of the action or forbearance Extent to which action or forbearance was foreseeable by the promisor Joyner v. Alaska Dem. Arden: Crabtree is offered a job. Prior oral or written agreements. In less than 2 years. b. Problem is that the 2-year period term is on a memo pad not signed by El. Writing has to contain essential terms Writing has to be signed by the party against whom enforcement is sought. Is this the kind of evidence subject to the Parol Evidence Rule? a. Subsequent things are not governed by the Parol Evidence Rule. they refer to the same transaction. but then the party denies the agreement. It does that by exclusing extrinsic evidence from getting to the fact finder. 1. Contemporaneous oral agreements and understandings. You can combine writings as long as on their face.
like contextual evidence such as: Trade Usage Course of Dealing: what were the prior transactions between the 2 parties Course of performance: Look to conduct of the parties in the agreement itself. Nanakuli: explains the nature of this kind of evidence. But. duress…) Qualification: (Sherrodd) When you talk about fraud in the inducement. undue influence. Some courts require ambiguity on its face before admitting evidence to explain a writing. still a question. consider: Evidence can. If partial integration: Is this evidence admissible as a consistent additional term? (to supplement the writing) If evidence is still not admissible. Assume you have integration: cash it in Complete integration doesn’t allow anything in. Remaining question has to do with other types of evidence. what kind it is. Another possibility is that you can admit evidence to establish an invalidating cause (ex: Fraud.4-corners test: to determine whether or not a writing is integrated. The Nanakuli court specifically required a clause negating the trade usage. Under what circumstances can you admit evidence to explain a writing? Courts require some ambiguity. all you do is look at the writing itself on its face (Thompson v. . it applies. but when digging a bit deeper) (Taylor v. State Farm: court takes latent ambiguity approach). Assume the evidence cannot be admitted to explain the writing. suggesting that trade usage. if contextual approach. some courts are not so open to admitting evidence of fraud in the inducement if that evidence contradicts some clause of the writing. Other courts: as long as there is a latent ambiguity (not on the face of the writing. under certain circumstances. perhaps allow the parties to talk about it. might not even be subject to the parol evidence rule. mistake. because it reflects implicit understandings. merger clause is dispositive. If 4-corners approach. Merger clause. Is that kind of evidence subject to the parol evidence rule? Nanakuli takes a liberal approach. otherwise. Not to be confused with admitting evidence as a consistent additional term. for example. Libby) Contextual approach (Corbin): look at the writing but also consider testimony as to the context. and if so. be admitted to explain a writing.
Locke had a pay or play agreement. Then Lucy starts to sell stuff at a profit. Warner Bros. Minority Dodson v. If bad faith. as long as the minor gives back what they have left. Is the threat improper? (§176) 3. the Dodson court recognizes an exception . Wood sues Lucy and she says there was no consideration for that promise. Did the party seeking rescission have any reasonable alternative? 4. Duress Key here is finding a threat. Implied in Law: Locke v. Real issue arose because she had borrowed 30 grand.Implied terms Implied in fact: Wood v. It was this promise that was consideration for Lucy to give him exclusive rights. But WB had decided not to give her anything from the start. because they found that the bank acted in bad faith (which was sufficient exception). Use rule allows the merchant an offset of any liability recognizing any depreciation or other loss…. Lucy Wood seeks to enforce Lucy’s exclusivity agreement. they can get rescission of the contrat. 1. Union State Bank: Court thought it was clear that customer was mentally incapable of understanding the contract. Was it the threat that induced the assent? . He wrecked the car. however. and some kind of restitution. Here. Defenses Followed by rescission. that’s ok. The court did allow rescission. The court finds that there was an implied term of the contract where Wood would use his best efforts to sell Lucy’s products. Shrader: purchase of a car. Locke says WB violated the spirit of the contract: violation of the duty of good faith. In the minority context. Good faith obligation imposed by the court. As a general rule. Mental Incapacity §15 2 tests Cognitive test Volitional test General Rule: you can’t get rescission if you can’t return what you got. and she was trying to rescind the contract but was unable to return the 30 grand. there might be an exception Hauer v. and just give back the car. Threat 2. wants to rescind the contract.
and then Totem filed for damages. There was a State rule that says that a seller has a duty to disclose material facts which affect the value of the property when known to the seller and not readily observable to the buyer. (see §164) . They argue that the grounds for rescission is economic Duress. The question was about whether the release could be rescinded using a theory of pure misrepresentation. Jones: Failure to disclose as a grounds for misrepresentation. §§168. Alyeska: First-time transport of pipes by a company. Alyeska breaches the contract and makes it difficult for totem to do what they promised to do. She sues the dancing school. Is this the right kind of relationship between the parties? Dominance versus subservience. like an employment relationship. Usually. where someone exerts their will through persuasion. 2-step analysis: 1. Circumstances where failure to say something is like saying something inconsistent with the facts. Misrepresentation Syester: dancing widow who got a bunch of dancing lessons and was told she could become a professional dancer. But if it was an opinion. we went through all the restatement provisions: §164(1) Foundational provision of when misrepresentation makes a contract voidable. Totem v. but then they settled it. Totem seeks to rescind the settlement agreement. Problem was that Totem was desperate for funds. Some jurisdictions apply the Selmer factor: Important to take into consideration to what extent was the threatening party responsible for the other party’s dire financial situation. 2. Alyeska terminated the contract. §162: Distinction between fraudulent and material misrepresentation. Odirizzi: Teacher who was coerced into signing a resignation. Eventually. it is based on a relationship.Has there been Overpersuasion? see factors Unusual time or place Person is pressed for time Person is isolated No access to a lawyer. Undue Influence Not about a threat. Threat? Improper? …. advice. but about overpersuasion. 169 deal with the problems of relying on an opinion.5. There is a restatement’s version of that. and there was a release. Had to do with purchase and sale of real property. The buyer perhaps had noticed evidence of termite damage. Hill v. Difficulty in Syester was finding a contradictory assertion of fact that wasn’t merely an opinion. multiple persuaders. In considering that. Subsequently. but the seller didn’t say anything.
M. Also. but it was worthless. . Was that clause unconscionable? Apply 2-part analysis. Williams v. and then complete the analysis with 154.Was there meaningful choice? (many factors like bargaining differences. v. and see if there is tension between them and the situation. R. and fraud in the execution (tricking someone to get their assent/into signing a writing by misrepresenting the content of what they’re agreeing to) In Park 100. but neither party knew about the sewage problem. MISTAKE Idea here is that the parties were mistaken at the time of contract as to some fact in the world. Start with a gut check How does the clause compare in terms of the industry? (does everyone do this?) Is there a function of the clause in question? Will this function survive scrutiny? Ex: You can’t use a clause as a threat.H. Unconscionability 2-part analysis: .Park 100: distinction between 2 types of fraud: Fraud by inducement (when someone gets someone to assent based on a false statement). Purchase and sale of an apartment building. the Kardiczes were told they were signing a lease.: Contract for a surrogate mother. So they were never able to pay off anything until they paid off everything. Lenawee: Mutual mistake. We saw how this is looked at as a secure transaction.R. fundamental values are looked at. They thought it would be income-producing.Procedural unconscionability: has to do with the process by which the agreement was reached.Substantive unconscionability: Has to do with the cause itself. Consumers were making payments without actually being able to pay off anything as they were buying more stuff. Start with Restatement 152 or 153. small print…) . but they were actually signing a guarantee. Public Policy courts look at other statutes/laws that don’t exactly govern the situation. Walker: Consumers and furniture company…lease-to-own situation. A mistake as to the contents of the contract doesn’t count.
Impracticability Karl Wendt v. No rescission allowed. That includes the question of whether or not . and they want to rescind. that the parties didn’t bargain over. but treats his limited knowledge as sufficient. They can bear the risk of mistake when aware at the time of contract that he has limited knowledge with respect to the facts to which the mistake relates. in determining whether or not that’s a basis for rescission. Intl. you have to find it’s the kind of thing that is extreme. you decide whether or not the mistake is related to something at the essence of the consideration. Court applies the restatement’s version of mistake: §§152-154. Once you have some kind of mistake. Arg: contract became impracticable because the market had totally changed. the basic idea is that rather than worry about essence of consideration. the subcontractor was relying on poor info. Harvester. Harvester. Franchisee sues Intl. So. for Lenawee. and it wasn’t. an event the non-occurrence of which was a basic assumption of the contract. sells their business. Harvester claims impracticability. Tricky thing with that test is you can characterize the facts differently. Subcontractor put in a deflated bid because their subcontractor was misled by the general contractor’s specs. value. What the subcontractor was arguing is that it was relying on a bad bid. Critical question has to do with risk allocation. You need a mistake That relates to a basic assumption on which the contract is made Has a material effect on the agreed exchange. Will-Freds: Unilateral mistake. Walker: fertile cow. or merely related to the value of the thing. H. one way to characterize it is that one of the things at the essence of consideration is that the property be income-producing.Court starts with a traditional test: Sherwood v. MODIFICATION Under what circumstances is the modification of a contract enforceable? Alaska Packers: Some courts look at the modification as a mini-contract. : Intl. So. and will impose upon that situation all the requirements of a contract. and leaves this franchisee hanging. etc…. and Intl. Just one party is mistaken. Exception: if the adversely affected party bears the risk of mistake (see §154) A party can bear the risk of mistake by agreement. from a company it had done much successful business with before. Did the parties allocate the risk of something like this happening as part of the contract? In order to find rescission based on impracticability.
allows the modification if it’s fair and equitable in view of circumstances not anticipated by the parties when the contract was made. to make the event occur. then the duty doesn’t arise. Oppenheimer: express condition is that they deliver the written notification of the landlord’s consent to improvements to the sublessee as a condition. and then said they wouldn’t work. Applies a kind of promissory estoppel idea based on reliance. Event not certain to occur. J. These are the implications of a pure condition. However. which must occur before a duty becomes due.A Oppenheimer and J. but once the company agreed to pay them more for their services. In Oppenheimer. If the event doesn’t happen upon which the duty is conditioned. but there is also a breach. non-occurrence of conditions can be excused. the condition had to be literally complied with. Courts also look at whether other defenses apply to the modification. We are worried about good faith (§89(a) and (c)) a. not only will the duty to sublet not arise. However. because the workers were transported.A v. like duress. If this is a promissory condition that was not satisfied. Alaska Packers: there was no separate consideration. CBC: focused on a bunch of situations where the nonoccurrence of a condition is actually excused.there’s consideration. there was no separate consideration for that promise. So they look to see whether there’s separate consideration for the modification. Claimed their nets were defective.N. This is if it was breached. conditions are laid out that also involve a promise. Court didn’t believe them.N. c. even though they can’t satisfy the condition by substantial performance.allows modification to the extent that justice requires it in view of material change of position in reliance on the promise. in some situations. Courts look to see whether there’s separate consideration for that modification. EXPRESS CONDITIONS Go back to the definition. Forfeiture Waiver Estoppel Prevention .
Assume that there’s nothing in the contract that addresses this issue. . In determining whether or not there was substantial performance you need to look at §241. total breach §242 (Sackett v. Constructive conditions of exchange (Jacob and Youngs) Substantial performance is sufficient to satisfy a constructive condition of exchange. Material failure §241: lists factors. Spindler) . does that breach justify nonperformance of that condition by a party. refused to pay the last installment.the extent to which the injured party will be deprived of the benefit which he reasonably expected . taking account of all the circumstances including any reasonable assurances. don’t think about conditions. In a situation where someone breaches a contract.the extent to which the party failing to perform or to offer to perform will suffer forfeiture .Now. and therefore.the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived . the plaintiff complained that he got the wrong pipe. The court imposes a constructive condition of exchange. In Jacob and Youngs.the likelihood that the party failing to perform or to offer to perform will cure his failure. Cardozo test: mirrors §241 test.Extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing. . Partial v. but the willfulness of the breacher is dispositive.