Contracts
Types of Damages
expectation damages consequential damages general damages reliance damages punitive damages
No consideration if:
i. promise amounts to a gift ii. promise is illusory iii. promise is for past consideration (because there is no bargaining tied to the exchange) iv. Promisor had a pre-existing duty · Neither party or one party fails to give/exchange · One party is unaware of promise · Intent but no exchange
Weintraub v. Krobatsch
"cockroach case" misrepresentation will allow frauded party to rescind; Some courts have required a party to disclose, the duty arises when the when one party enjoys superior knowledge or a superior position. If either party to a contract of sale conceals or suppresses a material fact which he is in good faith bound to disclose then his silence is fraudulent. to impose on parties to the transaction a duty to speak whenever justice, equity, and fair dealing demand it. This statement is made only with reference to instances where the party to be charged is an actor in the transaction. This duty to speak does not result from an implied representation by silence, but exists because a refusal to speak constitutes unfair conduct.
Reliance Damages limitations
("[R]eliance damages are subject to two pertinent limitations—the damages must have been both proximately caused by the breach, and foreseeable.")
Capacity (age)
("infant" or minor was anyone under the age of the "age of majority" is 18. Cannot enter into a contract under 18. )
Stokes v Dish Network
(1) The duty of good faith and fair dealing applies when one party has discretionary authority to determine certain terms of the contract, such as quantity, price, or time. The covenant may be relied upon only when the manner of performance under a specific contract term allows for discretion on the part of either party. However, it will not contradict terms or conditions for which a party has bargained.
Restatement § 20. Effect of Misunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither party knows or has reason to know the meaning attached by the other; or (b) each party knows, or each party has reason to know the meaning attached by the other. (2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if; (a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or (b) that party has no reason to know of any different meaning attached by the other
Rejection
(counteroffer qualifies) o If the offeror makes an offer and the offeree says no thanks. This is called expressed rejection.
UCC 2-207 (Merchants)
(2-207 rule—merchants): if either party is not a merchant, additional terms are proposals for addition to the contract that do not become part of the contract unless the original offeror expressly agrees. Klocek v. Gateway, Inc.
Hadley v Baxendale
(Crankshaft) Ordinary circumstance (damages could only be consequential) General rule: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Unless special circumstances communicated: - If the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. Special circumstances unknown: - If these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them.
Grenall v. United of Omaha Life Insurance Company ( Mistake of one party)
(Mistake is so grave that enforcement would be unconscionable.) § 153 When Mistake of One Party Makes a Contract Voidable § 153When Mistake of One Party Makes a Contract Voidable (unilateral mistakes) Same as rule 152 & (a or b) 1. 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 performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable (not the same as unconscionability defense/ different meaning)(fairness provisions), or (b) the other party had reason to know of the mistake or his fault caused the mistake.
Valley Medical Specialists v. Farber (public policy)
(public policy outweighed the enforcement of the contract) Rules of law: While a term in an agreement may not be facially unconscionable, it may still be regarded as contra bonus mores, and be considered unenforceable as such Holding: the trial judge concluded that this restrictive covenant was unreasonably broad and against public policy. Public policy elements/ Factors: o Can't be broader than needed to protect the public's legitimate interest o Harm/injury to public... to the public in general.
Interpretation of Contracts (ambiguity)
*Term contradicts/ nullifies part of the contract = cannot apply 1. § 203Standards of Preference in Interpretation In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable: (a)an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect; (b)express terms are given greater weight than course of performance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade; (c)specific terms and exact terms are given greater weight than general language; (d)separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.
Imperfect Acceptance
-A counteroffer is described not only as an implied rejection, but also as a kind of imperfect acceptance. -an acceptance with a condition. -Response that adds a new or different term. Ex: Ponoroff offers to buy Epstein's car for 100$ and Epstein responds "I'll accept your offer to buy my car for 100$ and I propose that any later disputes about the quality of the car be submitted by Markell.
Parol Evidence Rule Exceptions
-Fraud -Mistake -Illegality -Duress -Partial Integration -Conditions precedent 1. Parol evidence rule will bar everything before formation; does not exclude anything post formation. 2. Oral conditions precedent. (won't bar evidence that the entire contract was / Contract would only be effective depending on a condition. 3. Fraud, misrepresentation, or mistake even if fully integrated with terms. Restatement (Second) of Contracts § 214(d) (1981): § Restatement provides: Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish § (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause. . . .
Limitations on money damages
1) Avoidable Loss and Failure to Mitigate 2) Foreseeability 3)Certainty
EXCUSE: FAILURE TO PERFORM TERMS OR TO SATISFY CONDITIONS BECAUSE OF EXTERNAL FACTORS
1) IMPRACTICABILITY OF PERFORMANCE AND 2) FRUSTRATION OF PURPOSE ● Impracticability Lesser standard than impossibility (impossibility is replaced).
Terms are supplied by (sources)
1) Parties 2) Context 3) Court
CONTEXT-SUPPLIED TERMS: COURSE OF PERFORMANCE, COURSE OF DEALING, AND USAGE OF TRADE
1) Plain meaning rule: Terms of contract will be enforced based on their plain meaning. o Ambiguous or unambiguous ? Not; then contract is enforced (2) Context of terms with unresolved issues. (CLARIFY OR IMPORT Terms) o UCC sec 133 1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade. * * * (Ranked most important to least important) § Course of Performance: Same parties, same contracts, how they interacted previously (clarify or import terms.) § Course of dealing: sequence of conduct concerning previous transactions between the parties. (may clarify or import terms) § Usage of trade: looks to the trade and decides what's most common. Import the trend. Consistent meaning or terms across all contracts of transaction in a field. (May be used to clarify terms or import term.)
3 EXCUSES: LEGITIMATE WAYS TO AVOID PERFORMANCE
1. Nonperformance or any variance from the performance required is a breach 2. Parties use conditions to regulate when a contractual duty arises 3. Excuses ( make it unfair or imprudent to require performance) o External factors excuse performance: i. Effect that the parties' post-formation conduct has on their contractual duties. If the parties amend or modify their contractual duties, then the original obligations no longer bind. They have been superseded by a later agreement. Ø Subsection A: modifications, waivers, estoppel ii. Effect of external factors on the subject of the contract.. Ø Subsection B under the names of impracticability, and frustration of purpose. ○ Subsection B also looks at other types of external factors, such as when one party tries to prevent or impede the other party's performance (or conditions to their own performance) and those actions are not breaches of express terms of the contract. iii. Effect of a breach by one side on the obligations of the other. Ø Subsection C under the names of material breach and, for cases governed by the U.C.C., the perfect tender rule. iv. Effect of actions by one party taken before performance is due that indicate a rejection of contractual duties Ø Subsection D under the name of anticipatory repudiation.
Specific Performance
360. Factors Affecting Adequacy of Damages (general) In determining whether the remedy in damages would be adequate, the following circumstances are significant: (a) the difficulty of proving damages with reasonable certainty, (how much has person been inured) (b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages, and (c) taking into account concerns about personal liberty (hand over money or hand over object; not performances like massages)
Destroying the Offer
4 Ways: -Rejection -Revocation -Lapse, -Death or incompetence of the offeror.
What is a contract?
A LEGALLY ENFORCEABLE agreement. Ask: 1) Is there an agreement? (offer / acceptance) 2) Is it legally enforceable? (consideration / defenses)
Mirror Image Rule
A common law rule that requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer for a valid contract to be formed.
Express Condition
A condition specifically and explicitly stated in a contract and usually preceded by words such as conditioned on, if, provided that, or when.
Unilateral Contract
A contract that results when an offer can be accepted only by the offeree's performance. Section 12 of the American institutes restatement of the law of contract as follows: A. "A unilateral contract is one in which no promises or receives a promise as consideration for his promise." - Unilateral contract- offer of a reward is a clear- cut offer of a unilateral contract which cannot be accepted by a promise to perform, but only by performance.
UCC 2-207
A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
Illegality
A more common illegality problem is the enforceability of an agreement by someone who has failed to comply with a licensing statute. § 181Effect of Failure to Comply with Licensing or Similar Requirement 1) If a party is prohibited from doing an act because of his failure to comply with a licensing, registration or similar requirement, a promise in consideration of his doing that act or of his promise to do it is unenforceable on grounds of public policy if: (both elements must be met) a) the requirement has a regulatory purpose (promoting regulation), and b) the interest in the enforcement of the promise is clearly outweighed by the public policy behind the requirement. (promoting public interest) Unenforceable if there is a Regulatory purpose and interest in the enforcement of the promise are clearly outweighed public policy.
Nominal Damages
A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered.
Statute of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable. · Must be in writing · Pro- evidentiary function Contracts which are subject to the statutes of Fraud: -a contract made upon consideration of marriage (the marriage provision); -a contract for the sale of an interest in land (the land contract provision); -a contract that is not to be performed within one year from the making thereof (the one-year provision). (impossible complete before one year ). time of the stopwatch/things that cannot be performed soon -a contract for the sale of goods for the price of $500 or more (Uniform Commercial Code § 2-201). * * *
Implied Warranty of Merchantability
A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased. 2-314. Implied Warranty: Merchantability; Usage of Trade. (Broad) (1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Extra notes: i. (Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.) ii. Any sale from an item will have implied merchantability. (2)Goods to be merchantable must at least (a)pass without objection in the trade under the contract description; and (c)are fit for the ordinary purposes for which such goods are used. (3)Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade
Mailbox Rule
Acceptance is generally effective upon dispatch. Terminations are effective when received.
Liquidated Damages
An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach. Restat. Sec. 356 - Liquidated Damages 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. A liquidated damages provision is enforceable when: (factors) (1) The amount is reasonable in the light of the anticipated or actual loss caused by the breach; (2) It is difficult to prove exact amount of loss. Restat. Sec. 356 - Liquidated Damages (enforce provision) (do not enforce) <--------------------------------------------------------------------------------- (difficult to prove loss, (easy prove loss Reasonable in light of antic/actual dmgs) (unreasonable)
Revocation (Direct)
An express affirmative statement taking back of an offer by the offeror
Waiver
An intentional, knowing relinquishment of a legal right. "Once a contract is formed, the parties may of course change their agreement by another agreement, by course of performance, or by conduct amounting to a waiver or estoppel" * * * Thus, "[c]ontractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned," and "[s]uch abandonment may be established by affirmative conduct or by failure to act so as to evince an intent not to claim a purported advantage." * * * (Summary of waiver def: an intentional relinquishment of one's rights.) ● Waiver may be proved by "undisputed acts or language so inconsistent with [the party's] purpose to stand upon his [or her] rights as to leave no opportunity for a reasonable inference to the contrary"
Third Limitation on Money Damages: Certainty
As a general rule of limitation, damages for breach are recoverable only to the extent that the injured party's loss can be established with reasonable certainty. Prove damages with reasonable certainty. To establish damages, you must prove (come up with evidence that you lost that money) Applies to all damages!
Material breach
Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc. (Fridge Temps) When a parties breach is non-material, the non-breaching party may not breach the contract. The non-breaching party must perform its obligations under the contract. (pay the balance due) The non-breaching party may perform its obligations under the contract and sue later for damages of breach. Bartusch could have performed on its end and later sued for damages. A non material breach does not excuse further performance by the other party , neither does the second breach excuse the first. Rule: 1. Restatements that are "significant in determining whether a failure to perform is material." 134 Restatement (Second) of Contracts § 241 (Am. Law Inst. 1981)). These factors include: a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances; e) the 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. 2. Restatement (Second) of Contracts § 237 cmt. e: a) "a material breach will not discharge an obligation of the non-breaching party that arose before the alleged breach").
Parker v. Twentieth Century-Fox Film Corp.
Bloomer Girl; Big Country, Big Man Other employment must be comparable, or substantially similar, to that of which the employee has been deprived otherwise no need to mitigate Did not have the duty to mitigate b/c the employer must show that the other employment was comparable, or substantially similar, to that of which the employee has been deprived; the employee's rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages.
Hawkins v. McGee (HAIRY HAND CASE)
Compensation will be the difference between the value of the hand as promised and the value of the hand as it ended up
Hamer v. Sidway
Consideration is valid as long the promisee abandons some legal right in the present or limits future actions - "A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other." (Formative for consideration) · Unless the promisor was benefited, the contract was without consideration.
Ambiguous terms
Contract terms that are vague and indefinite. In contract law, these terms are construed by the court against the drafter. -· non-material term, such as mode of shipment, if ambiguous, the contract is still enforceable. -does not render the agreement void.
Quantity as a missing term
Contract void
Illegality and Public Policy
Courts may refuse to enforce a valid contract because it is illegal or a public policy concern.
R.R. Donnelley & Sons Co. v. Vanguard Transp. Systems, Inc.
Duty to Mitigate Rule: The victim of the breach must " 'exercise reasonable diligence and ordinary care in attempting to minimize the damages after injury has been inflicted.' " The amount of loss that could reasonably have been avoided by stopping performance or making substitute arrangements is simply subtracted from the amount that would otherwise have been recoverable as damages
Damages Default rule
Expectancy
Expectancy Damages Formula
Expectancy damages= (loss in value) + (incidental losses)+(consequential losses)-(avoided costs)-(non-breacher failed mitigation) Damages= (base expectancy+ incidental damages+ foreseeable damages- avoidable cost-failed mitigation Baseline- where the party was at contract formation Perfect performance- what would have been different for nonbreaching party comparing baseline to both the parties performing their contractual obligations. Actual performance- what would have been different for the non-breaching party comparing baseline to what actually happened. Trying to determine actual damage à perfect performance.
Expectancy Damages
Expectancy: Restat. Section 347 Section 347 of the Restatement (Second) of Contracts: "the injured party has a right to damages based on his expectation interest. * * *" The Restatement has an answer to that too. It states that the expectation interest is measured as: (a)the loss in value to [the injured party] of the other party's performance caused by its failure or deficiency, plus (b)any other loss, including incidental* or consequential** loss, caused by the breach, less (c)any cost or other loss that [the injured party] has avoided by not having to perform
SCHINDLER ELEVATOR CORP. V. TULLY CONST. CO., INC.
Express condition Ø Express conditions precedent "must be literally performed; substantial performance will not suffice," and "[f]ailure to strictly comply with such provisions generally constitutes a waiver of a claim" * * *
Groves v. John Wunder Co.
Facts: Contract to remove gravel. Promise in contract that at end of contract, D would restore to original state but does not, and was intentional and not in good faith. Rule: Damages for willful breach of a construction contract, even where there has been substantial performance are awarded as the cost of completing the failed performance. Here, D's breach was willful and therefore D cannot assert substantial performance as a defense and the value of the performance necessary to put P's property in the condition agreed in the contract is the proper award of damages. Where a party breaches a contract willfully, non-breaching party can sue for loss of value and when both DMV & Cost of Repair is known, the non-breaching party can choose which they want to apply. ( difference in amount cannot be disproportionate ) Ex (from case): DMV was $12,000 and Cost of Repair was $60,000. Pl got to choose. The ratio between the DMV and COR were not disproportionate.
Peevyhouse v. Garland Coal & Mining Co.
Facts: Contract to strip mine, with promise to restore land to original condition, would cost about 29K and D doesn't do it. Rule: Using 348 of R2K, Regardless of any agreement of the parties, damages awarded for breach of an agreement to perform remedial work on property should normally be measured by the reasonable cost of performance of the work; but, when the contract provision breached is merely incidental to the main purpose in view and where the economic benefit which would result to the owner from full performance is grossly disproportionate to the cost of performance, damages should instead be limited to the diminution in value resulting to the premises because of the non-performance. DMV was $6,000 COR was $29,000.00 Grossly disproportionate since the Plaintiffs may not gain more in damages for a breach of contract than actual performance is worth. It is unlikely that a reasonable landowner would spend $29,000.00 to increase the value of a piece of land by $300.00.
Sunnyland Farms, Inc. v. Central New Mexico Elec. Co-op., Inc.
Failure to state special circumstances and not an ordinary course of events. A defendant is liable for losses that were foreseeable at the time of contracting, regardless of whether the defendant actually contemplated or foresaw the loss. Restatement (Second) of Contracts § 351 cmt. a (1981); Loss was not foreseeable as a proximate cause ( more stringent than the standard in Tort Law) : , Sunnyland's injury was not directly caused by the lack of electricity. The actual harm was more attenuated: -the lack of electricity interrupted Sunnyland's water supply, which, in conjunction with Sunnyland's lack of backup firefighting options, made it difficult for Sunnyland to respond to the fire its employees negligently started. There were no findings that CNMEC should have known that Sunnyland was likely to start fires or was depending on electricity in order to fight any fires that occurred. -Speical circumstances were no mentioned. - loss was not foreseeable -Injury was not a proximate cause (more stringent)
MISTAKEN FACTUAL ASSUMPTIONS (voidable)
Focus: unstated factual assumptions that are erroneous, i.e., mistakes. Two person ex: enter into a contract and realize that land is on an unstable structure; now it would cost way more to build the house b/c it is 5x more. Both parties were mistaken; therefore, the person getting house built would go to court and announce mistake (if the builder isn't willing to back out of the contract.) One Person Ex:· All agreements are based on various factual assumptions. o Sometimes, these assumptions can be found in the terms of the agreement, and the terms of the agreement sometimes spell out whether a party can cancel the agreement if such an express factual assumption turns out to be erroneous.
Missing Terms
For a partially integrated contract, the court will supply missing terms if it is apparent that the parties wanted to bind themselves and are working under good faith.
Four Corners
Four Corners Rule of contract interpretation (The traditional rule) states: "An agreement, when reduced to writing, must be presumed to speak to the intention of the parties who signed it. It speaks for itself, and the intention with which it was executed must be determined from the language used. It is not to be changed by extrinsic evidence." In applying the four corners rule: 1. a court initially looks to the language of the contract alone. 2. If the language of an agreement is facially unambiguous, then it is interpreted as a matter of law, without resort to parol (or extrinsic) evidence. a. BUT IF AMBIGOUS. Then parol evidence may be admitted to aid the trier of fact in resolving the ambiguity.
Duty of good faith and fair dealing
Imposes on each party in a contract an obligation for honesty in the conduct of the transaction. (Restatements Sec 205 ) One must make a Reasonable effort to fulfilling end of bargain. Section 205 of the Restatement (Second) of Contracts states: Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. All contracts have an implied term of DGFFD
Failure to Mitigate Damages
In a breach of contract action, a plaintiff ordinarily has a duty to mitigate the damages that he incurs. If the plaintiff fails to mitigate his damages, the defendant cannot be charged with them. This duty applies to those damages that the plaintiff could have avoided with reasonable effort and without undue risk, burden, or expense. See Restatement (Second) of Contracts § 350(1)). --> Duty to mitigate damages( the doctrine of avoidable consequences)— requires only reasonable, practical care and diligence, not extraordinary measures
Interpretation against the draftsperson
In addition, the Restatement adopts a rebuttable presumption that may trouble those who think that they should draft everything on behalf of their clients: § 206Interpretation Against the Draftsman (punishes drafter) In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.
Cost of replacement vs Difference of value
In most cases of failure to perform the cost of replacement is the measure of damages. The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value.
Interpretation (Ambiguity)
Interpretation ( Ambiguity) Restatement (Second) of Contracts § 214(c) : To interpret a disputed term in a contract, the court will consider (in order of importance): (1) the language of the contract, (2) the preliminary negotiations, (3) trade usage, (4) legal standard, (5) course of performance, and (6) maxims.
Legislator supplied terms (fill in the gaps)
Legislation adds terms to fill gaps—default terms that apply when the parties have not otherwise agreed Consider the following examples from Article 2 of the Uniform Commercial Code. A. § 2-305.Open Price Term. The parties if they so intend may conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if: a. (a)nothing is said as to price; b. (b)the price is left to be agreed by the parties and they fail to agree; or c. (c)the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. * * * B. § 2-308.Absence of Specified Place for Delivery. Unless otherwise agreed: a. (a)the place for delivery of goods is the seller's place of business or if none, the seller's residence; but b. (b)in a contract for sale of identified goods that to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery. * * * C. § 2-309. Absence of Specific Time Provisions. * * * a. The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time. * * *
Interests that contract remedies can protect
Liquidated Damages, Specific Performance, Restitution
Loss of Value
Loss in value can be calculated as: (1) Price or Cost Differential (diminution in market value or DMV) (2) Cost to repair Loss in value when both DMV and Repair Costs are known? Ø Restatement, Contracts, § 348: Nonbreaching party (Plaintiff) gets to pick between the two unless cost of repair is clearly disproportionate to the probable loss of value."
Unambiguous Anticipatory Repudiation
Manifestation of intent to repudiate is displayed through clear and definite conduct. The Restatement provides the following easy example: "On April 1, A contracts to sell, and B to buy land, delivery of the deed and payment of the price to be on July 29. A says nothing to B on May 1, but on that date he contracts to sell the land to C. A's making of the contract with C is a repudiation." Illustration 5 to Restatement (Second) § 250. Another example: Wholesale Sand & Gravel, Inc. v. Decker, When Decker sues Wholesale for breach, who wins—Decker, because of Wholesale's repudiation through inaction, or Wholesale, because of Decker's termination?
Angel v. Murray
Modifications unenforceable unless consideration is given. Angel v. Murray New consideration required unless the 4 elements of the Preexisting Duty rule (§89) is fulfilled. § 89 of the Restatement (Second) of Contracts. Restatement (Second) § 89 states "A promise modifying a duty under a contract not fully performed on either side is binding: § (1) the promise modifying the original contract was made before the contract was fully performed on either side, ( Must voluntarily agree on both side) § (2) the underlying circumstances which prompted the modification were unanticipated by the parties, and (Circumstance arises that parties did not anticipate) § (3) the modification is fair and equitable.
Promissory Estoppel
PROMISSORY ESTOPPEL Rule: (1) promise made that promisor could reasonably foresee reliance on (2) actual, reasonable reliance on the promise (3) enforcement necessary to avoid injustice (fact pattern, equitable claim, bad faith? )
Avoidable Loss
Party's duty to avoid losses when a breach occurs by the other party.
Performance and Breach
Performance and Breach Restatement, "[w]hen performance of a duty under a contract is due any non-performance is a breach." Restatement (Second) of Contracts § 235(2) (1981). ● "any" non-performance.
Acceptance
Power of Acceptance: (1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance; (2) An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance." See Rs. 2d § 29(1)-(2). - Offeror is king (courts may examine this factor more harshly on the offeror)
Reliance Damages
Reliance damages may be pursued where the ability to recover expectation damages "is clouded because of the uncertainty in measuring the loss in value to the aggrieved contracting party." Restatement (Second) of Contracts § 349 cmt. a
Liquidated Damages Example
Restat. Sec. 356 - Liquidated Damages Bob agrees in writing to buy Louise's old IKEA dresser for $300, which is approximately $100 dollars over its market worth. As part of the deal, Bob agrees that, if the deal doesn't go through, then he will still have to pay Louise the $300 anyway. Bob breaches before the parties exchange money for dresser. Can Louise sue Bob and collect $300 for breach in accordance with the contract provision? -Difficult to prove loss? No. -Reasonable in light of anticipated/actual damages? No.
Restitution
Restat. Sec. 371 - What is Restitution? If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either: a.the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or b.the extent to which the other party's property has been increased in value or his other interests advanced. Restat. Sec. 373 - Restitution for Non-Breaching Party (1) Subject to the rule stated in Subsection (2), on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. (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. Restat. Sec. 374 - Restitution for Breaching Party (1)Subject to the rule stated in Subsection (2), 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, 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. - Breaching party entitled to benefit conferred - (loss caused by breach)
Capacity (Defense)
Restatement (Second) of Contracts § 12 Capacity to Contract: (1)No one can be bound by contract who does not have legal capacity to incur at least voidable contractual duties. . . . (2)A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby unless he is (DEFENSES): (a)under guardianship, or (b)an infant, or (c)mentally ill or defective, or (adjudication doesn't have to be previously adjudicated) (d)intoxicated. (must be super drunk; extreme); In order to use intoxication, other person should know that they are intoxicated. Other party must know!
Mistake of Fact ( Both parties make mistake)
Restatement (Second) of Contracts § 152. * * * Rescission is not available, however, to relieve a party who has assumed the risk of loss, in connection with a mistake. [Restatement (Second) of Contracts §§ 152, 154.] Sec 152 When mistake of both parties Makes a Contract Voidable 1. A Mistake of both parties at the time of the contract was made to be a basic assumption 2. material effect on the agreed exchange of terms (materiality) 3. Contract is voidable by the adversely affected party unless he bears risk of mistake under sec 154 Sec 154 When a party bears the risk of Mistake 1. Risk is allocated to him by agreement of the parties. 2. If you were aware at the time the contract was made but treat limited knowledge as sufficient. 3. Or risk is allocated to him by the agreement of the court.
Material Misrepresentation
Restatement (Second) of Contracts § 164. § 164.When A Misrepresentation Makes A Contract Voidable: (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, the contract is voidable by the recipient.
Imperfect performance
Restatement (Second) of Contracts § 235, cmt. b (1981): When performance is due, however, anything short of full performance is a breach, even if the party who does not fully perform was not at fault and even if the defect in his performance was not substantial. Non-performance of a duty when performance is due is a breach whether the duty is imposed by a promise stated in the agreement or by a term supplied by the court, as in the case of the duty of good faith and fair dealing. *KNOWWWWW: (Perfect match would satisfy that condition ) Courts strictly construe the language of a condition. They follow it to a T.
Reliance/Promissory Estoppel
Restatement (Second) of Contracts' revision of § 90, which now provides: 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 such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. NEW RULE Section 90 offers a mechanism whereby a purely gratuitous promise might be enforced. Elements: 1. Promisor makes a promise to the promisee. 2. The Promisor should have expected the Promisee or Third party to rely on the promise. 3. Promise induces reasonable reliance. 4. Enforcing the promise is necessary to avoid injustice.
Impracticability
Restatement Second § 261 - Discharge by Supervening Impracticability: Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary. Element after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event It is not the party's fault the event occurred the non-occurrence of which was a basic assumption on which the contract was made Consequence his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary. (Force majur, or other clause, context of the deal)
Frustration of purpose doctrine
Restatement Second § 265 - Discharge by Supervening Frustration Where, after a contract is made, 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, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary. Elements 1) after a contract is made, a party's principal purpose is substantially frustrated 2) It is not the party's fault the event occurred 3) the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made Then—> his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.
Modes and Manner of Acceptance
Restatement second of contracts section 50 (1) provides the acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree and in a manner invited or required by the offer. Rule : The "language of an offer may govern the mode of acceptance required, and where an offer requires a written acceptance, no other modes may be used." LaSalle National Bank v. Vega appellate court of Illinois Restatement (Second) of Contracts §60 states, "If an offer prescribes the place, time, or manner of acceptance its terms in this respect must be complied with in order to create a contract."
Breach and Other Parties duty to render performance
Restatement: § 237 Effect on Other Party's Duties of a Failure to Render Performance [I]t 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. Elements: Ø Each party is conditioned to perform its remaining duties Ø Exchange under an exchange of promises Ø No uncured material breach by the other party to render any such performance due at an earlier time.
illusory promise (illusory contract)
Rule of law: An illusory promise "appears to be a promise, but on closer examination reveals that the promisor has not promised to do anything," such that it does not provide sufficient consideration to establish a contract.
Invitations for offers vs Offers
Rule: (An invitation for offers does not operate as an offer to create an enforceable contract) Restatement section 25: "If from a promise, or manifestation of intention, or from the circumstances existing at the time, the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer."
Not an offer- (instead) invitations to negotiate
Rule: (An invitation for offers does not operate as an offer to create an enforceable contract.) Restatement section 25: the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer." Ex: Lonergan v. Scolnick (advertisement in the paper was a mere request for an offer/ no definite offer)
Unequivocal Anticipatory Repudiation
Rule: A party who receives clear notice of repudiation of a contract before performance is due may bring suit immediately, before the performance is due. Hochster v. De La Tour (definite and unequivocal anticipatory repudiation)
Reinstatement of waived right
Rule: Notice and the other party has not already detrimentally relied on it. Give other party reasonable notice.
Jacob & Youngs, Incorporated v. Kent (reading pipes)
Rule: The measure of damages for a trivial and innocent omission is not the cost of replacement but the difference in value. Rule: A party who substantially performs its obligations under a contract is entitled to expectation damages based on full performance of the contract, minus an offset for defects in the party's performance. D could have gotten what he wanted by "apt and certain words" (a CONDITION)
Halpert v. Rosenthal (Material Misrepresentaion)
Rule: where one induces another to enter into a contract by means of a material misrepresentation, the latter may rescind the contract. It does not matter if the representation was "innocent" or fraudulent.
Promise for Benefit Received
Rule: § 86.Promise for Benefit Received: 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. 2. A promise is not binding under Subsection (1): A. if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or B. to the extent that its value is disproportionate to the benefit. Webb v. Mcgowin ( D (promisor) promised to pay Pl for the injuries' caused when the Pl tried to save the D. where the promisor has received a material benefit,
Party Supplied terms
Sources typically consulted to supply or refine contractual terms: The words actually used by the parties, and what those words typically mean; 1. Words, practices, or meanings which are implied in contracts due to the context in which the contract was formed or performed, such as trade usage, course of performance, and course of dealing; 2. Words, practices, or meanings which courts imply in contracts to fill in gaps typically left open or to achieve certain public policies; and 3. Words, practices, or meanings that statutory law implies or inserts in contracts as a matter of public policy or common sense. A) -court will make no inference or give any construction to the terms of a written contract that may be in conflict with the clearly expressed language of the written agreement . . . -A court is not authorized to construe a contract in such a way as to modify the plain meaning of its words, under the guise of interpretation. -When a written contract is clear and unequivocal, its meaning must be determined by its contents alone.
Consequential Damages
Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.
Estate of Nelson v. Rice
The D bought two paintings for $60 that turned out to be worth over 1 million. Plaintiff wanted the K rescinded for mutual mistake because both parties thought the paintings were worthless. Conscious Ignorance. Even though the estate did not agree to bear the risk it was aware that their knowledge regarding the mistake was limited. (meaning it bears the risk) a material effect on the agreed exchange of performances as to upset the very bases of the contract.' the mistake must not be one on which the party seeking relief bears the risk under the rules stated in § 154(b) of the Restatement.: Section 154(b) states that a party bears the risk of mistake when "he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient."
Reliance Damages Formula
The Restatement (Second) of Contracts and case law also recognize damages based on reliance interest as an alternative. § 349 Damages Based On Reliance Interest * As an alternative to the expectation measure of damages stated in § 347, the injured party has a right to damages based on his reliance interest, including: 1) expenditures made in preparation for performance or in performance, (Minus avoided loss) a. less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed." (avoided loss) OBJECTIVE OF RELAINCE DAMAGES: *Award damages to the injured party for the purpose of undoing the harm which cause by the plaintiff's reliance on the defendant's promise. *Place injured party in as good of a position as he was prior to the breach.
Public Policy
The defense of public policy is not limited to agreements that directly or even indirectly violate a legislative enactment. Restatement (Second) of Contracts § 178 provides: A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms. ( no elements/ Just public policy based)
Unenforceable agreement/ Defense
The parties intend to form a valid bargain, but a court declares that some rule of law prevents enforcing it -Statues of Fraud, Misrepresentation -Incapacity -Illegality -Duress -Public Policy
Anticipatory Repudiation
There must be a definite and unequivocal manifestation of intention on the part of the repudiator that he will not render the promised performance when the time fixed for it in the contract arrives. 1) Unequivocal Statement as Anticipatory Repudiation 2)Unambiguous Conduct as Anticipatory Repudiation
Purpose of Expectancy Damages
To put the non-breaching party in the same dollar position as if the contract had been performed without breach.
Offer
Two essential components of a valid contract; a "meeting of the minds." Mutual assent. Restat. An offer is the manifestation of assent by the offeror that essentially says to the offeree, "I commit to the deal on these terms" Ø "[a]n offer is an act that leads the offeree reasonably to believe that assent (i.e., acceptance) will conclude the deal."
Express Warranty
U.C.C § 2-313 Express Warranty (1) an express warranty may be created by: a) any affirmation of fact or promise that relates to the goods, b) any description of the goods, or c) any sample or model. In each case, however, the affirmation, description, or sample must be made part of the basis of the bargain. (2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, BUT an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.
Missing price term
UCC: Default rule for missing price term is a reasonable price at the time established by the K for delivery CL: reasonable value for services rendered U.C.C. provisions on the Sale of Goods § 2-305: o (1)The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if: § (a)nothing is said as to price; or § (b)the price is left to be agreed by the parties and they fail to agree. * * *"
EXCEPTIONS TO PRELIMINARY OFFER/ NEGOTIATIONS
[UCC section 2-204 (1)] A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. Generally, a price quote is an invitation to an offer. However, a price quote that is DETAILED ENOUGH may constitute an offer capable of acceptance.... -must reasonably appear from the price quote that assent to the quote is all that is needed to ripen the offer into a contract. (J.D. Fields v. U.S. Steel Co)
Non-Material Breach
a party deviates from terms of contract, but substantially performs
divisible contract
agreement consisting of two or more parts, each calling for corresponding performances of each part by the parties
How is the Statute of Frauds' requirement of objective proof of the agreement met, i.e., "satisfied"?
be in written form identify the subject matter of the contact so it is reasonably understood (e.g. the purchase of "bowling balls") provide the essential terms of the agreement (with sales of goods it is the quantity and price of the goods) have the signature of both parties or, per the UCC for sales of goods, the signature of "the party to be charged" (the party contesting the validity of a contract.)
lapse
cease being in force; become invalid. Time of offer ends
Modification
change
bargained for consideration
exchange of value, incl. their detriment, for purpose of K Restat sec 81 "Bargained for." (Both know intent) Consideration requires that a performance or return promise be "bargained for" in exchange for a promise; this means that the promisor must manifest an intention to induce the performance or return promise and to be induced by it and that the promisee must manifest an intention to induce the making of the promise and to be induced by it. (Bargain for ( transactional)
Austin Instrument, Inc. v. Loral Corp.
gear parts - forced to lower price and form new contract b/c lack of options; ct holds duress (wrongful threat precluding exercise of free will); no options = duress; preexisting duty rule = no coercion to modify contract; constructive fraud = undue influence and abuse of confidential relations Rule: The existence of economic duress or business compulsion is demonstrated by proof that "immediate possession of needful goods is threatened" or, more particularly, in cases such as the one before us, by proof that one party to a contract has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand.
Warranties
guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner
Incidental Damages
incurred by the non-breaching party as part of the process of trying to cover (buy substitute goods) or sell (selling subject matter of contract to another); includes storage fees, commissions, and the like
Revocation (Indirect)
o Indirect revocation occurs when the offeree acquires reliable information that the offeror cannot perform. It requires acts inconsistent with the contract.
Foreseeability Limitation
o To satisfy the foreseeability requirement, the injury for which damages are sought 'must follow the breach in the natural course of events, or the evidence must specifically show that the breaching party had reason to foresee the injury.' ---> special circumstances and particular needs must be made known to the [breaching party] if they are to be considered in determining the foreseeability of damages."
Bilateral Contract
promise for a promise
Gratuitous Promise
promise made without consideration
Consideration
promises which are supported by a legal consideration are legally binding; other promises are not binding, even if the promisor intends to bind himself by his promise.
Expectancy Damages vs. Reliance Damages
reliance damages are appropriate where the injured party "cannot prove his profit with reasonable certainty"
Perfect Tender Rule
standard under the UCC that a seller's performance under a sales contract must strictly comply with contractual duties and that any deviation discharges the injured party
Non-disclosure / misrepresentation (Defense)
§ 161When Non-Disclosure Is Equivalent to an Assertion: A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. (b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
Manifestation of Mutual Assent Manifestation
§ 18. Manifestation of Mutual Assent Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
missing terms (UCC)
§ 2-309. Absence of Specific Time Provisions; Notice of Termination. (1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time. (2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. (3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. ‹ § 2-308. Absence of Specified Place for Delivery. Unless otherwise agreed (a) the place for delivery of goods is the seller's place of business or if he has none his residence; but (b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and (c) documents of title may be delivered through customary banking channels. § 2-305. Open Price Term. (1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by the parties and they fail to agree; or (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. (3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. (4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.
Implied Warranty of Fitness for a Particular Purpose
§ 2-315. Implied Warranty: Fitness for Particular Purpose. (Distinct) Uniform Commercial Code, Sales, [§ 2-315]: [§ 2-315]: "Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under section [2-316] of the Revised Code an implied warranty that the goods shall be fit for such purpose." Extra notes for clarification purposes: o APPLIES WHEN: If the seller affirmed that the goods would serve that purpose, the buyer will have a claim for breach of express warranty. Buyer may have recourse against the seller for breach of the implied warranty of fitness for a particular purpose under U.C.C. § 2-315. o WON'T APPLY: when the buyer was relying on her own judgment about the adequacy of the goods, there will be no recourse. o In these cases, the hard lesson learned would be that the buyer should have done a more careful investigation into the suitability of the goods to the purpose for which they were acquired before purchasing.
UCC 2-601 Perfect Tender Rule
§ 2-601.Buyer's Rights on Improper Delivery. unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2-718 and 2-719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may: Rule: Perfect tender rule: {I]f the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a)reject the whole; or (b)accept the whole; or (c)accept any commercial unit or units and reject the rest.
Retracting Repudiation
§ 2-611. Retraction of Anticipatory Repudiation. 1) Until the repudiating party's next performance is due, he can retract his repudiation unless the aggrieved party has since the repudiation (relied) cancelled or materially changed his position or otherwise indicated that he considers the repudiation final. 2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform but must include any assurance justifiably demanded under the provisions of this Article (Section 2-609) . . . .
Parole Evidence Rule (PER)
§ 213 Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule): (1)A binding partially integrated agreement (has terms in it but not all) discharges prior agreements to the extent that it is inconsistent with them. (partially integrated contracts) ---> (If terms are listed in agreement, whatever was said before (preformation) is barred if terms are in the contract ) (2) A binding completely integrated agreement (has every term in it) discharges prior agreements to the extent that they are within its scope. (No preformation evidence) --->(All evidence of (preformation) earlier stated terms/agreements are blocked out by integration clause. (cannot introduce anything prior to agreement). Integration or merger clause must be in a contract to be completely integrated. --->Must say "Fully integrated" in contract to be completely integrated. Integrated means present in a contract: defined. o Ex: Ill sell you my car at 5pm for 1000 dollars. ß(car, 5pm, $1000) o Ex: Ill sell you my car for $1000. ß Term of time is not integrated
Condition
§ 224. Condition Defined The Restatement (Second) of Contracts § 224. Ø A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance is due. (Professor Hev. stated ) A condition is an event not certain to occur which must occur before performance is due. ---> terms set the obligations, and the court compares the parties' action (or inaction) with those obligations. If there is a match, no breach; if there is any variance, breach.
Foreseeability Limitation (rule)
§ 351 Unforseeability 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. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach: (a)in the ordinary course of events, or (b)as a result of special circumstances, or beyond the ordinary course of events, that the party in breach had reason to know.
Requirements for consideration:
§ 71 Requirement of Exchange; Types of Exchange General idea: -both sides must give otherwise it is considered a gift or promise, NOT a contract. (Consideration has to be A factor not THE factor.) To constitute consideration, a performance or a return promise must be bargained for. -------------------------------------------------------------- 71(3) 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. Performance may consist of: 1. an act other than a promise, or 2. A forbearance, or 3. the creation, modification, or destruction of a legal relation. 4. The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
Duress Defense
§174 Physical compulsion 1. Party is compelled. ( gun to head) Always voidable!!!! § 175 When Duress by Threat Makes a Contract Voidable: If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. * * * Elements: 1. Assent is induced by an improper threat 2. Party has no reasonable alternative - Both Satisfied Contract Is Voidable. § 176When a Threat Is Improper A threat is improper if: 1. What is threatened is a crime or tort 2. What is threatened is a criminal prosecution 3. What is threatened is the use of civil process and threat in bad faith (Ex: im going to sue in bad faith) 4. the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient. (have a contract together already threaten to break unless you agree to the thing)
conditions vs covenants
○ First, the parties to the contract have no duty to perform until the condition is fulfilled, so the failure of a condition relieves the parties of all of their contractual duties. ○ Second, the parties have no remedy for breach of contract if a condition is not fulfilled, because at that point there is simply no contract to breach. ○ Third, conditions "typically fall outside the control of the parties to the contract, often requiring some environmental trigger (such as 'weather permitting') or action by a third party (such as 'upon the lender's approval') for the contract to begin." ■ Stated differently, even if one of the parties has some influence over the fulfillment of a condition, "its incidence usually is a matter of fate or of the decision of one or more third parties." Covenants, by contrast, "are almost always within the control of the contracting parties." (conditional language..)
