contracts outty

8/13/2019 Contracts OUtty

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I. CONTRACTS IN GENERAL

A. What is a contract?1. R 2d 1 Contract Defined

a. A contract is a promise or set of promises for the breach of which the law gives a remedy, othe performance of which the law in some way recognizes as a duty.

B. T!es of Contracts1. Express

a. Parties expressly agree to certain words and terms.. !mplied in "act

a. #o express agreementb. $onduct of the parties implies an agreement from which an obligation in contract can be

said to exist.c. %reated the same way as express contracts .

&. !mplied in 'aw ()uasi $ontracts*a. #ot a contract at all.b. +ecovery is where ustice so re-uires.

c. #o reference to intentions or expressions of the parties.d. uty based on concept of unust enrichment.

/. Bilateral $ontracta. A promise is exchanged for a promise.b. 0ust be mutuality of obligation.

i. Either both parties are bound or neither are bound.. 2nilateral $ontract

a. A promise is exchanged for a performance or something else.b. 3nly one promise is present.c. Person performing is not bound to perform the act, but if she begins, the promise becomes

enforceable.

$. Re"#ired E$e%ents of A Contract1. Bargain(+ d 14*

a. "ormation of a contract re-uires a bargain which includes manifestation of mutual assentand consideration.

2. Mutual Assenta. %a5es place through offer and acceptance.b. +e-uires that each party ma5es a promise and6or begins to render a performance.

&. Consideration(+ d 41*

a. A performance or return promise must be bargained for.b. 0ay consist of act, forbearance, or changing legal relation.

. A$ternati&es To Contract1. Promissory Estoppel

a. #o contract created, but promises reasonably induce action or forbearance on the otherparty7s part and therefore the promise is held binding when necessary to avoid inustice.

b. +eliance is enough to re-uire enforcement even though there was no bargain orconsideration.

. 2nust Enrichmenta. Enforcement allowed in cases where it would be unust to let a party receive a benefit

without having to pay for it.

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II. CONSIDERATION8 Assuming that there is a sufficiently definite and sufficiently formal agreement, theplaintiff must show that the agreement was supported by ade-uate consideration.

A. R#$es In&o$&ed1. R 2d 1' Re"#ire%ent of a (ar)ain

2. R 2d '1 Re"#ire%ent of E*chan)e+ T!es of E*chan)es

a. %o constitute a consideration, a performance or a return promise must be bargained for.b A performance or return promise is bargained for if it is sought bythe promisor in exchange for his promise and is given by the promiseein exchange for that promise

&. R 2d ', -erfor%ance of Le)a$ D#t(If you perform a duty you already

owe, not consideration unless that duty modified)

/. R 2d ' / Sett$e%ent of C$ai%s(Forbearing from asserting an inalid

claim not alid unless uncertainty as to claim being alid or forbearing party belieing claim isalid*.

. R 2d '0 Ade"#ac of Consideration+ #t#a$it of O$i)ation(!here does not hae to be a

benefit to the promisor or a loss to the promisee. !here doesn"t hae to be e#uialent alues

e$changed.)9. R 2d 31 Consideration as oti&e or Ind#cin) Ca#se(%hat is bargained for doesn"t hae to

be what induces that ma&ing of a promise and can still be consideration if it isn"t).4. R 2d 34 -ro%ise for (enefit Recei&ed('romise in recognition of past benefit binding to e$ten

its necessary to preent in(ustice*a. 0aterial Benefit +ule8 A promise made in recognition of a benefit previously received by

the promisor from the promisee is binding to the extent necessary to prevent inusticeb. A promise is not binding under :ubsection (1*

i. !f the promisee conferred the benefit as a gift or for other reasons the promisor hasnot been unustly enriched; or

ii. %o the extent that its value is disproportionate to the benefit.

B. (asic E$e%ents1. :erves to distinguish between promises that are and are not enforceable.. $ontracts that lac5 consideration are not enforced.&. efinition8

a. A bargained for exchange. Either bilateral or unilaterali. Bilateral is a promise for a promise

ii. 2nilateral is a promise for a performance.

$. -ro%ises to a5e a Gift1. A gratuitous promise is a promise to give a gift now or in the future.

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. :t. Peter v. Pioneer %heater $orporation (p. /4* (changes rule from benefit+detriment to bargainedfor e$change)ade#uacy of consideration)

a. $ase where ban5 lottery held and ban5 manager refuses to pay money to winner, arguing nconsideration because plaintiff didn7t pay anything and if there was consideration, there waa lottery.

b. %he sufficiency of consideration lies wholly within the discretion of the one who offers topay the prize

i. !t doesn7t matter how insignificant the benefit may apparently be to the promisor or

how slight the inconvenience may be to the promisee.ii. >hen a promisor ma5es a promise contingent on another performing an act he is nolegally obligated to perform, an affirmative act by a promisee constitutesconsideration.

c. Promisor must honor all unilateral contracts he initiates even if benefit arising fromconsideration is minimal.

d. $onsideration ? signing register; waiting outside for prize.9. @ir5sey v. @ir5sey (p. 1&* (Consideration . ratuitous 'romise) ift not binding when

conditions are not bargained for)

a. P writes to ma5ing promise that if P moves from her house to 7s lot, will give her aplace to raise family. P abandons possessions, moving to . years later, re-uires her tmove.

b. $ourt holds that the original promise unenforceable.i. 7s promise was a mere gratuity and lac5ed consideration.

ii. P moving her family is a necessary precondition for her to receive the gift that offered her.

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c. %he inade-uacy of agreed to consideration does not void a contract, therefore this contract valid.

. >olford v. Powers (p. 1/4* ('arties free to fi$ own alues to consideration + courts won"t #uestionade#uacy)

a. Powers had given promissory note that in exchange for baby being named after him, hewould ta5e care of boy. "ive months after baby born, 1, promissory note signed. 7estate doesn7t want to pay b6c lac5 of consideration

b. $ourt holds estimate of value of consideration should be left undisturbed unless there is

evidence of fraud.c. >here a party contracts for the performance of an act that will please him or express hisappreciation for a service done on his behalf, there is consideration.

d. ecision supportsFreedom of Contract !heory

III. O(6ECTI7E T8EOR9 O: ASSENT

A. -#r!ose1. 0utual assent is re-uired within a contract because it provides an o;ecti&e standard(reasonable

person standard* to determine whether a promisor intends to be bound.. %he obective determinate of assent is what meaning a reasonable person would ascribe to the wor

and actions of the parties.&. !f an alleged promisor7s words and conduct are of the sort that normally would indicate to a

reasonable recipient that the promisor intends to be bound, then the promisor will be boundnotwithstanding any secret, or subective intent not to be bound.

B. R#$es on Assent1. R 2d 13 anifestation of #t#a$ Assent

1. 0anifestation of mutual assent to an exchange re-uires that each party either ma5e apromise or begin to render a performanceC

. R 2d 2< Effect of is#nderstandin)(no manifestation of mutual assent to an e$change if the

parties attach materially different meaning to their manifestations)&. R 2d. 22 ode of Assent= Offer and Acce!tance(manifestation of mutual assent usually is by

offer and acceptance, but can be made without either)

$. Theories on Assent >ora$ Gro#nds of ee!in) -ro%ises@1. Autonomy (>ill* %heory

a. "undamental purpose of contract law is to give effect to the intentions of the parties.i. !t is the party7s free choice, which ma5es the contract binding.

. +eliance %heorya. >hen a contract is made, parties rely on the promise, often changing what they would do.b. >hen promise bro5en, the reliance represents harm to the promisee caused by the breach o

promise.&. !nstrumental %heorya. People enter into contracts b6c they believe they will ma5e them better off.

i. $ontracts are efficient and ought to be supported.ii. Promise ma5ing benefits the parties and society by allowing them to shift the ris5 o

uncertain events to the party who can bear the ris5 at the least cost.

. S#;ecti&e &. O;ecti&e Theor1. :ubective %heory (3ld +ule*

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a. +e-uires a meeting of the mindsC of parties to a contract before the contract is legallybinding

b. 3utward manifestations very insignificant.2. /b(ectie !heory 0efault 1ule)

a. oesn7t rely on actual intentions of parties.b. $ontractual obligation imposed based on what a party reasonably believes was said and

done, rather than what was intended.c. Places liability on the party with the comparative advantage in minimizing the li5elihood

that a misunderstanding will arise.d. !f the manifestation is at variance with the mental intent, it is the expression that iscontrolling.

. 0oesn"t rely on actual intentions of parties. -ot mutual assent, but manifestationindicating such assent.

". 'ucy v. Gehmer (p. 1/* (Applies ob(ectie theory of assent)1. Gehmer promises to sell from to 'ucy while out at bar. Gehmer claims offer was a o5e, bu

he signed a note and had his wife sign it too. #either party was too intoxicated to not realizthis was a serious transaction.

. 3bective test ? 'ucy was reasonable when he assumed that this was a serious businesstransaction.

&. 3utward manifestation rather than undisclosed intentions control whether a contract wasmade.


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a. erived from the characteristics of the agency relationship.b. Exists for protection of persons harmed by or dealing with an agent.c. $ustomary scope of authorityH arises because we thin5 principal should be liable.

4. 0istinction between apparent and inherent authority

a. !nherent authority is a type of apparent authority, as there are many things a party can do togive the third party the belief that a principal7s agent has sufficient authority.


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&. Ads and solicitations are generally not offers.i. Ads invite someone to ma5e an offer, they are not offers themselves.

/. yno $onstruction v. 0c>ane (p. /* ('rice #uotations are not offers*i. faxed P documents with prices to enter a contract. P never got them so sent another

copy, but without the additional terms. P signed the latest version of the contract.ii. $ourt found the version signed by P was a binding contract.

iii. %he original price -uotation was ust an invitation (an offer* to engage in future negotiationiv. =owever, P should have 5nown about the additional terms.

. 'ef5owitz v.


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l. +d J9F Acce!tance Si$ence(silence typically does not constitute acceptance)m. + d &K Re;ection('ower of acceptance terminated by re(ection*

n. + d &F Co#nter/offer(terminates power of acceptance*

1. A counterHoffer is an offer made by an offeree to his offeror relating to the samematter as the original offer and proposing a substituted bargain differing from thatproposed by the original offer.

o. + d F irror I%a)e R#$e

1. A reply to an offer which purports to accept it but is conditional on the offeror7s

assent to terms additional to or different from those offered is not an acceptance butis a counter offer.

. %his is opposed to $ast shot doctrine. %his maintains that both parties are bound tothe last offer or counterHoffer even if there is no agreement on all the terms.

. Cases re$atin) to %ethods of acce!tance1. Evertite +oofing $orporation v.


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1. Basicsa. #o clear offer and acceptance in sophisticated business transactions.b. 0onthsHlong negotiations culminate in agreement in principleC or wor5ing agreement

between the principals.c. 'oo5 at intent of parties to determine when they are bound in a complex transaction.

i. Either written agreement is merely a memorialization of agreed upon terms, 3+ nobinding obligation exists until final written agreement executed.

d. Four*Factor !est("rom1.. . :ardart*

i. Expression of intent1. >hether party reserves right to be bound only by signing written contract.ii. Partial Performance

1. Acceptance of partial performance by party disclaiming contract indicatesthat it understands a contract is in effect.

iii. 3pen %erms1. >hether there were open terms left to negotiate, so that only signing written

agreement remains.iv. %ransactional #orm

1. >hether re-uirement of written contract is norm rather than the exception.. +ules

a. +d (* L ode of Assent= Offer and Acce!tance

i. A manifestation of mutual assent may be made even though neither offer noracceptance can be identified and even though the moment of formation cannot bedetermined.

b. +d 4 E*istence of Contract Bhere Britten %e%oria$ is conte%!$ated

i. 0anifestations of assent that are sufficient to conclude a @ will not be preventeddoing so only because parties also intend to adopt a written memorialization.

ii. =owever, circumstances may show that agreements are preliminary negotiations.&. !nternational %elemeter $orp. v. %eleprompter (+eadings*

a. :ettlement deal ready to be signed between P and .b. Enforceable agreement

c. Preliminary negotiations showed manifestation of intent to be bound.d. Agreement was all but formalized, so it was an enforceable agreement8 both parties withintent to be bound.

i. #o issues left about which to bargain.e. #eed clear and convincing proof of intent to be bound before contract signed.f. 0efault rule

i. A contract is not binding until a closing with signatures and a deliery, but anagreement could be determined prior to that with 5clear and conincing6 eidence

of an intent to be bound prior to closing./. +.


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e. -o need for considerationto prove that promises of merchants are not gratuitous. Presumeto be executory.

7I -ROISSOR9 ESTO--EL

A. Genera$1. Purpose

a. %o compensate a promisee where he has reasonable relied on a promise by incurring costs

the expectation that the promise would be fulfilled.b. Promise must induce reasonable reliance and must be definite and substantial in character irelation to the remedy sought.

. $ategoriesa. "amily promises L :eldom Enforced.b. $haritable :ubscriptions L 3ften Enforced, but would institution want it soNc. Promises to insure L 3ften Enforced.d. +etirement Benefits L 3ften Enforced.e. Preliminary #egotiations L :eldom Enforced.

&. Re"#ire%ents8 R 2d 0ith note, grandfather influenced her to alter her position in the expectation

that note would be paid when due. (reliance was not wor5ing for 1 year;reasonably expected her to rely (intended for reliance*; sufficiently formal;reasonable relianceH family relationship*

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c. Promissory estoppel is designed to insure that those who reasonably rely will not end up inworse positions for relying on the promise.

,. Re&ocation of Offers

a. Pavel v. A: Mohnson (p. 4* (subcontracting bid reo&ed)i. PE! solicited bids for subcontracting wor5. Mohnson submitted a bid and was

awarded the contract. Mohnson then revo5ed their offer claiming an error.ii. PE!7s acceptance was made after Mohnson revo5ed its offer resulting in no contract.

iii. %here is no detrimental reliance by PE! that binds the subHbid.

. E%!$o%ent CasesL


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a. !n promissory estoppel, loo5 to P7s detriment. !n unust enrichment, loo5 to 7s gain.. 2nust enrichment awards damages based on mar5et value of a benefit conferred.

B. -ast Consideration/performance then promise1. yman (p. /* (A mere erbal promise, without any consideration, cannot be enforced b

action*a. $ase where P brings suit against to recover for care of son (who eventually died*. wro

a letter to P promising to pay him for the expense of caring for his son.b. A moral obligation is not sufficient to constitute valuable consideration.c. 7s promise made out of transient feelings of gratitudeCd. Promise is legally enforceable only when promisor gains something or promisee loses

something./. 0anwill v. 3yler (p. 9* (By themseles, moral obligations do not sere as consideration

necessary to form a legally binding contract*a. $ase where man paid for other man7s farm, alleges orally agreed to pay him those sums

subse-uently.b. 0oral obligations to pay bac5 are not sufficient.c. Plaintiff must have shown that there was a reasonable expectation of compensation, but

didn7t.. >ebb v. 0cI%!$ied in LaB Contracts@/ F#ant#% er#it1. #o contract at all, but an obligation imposed by law for the purpose of bringing about ustice

without reference to intent.. has received a benefit which would be ine-uitable for him to 5eep without compensating P.&. 3 elements necessary for recoery under a #uasi contract for un(ust enrichment8

a. %here must be benefit conferredb. Benefit must be appreciated and accepted by defendant.c. Acceptance and retention of benefit by the .

1. Acceptance must be such that its retention would result in unust enrichment ofdefendant and unfairness to plaintiff.

. E-uity demands compensation be paid for the benefit./. A$%: 02:% BE 3'2#%A+Q

. I%!$ied in :act Contracts1. +e-uires mutual agreement and intent to promise that isn7t express.

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. !mplied in fact contracts are not explicit, but they have agreement and consideration.&. =appen where circumstances of course of dealing and ordinary reasonable understanding show

mutual intent to contract.

Bailey v. >est (p. /* (1. $ase where there is a dispute of ownership about the horse, the plaintiff 5nows this, but still ta5es

care of horse and then bills defendant. efendant is not owner of horse.. #o implied in fact contract.

a. !mplied in fact deals with intent, and there was no intent to enter into a contract between thparties.&. #o implied in law contract.

a. P 5new of controversy of ownership, so he could not reasonably expect payment fromdefendant.

b. did not accept benefit.c. 'imitation to unust enrichment

i. !f a performance is rendered by one person without any re-uest by another, it is verunli5ely that this person will be under a legal duty to pay compensation.

:. R#$es >See Restit#tion@

1. R2d ,'< Re"#ire%ent That (enefit (e Conferred

2. R2d ,'1 eas#re of Restit#tion Interest

7III DE:ENSES TO CONTRACT

A. Genera$1. Even when there is assent, contracts may be unenforceable because they are not in accord with

substantive policies.. 2nderlying obective is preservation of bargain ideaC and norm of expanded choice.&. oluntary exchange is a good thingC because it offers people more choices than they otherwise

would enoy./. $hallenge for legal regulation is how to preserve 5ey elements8free, informed, rational choice.

B. I$$e)a$it and I%%ora$it= S#;ect atter Li%itations on :reedo% of Contract1. :ubect 0atter 'imitation

a. $ourts will not enforce contracts that involve illegal activity or are void as against publicpolicy.

b. $ontracts to perform illegal or immoral activities not enforceable.c. $ontracts based on meretricious consideration are unenforceable.

. R 2d 1'3

a. $an be unenforceable on grounds of public policy or if legislation prohibits it.

i. $an7t enforce a contract to do something illegal.&. $asesa. =ewitt v. =ewitt (p. &* (cohabitants" property rights unenforceable)

i. $ase where woman attempts to recover e-ual share of assets ac-uired over 1 yearswith cohabitation partner where they lived li5e husband and wife.

ii. $ourt held that it was against public policy in a state where common law marriage isoutlawed.

iii. $ontract not enforceable.iv. Public policy argument is against the wea5ening of marriage.

b. 0arvin v. 0arvin (p. &&* (nonmarital partners* alid contracts)

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i. $alifornia court holds that courts should enforce express contracts between nonmaritapartners except to the extent that the contract is explicitly founded on sex.

ii. !n absence of contract, court should loo5 to outward expressions of parties to see ifthere was implied in fact marriage.

c. hen women have evidence of motherHchild relationship, loo5 to intentH butHforC

who would the child be bornNiv. Public Policy

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b. !nducing someone to enter into contract by improper threat, where there is no reasonablealternative.

c. +E#E+: $3#%+A$% 3!AB'E2. R2d 1' When D#ress Threat a5es a Contract 7oida$e

a. !f a party7s manifestation of assent is induced by an improper threat by the other party thatleaves the victim no reasonable alternative, the contract is voidable by the victim.

b. ;lements=

i. !mproper threat

ii. %hreat induced assent (causation*iii. !nducement was reasonable (no reasonable alternative*,. R2d 1'4 When a Threat is I%!ro!er

/. >olf v. 0arlton (p. //* (economic duress@ physical duress)a. >olf and 0arlton entered into contract for 0arlton to build him a house. >olf contends he

never made the second payment because they didn7t receive notice; 0arlton claims they tol>olf7s lawyer. >olf wanted out of contract and his lawyer economically threatened0arlton.

b. Economic duress is e-uivalent to physical duress and can ma5e a contract unenforceable.c. efendant was not physically prevented from enforcing the contractH the impress was the

same as if physical pressure had been exertedH defendant was effectively prevented from

enforcing the >olfs to comply with the contract as if a more immediate form of coercionhad been employed.d. Acts or threats cannot constitute duress unless they are wrongful; but a threat may be

wrongful even though the act threatened is lawful.. Austin !nstrument v. 'oral $orporation (p. /1* (economic duress)

a. 'oral had contract with #avy that said if delivery late, there could be li-uidated damages ocancellation. 'oral hires Austin as subcontractor. 'oral later award second deal with #avy,tells Austin it would be awarded subcontract only ifit was the lowest bidder.

i. Austin doesn7t li5e this, demands price increase on 1stsubcontract, and says it shoulget all of ndcontract or else it would stop delivery.

ii. 'oral could not find anyone else, forced to agree.

b. 18>;? A @ is voidable on ground of duress when its established that the party ma5ing theclaim was forced to agree to it by means of wrongful threat precluding the exercise of freewill.

c. ;C/-/MIC 081;? immediate possession of needful goods is threatened.i. Prove by showing that one party to a @ has threatened to breach the agreement by

withholding goods unless other party agrees to further demands.ii. 0ust also show that threatened party couldn7t obtain goods from another source of

supply and that the ordinary remedy of an action for breach wouldn7t be ade-uate.d. %his case8

i. #o mar5et substituteii. #onHcompensable damages for loss of future business.

iii. 'oral deprived of its free willCiv. %hreat was improper L +etroactive price increases without obectively demonstrabl

reason.9. Post v. Mones (p. /1&* (duress oids salage contract)

a. $ase where boat is far from nearest port and home port when it hits bottom on an islandinhabited by thieves. 3ther boats save crew and ta5e oil on auctionC by captain.

b. =ere, there was no mar5et, no money, no competition

i. 6one party has absolute power over other.

c. argued that it gave up possible profits to save crew

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i. $ourt says that there is a liberal salvage allowance in maritime law that would ma5up for possible chance of greater profits.

d. P argues that it was in best interests of all concerned to ta5e what was offered, not suffertotal loss.

i. $ourt says they won7t enforce any @ where salvor ta5es advantage of situation.ii. P is as5ing court to ustify every sale to every salvor.

e. >here it is not fixed by statute, amount of salvage must necessarily rest on an enlargeddiscretion according to circumstances of case,

E. :RAD(0ust have misrepresentation, reasonable reliance, causation*1.


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they hadn7t been ma5ing money. Purchasers operate resort for a time at a loss and wereunable to meet payments. P7s see5 to rescind.

b. $t. holds that unenforceable b+c of 0"s fraudulent statements as to the past and presentprofitability of resort. 7s had in fact lost money and they 5ept boo5s from P7s when P7sre-uested to loo5 at them. Also, had intent to deceive P (scienter*. (>hether areasonable person in the situation would be deceied*

i. $ourt presumed that if there is a fraudulent message, there may necessarily followreliance based on nature of fraud.

c. issenti. R1 L :ale was essentially at P7s priceii. R L :tatements made by s about earnings related to future prospects, and not

current conditions./. anann v. =arris (p. /&&* (disclaimer oids fraud claim)

a. Plaintiff alleges that it was induced to enter into a contract of sale of a lease of a buildingheld by defendants because of oral representations, falsely made by defendants, as to theoperating expense of the building and as to the profits to be derived from the investment.Plaintiff see5s damages for fraud.

b. Plaintiff cannot establish reliance of misrepresentations because he signed a specificdisclaimer that defendant did not ma5e any representations.

c. Plaintiff stipulated that is not relying on any representations as to the claim it was assertswas defrauded. :uch a specific disclaimer destroys plaintiff7s allegations that he relied onoral representations.

. "+A2 A# 2%Q %3 !:$'3:Ea. efault +ule ? #o duty to disclose

i. Basis is that we want to reward speculators that turn out to be right and if parties hato disclose, there would be no incentive to ac-uire information.

b. #3%E ?If both parties hae e#ual access to &nowledge or information, no duty to disclose8->; one party is in good faith bound to disclose.

c. R2d 141 When non/disc$os#re is e"#i&a$ent to an assertion

i. "act must be 5nown to A# (one of these*.1. where disclosure is necessary to correct an earlier assertion. where disclosure would correct mista5e as to basic assumption underlying @

and disclosure re-uired by good faith and reasonable dealing.&. disclosure would correct mista5e as to writing itself./. relationship of trust and confidence between parties (fiduciary duty*

d. 3ld $ommon 'aw +ulei. #o duty to disclose in armsHlength relationship.

1. Arms length ? 1sttime doing a deal together.ii. $aveat Emptor

1. Buyer beware. 2sually, buyer has duty to investigate

e. 0odern, four factor test for duty to disclose (3bde v. :chlemeyer*i. $oncealed, latent defect

ii. angerous to property, life or healthiii. @nown to vendor and un5nown to vendee.iv. 2ndiscoverable by careful examination

f. 3bde v. :chlemeyer (p. /91* (duty to disclose termite problem)i. :eller had previously ta5en steps to remedy a termite infestation. =owever, they did

not pursue total solution because of cost and inconvenience. +esult is that premisesloo5s termite free, but in fact there is termite problem.


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ii. $ourt holds duty to disclose latent defects. :eller already 5nows the defect and thushas the lower cost to discover and reveal defect.

iii. / factor test giveniv. amages should be difference between actual value of property and value of

property had misrepresentation been true (i.e. if there were no termite problem* Lexpectation remedy.

g. +eed v. @ing (p. /9/* (duty to disclose site of murder)i. +eed purchased a home from @ing and @ing did not tell +eed that it was the site of

multiple murder. @ing told neighbors not to tell +eed, but she found out.ii. %his fact may foreseeably deprive a buyer of the intended use of the purchase.1. %his will have a negative impact on mar5et value.

iii. 0urder is uncommon enough that buyers should not reasonably be charged withanticipating its possibility.

h. 'S# hen does the party bear the ris5 of mista5eN

i. +is5 allocated to him by agreement of parties 3+ii. Aware, at the time @ is made, that he has only limited 5nowledge with respect to

facts to which mista5e relates B2% treats this as sufficient 3+

1

3+

0inds of bothparties must meet onsingle subectmatter.


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iii. +is5 allocated to him by court on ground that it is reasona$eunder circumstances.&. :herwood v. >al5er (p. 4KF* (Mutual Mista&e*

a. tells P that cow was barren and could be purchased for K, her value as stea5. P accepts7s offer. Before he could ta5e possession, finds out that cow was Twith calf7 and refuseto hand it over. :ince it could breed, cow was worth 1.

b. $ourt says that at the time they entered into agreement, both parties did in fact believe thatcow was barren and forever useless for breeding, so has right to rescind and refusedelivery.

c. can"t be enforced if8i. whole substance and very natureC of merchandise sold is different than that whichparties bargained for;

ii. mista5en identification was mutual;iii. dollar conse-uences to disadvantaged party are significant

d. $ourt7s reasoning is that parties would not have made @ except upon understanding and

belief that she was incapable of breeding, and of no use as cow.substance of thing.e. !::E#% says that parties were not mista5en in legal sense.

i. :ubstance of thing bargained for was a cow supposed to be barren by one party,believed not to be by the other.

/. Anderson Brothers $orp. v. 370eara (p. 4F* (

a. Anderson sells 370eara a barge dredge, 370eara sends engineer, not barge expert, toinspect it. Anderson is in business of dredging, 370eara is in business of oil well drilling.370eara bought a dredge which, because of its design, was incapable without modificationof performing sweep dredging.

b. =olding is unilateral mista&eon 370eara7s part.i. 370eara treated limited 5nowledge as complete and acted on it. :hould have

conducted a better examination of dredge7s capabilities before buying it.1. therefore he bears ris5 of mista5e.

c. 0ista5e on part of Anderson in assuming that 370eara intended to use dredge within itsdesigned capabilities not shared by 370eara.

i. :eller7s mista5e is P7s intended use 6 P7s mista5e is machine7s capabilitiesnot th

same.. Professional :ellersa. A professional seller that 5nowingly assumes a ris5 of mista5e cannot be permitted to have

@ rescinded when that 5nown mista5e affects him adversely.9. +eal Estate

a. 'urchaser"s information should be iewed a property, which is therefore entitled toprotection.


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i. An unreasonable failure of one party to inform other party about important aspects othe exchange.

ii. $omplete lac5 of bargaining power.iii. +educes individual7s ability to ma5e rational choices concerning the bargain.iv. Absence of meaningful choice on side of one party

,. R 2d 2here court finds contract or clause therein is unconscionable at time it was made,court may8

1. refuse to enforce @. enforce remainder of @ without unconscionable clause&. limit application of unconscionable clause.

c. $omment 1 to 2$$

i. %est is whether in light of general commercial bac5ground and commercial needs oparticular trade or case, the clauses involved are so oneHsided as to beunconscionable under circumstances existing at time of ma5ing of @.

. 2ne-ual Bargaining Power and 2nconscionabilitya. 2ne-ual bargaining power alone does not lead to unconscionability.b. 0ust have that andterms unreasonably favorable to the stronger party.

7. 0uty to 1ead

a. 3ld $ommon 'aw ? duty to read negates fraud and mista5e.b. 03E+# %+E# ? less strict duty to read standard.

4. 2nconscionability and eHforum

a. 2$$ raft bH11 extends unconscionability to internet transactions without changingmeaning of unconscionability.b. B2%, it allows for parties to choose an exclusive udicial forum unless the choice is

unreasonable and unust.K. >illiams v. >al5erH%homas (p. 4* (8nconscionability 'resent)

a. P, single mother on welfare, purchased several items from . Purchases were on aninstallment plan allowing seller to retain title to all goods until P had paid off A''purchases. P was unable to pay for the last good purchased and repossessed all the items

b. +2'E ? une#ual bargaining power and absence of a meaningful choice on part on one ofthe parties, together with contract terms that unreasonably faor other strongerD party,may constitute unconscionability. Must loo& to circumstances of particular contract.

c. $t. holds agreement unconscionable.i. Procedurally

1. :eller 5new that buyer didn7t properly understand implications of a @structured this way and she never assented to the terms.

. 5new that P had no other meaningful choice.&. :ince 5new of P7s financial position, should not have sold P stereo b6c

no necessity for it.ii. :ubstantively

1. %he crossHcollateral clause (re-uiring her to pay for all items fully beforeowning any* is unreasonable.

&

#3%E L %here mustbe some proceduralaspect to findunconscionability.


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d. "actors $ourts consideri. ithout crossHcollateral clause, it might be impossible for >illiams to ever be able

to buy any of the things she needs because of her poor credit.ii. %his type of @ common to industry, we want to encourage bargaining and expanded

choice.F. :eabroo5 v. $ommuter =ousing (p. /* (unconscionable lease clause)a. A clause in a long lease with very small print for a building under construction said that in

case the building was not finished on time, then the lease would start whenever the buildingwas finished. P claims she was unaware of the clause, and sues for return of security deposue to deal, P was forced to find housing elsewhere, so cancels lease.

b. $ourt holds unconscionable.i. Procedural

1. %echnical, hidden clauses.a. 'andlord was under affirmative duty to bring clauses to attention of

lessee and to explain their meanings.. 'ease agreements rarely negotiable; lessor in superior bargaining position,

especially where there is a shortage of locations.ii. :ubstantive

1. #o reasonable time limit, ' has affirmative duty to set forth reasonable time. 3ne sided L guarantees landlord full occupancy, leaves tenants hanging

c. ;E';1! >A-0>/10 I-C>80;0) CA--/! :I0; B;:I-0 >;A> C>A8;%:;- 0;A>I- %I!: >;;; !:A! >AC ;I!:;1 -/%>;0; /F 1;A> ;!A!

>A% /1 >AC >;A> C/8-;>.1. =enningsen v. Bloomfield 0otors, !nc. (p. K* (8nconscionability*

a. 1 page long @ for sale of a car had an express warranty limiting liability on the car. P7ssteering fails 1 days after purchase causing wife to crash. P sues for breach of impliedwarranties.

b. $ourt held term unconscionable.c. +easoning

i. >arranties originated in law to safeguard buyer, not to limit liability of seller ormanufacturer.

ii. Effect of purchase agreement language unfair.1. 0onopoly

a. #o competition among.b.


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i. :hute1. :ubstantive unconscionability (violates constitutional right* and procedural

unconscionability (small print, hard to understand, no refund*ii. $arnival

1. $onstitutional right not given up, ust limitation on where suit can bebrought, not of liability.

c. $ourt holds no unconscionability.i. P7s had notice of clause

ii. $lause benefits both sides.1. $arnival in that it spends less on litigation.. $onsumers in lower prices

iii. Even though it is a form contract, some form contracts are permissible.d. #3%E ? Prevailing rule is that forum selection clauses not enforceable !"

i. #ot freely bargained for 3+ii. $reate additional expense for one party 3+

iii. eny one party a remedy.

I -ROCESS O: CONTRACT INTER-RETATION

A. Introd#ction1. >hat to loo5 atN

a. >riting, performance (conduct*, past dealings, negotiation history, trade usage. $ontextual Approach

a. Mustice %raynor (Pacific


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1. :ubse-uent agreement. !n determining if agreement is integrated&. !n determining meaning of writing, whether integrated or not./. Establishing defenses. Establishing grounds for granting or denying rescission, reformation, specif

performance, etc./. %ests

a. :o#r Corners Test(0itchell v. 'ath*

i. ocument complete on its face is presumed to be completely integrated express ofparties intent.1. writing spea5s for itself.

b. odern conte*t#a$ &ieB8 +eects four corners test, loo5s instead to intent and evidencethat offering party see5s to introduce.

. :tandards (#3%E we are moving toward a more expansive standard*a. Co%%on LaB8 !f oral condition ordinarily would hae been included, then e$clude

extrinsic evidence.b. 214L !f oral condition might naturally be omitted, then allowextrinsic evidence.

c. 2/2


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1. 0asterson v. :ine (p. 914* (parol eidence admitted)a. 0asterson sells land to :ines, his sister, with option to buy bac5 within 1 years. 0asterson

go ban5rupt, creditors try to ta5e advantage. !ncluded in @ was a 1 year buybac5 period,where 0astersons could by bac5 land for same , sold for plus improvement costsincurred by :ines.

b. !ssue is whether there was a collateral agreement that the buybac5 option only applied tofamilyN

c. $ourt admits parol evidence, shows there is a collateral agreement regarding assignability.

d. PA+3' E!E#$E 0AQ BE 2:E %3 P+3E E'E0E#%: 3" %=E A+!%!#ant evidence to be admitted

i. 2se =unt and 0asterson to support the admissibility of additional supplementalterms.

C. er)er C$a#ses

1. !ntroductiona. $lause indicating that the writing constitutes the final expression of the agreement between

the parties.b. $urrent approach is to say merger clauses are factor but not determinative.c. %o get around parol evidence rule, claim an oral agreement was modification and then relie

on oral promise.

4


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. 0erger $lauses and "orm $ontractsa. Problem in that if merger clause is part of form contract, it may be complex and

unsophisticated parties may not understand it.b. !f too much effect is given to a merger clause, it creates incentive for the more sophisticated

party to write one, further exploiting its superior bargaining position.&. 2A>H


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i. !est of admissibility of e$trinsic eidence to e$plain meaning of written instrument

whether offered eidence is releant to proe meaning to which language ofinstrument is reasonably susceptible.

1. %wo step processa. %he language of a contract in light of all the circumstances is fairly

susceptible of either one of the two interpretations contended forCb. %=E# admit extrinsic evidence relevant to prove either of such

meaningsC

d. +ational interpretation re-uires at least a preliminary consideration of all credible evidenceto prove the intention of the parties.e. Extrinsic evidence admitted.

/. %rident $enter v. $onnecticut riting seemed ade-uately complete and understandable and completely integrated. "rigaliment !mporting $o. v. B#: !nternational :ales $orp (p. 94* (5chic&en6 used broadly)

a. $hic5en case, issue is whether @ meant :tewingC or broilingC chic5ens.b. P had burden of showing that chic5enC was used in narrower, rather than in the broader

sense, doesn7t do this.c. 1stloo5ed to meaning in contract, then to trade usage.

i. 7s intent coincided with the obective meaning of chic5en provided by definition ithe epartment of Agriculture regulation and realities in mar5et.

. GOOD :AIT8 AND CONTRACT ODI:ICATION

A. Genera$ ALWA9S I-LIES 8ONEST9 IN :ACT

1.


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d. R2d ', -erfor%ance of D#t

. CC 2/2


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/. +oth :teel Products v. :haron :teel $orporation (+eadings* (bad faith)a. 0odification of @ price when steel prices rose and there were shortages in raw materials

because of increased export demand. told P they were going to discontinue priceconcessions given to P. Eventually, parties agreed to stay at old price for a few months andthen set a new price in between original @ price and new mar5et price, because P hasnowhere else to go for steel.

b. $t. holds that modification unenforceableeven though the original @ had included a clausethat allowed reHnegotiation of price, because did not act in )ood faith. $t. sees this term

as coerced by 7s powerful position as P7s main supplier.i. $onduct was not consistent with commercial standards of fair dealing in the trade,there was no honest desire on 7s part to see5 modification and used coerciveconduct (threatening to cut off P7s supply* and was not late to other buyers, as theywere with P.

c. 0odification unenforceable under 2$$ HF8i. 3bective %est met8 Price increase leading to contract modification reasonable.

ii. :ubective %est8 $ompany was not truthful, was partially insulated from raw materiprice increases and used coercive conduct.

D. Good :aith as ni&ersa$ Ga! :i$$er

1.


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.


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i. >hat ris5s did parties foresee 6 contemplateNii. id they allocate the ris5s in the contractN

1. 'oo5 at contract, prior negotiations, agreements, trade usage.&. +estatement Approach

a. R2d 241 Dischar)e S#!er&enin) I%!racticai$it

i. %here, after a is made, a party"s performance is made impracticable without his

fault be 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 i

discharged unless the language or the circumstances indicate to the contrary.b. R2d 24 Dischar)e ( S#!er&enin) :r#stration

i. !f purpose is s#stantia$$ fr#stratedwithout fault by the occurrence of an event thnonHoccurrence of which was a basic assumption on which the contract was made,his remaining duties to render performance are discharged, unless the language orcircumstances indicate the contrary.

c. R2d 244L Existing !mpracticability or "rustration

/. 2$$ Approacha. CC 21 E*c#se :ai$#re of -res#!!osed Condition

i. :eller is excused from timely delivery of goods contracted for, where hisperformance has become commercially impracticableb6c of unforeseen supervenin

circumstances not within the contemplation of parties at time @ was made.. Problem of "oreseeability (Allocation of +is5*

a. 0ust loo5 to see who is best able to manage ris5b. >hich of the parties was intended to bear the ris5 that performance would in fact be

rendered impossible by the particular eventN9. "rustration (@rell $ase*

a. Buyer saying the value of the obect is near zero.i. #o reason to perform; will no longer get benefit from performance.

ii. :omething happens after contract that has decreased value of performance.iii. $ould render performance8 it7s not too expensive; however value of performance is

really low.

4. !mpossibility (unbar 0olasses, %ransatlantic, Easter Air 'ines*a. !f a court concludes that performance of the contract has been rendered impossibleC by

events occurring after the contract was performed, the court will generally dischar)ebothparties.

b. All or nothing claim.c. %hree factor test ("rom %ransatlantic*

i. 2nexpected $ontingencyii. "ailure to Allocate +is5 for it.

iii. Co%%ercia$ i%!racticai$it

1. +endering performance is infeasible

. %oo costly to perform.K. !mpracticabilitya. !f due to changed circumstances, performance would be commercially infeasible, the

promisor may be excused ust as he would be if performance were literally impossible.. O:: 8OO

i. Agreed performance is impracticable because of occurrence of contingency, thenonoccurrence of which was a basic assumption of the contract >2/41>a@@

1. 0ust be extremec. ON 8OO

i. 2nexpected price increases

&&


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1. Especially when price increase wasforeseeable.

F. %aylor v. $aldwell (p. KF* (Impossibility)a. Plaintiff and defendant entered into contract for the use of a music hall, which was essentia

to the contract. A fire, without fault of either party, destroyed the music hall.b. %he parties must from the beginning have 5nown that it could not be fulfilled unless when

the time for the fulfillment of the contract arrived some particular specified thing continued

to exist, so that, when entering into the contract, they must have contemplated suchcontinuing existence as the foundation of what was to be done.i. !mplied condition of continued existence is necessary.

ii. $ourt found the contract was based on the continued existence of the music hall andperformance is excused.

1. =owell v. $oupland (p. K&9* (Impossibility)a. Plaintiff and defendant entered into contract for delivery of potatoes. $rop disease destroye

much of the crop. efendant delivered some, but not all, of potatoes.b. Performance was impossible.

i. %here is a condition implied before performance that the potatoes should be inexistence.

11. $arroll v. Bowersoc5 (p. K&4* (Impossibility but recoery)a. Plaintiff contracted with owner of warehouse to construct a concrete floor in warehouse.

>hen part of the wor5 was done, warehouse was destroyed by fire through no fault.efendant refused to rebuild, rendering plaintiff7s performance impossible.

b. !mpossibility of performance because of destruction of the building was not contemplatedby either partyH performance was prevented without fault and neither party can be helddelin-uent.

c. Even if performance is rendered impossible, plaintiff can still recover for some performancif defendant is unustly enriched.

1. :eitz v. 0ar5HoH'ite (p. K/1* (-o Impossibility)a. Plaintiff and defendant entered into subcontract to renovate a theater. %he contract had a

force maeure clause. efendant7s expert got sic5 and was unable to wor5 and was the onlyperson in their company who could perform the wor5.

b. $ourt found no impossibility.i. Performance is not excused for foreseeable illness by the only employee within the

company who could do the wor5 when the contract did not expressly state so andothers outside the company could perform.

1&. $anadian !ndustrial Alcohol v. unbar 0olasses (p. K/* (-o Impossibility*a. P contracted to buy molasses from , who ac-uired it from third party refineryDoutput of

refinery goes down, given less amount.b. argues that duty to deliver was conditioned upon the production of the refinery.c. #o impossibility

i. :hortage by refinery was unforeseen but not unforeseeable.

ii. +is5 allocated to 1. !f would have made a timely @ with refinery, could have assured itself of

sufficient supply.d. Business could not be transacted smoothly if a presumption of nonperformance were at the

root of its engagements.1/. @rell v. =enry (p. K4* (Frustration*

a. %he @ing7s coronation case. @ing gets sic5, =enry doesn7t pay balance.b. $ontract was frustratedc. %est

&/


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i. >hat was the fo#ndation of the contract1. 'oo5 to surrounding circumstances. Parol Evidence used.

ii. >as the !erfor%anceof the contract !re&entedN1. !s there the absence of an assumption of the existence of a particular state of

thingsNiii. >as the event which prevented the performance of the contract of such a character

that it cannot reasonably be said to have been in the conte%!$ation of the !arties a

the date of the contractNd. %he procession was an implied condition in the contract and its nonHexistence excusesperformance.

1. 'loyd v. 0urphy (p. K4&* (-o frustration of purpose)a. Plaintiff leased to defendant a premises for the sole purpose of selling automobiles. "ederal

government then restricted the sale of automobiles. efendant contends that this restrictionhurt his business and he vacated.

b. >aws or goernmental acts that ma&e performance unprofitable or more difficult or

e$pensie do not e$cuse performance.

i. %he sale of automobiles was not made impossible but merely restricted, therebyma5ing it less profitable.

c. %his ris5 of war was foreseeable so the ris5 was assumed.19. %ransatlantic "inancing $orporation v. 2: (p. K/F* (-o Impossibility)

a. P was shipping coD:uez war leads to canal being closedDBoat has to go through $ape ofhich failure was unforeseeableiv. +is5 not specifically allocated to complaining party.

c. !s change in price a foreseeable contingencyNi. #eed more than unprofitability, need unustness.

d.


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a. P and enter into @ so that P can breed his horses with 7s horse. sells horse to peoplin @entuc5y. 1strepudiation is in 7s letter (not ta5en 6 repudiation retracted when offersto service horse in @entuc5y*

b. Anticipatory breach occurs when one of the parties to a bilateral @ repudiates the @.i. +epudiation can be expressed or implied.

1. Express is a clear, positive, une-uivocal refusal to perform.. !mplied results from conduct where promisor puts it out of his power to

perform so as to ma5e substantial performance of his promise i%!ossi$e.

a. -o repudiation until there is conduct which remoes the power toperform.

9. %ruman "latt v. :ara 'ee :chupf (p. KF9* (repudiation then retraction)a. Plaintiff and defendant entered into a contract to sell a parcel of land. %he transaction was

contingent upon the buyer obtaining a zoning license. %he public opposed the re-uest forrezoning and plaintiff withdrew the re-uest. %hey offered defendant to purchase the land atlower price but defendant did not accept. Plaintiff later said it would fulfill original contracbut defendant refused.

b. Plaintiff did not repudiate the contract but, even if they did, they retracted the repudiationbefore defendant changed their position in response.

c. An anticipatory repudiation may be retracted until the other party has commenced an actio

or otherwise changed its position.

i. "or party to treat repudiation as breach, must give notice to other party or materiallychange their position in reliance.

C. S#stantia$ -erfor%ance

1.


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/. Macobs W Qoung v. @ent (p. 94* (substantial performance)a. P contractor built house for without using pipe specified in @, though the pipes used wer

comparable in -uality. 2sing other pipes is not willful L it was agood faith breach. %herewas no difference in value of house b6c other pipes were used L therefore defect wasinsignificant. did not complain for F months. $ost of replacing pipes would be huge.

b. $ourt he$dthat contractor had s#stantia$$ !erfor%ed even considering the @ hadspecifically called for +eading pipes.

c. $ourt nullifies party7s intent in favor of a more economically sound policy b6c the main

obective of the @ was a wellHconstructed house.i. >hat is ust and fair e$ posteis derived from e$ anteintention of @.d. +eplacing pipes would be econo%ic Baste.e. amages

i. iminution of value based on the use of other pipes.ii. $ost of performance is out of proportion.

D. The E*!ectation -rinci!$e

1. American :tandard v. :chectman (p. F4/* (cost of completion)a. =aving decided to close its plant, plaintiff made a contract with defendant to remove the

e-uipment, demolish the building, and grade the property as specified. Plaintiff filed suit fohis failure to complete grading and to ta5e out certain foundations as promised.

b. >hen the breach is only incidental to the main purpose of the contract and completionwould be disproportionately costly, courts have applied diminution in value measure. (MacoW Qoung*

c. !n this case, it cannot be said that the grading and removal were incidental to plaintiff7spurpose in the contract.

i. %herefore, cost of completion is correct measure.. Peevyhouse v.


39/46

1. Reasonably foreseeable consequential losses.. !nclude value of opportunities foregone as well as costs of actions ta5en.&. Benefit ? approximates optimal level of enforcement8 pay for loss of benefit

of breach./. %radeoff ? ifficult to measure accurately, and have high administration and

error costs.. $i%itationis foreseeability.

c. 1estitution Interest

i. !nterest in having restored to him any benefit that he has conferred on the otherparty.1. 0easured by value of the benefits conferred upon promisor by promisee.

ii. R2d ,'


40/46

(. Cases Re$ated to What T!e of Da%a)e to ABard

1. "reund v. >ashington :-uare Press (p. FF* (nominal e$pectancy interest)a. P7s boo5 was not published after he relied on commitment from press that it would publish

boo5. P then spent 1, of his own money to publish the boo5 himself. P had beenpromised a percentage of royalties under original @ with .

b. P7s e$pectancy interestis the advance and the royalties.i. Advance was paid and royalties were too speculative so expectancy damages were

nominal.c. 0amages are not measured by what defaulting party saed by breach, but by the naturaland probable conse#uences of breach to '.

. :ullivan v. 37$onnor (p. FF* (1eliance damages)a. P contracted with for a nose ob that said would improve P7s appearance after

operations. P was not satisfied with poor results. :he ended up having to undergo a &rdoperation. :he is left with no further surgical options to improve nose.

b. $ourt awards reliance damagesi. -o e$pectancy damagesbecause they were too speculative

c. >hat she gets under reliance damagesi. 3ut of poc5et expenses for all & operations

ii. 0oney damages for worsening of conditioniii. 'ost earnings of obs she had before surgeryiv. Pain and suffering associated with all & operations.

d. Pain and suffering issuei. P sued for pain and suffering which is not typically awarded in @ cases since @

remedies are generally limited to foreseeable results. !n this case, pain and sufferinwas foreseeable.

1. $ourt only awarded pWs for &rdoperation.e. !f expectation damages awarded, would have gotten

i. 'ost earnings, out of poc5et expenses for &rdop., money for pain and sufferingassociated with &rdoperation only

1. value of @ nose L value of actual nose.f. !f court had awarded restitution damages, P would only get her out of poc5et expenses paid

to for & operations.

C. S!ecific -erfor%ance

1. R2d ,0>a@ and ,4A&oidai$it@

/


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a. !nured party is under a legal obligation to ta5e (or else to be presumed to have ta5en*reasonable steps to avoid waste and minimize cost of breach.

b. =aving become aware of promisor7s nonHperformance, inured party is expected to suspendor terminate his own performance and has no claim for expenditures beyond that time.

c. R2d ,< A&oidai$it as a Li%itation on Da%a)es

i. %he inured party is not !rec$#dedfrom recovery by the rule stated in subsection (1to the e*tent that he has %ade reasona$e #t #ns#ccessf#$ effort to a&oid $oss.

d. +oc5ingham $ounty v. 'uten Bridge $ompany (p. 1* (duty to mitigate)

i. is a county that had contracted to build bridge with P. %he @ raised controversy,and the board rescinds @.P had already incurred costs of 1F but continueswor5ing until completion.

ii. $ourt reverses an award for P.1. :ays P entitled to recover 1F plus anticipated profit only.

iii. After an absolute repudiation or refusal to perform by one party to a , the otherparty cannot continue to perform and recoer damages based on full performance.

1. P, so far as he can w6o loss to himself, must mitigate the damages caused by7s wrongful act.

e. Par5er v. %wentieth $enturyH"ox "ilm $ompany (p. 1&* (no duty to mitigate)i. :hirley 0ac'aine entered into @ with "ox to play lead in movie version of

Broadway musical for 4,. "ox canceled musical and offered 0ac'aine femalead in western film. 1st@ included right of choice in who was involved with filmand the film was to be filmed in 'A. nd@ had no such choice and was to be filmedin Australia.

ii. $ourt held that 0ac'aine had no legal obligation to mitigate damages by acceptingwestern.

iii. eas#re of Reco&er a Bron)f#$$ dischar)ed e%!$oee1. ;mployer must show that the other employment was comparable

substantially similar) to that of which the employee had been depried)

. Employee7s reection of or failure to see5 other available employment of adifferent or inferior 5indis not re-uired to mitigate damages.

iv. issent says this is an issue of fact that should be for ury.

:. Re$iance and Restit#tion

1. @izas v. >ebster (p. 11* (1eliance damages)a. efendant terminated a program whereby clerical employees of the "B! received

preferential consideration for obs as special agents with the "B!. 0oney damages wereawarded on the basis of rough usticeC in the trial court.

b. $ourt concludes where the value of the expectancy is speculative, the reliance measure ofdamages is the appropriate measure.

i. +eliance measures are appropriate here, even though they exceed expectancy damagec. $ourt concludes that even though the benefit was not guaranteed, it still had value.

. 2: v. Gara $ontracting (p. 1K* (1estitution damages)a. Plaintiffs sued Gara to recover for wor5 performed and e-uipment supplied in the

performance of a contract to extend an airport. Gara entered into subcontract with plaintifffor excavation of material, etc. uring the course of performance, plaintiffs encounteredunexpected soil conditions, which made the wor5 more difficult, and they claimed this worwas not re-uired in the contract. Gara too5 over the completion of the contract.

b. !he measure of recoery by way of restitution should be considered with respect to thecontract and the alue of the performance to the defendant, including the cost of labor and

materials. restitution based on un(ust enrichment and conferred benefit)

/&


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c. Because plaintiff was not in breach and performance was part of the performance bargainedfor, then not limited to the extent by which defendant7s total wealth increased, but also byservices and materials as constituted the part performance.

&. Britton v. %urner (p. 111* (1estitution damages)a. P agreed to wor5 for for one year for 1 to be paid entirely at the end of the term. P -u

after F. months.b. $ourt awards restit#tion da%a)es saying that P had conferred a benefit on that could

neither be reected nor returned.

c. $ourt concludes that the party who contract for labor does so with full 5nowledge that hemust accept part performance.i. If he receies a benefit from the labor performed, oer and aboe the damage

occasioned by the failure to complete, he should pay the reasonable worth of whathas thus been done for this benefit.

G. Li"#idated Da%a)es

1. +ule is designed to allow parties to bargain, within the @ formation process, for the amount ofdamages that will be paid if there is a breach.

. !'' #3% BE E#"3+$E A:';-A>!H C>A8;.

. CC 2/'13 Li"#idation or Li%itation of Da%a)es

a. amages for breach by either party may be li-uidated in the agreement but only at anamount which is reasonable in the light of the anticipated or actual harm caused by the

breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of

otherwise obtaining an adequate remedy. A term fixing unreasonably large li-uidateddamages is void as a penalty.

9. +ule from 'a5e +ivera. >i#uidated damages clause alidwhen

i. !t is reasonable estimate at time of @ of li5ely damages from breach A#ii. #eed for estimation at time is shown by reference to li5ely difficulty of measuring

actual damages from. 'enalty Clauses

a. Basic rule is if li-uidated damages are too high relative to either actual damages or damagethat would have reasonably been anticipated at time of contract, clause will be invalidated apenalizingH ta5es into account difficulty of proving damages

b. >hen a @ specifies a single sum in damages for any and all breaches, EE# %=32


45/46

b. $ourt says loo5 at reasonableness of anticipated damagesH said this was reasonable b6cthere was no reason to anticipate that both would be lateH therefore reasonable that doublebreach would result in big losses.

i. 'i-uidated damages clause is enforceable and is not penal.c. %he court must decline to substitute the re-uirements of udicial proof for the parties7 own

conclusion.F. 'a5e +iver v. $arborundum (p. 19K* (li#uidated damage unenforceable)

a. @ to bag and deliver steel powder. P buys KF, bagging system. @ contains li-uidated

damages clause8 guarantees difference between -uantity bagged and minimum guaranteetimes a price.b. >i#uidated damages clause improperbecause it is penal and superHcompensatory.

i. %he damage formula is a penalty because it is designed always to assure 'a5e +ivermore than its actual damages and is invariant to the gravity of the breach.

c. $orrect damages here is e$pectancy damages.

EA -RE-ARATION

Plaintiff to establish breach of contract8 1* enforceable contract (assent, consideration* * breach (contract

interpretation, default rulesH substantial performance, anticipatory repudiation, excuse for nonperformancegood faith* &* remedy (P would thin5 broadlyH default is expectation damages, but reliance or restitution ospecific performance may be available*

o

Alternatives to breach8 promissory estoppel (possibly try for expectation damages*, -uantum meru

efendant defenses8 1* not enforceable contractH no assent, no consideration, public policy * assent

induced by fraud, duress, mista5eo efenses are in lieu of admitting enforceable contract but there is no breachH difference between

defenses (pertain to things that were done or not done at time contract was made* and breach(material breachH could claim substantial performance therefore no breach or excuse*

o !f loses, try to limit damages

3bective theory of assent (reasonable person standard* and default rulesshape a maority of the

doctrines used by courts that were mentioned above.

%ension b6t default rules and notion of contract law (finding and enforcing the parties7 intentH moresubective*

Co%%on/LaB Reasonin)

%hese default rules (doctrines, elements* are induced from cases

>hat are the purposes underlying enforcing contractsN

o alue maximizing cooperative venturesH social value

o %o have freedom of contract, there must be assent and no defenses.

o 0o these factual differences ma&e a difference

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