1727736
Description
Flashcards by SarahKalman, updated more than 1 year ago
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Created by SarahKalman
over 9 years ago
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| Question | Answer |
| RS 1 | A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. |
| RS 71 - 1 Requirement of Exchange | 1. To constitute consideration, a performance or a return promise must be bargained for. |
| RS 71 - 2 Requirement of Exchange | 2. A performance or return promise is bargained for if it is sought by the promissor in exchange for his promise and is given by the promisee in exchange for that promise. |
| RS 71 - 3 Requirement of Exchange | 3. The performance may consist of a. an act other than a promise, or b. a forbearance, or c. the creation, modification, or destruction of a legal relation. |
| RS 71 - 4 Requirement of Exchange | 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. |
| Hamer (ROL) | The waiver of a legal right at the request of another constitutes consideration. |
| Hamer (Facts) | Uncle promised his nephew money if the nephew would stop drinking, smoking, and gambling until he turned 21. |
| Hamer (Historical Importance) | Moves us from the benefit-detriment model to the consideration model. |
| 3 Benefits of the Consideration Model (Without Holmes) | 1. Respect for autonomy/individual liberty 2. More objective (puts objective values on what may have different subjective values to the contracting parties) 3. Predictable outcome benefits bargain makers, courts' efficiency, society doesn't have to pay for overburdened courts. |
| Holmes's 2 Benefits of the Consideration Model | 1. Gives notice to the parties 2. Evidence of the transaction for later |
| Mehra on Bargain for Exchange (2) | 1. It helps us identify when parties made a choice about what they wanted and invoked legality. 2. BFE is a proxy for something we can't measure, wanting to be in a binding agreement. |
| Dyer (ROL) | Forbearance of a legal claim, even if invalid, can be consideration if it was honestly/in good faith thought to be valid. |
| Dyer (Facts) | Employee was injured, went on leave, and came back to work where the employer verbally promised lifetime employment in exchange for not bringing a legal claim, but then was fired. |
| Dyer (Policy Harms to Invalidating the Agreement - 3) | 1. Incentivizes employers to act in bad faith in the future. 2. Limits autonomy to make our own choices. 3. Would imply that future settlements (considered final) could be re-settled. |
| How to Hamer and Dyer compare? | Both were forbearing on a legal right, even though in Dyer that legal right wasn't really valid he thought it was and thus had value to him. |
| Dyer - Explain the objective vs. subjective model of looking at the term in question. | Forbearing on a legal right that isn't valid has to be in good faith, which should be determined by looking at the facts: 1. Objective: Is there any reasonably ground to believe the claim existed? 2. Subjective: Did this personal honestly believe that the claim existed? |
| Boehm (ROL) | Forbearance of a legal claim, even if invalid, can be consideration if it was honestly/in good faith thought to be valid. |
| Boehm (Facts) | Boehm, an unmarried woman, got pregnant and told a man that he was the father. If he paid child support, she wouldn't file a paternity claim in court. A doctor later informed the man he couldn't be the father. He stopped paying child support, but court found in Boehm's favor. |
| Boehm (Policy Issues supporting this agreement - 2) | 1. It would have been easier to make other arrangements for the child at birth rather than at 2.5 years when support was withdrawn. 2. We don't want society at large to bear the burden of raising a child - public assistance cost, long-term costs of bad apples. |
| RS 74 Settlement of Claims | 1. Forebearance to assert the surrender of a claim, or a defense, which proves to be invalid is not consideration unless: a. the claim or defense is in fact doubtful because of uncertainty as to the facts or to the law, or b. the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. |
| What is a Peppercorn? | AKA Gratuitous Promise - Something given as a pretense for consideration. It is not valid consideration unless it is shown that some subjective value exists and it isn't a pretense (like in Dyer and Boehm). |
| Feinberg (Consideration ROL) | Past consideration is no consideration. You cannot bargain for things already done. |
| Feinberg (Facts) | A woman worked for a company for 37 years, they gave her a raise and retirement benefits. She continued to work, then retired soon thereafter when they paid her for 4 years - then stopped. (No consideration, Yes reliance) |
| Mills (ROL) | Moral obligation is not consideration, it is a bare promise. |
| Mills (Facts) | A boy was on a ship, got sick, and a doctor tended to him but he died. The father offered to pay the doctor but then reneged. |
| Mills (Policy Reasons for not finding a K) | A legal obligation may crowd out the moral reasoning of individuals. It changes a feeling of shame to the feeling of settling a debt, so they are less likely to comply. Remember the Israeli daycare example. |
| Webb (ROL) | An exception to the moral obligations rule - in an emergency situation, without the opportunity to contract, we may find BFE for a promise after the fact when they would have made the deal given the opportunity. |
| Webb (Facts) | A man was clearing a building of wood blocks, throwing them off the second floor of a building to the floor. The boss walked underneath the landing path in the middle of a throw, so Webb flew with the wood to avoid the man's certain death and was injured. Afterwards, the employer made a promise of lifetime support. |
| Webb (Policy reason for upholding) | Saving a life is recognized as a material benefit (remember benefit/detriment?) which can be consideration for a subsequent promise to pay. WHY? We don't want potential life-savers ignoring peril because they may not be compensated. |
| Webb: How do the specific terms of the agreement play a role? | Because the contract was very specific, it was obviously their intention to be bound. It also expresses to the employee that they can rely on that promise in ordering their affairs. |
| Webb: What two main issues had to be overcome to find a contract? | 1. Past consideration = no consideration 2. Moral obligation, not a legal obligation |
| Harrington (ROL) | A humanitarian act, not voluntarily performed, is not consideration. |
| Harrington (Facts) | A man was beating his wife, she ran to the neighbor's house. The man came to the neighbors house to beat her more, the wife is about to swing an axe to his head, then the neighbor intervenes and stops the axe but injures her hand. Man promises to pay, doesn't. |
| Harrington: Why isn't this a K like in Webb? | The court is hesitant to make a contract in absence of bargain for exchange, and even though there's a subsequent promise there is an alternative: tort action. |
| RS 90 - 1 Promise Reasonably Inducing Action or Forbearance | 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. |
| RS 90 - 2 Promise Reasonably Inducing Action or Forbearance | 2. A charitable subscription or a marriage settlement is binding under Subsection 1 without proof that the promise induced action or forbearance. |
| RS 90 - 1: Name 4 things that changed between the 1st and 2nd RS. | 1. Removed the requirement for reliance of a "definite and substantial character" which was an issue in Feinberg. 2. Becomes more concrete by requiring that action to actually be induced. 3. "Reasonably Expect" moves the burden from individual motive (subjective standard) to that of a reasonable person) objective standard. 4. Allows the remedy to be limited so that the rules can better fit individual situations. |
| RS 90 - 2: What changed between the 1st and 2nd RS? | It made charitable donations exempt from the BFE model - they no longer have to show reliance. |
| What is the problem with BFE that leads to the need for promissory estoppel? | It left too much room to induce action in another party without any accountability/enforceability. |
| Kirksey (ROL) | Incidental actions because of a promise do not necessarily mean that reliance was induced. Without inducement, there is no basis for promissory estoppel. |
| Kirksey (Facts) | A woman's husband died, her brother-in-law offered her a house on his land as a gesture of goodwill, she left her home and moved in with him then a couple years later was kicked out. |
| Kirksey: Why wasn't there promissory estoppel? | Her actions were not induced by the letter from the brother-in-law, they were merely incidental since she obviously can't bring her land with her. |
| Ricketts (ROL) | Reliance on a promise which induces actions can result in promissory estoppel. |
| Ricketts (Facts) | A woman received a letter from her grandfather that since non of his grandchildren work, she shouldn't have too, either, and offers her money in a savings account type setup earning interest. She quit her job, but later goes back to work with his consent. |
| Ricketts: Why is there inducement? | He induced her actions - they were a reasonable and indeed probable consequence of the gift the grandfather made. He explicitly intended for her to be able to quit her job. |
| Define promissory estoppel. | Changing position based on a promise. |
| What good does promissory estoppel do? | If these types of promises weren't enforced, someone could induce action to the detriment of the other party and then do nothing for their party. It would be unfair to the less sophisticated party. |
| Feinberg (Reliance ROL) | By relying on a promise, resulting in foregoing other beneficial opportunities, it would be unjust not to enforce the promise. |
| Feinberg: Where was the reliance? | When she chose not to work longer nor look for another job - her age was a factor (for the court) in finding gainful employment. |
| Compare and contrast Feinberg (reliance) and Ricketts. | Both relied on promises of of money and acted accordingly - quitting their jobs were foreseeable consequences of the promise. However, Ricketts was a family thing and Feinberg was an employment thing. In Rickets, quitting her job was the intent of the promisor. |
| Feinberg (reliance): What issue from the 1st restatement resigning on the promise of retirement benefits fulfill? | The reliance was of a definite and substantial character. |
| Wright (ROL) | Assuming a commitment voluntarily, resulting in the other party foregoing a valuable legal right and relying to their detriment, results in an enforceable contract. |
| Wright (Facts) | A woman sued for child support for her daughter and son - only one of which was actually fathered by the man (Wright). The man knew this, though, and had assumed the role of parent for the son - gave him his name, support, held him out as his son in the community, etc. then stopped supporting him when the child was 10. |
| Wright (Dissent Opinion) | This is a moral obligation, not a legal one. |
| Wright (Concurring Opinion Policy Issues - 2) | 1. For the child: An injustice to the child since he was told that he could depend on Wright and to break that commitment will cause the child harm. 2. To society: When a child suffers, society suffers (but really, they don't want to pick up the tab). |
| What effect does time have between promissory estoppel and bargain for exchange? | In BFE, there's a contract and you've had some kind of exchange - the passage of time is irrelevant (ignoring time-based contractual clauses). In promissory estoppel, time may matter (like the 10 years in Wright). |
| Cohen (ROL) | Enforcement of the promise was required to prevent an injustice where another suffered a harm by relying on that promise. Promissory Estoppel cares about the justice between the parties. |
| Cohen (Facts) | A political advisor leaked negative information about an opponent to a newspaper and the reporter promised anonymity. His identity was included in the story and as a result was fired from his job. |
| Cohen: When Cohen relied on that promise, was it reasonably expected? | Yes, Cohen's reliance was reasonably expected because secrecy is a hallmark of the news media in America. |
| Cohen: What effect did the 1st amendment have? | None - SCOTUS ruled that the telling of the truth in the media could be done without revealing the source. The 1st amendment wasn't offended by enforcing the confidentiality promise. |
| Why do we like BFE more than PE? | It's more black and white - we have an interest in predictability and certainty. |
| Define executory contracts. | A contract that remains wholly unperformed or for which there remains something still to be done on both sides. |
| Anson (Principles of Law) Quote on Discharging Executory Contracts. | "If a contract is wholly executory, and the legal duties of the parties are as yet unfilfilled, it can be discharged by mutual consent, the acquittance of each from the other's claims being the consideration for the promise of each to waive his own." |
| When filling gaps, what are they moving away from and why? | In gap filling, they move away from looking only at the agreement/text because they want to look at what the parties are trying to achieve and help them do that. |
| Give the pros and cons of gap filling. | Pro: There's isn't a trap door in agreements so parties can just get out of the contract. Con: The court is willing to do more work when trying to create/enforce these types of agreements. |
| When are courts especially likely to use gap filling? | Courts are especially likely to use gap filling when there are certain terms in play where there are common or customary meanings, or when there's a definition in the UCC (if it involves goods). |
| RS 75: Exchange of a Promise for a Promise | Except as stated in 76/77, a promise which is bargained for is consideration if, but only if, the promised performance would be consideration. |
| Wood v. Lucy, Lady-Duff Gordon (ROL) | The written agreement implied certain actions on the defendant even though they weren't expressed, making it a contract because there was consideration. Used gap filling. |
| Wood v. Lucy, Lady Duff-Gordon (Facts) | Wood was a retailer and went into an agreement with Lucy-Lady to use her name to peddle goods. She then goes off and lends her name to others, undercutting Wood's sales. Lucy-Lady said there was no contract because Wood wasn't bound to do anything. |
| Lucy-Lady Quote about something being instinct with obligation. | "A promise may be lacking, and yet the whole writing may be 'instinct with an obligation,' imperfectly expressed." |
| What is the policy implication of gap filling? | It may help to protect the weaker side of a transaction when they thought they were contracting. |
| UCC 2-306 - 1 Output, Requirements, and Exclusive Dealings | A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate to any normal or otherwise comparable prior output r requirements may be tendered or demanded. |
| UCC 2-306 - 2 Output, Requirements, and Exclusive Dealigns | 2. A lawful agreement by either the seller or the buyer for exclusive dealing in the kinds of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sell. |
| How was UCC 2-306 used in Lucy-Lady and EAL? | It was used to fill gaps to show good faith on behalf of the non-breaching party. |
| How does UCC 2-306 work as a gap filler, and what is the effect? | If this kind of agreement exists, it will insert the assumption that best efforts applied. In situations where you don't want best efforts, that different standard would need to be agreed to by both parties and included in the agreement (ie, reasonable efforts, specific performance measures, etc.) |
| Strong (ROL) | There was no consideration for the promissory note, it was an illusory promise, since the uncle could exercise his rights at anytime - undermining the promise. |
| Strong (Facts) | An uncle sold a business to his neice's husband, who signed a promissory note but default. The uncle promised to call in the note when he wanted to, not at that moment, if the niece would also sign a promissory note. She brought suit. |
| Compare and contrast Strong and Hamer. | While in both cases there was a waiver of a legal right (in Strong the uncle doesn't call in the note for 2 years), here the forbearance wasn't asked for. See RS 71 - it must be asked for. |
| What is an illusory promise? | It looks like something of value has been promised - but it's an illusion. It's not really worth anything. |
| Mattei (ROL) | The buyer's promise was not illusory because of the satisfactory leases clause since the satisfaction is based on judgment which requires that the buyer act in good faith - which the buyer did. |
| Mattei (Facts) | A real estate developer was interested in building a shopping mall and entered into a contract with a landowner, which included a clause regarding satisfactory leases. The landowner tried to pull out of the agreement, saying that that clause made it illusory. |
| Mattei: What are the policy issues involved here? | "Satisfaction" as a term in real estate contracts like this are good overall because it helps to make sure that the land is suitable for the use - maximizing resources. |
| Compare and contrast the promises in Mattei and Strong. | In Strong, the uncle's promise really had nothing holding him to a specific term. In Mattei, there is a gap filler that requires that he act in good faith - so it's not illusory. |
| Mattei: What is the type of satisfaction clause useful for objective values, and what is the standard? | 1. Useful for objective values - reasonable person standard. "In those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously and the standard of a reasonable person is used in determining whether satisfaction has been received. |
| Mattei: What is the type of satisfaction clause useful for subjective values, and what is the standard? | 1. Useful for subjective values, when used in Good Faith there is consideration. "Those involving fancy, taste, or judgement. Where the question is one of judgment, the promisor's determination that he is not satisfied, when made in good faith, has been held to be a defense to an action on the contract." |
| Easter Air Lines (ROL - 2) | 1. Reduced profits does not make a contract impracticable. 2. Courts use gap filling for "requirements" clauses to show when one party has fulfilled their part of the bargain. |
| Eastern Air Lines (Facts) | Gulf promised to sell out to EAL under a requirements contract, meaning that EAL would buy everything they needed from Gulf. Two-tier pricing took over, it changed the effect of their index, so Gulf claimed that it made the contract impracticable. |
| Eastern Air Lines: What is the policy consideration for not nullifying this contract? | If this contract was nullified, it would set a dangerous precedent for nullifying contracts when they aren't maximizing profits and people would be getting out of contracts all the time - to the detriment of the other party. |
| What does it take for a contract to be impracticable? | A hell of a lot - lost profits aren't good enough and there are limits to how much work the courts will do. |
| UCC 2-614 - 2 | If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or manner provided by the regulation discharges the buyer's obligation unless the regulation is discriminatory, oppressive, or predatory. |
| What is restitution? | Restitution is a broad term used to embrace all of the grounds for recovery based on unjust enrichment; it doesn't exist if someone on purpose conferred that benefit, as opposed to by accident or because they were mislead. |
| Compare the Cotnam and Collano in terms of the policy implications of finding a contract. | There are greater policy reasons for paying doctors to provide potentially life-saving professional services than to make sure that a gardener is paid for planting shrubs. |
| Cotnam (ROL) | Acting in good faith, the doctor should be able to recover for services performed on an unconscious person. |
| Cotnam (Facts) | A man was thrown from a trolley, hitting his head and landing on the ground - unconscious. A passerby alerted a doctor who performed an unsuccessful surgery in an attempt to save his life. Doctor sued the estate for payment. |
| Cotnam: Did the doctor receive full payment? | No, the doctor can only recover his costs to make him whole - not the typical service rate that would be contracted for under normal circumstances. |
| What does it mean when a contract is implied in fact vs. implied in law? | Implied in Fact: When the parties' conduct (facts) show that there was an agreement. Implied in Law: When it's treating as a contract in the interest of fairness/policy even though there isn't one in fact. |
| Cotnam: Name 3 policy reasons for enforcing a contract here. | 1. It makes for a more uniform system since historically some people in this situation would get paid and others wouldn't. 2. We don't want doctors only treating people that they had an existing contract with because they wouldn't be paid for the others. 3. We want to encourage people to provide necessities to those who can't legally contract. |
| Compare and contrast Cotnam and Webb. | In both cases, the court found that the parties would have contracted for the exchange if given the chance, but in Webb there was an explicit promise and in Cotnam the man died. |
| Compare and contrast Cotnam and Collano. | Collano had the opportunity to contract, and policy issues are much stronger for attempting to save someone's life and planting shrubberies. |
| Collano (ROL) | There was no restitution available to because they sued a third party who was not party to the original act and there were alternatives. |
| Collano (Facts) | A gardener planted a shrub for a homebuyer, but the homebuyer died before they closed on the home and after the shrub was planted. Collano sought to have the developer pay for it, but they refused. |
| Why do quasi-contracts (a theory of restitution) exist? | To make a plaintiff whole when another party has been unjustly enriched and there aren't alternatives to recovery. |
| What is the common thread in quasi-contracts as expressed in Collano? | "The common thread is that the plaintiff expected remuneration from the defendant or, if the plaintiff were aware of the true facts, would have expected remuneration from the defendant at the time that the benefit was conferred." |
| Define assent. | Assent is agreement, approval, or permission, especially verbal or nonverbal conduct reasonably interpreted as willingness. |
| What does assent imply? | It implies that both sides have a reasonably clear conception of what they are giving and getting. |
| Explain the objective versus subjective theories of assent. | The objective theory looks at outward manifestations of intent, while the subjective theory looks at what an individual was thinking at the time. |
| What does Learned Hand say about the objective theory of assent? Quote + 2 | "A contract has, strictly speaking, nothing to do with the personal, or individual intent of the parties." 1. Certain acts, usually words, ordinarily accompany and represent a known intent. 2. Introduces the reasonable man idea into contracts. |
| How does the objective theory of assent benefit contracts? | The objective theory of assent benefits contracts by being able to interpret them on fact without any "gotchas" and society at large via the court system through predictability. |
| What is the concern about the objective theory of assent? | We worry if the courts should interpret a contract without looking at the parties' intent. |
| Under the objective theory of assent, can a party unintentionally enter into an enforceable contract? | Yes. Saying something that's the opposite of what you mean or think (sarcasm, mistake, joking) can result in an enforceable contract if the other party doesn't reasonably know that you didn't intend it. |
| Why does Judge Jerome Frank think the objective theory of intent has gone too far? (2 reasons) | 1. It treats all situations the same way. It ignores the original intent of one or both parties. |
| Lucy (ROL -3) | 1. Outward manifestations signal the intent of the parties. 2. When a person's words and actions, judged under a reasonable standard, demonstrate an intent to agree to a contract, his or her unexpressed subjective state of mind is irrelevant. 3. There can only be one reasonable interpretation of an outward manifestation of intent unless an unreasonable interpretation is know by both parties. |
| Lucy (Facts) | A man and his wife, the Zehmers, were talking with another man at a bar - and they agreed to sell a farm for a set price. Lucy had the write the agreement on the back of a check, and rewrite it to add terms, and had both Zehmers sign it. The husband told the wife it was a joke, but no one told the buyer. |
| Lucy: Does undisclosed intent matter to forming a contract? | No. Under the objective theory of assent, "undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is know to the other party. |
| Lucy: Gilmore (The Death of a Contract) says what about the difficulties of subjective intent? | "If...the actual state of the parties' minds is relevant, then each litigated case must become an extended factual inquiry into what was 'intended,' 'meant,' 'believed,' and so on. If, however, we can restrict ourselves to the 'externals,' then the factual inquiry will be must simplified." |
| According to Corbin, what is an offer? | "An offer is...an act whereby one person confers upon another the power to create contractual relations between them...It must be an act that leads the offeree reasonably to believe that a power to create a contract is conferred upon him..." |
| According to Corbin, what is excluded from being an offer? | "Invitations to deal or acts of mere preliminary negation and acts evidently done in jest or without intent to create legal relations." |
| What medium is required of an offer? | An offer resulting in a contract can be done in just about any medium, so long as the "communications are 'sufficiently clear and concrete' to establish such intent." |
| Owen (ROL) | An offer is an act that must express the will or intention to allow an offeree to reasonably believe that they have the power to create a contract. It excludes situations that evidence intent to deal or open negotiations. |
| Owen (Facts) | Owen sent a letter to Tunison asking to buy a property for 6k. The seller replied that "it would not be possible to sell unless I was to receive 16k cash" to which Owen replied that he accepted. Tunison then refused to sell his property. |
| Harvey (ROL) | Only the offeror has the power to give terms to the contract - an offeree cannot transform the offer. That would be a counteroffer, which is a rejection + new offer. When it's ambiguous, the offeree cannot force the deal. |
| Harvey (Facts) | Kingston, Jamaica case. The buyer telegraphed the seller asking two questions (will you sell + lowest price). The seller only responded to one (lowest price). Buyer telegraphed accept but the court found no agreement because there was no offer - it was a mere opening of negotiations. |
| Why wasn't there an offer in Harvey? (2 reasons) | 1. The buyer knew that other buyers were involved. 2. When the seller responded with the answer to one question, but not both, it should have signaled that it was to open negotiations. |
| What is an acceptance? | An acceptance is an outward manifestation that shows an intent to be bound. |
| Must notice of acceptance be given? | Yes - Unless the offeror has otherwise, expressly or impliedly (Carbolic), waived the requirement for notice. |
| When and how must notice of acceptance be given? | In a reasonable period of time and in a reasonable manner (unless otherwise contracted). |
| When can an offeror withdraw their offer? | Before the acceptance. |
| When is an offeror bound? | Once an offeree has accepted an offer - even if notice hasn't been received by the offeror. |
| At what point has acceptance occurred? | An offer is accepted when the offeree makes an external manifestation showing the intent to be bound. |
| When is an offer revoked? (2 ways) | 1.When notice of the revocation has been received by the offeree. 2. When the offeror dies (not upon notice of death). |
| When is indirect revocation possible? | Indirect revocation is possible if the notice is received through a 3rd party or the offeree should have known about the revocation. (Dickinson) |
| What is the mirror image rule? | The acceptance must be the exact same terms as the offer. If any terms are different, it is a counter offer (rejection + new offer). |
| Lefkowitz (ROL) | An advertisement, while generally considered to be an invitation to make an offer, may be considered an offer when it promises something in exchange for clear, definite action and leaves nothing open for negotiation. |
| Lefkowitz (Facts) | There was an ad in the newspaper for a specific item for a specific price, first come-first served, with the date and time. Nothing was left to question, but the store tried to say the sale was only for women. |
| But what about the Pepsi Points case? | Though it was specific, it was obviously too good to be true and they weren't specific people or groups of people. |
| International Filter (ROL) | The form of the offer may require some final approval - but acceptance is when there was an external representation, not upon receipt of notice. The notice must be given in a reasonable way in the reasonable course of events. |
| International Filer (Facts) | There was a travelling salesman who sold something to Conroe but required final approval. Conroew tried to yell countermand, but IFC had already accepted in Chicago and sent notice via a letter. |
| White (ROL) | There must be an act (objective) must indicate the intent (subjective) to be an outward manifestation of acceptance. |
| White (Facts) | An office was being outfitted and an negotiations went back and forth between the owner and the contractor. The owner said "upon agreement...begin at once" and the contractor went and bought lumber. |
| White: Why weren't his acts an acceptance? | He bought the lumber, which is an act, but nothing about that lumber or what he did with it indicated an intent to enter into that specific contract. |
| Ever-Tite (ROL - 2) | 1. An offer may be withdrawn before its acceptance and no obligation incurred thereby - but an offer is acceptance when the act showing intent occurs. 2. A reasonable time to communicate this acceptance is presumed, based on the facts, circumstances, and evident intent of the party unless otherwise contracted. |
| Ever-Tite (Facts) | The roofing case where the homeowners applied for financing for a roof, after a few days the roofing co. got financing approval, loaded a truck, and drove to the property. There were other roofers already there. |
| What are the two possible methods of acceptance? (Given in White) | 1. Performance - good for when paperwork is screwed up or there is a timing issue. 2. Written - good for creating a binding agreement when it's not going to happen immediately. |
| Carbolic Smoke (ROL) | A offeror may dispense with the requirement of notice of acceptance expressly or impliedly. |
| Carbolic Smoke (Facts) | There was this carbolic smoke ball that, if inhaled regularly, was supposed to prevent flu with a guarantee for success. A woman used it, it didn't work, and she tried to collect. |
| Allied Steel (ROL) | Even if a form of acceptance is plainly worded but is in suggestive language (i.e., merely a suggestion for acceptance), then the offeree may accept in another manner, such as performance, and be bound bu the stated terms. (This was a case where the offeree tried to get out of the contract after beginning performance.) |
| Allied Steel (Facts) | There was a purchase order for conveyors that had an indemnification stricken clause. Then, a modification was made and included the clause. It said that a copy "should" be returned to the buyer, which was construed as not a requirement. A worker was injured because of Fords's negligence (which would invoke indemnification), and Allied tried to get out of it. |
| Corinthian Pharmaceutical (ROL) | Shipping non-conforming goods can be acceptance unless the offeree seasonably notifies the offeror that the shipment was an accommodation. |
| Corinthian Pharmaceuticals (Facts) | Corinthian got word of a cost hike in a vaccine from a third party and ordered way more than they usually do, which was confirmed by an automated system. The company's policy was the price things when shipped. They sent a smaller portion of the order at the good price, but said it was an accommodation and gave them a change to modify their order. |
| UCC 2-206 is a default rule for goods that modifies the mirror image rule. Why? | It tries to track with the reality of ongoing business relationships involving frequent non-conforming shipments and repeat dealings. |
| How does UCC 2-206 accommodate business practices? (4 ways) | 1. The seller can't always give the goods requested. 2. Carelessness somewhere in the supply chain doesn't absolve someone of contractual duties. 3. Sometimes those non-conforming goods work out to be fine. 4. It is easier for suppliers to rely on contract formation by making the process easier and faster. |
| What is the major effect of UCC 2-206? | For goods, it circumvents the mirror image rule when acceptance is performance (allowing non-conforming shipments). |
| What is the major effect of UCC 2-207? | For goods, it circumvents the mirror image rule when acceptance is a promise (terms sent back don't have to be the exact same). |
| UCC 2-207 - 1 Additional Terms in Acceptance of Confirmation | 1. 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. Note: When the situation is not “between merchants,” an acceptance varying the terms of the offer can still be an acceptance, but the new or additional terms do not automatically become part of the contract the way the that they may do “between merchants” based on 2-207(2) |
| UCC 2-207 - 2 Additional Terms in Acceptance of Confirmation | 2. The additional terms are to be construed as proposals for addition to the contract. Between MERCHANTS, such terms become part of the contract unless: a. the offer expressly limits acceptance to the terms of the offer; b. They materially alter it; or c. Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. Note: When the situation is not “between merchants,” an acceptance varying the terms of the offer can still be an acceptance, but the new or additional terms do not automatically become part of the contract the way the that they may do “between merchants” based on 2-207(2) |
| UCC 2-206 - 1 Offer and Acceptance in Formation of Contract | 1. Unless other unambiguously indicated by the language or circumstances, a. An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances b. An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, BUT such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. |
| Dickinson (ROL - 2) | 1.A promise to keep an offer open until a certain period of time is only a promise (not binding) unless consideration has been given for it. 2. Indirect Revocation: If an offeree has reason to doubt that the offer is still open for acceptance from a reliable source, it can act as a revocation. |
| Dickinson (Facts) | Dickinson wanted to buy real estate from Dodds, who made an offer to sell it to him with a promise to hold it open for a period of time. Before the deadline, Dickinson heard from a third party that Dodds had sold the land to someone else so Dickinson tried to accept immediately. |
| What is the battle of the forms? | At common law, there is the mirror image rule - but that's circumvented by the UCC (206/207). So, parties often pass one-sided terms back and forth and a final contract isn't signed - resulting in the last shot (trying to be the last one that sent terms). |
| Step Saver (ROL) | Under UCC 2-207(2b), the box-top license may not be included as an additional term of a contract if it materially alters the terms of the agreement. |
| Step-Saver (Facts) | A distribution company bought software and distributed it, but their customers were dissatisfied. The boxes had a a license on the individual packages including a warranty disclaimer that said opening the package constituted acceptance of those terms. |
| ProCD (ROL) | If a buyer is presented with additional terms and offered the opportunity to reject and return the goods, and subsequently does not reject the goods, then the buyer will have accepted those terms. |
| ProCD: How was acceptance demonstrated? | By not returning the good after the term was known. (UCC 2-606(1)(b)) |
| UCC 2-204 - 1 Formation in General | 1. A contract for 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. |
| UCC 2-204 - 2 Formation in General | 2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. [Contractual Ripening - a gradual process] |
| UCC 2-204 - 3 Formation in General | 3. Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. |
| UCC 2-606 - 1 What Constitutes Acceptance of Goods | 1. Acceptance of goods occurs when the buyer a. after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity, or b. Fails to make an effective rejection, but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them, or c. Does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him. |
| Hill (ROL) | Additional terms included in a box become part of the contract between the parties, even if the purchaser is unaware of the additional terms and the purchaser's acceptance of the terms is by not returning the item purchased. |
| Hill (Facts) | The Hills bought a Gateway computer and it was shipped to them. Inside the box were terms, but the Hills didn't read them. When the Hills had a problem and tried to sue, they found that there was a contract formed by their not returning the good. |
| Drennan (ROL) | When an offeree relies on an offer, or the offeree can reasonably expect that the offeree will rely on an offer, the offer cannot be rescinded for mistake unless the offeree knew or had reason to know (should have known) that it was a mistake. |
| Drennan (Facts) | The subcontractor submitted a low bid for a paving project, which the GC then submitted as part of a larger project bid. Later, the defendant refused to perform because they said they made a mistake. |
| Drennan: What is the reasoning for enforcing the subcontractors bid? | The subcontractor, by submitting the bid, was inviting performance by the contractor to submit his bid, get the work, then paying the subcontractor for work. When the GC submitted the bid to the school district, part performance began under RS (1st) 45. |
| RS (1st) 45 Revocation of Offer for Unilateral Contract; Effect of Part Performance or Tender | If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by the contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time. |
| RS (1st) 45 Revocation of Offer for Unilateral Contract; Effect of Part Performance or Tender | If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by the contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time. |
| RS (2nd) 45 Option Contract Created by Part Performance or Tender | 1. Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. 2. The offeror's duty of performance under any option so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. |
| Define Type I Preliminary Binding Agreements | Tribune Type 1 Contract: Basically a contract, just waiting for the forms. "A fully binding preliminary agreement, which is created when the parties agree on all the points that require negotiation (including whether to be bound) but agree to memorialize their agreement in a more formal document. Such an agreement is fully binding: it is 'preliminary in form only in the sense that the parties desire a more elaborate formalization of the agreement...It binds both sides to their ultimate contractual objective in recognition that, despite the anticipation of further formalities,' a contract has been reached..." |
| Define Type II Preliminary Binding Agreements | Tribune Type II Contract: Binds them to good faith negotiations on open terms. "Does not commit the parties to their ultimate contractual objective, but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the...objective within the agreed framework...Indeed if a final contract is not agreed upon, the parties may abandon the transaction as long as they have made a good faith effort to close the deal and have not insisted on conditions that do not conform to the preliminary writing." |
| Channel (ROL) | Where the parties exchange promises of value to each other, they can be found to have provided consideration sufficient to support a binding agreement to negotiate in good faith. This is a binding preliminary agreement. |
| Channel (Facts) | There was a homestore company that wanted to lease a piece of property and they came to an agreement, via letter of intent, with the property owner that they would withdraw the property from the market and negotiate only with the homestore company. They both complied, and the homestore took expensive actions showing their intent to make the lease happen, but then the property owner put it back on the market. |
| What are the policy reasons for Tribune Type II agreements? | Formerly, these agreements to agree were rejected, but now they are considered to be preliminary binding agreements. This is because increasing complexity requires wider acceptance of both preliminary binding agreements (like Channel) and/or subsidiary agreements (Like Drennan's implied subsidiary agreement to keep the offer open because of the foreseeable chain reaction of SC/GC bid processes). |
| What is the history of the UCC? | The law tries to track the underlying issues to be addressed. In olden times, only the few and wealthy needed contracts. And economic resources became more spread around, more and more people needed to contract. As industrial manufacturing changed the world and the sale of goods increased, there was a need for transactional rules to make the process of contracting easier and cheaper. |
| What is the general policy reason for the UCC as default rules for goods? | They are often what we think that the parties should or would have wanted - so they'll apply unless the parties craft their agreement to reflect a different standard. |
| Ortelere (ROL) | A person entering into a contract by reason of mental illness incurs only voidable contractual duties provided he cannot act in a reasonable manner and the other party had reason to know of his condition. See also RS 15. |
| Ortelere (Facts) | A teacher had a breakdown and left teaching due to mental illness. She collected benefits from teacher retirement based on the higher amount, but they expire at her death, as opposed to a lower amount that would continue to go to her husband. He brought suit. (Dissent considers additional facts.) |
| What are the policy concerns in Ortelere (as expressed by the Dissent (d-on other grounds)? | We want to balance autonomy/freedom to contract and protecting the "security of transactions between individuals" (stability in contracting/predictability of enforcement) vs. protecting the mentally handicapped. |
| RS 15 - 1 Mental Illness or Defect | A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect a. He is unable to understand in a reasonable manner the nature and consequences of the transaction, or b. He is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition. |
| RS 15 - 2 Mental Illness or Defect | 2. Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance under Section 1 terminates to the extent that the contract has changed that avoidance would be unjust. In such a case a court may grant relief on such equitable terms as justice requires. |
| Black Industries (ROL - 2) | 1. When parties are well informed, we don't put a value on their consideration (we don't review the substantive nature of the exchange). 2. When claiming that a contract goes against public policy, the specific harm should be grounded in some kind of statute. A contract is void as against public policy if: 1.it is a contract by the defendant to pay the plaintiff for inducing a public official to act in a certain manner; 2. it is a contract to do an illegal act; 3. it is a contract that contemplates collusive bidding on a public contract. |
| Black Industries (Facts) | This case involved a contract to provide machine parts to an intermediary (plaintiff) who then sold them to the government with a markup for profit. The plaintiff brought suit when the subcontractor stopped providing the parts, and the defendant said the contract was against public policy because there was a profit markup for something involved in the war effort. |
| Black Industries: What is the policy reason for not invalidating a contract based on vague public policy arguments? (3 reasons) | 1. We value the autonomy of the parties, when well informed, to contract for themselves (including the government, who knew there'd be a markup). 2. Allowing this vague argument would swallow up contracts resulting in uncertainty. 3. We don't want to disincentivize working with the government - it would be unreasonable to make people who contract for the government essentially work for free. |
| What is the pro and con of modifications without consideration? | Pro: Sometimes contracts just need to be adjusted as circumstances change. Con: The modification could be forced under duress. |
| Why are there statutes and guidelines that allow contracts to be modified without consideration? | Because there are times when, acting on their own free will and for good reasons, people need to modify contracts. |
| Name a state whose statutes allow a contract modification without consideration, and under what circumstances it can happen. | New York - The agreement can be changed, modified, or discharged so long as it is in writing and signed by the party against whom enforcement is sought. |
| What does the UCC say about modifications to contracts without consideration? | UCC 2-209(1) allows it, unless otherwise contracted (UCC 2-209(2)). |
| Watkins (ROL) | Changes to the contract to meet changes in circumstances and conditions should be valid if the law is to carry out its function and service by rules conformable with reasonable practices and understandings in matters of business and commerce. |
| Watkins (Facts) | The plaintiff agreed to excavate to build a cellar but hit solid rock. The two parties got together and agreed to an increased price for the removal or the rock. |
| Watkins: In terms of general policy, what economic restraints are there on a party who attempts to opportunistically renegotiate terms? (6) | 1. The impact on future dealings with the other party if they do repeat business. 2. How it will affect their reputation with other parties they may contract with in the future. 3. How easy the other party can substitute the good or service. 4. If the original contract terms make the other party unreceptive to modifications (like a liquidated damages clause). 5. The possibility of them taking you to court and being granted specific relief. 6. Exposure to damages if the contract isn't modified and you breach. |
| Watkins: What is Holmes's view of duress here? | If you can express and exercise your own will, it's probably not duress. The modification is okay if it was done in free will, but duress is always a matter of degree. |
| Alaska Packers (ROL) | When there is a pre-existing duty to perform, a promise to pay more for the same performance is nudum pactum. |
| Alaska Packers (Facts) | Alaska Packers contracted with fishermen to sail from San Francisco to Alaska on a wage rate + per fish bonus. When they got to Alaska, the fisherman demanded double their wage rate and, despite telling them that he didn't have authority, the manager signed an agreement to that effect but paid the original wage rate upon return. |
| Alaska Packers: Why does the court disallow renegotiation under duress/drastic differences in bargaining power? | It would make contracts meaningless. "It would be to offer a premium upon bad faith, and invite men to violate their most sacred contracts that they may profit by their own wrong." |
| Alaska Packers: What does Posner say about the circumstances in which the contract was renegotiated? | The fisherman here had a temporary monopoly on labor and "the exploitation of monopolies is the functional meaning of the legal concept of economic duress. |
| What is the pre-existing duty rule? | A pre-existing duty is not consideration for a new promise. |
| What's the problem with the pre-existing duty rule? | It's easy to get around - just add a new element as consideration (but don't forget the Peppercorn rule). |
| What is the UCC stance on the pre-existing duty rule? | It rejects it (UCC 2-209) |
| What is the RS (2nd) stance on the pre-existing duty rule? | The Second Restatement, and most modern courts, follow this general rule, but they make an exception where the modification is "fair and equitable in view of circumstances not anticipated by the parties when the contract was made." |
| Alaska Packers: On what two grounds is the renegotiated contract void? | 1. The manager didn't have authority. 2. There was no change in circumstances and no extra services, so it was a pre-existing duty. |
| Why might advantages like expertise an experience be fair in a bargaining context? | Because the expense of acquiring such expertise would not be justified if it yielded no bargaining advantage. In enhancing the efficiency of resource allocation, "certain information...is in essence a property right, at least when produced by a deliberate search for socially useful information. The law tends to recognize such a right, and not to recognize it where the information has been casually acquired." |
| How does expertise and experience pose problems for traditional contract theory? | We want to respect autonomy, but that is difficult when bargaining is very one-sided. |
| How do we avoid the problem associated with one-sided information in the bargaining context? | We have a default rule of caveat emptor - there is a duty to inform yourself. This allows the parties to know the rules and structure their behavior accordingly. |
| Swinton (ROL) | A selling party is not liable for failing to disclose defects. |
| Swinton (Facts) | Termite House - The sold a house with termites without disclosing it, even though it is a defect difficult to detect. They were not liable. |
| Swinton: Even though it would be very difficult to discover the termites, why does the court hold for the seller? | "The law...can hardly attempt to determine liability according to the varying probabilities of the existence and discovery of different possible defects in the subjects of trade." |
| Swinton: The charge is concealment and nothing more - what did they rule out? | Fraud, there was no duty to disclose, and the seller didn't prevent the buyer from finding out for themselves. |
| Swinton: Here we had a strict application of caveat emptor, which also rewards parties who inform themselves and drive market prices. What two things de facto changed this rule? | 1. Legislative fixes requiring things like sellers' disclosures. 2. Market responses in services like Carfax. |
| Kannavos (ROL) | While a party is not required to disclose/speak at all, if they do they must speak honestly and divulge all material facts bearing on the point which lie within his knowledge. |
| Kannavos (ROL Quote) | "Because the vendors did as much as they did do, they were bound to do more." |
| Kannavos (Facts) | A buyer purchased a building which had been modified into 8 apartments in violation of zoning ordinances and without a building permit. The seller had advertised that it could be used as apartments and never disclosed the problems, resulting in trouble from the township after purchase. |
| Kannavos: What's the big deal if he could have found out the zoning issue for himself? | "Where there is reliance on fraudulent representations [and negligent misrepresentations (half-truths here)] or upon statements and actions treated as fraudulent, our cases have not barred recovery merely because they did not use due diligence when they could have readily ascertained what the true facts were." |
| What is another name for a no-reliance clause? | A big boy clause. |
| What is a no-reliance/big boy clause? | Clauses inserted into contracts indicating that there was no reliance on statements made, only their own judgement in an effort to avoid claims like in Kannavos. |
| What is an adhesion contract? | A standard-form contract prepared by one party, to be signed by another party in the weaker position, usually a consumer, who adheres to the contract with little choice about the terms. |
| O'Callaghan (ROL) | An exculpatory clause is generally enforced "unless 1. it would be against the settled public policy of the State to do so, or 2. there is something in the social relationship of the parties militating against upholding the agreement." |
| O'Callaghan (Facts) | A tenant was walking across a paved courtyard and tripped. When she sued for damages, the landlord pointed to an exculpatory clause in her lease relieving the defendant of liability from personal injuries caused by any act or neglect of the landlord. |
| O'Callaghan: Name two benefits and four problems to allowing an exculpatory clause in a lease like this. | Benefits: 1. Tenants will take more personal responsibility to prevent accidents. 2. Fewer claims needing payouts will benefit both the landlord and the tenants in the form of lower rents. Problems: 1. It absolves the landlord, not the tenants, so extra precautions by the tenants are unlikely to help. 2. When there is no meaningful choice in a housing situation like this, and everyone is using the clause, it forces the tenants hand. 3. It creates a class system with people who can afford to bargain out of it getting more rights than those who have less money. 4. It displaces tort loss resulting in a loss of the deterrent effect of tort law. |
| O'Callaghan: Characterize the spectrum ends by the majority and dissent. | The majority is looking at the freedom to contract through the potential benefits. The dissent is looking at the public policy issues in general and specifically relating to tort law. |
| Henningson (ROL) | A disclaimer or limitation of liability shall not be given effect if "unfairly procured," that is, the consumer was not made understandingly aware of it or it was not clear and explicit. PROCEDURAL UNCONSCIONABILITY (focuses on the process). |
| Henningson (Facts) | This couple bought a car and there was a warranty disclaimer in tiny print, vague terms on the back of the purchase contract. The steering on the new car broke, and they were injured. |
| Henningson: On what grounds did the court find for the Henningsons? | Because they had no real choice - 93% of auto companies were using the same language. They tie it to the standard for common carriers that the disclaimer isn't enforceable unless the limitation is fairly and honestly negotiated and understandingly entered into. |
| Williams v. Walker-Thomas (ROL) | Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced. FOCUSES ON THE CONTENT, NOT THE PROCESS. |
| Williams v. Walker-Thomas (Facts) | The poor woman buying household goods with the dragnet clause that made it damned near impossible to pay off the goods and functioned in a way that reorders household expenditures. |
| Williams/Walker-Thomas: How can voiding unconscionable clauses harm in the end? | When these unconscionable clauses are voided in the interest of protecting the weaker party, it could make the weaker parties less able to contract in the future. |
| Define unconscionable. | It shocks the conscience. |
| Why is voiding an unconscionable contract said to be a double edged sword? | On the one hand, it's good to protect the weaker party in such a situation, but on the other hand the courts can override your decisions which limits autonomy to contract and feels paternalistic. |
| UCC 2-302 - 1 Unconscionable Contract or Clause | 1. If the court as a matter of law finds that the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. |
| UCC 2-302 - 2 Unconscionable Contract or Clause | 2. When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination. |
| What is unconscionability as defined in Williams v. Walker-Thomas? | An absence of meaningful choice on the part of one of the parties, together with contract terms which are unreasonably favorable to the other party. [meaningful choice is often negated by a gross inequality of bargaining power] |
| Baby M (ROL) | While the surrogacy contract in itself was not an illegal purpose, it goes against the stated public policy goals of the legislature and the statutory intent of other statutes that deal with similar issues, making it against public policy. |
| Baby M: What reasons does the court give for not wanting baby selling? | It should be about the child, not the money: 1. If someone isn't fit to adopt, we don't want them entering the black market. 2. Fit parents could be outbid by non-fit parents to the detriment of the child. |
| Baby M: There are some things money can't buy, but those tend to be what? | Issues of bodily integrity or involving human relationships. |
| Baby M: Revocability was a big issue here, why? | In this case, the woman may not have fully understood the value of the right she was bargaining for until the birth. However, it also seems paternalistic to second guess a woman's understanding or decision. |
| Track the development of rulings involving charges of public policy. | Black: You need a statute. Walker-Thomas: We don't have a statute, but a statute was enacted in nearby locations or after the contract was made. Baby M: We don't have a statute, but the reasoning from statutes dealing with similar things can guide us via statutory construction. |
| What is the parole evidence rule? | "The parole evidence rule may preclude a determination that an agreement made prior to or contemporaneously with the writing - but not reflected in it - is part of the contract...The parole evidence rule is a rule of substantive law that, when it applies, precludes any proof that the terms of the contract are other than as expressed in the writing." |
| The effect of the parol evidence rules is that prior and contemporaneous agreements merge. Does it affect a subsequent agreement? | No. |
| Name 2 Pros and 1 Con of the Parol Evidence Rule. | Pro: 1. It prevents a jury from acting on empathy. 2. It prevents someone with bad or mistaken intentions from inventing self-serving fictions. Con: It could limit the ability to find the truth. |
| What 2 effects does the Parol Evidence Rule have because it is a rule of substantive law? | 1. A failure to object to the use of parol evidence does not bar later assertions of it. 2. Federal courts adjudicating a state claim must apply the parol evidence rule of that appropriate state. |
| What three cases look at how to figure out what's merged under the parol evidence rule? | Gianni, Masteron, and Bollinger. |
| Name 4 policy reasons for having the Parol Evidence Rule. | 1. There's a concern that we need to control frail/opportunistic/fraudulent human testimony that is distorted or false. (e.g. was it a mere negotiation or a promise?) 2. It creates incentives for parties to take the drafting of a contract seriously, cautioning the parties of the brick wall surrounding them. 3. If parties go through the trouble and expense of creating a written agreement, we want to reward them with consistency. 4. There is a concern about the litigation process, and this prevents juries from policing the bargain. |
| What two issues do we look at in the cases for parol evidence? | 1. To decide what terms we would expect the find in a written agreement, we look at the parol evidence to see if it fits. If it does, it's not admissible. 2. Mistake or fraud. |
| Parol Evidence Rule: When we look at the written agreement to see if the term is a natural fit, what two ways can we look at it? | 1. Subject Matter (like Gianni). Is the oral agreement like what's in the written agreement? 2. Type of Contract (like Masterson). What do you expect to be in that type of document? |
| What's an appropriate greeting in Boston? | Go fuck yourself. |
| Gianni (ROL) | In the absence of fraud or mistake, a written agreement is the only evidence of the agreement between two parties. As the written...is the complete contract of the parties, and it embraces the field of the allege parol evidence, evidence of the latter is inadmissible under the Parol Evidence rule. (Looks at the substance of the agreement.) |
| Gianni (Facts) | Gianni lease a room to use as a snack-type shop. In the negotiating, he agreed not to sell tobacco and claims that this was in exchange for the exclusive right to sell soft drinks. The tobacco part was in the lease, the exclusive right part wasn't, and the company attempted to lease to a pharmacy that sold soft drinks. |
| RS 209 Integrated Agreements | 1. An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement. 2. Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence. 3. Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. |
| RS 210 Completely and Partially Integrated Agreements | 1. A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement. 2. A partially integrated agreement is an integrated agreement other than a completely integrated agreement. 3. Whether an agreement is completely or partially integrated is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence rule. |
| RS 215 Contradiction of Integrated Terms | Except as stated in the preceding section, where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing. |
| RS 216 Consistent Additional Terms | 1. Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated. 2. An agreement is not completely integrated if the writing omits a consistent additional agreed term which is a) agreed to for separate consideration; or b) such a term as in the circumstances might naturally be omitted from the writing. |
| What is a collateral agreement? | An agreement made before are at the same time, but separate from, another contract; a side agreement that relates to a contract which, if the contract is unintegrated, can be supplemented by evidence of the side agreement. |
| Masterson (ROL) | Evidence of oral collateral agreements is excluded only when the finder of fact is likely to be misled. LOOKS AT THE FORM OF THE AGREEMENT. |
| Masterson (Facts) | Masterson and wife conveyed land to his sister by grant deed which included a buy-back option. Masterson goes bankrupt, and the trustee attempts to buy it to sell as an asset. Masterson and his sister say that there was an agreement that it had to stay in the family. |
| Traynor's opinion on looking at the collateral agreement, and RS 210 (cmt b) as seen in Masterson | Traynor: Look at the collateral agreement to see whether those terms look like they were intended to be included in, excluded from, or otherwise affected by the written contract. RS 210 (cmt b) says that "a writing cannot of itself prove its own completeness and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties." |
| How can a contract explicitly prove that it is fully integrated? | With a merger/integration clause that says something to the effect of "this is a complete and exclusive statement of terms..." |
| What quote best describes Traynor's view of only looking at the 4 corners to determine if a contract is integrated in Masterson? | "The conception of a writing as wholly and intrinsically self-determinative of the parties' intent to make it a sole memorial of one or seven or twenty-seven subjects of negotiation is an impossible one." |
| What is the perspective of the dissent in Masterson? | That this type of thing was exactly what the Parol Evidence Rule was trying to prevent and this guy is just trying to skirt his debtors. |
| Bollinger (ROL) | Equity permits a court to reform a written contract to make it correspond to the understanding of the parties, provided that the mistake is mutual. Mistake opens the door to oral evidence, but only if the oral evidence is directly to the issue. |
| Bollinger (Facts) | The defendant had been doing the topsoil sandwich thing for awhile, then stopped. Plaintiff contends that there was a clause in the agreement for a topsoil sandwich from construction/mining waste, but the defendant point out that there wasn't a clause to that effect in the contract. |
| In Bollinger, they found a mutual mistake based on the parties' actions - but what does the court say about the fact that the plaintiff didn't read the contract? | "Once a person enters into a written agreement, he builds around him a stone wall from which he cannot escape by merely asserting that he had not understood what he was signing." |
| Frigaliment (ROL) | There is an exception to the parol evidence rule for interpretation of a contract term that is disputed, but the plaintiff bears the burden of persuasion that there is only one reasonable interpretation more likely than not. |
| In Frigaliment, we learn about an exception to the Parol Evidence Rule for term interpretation. What is the hierarchy of interpretation? | Hierarchy of Interpretation 1. Text Itself 2. Drafts 3. Supplemental Meanings (like trade usage) 4. Policy Arguments (like when we regulate this, what do we mean? what does the economics of the deal suggest?) |
| Frigaliment (Facts) | It's the chicken case...I don't think you need the facts here to remember it. |
| There is an implied duty of good faith once you enter a contract. Why? | Without good faith, one party may be deprived of the peak of mind a contract provides. |
| Dalton (ROL) | Implicit in all contracts is a covenant of good faith and fair dealing. |
| What is interesting about Dalton relating the Kannavos? | In both cases, the parties didn't have to say anything about the term that landed them in court - but since they did, they had additional obligations. |
| Dalton (Facts) | The SAT case where he took the SAT twice, improved too much, so they put a hold on the score. The agreement said that they would review evidence of the discrepancy, so the court held that they had to review that evidence in good faith. |
| Based on Dalton, what does good faith mean? | Honesty, reasonableness, acting in accord with both parties getting what they wanted from the contract (fruit of their bargain). |
| Market Street (ROL from Posner) | While you aren't your brother's keeper, good faith means that you can't take advantage of someone for an oversight. In this case, subjective thought is important because what they were thinking could mean the different between acting in good faith and sharp dealing. |
| Market Street (Facts) | There is a sublessor of JCPenney that sends a request for money to the GM fund that owners the sale-leaseback note. They decline to provide it, so the sublessor invokes a provision in the contract that allows them to buy the property at less than market value. They didn't tell GM they intended to invoke this clause. |
| Market Street: What is the difference between exercising discretion in a way that leads to the dissolution of the contract versus a way that is legitimate? | Bad way: "The discretion-exercising party is or is not using discretion to recapture opportunities foregone upon entering the contract." Okay way: "Discretion in performance may be exercised legitimately for the purposes reasonably contemplated by the parties, including ordinary business reasons." |
| Market Street: In the bargain stage, it was okay to use your own knowledge. Why isn't that the case here? | Because you would be acting in bad faith by trying to use your knowledge to mold the contract to your advantage at the peril of the other side. |
| Name 3 Pros and 2 Cons about allowing quick breaches. | Pro: 1. If time is a factor, the other party could exploit the delay. 2. An efficient breach can benefit both parties. 3. If the parties' relationship is irreparably damaged, the lengthy time to get out of the contract is burdensome and wasteful. Con: 1. The parties made a contract to get what they wanted out of it, not spend time in court. 2. A lengthy time period to get out of a contract creates incentives to avoid litigation and work together to solve the problem. |
| RS 224 (Condition FKA Condition Precedent) Condition Defined | A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. |
| RS 230 - 1 (Termination FKA Condition Subsequent) Event that Terminates a Duty | 1. Except as stated in Subsection2, if under the terms of the contract the occurrence of an event is to terminate an obligor's duty of immediate performance or one to pay damages for breach, that duty is discharged if the event occurs. |
| RS 230 - 2 (Termination FKA Condition Subsequent) Event that Terminates a Duty | 2. The obligor's duty is not discharged if occurrence of the event a. is the result of a breach by the obligor of his duty of good faith and fair dealing, or b. could not have been prevented because of impracticability and continuance of the duty does not subject the obligor to a materially increased burden. |
| RS 230 - 3 (Termination FKA Condition Subsequent) Event that Terminates a Duty | 3. The obligor's duty is not discharged if, before the event occurs, the obligor promises to perform the duty even if the event occurs and does not revoke his promise before the obligee materially changes his position in reliance on it. |
| Luttinger (ROL) | A contract is not binding where a condition precedent to performance of the agreement was not met. After a contract has been formed you're no longer arm's length and good faith and fair dealing is required. The buyer is required to use due dilligence to meet the condition precedent to enable the other party to obtain the fruits of their bargain as it relates to that condition. |
| Luttinger (Facts) | The home sale subject to mortgage on set terms, and the attorney for the buyer went to the one lender who may give that mortgage but they couldn't get the mortgage. The other attorney offered to fill the gap, but the buyer didn't take it - and he didn't have to. The buyer used good faith and due diligence to meet the condition precedent. |
| After Acquired Evidence | In employment law, facts the employer learns after firing an employee for which the employer would have fired the employee anyway. After-acquired evidence may be used as a defense to a wrongful termination lawsuit or to limit the damages available to an employee who was wrongfully fired. For example, an employer may discover, after illegally firing an employee because of his age, that the employee stole from the employer. The employer may use this evidence to limit its damages for lost wages in an age discrimination lawsuit to what the employee would have earned between the time he was fired and the time the employer would have discovered his theft and fired him absent any age discrimination. |
| What is the positive about after acquired evidence? | We treat employees like this because we don't want business going out of business over bad employees. |
| Name 3 cons to the After Acquired Evidence rule. | 1. There is a fear that employers and their lawyers will scour an employee's record or interview co-workers to dig something up. 2. An employer might ignore employee wrongdoing, but tuck away that knowledge for the day that a charge of discrimination is made. 3. An employee might endure repeated harassment or discrimination without complaint because she knows her record is not spotless. |
| Walker & Co (ROL) | A party who wrongfully repudiates an agreement will be found to be in material breach of the contract. (In this case, it was treated as a total breach.) |
| Walker & Co (Facts) | There was a dry cleaning store who leased a sign and then a tomato hit it, they called to have it cleaned but the lessor didn't clean it quickly. The dry cleaner yelled breach and stopped payments, the sign company took them to court for damages (which were lessened, btw, for the cost to clean the sign). |
| Based on Walker & Co., from RS 275 (1st), how to we determine if a breach is material? 6 considerations | 1. The extent to which the injured party will obtain the substantial benefit which he could have reasonably anticipated. 2. The extent to which the injured party may be adequately compensated in damages for lack of complete performance. 3. The extent to which the party failing to perform has already partly performed or made preparations for performance. 4. The greater or less hardship on the party failing to perform in terminating the contract. 5. The willful, negligent, or innocent behavior of the party failing to perform. 6. The greater or less uncertainty that the party failing to perform will perform the remainder of the contract. |
| K&G Construction (ROL) | The failure of one party to render substantial performance on an agreement may allow the other to refuse to perform some or all of his obligations under the contract. (Here, it was treated as a partial breach.) |
| K&G Construction (Facts) | This was the construction case in which the subcontract caused a wall to collapse, the insurance that the subcontractor was required to have refused to pay, but the GC was otherwise satisfied with the work. The GC refused to pay the SC until the SC paid for the damage they caused, so the SC stopped working. GC offered SC to pay and return, but they didn't, so GC had to hire another contractor to do the work and sued for the difference in cost. |
| In a contract, why would or wouldn't treat all breaches as partial breaches? | We often treat breaches as partial breaches because: 1. it mitigates the peril of invoking a total breach if the breach is immaterial, 2. where the damage is mendable, the relationship can go on. However, there are some circumstances where the breach is so grievous you just have to cut ties. |
| What damages are recoverable under total and partial breach? | Total breach - you terminate the contract and recover damages for the whole contract. Partial breach - you keep performing but recover damages only for that particular breach. |
| How can a court determine if a partial breach of total breach is being charged? | By looking at actions (continued performance) or words. |
| How does a partial breach affect future claims? | In a partial breach, you can't later claim a total on that issue. |
| US v. Peck (ROL and Facts) | The conduct of one party to a contract which prevents the other from performing their part is an excuse for nonperformance. This is a clear cut case, because the contract called for Peck to supply from a specific field but the government that owns the field, and was the other party, mowed the field. |
| How does cooperation affect a contract? | If it can be shown that a cooperative effort is essential to the other party's performance, the contracting party is responsible for taking affirmative steps to cooperate even if it's not in the express agreement. Cooperation tends to come down in terms of degrees. |
| Kehm v. US (Facts) | The concrete bomb maker for the gov't had trouble making the bombs when the government stopped providing tail assemblies. |
| Kehm v. US (ROL) | The promisor's undertaking normally gives rise to an implied complementary obligation on the part of the promisee: He must not only not hinder his promisor's performance, he must do whatever is necessary to enable him to perform...The implied obligation is as binding as if it were spelled out." |
| Iron Trade Products (ROL) | When a party unintentionally makes performance harder/more costly but does not prevent performance, the other party may not breach a contract simply because it is difficult for him/her to perform his obligations on the contract. |
| Iron Trade Products (Facts) | Iron Trade was supposed to deliver rails to the defendant, but the defendant had also contracted to buy with rail suppliers who also supplied Iron Trade. Iron Trade charged that they couldn't perform at the contract price because the defendant had undercut them. |
| New England Structures (ROL) | A terminating party, when the other party has breached, does not need to convey all of its reasons in its notice of termination - absent bad faith, and absent the other party relying on the reason given to their detriment. |
| New England Structures (ROL) | A terminating party, when the other party has breached, does not need to convey all of its reasons in its notice of termination - absent bad faith, and absent the other party relying on the reason given to their detriment. |
| New England Structures (Facts) | The GC hired a subcontractor who didn't provide enough workers, a provision in the contract, and gave the required notice of five days to the SC that it was terminating the contract. SC was preventing by GC from working at the site and GC sued for the difference between K price and the cost to hired a new SubC. |
| New England Structures: How does the rule that you don't have to give all of the reasons for terminating a contract because of a breach work for and against the policy goal of contracting parties working together to resolve their disputes? | For: There is an incentive to put all your cards on the table or risk other factors not being allowed in (likely to result in losing the case) if the other party relies to their detriment. Against: By not actually requiring all of the reasons to be laid out, it limits the other party's ability to fix the party. |
| Define Anticipatory Repudiation. | When a repudiation has been made before the time for performance has arrived. |
| How sure does the court need to be that a party has repudiated? | The court's don't find repudiation lightly - the party's language must be sufficiently positive to be reasonably interpreted to mean that the party cannot or will not perform. "It should be shown that the announcement of an intention not to perform was positive (clear) and unequivocal. |
| RS 250 When a Statement or an Act is a Repudiation | A repudiation is a. a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach under 243, or b. a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach. |
| RS 253 Effect of a Repudiation as a Breach and on Other Party's Duties | 1. Where the obligor's insolvency gives the obligee reasonable grounds to believe that the obligor will commit a breach under the rule stated in 251, the obligee may suspend any performance for which he has not already received the agreed exchange until he receives assurance in the form of performance itself, an offer of performance, or adequate security. 2. A person is insolvent who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of the federal bankruptcy law. |
| Hochster: What is a pro and con of allowing anticipatory repudiation? | Pro: It allows people advance notice to reorder their affairs. Con: When filing suit before the end of the contract term, there's a gray zone for damages due to the opportunity to mitigate damages in the mean time. |
| Hochster (ROL) | If two parties enter into a contract to be performed at a designated time in the future, and one party refuses to perform the contract before the designated time the parties agreed to perform, the other party may sue before the contract was to be performed. That party need not wait until the time for performance has passed. |
| Hochster (Facts) | A man was hired to be a courier for a summer Europe tour, but the employer tried to get out of the contract before that date. The courier brought suit before the term was set to begin but also entered into an employment agreement with another party that would be performed during the term of the first contract. |
| Hochster: What is the economic efficiency argument for anticipatory repudiation? | It is more economically efficient to allow this plaintiff to find new employment after the anticipatory repudiation than waiting and missing opportunities. |
| Hochster: Which state does not allow anticipatory repudiation? | Massachusetts. |
| Hochster: What does good faith have to do with allowing anticipatory repudiation? | When there is a contract to act in the future, a relationship is created by the contract in which there is an implied promise not to screw over the other party. |
| Sullivan (ROL and Facts) | Remedies: Expectancy, reliance, and restitution. A woman went to a plastic surgeon who promised to enhance the patient's nose in two surgeries. It doesn't, so there is a third surgery, but then it's even worse and can't be operated on anymore. What is she entitled to? |
| Sullivan: What could distinguish the importance of a promise form a plastic surgeon compared to, say, a heart surgeon? | When you have heart surgery, you aren't paying for a guarantee of success. But plastic surgery isn't heart surgery and the doctor promised her a better nose - she relied on that promise as a basis for contracting. She had an option and lost the optionality because her nose was ruined. |
| Sullivan: Which damage formula is seen as almost a Goldilocks solution? | Expectancy damages were too high. Restitution was too low. Reliance seemed just right. Note: The baseline for comparison seems to be the judge's own sense of what seems to be a good ex-post. |
| Sullivan: What are expectancy damages? | Expectancy damages, or contract damages, is the different between what was the expected outcome after the contract is performed and what actually happened. |
| Sullivan: How do expectancy damages relate to the bargain for exchange model? | What the parties expected is what they bargained for, so that is what will be awarded to get the person back to where they expected to be. |
| Sullivan: In this case, give two ways expectancy damages might be formulated and why. | The first way is a pure expectancy damages analysis: find the difference between total expected benefits and the total loss including actual costs, pain and suffering, and things like disfigurement. The second way, and what most courts would probably do, is to take away from that total the amount that she expected to pay anyway (like the costs and pain and suffering for the first two surgeries). |
| Sullivan: Which type of damages do most typical contracts use? | Expectancy damages. |
| Sullivan: What are reliance damages? | The amount that will put you back where you started, likely including everything that made her worse off but nothing above where she was ex-ante. |
| Sullivan: What are restitution damages? | Restitution damages only restores the benefit conferred on the other party. For example, in this case, the doctor was the only party in the suit - so the fee paid to the doctor is the only thing recoverable. |
| Sullivan: How does the amount typically given in restitution damages compare to expectancy or reliance damages? | It tends to be smaller than both expectancy and reliance damages. |
| Peevyhouse (ROL) | It's unreasonable to require specific performance when the cost is disproportionately excessive to the resulting value that they cause economic waste where the provision breached was merely incidental to the main purpose. |
| Peeveyhouse (Facts) | A couple lease their land the a company to do strip mining. There was a provision in the agreement that the land be filled after the mining, and it wasn't. They sought money damages - not specific performance. |
| Peeveyhouse: How does the majority view the clause to repair the land? | As being incidental to the contract, not related to the main purpose of mining the coal. |
| Peeveyhouse: The court has wide latitude for damages. What are some of the reasons that, if they so wanted, they could use to justify giving more to the Peevyhouses? | Non-Economic: 1. Moralistic theories 2. Respecting the autonomy to contract Economic: 1. How material was this to the economics of the deal? (Ex: Did they ask for a rate cut to have this done resulting in the mining company getting a windfall if not enforced? |
| Peevyhouse: The court here limits this ruling to specific situations involving mining contracts, specifically rejecting this as a construction contract. In what case does this issue come up in a construction contract and how is it dealt with? | Jacobs & Young (the one with the wrong pipe installed). In that case, they found that the breach was not material and in the interest of economic efficiency it was okay. In Peevyhouse, there was a dispute over the provision, in Jacobs & Young there wasn't and the incorrect pipe was a mistake. |
| Peevyhouse: What does the dissent hold? | The provision here wasn't incidental because parol evidence showed that they would not agree to the mining lease without the provision. |
| Peevyhouse: What four problems does the dissent see with not giving them specific performance? | 1. It would be ignoring the express provisions of the contract. 2. It would be taking from the plaintiffs the benefits of the contract and placing those benefits in the the defendant which has failed to perform its obligations. 3. It would be granting benefits to the defendant without a resulting obligation. 4. It would be completely rescinding the solemn obligation of the contract for the benefit of the defendant to the detriment of the plaintiffs by making an entirely new contract for the parties. |
| Hadley (ROL) | Collectible damages must be foreseeable: 1. The damages to which a non-breaching party is entitled are those arising naturally from the breach itself or those that are in the reasonable contemplation of the parties at the time of contracting. 2. If the special circumstances are communicated by the plaintiffs to the defendants and are known to both parties, the damages resulting from the breach of contract, which they would reasonably contemplate would ordinarily follow from a breach of contract under these special circumstances. |
| Hadley (Facts) | The mill and the broken crankshaft being sent to make a mold of the new crankshaft. The laborer told the shipper that the mill was down, but then the shipping had a delay which resulted in the mill being down for an extended period of time. |
| Hadley: As a general rule, what should damages be? | Damages should be what the natural consequences of the breach would be expected to be - a probability of what people normally think of as consequences of that type of breach. |
| Hadley: What is the exception to the general rule that damages must be normally thought of as a consequence of the breach? | If both parties have a particular type of damage in mind that from the outside may not be contemplated, it could still count. |
| Hadley: What can parties do to get around the general rule of foreseeability and why? | They can negotiate for more. It puts the burden on the parties to act in their own interests and convey knowledge that they uniquely have. |
| Virtue v. Bird SQUIB: ROL | The promisor must compensate the injured party for costs associated with reasonable mitigation efforts and attempts, whether or not mitigation occurs. |
| RS 350 Avoidability as a Liquidation on Damages | 1. Except as stated in subsection 2, damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humiliation. 2. The injured party is not precluded from recovery by the rule stated in subsection 1 to the extent that he has made reasonable but unsuccessful efforts to avoid loss. |
| UCC 2-713 Buyer's Damages for Non-Delivery or Repudiation | 1. Subject to the provisions of this article with respect to proof of market price, the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this article, but the less expenses saved in consequence of the seller's breach. 2 doesn't matter... |
| Rockingham County (ROL) | Once a contract is breached, the non-breaching party has a duty not to increase the resulting damages. He should stop work and sue for the lost profits and any other incurred costs. |
| Rockingham County (Facts) | This is the bridge case where the county stopped constructing the road and cancelled the contract and the bridge company finished the bridge anyway. |
| Rockingham: What two reasons does the court give? | 1. It inflicts damage without benefiting the other party. 2. The plaintiff should only be interested in the profit, so it should be more advantageous to collect on that and use the time to find more opportunities. |
| How is mitigation involved in the UCC version? | In the sale of goods, you can't just stop working (like in Rockingham) but you must take affirmative steps to arrange a substitute transaction. |
| UCC: Buyers mitigation | If the seller fails to deliver, they can buy substitute products on the market then seek damages based on the price difference between the market and contract price. UCC 2-712 |
| UCC: Seller mitigation | If the buyer fails to take goods, the seller should go into the market and sell them to a substitute buyer and damages will be based on the difference between the market price and contract price. UCC 2-706 |
| UCC: How does the substitute transaction system work in mitigation if either the buyer or seller doesn't find a substitute? | Buyers: UCC 2-713 Sellers: UCC 2-708 If either fails to take advantage of substitute transaction, a formula will be used based on the difference between the contract price and what the market price would have been. |
| Tongish (ROL) | This applies to goods: The breaching party is not to be penalized, but the non-breaching party should be made whole. |
| Tongish (Facts) | This was the sunflower case - where Tongish the farmer had a K for selling sunflowers, then the sunflower dealer resold them with a fee markup but otherwise contract price. Then, market price jumped and Tongish sold the seeds to someone else. |
| Tongish: In addition to the actual sunflower seeds, what did the buyer bargain for? | The options that go along with it - they could resell it, keep it, etc. |
| Tongish: What does the Scott article say? | "Market damages measure the expectancy ex ante, and thus reflect the value of the option; lost profits, on the other hand, measure losses ex post, and thus only reflect the value of the completed exchange." |
| Tongish: What is the effect of the Scott quote? | Thus, if looking at damages for the sale of goods only as ex post: if the non-breaching party laid off the risk inherited with the choice (like the buyer here did reselling it) then only allowing actual damages would result in instability by encouraging breach since the seller would get a windfall. |
| Parker (ROL 1) | This has to do with personal services: The measure of damages owed to a wrongfully discharged employee is the amount of salary agreed upon for the period of employment reduced by the amount the employer proves the employee has earned or with reasonable effort may have earned from other employment. |
| Parker (ROL 2) | Before projected earnings from other employment opportunities (not sought or accepted) can be applied in mitigation, 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. |
| Parker (Facts) | This is the bloomer girl vs the big man, big country movies. |
| Jacobs & Young (ROL) | Where the difference in quality or value is limited, you get the market difference in value because there was substantial performance. The measure of damages for a trivial and innocent omission is not the cost of replacement but the difference in value. |
| Jacobs & Young (Facts) | The wrong pipe in the house - wasn't intentionally, just an accident, and there was no disagreement of the terms. There wasn't a real difference in value, so it was viewed as substantial performance. |
| Jacobs & Youngs: What is considered in the question of the measurements of damages? (3 things) | 1. The cost of replacement (performance for either the contractor (specific performance) or the owners to do it themselves (money damages)) 2. The difference in value between what done and what was wanted 3. If the cost to complete the wanted performance is grossly/unfairly out of proportion to the difference in value after work would be done (which would be economically inefficient which would be bad) |
| Jacobs & Youngs: How does subject and objective intent matter? | If there's a compelling subjective interest, it may override the issue of difference in market value. (Example of the VT statehouse's granite source) |
| Why, historically speaking, do courts carefully evaluate liquidated damages clauses? | They used to be used to punish or deter/coerce performance. It's often a penalty couched in other terms which allows the courts to become a powerful tool to crush weaker people, causing a loss in respect for the courts. |
| Gustafson (ROL) | Liquidated damages are okay when, ex-ante, it's a good faith estimation of breach damages where damages are impossible or very difficult to calculate. |
| Gustafson (Facts) | A construction company was building the road. They were 67 days behind schedule and, per the liquidated damages clause, the court allowed the government to withhold the amount due per diem in the liquidated damages clauses. |
| Gustafson: Ex ante and ex post, how is this liquidated damages clause viewed by the court? | While the state has pretty absolute bargaining power which forces the contractor's hand, the court sees it as a fair/reasonable attempt to determine damages because of how difficult it would be to actually measure damages. |
| Lake River (ROL) | Liquidated damages clauses that are vastly disproportional to the actual damages are penalty clauses in disguise and not value. |
| Lake River (Facts) | Lake River bought new bagging machinery for bagging Ferro Carbo, and there was a promise to allow them to bag a certain amount. When sales dipped, Lake River didn't get the promised amount and attempted to collect liquidated damages - but no matter when the breach occurred it would have allowed Lake River to have a windfall. |
| Lake River: What policy reason is there for penalty clauses being bad? | They deter not only inefficient breaches, but efficient breaches also. |
| Lake River: Compared to penalty clauses, why are compensatory clauses better? | They only deter inefficient breach. |
| Wassermans (ROL) | Liquidated (or stipulated) damages clauses are enforceable if the amount of damages fixed by the contract is a reasonable prediction of the actual harm caused by the breach and do not act as a penalty. TWO LOOKS IDEA |
| Wassermans (Facts) | They entered into a lease with the township, then subleased the place to JBs. There was a stipulated damages clause that allowed reimbursement for improvements and damages of 25% of gross receipts for one year if the city reneged on the lease. |
| Wassermans: Which Restatement and which UCC provision embrace the two looks idea? | RS 356, UCC 2-718 |
| Wassermans: How does the court view remedies? | Remedies are more of a public function, not private (ie - in the K and negotiated by private parties) because if you show the parties that this is how the court will interpret and enforce contracts then you can guide their behaviors and still get three benefits: 1. Allowing parties to control their own exposure to risk 2. Avoids uncertainty, delay, cost of judicial intervention 3. Allows for a remedy consistent with economic efficiency |
| RS 356 Liquidated Damages and Penalties | (Only section 1 matters) 1. 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 term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy. |
| UCC 2-718 Liquidated or Limitation of Damages | (Only section 1 matters) 1. Damages for breach by either party may be liquidated in the agreement but only at an amount 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 non-feasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty. |
| UCC 2-716 Buyer's Right to Specific Performance or Replevin | 1. Specific performance may be decreed where the goods are unique or in other proper circumstances. 2. The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just. 3. The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver. |
| Klein v. Pepsi (ROL) | This is for the sale of goods: Specific performance is inappropriate when damages are recoverable and adequate. Specific performance of a contract is appropriate only if the goods are unique or "in other proper circumstances." |
| Klein v. Pepsi (Facts) | Pepsi was going to sell a small jet to Klein, they reneged on the deal. Klein tried to get specific performance, but there were others on the market (not unique) and he was going to resell it anyway (profit/money damages would have sufficed). |
| Morris (ROL) | Chattels rarely get specific performances because you can put a dollar amount on it and replace it - but sometimes special circumstances warrant specific performance. |
| Morris (Facts) | A man watched a farm while someone was away. While there, he broke the mustang and made it a roping horse. The court awarded specific performance because the horse was kind of customized now and the relationship between the man and horse seems unique. |
| Curtice Brothers v. Catts (SQUIB p. 628-9) (ROL and Facts) | Special circumstances may necessitate specific performance. The good may not be unique but the circumstances could matter a great deal. This was the case of tomato canning where the farmer withdrew the tomatoes from being canned. The factor can't be moved, it's hard to get other tomatoes in the very finite time period. |
| Name four reasons personal services often don't result in specific performance. | 1. Involuntary servitude is bad, maybe unconstitutional. 2. It is difficult to enforce (administrability issue by the courts). 3. It is undesirable to compel personal relationships that have already gone sour. 4. It is a moral hazard - it's difficult to monitor (= lack of accountability) + judicial order isn't a good incentive to perform well = risk that the performances will be less than idea. |
| Laclede (ROL) | Specific performance may not be ordered under the proper circumstances where the remedy at law is not adequate. It may turn on issues outside the relationship between the parties, such as when there's a public interest involved. |
| Laclede (Facts) | A gas company installed gas lines to new developments that were to eventually get a different type of system. There was a contract in place for a 2nd company to provide natural gas in the meantime, but Laclede could withdraw at anytime. There was no such provision for the 2nd company, so they claimed that it lacked mutually and tried to get out of the deal. |
| Laclede: What was the public policy interest involved here? | Other people were relying on this contract - they invested in houses and ordered their affairs based on it. |
| Laclede: There was another natural gas company - why did they still order Amoco to provide natural gas? | While natural gas isn't unique - it wasn't just about the gas. It's also about a reliable supply of it and the other supplier didn't have a readily available, consistent supply. |
| Laclede: How does the court address the administrability issue? | They feel that it's pretty easy to tell if a subdivision has been cut off from a natural gas supply. |
| What is an injunction? | A court order commanding or preventing an action. |
| Walgreen (ROL) | Injunctive relief is appropriate when money damages are difficult and costly to calculate and would not cure the ill the plaintiff seeks to cure. |
| What are the two types of equitable relief? | Specific performance and injunctions. |
| What is equitable relief? | Awards given in the interest of fairness and/or justice. |
| What is the difference between specific performance and an injunction? | Specific performance commands you to do something (typically what was in the contract) and an injunction commands you to not do something. |
| Walgreen (Facts) | Walgreen leased a store in a shopping mall, and the lease forbade the defendant from allowing another pharmacy in the mall. The defendant wanted to rent out a big space to another pharmacy and Walgreens sought an injunction to prevent it. While lost profits were measurable damages, things like loss of goodwill cannot. |
| Walgreen: What in this case is calculable but unique? | The location. But it's not used as much of a reasoning in this case because they could still use the same space even if a new pharmacy opened up in the mall. |
| In general, specific performance isn't ordered in construction contracts. What is the big exception? | If the construction is tied to conveyance of the property once the construction is done. In these cases, the construction is ancillary (def: providing necessary support to the primary activities or operation) to the sell of this unique property and it's thus sometimes viewed as an integral and necessary party of the real estate sale. HOWEVER - there are cases where the work is not so integral or primary, then the courts tend not to grant specific performance. |
| Walgreen: Posner gives the benefits in costs of allowing specific/injunctive relief - what are they? | Benefits: 1. Encourages the parties to work together to make both better off. 2. Market actors determine value better than the government/courts which also doesn't waste court resources. Costs: 1. Bilateral monopoly: the two parties can only work with eachother. The lac of alternatives means that there is a specific range of acceptable outcomes and it may be a costly and drawn out process to find that common ground. PLUS - if the negotiations break down, then the wasting of resources is inefficient. 2. Costs of supervision by the courts and potential costs/burdens on third parties. |
| Walgreen: How does Posner weight the pros and cons of injunctive relieve versus damages? | If the benefits outweigh the costs, then injunctive relief is warranted. If the costs outweigh the benefits, then damages are warranted. |
| Walgreen: What does Posner actually say about the balancing test from an appellate point of view? | The judge is not required to explicate every detail of the analysis...so long as we are satisfied that his approach is broadly consistent with a proper analysis, we shall affirm." |
| Mehra's Last Thoughts (they come from Posner) | You can't just say that something is efficient or correct. You have to take those intuitions and ground them in a series of logical steps using rules as building blocks. |
| Northern Delaware (ROL) | A court can decline to enforce specific performance if doing so would put a burden on the court when it is disproportional with the benefit of doing so. |
| Northern Delaware (Facts) | The plaintiffs and the defendant made a big money agreement to update a steel plant. The defendant was too slow, and the plaintiffs sought a court order forcing them to hire more workers. |
| Northern Delaware: On what two grounds does the court avoid specific performance? | 1. The adminsitrability is difficult - would a clerk have to sit there and supervise the quality or the work or sign all the workers in? 2. While the calculation is difficult, money can probably make up for the harm. |
| In cases like Henningson and O'Callaghan, what three things should be considered in whether or not to allow an exculpatory clause? | 1. a degree of lack of choice due to scarcity or monopolistic conditions and the resulting inability to bargain over the provision 2. problems in process, esp. in Henningsen, such as opacity or problems of form such as six-point type on the back (e.g., procedural unconscionability) that make the bargain suspect 3. the use of contract to displace public policy (esp. tort law) aimed at creating a dynamic that furthers social welfare through e.g., improvements in auto safety |
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