Contracts

1. General Rule

   Annotations:

   • A contract need not be reduced to writing to be enforceable, an oral contract is in every way as enforceable as a written contract.
   1. Exception to the rule

      Annotations:

      • Arises from the statutory requirement that certain types of contracts be in writing to be enforceable.
2. History
   1. Asumpit

      Annotations:

      • 14th Century English law. First legal theory that permitted a person to sue for damages for breach of contractual promise.
   2. Statute for the Prevention of Frauds and Perjuries

      Annotations:

      • Enacted by Parliament in 1677.
      1. Section 4 of original Statute

         Annotations:

         • Applied to: 1. Suretyship promises 2. Consideration of marriage 3. Interests in real estate 4. Agreements not to be performed in 1 year. 
      2. Section 17 of the original Statute
3. Terminology

   Annotations:

   • If the State of Frauds applies it is "within" the Statute. If it does not apply, it is "not within" the Statute.

1. Suretyship promises

   Annotations:

   • This clause applies to a contract wherein a promise is made to a creditor to pay the debts or obligations of a third person.
   1. Example

      Annotations:

      • Father (surety) tells merchant to extend credit to his son and says "If my son doesn't pay, I will".
   2. Collateral Promise

      Annotations:

      • "Secondary" promise, in that the promisor is not the one primarily liable or benefitting.
   3. Original Promsie

      Annotations:

      • The Statue does not apply and the promise may be oral.  The surety cannot make a promise to answer for a debt which is partly his own.  He cannot have personal interest or responsibility.
      1. Example

         Annotations:

         • Father tells merchant to deliver certain items to his son and says, "If he doesn't pay for them, I will."
2. Promises in the consideration of marriage

   Annotations:

   • Aimed at the fortune hunter who is also a perjurer. An honest fortune hunter who puts the agreement in writing will be protected under the law.
   1. Different from a promise to marry

      Annotations:

      • - Promise to marry: "Tarzan will marry Jane if Jane marry Tarzan." - Promise in consideration of marriage: "If Jane will marry Tarzan, Tarzan give Jane Cheetah."
   2. Breach of promise to marry

      Annotations:

      • Barred by statute in Indiana. One cannot sue to recover damages for a broken engagement.
   3. Contracts within this provision

      Annotations:

      • Those making provision for a marriage settlement or the regulation of the property rights of spouses. 1. All executory antenuptial agreements 2. Promises to make certain provisions in a will 3. Promises of dowry
   4. Performance

      Annotations:

      • Will not take promise out of the statute. Equity will not rescue the promisee.
3. Interests in Real Estate

   Annotations:

   • Applies to leases < 3 years, may be enforced even if oral if < 3 years.
   1. Applies to:

      Annotations:

      • Contracts for the sale of land or an interest therein: 1. Oil and mineral leases 2. Easements 3. Water right (MOST VALUABLE) 4. Mortgages
      1. Easements

         Annotations:

         • The right to use someone else's property in a particular way. Ex) Passing over someone's property to get to own's
      2. Water rights

         Annotations:

         • MOST VALUABLE RIGHT Appropriation: First person to divert water from the main stream owns the right
      3. Oil & mineral leases
      4. Mortgages
   2. Part Performance Doctrine

      Annotations:

      • An exception to the Statute of Frauds’ requirement that certain contracts must be in writing to be enforceable. Even when there is an oral agreement that is otherwise governed by the Statute of Frauds, the doctrine of part performance treats partial performance in reliance on the oral agreement and acceptance of such performance as evidence of an enforceable contract.
   3. Minerals
      1. U.C.C. 2-107

         Annotations:

         • https://www.law.cornell.edu/ucc/2/2-107 If seller moves mineral then it is a contract for sale of goods. - crops and timber are considered goods
4. Contracts not to be performed within 1 year

   Annotations:

   • If there is ANY possibility that the contract can be fully performed within one year, it need not be in writing.
   1. Examples

      Annotations:

      • Runs from the time the agreement is MADE 1. A hires B for 1 year starting next week - within Statute 2. A hires B for 1 year starting tomorrow - NOT within 3. A hires B for 1 year starting as soon as B can start - NOT within
5. Sale of goods
   1. U.C.C. 2-201

      Annotations:

      • A contract for the sale of goods of $500 or more is not enforceable unless there is a writing signed by the party against whom the enforcement is sought.
      1. U.C.C. 103

         Annotations:

         • Defines "Goods" Also 2-105
   2. Rejection

      Annotations:

      • 2-201(2) A merchant may be bound without signing anything if he fails to object within 10 days to a confirmation received by him
   3. Exceptions:

      Annotations:

      • 2-201 (3)
      1. Specifically manufactured goods
      2. Admissions in pleadings or testimony
      3. Goods for which payment has been made and accepted or which have been received and accepted
6. Other Applications in Indiana
   1. Real Estate commissions

      Annotations:

      • Must be in writing
   2. Doctor's promsies

      Annotations:

      • Patient can't sue unless he puts his promise in writing
      1. Hawkins vs McGee

         Annotations:

         • The hairy palm case. https://en.wikipedia.org/wiki/Hawkins_v._McGee
      2. Stewart vs Rudner

         Annotations:

         • Woman sued doctor for breach of him promise to perform a C section, claiming the operation would've prevented the death of her child. Jury awarded her $5,000

1. The writing or memorandum
   1. Should specify parties, subject matter, and any material or special terms. All with reasonable certainty
   2. ALL terms of the contract must be in writing in Indiana
   3. NOT necessary that the parties view the writing as having legal significance

      Annotations:

      • Can be a personal letter, an inter-office memo, or minutes of business officers
   4. May consist of many documents, each of which is sufficient in itself
   5. U.C.C. 2-201

      Annotations:

      • More liberal. -Need only be "some writing sufficient to indicate that a contract of sale has been entered into between the parties. -May omit or incorrectly state a term agreed upon, but is enforceable only as to quantity of goods stated. -Between MERCHANTS a written confirmation that binds the sender will also bind the receiver unless notice of objuection in given within 10 days.

Annotations:

• Where the language in a contract is clear and unambiguous, extrinsic evidence tending to show a different meaning from what the words clearly carry will not be considered by a court.

1. Definition

   Annotations:

   • Interpretation: The process of ascertaining the meaning to be given to the words used by the parties to determine the parties' intent.
2. Rules of interpretation (8)

   Annotations:

   • 1. A writing is regarded as a whole and all writings which are part of the same transaction are interpreted together. 2. All circumstances accompanying the transaction may be taken into consideration 3. Words will be given their ordinary meaning unless circumstances show a different meaning was intended. 4. Technical terms & words of art are given their technical meaning unless indicated otherwise. 5. An interpretation which gives a reasonable, lawful, and effective meaning to all manifestations of intent is preferred 6. Where there is an inconsistency between general and specific provisions, the SPECIFIC provisions will prevail 7. WORDS in a document prevail over inconsistent figures and numbers 8. WRITTEN provisions prevail over printed provisions when there is an inconsistency
3. Parole Evidence Rule

   Annotations:

   • Where the parties have reduced their agreement to writing, which writing has ben assented to the full and complete statement of terms (integration clause), EXTRINSIC evidence wont be permitted to vary or modify any of the terms and provisions.
   1. Definition

      Annotations:

      • "Parol" means "speech" or "words".
      1. Refers to any evidence written or oral which is extrinsic to the written contract
      2. Usually consists of previous agreements, negotiations, & understandings
   2. Rule of substantive contract law which defines the limits of a contract
      1. Defines rights and duties, not rules.
   3. Does NOT apply:
      1. Where the contract is party oral
      2. Where there is a clerical or typographical error which obviously doesn't represent the agreement
      3. To evidence showing lack of contractual capacity
      4. Evidence establishing a defense of fraud, duress, undue influence, or illegality
      5. To a later mutual rescission or agreed modification of contract

         Annotations:

         • But if the contract is within the Statute of Frauds, THE RESCISSION OR MODIFICATION MUST ALSO BE IN WRITING.
      6. Evidence as to usage and custom

         Annotations:

         • Because that would not vary the terms, but rather show meaning to which the parties attached to the language.

1. Historical Development
   1. A "chose in action"

      Annotations:

      • Means personal rights enforceable by a lawsuit. Could not be transferred from one person to another in early English history.
      1. Example

         Annotations:

         • Bilateral contracts weren't enforceable because early English legal theories were tried inexplicably to property and physical objects. The exchange of promises had nothing tangible to be called "property"
   2. As commerce grew, so did the idea of transfer of contract rights
      1. First step was likely the use of power of attorney

         Annotations:

         • The holder of the power of attorney could enforce the contract in the name of the original party
         1. Preserved the doctrine that a "chose in action" couldn't be assigned
         2. Power of attorney is a written doc that authorizes a person to perform acts on behalf of another
         3. Problem is that it could always be revoked
            1. Then courts of equity would step in

               Annotations:

               • They would either prevent the power from being withdrawn, or permit the assignee to maintain the suit in his own name. Before 1800, the courts of law were offering similar protection to assignees.
            2. Judicial decisions came to parallel commercial custome
            3. American courts have always recognized the necessity to exercise their powers in favor of the assignee while giving adequate protection to the obligor
2. Nature of an assignment
   1. Definition

      Annotations:

      • An assignment is a transfer or a setting over to another of the rights held by a party to a contract. It substitutes a new party to a contract & makes that new party the focus of legal relations w/ respect to the subject matter of a contract.
   2. May be oral or written
   3. Different from a promise to assign

      Annotations:

      • An assignment extinguishes the assignor's rights to receive performance from the obligor whereas a promise to assign does not.
      1. Example

         Annotations:

         • A is owed money by B, who refuses to pay. C, a collection agency, is retained by A to collect the debt for which A will pay C a percentage of any money collected from B. NOT AN ASSIGNMENT, but a PROMISE TO ASSIGN. -C may have contract rights against A but doesn't "own" the debt.
   4. Only rights under a contract are assignable
      1. Duties may never be assigned but can be delegated to a 3rd person if they don't require personal service or individual attention
         1. A professional athlete
         2. An artist commissioned to paint a portrait
   5. A party may never rid himself of his duties under a contract w/o the consent of the other party
      1. Original obligor is bound to perform duty
      2. Novation

         Annotations:

         • The obligor may be discharged from the duty if the obligee consents to the substitution. 3rd party assumes all rights and duties. HAS THE EFFECT OF TERMINATING ONE CONTRACT AND CREATING ANOTHER.
   6. To protect the rights acquired, assignee must give notice to the obligor
      1. If he doesn't the obligor can give performance to the assignor and discharge assignee, not being liable to assginee
   7. Not every contract is assignable
      1. Personal service contracts
      2. "Needs" or "output" contracts
      3. Bilateral contracts before performance by one party
      4. Contracts which expressly forbid assignments
3. Relationship of the Parties
   1. It is said that the assignee "stands in the shoes" of the assignor

      Annotations:

      • Having no greater rights than the assignor and subject to all of the claims & defenses that could be raised against the assignor.
   2. Assignment extinguishes the rights of the assignor but not his duties. Assignor is still liable for an obligations or duties
   3. An assignment cannot affect performance in any material way
   4. A contract may be assigned more than once
      1. Lease, sub-lease, sub-sub-lease
4. Implied Warranties of the Assignor
   1. An assignor warrants to the assignee that:
      1. He will do nothing to defeat or impair the value of the assignment
      2. The rights actually exist & are subject to NO limitations or defenses EXCEPT which are apparent at the time of assignment
      3. Any writing or evidence of the right being assigned is genuine.

1. Definition

   Annotations:

   • A contract in which a party promises to render a certain performance not to the promisee but to a third person. The third person is not a party and the general rue of law is that a person who is not a party to a contract has no rights in it and therefore cannot enforce its performance.
   1. However..

      Annotations:

      • If the parties INTENDED to give the third party the right to enforce the contract, then he may do so.
2. Types of Third-Party beneficiary contracts
   1. Donee beneficiaries
      1. A donee beneficiary is one whom the contracting parties intended to make a gift
         1. May sue to enforce the contract
   2. Creditor beneficiaries
      1. One to whom performance of the contract will satisfy a duty owing by a promisee to the benficiary
         1. May sue to enforce contracts
   3. Incidental beneficiaries
      1. One who will be incidentally benefitted by performance of the contract
         1. May NOT sue to enforce contract

1. Original parties may change or modify contract to the detriment of the 3PB at any time before the rights of the 3PB vest
2. Rights of a creditor and donee

   Annotations:

   • Rights of a creditor beneficiary vest when he RELIES on the original agreement. Rights of a donee beneficiary vest as soon as knows of the contract (Indiana rule) General rule: it vests automatically whether donee knows of it or not.

1. Definition

   Annotations:

   • Conditions provide an excuse for non-performance. It is any operative event the happening or non-happening of which either limits, modifies, precludes, or must occur prior to the existence of a duty of performance under a contract, or terminates an existing duty under a contract.
2. It is the natural enemy of a promise and is inserted for the protection and benefit of the promisor.
3. 3 types of Conditions
   1. Express conditions
      1. Satisfaction is an express condition

         Annotations:

         • Use an objective standard. More complicated.
   2. Implied in fact

      Annotations:

      • Conditions which are understood to be part of the agreement, although not expressly stated.
   3. Implied in law

      Annotations:

      • A condition is implied in law to make the performance by each party dependent upon performance or tender of performance by the other.
      1. Example

         Annotations:

         • Two people trading bikes and having them ready but not telling the other party, and each waiting at their own house for the other.
4. Conditions precedent

   Annotations:

   • An event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due

Annotations:

• The most common manner of discharge is by performance.

1. Anything less than full & exact performance does not fully discharge the promisor from his duty under the contract
2. Substantial performance

   Annotations:

   • If a party makes or tenders something less than full and exact performance his duties are not discharged.
   1. Deprives other party of an excuse for non-performance on his side.
      1. Doctrine holds that a party who substantially performs his duties under a contract is entitled to substantial performance by the other party
3. Material breach

   Annotations:

   • If the promisor is guilty of a material breach, he has no right to enforce the contract, unless the other party has accepted the defective performance without objection.

1. Anticipatory breach
   1. Applies in a situation in which one party repudiates the contract.
      1. Other party may sue even though the time for performance has not yet run out
2. Prevention of performance

   Annotations:

   • -If one party substantially interferes with or prevents performance by the other, such other party may be discharged. -Prevention is usually asserted in connection w the non-occurrence of a condition.
3. Time is of essence

   Annotations:

   • Words of art. Means all dates and time periods are material terms.
4. Impossibility

   Annotations:

   • Must be OBJECTIVE to result in discharge
   1. Objective impossibility

      Annotations:

      • Where performance is impossible by the promisor or anyone else. Only objective impossibility results in a discharge.
      1. Incapacitating illness or death of promisor
      2. Intervening illegality
      3. Destruction of subject matter essential to performance
   2. Subjective impossibility

      Annotations:

      • Where performance is impossible due to some personal lack of capability by the promisor
      1. Promisor goes out of business
      2. Promisor decides to retire
      3. Promisor suffers financial setbacks making him unable to perform
5. Frustration

   Annotations:

   • The parties to a contract are both discharged if supervening circumstances make impossible of fulfillment the purpose which both parties had in mind.
   1. Coronation Cases
6. Merger

1. Bankruptcy
2. Mutual Rescission
3. Accord & Satisfaction
4. Novation
   1. Landlord discharges leasee
5. Release
6. Statute of Limitations
   1. Does NOT result in discharge. Rather a bar to a lawsuit seeking a remedy

Annotations:

• Every party to a contract has a primary right to receive the exact performance promised by the other party. - The law permits an injured party to sue and compensate him for the loss he has sustained.

1. Suing is flexible and measurable
2. 3 general forms of remedies
   1. Money damages
   2. Restitution
   3. Specific performance

1. Money damages

   Annotations:

   • The measure of money damages in an action for breach of contract is that sum of money necessary to put the injured party in the same position he would have been in had the contract been performed.
   1. Fundamental theory
      1. We want to compensate the injured party for his loss
   2. Nominal Damages

      Annotations:

      • Damages in name only. An injured party may maintain an action for breach of contract even though he cannot prove any injury or loss.  All he can recover are nominal damages
      1. For people who sue "for the principle of the thing"
      2. USFL vs NFL
   3. Hadley v Baxendale

      Annotations:

      • http://www.lawnix.com/cases/hadley-baxendale.html
      1. Case limits the award of money damages to compensation for foreseeable injuries
      2. Restatement of the Law

         Annotations:

         • http://www.cs.xu.edu/~osborn/main/lawSchool/contractsHtml/bottomScreens/Briefs/Restatement%20351.%20Unforeseeability%20and%20Related%20Limitations%20on%20Damages.htm
         1. Damages are not recoverable for loss that the party in breach didn't have reason to foresee when the contract was made
         2. A loss may be foreseeable bc it follows from the breach
            1. In the ordinary course of events
            2. As a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.
   4. Loss is not limited to his expenses. Also can include lost profits and opportunities
   5. Exemplary or Punitive damages are not recoverable for breach of contract
   6. Special or Consequential Damages

      Annotations:

      • Arise in contract cases when a seller of goods expressly or impliedly warrants the goods to have a certain quality, and the warranty if breached, the seller is liable for the special damages which are the foreseeable consequence of the breach of warranty.
      1. One who sells contaminated food is liable for the medical, doctor, and hospital bills.

         Annotations:

         • The expenses are a foreseeable consequence 
         1. Different from the usual measure of damages

            Annotations:

            • Usually the measure of damages is the difference between the value of goods as they were supposed to be and the value they actually were.
         2. U.C.C. 2-714 and 2-715

            Annotations:

            • https://www.law.cornell.edu/ucc/2/2-715
   7. Liquidated Damages

      Annotations:

      • Refers to a sum of money which is specified in the contract as the amount of damage should the contract be breached.
      1. Injured party will not have to prove amount of loss
      2. Enforcement

         Annotations:

         • If the amount stated is a reasonable forecast of just compensation for a loss resulting from a breach, it will be enforced. If the amount states is in effect a penalty for breach of contract it will NOT be enforced.
         1. Restatement of the Law, 356

            Annotations:

            • http://www.cs.xu.edu/~osborn/main/lawSchool/contractsHtml/bottomScreens/Briefs/Restatement%20356.%20Liquidated%20Damages%20and%20Penalties.htm
   8. Important to remember!

      Annotations:

      • An injured party has a duty to mitigate, or minimize, his damage. A landlord has a duty to seek new tenants. Merchant must obtain goods elsewhere.
2. Restitution
   1. The return to the injured party of that with which he parted.
   2. Court is asked to restore the "status quo"
3. Specific Performance

   Annotations:

   • Consists of a court decree requiring a party to perform his contractual promise
   1. Promise must be clear, unambiguous, and relate to a UNIQUE ITEM
      1. Contract for the sale of a particular painting IS enforceable
      2. A contract for the sale of land IS enforceable
   2. The key

      Annotations:

      • Because the item is unique, no amount of money can compensate for its loss
   3. Personal services contract

      Annotations:

      • CANNOT get specific performance Thank would be involuntary servitude.
      1. Can receive in a negative covenant

         Annotations:

         • Can urge a concert pianist to not perform elsewhere for a period of time. Court will not order him to perform on a given date and time.

Annotations:

• 1. Money damages and restitution are INCONSISTENT 2. Specific performance and restitution are INCONSISTENT 3. Money damages and specific performance are CONSISTENT

1. An injured party may have to choose between the remedies available to him.