Barbri Contracts PDF

-A contract is an enforceable promise, binding agreements that provide legal recourse. 7 questions for contracts. The mnemonic device is **"Love For Dogs Treat Every Rover Terrifically."** **L:** Law- What law applies? Is it governed by common law or Article 2 of UCC governing sale of goods (anythi...

-A contract is an enforceable promise, binding agreements that provide legal recourse. 7 questions for contracts. The mnemonic device is **"Love For Dogs Treat Every Rover Terrifically."** **L:** Law- What law applies? Is it governed by common law or Article 2 of UCC governing sale of goods (anything moveable, tangible personal property)? Common law governs everything except the sale of goods. UCC is adopted in 49 states except Louisiana. Some contracts are part services and part goods, here when trying to decide on what law to apply, you should go with the all or nothing rule depending on the most important parts. This is called the **predominant purpose tes**t, ask yourself what was the predominant purpose of the contract, what part of the deal was more valuable and how much time is spent on services vs. goods and how sophisticated is the service (e.g. a surgical implant of a device in your body would be a service instead of a sal of goods), does contract contain typical sale language- that leads to be a sale of goods contract. When deciding how to proceed you should do all Article 2 or all Common law. UCC Article 2 A- covers leases of goods.. Restatement- not actual codified law, its attempts by law professors, judges and lawyers restating what the black letter law is and they\'re helpful studies of the law. Every contract needs an agreement formed and something to make it enforceable. **There are different types of contracts:** **Classified by Formation:** **Express:** By words, look at parties words in contracts. Oral or written. **Implied:** Look at parties conduct. Constructive/ Fictional/Quasi/**Quantum Meruit:** A legal obligation created to prevent unjust enrichment or to promote fairness. It\'s a fictional contract that a court recognizes, and it\'s used when there\'s no agreement between parties but one person benefits from another without paying for it. Relates to restitution remedy and its about preventing unjust enrichment. You measure this by the reasonable fair market value of the benefit conferred. **Void/Voidable** **Void-** A nullity from its inception, it never existed and no one can enforce it. **Voidable -** Gives aggrieved party option to render contract unenforceable (if contract subject matter is illegal, theres no contract) **F:** Formation- Do you have an agreement validly formed? Is there an offer? Is there acceptance? Is there consideration? Are there alternatives to consideration? -Reasonable person standard to determine if a contract is formed. (Lucy v. Zehmer- Farm sale written on piece of napkin, one party said they''re joking, court said there is a contract) **OFFER-** A manifested commitment by an offeror which justifies the offerees belief his assent is invited and would be conclusive, and terms are reasonably certain. AKA A communicated willingness to bargain seeking another's mere assent. -**If quantity is missing**, you don\'t have a legally valid offer. An exception is Requirements or Output Contract under UCC Article 2, you can have a contract which requires from all output of something to be sold. "I agree to buy all of my requirements of widgets from your factory) even if quantity is not set, courts will say theres a contract because theres a formula for setting quantity, all the requirements you need or all the output the factory produces. (hint words its an output contract: I agree to buy all, i agree to buy all my requirements, you're the sole source of supply) -**Missing price term**, you must have a price at the common law. An exception is UCC Article 2 Sales of Goods, if someone is selling a car, you can have an offer even if a party has no price. Vague and ambiguous price terms like "fair, reasonable price" thats not an offer under UCC Article 2 or Common Law. You cant sell a house without a price, thats not a valid offer at common law. -**Advertisements** - If initial communication is an ad, general rule is ads are not legally valid offers, they're invitations to bid. **Exceptions: A reward,** an ad for a reward is an offer, and the person act will be the acceptance. **Specificity is also an exception**, if quantity and manner of acceptance are specified and someone accepts, thats an offer. (mink stole case, first come, first serve case) **4 methods of termination:** **Death**- If an offer is made by someone who dies before the offeree accepts, theres no more contract. Same goes if the offeror dies. An exception is a contract completely formed while person was alive, the obligations go to the estate of the deceased. **Lapse of time -** The time stated or a reasonable time if no time is stated. **Revocation -** An offeror changes their mind and revokes the offer, you need an unambiguous language or conduct that the offeror is no longer willing to contract w/ the offeree. The offeree must be aware of the revocation before its effective. Direct revocation- offeror tells offeree they revoke. Indirect revocation - a reliable 3rd party indicates to the offeree the offeror no longer wants to contract. *(Dickinson v. Dodds- seller of a house that gave buyer until Friday, buyer learns from agent its been sold to a thor party, buyer tries to track down seller at his mom in laws to accept the offer, offer is gone because he knew from a reliable 3rd party the seller no longer wants to contract. There was no consideration to hold offer open so seller was free to revoke.)* **Offeror can revoke anytime prior to acceptance unless (4 exceptions)** 1. 2. 3. 4. **REJECTION** - All rejections must be received to be effective. **Counteroffer Rejection-** Simultaneous rejections + a new offer which terminate the original offer. (e.g. seller offers to sell house to a buyer for 100K, and seller offer 90k, that counter offer terminated the original offer) **Conditional Acceptance -** When a person excepts but or if you do something additional, its an indirect rejection because the conditional acceptance becomes its own new offer and the original.offer is terminated. **Additional Terms -** Under common law, additional terms makes a a new offer, its not a mirror image acceptance. It's not a rejection and counteroffer and the original offer no longer stands. -Under the UCC, and its a sale of goods 2-207 says there is a contract formed even though additional terms are thrown in as long as you have a seasonable expression of acceptance. -**Termination of offers due to operations of law**: 1) Destruction of subject matter terminated the offer. (e.g. building you were going to rent burns down) 2) Supervening illegality - If someone offers to do something and subject matter of your contract becomes illegal, that terminated the offer. **ACCEPTANCE -** Acceptance requires the offerees manifestation of agreement in the manner invited and time required. The offeror control the offer and the offeree must abide. Also, think about who can accept, the offeree can accept and if offer is made to a class of people (e..g law students), then anyone in that class can accept. Acceptance must mirror the terms of the offer exactly, if any term is different, thats a rejection/ counter offer at common law. \***The UCC rules in 2-207** allows additional terms, so thats an exception as long as the acceptance isn't conditional, the additional term wont doesn\'t defeat valid acceptance w/ a sale of goods. \* **If both parties are merchants,** the additional term does not defeat acceptance, it's actually automatically part of their deal unless it materially changes the offer. Merchants are held to a higher standard. \***If one or both parties are non merchants**, the additional terms aren't part of the deal, they're proposals to be separately accepted or rejected. \***The knockout rule** is when terms directly conflict w/ each other and the UCC says they knock out conflicting terms out the contract completely and the contract is only what both parties agreed upon w/ gap fillers that the UCC provides. **Silence as acceptance** - Acceptance must be communicated, silence isn't acceptance unless 1. 2. **Mailbox rule** - when you accept, the moment of acceptance is when you send it off in the mail upon dispatch, so its effective when letter is sent, not received. **Exceptions to mailbox rule**: 1. 2. 3. \- generally performance is acceptance, however, if the offeree who performed may need to give notice of performance. **C: Consideration** \- A bargained for exchange of legal value. A bargain is an exchange, a promise in exchange for a promise. You can have a promise in exchange for an act, performance, or forbearance. *(e.g. Hamer v.s Sidway, uncle offer nephews 5k to refrain from drinking and swearing until he is 21, thats consideration)* -Regarding legal value, courts don't look into how equivalent the exchange was and if consideration was adequate. *(e.g.Batsakis v.Demostis- lender lending 500,000 drachma only worth \$25, and borrower didn't want to have to pay it back because they felt it was inadequate consideration but contract said they do have to pay it back.)* -**Nominal consideration will not support a contract.** (e.g. Dad selling daughter house for \$1, we know its not a real contract and just a joke.) (e.g. Schnell v. Nell - P promises to pay 3 people \$200 that his wife had loved and left money for, turns out her will was invalid and he said he promised to pay them \$200 in exchange for a penny and then he reneges, they sought to enforce and court says thats only nominal consideration, a sham transaction, not a serious bargained for exchange of legal value) However, don\'t confuse this with possibility of value. (e.g. you buy a start up for 10K that turns out to be worthless, thats still consideration) - **Past consideration**- An act in the past now being recognized w/ a gift promise. (e.g CEO saying to top employee, in recognition of your past 30 years of service, I offer you 1K a month for the rest of your life.) - This is a gift, no consideration, that was past consideration, they already got paid for their past work. However, if they added if he retires on top of 1K a month, thats consideration. **Illusory promise** - An empty promise manifesting no commitments. (e.g. I promise to buy your house if I feel like it) There is no mutuality for consideration. However, watch out for non illusory promises, with the satisfaction clause. (e.g. I agree to pay you \$50 if you paint a picture to my satisfaction. Law implies the obligation of good faith, so thats not an illusory promise, they can exercise personal satisfaction but it must be in good faith and cant be used as a pretext to get out of a contract.) **Output or Requirements Contract - UCC Article 2 -** Sale of goods where one party is contracting to buy all output of something or all products there business requires, these contracts do contain consideration and satisfy bargain for exchange. It is no illusory even though quantity isn't exact, because there\'s a formula for figuring it out. **Exclusive Agency Contracts** (e.g. one party says they will represent a band as their exclusive agent, not all terms and duties are specified, the other party cant later allege its an illusory promise to get out of the contract because law implies obligation of good faith. For exclusive agency, according to the UCC it requires best efforts to do what exclusive agents would do even w/ no terms specified. (e.g. Wood v. Lucy- A contract to use lucy's exclusive name on fashions and give her 50% profits, but she sells her name to other people and tries to get out the contract saying his obligations were not all specified but court said thats an exclusive agency contract and imply good faith and imply reasonable efforts to be made by both parties. **Modification Issue** - At common law, the rule is different that UCC rule, modification must have separate consideration to be enforceable at the common law. In the UCC, all modification require is good faith. At common law its pre existing legal duty rule stating doing what you\'re already legally obligated to do, is not new consideration for a promise to pay your more money to do that, you'd need new consideration to support the modification or it violates common law pre existing legal duty rule *(e.g. Alaska Packers case- contract made by fisherman to catch salmon in exchange for \$50 but when they get to Alaska they go on strike and ask for \$100, the ships captain reluctantly agrees but when they go to collect the ships captain refuses due to the pre existing legal duty rule, and that there was no consideration, they were already obligated to catch salmon for \$50)* **Exceptions:** -If theres **new or different consideration** to offer, thats no pre existing legal duty, theres ana agreement to change of the obligation. -If there\'s an **honest dispute** as to what the duty was, there, if parties enter into a modification to do the work one party thought they didn\'t have to do, that modification is enforceable. -**Unforseen circumstances** - A party begins performance and discovers an obstacle neither party could have foreseen at time of contract formation, that party can ask for additional money and modify the contract because of unanticipated circumstances encountered. **Substitutes for Consideration** - 1. 2. 3. 4. **Modifications made under the UCC** - **Promises to pay legal obligations already barred by law** - - - - - - **FORMATION DEFECTS DEFENSE** **Mistake** -A factual error regarding a fundamental matter that has a material effect on the agreed exchange. The adversely effected party can void the contract, provided they did not bear the risk of the mistake. *(e.g. Mutual mistake - both parties suffer from factual error Sherwood v. Walker - Rose the 2nd Cow, buyer and seller bargained assuming she was a a barren cow and they priced her as such to be sold for beef, before shes transferred to buyer seller discovers shes pregnant, seller was granted rescission because he shouldn\'t have to sell a fertile cow at a barren cow price)* *(e.g. Unilateral mistake - One person is confused, these cases are harder to make the defense. When a palpable mistake is made, a very obvious one, the law wont let you take advantage of palpable mistakes and relief may still be granted.)* **Misrepresentation** - An innocent or negligent untrue assertion of fact or omission. It renders a contract voidable, giving aggrieved party the option to get out, if it was material and induced detrimental reliance. (e.g. seller offering to sell for 100k and says her house has no termites to her knowledge, buyer can seek to void the contract even though the buyer was mistaken) **Fraud** - A deliberate or intentional lie or omission, it renders contract voidable if innocent party is deceived to their detriment. **Duress** (TWO types) - where one person makes unlawful threats or otherwise engages in coercive behavior that causes another person to commit acts. Physical - One party is forced to enter into a contract by the threat of immediate physical harm or violence from the other party, this renders contract void as if it never existed. Economic - An improper or wrongful threat to not carry through with a contract obligation which leaves no reasonable alternative but to agree, this renders the contract voidable by the adversely effected party.(Austin v. Loral Corp) **Unconscionability** - Procedural - Absence of meaningful choice in bargaining process (i.e. unfair surprises) *(e.g. Williams v. Walker Thomas Furniture- Ms Williams rents items from a rent to own furniture shop, the bill is around \$1200, she pays off \$1100 and defaults on last payment and they repossess everything she had rented, they had a clause that allowed them to do it, that is unconscionable, this was procedural unconscionability, she had a highschool education and didn't know what she was signing and there was substantive unconscionability, very harsh and oppressive terms)* Substantive - Refers to terms of deals themselves, unreasonably harsh and oppressive terms, something that shocks the conscience. **Ambiguity** - Something not obvious on face of contract but appears as the context unfolds. 3 requirements (Raffles v. Wichelhaus- Peerless ship case, a contract for sale of cotton to arrive by ship buyer is thinking about October ship, Seller is thinking about December ship, when cotton doesnt arrive in October, buyer says theyre in breach, and seller is thinking of December, court said neither knew two ships were sailing in night, so there was no contract according to court) 1. 2. 3. **Absence of Capacity Defenses** **Infancy -** Contracts by people under 18 years old is voidable by the minor, unless they are for necessities like food, clothing, shelter, medical care or the contract was ratified by the minor at the age of majority which is 18 which means they formally approve and accept all terms. Some jurisdictions draw exceptions to minor married to adults and treat the minors as adults, also for educational loans the age of majority is 16. **Insanity** - A contract is voidable by one who is unable to understand the nature and consequences of the transaction. **Intoxication -** Someone under the influence of drugs or alcohol. Voluntary Intoxication is not a defense unless the other party knew and took gross advantage. Involuntary intoxication - spiked drink without person knowledge, its treated as an insanity defense and its voidable if you were unable to understand the nature and consequences of the transaction. **Illegality and Public Policy -** **Illegality**- If the subject of a contract is illegal, then you have defense. **Public Policy** - If contract is contrary to public policy, like exculpatory contracts that someone is using to escape liability for tort actions, you cant do this for intentional torts and gross negligence, but maybe for ordinary negligence. **Non Compete covenants** - A person agreeing to not complete with a past employer, general rule is there needs to be a reasonable business need to ask for a non compete agreement and it must be reasonable in terms of scope of time and geographical scope. (e.g. cant open competing business more than XX miles from past business) **TERMS AND WARRANTIES -** What the meaning of the contract is and intent of the contract. (THESE ARE LISTED IN A HIERARCHICAL ORDER YOU SHOULD FOLLOW) **Parol Evidence Rule** - A final written contract cannot be contradicted by evidence of prior written agreement or oral agreements made at time of signing. A legal rule that prevents parties from introducing evidence outside of a written contract to contradict or modify its terms. It can exclude things outside this. (Mitchel v. Lath - Sale of farmhouse for \$8400, after the contract is entered into the buyer asks about removing an ice house, seller's defense is parol evidence rule because it wasn't in the contract) -Collateral Agreements- Parol evidence rule doesn't apply to these, collateral agreements are two separate contracts that don't effect each other. -Parol evidence is allowed in to evidence to explain ambiguity in an agreement. -Consistent additional terms are allowed if contract is only partially integrated. -Condition precedent, you're not barred from proving the existence of a condition precedent because a contract obligation is not due until a condition precedent has been satisfied so someone shouldn\'t be barred from using parol evidence from trying to prove a condition precedent. -Consideration- you\'re not barred by using parol evidence from making a consideration argument. -Parol evidence rule does not prevent you from laying out a defense (e.g. duress, unconscionability, etc) -Context rule, extrinsic evidence outside 4 corners of contract is admissible to determine intent and context surrounding the formation of the contract, it can be used to see if the document is fully integrated. (different jurisdictions have different approaches, modern view courts want extrinsic evidence, traditional view court they reject it) **Course of Performance** - -Course of performance is evidence one party repeatedly performed in a particular way and other party w/ this knowledge and opportunity to reject, did not reject and accepted performance. Focuses on the previous conducts of contracting parties in the same contract and previous installments of the contract, and use that to ascertain the meaning of terms for future performances. Court first looks at parties words in the contract. Ambiguous words are construed against the drafting party in ascertaining the meanings. Then court goes to course of performance - it refers to a sequence of actions taken by parties within a specific contract, where repeated performance by one party is accepted by the other without objection, essentially establishing a pattern of behavior that can be used to interpret ambiguous contract terms or fill in gaps in the agreement; it essentially acts as evidence of how the parties have understood the contract through their actions over time. **Course of Dealing** - Looking at two contracting parties and look at prior contracts, possibly from previous year to ascertain meaning in the current contract. **Trade Custom** - Community norms of which the parties either are or should be aware. What people in that industry think certain things mean. **Sale of Goods contracts that have UCC terms.** Under 2-207 doesn't defeat acceptance, additional terms are automatically apart of the deal between merchants unless they are a material change. **Perfect Tender Rule** - General standard of performance under UCC 2-601, seller has to deliver 100% perfect goods. Buyer has a right to reject all items even if one is imperfect. **Possibility of Cure (UCC)** - A seller in limited circumstances had an opportunity to cure their imperfect tender under UCC 2-508. **Reasonable Belief** - They can cure when they had reasonable grounds to believe that their improper delivery would be allowable. Buyer still has right to reject but must give seller additional reasonable time to cure if the buyer is operating off a reasonable belief from past dealings something was acceptable. **Time left for delivery -** If theres still time to deliver and a seller delivers something early, the seller still has time to cure the defect. **Delivery Obligations of a Seller of Goods (UCC)-** 1. 2. **Risk of Loss (UCC)** - 1. 2. 3. 4. **Warranties -** Implied warranties automatically become part of contract. **Implied warranty of merchantability** - Good must be fit for the ordinary purpose for which they are to be used. You need a merchant seller who regularly deals in goods of that kind and you can hold them to this standard. (Sellers make disclaimers of implied warranties by selling goods as is or with all faults, so theres no warranty) **Implied Warranty of Fitness for Particular Purpose** - Goods are fit for a special and particular purpose the buyer provides. A seller who is aware of buyers particular purpose, and a buyer who relies on seller for selecting suitable goods for that purpose. **PERFORMANCE AND DISCHARGE OF DUTY TO PERFORM (Excuses to get out of contract)** **Breach -** An excuse due to breaching party, a material breach undermines the substantial benefit of the bargain so that should excuse your obligations under the contract. However, a minor breach isn't as serious and a person still receives most of the substantial benefits of the bargain so the non breaching party isn't excused from obligations. **Excuse due to failure of conditions** - Duty of performance is generally due if there are no conditions to your performance or all conditions have been satisfied or excused. A condition is an event not certain to occur that will trigger or terminate a party's performance obligations. **Condition precedent** - An event that must occur before a party has a duty to perform. Conditions precedent outline what must happen before a contract is enforceable. For example, a condition precedent might be that a company must conduct due diligence before a contract is binding. (if, until, provided that, etc.) **Condition subsequent** - An event that terminates a party\'s obligation to the other. Conditions subsequent outline circumstances under which a contract can be terminated. For example, a condition subsequent might be that a party\'s obligation to maintain confidentiality ends after a year if payment isn\'t made. **Concurrent conditions** - These are done simultaneously. A condition that must be performed at the same time as another condition in order for the contract to be legally enforceable. **Express Conditions** - Parties words set up the condition, these are strictly construed, you need 100% satisfaction, condition must be exactly as stated and if its not, buyer has no performance obligation. **Implied Conditions/Constructive conditions** - Courts are construing it a certain way, they're essentially making it up because its important. Substantial performance is generally enough (Jacobs Young v. Kent - Builder used wrong pipe in the house but was same quality and type of material and didn\'t effect value of the house at all, court treated the specific redding pipe as an implied condition because court was worried about forfeiture) **Doctrines that Excuse Conditions** **-Failure to Cooperate/ Hindrance -** a situation where one party to a contract actively prevents or significantly obstructs the other party from fulfilling their contractual obligations, essentially breaching the contract by not providing necessary assistance or creating roadblocks to performance -**Substantial Performance** - discharges an implied/ constructive condition, person did enough. -**Equitable Doctrines of Waiver or Estoppel -** Estoppel - Based on statement made by a person protected by a condition before the conditioning event were to occur and requires a change in position of reliance by the other party. *(e.g. homeowner hires builder nad agrees to pay builder each month if they get a certificate of their prior work. After first 3 months of perfect performance, the homeowner tells him he doesn\'t need the certificate, in that situation, the homeowner can't say that the certificate is now needed, its excused due to estoppel, he changes his position in reliance on homeowners words.)* **Waiver - Based on a statement by a person protected by a condition made after conditioning event failed to occur** *(e.g. homeowner hires builder nad agrees to pay builder each month if they get a certificate of their prior work. After month 1 builder does not have certificate and homeowner tells builder not to worry about it, thats after the conditioning event failed to occur and homeowner couldn't insisted, so she is waiving the condition now)* **Actual Performance -** One party already performed. **Tender of Performance** - Offer to pay and perform by one who is willing and able to do so, and other party repudiates, this discharges duty of performance. **Condition Subsequent** - The occur of condition subsequent cuts off a duty of performance. **Unforeseen Post Formation Changes of Circumstances -** supervening illegality would excuse obligations under the contract. **Impossibility -** Contract is impossible to be performed. (*Taylor v. Caldwell- Contract for a music hall for 4 concerts and music hall burned down.)* This discharges a condition and duty of performance **Impracticability -** Where performance has become unduly and unreasonably expensive or burdensome. This discharges a condition and duty of performance. (e.g. severe shortage of lumber that makes job 10x more expensive) **Frustration of Purpose** - The mutually understood purpose of the contract must be undermined. Its still possible to perform but it doesn\'t make sense anymore. This discharges a condition and duty of performance. *(E.g. Krell v. Henry - tenant and landowner, landlord agrees to rent a flat for 75 pounds because it has a beautiful bay window with an awesome view for the coronation of the King which is why its so expensive and why renter wanted it, the King fell ill and cancelled the parade, court said both parties understood purpose for the rental was for the coronation so now theres an excuse due to frustration of purpose, so contract is void)* **Parties Subsequent Agreement** - Later formed contract that may excuse previous obligations in original contract. **Rescission Agreement**- Parties exchange mutual promises to end original contract. There needs to be performance still owed by both contracting parties, its called an executory contract, so some obligation was still remaining from both parties. **Modifications** - Where parties mutually agree to change the contract. If theres a valid modification, under common law, they require new consideration to be binding because of the pre existing legal duty rule. However, for sale of goods, under the UCC, the only requirement is the modification needed to be made in good faith. **Novation** - A mutual agreement to substitute a new party to do the same performance obligation under the original contract. **Accord and Satisfaction/ Account Stated** - **An accord** is an agreement by the parties to an existing obligation to accept a different performance in satisfaction of the existing obligation. Satisfaction is performance of the new agreement. *(e.g. debtor and creditor, debtor said they will forgive a 1K debt for \$500)* **Account Stated** - (where you lump together an accord and satisfaction for more than one transaction *(e.g. debtor lumping debts together to be paid by one lump sum)* **Statutes of Limitations** - Once the statue has passed, the person can't be sued anymore so a person is excused from performance obligations because theres no enforceability. If you start with oral contract or promissory estoppel causes of action most states have a 3 year time to bring suit. Oral contracts typically have shorter statute of limitations than written. ***Time of breach triggers the running of statue of limitations, not the time the parties entered into the contract.*** **REMEDIES** -Breach is any deviation from promised performance and there will be remedies no matter how slight the breach is. **Repudiation and Retraction** - An unambiguous indication breach will result when it comes time to perform. Repudiations can be retracted only up until time performance is due or relied upon, whichever comes first. **A retraction** reimposes a duty to perform if theres still time left on the contract to perform and as long as other party hadn't relied on repudiation by breaching party. **Non Monetary Remedies** **-Specific Performance -** Make the breaching party perform, courts are reluctant to do this, its an equitable remedy, equitable remedies are used when a legal remedy such as money damages is inadequate. Money damages are typically adequate. Plaintiff has to show that the specific performance wont be unduly burdensome on the courts to babysit a sout relationship, and contract terms must be certain and definite before they award specific performance. e.g. Sale of land - this is a situation courts will always order specific performance because land is so unique and its not unduly burdensome for court Sale of goods - specific performance wont be granted for sale of goods unless the goods are unique or theres no cover contract available which gives the aggrieved party the ability to enter into a substitute transaction that replaces the first transaction Personal service - If its a contract for personal services, employee and employer possibly, a court will not give specific performance, its a violation of the 13th Amendment of the Constitution, courts are worried of difficult burden of supervising that sour relationship too. **Reformation** - Court will reform a contract to get it to say what the parties thought it was going to say. (e.g. clerical errors, omissions) **Fraudulent Misrepresentation (Reformation)** - Occurs when a party intentionally or recklessly misrepresents a fact or opinion to induce another party to enter into a contract. **Reclamation** - The right of an unpaid seller to get their goods back. Transaction starts off a sale given on credit, then the buyer can't pay at time they receive delivery of goods, the seller must demand goods back within 10 days of buyers receipt and buyer must still be in possession of the goods. **Monetary Remedies - Its about compensation, there are limitations on recovery: damages must be reasonably certain, foreseeable, and unavoidable.** ***Certainty -** Damages can not be speculative.* ***Foreseeability*** *- Damages which arise and occur during natural course of events from breach.* *- Breaching party had special notice of damages, consequential damages that are special to that particular plaintiff, indirect results from breach special to this scenario, these must be foreseeable at time of formation to recover them (e.g. Hadley v. Baxendale- Mill owner contracts w/ courier to transport a broken crank shaft and courier delays it shipping for two weeks, the mill owner sued for loss profits for additional weeks his mill was shut down and court said he had to make that foreseeable at time of formation and communicate all those circumstances upfront)* ***Unavoidability** - There is a duty to mitigate damages, damages are not collectible if they could have been avoided w/o undue risk, burden or humiliation, you cant pile up damages.(e.g Parker v. 20th Century Fox - Shirly Mclaine had a contract to do the movie bloomer girl and after contract was made, they breached and offered her a substitute movie called Big Country, Big Man with same payment 750K, she declined and 20th century Fox said she failed her duty to mitigate, and she should have taken substantially similar employment, there was no duty to mitigate by accepting a different or inferior kind.)* **Expectation Interest -** Provides the amount of money to put aggrieved party in position had contract actually been performed. This is the FIRST stop for damages. *(e.g. Hawkins v. McGee- Hair hand case where a physician told a boy he's fix his scarred thumb, the physician wants to experiment in skin grafting and promised the boy he could give him a 100% perfect hand, he does the surgery and the boy gets a hairy and scarred hand. The court decided the remedy will be expectation interest, so they came to the valuation of a perfect hand)* **Reliance Damages** (You go here if expectation fails) - You reimburse a non breaching party for detriment occurred, taking non breaching back to the position had the breach never occurred. Courts gives reliance when expectation measure is uncertain or speculative. Also, when ground for enforcement is promissory estoppel, remedy may be limited as justice requires. **Punitive Damages** - There are no punitive damages for breach of contract. Purpose on contract law remedies is to compensate and aggrieved party, not to punish the breacher. **Nominal Damages** - There has been a breach but theres very little economic loss or its very uncertain what the loss would be so court will award a token amount to recognize a Plaintiff was a victim of breach. **Liquidated Damages**- Parties decide the remedy themselves in the contract, liquidated damages clauses cannot be a penalty, it must just be an agreed amount parties will pay for breach. The liquidation damages must be a reasonable forecast of just compensation for harm that is difficult to measure- these terms kind of contradict. **Restitution/ Quasi Contractual Relief/ Quantum Meruit** - Prevent defendants unjust enrichment. Must be a benefit conferred, the conferring party must have had a reasonable expectation of compensation, benefit was conferred at the express or implied request of the defendant who received it, and unjust enrichment must have resulted. Restitution is based on value of benefit conferred. **THIRD PARTY RIGHTS & OBLIGATIONS** - **Assignment** - someone transfers their contract rights to someone **Delegation** - transferring the duty under the contract, not your rights *(E.g. - Lawrence v. Fox - Holly owes money to Lauren, Fox borrows money from Holly and Holly tells Fox to pay back Lawrence directly, then Fox never pays Lawrence directly. Lawrence can now sue Fox directly due to third party beneficiary contract law.)* **Third party beneficiary**- Person not in original contract but able to enforce contract because tis made for their benefit. (e.g. beneficiary of life insurance contract) Rights are vested when third party manifests assent, brings suit on promise, or beneficially relies on the contact. Third party beneficiary can sue the breaching promisor directly. **Promisor** - Person making the promise that will give the benefit to the third party. (e.g. life insurance company itself) **Promisee** - Party that obtains the promise that will later benefit third party. (e.g. person creating life insurance contract) Promisee can also sue promisor. **Intended beneficiary** - The contracting parties explicitly name and intend to benefit these individuals. Only they have contract rights. **Incidental beneficiary** - They have no contract rights. Creditor beneficiary exception: Someone was already owed money, they can sue a promisee. **Assignments and Delegations** **Assignments** - Transfers of a contract right in two steps, you have a contract, and then one party transfers their rights to another party. Conversely, third party beneficiary is a one step situation, two people contracting for a third party at time of contracting. In the assignment of rights, person making the assignment (who will be on of the original contracting parties) is called **assignor**. -The person to whom the assignment of rights is made is called the **assignee**, the third party given the rights that can sue obligor directly on a promise. **Obligor** - The party with a duty to perform on the assigned right. They must make payment to assignee due to the assignment. **Rights that can be assigned:** right to pay money, **Rights that cant be assigned:** Other performance rights that substantially change the duty of the obligor. **Delegations** - Unlike third party beneficiaries and assignments, its about transfers of DUTIES, the duties of a contract to someone else, the work. You can do this unless your contract prohibits delegations or the other party has a special interest in you doing the job due to a special reputation as opposed to someone else. The original contracting party ALWAYS remind liable. **Delegator** - Party who is delegating his duty to someone else, this person is ALWAYS liable. **Delegate** - Party to whom a duty has been transferred. (only liable if he received consideration) **Obligee** - Party w/ right to receive benefit of the delegated duty. **Classified by Manner of Acceptance:** **Unilateral -** results from offer that expressly require performance as **only** possible method of acceptance. (e.g. Professor offers \$ to you to walk across bridge, he seeks an act, not a return promise outside the act.) **Bilateral -** promise for promise exchange. **D:** Defenses. 1. 2. 3. 4. Economic: One party makes an improper or wrongful threat to breach contract and other party has no reasonable alternative but to agree. 5. Procedural: Absence of meaningful choice in bargaining process. Substantive: Unreasonable and unduly harsh or oppressive terms. 6. 7. **T:** Terms of contract, and influence of parol evidence rule. -Parol Evidence rule -Parties conduct -Trade custom -UCC (Sale of Goods) -Delivery obligations -Risk of Loss -Implied Warranties **E:** Excuse - IS there potentially a doctrine that excuses nonperformance? Material breach- one that undermines substantial benefit of bargain, contract said you have right to suspend your performance obligations. Minor breach- slight deviation from promise performance, you have to obliged your obligations and sue for damages. Conditions Precedent- Subsequent- Estoppel Waiver Impossibility Impracticability - Events that make performance extremely and unduly burdensome. Frustration of Purpose- The mutually understood purpose of contract has been destroyed. **R:** Remedies - available remedies for breach. Anticipatory Repudiation - is a type of contract breach that occurs when one party to a contract makes it clear they will not fulfill their obligations before they are due. This can be done through actions or words Retraction - a retraction of a breach is when a party who has breached a contract can take back their breach before they are required to perform. Specific performance- non monetary remedy, make D honor performance and do what they said they would do under the contract. Legal remedy- Money damages- you have to show money wont adequately compensate a person for this loss to ask for specific performance? Reformation Reclamation Expectation Interest - providing the aggrieved party with money to put them in same position they would be in had contract been actually performed and gives loss expectation. Reliance Damages - Providing money putting P back in position before contract. Liquidated Damages Clauses- Parties themselves tell you what damages can be, these clauses can't be a penalty for breaching or its unenforceable. Restitutionary Damages - Intends to takeaway unjust enrichment of the D. **T:** Third party rights and obligations Assignment - transfer of contract rights in two steps. First a contract is formed, later on someone transfers rights to other 3rd party, typically a right to collect money. Delegation- Transfers of duties UCC SELLERS DAMAGES 704-720 BUYERS DAMAGES 711-716 RESTATEMENT SERVICE DAMAGES: 345-374 **RESTATEMENT 344-345 - Purpose of contract remedy is to put aggrieved party in as good a position as if they other party had performed fully.** **Expectation Damages:** The value expected had the contract been carried out as promised. **Reliance Damages:** The amount lost in reliance on the contract as a result of the breach. **Restitution Damages:** The return of any income gained by the breaching party **Go in the order below** **Is there a contract?** Yes- Expectation damages: suit on the contract\>Reliance damages: suit on the contract **IS there a contract?** No- Restitution Damages: Suit off the contract (quantum meruit concept) **RS 378-** P has a choice of expectation, reliance, and restitution damages if they are all available. **EXPECTATION DAMAGES** **Expectation Damages =** Value of (contract performed - actual value as a result of breach)+ incidentals - costs saved by breach **Certainty general rule:** A party will be denied expectation damages if the evaluation of those damages is too speculative (go to reliance damages if youtube uncertain of what damages are) **UCC 2-714(B)-** Buyers damages for breach in regard to goods. **RS 347-** Expectation Damages for services **MEASURING EXPECTATION DAMAGES** (always do this before reliance) -Santorini Cab Corp v. Banco Popular North America - expectation damages are calculated by the market value at the time of breach. American Standard Inc. v. Schectman- when the contract is for performance and the breach is a failure to perform, damages are the cost of completing the performance. -Only non breaching party can sue for reliance and expectation damages because they can sue on the contract because they breached. **RELIANCE DAMAGES** (AKA RELIANCE INTEREST)- Money spent in preparation of or performing the contract - any loss P would have suffered had contract been performed) What would restore the injured party to the economic position occupied before the party acted in reasonable reliance on the promise. RS 349 Damages based on reliance interest UCC 2-706(shes not certain on this) **THE RELIANCE INTEREST** Sullivan v. O Connor- Reliance damages are collected when expectation damage cannot be calculated. Anglia Television Ltd v. Reed - If the breaching party is aware of all possible damages, then the non-breaching party can collect expenses before and after the contract was made if they were all wasted due to the breach. **RESTITUTION DAMAGES= value of the benefit incurred** (this is off the contract, either you're the non breaching party w/ no contract to sue on or you're the breaching party who breached and can't sue on the contract) **Restitution is an equitable remedy -** lets put everyone back to square one. -You also use restitution for promissory estoppel - thats what youre going to claim that you detrimental relied and then you'd get restitution damages. **UCC 2-711** **RS 371** **RESTITUTION: QUASI-CONTRACT** Kafka v. Hess- unjust enrichment is measured by the gain of the D not the loss of the P. Commerce Partnership v. Equity Contracting Co. - For the quantum meruit claim there must be proof of the D did not pay for the gain (e.g. contractor/ sub contractor) **RESTITUTION: BREACH OF CONTRACT** United States v. Alernon Blair - Even if a promise would not recover in a suit on the contract because the contract is a loss, the promise is allowed to recover in quantum meruit the value of the services he conferred on the D who breached the contract. Rosenberg v. Levin- In attorney's cases they are allowed to recover the set value of the contract, but no more than the contract list value. RESTITUTION: BREACHING PLAINTIFF Britton v. Turner- Under quantum meruit where D retains benefits from labor of P, D must pay for the value of services rendered (MORE ON SLIDE) **Certainty** - P is generally denied relief that is too speculative. Merry Gentleman LLC v. George and Leona Productions - to recover Freund v. Washington Square Press **Foreseeability** Hadley v. Baxendale -Consequential Damages for breach of contract are limited to losses foreseeable by both parties. AM/PM Franchise v. Atlantic Richfield Co. -Loss of primary profits, secondary profits, and goodwill are the 3 types of recoverable losses as consequential damages along w/ general damages -Damages for emotional distress **Avoidable (Mitigation)-** you have an option to finish contract if it would lower the cost but you have a duty to stop if it would make the contract more expensive. Rockingham Country v. Luten Bridge Co. **-After a party repudiates a contract** Parker v. Twentieth Century Fox-Film Corp **DAMAGES BY AGREEMENT** Lake River Corp. v. Carborundum Co. - liquidating damages must be a reasonable estimate of damages at the time of the contract. Schurtz v. BMW of North America - just because a clause is one sided doesn\'t necessarily make it unconscionable but a peron's injury due to breach if warranty is not limited. **EQUITABLE REMEDIES** **Specific Performance (very hard to get, but land will always get this)** Laclede Gas Co. v. Amoco Oil Co.-specific perform Lumley v. Wagner L: LAW (UCC or RS) If mixed contract - predominant purpose test