Contract I Outline

8/3/2019 Contract I Outline

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Assumpsit: Breach of contract complain is an action for the recovery of damages by reason of thebreach or nonperformance of a simple contract that was made orally or in writing

Writ: a formal written order issued by a body with administrative or judicial jurisdiction it is thepassword, it is how you get into court.

- In the past there were a variety of writs and certain remedies were attached to specific writsand they were not interchangeable.

o These writs create barriers to getting remedies under other forms of action

Contract: a contract is a set of promises agreement with specific terms between two persons orentities in which there is a promise to do something in return for a valuable benefit.

Breach of Contract: breaking of the promise within a contract

What is a Promise?

Cannot claim assumpsit until can prove a promise was made to begin with.

Plaintiff felt the following promises were made:

1) 100% perfect hand2) In hospital for only 3-4 days3) Will be able to get back to work after a few days after being home

What the doctor is thinking cannot be the test, word when spoken cannot be based on intent becausecannot take law as to what someone is thinking court doesn t care what doctor intended

- Legal significance / test (what is going on inside either of parties head): whether or not areasonable person would agree

When discussing INTENT , we are talking about the subjective cannot determine contract liability onsomething that is subjective.

- R easonable Person is an objective standard, makes more sense to use can create ahypothetical reasonable person.

o It is the reasonable person, in the circumstances in the person we are dealing with ourreasonable person is not a completely abstract person, but a reasonable person who hasexperience with the relationship with the doctor.

What makes promise 2 or 3 not something a reasonable person would expect a reasonable personwhen given a prediction or forecast about an ailment by a doctor does not take that as an absolute100% promise.

- Does the outcome of a medical procedure depend completely on the doctor? NO , also dependson the patient and how he responds.

- But because Mcgee was so adamant for years and years that he could make the hand 100%better, it made a reasonable person believe the statement was true as fact.


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o The other promises this didn t apply as it was only heard once not repeatedlyN ow that promise has been established, we can see that the promise was breached.

- Breach a contract, then you need a remedy.

Trial courts is where cases start, trial courts don t generally make law but at trial one party will lose,that party will often appeal and claim mistake/error..

- This is then sent to appellate court the appellate court is the system that makes laws,appellate court tells trial courts what the law is. Trial courts apply the law

- Here the plaintiff says the jury instruction was wrong, and made a mistake and appealed on thisbasis..

- The plaintiff felt the big mistake was that the trial court improperly instructed the jury..o Jury instruction is how the trial court tells the jury what the law is going to use to

solve the dispute.- The jury instruction actually shows what the judge thought the law was.

R emedy:

1) Pain and suffering: $ assign a value 2) Ill effects of the operation: $ assign a value- Total $3000, jury court offered only $500- The plaintiff didn t take it, and trial court throws case out and Hawkins decides to appeal

courts decision- Defendant feels the instructions were a mistake.

February 12, 2008

In Hawkins v McGee there were three statements of promise

1) 100% perfect hand2) Limited hospital stay3) Could quickly return to work

Court decided legal liability would be based on only the first promise.

- Usually doctor would not be responsible for these types of promises because doctors cannotguarantee or provide a warranty of cure, but because McGee repeatedly endorsed the surgerythe promise was established.

Trial court said this is what the jury should look at in making decision1) Pain and suffering and assign a monetary value to that2) Worsening of hand and assign a value to that- The total of both came to $3000- Trial court observed this, and said you cannot have $3000 but you can have $500 take it or leave

it this is called a reemitted if plaintiff does not take it, case gets thrown out and retried- Jury instruction is wrong in this case, they were incorrectly informed.


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K = voluntary arrangement

What is the purpose of awarding damages in a contract case? To put the injured party, non-breachingparty, in the position she would have been had the other party performed the contract

- Promised 100% perfect hand, and due to aforementioned rule, ask what a 100% hand worth is?- Quantify 100% hand minus what he got in his currently

o Take what he currently got to prevent over compensation.o We also don t have a formula to find an answer to this question so have to send this

new formula to trial court for jury to decide.

The basic measure of damages is the expectancy measure once we step outside fo the contract thoughhow far are we going to go? If Hawkins was on his way to becoming Roy O should he be compensatedfor future income?

- But for Hawkins could ve solved global warming with both hands (has to be some limitation)..harm outside of promise of exist but there has to be a limitation

- Therefore, courts feel that defendant is responsible for fair contemplation of the parties

Why is Hawkins still responsible for his own pain and suffering ? Because he agreed to it prior whenaccepting to endure the surgery and the pain and suffering was a packaged deal.

Parts of a Contract

1) F ormation2) Performance3) Remedy

The essence of contract is private.. the law stays out of it, the law only enters when there is an error ordispute and parties alone cannot find a way to resolve this.

Present contracts like handing over a book don t really need tow rite anything down

Future contracts, want to write something down because you ve committed to something and if youhave a commitment you can plan

When promise is made, and don t have something to resolve the dispute.. Where are you going to lookto find a basis to resolve the dispute if it s not provided for in the contract?

- You are going to look at the LAWCommon Law: judge made law..

- Have statutes made by legislatorsS ales of Good: these contracts are controlled by the UCK it was enacted in all 50 states, when contractdoesn t cover things you refer to this has been enacted by all 50 states..


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F irst issue? Was there an agreement?

Second issue? What was the agreement?

Should the agreement be enforceable? Contract law assumes that if we have an agreement and terms it

should be enforced- Is there something about this agreement that is thought for reasons other than contract

principles it should not be enforced? Public policy filter

Baby M

Surrogate contract two parties S tern and Whiteheads

S tern would give his sperm and use Whitehead to serve as a surrogate mother

K = must pay, terminate parental rights, surrogate accepted

O nce baby born S tern s get child and allow Whitehead to take baby for a weekend, during this timewhile at W s home S s come to visit and while there and ask for baby Whitehead gives child to herhusband out of a window.. they then flee to florida there the S tern s served them (child was with sternsat this point)

Court says having a kid is only the small part of a deal.. the kid wasn t just for the S tern s to ultimatelyobtain custody of the child they needed her to terminate the parental rights and support the adoption

S tern s sue, they want to have the contract followed to .

Contract of Adhesion: when a contract is imbalanced unfairly on one side or another. That the termswere not fair gives one side an unfair bargaining position

Why should the contract not be forced according to Whitehead

- F irst thing was adhesion- But the contract itself was novel and first of its kind- As a general proposition, she feels surrogacy contracts should not be enforceable.

Efficacy of surrogate agreements:

1) Child will not be protecteda. There is no determination in the agreement of who would be the better parent


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b. Ultimately issue is custody of child, parties cannot predetermine who is the best personto have the child.

c. Court doesn t allow this to be used as a grounds for striking down surrogacy contracts2) Potential or exploitation of the surrogate mother

a. She is more vulnerable for financial pressures that aren t exertedb. Court doesn t value you this and wipes it

3) Alleged denigration of human moneya. Say its selling the child for money and buying the parental rights the father is not

buying parental rights though because he is already the parentb.

4) S urrogacy is invalid bc it is contrary to adoption statutes and other child benefit laws such asstatues establishing standards for termination of parental rights

5) Doesn t create family, it is anti-familya. This is actually pro-famliy not anti family as whitehead claims this is creating a family

and giving someone an official mother and father who wants a child6) E lites benefit by taking advantage of the poor

a. Whitehead says rich people pay poor people to do whatever they need to do. Argumentis the rich here, part of this pattern, the wealthy people will seek out poor woman andentice them to perform the function as a surrogate

b. Court says

Surrogacy trials do not harm the protection of the child, the reason for this is because

Whitehead says adoption statutes determine parental rights and should apply to surrogacy court saysno, even though it regards parental rights at the time adoptions rights were made prior to existence of surrogacy

- S

ays legislature didn t assume and couldn t assume that surrogacy would be possible duringadoption statute so no concept of surrogacy in early 70s and therefore adoption statute cannotbe applied here

- Trial court has another issue.. adoption statute says you cannot pay for adoption. Court saysshes providing gestation under the contract, shes not paying for interest she has in child she is just being paid for her service of providing her body to carry this body to terms.

Because all of the arguments are set aside 1-6 above, what happens next? The stern doesn t get thebaby immediately after they win the contract case

S tern s want SPECIF IC PERF O RMAN CE O F K

- Contracts are promises, sometimes promises are broken- In Hawkins case, the normal remedy for contracts is money why don t the stern s just want

money?o Because they want the kid they don t care about the money!o It is difficult if not impossible valuing the worth of a child to the genetic father


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- Contract said Whitehad has to terminate parental rights and custody of child and because lawof N J is you keep a child with its natural parent/parents with as logn as possible there is a wholepossible.. you can t do that prior to birth of even to child

- The bar to remove natural parents rights is very high.. it can t just be done easily and thecontract in this case preapproves an adoption

- O ne of the procedures that is required in an adoption is precounseling when a women decidesto give up her child for adoption, it just doenst happen right away theres a series of counselingand scoping

- If sign baby away before its born can you change your mind? The court says until the baby isborn the mother still has conrol over it.. even if adoption thing is signed up before child Is born,mother has the automatic right to revoke .

o Keeping child with natural decision and can you make an informed decision about givingchild away before you actually have the child in your arms?

- S ays nothing is technically wrong with the contract but its against public policy bc contract of sale of baby and therefore unenforceable

Calvert v. Johnson- California law allows for only O NE natural mother- Difference of this from baby M is the fact that the genetic mother is not in question- Use the phrase, breaking a tie because both mothers are tied- What is the best evidence toward the intent of the parties?

o What is there to look to to determine the intent? What is underlying the dispute here? It is the contract intent is how tie is broken, what is the best evidence of the

intent? It is the surrogacy contract itself - Majority says, contract says the plaintiffs wanted the child and they went about the process of

making the arrangements to get a child and those arrangements reflects they were going toend up with the child

o Johnson s side of the contract said she was the gestational mother and nothing incontract shows that she was going ot have anything to do with the child..

- In baby M case, the issue was custody (who got the baby) in custody determination court said,in N J the most important consideration is the best interest of the child

- The dispute here is not a custody dispute, it is w ho is the parent once determined calvert is thenatural parent, then there is no custody issue at all if not natural parent you have no claim tocustody of the child

- Take advantage of the poor? N o Johnson was a professional- Does this violate adoptions laws? 1) K like this has payments throughout gestation period

(doesn t have one lump sum upon baby) . 2) adoption statue addressed adoption and bypassing a law of adoption the quote was saying court gave adoption its blessing

o N ot approving of surrogacy in the statute, leaving surrogacy out of the adoption statute,it didn t qualify it

o When adoption statutes were adopted, there was no concept of surrogacy so cannotclaim a position for legislatures.


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O pinions:

- Looking at contract being the best evidence of where the child should go is a terrible way of resolving situation.. it should always be the best interest of the child

R EM EDIES

- Understanding remedies available for breach of contract goes far towards the issues that will berelevant in terms of applying to a dispute the remedy sought will also play crucial role in howto structure a case

o Understanding how remedies work will also play a role in how you draft a contract

- R emedy of specific performance: very limited, difficult to execute client says, I want to make

a person cause specific performanceo $ Damages are trivial, is it worth it? Sometimes not worth it

Hawkins v. M cGee (AGAIN)

- Promised 100% hand, hand after surgery was in a position worse than the original- Trial court said could assess damages by:

o 1) pain in suffering o 2) harm to the hand

- What is the purpose of contract damages? o Put the non-breaching of party into a position that they would have been in if the

contract was met

- If contract is breached, you lose the value of the promise (promise being statement of futureintent)

- N on-breaching party cannot be overcompensated either that s why Hawkins says you startwith the value of the promise, what you expect to get from the other party but then have tofactor into the award what the person actually got

o EXPECT ANCY M EASUR E O F CO NTR ACTS : Value (expected) - Value (received) = Loss of Value

o Loss of value: primary measure of damages for breach of contract the basis of theexpectancy measure

- Pain and suffering is not included for the fact that, pain and suffering was accepted whether thecontract was beached or not breached (surgery for example).. in order to have a contract eachside has to give something up

o Contract to build house and sell for $100,000 seller can build house for $90,000 o Seller then sues for 100,000$ as that is the value expected.


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Seller can only sue for the $10,000. This is the cost of building a house or thepain and suffering in terms of building the perfect hand

Therefore not going to pay Hawkins for what he was going to contribute tobuilding the perfect hand

What would be done if Hawkins required additional surgery and could not go on as is?

- Under expectancy measure, the cost Hawkins incurred of obtaining the additional surgery iscompensable

- Anywhere court say we start with contract, but that s not the end all be all, it can be extended if necessary start with contract, but other things might need to be considered in the context of fully compensating the victim for a breach of contract

o incidental consequences fairly within the contemplation of the party This would include additional surgery for a botched hand

- What if Hawkins had informed doctor if you mess this hand up (and I have a future in theleagues playing AA baseball) if doctor botches the hand and can t pitch anymore than?

Nurse Case

- Plaintiff was going to lease mill for six months, was paying 10l and year cost was 20l the leasordidn t allow plaintiff to use iron mill for six months plaintiff sues the lessor and hes out 10l

- Plaintiff was going to use the iron mill for six months, going to make things in the iron mill, goingto need ingredients and assets.. he bought 500l worth of stuff and going to incorporate into thatat the iron millwithin the six months.. and did this specifically bc defendant told him you couldhave iron mill for six months

o N ow plaintiff stuck with 500l of stuff he cant use However now, 500l was not in contract anywhere?

o To lessor s perspective would the loss of stuff he was going to use to make in the mill,the 500l, would that be a consequence of the breach by the lessor?

- Bu t-for the breach he would not have lost 500l- H a wk ins said there s another component, it doesn t have to be a conseq u ence b u t it has to be

fairly w ithin the contemplation of the parties o If granting plaintiff to use mill for 6 months, its within contemplation that breaching

party to think that plaintiff would buy things to make out of the iron mill

S o there is something else!

Loss of value Value Received = Loss of Value + O ther Loss

Other loss is compensable, which is loss of value that is outside of the contract but it is not very clear,it is just but-for

R eliance measure: not the chosen measure for most plaintiff s most plaintiffs will want the Expectancymeasure.

- RELIANCE MEASURE WILL LIMIT THEM TO OUT OF POCKET EXPENSES


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If defendant breached the contract, and by breaching the contract and prevented him from makingmoney on the expectancy use of the mill reliance will not give you loss of profits

- But if can establish a causal connection between broken promises and loss of profits, at leasttheoretically, the addition to the expectancy measure of other losses will give means to additems that fall outside the contract terms in itself

Hooker v. R obert Cabinets Co.

- The contract price is about $150,000- Two separate contracts were involved.

o 1) housing agency of city and the general contractoro 2) the general contractor (Hooker) and the sub-contractor (Robert Cabinet Co.)o

- T he major disp u te that arose w as based u pon the disposal of the cabinets- Hook feels all of the terms relevant ot the cabinet disposal and part of the project were

incorporated into the sub-contract and they provided some specific terms about the details of parts of the project.

- What claim does Roberts have against hooker, he wrongfully breached a subcontract agreementafter Roberts had already started performance

o Hooker by faxing notice to Roberts to terminate the contract breached the contractso Along with this breach for damages, Roberts now wants money

- What first must be decided before can consider breach of contract claim?o Whether going to use common-law rule for contract or the UCCo The sale is a dual process, of sales and service (labor)o IRAC =Issue Rule Analysis Conclusion

- Have two sources (statues/commonlaw), and there are two components (goods/services)o If we decide it s a service contract you use the common-law

- Why exclude services analysis from the UCCo The UCC applies only to transaction involving goods.

- UCC applies to all contracts? Article 2 applies to contracts that involve the scope of goodso F irst have to determine whether you have goods?

good means all things including specially manufactured goods which aremovable at the time of identification to the contract for sale other than themoney in which the price is to be paid, investment securities, and things oaction.

Goods are movable transferable property at point of purchase This does not apply to real estate because you can t really pick it up- If have both service/goods then how do you know which to apply or point to?

o The dispute arose from the services not the goods so going to focus on serviceaspect this is the ways of resolving the source of law issue.

o Bates doesn t like this idea, thinks everything should be looked at together as a wholeservice/goods


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o So for this class purpose going forward, going to use PR EDO MIN ATE F O CUS TE S Tgoing to look at contract as whole does hooker care more about the installing/puttingin of the cabinets or the actual quality of cabinets themselves

- Trial court granted summary judgment for Roberts because of breach of contract- Hooker had no right to unilaterally void the contract- S ummary judgment occurred before the trial

o S ummary judgment: court has concluded that the party looking for summary judgmenthas proved that there is no dispute over the facts.. there were no trials and TC saiddidn t need a trial because no factual dispute that needed resolution

- O nce breach, time to look into damages and $$$- Court awards $43,050.95

o 1) net loss on manufactured cabinetso Countertopso Laminateo Travel expenseso Administrative timeo S torage of cabinetso Lost profit on job (supposedly lowered)o = total damages

- Roberts showed losses following contract breach and quantified them.- Hooker conceded he breached the contract, and said the first four damages were also accepted,

he had issue with the administrative time, storage claim, and lost profits had something wrongwith them.

o Hooked asked for remitter- - Court decides Robert s leasing of storage space was unrelated to this contract as he was leasing

the storage space prior to the contract

- V E I

s what Roberts assumed he was going to get from hooker.o VALU E EXPECT ED = BID PRIC E (COST + PRO FITS )o Value expected therefore is the contract priceo Value expected, because it includes profits, presumes all costs are paid for.

- Administrative costs/Employee salary argumento Measure of damages is Value Expected Value Received, whereo Hooker comes to offer job, he comes to Roberts and Roberts has to calculate his B ID

Bid includes all of his costs, employee costs, and other compensations Also includes profit value and the total of all will be what is expected Profit claimed is 26% which comes out to $30,000

o Court said can recover salary here, as long as you can establish when calculating yourbid part of the costs included this employee/administrative costs

- Bates builds house for 100, cost him 90 expected 10k in profit breached don t like his houseafter signed, he had already bought $15k of lumber

o O nly way to make profit for bates is to build the house for less then $100,000


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o The cost of performing the contract has to be part of the value expected, so somehow ithas to be calculated into the value expected

- R EST ATEM ENT IS NOT LAWo Restatement is simply what some people think of what the law kind of us if you find the

lowest common denominatoro T he loss in the val u e to him of the other party s performance ca u sed by its fail u re or

deficiency pl u s any other loss, incl u ding incidental or conseq u etional loss, ca u sed by the breach ,less any cost or other loss that he has avoided by not performing

VE +V R + OT HER LOSS

150 + 0 + 0 (bc no causal connection w/ storage) Cost Avoided Loss avoided = Expectancy

- F actor in cost of performance under cost avoided, if you don t then injured party getsovercompensated

- When injured party has incurred expenses , it must go here if he spent 75,000 then youtakeout his 30k profit and leaves you with 45,000$

- Loss avoided by inj u red party : any cost or other loss that he has avoided by not having toperform don t want to over compensate

- F rom now on have to use formula to calculate expectancy damages

Put Injured person in position if there would not have been a breach.

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s there a difference based on when contract was breached in the following situations?1) N o Performance: Compensate Just Profit2) Part of Performance: Reimbursed of costs + profits3) F u ll Performance: Costs + Profits

Basic damages calculations under expectancy formula, $150,000 is what he expected since hookerdidn t pay him anything, he got nothing.

- Looks like he gets $150,000 part of the value expected was his costIf goal is to put person in position if there had been no breach, something is missing from the basicexpectancy calculation derived from the Hawkins case

- The restatement completes this formula

V E - VR + O ther Loss - Cost Avoided Loss Avoided

O ther loss > if breach of contract caused losses outside of the contract


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Assuming value expected costs to manufacture/ to uphold end of contract if this is not the case, haveto factor in cost avoided

In hooker, if breach occurs before any performance by Roberts Get 150 0 + 0 120

I

f hooker breaches before Roberts has performed, we know 30k of the 150 was expected cost avoidedtakes away from the recovery of those costs that were built into the value expectedbut then were notnecessarily ultimately occurred by the non breaching party

Loss avoided: if he got stuck with these cabinets and stuff and if he were able to sell them or use themin another job, it is only appropriate you give the breaching party credit for thatx

RS T = $15

Contract was, Bates will sell me restatement in return for payment of $10

- I will give bates copy of my contrat notes and those notes have the value of $1- But photocopying those notes will cost $3

I pay bates the $10 and deliver the notes, but bates refuses to perform by giving the R S T what would I be entitled to recover?

Expectancy measure:

V E VR + otherloss cost avoided loss avoided

= $15

Value expected = $15

Value received = $0

O ther loss = $0

Cost Avoided = 0

Loss Avoided = 0

R eliance M easure (costs): what did you actually spend performing your obligations under the conract?

Expenses you incurred producing the contract to do your performance

$10 + $1 + $3 = 14

- The $1 is not a reliance expense, because it was not spent it is just the supposed value

R estitution: identify any benefit the breaching party has received as a result of the K performance, andmake him return it disgorge any benefit

Should give back $10 as well as the notes and the value of the notes is $1

= $11


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Expectancy w ill al w ays give the most

Reliance will almost always give you less then the expectancy, why? Because you aren t getting profit

Restitution will give smallest recovery

Value expected ($15) value received ($0) + O ther loss ($0) Cost avoided ($10) Loss Avoided = $5

- S ometimes will back into these to demonstrate the infallibility.. when calculating damges do notback into the number, always start with the formula

Say RS T has vale of $9 . I give $10 plus notes , using expectancy measure lets calculate damages

Value exp (9) Value received (0) + O L (0) Cost avoided (0) Loss avoided (0) = $9

- But this cant work, can it? So lets try another one

R estitution : loking totally at benefit conferred on breacing party if I sold the notes, their value is $1 Bates has the notes $1 and the $10 I paid for the notes even if hes not paying for them

- $11 = total benefit given on breaching party- In restitution, only look at the breaching party what did he get out of the transcation? How is

he benefitting?

R eliance cost: get what breached party spends in preparing or performing the party.. under reliance

measure should get $13

Contracts provides you two sources of law:

1) Common Law2) AllS tates have -> UCC

a. UCC is contract for sales of goodsSo when have contract dispute, first question to ask is whether going to use Common law or the UCC

Hooker case told us, look at the dispute if the dispute involves the services portion of the contract htenwe look at cmmon law.. .common law controls services.. if we are looking at goods look at uCC but thisis the minority view.. the MAJ O RIT Y RULE is:

- Look at the predominant purpose of the contracto Is primary issue the goods or the services that accompany the goods?


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The minority view has a simple aspect to it, are we fighting about goods or services? Bates doesn t likethe one with a clear line and going to have to argue are the goods available just anywhere or is theresomething about this specific gender that makes individual go to Rogers for the goods or is the bigcomponent of the thing installation

Tongish made contract w/ coop to sell sunflowers coop then went to bambino company selling themfor same price plus a 55 cent handling price

- Then the value of the seeds jumped for a various reasons- There wre multiple deliveries, and he started elivering the seeds and between the time he

started elivering the seeds and doesn t want to fulfill his obligation of the contract whathappens to make him rethink things? Market price sores because a supply and demand issue

- Tongish gets offer for $20 for hundred seed, better hten $13 from coop

- What is effect on bambino? N o effect bambino is suppose to pay to coop whatever coopbought item for plus 55 cents

- Plaintiff says hteres a breach of contract, tongish is saying hes entitled to damages how do youwant damages to be calculated? Coop wants damages to be calculated by means of

o market price contract priceo what is the basis for difference of market price and contract price? UCC, why? Because

contract of sale of goods Article 2 , buyers remedy for sellers breach is 2-713; measure of damages for

non-delivery or repudiation by seller is the difference between the market priceat the time when the buyer learned of the breach and the contract price

together with any incidental consequential damages provided in this article. Market price is $20 and contract price was $13, so difference is $7 ahundredweight and that amounts to $5100 the extra amount Tongish made insale after breach

- Defendant says P should only be able to receive his handling fee Tongish says, all the plaintiff lost here was the profit was going to make on its contract with Bambino of $455 that Is whatCoop is entitled to

o Basis for this remedy is UCC its an article 1 provision, 1-106 This provision reads: put the injured person in as good of a position had the

other party performed. Using that language, explains why heee should only receive $450 . Says put him

in as good of a position as he would be in, not a better position Granting him the $5100 would over-compensate and put plaintiff in a better

position then he would have been in- We have two sections here that apply, which to use?

o If you have two conflicting codes, need to use the more specific rule of codeso Does 1-106 apply to all transactions covered by the UCC?

It says it applies to everything covered by the UCC Does 1106 apply to transctions covered by 2713? Y E S 2-713 transactions is limited to only transactiosn wehre the seller breaches


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o Article 2 is more specific because only applies to sales of goods, because of thislimitation

o Article 1 is the general provisions that cover the entire code- In a matter of statutory construction, why do we prefer the specific over the general?

o W hat does it mean to u se specifics by legislat u re that provides? Legislature throws out rules that apply generally, when the legislator tells us use

the general unless we tell you that matches the exact situation that you areaddressing

o If seller is going to pay damages, wahts the incentive to breach the contract? If marketprice goes up even cutting out the profits hes still profiting but this prevents it

- Court says, when you put the injured party in a better position then it would have been in youare effectively punishing the breaching party and court says we do not punish people forbreaching contracts giving coop $5100 would be punishing tongish..

o Court says, don t want to punish people for breacing contracts but don t want to rewardhtem either. In this case tongish would be receiving a $4600 reward

- Why would you enter a K and lock in a price?o Contract is about allocation of risk ultimately, tahts why you make a contract like this

therefore implicit in a contract lke this is allocation of risk Tongish took this risk, even if price bottomed outhe would still get $13 Article 2 takes all these things into consideration yes it may seem unfair that

tonigsh is going to have to transfer his extra profit to coop even if coop didn texpect to make that extra money.. but tongish assumed that risk, risk of marketincrease

Court is not going to encourage breach of a contract

UUC = Article 2

S 2-712 : creates a concept called cover

- S eller buys goods to sell to a third party if seller doesn t deliver goods to third party, thebuyers relatoiship with a third party is hindered

- What cover does is allows the buyer, in the situation where the seller refuses to sell the goods isto go out and purchase the goods some place else and does not penalize the buyer if he has topay more for those goods then the seller had agreed to provide them for.

o If buyer has to pay more, buyer knows that it is protected because 2-712 says if sellerbreaches and buyer covers, the buyer is entitled to the cover price to buy the substitituegoods and the contract price.

y 1) GOO D FAIT Hy 2) WIT HO UT UN REAS ON ABLE DELAYy 3) PURCHAS E = REAS ON ABLE

Camera example bates says $1000 sell wont sell it, guygoes out and buys it for $1300 photographer, neededit right away paid a little extra to make it happen


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S 2-713: if buyer decides not to cover, then buyer is entitled to this section this allows for the marketprice the cover price.

All UCC sections come with C O MMENT S , whenever using code sections, don t stop with reading thecode section always rad the comments that go wth it..they are usually very helpful sony computerscost 1000 more, and 250 of that is some arts program the cove price is going to be cut out becauseBaylor has no use for art software, its not all that reasonable i

Ex. If software had art program but with a file organizer, but Baylor could make use of that additionalprogram the price was able to apss along to whoever Baylor was selling the computers to wasn t going

to help.- The mere presence of ad ifferent that adds value to the substitute value does not mean you

have to carve that out of your cover measure and award cover damages for it.

- Buyer does not have to cover/buyer can decide not to invoke substitute if that s the case,buyer can invoke 2-713

Can you cover A N D claim market price/contract price differential.. hwat if you were able to cover for

$18 but market value was $20, could you in law suit for breach against seller claim losses under 2-713the code does not answer this question in either code.. does not say if thou cover, thou shall not beentitled to market price contract price issues

- Comments tell us that however, if you cover you cannot use market price and cover pricedifferential makes sense, because not trying to punish the seller the whole idea behind cover isto put the buyer in position to go about his business as he intened to go about.

What happens if breach saves money? The code tells us that is calculated into the ultimate reward of damages (market price)

Consequential & Incidental damages are defined for us in the code

- Incidental damages Additional costs the buyer incurs as result of the breach.. I choose to coverwhne the seller breaches, I have to pay someone to go out and find another seller.. or have toadvertise needs the additional costs that are associated wit hcovering are incidental costs

- C onseq u ential damages: Consequential is different consequential is additional losses I incurred by not having goods delivered when they were delivered.


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HADLEY

- You ll hear arguments of council and questions asked during those arguments

- Its 5 days left so P sues for breach of contract- Claim for dmages, what are the damages?o What performance was lost? Breach of contract/value expected/value received etc

- The time that it takes, 5 days late delivery the P loses money hes expecting- The neglect was that the defendant palced the cranksaft on a barge, thus causing the delay. It

should have been placed on a train to ensure delivery by the next dayo Plus P says he had to pay employees to do nothing

- P said, we want 300ls calculated employees/equipment operating the mill/profits/- The judge says anything that is caused by the breach you can consider as part of the damage

reward, anything that is causd by the defendants breach of his promise to get the crankshaftwithin one day

o Defendant is pist, says its too much all these damages weren t forseeableo If defendant knew they were going to be liable for all this they wouldn t have entered

this contract whats the law, what law does the defendant point to to justify that heshoudlnt have to pay for unforeseeable damages

Plaintiffs argument is, causation as long as there is a causal connection nbetween harm claimed andbroken promise then you can recover for that harm . This is English law, according to English law hesright.

- Law, debtor is only liable for the damages foreseen.o Judge quoting sedgwig sedgwig is a treatise writer, its someone who rites about the

law making him simply no different from any of us therefore hes not a judge, andwhat he says is not law

- Hes saying if we are liable for every single thing regarding breach of promise, nobody is going totake on contracts D did not take on the end of the universe, he wasn t contemplating thetermination of universe nd for that reason, if he would have known he would have ethercharged more or made contract in the first place.

- Maybe this causation approach needs to be rethought toward liability for breach of contract..and that is the contxt within which the court is writing /hearing this case.

Cout says we will let causal chain go, from things that would naturally arise from this type of situation..but in claim of those injuries you are claiming damages for arise from special circumstances , thenplaintiff can only collect for those damages if plaintif alerts defendant to those special circumstances.


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M ARTI NEZCAS E

- Hector Martinez had his agent deliver a dragline took 5 rail road cards to ship ito Used for mining

- Plaintiff wants defendant to send dragline from O hio to Texas- F eb 11 / march 1 / april 2

- S uppose to arrive by March 1st

arrives on April 2nd

- When it arrives in Eagle Pass, the dragline has been damaged from the shipping process- Total damage is like 117k

o Paid money to have it fixedo In pocess of delaying shipment, charged him for storageo From March 1 st to June 20 th he didn t have dragline so he wanted compensation for not

being able ot use dragline- D saying if there was a delay in getting dragline to you, you have to tell me that yu ll suffer from

these things and you have not done that!!o How does trial court respond initially to the motion dismissed?

March 3, 2008

The issue with Hadley is a contract to transport a driveshaft the transporter/currier messes up theres a5 day delay

- As a result, the plaintiff s mill is closed for 5 dayso As a result, plaintiff made no money and had its works sitting around doing nothing

(empty salary)o The issue is, of this loss that the P has identified resulting from the failing of the currier

to timely performance.. how much of this loss is the currier actually responsible for.- F or a 2l contract to transport a dry shaft, ultimately if everything was compenstable for 500l..

- Hadley court says, yes other things resort from contract of a broken promise and that otherharm the breaching party is responsible for but there are limits to these consequentialdamages

o Hadley gives us 2 rules/components 1) those that naturally arise from the ordinary course of events from a contract

like at hand 2) we may reasonably suppose were in the contemplation of both parties at the

time they entered the contract as a probably consequences as a berach of thecontract

o Whats the difference? 1) is what the martienz court refers to as G ENE RAL DAMAGE So 2) what is the burden of proof?

For naturally arising there is no burden of proof these are consequences areasonable person would presume

- What is it that allows us to say the loss was in the contemplation of the parties?o What is that we are looking for? S ome sort of communication?


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Don t have to give list of potential harms/losses that will be suffered just haveto put the preson on notice if this contract is breached this is going to happen

- Both 1 and 2 are consequential damages but court distinguishes ultimately the burden of proof naturally arising and because they are within the understanding of reasaonable peoplethis kind of contract is going to arise from a specific type of harm no specific notice is needed todetermine that the breaching party is responsible for that loss..

o If loss we are talking about falls in to 2, not something we d naturally see as arising wewill only make the breaching party responsible for the loss if we can prove that it is inthe contemplation of the breaching parties.

M artinez D R AGLINE

- Contract provided that the railroad would transport the dragline from Pennsylvania to Texas onF eb 11 and would arrive in El Paso on March 1 st did not arrive till April 2 nd and arrived damage

and was not serviceable till June 20th

- O wner sues, wants damages of:

o 1) loss it suffered for damage to draglineo 2) storage costs assessed by railroad against ito 3) compensation for the delayo The damage claim and the storage costs were settled eventually, only thing left was the

compensation of the 3) D ELAY- Trial court says in response to a motion to dismiss, the P needs to plea additional circumstances

and P can t , the trial court dismisses claim and then an appeal is made.- P wants damages from March 1 st to June 20 th

o Court says damages should be split into two sections

1) March 1st

to April 2nd

2) April 2nd to June 20 th o P lawyer settled out the damages claim, the cost of repairing the damages the dragline

incurred but the plaintiff also wanted to be compensated for loss of use of thdragline court says wait a second.. any damages for loss of use for injury done todragline is part of your claim for repair damages

When you settled the claim for damages, included in that claim was the amountof loss you sustained of not being able to use the machine this lawyer gaveaway damages claim to April 2 nd to March 20 th

y Court says not even going to consider damges of 2 because its goneo Left with consideration for damage from March 1 st to April 2 nd

What is the defendant s argument?y the D says these damages are not forseeable court wants to

compensate the injured party but protect the defendant fromunforeseeable loss.. so they need to limit it somehow

*** so now want to make injured party in position similar to if the contract not breached but also,doesn t want to screw the D in the process ***


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Types of Hadley Damages

1) naturally arising2) within contemplation

does court agree with these damages? Yes.Does court use the same terminology? N o.

Court says:

1) naturally arising > G ENE RAL DAMAGE S a. eliminates burden because these damages are foreseeable

2) Within contemplation > SPECIAL DAMAGE S a. By calling them special, it means something additional is required for us to make

defendant liable for this loss what additional is required? N otice of specialcircumstances that make this particular loss a probable consequence

i. O

nly way to recover these then is to provide notice to other party of thesedamages to make these damages within their contemplation

Martinez builds on Hadley as it renames the two categories as general damages are foreseeable butthen there are special damages and those are damages that Hadley talked about being within thecontemplation of the parties.

What is the loss that the P in Martinez case is seeking? Is the same as what P wanted in Hadley?

- If they couldn t use it they couldn t make money, is that the case here? don t know answer- US E value the Hadley situation they calimed profits because couldn t use their mill- The plaintiff here is asking for the vALU E here of being deprived of the dragline between March

1st

to April 2nd

sometimes things have use value to you just to have it to have it parked in thefront lawn.o Just having access to something has some value

- D is saying P is asking for same thing P wanted in Hadley they wanted their use profits but Pis seeking loss of use value not the loss of oncime it would have been able to generate had tibeen able to use the dragline.. but instead just having possession, or having the ability to dosomething there is value to that

o Court says if you have capital equipment, most logical way to find value is check rentalvalue.. how much would it cost the P the rights to acquire a drag line..

- If damages are not foreseeable then the P is right so what is it about this case makes thespecial damages foreseeable ?

o What makes a breach of contract to deliver by march 1 st, what makes loss of use valueforeseseable?

It is obvious to everyone that because you were 30+ days wrong, a naturalarising consequence of being 30 days late is the fact he cannot use the draglinefor 30 days not talking about lost profits but talking about U S E VALUE

If plaintiff here asked for loss income, or going have to go out and rent anotherone, etc those losses would have came into special damages category


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P wants the use value, the lost value of not having dragline in its possession for30+ days its foreseeable to anyoneif you do not deliver ad ragline for that longthey wont be able to use it for that many days

o D then says, w euse the rental value that wasn t foreseeable it was just as forseeablethe P was going to sell this thing as use it..

Friend offers 1000 for outline I packaged it up send it via IPS and on it way to Yale the plane it was incrashed and package never got there

I ask c mon ive me 1000 I sent it, friend says no so I sue IPS it cost 30$ to ship, IPS says its notforeseeable to us

- T he point is, the ca u se of the breach doesn t have to be foreseeable it s the conseq u ences of the breach!

When assessing consequential damages, the forseeabltility conmponent doesn t go into the cause of thebreach but it goes into the consequences that result form the breach simly arguing that we didn tknow we were going to breach, it wasn t forseeable to us that the plane was going to crash.. that D OE S NOT help break of csonequential damages

MORRO W V. Bank

- P coni collectors, told boxes will be coming out soon P sign for 3 boxes at 25$ per- Does bank person know why they want the box? Yes they said they are getting it for the coins

and said by the very least needs the box for S EPT 1st why? Because the big son was going off ot

collge and makes him worried about someone breaking in to stealthe coins..- At his house P said he installed a case, and that the thief would have to go through 11 differentsets of locks to get to coins

- Bank said as soon as box become available we will let you knowo Box becomes available on august 30 th they are notified sometimes after September 4 th o It is singificnat because September 4 th home is burglarized and lose like 30k in coins

- They sue for breach of contract what is the promise that was breached? The bank promisedwould be notified immediately when breach occurs?

o Had the bank notified us of august 30 th we would ve put the coins in the bank on august30h and when burglar came by nothing would ve been found

- W as loss of coins ca u sed by the ban k s breach by the promise? o Did the bank reasonably know? Could they foresee what damages would arise? o O utside of Arkansas, this would hve turned on forseeability but Arkansas has add l rule o To establish special damages, P would have to demonstrate the bank had received the

information necessary to understand a probable consequence of not informing the P of the availability of the boxes that their coins would be stolen


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- Ar k ansans isn t content w ith t w o prongs w ith H adley, has add l component w ith special dmages not only do yo u have to p u t breaching party on notice for special damages b u t ALSObreaching party has to tacitly accept

o What is the risk of loss to the bank? O r the risk the bank is being asked to assume in thiscontract is assuming the liability for 32,000$ worth of coins how much did they paythe bank $75 for boxes

o Does the bank agree to assume 32000 of liability for 75$? That is the significance of thestwo figures it doesn t have to be an actual expressed agreement to assume theresponsibility created by the circumstances presented

Court says there is something about the arrangement the court assumed theresponsibility, how might we look for an implied assumption for responsibility?Lets look at the bank charged for the claim of liability are looking at now.

y We do not have expressed undertaking baed on the #s expressed tacitagreement to assume liability not do we have circumstances we arewilling to imply

When we compare the price charged by the bnak to the liability that waspotentially assumed by the bank theres a disconnect there. if insuring thatmuch, have to expect bank would charge that much more.

ARK ANS AS IS AN EXCEPTIO N FOR OUR PUR POS E ,WE WANT TO US E HADLEY LAWS

1) Naturally Arising = foreseeable in ordinary course of events when contracts are breached2) Within contemplation these are loss/damages that do not naturally arise from ordinary

course of events but are still recoverable part of our damages calculation if we can establishboth parties had this loss/injury within their contemplation at this time that can beconsidered a probably consequence.

Consequential Damages

What value we assign to a loss of use, it has nothing to do with foreseeability, what we are talking aboutin terms of foreseeability is the loss but not how we value the loss

- Everyone knows, if you delay shipment, a consequence of that delay is the party who isexpecting the goods does not have the goods during the delay

Serr & Counsellor enter into contract .

- Couns enters a movie theater- S err does something- Couns sues for breach of contract, what damages would we anticipate Couns asking for this.

o Theater ends up being closed for 2 months, he says hey I could have made movie duringthat time . Couns says hes out of profits he could have made.


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o Contrast this to a situation where instead of contract of sehr and cousnellor to remodelmovies theaters .

- N ow sehr is building counselor a movie theater by dec 1 st o Serr doesn t get it done on time, doesn t get done by feb 1 st o Is counsellor s claim for loss going to be different in the second situation? He will still

claim he wants lost profitso In first one have records of sales, in the second ones you don t because you can t

quantify the possible loss, you can t claim the losso It is foreseeable to serr if he doesn t finish constr u ction that he w ou ld be losing money.

Chicago Coliseum v. Dempsey

3 contracts

K1 Dempsey, M arch 13

- Dempsey = fighting wills- $10- 300k + 500k- gate receipts over 2mil- And 50% of concessions/royalties- Life/health insurance favor of plaintiff - Was not suppose to fight between date of contract and fight w wills

K2 Wills, M arch 6

- Wills contract was made one week bfore Dempsey- S uppose to get $50,000 to box- F ight scheduled for S eptember

K3 Promoter

- S uppose to plan flights- Book hotels- His job was to make it happen- S uppose to pay for everything out of pocket and get reimbursed with $ made from gate

What is the outcome of the Indiana legislation? It orders the Plaintiff what he wants orders Dempsey

to stop preparing to fight Tunney and orders him to fight Wills in S eptember.

Damages/ Claims

1) Loss of profitsa. How does P go about establishing loss of profits? They called an expert, who had all

kinds of dat a to back this up


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b. With dragline, you can call a rental service and get a price.. but entertainment event,Dempsey has never fought Wills just don t know

c. T ickets/Concessions would generate the revenue don t know how many tickets wouldbe sold, or how many beers etc./bears playing?/how big was facility? Tooooo manyvariables

d. Why does law care this is not quantifiable? What is standard to justify damages likethis?

i. Lac k of stability / spec u lative; have to establish foreseeability and have toestablish them w ith a reasonable degree of certainty.. all the st u ff isspec u lation

2) 3) Expenses occurred to restrain him4) Expenses occurred after the signing but before the breach in July

3 Limits

1) Causal2) F oreseeability3)

Anglia Television v. R eed

- P doesn t want lost profits because knows not attainable don t know how its going to go/turnout

- If you don t want loss profits why would you use the expectancy measureo Is there an alternative when profit is taken out? Yes, reliance

What is included in cost? Cost before the contract and after the contract, all thesetup pre-production costs associated w/ a film is what they are after

All this done before reed signed the contract, then they want the costs theyincurred between when he was coming and not coming.

o Total damage claim is 2750l


27/62

IRAC for Counsellor movie theater example (narrowed to consequential damages)

I = Can Counsellor recover loss of profits based on the delay in construction of his movie theater?

R = the loss is not recoverable beyond the amount the evidence permits it to be established with

reasonable certainty- What are 3 categories brought up for consequential damages

o 1) did the breach ca u se these damages (hooker)o 2) foreseeability limit on consequential damages (Martinez case)o 3) certainty (Dempsey Case) not only does it have to be forseeable, but they have to be

established them with certainty- With R we need to formulate this based on our rule for Certainty- Have ot think if we have loss profit issue, we have to look automatically to certainty- At this point in counselor example, disregarding cause/foreseeability- Can counselor establish the loss of profits to the certainty issue

A =

C=

MISTL ETO E Case

Contract terms:

- 1 year term, after that month to month can be terminated with 30 days notice

P expenditures to perform contract:

- $3500 to build ramp, some connection w/ provision of delivery service- $1000 for dirt work- $15000 loan to purchase two trucks (vehicles for $9000 and startup $6000)

We are 9 months into the contract; power to terminate hasn t come into existence yet

- Mistletoe then calls and breaches, said we aren t using delivery services past June- Value expected value received

o She doesn t ask for expectancy damages because she is not profitingo Components of value expected are profits + cost if you re losing money you aren t

getting your costs back either, soo If you have a problem with some component in your expectancy measure, and you can t

prove consequential damages with reasonable certainty, then you need R ELIANCEDAM AGES !

- Expectancy measure: put you in a position where the contract would not have been breached. - R eliance M easure: put you in a position had there not been a contract

Courts uses restatement of contracts 349 for reliance measure :

- As an alternative to expectation damages , the injured party has a right to damages based on hisreliance interest , including expenditures made in preparation for performance or in performance , less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed


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- Whats wrong with giving her all expenses back? S hes losing, she would be put in a betterposition Mistletoe could make a compelling argument by breaching they actually saved Lockemoney

o However, don t know what position she would have been in had contract run for its

total duration because mistletoe denied her last 3 months of potential earnings of thecontract and in terms of losses, the loss was getting smaller and smaller in the first fewmonths like any small business can start w/ losses and grow into profits later

o Using reliance measure therefore, we cannot say if she would be put in a better positionthen she would have been put in

o **** why is this not an issue here, why is that a non-starter, restatement gives you costyou have incurred and less any loss party in breach can prove resasonable certaintyinjured partyw oudl have suffered if contract was performed.

- Concurring opinion said we put P in a better position then we would have been, but D hasburden of establishing any loss . But D did not do this! Sucker

o Any loss that the breaching party can establish that non-breaching party would havesustained

o So mistletoe had a chance, a right under the rule to factor in to damaging award but thelawyer messed up

- Trial court awarded $19,400o $3000 lost on ramp (500 can be salvaged) o $1000 on dirt o $9000 amount still owed on loan o Can she recoup any of her losses , yes some for the salvage

The reliance measure is going to be useful when you have a problem proving damages under expectancy measure because the big part of the claim / loss was not foreseeable you cannot establish it withreasonable certainty , or if you see a losing contract.

ROCKI NGHAM COU NTRY v. LUT EN BRI DGECO .

- Non breaching party cannot recover for a loss that the injured party could have avoided!!- R estatement says, you cannot recover for a loss that you could have avoided as long as the

steps that must be taken to avoid the loss don t screw you in the process.

S hirley Parker v 20 th Century Fox

- Contract details in brief - Contracted to make Bloomer Girl (musical) and that movie cancelled, then offered her Big

Country Big Men (western drama)- F ox claims she didn t have to lose 750k because they gave her anoter opportunity to make 750k


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3/17/08Expectancy formula:Loss of value component deals with the loss of value expected with the contract itself N et value Value Receive +

- Has to be a causal connection but that itself is not enough to limit consequential damages- In Hadley, courts apply a foreseeability limit, two types:

o 1) presumed: those that ordinary arise from course of events of breach of contracto 2) special circumstances: only when special circumstances are reasonably within

contemplation of the parties- Dempsey case, introduce the certainty concept

o N ot only does the harm have to be foreseeable, but has to bre a reasonable degreeof certainty that these harms would have actually resulted from the brief andcertainty is not 100% mathematical proof of consequential damages all we requireis a reasonable degree of certainty.. implicit in reasonable degree of certainity isthat you need a reasonable basis for calculating damages.

o In Dempsey, wasn t a legit basis the plaintiff presented for calculating- Avoidability , based on restatement says you cannot recover for the plaintiff for any

damages/harms that it could have avoided without any undue risk/harm/humiliationo Rockingham county bridge case

S hirley M clane case:- Mitigation = avoidability in essence- Fox says shouldn t have to pay her 750,000$ , why does avoidability matter? Because fox

presented her an opportunity to avoid her loss.o The basic doctrine of whether avoidability applies is what? Under California law at

time of case, is recovery for damages a basic defense avoidability and mitigation,and the court says you have to mitigate .. does court say you have aduty to mitigatein every contract? N o

o but in employment contracts, the injured employee who has been wrongfullyterminated, the employer has a duty to mitigate

o the McLane case regards a special circumstance, court says we have a duty tomitigate employment cases.

o When an employer breaches an employment contracts, what does employee suffer? 1) Loss of wages/compensation usually a period involved

o How do you determine if job is comparable? 1) different in kind, determine comprabableness whether the substitute

employment was different in kind then the employment that was lost in theemployers conduct

2) inferior, if the alternative substitute is inferior


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o *** if either of those, then it is the failure of the employer to take the substitutealternative, not going to hodl that against the employee to see what is recoverable

- Applying this analysis of different in kind/inferior, was the role different in kind/inferioro Yes, two types of films, difference in K IN D.. how would you characterize

responsibilities in boomer girl she was an actor...

Just to sort of pick through these things and identifying one as a different inkind, it is inferiorating to the dissent.. the problem for the dissent was thestate of the record, the plaintiff was excused from attempting to mitigatethe damges S UMMARY JUDGMENT

- So general rule: restatement rule, not going to be able to recover for loss you could haveavoided without undue harm/risk//humiliation/burden

Mercedes example, under our expectancy measure what does allan Samuels want from you, what harmhave you caused by not buying the car?

- They were expecting for you to pay them and make a profit- When they sue, they are going to sue for the profit they lost, could you successfully defend

that allan samuals could have avoided its loss profit by selling your lost car-

Neri v. M arine Corp.- N eri contracted to purchase new boat with a def, agreed price was $12587.40- O riginally paid deposit of 40$, wanted expedited delivery so then paid $4250- S ix days later, N eri attorney said P had surgery and couldn t make payemtns on the surgery,

and dealer said the boat was already purchased on its way to N eri.. dealer couldn t preventdelivery

- P breaches the contract, why is the breaching party the plaintiff usually the seller bringsthe lawsuit why didn t he dealer sue here

- Why is seller not suing here? Because the seller has the deposit of $4250 more than hisprofits!

- What does P base his return of the deposit on? 2-718o How does 2718 help the buyer here what about 2718 entitles the buyer to this

deposit.. Code gives the buyer, a right to recover some portion of the deposit the

formula in 2-718 is you get 20% of the purchase price of $500 whichever issmaller

We will deduct 20% or $500 of purchase price and give it back to thebreaching buyer in our case is $500, beause 20% of purchase price is like2500 bucks

In this case, seller will be entitled to keep $500, and has to give back rest of deposit back.


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o When talking about buyers remedies for sellers breach, at some point wea re goingto find that thre are remedies for sellers too, sometimes sellers can be injured aswell so the code provides remedies for breach by the buyer, the basic remedy is 2-706

Mirrors contract price/market price differential this tells us, the injuredseller is allowed to differ between contract price and market price

o 2-708 gives us alternative, seller s damages for non-acceptance or repudiation Diff between maret price and contract price in our situation is contract

price $12,587 and market price is $12,587 = 0y But that is not fair, the seller is out something still they are out their

profity But for the breach, the seller would have sold 2 boats, not one..

wouldn t have to make up the profit he lost with another seller he dstill have lost the sale using contract price market price diferential,it doesn t put the injured seller in the position had the contract notbeen breached

o 2-708: if market price-contract price inadequate, to put seller in as good a positionas performance would have done then the measure of damages is the profit(including reasonable overhed) which seller would have made from full performanceby the buyer, together w/ any incidental damages

o What might be evidence to establish inadequacy of market price and contract price?When you have a L O S T V O LUME S UPPLY.

When you have seller with an unlimited supply breaching a contract from asale of one of those items, the contract price market price will always be inadequate in that position

3/18/2008

N eri review:- Incidental damages do not include attorneys fees- Also under American system, if you win a case, you are not entitled to attorneys fees- What is next big category of contract loss that the non-breaching party is entitled to

recover, based on expectancy formula

o Loss based on contracto Category limited by L O V

Value expected value received + other loss (includes incidental 710)(includes consequential damages ___ )

o Aren t lawyer s fees consequential damages ?o If seller breaches then buyer doesn t have goods so buyer wants to get some goods

2-712 (remedy of cover


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2-712 when seller breaches buyer can cover, and recover the differencebetween the original contract price and the cover price

o 2-713 indicates buyer can recover the difference between market price contractprice differential

o 2-710 - What Incidental damages could the buyer incur? The expenses incurredfinding a cover/substitute maybe paying an agent or shipping is more, maybeshipped from Dallas coming from China and going to cost a lot more

o Can buyer get consequential damages? Can injured seller get consequentialdamages?

2-715 identifies damages for buyers consequential damageso Must recognize what position do we put the seller in when he doesn t take the

goods? So being stuck with something it is likely going to have expenses associatedwith dealing with that stuff (like storage of boat)

- Because buyers aren t the end users, and there is another place they are going to sell thetoasters we have to realize the buyer will endure consequential damages because wont beable to make profit

o Therefore more likelihood for consequential damages when seller breaches then abuyer

- However, a buyer who breaches leads to only incidental damages because there is noconsequence for a sale really besides losing the sale which can be considered incidentaldamages

- The consequential damages a buyer is entitle dto cover is subject to limitations it is onlysuch that could not be avoided by cover!

o If claiming consequential damages in relation to a seller s breach and those damagesare the result of you not covering and not purchasing a substitute you CA NNOT recover or cover or damagses if there is a market out there you have to reach outand apply a cover .

- 2-706 sellers resale for contract for resaleo If you can find alternative for resale, go ahead nad sell it evne if its less then your

original breached buyer contract price.. the code says we will give you thedifference breaching buyer will be responsible for difference as long as thetransaction was commercially reasonable

- Does code take into account any other factors that we are going to allow the injured partyto recover? Anything else? Think about expectancy formula make provision in that:

o Loss of value + O ther Loss Cost avoided Loss Avoided Does code have analog for loss avoided? Less expenses saved applies to both the seller and the buyer of the code

- 2-708 loss profit section, you get lost profit + incidental loss


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o There is no unanimity of what the last part of 2-708 means there is a revisedarticle 2 that has been made to clear it up but only a few people have adopted it.. .

Yesterday allan Samuels mercdes hypothetical . After you agreed to buy it then he sues you for breachof contract and asked if you would argue dealers lack of attempt to resale/mitigate would be a claim

against you wahts the answer?- O nly matters if Allan Samuels would have benefitted could the injured party done

something to injure the amount of loss - If the car you were suppose to buy that you decided ot to, would Allen would have been

made whole.. NO he wouldn t have because he was a volume seller he is one sale short.o Loss profit angle assumes an unlimited supply, if its unique make/model then going

to have a different analysis

- Duty to mitigate is like asking for problems, don t frame it say responsibility to avoid a losswhen talking about cover, buyer doesn t have a responsible to cover if I am going tosubsequently claim consequential damages we are going to consider if I take intoconsideration cover..

M EMORI ZE ARTICL E 2 R EM EDIES

KEM BLE v. FARR EN- Why would you have a liquidated damages provision?- Comedian > foreseeable based on Hadley- Comedian > certainity based on Dempsey

- How can you predict everything that might happen if the other side breaches? Because if something happens and I can t prove that it wasn t foreseeable

o If I don t put the other party on rise to the injury then I cannot claim for thoseinjuries based on Hadley

o With Dempsey the question was how do you calculate the amount of loss? Can t just make it up, how many tickets would be sold, etc?

- With these problems in mind, describe liquidated clauses?o We can kinda guess, we know if the other party breaches the contract we will suffer

some losses and I will not be able to identify what these losses are or be able otprove with a degree of certainty the losses

- but a clause of a liquidated damages clause is to anticipate the loss that might result to oneor both parties in connection with an ultimate contract breach.

o If it s a penalty, no good.. don t penalize for breaching contract but can agree, if one breaches we can put in clause saying x is the result if breach occurs.

- If actor breaches, owner can say I ahd to shut the theater down then nobody is going tocome to an empty theater.. this is comparable to Dempsey


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o There are some potential losses for the owner if the actor breaches that could posesome problems later on damages (certainty)

o Isnt there a legitimate basis for using a liquidation damages clause here- Whoever drafted this contract knew that liquidation damages were limited in some sense..

the party tried addressing this issue of whether this was a penalty

- Even bsides the fact aprties anticipate this problem the court syas no we are goin to lookbehodn the words of the parties nad look at the actual effect of the clause and in thecontext of the relationship here and because it doesn t deal with permissible puprposesor address problems with establishing certain types of damages after breach, because theaward is so out of whack with the amount of harm suffered it is a penalty clause and itsnot enforceable

Wassenaar v. Towne Hotel- N ot much haggling based on wrongful termination.. the appeal is not about legitimate basis

for terminating employ the appeal is based on the enforceability of the liquidated damagesclause.

o Are liquidated damages prohibited per se in Wisconsin? N o have to be reasonableand not a penalty.

o Applied a 3 prong reasonable test to determine: 1) Intent of the party, like in Kemble... was the intent to be a penalty or not?

y In Kemble it said we intend this disconnect w/ Kemble caseo Court in Kemble ignored the parties intent completely, if

this contract had a clause in it that said we don t intend thisto be a penalty would that be the end of all of this case?

y Its discussed but disregarded.. INTENT NOT IMPO RTANT !!o only time intent matters, is when something in the contract

clearly evidences a bad intent (punishment/coercive) 2) difficulty of ascertainment sounds like problems identified with

consequential damagesy O ne of the problems consequential damages limitsy Deals with foreseeabilityy calculation ___ - looks like certainity

3) circulated damages provision disproportionate

If looking at these basis based on when the contract is formulated . Have to look at it at two differenttimes once when contract established and then at the end.


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M arch 19, 2008

Wassenmer case extension

O ther factor, difficulty of ascertainment broken into two categories:- 1) the predict/anticipate, can we look ahead and identify the types of harms that might

resulto O ne of the limits on damages is foreseeability

- 2) will we be able to quantify those damages as a result?*** so even if we can anticipate a particular type of harm, still have to be able to qu antify

And reasonable forecast of compensatory damages- Look for disproportionality between what liquidated damages clause provided and what

damages were

In this case, D says its going to be easy to figure out what the damges were if we breached the contract,36 month contract for monthly salary, so there was never any problem in quantifying this .

- D also argues that giving him 21 months of salary, but he was only out of work two monthsso his actual damages were 2 months salary (he could ve worked and did after 2 months sogiving him full 21 months was disproportionate)

- CO URT REJECT S .- Isn t 21 times salary foreseeable and certain? Yes but court is not considering:

o 1) loss of reputationo 2) impact on job advanceo 3) emotional distress

- These items we cannot identify with precision or quantifying/qualifying- So court says very superficially this looks like an easy contract to ultimately determine but

there is more to the story then just simply the salary for the period of the employmentcontract

Is liquidated damage clause in there for a permissible reason or impermissible? Permissible, and clausewas reasonable . And because it is reasonable it was enforceable

Mitigate damages, enforces the duty to mitigate .. the fact that the employ did mitigate his damages, hewas out only 2 months the employer doesn t get credit for that 19 months subsequent employmentnot going to subtract that as mitigation of his loss because we have an enforceable liquidated damagesclause.


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LO VELESS v. DIEHL

Equitable poers of the court are to do wahts right under the circumstances, even if the commonlaw/statutory rules don t do exactly what they do

- Equity is always there, and courts under certain circumstances can access this and can dosomething about this.

Generally don t use specific performance because can compensate someone by paying them somecompensation

- Specific performance = you can t breach, have to carry on your promise

Contract is a lease, provides for $100 a month and asys anytime during 3 year lease you can sell for 21k..doesn t say anything about resell

- $5000 improvement made on property- $1440 signed a note/credit transaction for milking system to D

- What caused them to try and find to buy the land why not just pay the $100 till lease ends?They couldn t come pu with 21k and the lease expires the 5k improvements get wasted, sothey have to get some of their money back so they the onlyway possible is to buy theproperty and sell it for more then the purchase price

- They are successful in finding a buyer, exercise option and loveless steps into canceltransaction

He refuses, lease expires by by Dec 15- Loveless sues for specific performance for the clause of selling is the remdy they want- So sue for :

o 1) breach of contracto 2) or money

Said give us $7000, the money

- This case is about dirt , what about this case then says giving money doesn t quite do this- At the appellate level, it was reversed the real opinion said we wanted the property we

cannot give them any other property like that s owe if they were willing ot keep theproperty we coul d give them the property but that is not what tey wre going to do

o Ther ewas nothing that unique about the dirt to them because they were going toturn around and sell it they were going to make $1000 w/ hart

o So giving 1000 would be in same position would ve been had there not been abreach


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- SC has second thoughts about that, says whether or not they were going to sell the land isnot what matters what matters is if they were going to sell the house or not

- Specific performance = when the legal remedy is in adequate- What purpose injured party was acquiring the dirt for was relevant determining whether

monetary damages was in adequate, there is a presumption that when we have dirt $ is

inadequate

- The P said give us specific performance or give us money and dissenting judges said thatrejects the presumption

Cumbest v. Harris - Cause of action = breach of K- The general rule is there Is no equitable relief for personal property but there are a few

exceptions- General rule = specific performance is a special remedy only available when legal remedy is

inadequateo It is inadequate when subject matter of case is unique

- Is personal property presumptively unique? N oo You get the exact opposite, in personal property contracts subject matter is not

unique but there are exceptions

- There are certain circumstances when there is something special about the property thatwill allow the court to ultimately conclude that it is unique

R ule: specific performance not allo w ed if s u bject matter is personal matters/possessions ho w ever theexception exists w hen:

1) There is not an adequate remedy at law 2 ) Where specific articles or property are of peculiar , sentimental , or unique value3 ) Where due to scarcity the chattel is not readily obtainable

These exceptions are partly founded on the principle of the inadequacy of a remedy at law and theremedy may , in a proper case , be allowed where damages are not readily ascertainable

SC HOLL v. HART ZELL - Replevin I m not suing for performing I m suing the seller for having something that is

mine and not giving to me..- UCC 2-716 says you can sue for replevin- Court here says, first is can he get specific performance? N o because the vette isn t that

unique


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- And because he cant get specific performance we aren t going to let him circumvent withrepleving

o Court oesnt like what hes trying to do so they mess it upO nly condition on replevin is what? To get replevin you have to establish that you C O ULDNOT CO V ER

- And he never pled he could not coverThat s the only thing about this case that is right

Replevin is available as long as you cannot cover and as long as you have rights in the subject matter of the contract/goods have been identified in the contract .

- All this talk about specific performance is unnecessary bc he didn t ask for specificperformance

- Is court right about specific performance here? Based on what the court tells us how thecourt interprets 2-716 in the sedvick case, was the court correct about the shulls ca

Harddrive lost prior

M ary C lar k , W oman of C olor - This is involving a labor contract, and what is it about labor contracts that may make us

pause before we specifically enforce themo There is a public policy concern, goes back to constitutional issue but look at more

practicallyo Whats courts reasoning for doing service against their will, you can t force someone

to do a good job at something . The real problem is the real practical problemso Every single day its degrading, every day you act under supervision of this person

who you contracted with- Court said the fact is that the woman who was contracted that it wasn t a voluntary contract

in the first place . Its not the employer who is suing asking for specific performancebasically asking th court to prevent the enforcement of the contract

Lumley v. Wagner

P = theater cD = singer

K terms and agreements


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- 3 months- O pera- Thou shall not sing anywhere else

The indiana court gave us this list of bad things that happen from specific performance contract- Is involuntary servitude good in england? N o so then application here?- Making her do this will not allow her to get any other jobs . D say you cant make me not

sing- Courts say, aren t making you not sing.. court says look you promised not to do something

making you live up to your promise is different from asking for affirmative conduct on yourpart

- But if I tell her to sing like she promised to sing, that implicates the court then you setyoureslf up for monitoring did she really give it her all or did she fake it that night

Ford v. Jermon - Jermon entered contract with ford to perform in his theater

KTerms- S tipulated period, don t know that # of years- Pay?- If we don t know contract, whats the dispute- The dispute is does court have authority to force specific performance- The P is asking the D don t perform at any other theater besides one managed by the P- What is the covenant in the contract?

o There is no negative covenant in the contract how does P get to the argument thatthere was a negative covenant?

o Said it was IMPLIE D, no expressed language in the contract, says I will not do this I will not be funny anywhere else

Terms of the contract here say, she agreed to perform 52 weeks, 7 dyas aweek, the nature of her obligation would preclude her from being funnyanywhere else and therefore it was implied

Is this court going to imply the negative convenant in this contract thecourt does not want to enforce this, court says we arent going to let youtrick us into doing something that we would not otherwise do, by stating it

in the ngative Court says if you aren t going to be funny anywhere else, what is she goingto do? You are effectively saying you have to be funny here and that is doingwhat you are saying here


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DU FF v. RUSS EL P = theater owner

D = singer- Hes not asking for specific performance, hes just asking that he not be allowed to perform

anywhere else.- He wants what he cant have, he want sto compel her to sing but in the U S you cannot get

compelled performance- After reading Lumley case says we will ask to stop her from performing for anyone for two

yars of the contract- This isn t lumley, there isn t a clause saying she didn t promise not to sing anywhere else- Preventing me to perform anywhere else is forcing me to perform for the P here- N ot equitable, she got a better deal- Last argument, D was justified in breaking contract was her refusal to wear tights that were

bad for health / costume disputeo The nature of costume dispute, she was being forced into wearing tights and did not

want to and the tights wre a health hazard what was the health hazard? It was cold and the costume didn t allow her to protect herself against the

cold only had to wear it for ten minutes When was first time she notified P about costume, wasn t until after the

first year and it was imortantly after she was in negotiations with newtheater owner

- Moral of the story?o Can you enforce specific performance contract after russell case in the U S? N o

You can get yourself that ultimate remedy by incorporating a negativeconvenant into the contract

K terms- 2 years- 8 shows a week

Dallas Cowboys- 8k a year- Assignable- N egative convenant can t play for anyone else, and could be enjoined- To sign with the cowboys


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- Harris then leaves to O K to be asssistant coach- Harris signs a contract to paly in the A F L for the Dallas Texans- Cowboys are the N FL- Cowboys want harrs on their team, go to court trying to enforce the negative convenant- Has law changed with specific performance contract? N o court wont compel himto paly for

the cowboys buto Does texas enforce negative convenants? Yes are all negative covenants

automatically enforceable ? NO o What is the test? U nique and exceptional skill & ability o The standard is not one of a kind, it is about the difficulty /ease of replacing

In Britton case, employee had proven the services he contributed had been more substantially then thecontract price, the contract price would be a cap on that..

- When restitution is used as an al

Contract I Outline

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Transcript of Contract I Outline