Bottom line: analyze the facts. P will claim.... D will defend.... Even if D is right, P will argue.... If P is successful, P will seek specific performance.... If P loses the breach of contract claim, P might sue for unjust enrichment....

Arguing “Hard cases”I. Operative language (UCC & Restatement & Court)II. Analogizing facts from prior casesIII. Underlying theory of ruling, etc

TOOL-KIT Line-drawing / Slippery-slope vs. Distinguishing Facts It’s the Legislature’s job vs. Courts can fill the gap Flood of Litigation vs. Justice Individual Autonomy vs. Government Protection Policy / Future Effects of Decision Social Norms vs. Rules of Contract Law Market vs. Adhesion

Step 1: State the issue Step 2: Identity the rule, but don’t waste time stating the rule. Step 3: Summarize the elements of the rule that are easily satisfied by the facts. Step 4: State the sticking point on which this issue turns- i.e. the ambiguity in the facts that

makes it a difficult question Step 5: Apply one or more of the four types of analysis to the problem. Step 6: Contrast conflicting authority. Step 7: What are the defenses? Step 8: Make a conclusion. “Courts would…” “Given fact, highly likely” Step 9: Go to the next issue.

Basic Contracts Questions to ask yourself when you see the fact pattern:1. Good faith2. UCC/Common Law3. Was there consideration?4. Was there an offer?5. Was there an acceptance?6. Is there a deal (promise)?7. How do courts enforce the deal (promise)?

i. Breach of contractii. Unjust enrichment

iii. Promissory estoppel/ Detrimental Reliance8. Is there any reason for the court not to enforce the deal (promise)?

i. hold upii. extortion

iii. public policyiv. Duressv. Unconsicionability

9. Exactly what is the deal (promise)? What was agreed to?i. interpretation, performance, remedis?

ii. Parol Evidenceiii. Extrinsic evidecen

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iv. Substantial performancev. Remedies

vi. SOFvii. Battle of Forms

10. Did anyone fail to do what he agreed to do?11. If someone failed, is there a legally recognized excuse?12. Lack of valid defense or excuse?

i. mistakeii. statute of fraud

iii. Incapacityiv. Impossibiliyv. Frustration of Purpose

2. Performance1. Conditions

i. Type – precedent, concurrent or subsequent AND express, implied or constructive

ii. Excused – anticipatory repudiation, impossibility, impracticability, waiver

iii. Satisfaction – question of fact2. Remedies

i. Benefit of bargainii. Reliance

iii. Restitution-unjust enrichmentiv. EXCEPTION: Monetary damanges somtiems not enoughv. Liquidation Clause enforceable

1. tell story not a penalty

UCC Article 2When does article 2 apply?

Sale of Goods- movable personal propertyo Never applies to real estate or employment/service

Mixed deals- Paying for goods along with labor- 2 part rule:o What is the more important part of the deal?

Is it basically a sale of goods or a sale of service?o All or Nothing- either article 2 applies to all of the deal or it does not apply

Relationship between Article 2 and Common Law Contract Overlap- most answers under Article 2 are the same as Common Law Common Law deals with issues that Article 2 never addresses

focus on situations where UCC dictates different answer from Common Law

Haley: group types of cases in review to know common issues for 3 important fact pattern types:3. sale of goods4. employment contracts5. construction contracts

I. Common law or UCC? a. If this is an issue, discuss which dominates contract and then analyze both ways

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II. What is the Claim?a. Seeks damages for Breach of Contract?b. Restitution?

III. Is there a Basis on which to Enforce the Claim? (Consideration+Offer+Acceptance= K)a. Is there Consideration for the promise? (Hamer v. Sidway)b. Check sufficiency (value both direction) not adequacy (fairness) of consideration.

i. Was there an exchange? (past/future performance or gifts don’t count)1. Waiver of legal right or imposition (use card)

ii. Was there a bargain?iii. Is there an underlying motivation? (Not relevant ever as long as value

going each direction)iv. Was it an Illusory Promise? (Kirksey v. Kirksey)

1. Requirement/output/exclusive dealing (best effort, good faith, reasonable)

2. Is it his job, so best effort and good faith implied?3. Satisfaction clause (objective/subjective)4. Was there a promise to do anything? 5. Is there too much discretion?6. Was promise illusory? (good faith, BE)7. Was promise given in exchange for anything? (preexisting duty)8. Did promise creat reasonable and detrimental reliance?

c. Are there Implied Terms to obligatoin to act in good faith (implied in law) or make reasonable efforts (implied in fact)? (Wood v. Lucy, Mattei v. Hopper)

I. IMPLIED TERMS 1. Wood v. Lady Duff-Gordon (instinct with an obligation)2. Leibel v. Raynor Manufacturing (reasonable notification)

II. GOOD FAITH 1. § 205 – Duty of Good Faith and Fair Dealing = implied in every K2. Requirement/output/exclusive dealing (best effort, good faith,

reasonable)a. can’t ask for disapportinate amounts or take advantage

3. Satisfaction clause (objective/subjective)4. Locke v. Warner Bros. (performance is discretionary)5. Empire Gas v. American Bakeries (requirements K)6. Donahue v. Federal Express (at-will employment)

III. WARRANTIES 1. § 2-314 – Merchantability = seller is merchant of those goods,

trade standard & fit for ordinary purpose2. § 2-315 – Fitness for Particular Purpose = seller knew of particular

purpose and buyer relied on seller3. Bayliner Marine Corp. [D] v. Crow [Pl] (merchantability & fitness

for a particular purpose)4. Caceci v. De Canio Construction Corp.

(habitability/merchantability) d. Did you give up your right to a claim?e. Did you give up a legal right to do something? f. UCC writung enoughg. Is there a settlement of legal claim? (value)h. At will-employee (continued non-bargained for service)i. Forbearance from asserting an invalid claim needs to be in good faith

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j. Promises to make gifts including conditional promisesk. sham bargain (peppercorn)l. Value in your eyesm. Are they meaning to enter into a legally enforceable contract? (newpaper)n. Did either side attempt at Modification/New Promise for Pre-existing duty?

a. Sale of goods (ouside LA) 1. Consideration

a. New/diff performance? b. Disputed performance/amount?

i. previous debt2. Is no consideration, good faith modification without any threats

(unless other alternatives available) under UCC 2-209?b. Not Sale of goods

1. Consideration a. New/diff performance? b. Payment/performance of disputed duty/amount?

i. previous obligation (debt)2. Is no new consideration in “Traditional Rule” jurisdiction, NOT

binding ifa. past benefit + Pre-Existing Duty Rule apply? (Alaska

Packers Ass’n v. Domenico)3. If no consideration in “Modern rule” jurisdiction, must be:

a. Unanticipated circumstancesb. Fair + equitable (ententainer more valuable)

i. past benefit c. Not fully performed on either side

2. Is consideration sufficient? (value exchanged in both direction? a. Don’t check adequacy (wether balanced exchange)

c. If no consideratoin, is promise enforceable on basis of Reliance on promise?1. Equitable Estoppel? (reliance on statement of fact) (Ricketts v. Scothorn)2. Promissory Estoppel ? (§ 90) (Feinberg v. Pfeiffer, Cohen v. Cowles Media Co.)

a. Did D make a promise?b. Did it result in aciton/forberance by P? (determineal reliance)

i. Was there just plan or hope for the promise to be fulfilled? (not reliance)c. Could D reasonably expect AND forsee P to take an action/forbearance? d. Was P’s action induced by (taken in reliance on) the promise? (would that action

occur anyhow)e. Is enforcement of promise necessary to prevent injustice? (enforce full promise

or compensate reliance)f. Was it preparation or performance?

i. If buy unique equipment during preparation, D expected to pay for that.g. Hoffman (substantial actions taken under a promise to extend offer)h. Is it a charity subscription? i. Is it a subcontractor?

i. Option contract due to determental reliancej. Is the person not obviously mentally impaired?

B. Is there a Moral Obligation to enforce promise? (Mills v. Wyman)1. Is it a special case, e.g. discharged by SOL, bankruptcy, voidable due to infancy?

a. promise to pay debt->new limitation period (had duty; saved by law)2. Did D promise to pay money in recognition of material benefit P conferred on

D? (Webb v. McGowin) (Quasi-contract completed without court interference)4

a. traditional rule: not enforceable-> no considerationC. Implicit renewal?

1. Did parties implicitly renew agreement through conduct? (listing agreement)a. If so, was agreement supported by consideration? (illusory promise)

2. If didn’t implictly renew, was new promise given in exchange for new consideration?

3. If didn’t implictly renew, is new promise enforceable as promise?4. If didn’t implictly renew, is new promise enforceable based on past service?

a. Traditional Rule? (new promise, based on past consideration not enforceable generally, but renewal of previous debt is)

b. R2d approach1. Promise to pay quasi contratual debt?2. Promise based on past benefit conferred?

D. If all else fails, can P get Restitution?1. Was there Benefit conferred? (listing agreement)2. Appreciation/acknowledgement of benefit3. Acccept under circumstances that would make it inequitable not to pay.4. Did D receive Unjust Enrichment at P’s expense?5. Can D assert the following defenses?

a. P conferred benefit as Volunteer OR Intent to chargeb. P was an Officious Intermeddler (Cotnam v. Wisdom)c. P has Other Remedies (Callano v. Oakwood Park Homes)

3. Compensation for services limited to reasonable value (Cotnam)

III. Was there proper Offer and Acceptance?A. Did party Assent to be bound?

a. Manifest willingness to be bound not acutal willingness, but reasonable person expectations.

b. Would reasonable person assume power of acceptance created in him?c. Misunderstanding? -> so no mutual assent (“pearless”)

6. neither party more reasonable than other in argument for its meaning7. no reason to know what the other party means

d. Objective v. Subjective6. fact + circumstances over intentions7. Look at words, actions, and circumstances (Wrench v. Taco Bell)8. prior negotiations? (JW Southworth->neighbors land sale) 9. all terms don’t need to be decided at time

e. Is it preliminary negotiations or is there intent to be bound?f. Contractual negotiations (intent to be bound, definiteness, consideration)

B. Was there an Offer? (Owen v. Tunison, Fairmount Glass, Lefkowitz)a. Offeror master of offer

6. Can say not giving power to conclude offer and retain power to accept7. otherwise default rules

b. Does other party have ability to conclude bargain? Create power of acceptance?6. offeror controls terms of offer and mode of acceptance-> overcome

default rulesc. Directed at a specific party?d. Sufficiently certain terms? (subject matter, time for performance, price)e. How was it communicated? Identifiable offeree?f. Was it irrevocable? (promissory estoppel? UCC? Statute?)g. Other party know of offer?

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h. Answering question? i. Were there prior dealings?j. Price quote/lists? (invitation for others to make an offer) Corinthian order vilesk. Order form? (offer)l. Advertisement vs. unilateral contract (Carbolic Smoke Ball performance=accept)

6. not usually an offer, but rather invitation for offer. (can be offer if clear, definite, explicit, nothing left for negotiation)

7. open terms?8. rationale: would never give that many ppl power to accept placing

offeror in tough position 1. limited quantity?

9. doesn’t seem appropriate that anyone could accept? 1. says “first come”

10. Consideration: Offeror gets performance and offeree gets the offerm. Letter of intent not usually offer (unless party makes it clear they are bound)n. Form letter-> not offer/doesn’t give power to accepto. unsolicited price quote (unless you said for immediate acceptancep. Is it a subcontractor? (invitation for offers)q. Was it a firm offer?r. Is it preliminary negotiations? not definite enough for contract

6. Not binding if both parties know that they are not intended to be7. But reliance based on assurances during negotiations (Red Owl)

C. Was the offer Terminated/Revoked?a. If Revocable, did offeror revoke?b. Expiration ? Specified timeframe of acceptance end?

6. No time, there lapse after reasonable time ?7. Offeror keep it open through conduct?

c. Was it revoked prior to acceptance? (Ever-tite Roofing)6. Revocation: direct or indirect (Taking action inconsistent of keeping

offer open is valid revocation if offeree learns from reliable source.)1. definite to be effective revocatoin

d. Option Contract (open even after counteroffer or rejection)? (Dickinson v. Dodds no option to keep contract open, heard sold land, tried to accept. unable)

6. Was there a promise to hold open, plus1. consideration, OR2. signed writing under R2d 87, OR3. signed writing under UCC 2-205 (no consideration required)

7. Beginning performance under R 2d 451. Gives option to complete performance but not required2. Buy equipment? specific equipment to the project?

8. Detrimental reliance (R2d 87) – Subcontractors9. Did offeror rely on counteroffer or rejection?

1. Reliance on a later rejection can overcome option contract as can agreement between them

e. Did offeror Die/incapacity? (Earle v. Angell)f. Was it rejected? Rejection, or Counteroffer not in mirror image? (Columbus

Rolling-Mill)6. EXCEPTIONS:

1. Option contract

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2. UCC 2-206: non-conforming goods are not a counteroffer but rather an acceptance unless notified that they are not acceptance but couteroffer or offered as accomodations.

3. UCC 2-207: Mirror image rule (deviates from common law which would say no agreement if counter-offer)

a. Results in more contractsb. BUTc. May find contract where parties haven’t fully agreed

i. parties needed instead to sit down & clarified termsd. introduces complexity eg “materially alter” + different

termsi. good for ecnomic efficieny & socially good

4. Intent to keep it open/prserve original offer w/ clear langauge?D. Was there a reason offer could not be revoked? Option? Implied option by part

performance?E. Was there Acceptance? (Int’l Filter, Carbolic Smoke Ball, Ever-tite)

a. What is the offer?b. Does the offeree know of the offer?

6. Did he/she find out midway?c. Did the acceptance invite performance, promise, or either?

6. If promise, was there communication of return promise? (Hendricks offeree signed didn’t notify)

1. If promise and common law, “mirror image”? OR UCC2. If perform instead, was an option created through reliance?

7. If performance requested?1. Was notification requested?2. Accept through full/completed performance?

a. If not, offeree “began performance” or gave partial performance?

i. Option contract created to complete perfomance, not required and not actual acceptance until full performance (Marchiondo Broker option to ComPer

ii. Buy equipment? specific equipment to the job?b. Or still in preparation stage?

i. If buy unique equipment during preparation, D expected to pay for that.

3. Was performance given in reasonable time? a. preparation done in reasonable time? (Ever-Tite Roofing)

i. credit check-> D & P aware of procedure etc4. Was notification of performance given in reasonable time?

8. Offer seeks either, ambiguity on requirment decided by the offeree1. Beginning performance (offeree obligated to finish)2. Promise as acceptance

d. Did acceptance occur through non-conforming goods?6. Were the goods an accomodations?

1. No, can sue for breach; bound to complete performance once started.

e. Is it a subcontractor?6. Advertisment: Invitation for offers7. Was there an offer?

1. was it option contract? No consideration okay?7

8. Was there acceptance?9. Was revocation allowed? (split)

1. James Baird v. Gimbel Bros. (subcontractor—D—minority view)a. Allows revocation by offeror b. consideration to make it option contract

2. Drennan v. Star Paving (subcontractor—Pl—majority view)a. create option due to determential reliance

10. Was he looking around/open bargaining/or anything else to lose option?f. Did you substantially rely on offer? -> option createdg. Does the acceptance add qualifications?

6. Common law: counteroffer, offer terminated7. UCC 2-207: Key Questions for Analysis

1. Was there an offer?2. Was there a definite/seasonal expression of acceptance?3. Did the expression of acceptance include additional/different

term not present in the offer?4. Was the acceptance expressly conditional on the offeror’s assent

to the additional/different terms? TEST: Did A make it clear that offeree is unwilling to proceed w/ the transaction if the new terms are not accepted?

a. If so, the acceptance doesn’t create a contract unless the offeror assent to the terms. (Acceptance can’t be implied from conduct/silence; must express specific/unequvoical assent)

i. If no assent, no contract formed BUT contract may still form through parties conduct § 2-207 (3)

1. Terms parties agree included in K2. Throw out any conflicting terms, and UCC

gap fillers (indemnity clauses not gap fillers)b. If not, then look to see who the transaction is between?c. If not between merchants, acceptance is restricted to

offerors terms of deal; additional/different terms are merely proposals when no express acceptance or rejection (fall away and offeror’s original terms apply)

d. If the transaction is between merchanti. Additional terms become part of the contract

unless:1. Offer expressly limits acceptance to

original terms of offerora. Offeror is still master of the offer. If

don’t want addt’l terms imposed by acceptance, they can put that language in the offer–must be explicit.

2. Additional terms materially alter offer, ora. Price, quantity, type of good, limits

on liability, damages, warranty disclaimers, choice of law, arbitration, indemnification

3. Offeror objects to additional terms 8

a. Within a reaonsble timeii. Different terms are handled in one of two ways

1. Different terms can cancel each other out (knock-out), MAJ OR

a. Problem : opens up potential for offeror to bury terms in b/p

b. Advantage: if dispute over material terms, no K; b/p terms are not meaningful agreed to terms; prevents offerors from sliding in terms; offeror’s don’t have unlimited dominance

2. Different terms are analyzed like additional terms

a. Advantage: offeror doesn’t have to be bound by terms not intended; offeree has 2 options

8. Policy consideration for UCC 2-207 -> deviates from common law which would say no agreement if counter-offer)

1. Results in more contracts2. BUT3. May find contract where parties haven’t fully agreed

a. parties needed instead to sit down & clarified terms4. introduces complexity eg “materially alter” + different terms

a. good for ecnomic efficieny & socially goodh. Is there Implied Acceptance? (listing agreement)

6. Is so was agreement supported by consideration? (illusory promise)i. Does Silence constitute Acceptance? (Hobbs v. Massasoit Whip Co.)

6. Offeree takes benefit of service with time to reject?7. Do previous coure of dealings make silence a sufficient form of

acceptance? (reasonable for one to assume acceptance) Ammons8. Did offeree use offered property in a way inconsistent with offeror’s

continued ownership? Tortious act (Texas Co.)9. Is silence an explicit agreed option for acceptance (contract) Beneficial

National Bankj. Was it an option contract?

6. Was there a promise to hold open, plus1. consideration, OR2. signed writing under R2d 87, OR3. signed writing under UCC 2-205 (no consideration required)

7. Beginning performance under R 2d 451. Gives option to complete perfomrance but not required

8. Detrimental reliance (R2d 87) – Subcontractors1. Did subcontractor look around?

9. Did offeror rely on counteroffer or rejection?1. Reliance on a later rejection can overcome option contract as can

agreement between themk. Was it a firm offer?l. Was it sale of computer? Shrink-wrap

6. What was offer?

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1. Selling the comp with terms (ProCD) OR ordering comp (Gateway)

7. What was acceptance?1. Keeping the comp after reading the terms and reject them by

returing the product (ProCD) OR shipping the comp with new/diff terms (UCC-2-207)

8. How are terms treated?1. Part of K OR mere proposals (not conditional on offerors assent)

m. Shrink-wrap? Click-wrap? Browse-wrap? 6. manefisted your assent

1. impute knowledge by clicking similarly impute knowledge to user2. Policy: allow welfare to increase by protecting businesses->

burden shifted to consumer (no meeting of the minds)F. When is acceptance effective?

a. Generally effective upon dispatch (mailbox rule) unless specified otherwise6. Protects the offeree from revocation of the offer from the offeror7. Exceptions

1. Offer says otherwise (not acceptance until received)2. Option K: accepted when received 3. Rejection/counter sent first4. Improper disptach

b. Effective upon receipt6. Counteroffer7. Rejection8. Revocation

c. UCC 2-206 – Any manner reasonable (shipment counts as acceptance)6. Acceptance non-conforming goods/not perfect tender, so breach

G. Liability despite Incomplete Negotiations? (Drennan, Hoffman, Channel)H. Is there an agreement?

a. Is there Definiteness? (Varney v. Ditmars, Toys, Inc. v. M. Burlington Co.)6. Are essential/material terms of K defined for it to be enforceable?

1. No K if incurable uncertainity about material aspect7. Is there ambiguity/uncertainity in terms?

1. Who’s meaning prevails?2. if one party either has no reason to know or does not know another

meaning attached by the other, and the other knows or has reason to know of the meaning attached by the first, the first's interpretation will be operative

3. look beyond 4 corners of K when document unclear to gauge party intent-> parol evidence

4. Things to look at: contract itself (no definition or clarity?),>negotiations, trade usage, federal regulations, commercial context, course of dealing (would one party have taken loss) Frigaliment Importing v. BNS Int’l

8. When indefinite terms look for … to enforce1. Intent to be bound

a. circumstancial? inter-dependence, mutual investments in products/inventory closely linking the two together, long-term procedures Armco

b. langauge vague?

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2. And basis for determining remedy (can courts determine remedy)

a. Armco said would work it out3. If both absent, then look for detrimental reliance (Hoffman Red

Owl store) or unjust enrichment.9. Good faith and reasonable effort are definite terms if determinable by

external standard Varney v. Ditmar 10. courts reluctant to find indefiniteness because both parties wanted to be

bound in spite of essential terms missing11. Court may look at four corners/contextual, preliminary negotiations,

prior communications, external sources, trade usages, course of dealing, performance

12. Option contract construed to be binding if possible, not all terms must be listed just material term.

b. Does agreement have open terms?6. Is there an intent to be bound?

1. defense: no intent to be bound. still negotating on term.7. UCC §2-204:

1. Even if 1 or more terms are left out of K, will be enforceable if parties intended K

8. Are there open terms that can be filled in? (MGM actor contract)1. industry standard, customs, default rules

c. Is there agreement to agree? (Delicatessen retail shop; renew lease 5 years later)6. courts will not make contract if no agreement reached.

d. Is there agreement to negotaite? (Empro, teacher insurance)6. Doesn’t give other party power to accept. It’s not offer. 7. In good faith?

IV. Are there any Statute of Frauds issues?A. Is writing and signature of defendant required to prove existence of contract?

1. Marriage (not between couple)?2. Is the agrement for more than a Year?

a. Can promise be performed within Year?1. Yes, look to see if alternative performances? Autozone 2 seasons

a. one alternative perfomance can be completed in a year?i. has option to and can elect to terminate after AP

completeb. courts look to find a way to say it will finish in less than

year2. No, then Early Termination is not performance.

3. Transaction related to Land? Exceptions…b. Has the land been conveyed?c. Partial Performance ? Improvements? Payments? (Sullivan)

4. Does Executor pay a decedent’s debt out of pocket?5. Are Goods > $500 being exchanged?

a. Can omit essential terms and incorectly state essential termsb. Quantity is sealing-key to making writing sufficientc. Are the goods specially made?

8. Has Surety guaranteed someone’s debt? (Langman v. Alumni Ass’n of Uva)B. Are the relevant writings sufficient?

1. Are all of the Essential Terms written? (price, duration, parties, subject matter)

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2. Has the Defendant Signed any of the writings? (letterhead/logo/initials ok)a. Criticims: lack of mutuality between parties – makes K enforceable by

one party, but not against the other. D can’t sue P.3. Do the writing indicate realtions to same transaction? (Crabtree)

C. Is there an applicable exception?1. part performance in sale of land or misrepresentation – reasonable reliance theory 2. adimited to oral contract under oath?

D. Can the person recover in spite of the contract not being written?1. Can the person recover f/ unjust enrichment? (Restitution)2. Equitable Estoppel ? (D asserts signed writing made, but mistake of fact)3. Was there Partial Performance? (Sullivan sale of land)4. Does Promissory Estoppel apply? (P relied) (Monarco v. Lo Greco)

E. Police Rationales (avoid fraud & carelessness; not to let people out of legitimate agreements) but sometimes people get out of legitimate agreements because of SOF

V. Are there other reasons to Police the Bargain? Discharge of duties? VoidableA. Did P have the Capacity to enter into the contract?

1. Is he an Infant? (Bowling car)a. General rule: voidable at election of minor (must restore not give restitution)b. Special rule: “necessaries”

c. Unjust enrichment1. Show it was necessary good to recover under enrichment and not

contract2. Not recover full value but “reasonable value”

2. Courts less likely to work out deal because transacted your own peril.2. Does he have a Mental infirmity?

a. Did P understand substance of contract? (traditional) (Cundick v. Broadbent)b. Was P able to act reasonably while forming contract, and did other party have

notice of defect? (modern) (Ortelere v. Teachers’ Retirement)c. Did the other side start performing? Pay for performanced. If under Fair terms, then courts have discretion to work out deal?

B. Intoxication: show other party had reason to know was intoxicatedC. Was there a Mistake as to basic assumption? (allows rescission of contract)

1. Mutual Mistake ? (Sherwood v. Walker)b. Mistake as to basic assumption c. Material effect (not value of thing) Sherwood barren cowd. No assumption of risk by mistaken party/disadvantaged party? (Leanwee County

Board Health rental property, clause “as is” property)1. Sometimes not directly acknowldged, but risk allocated when reasonable 2. both paries innocent?

3. Unilateral Mistake ? (Boise Junior College bid calculations)a. Mistake as to basic assumption b. Material effect (not value of thing) Sherwoodc. No assumption of risk by mistaken party/disadvantaged party? (Leanwee County

Board Health rental property, clause “as is” property)c. Would enforcement be unconscionable? (substantial loss, etc), ORd. Was there non-disclosure by other party who knew or suspected mistake? e. Will affected party does not bear risk of mistake?f. Is there substantial harship to non-mistaken party?g. Was there violation of legal duty, gross negligence, or deviation from common

indsutyr practice?h. Were reasonable steps taken, which still lead to mistake?

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i. Was prompt notice given of mistake by mistaken party? (not specualting to make money)

j. If it is unilateral it must get to higher level of unconscionable. Sometimes the court will say that a party must bear the mistake if it is reasonable for that side to

k. Was there a misrepresenation? 4. Arguments : Plaintiff will say that it was a material mistake of fact

e. Defendant will say that it was an incorrect prediction D. Was there Mistake as to Expression? (allows reformation of contract)

1. Did what writing not match what was agreed upon? OneBeacon v. Travelers trying to take take advantage of ambugities, reformation not allowed.

2. Misunderstanding not mistake: Peerless each party right, neither mistaken, no contract came into being caue never meeint of minds

3. Check for fraud and unilateral mistake?E. Was there a duty to disclose?

a. Starting point: No duty to disclose everything you know (Laidlaw)1. people should go out and get information

b. There an affirmative duty to disclose, when1. information “not reasonably capable of being known (or discovered by)

to buyer/seller” (Hill)2. its material info

1. innocent misrepresentaiton allows recession)3. a question asked? (Hill termite inspection)

1. fraud or deception involved?4. Is there a special relationship of trust?5. Is arms length dealing? -> material info might not be reasonably known

through reasonable diligence6. disclosure required by good faith/fair dealing?

1. info uniquely in possession of other OR to correct misconceptionF. Was there a Misrepresentation?

a. Generally silence is NOT misrepresenation (no duty to speak)b. innocent misrepresentation , when material allows recession

1. context suggest failure to disclose1. fraud or deception invovled?

2. Was it Material or Fraudulent, and did the party Justifiably Rely upon it?3. Was there Active Concealment of a fact?

4. disclosure was necessary to prevent misrepresentation/correct mistake5. was it information they wouldn’t have gotten on their own?6. Opinion = mere belief (NOT misrepresentation).§168, 169

7. Was there Bare Nondisclosure? (Swinton v. Whitinsville Savings Bank)a. Did the D tell a Half Truth? (Kannavos v. Annino)b. Does P expect full disclosure because of Confidential Relations?

8. Arguments: Plaintiff will argue material fraudulent misrepresentation based on active concealement or half truths OR other in financially better position?

1. Defendant will argue bare non-disclosure, this will not work if in special relationship

2. Or defendant will argue that it was just opinon/puffingG. Does Public Policy outweigh enforcement? (Black Industries, Inc. v. Bush)

a. Would enforcing contract go against public policy? (Sinnar liquor license)

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1. look at Specific policy (health & safety), seriousness of offense, degree of fault of parties?

b. Can any part be saved/reformed?c. What should be done with parties if contract is unenforeable?

1. leave where finds or order restituion?d. Can we take out overbroad stuff?

H. Is there a covenant not to complete?a. Is it too broad?

1. Wholly unenforceable?2. Blue pencil rule (delete words)3. Good faith?

I. Is there an Exculpation Clause as part of an Adhesion Contract?1. Can language be Strictly Construed against drafter? (Galligan v. Arovich)2. Did party receive Adequate Notice that he was entering into a contract? (Klar)3. Would enforcing the contract go against Public Policy (O’Callaghan)4. Would enforcement be Unconscionable? (shocking to conscience of ordinary person)

b. Clause waives not just ordinary but also gross negligence? 1. Courts refuse to narrow because wasn’t bargained, too overbroad, no

noice of what waived? (Broadly v. Marina)J. Promise made under Duress? (external threats don’t matter) Austin v Coral

1. Improper threat to commit a tort or crime, or break the contract in bad faith?b. Depends on motivation of party

1. Absence of Reasonable Alternative ?c. find another supplier and sue for difference

1. What are the bargaining powers of parties ?2. Could you have sued for breach instead of making promise ?

a. suing inadequte to make you whole (loss offurture business)?3. Agreed to avoid loss of future business with company? Machinery

d. no right to future business. could have lost business for other reasons? not duress!K. Why was assent to modification given?

a. Was it given willingly?b. Are the two requirments above missing?c. In absense of duress (polite request), if there is lack of reasonable choice, could

mean absence of good faith1. if they know you have no reasonable alternative

d. Was there duress?1. Improper threat2. Absence of reasonable alternative

e. Duty of good faith doesn’t require charity, need to have reaonsable stand of dealing AND honesty in fact!

f.L. Was the agreement Unconscionable? Williams v. Walker-Thomas Furniture

1. Would enforcement be Unconscionable? (shocking to conscience of ordinary person)b. Was there unfairness in bargaining process? (procedural)c. Was their unfairness in oppressive terms? (Substantive)

1. Unfairly one-sided: high costs of litigatoin, only one party2. Shocking as to: (a) industry or (b) P’s specific circs

d. Did person just not shop around enough/was lazy?e. Did person have informational disadvantage? (MacIver – K voidable, cause of

hidden charges for home, Henningsen)f. Was there a structured monopoly?

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g. Is there an absence of meaningful choice? (Need to show this to prove k=unconscionable, Bad price is NOT enough!

h. Is there a major imbalance in knowledge/bargaining power? (Need to show this to prove k=unconscionable,

i. Was there market irrationality? (ex. Racism)j. Are we talking about a market of necessities? (and should be regulated)k. Is consideration = adequate OR grossly inadequate (and, thus, unconscionable)

(Embola, Marks v. Gates)l. Did D get windfall? (However, Bad price is NOT enough! m. If exclude/modify warranty, it must be done in conspicuous writing (2-316)

(Walker-Thomas v. Williams: Hidden add-on clause = unconscionable/not allowed)

n. Car manufacturer cases: disclaimers of implied warranty are invalid due lack of knowledge/gross inequality in bargaining power (Henningsen)

o. Policy questions: if court voids K is it acting paternalistically (Shwartz)? Should we look at entire classes? Is this a tort or K question? What is court’s role in distributive justice? Would voiding the contract leave less options for the disadvantaged party because they are high risk and businesses are wary about dealing with them without some oulandish terms that look problematic at first?

M. Impossibility/Impracticability – Unanticipated or extraordinary eventN. Frustration of purpose – K has become valueless by virtue of some intervening event

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Principles of InterpretationI. INDEFINITENESS

II. AMBUIGIOUS TERMS? III. PAROL EVIDENCE RULE: ANALYTICAL PROGRESSION

o Exceptions to Parol Evidence Rule = evidence explaining meaning, agreements made after writing, oral condition precedent, fraud/duress/mistake/illegality, equitable remedy, collateral agreement

1. Does the expression of their agreement in final writing include other written or oral agreement made prior to or contemporaneous with the writing?

2. Would the relevant term naturally have been included in the written agreement?3. Did parties intend writing to be final expression on all terms? (complete integration)

a. All contradictory terms excludedi. Are terms in harmony with writing?

b. All additional terms excludedi. UNLESS Agreements/terms that wouldn’t naturally have been included in

writing can be shown (Lath Farm ice house)1. Would not naturally have included:

a. if using standard form hard to modify (Masterson family home)

2. Would naturally have included ifa. industry practiceb. extensive and detailed Kc. Merger clause included

4. Did parties intend it to be writing to be final agreement on some terms? (partial integrat.)a. All conflicting terms excludedb. Additional terms allowed if its in harmony with what’s written

i. UNLESS specific limitations on new terms5. Was there a merger clause?

a. Doesn’t allow arguments of terms naturally kept out, because gives notice to people to put EVERYTHING in writing

6. Can you make an ambiguous term argument to get extrinsic evidence in? (PG&E indemnify clause, cover everyone or only 3rd party)

a. look beyond 4 corners of contract when document unclear to gauge party intentb. Things to look at: contract itself (no definition or clarity?), negotiations, trade

usage, federal regulations, commercial context, course of dealing (would one party have taken loss) Frigaliment Importing v. BNS Int’l

7. What is the reasonable expectation?a. would not have assumed oral agreement would have been naturally included in

merger clause? AMFb. insurance?

8. Remember the separate rule for UCC 2-202. Parol Evidence = express integrated terms cannot be contradicted by extrinsic evidence

9. Be aware of some key debatesa. when is extrinsic evidence contradictory?

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b. when would agreement naturally have been included in the writing?i. effect of “merger” clause

10. Remember Limits on parol evidence rule (illegality, explain ambiguities, fraud, oral condition precedent, mistake/reformation of K, boilerplate, unequal bargaining power (no choice), knowledge of party’s intent)

11. Purpose of keeping out oral evidence : If you put something in writing, you should be able to rely on it. If oral evidence always admitted, then once a dispute arises, don’t want people running to ct w/ oral evidence: Underlying notion: PE rule assumes that juries would believe oral evidence or side with sympathetic party even though know truth; distrust of juries. Also incentivize certain type of conduct (get writing)

12. Arguments against PE rule: contract law is about intention. So why not look at extent of negotiation. look at oral agreements as well.

13. Who does PE rule favor? Big business companies; giving the writing weight gives grafter of K the advantage

Are there conditions?Performance Condition

Is it express? Is it implied? (pay you if you complete x)

o Is it small part of the contract? Is the rest of the contract substantially performed?

o Is it main part of contract? Parties would not have agreed to contract. It is part of consideration?

o Is the contract divisible? Performance can be split

o Can we impose values of fairness on parties contract to re-read intentions?o Is satisfication expressily conditional on performance?

Express conditiono Is performance dependent or independent?o Is there substantial performance? (if not completely satisfied)

ConditionsExpress Condition: an event must occur before obligation to perform arises

1. Was there an express condition?2. Was it satisfied?

a. Is it asking for perfect/strict performance ?i. Is it conditional on things in your control?

ii. Is it conditional on something beyond your control?1. Is it impossible to perform? (impossibility is a shield (if get sued

for breach) not a sword (for getting what you want).iii. Is the condition a material part of the contract?

1. Is the condition part of the consideration? Clark bargained for books not sobriety

2. Is the condition what the parties were bargaing for?3. Was it waived?

a. Was there consideration?iv. Is the condition immaterial (technical)?

1. Was it just a technical condition?2. Did parties get what they bargained for?

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3. No need for consideration.b. Is it asking for substantial performance?

i. Did the other side get what they bargained for?ii. Was it just a techncial condtion?

3. If not, was the express condition waived?a. Is it material part of exhange?

i. Was there consideration?b. If not material, can be waived without consideration. c. Was there an express waiver?d. Was there an implied waiver by words or conduct indicating no condition?

4. If not, might a court reintrepret or excuse condition?a. Is there an immaterial condition plus presence of forfeiture?b. Is the forfeiture against public policy?c. Was there good faith complicance?d. Do courts get creative?e. Public Policy: B/c finding of an express condition can have an extremely harsh

effect on the parties, so cts sometimes work hard to NOT find an express cond. 5. If perfect performance wasn’t enough or didn’t occur, restitution? (unjust enrichment)

a. Did performance benefit injured party?i. No, did you make clear in contract that less than what you require is no

beneft to you?1. even if didn’t mention that its of no benefit, clear condition makes

it not unjust. otherwise no value of express condition.2. Was the conferred benefit offset by damages?

ii. Even if clear about conduct was there a benefit conferred would would be unjust to retain.

b. Is strict enforcement of a clear condition unjust?c. How much was the benefit?d. Is there gross negligence? no recoverye. Is there little forfeiture? no recoveryf. Was there good faith effort at compliance?

Constructive Condition Analysis1. Underlying assumption: parties meant to have reasonable contract, unless said otherwise.

Parties would not have entered into an unreasonable contract if they had known.a. courts: offends justice to allow forfeture when there is substantial performance

2. Who goes first? a. If can perform simutaneously then expected to.b. If one obligation takes longer than that’s due first before triggering other parties

performance.3. Is substantial performance enough to trigger other party’s duty?

a. Was the contract divisible?i. substantial performance of each part enough

ii. How do you know it is divisible?1. Two phases, different tasks, differen portion of money for each

task, exchange for each phase (payment consideration for diff task)b. If so, did substantial (material) performance occur? (breach; not material breach)

i. What is the proportion of mistake to the value of the project? (Jacob & Young Redding pipes not used)

1. What was lost value?2. How much was the benefit conferred?

ii. Will breaching party suffer forfeiture? 18

iii. What lead to the mistake? (willful)1. Was it a good faith deviation?

iv. If affects artistic/desired taste, then perfection not necessary1. peformance acceptable with cavaet of damages

v. If affects utility/functionality, then deviation substantial/material 1. not a performance

vi. Note: Can be imperfect.c. Is the condition impracticable? (shield not sword)

i. Is it conditional on things in your control?ii. Is it conditional on something beyond your control?

1. Is it impossible to perform? (impossibility is a shield (if get sued for breach) not a sword (for getting what you want)

d. Is there a material breach?e. If performance was substantial, what are non-breaching party’s damages?

i. Standard measure=cost to replace and get what wantedii. UNLESS cost of replacement is grossly disporportinate to overall project

1. Then difference in value of what desired and what wantedf. BUT: could make conition express by “Apt + certain” words (also tell why)

4. Was constructive condition waived?a. Is it material part of exhange?

i. Was there consideration?b. Was there an express waiver?c. Was there an implied waiver by words or conduct indicating no condition?

5. If substantial performance wasn’t enough or didn’t occur, restitution? a. Did performance benefit injured party? (unjust enrichment)

i. No, made it clear in contract that less than what require is no beneft?1. “I conferred no benefit”?2. Was the conferred benefit offset by damages?

ii. Even if conduct did not meet expectation there was benefit conferred that would be unjust to retain. (Britton quits early, not substantial performance)

b. How much was the benefit? c. Was there good faith effort to comply?d. Would any party willingly assent to the implied condition?

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Is there a breach?I. Duty of good faith Applications (not independent duty)

a. Did party breach by not performing in good faith? (can’t try to recapture a foregone opportunity)

i. Performance of conditions : gave up right to walk away if condition satisfied

1. Hensel contract conditional on obtaining mortgage implied commitment to engage in good faith; gave up right to walk away if don’t like house; can only walk away if can’t get mortgage

ii. Satisfaction requirement : objective or subjective need to be in good faith (chip marker)

iii. Output contracts Baker all bread crumbs produced (what may occur in good faith, as long as proportionate to an estimate or to normal otherwise comparable prior output or requirement)

iv. Requirement contracts v. Modification (doesn’t have to be given, but if later regret modification

prove two requirments missing)1. Under UCC, in commercial context no consideration necessary.

(2 requirments)a. Legitimate reason for seeking modification? (Objective)

i. As viewed through reaonsble standard of dealing (not trying to extort)

b. Honesty in fact (Subjective)i. have to tell other side your genuine reason for

modification2. Why was assent to modification given?

a. Was it given willingly?b. Are the two requirments above missing?c. In absense of duress (polite request), if there is lack of

reasonable choice, could mean absence of good faithi. if they know you have no reasonable alternative

d. Was there duress?i. Improper threat

ii. Absence of reasonable alternativee. Duty of good faith doesn’t require charity, need to have

reaonsable stand of dealing AND honesty in fact! vi. Terminations

1. Is it at-will employment?a. Protection should come from statute?b. Did employer follow its termination process?c. Was there implied/express conditions? (fire only for

cause) Hilleslandd. Was there implied modifictaion from at-will to just-cause

through conversations and conduct? e. Is there a duty of good faith that we can read in?

i. transform at-will into just cause?1. problem: interfer with ability to fire; you can

always have bad faith claim

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f. Does non-enforcement interfer with employer’s normal exercise of his right?

g. Can you sue for detrimental reliance? (relied & turn down jobs)

2. Policy: you can always turn into bad faith firing and we are moving away from intent of the party!

b. Agreement to agree on specific term at later time? i. have to be cooperative, can’t try to weasel out, or change older terms

c. Express warranty of merchantability or fitness for a particular purpose?d. Is there an implied warranty of good faith and fair dealing?e. Two ways to look at cases:

i. Concerned with party’s intent ii. Importing moral duties/principles of fair dealing

II. Is the breach material or was there substantial performance?a. Look to see if there is an express or implied condition

III. Anticipatory Repudiation (=statement: intent to breach, right to stop performance, sue for damanges)

Did other side indicate it will not perform giving right to stop performance and sue? Is it a material breach? (Hochster v. De La Tour traveler changes mind before start of K) Was there a clear express unequivicoal statement of non-perfomance? Was there an implied repudiation?

o Were actions and conduct equivlant to an unequivocal refusual to perform?o Did the party put it out of their power to perform?

Was it just a postponing? H.B Taylor breeding horse still posible Was there action that makes performance impossible or practically impossible? Did the repudiating party retract? UNLESS

o Did the other party say repudiation final?o Did other party change postion materally?

Policy: not just contracting for perfromance but for piece of mind and ecouraging mitigation of damages

Mitigationo Did the party wait for reasonable amount of time for performance (retraction)

after repudiation?o Did the party take reaonsoable steps to mitigate his losses?

Cannot recover for avoidable losses, but can if made ‘reasonable but unsuccessful efforts’

Sue right away?o POLICY: if repudiation, then can sue. encouraging mitigations of damanges so

that P takes reaonsble steps, so as to prevent damaged party from running up damges and reduces reliance.

Assuranceso What are the grounds for insecurity?o Was there reasonable grounds for insecurity? (AMF protype delayed)

allows you to suspend your performance & demand assurances of due performance

relevant factors: defects, delays, falling behind or breaching other Ks (not just yours but also others)

o Did you send written demand for adequate assurances? (AMF written demand)o What kinds of assurances may one request?

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Business practice, commercially reasonable practices, alternatives available

o Were adequate assurances given within a reasonable time under the circumstances?

Yes, keep performing/contract keeps going. No, stop performance and terminate contract-> Sue for damanges.

o Can you suspend performance?

Defenses 1. Didn’t perform in good faith2. Against public policy3. Statute of Fraud4. Unconscionability 5. Mistake (unilateral or mutual)6. Duress (look above for more)

a. Why was assent to modification given?i. Was it given willingly?

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ii. Are the two requirments above missing?iii. In absense of duress (polite request), if there is lack of reasonable choice,

could mean absence of good faith1. if they know you have no reasonable alternative

iv. Was there duress?1. Improper threat2. Absence of reasonable alternative

v. Duty of good faith doesn’t require charity, need to have reaonsable stand of dealing AND honesty in fact!

7. Impracticability (objective impossible to perform because person or thing is unavailable)

I. Use when other party says no to modificationa. What is the source of hardship? (1)

i. Was it something that could not forseen the risk if they had sat down?ii. Did you do enough to protect yourself by allocating risk?

1. Force majeure excuses performance (argument on contract lang)a. Is excuse counter/against the entire contract?

i. What did parties mean?ii. Would other side have agree to this provision?

b. What are the relative bargaining powers?iii. Did one party assume the risk?

1. Was the risk in their basic assumption? (U.S. v. Wegematic bids computers)

2. Are there conditions that discharge duties?b. What is the extent of harship? (2)

i. Was perfromance so burdensom/onorous.expensive to require completion?1. Is the degree of burden just difficult not impracticable?

c. Was their a response to harship? (3)i. Did you take steps to allocate hardship?

ii. Did you take affirmative steps to comply with contract?d. Counter: all above doesn’t matter; enforce K; otherwise no value in contracting

i. increases in cost and market changes are risks you take. 1. should have alllocated risks beforehand now should perforn.

ii. Problem: Is it efficient to require them to sit down and allocate unforeseeable risks?

e. Policy: importing social norms into contract when parties don’t think of all possible risks

i. Courts think about what parties would have done if they had anticipated the risk. (reading in good faith behavior)

1. What is the basic assumption of the parties when contracting? (Wegematic lead to believe computer were ready)

2. Is there an implied agreement that if certain conditons occur discharged from duties?

a. UNLESS direct language says otherwise.3. Who can best bear risk?

f. Situations in which have a good chance of making out an impracticability defense:

i. Changes in gov’t regulation that make performance illegal1. can you call back on unjust enrichment?

a. reasonable value of service or value of benefit conferred2. Arguments against UE: public policy

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ii. Acts of Godiii. Mineral, crop grown in 1 countryiv. Political crises

g. Situations in which no impracticability defense :i. the risk was forseeable, even if outside the basic assumption of parties

ii. Fall back: quantum meruit (unjusti enrichment)1. sue on contract first2. unjust enrichment

a. retain the benefit conferred 1) reasonable value of service; OR 2) value of benefit

8. Frustration of Purpose (can perform but undermines point of agreement-> rarely wins)II. Can you still perform?

a. Yes, not impractiability.b. No, impracticability?

III. Can you instead use "frustration of purpose” argument?c. Is the central purpose of K no longer viable (pointless to perform)?

i. Government policy change, etc.d. Does it undermind the purpose of contract?e. What one party wanted to get out of the K is no longer available?f. Is there an implied condition?

i. Would either party have agreed if they had anticipated this risk? g. Are there langauge or actions used to protect onself from risks? (buyer-

intermediary-supplier, interme. didn’t get contract to fulfill obligation with buyer)h. Did you take affirmative steps to comply with contract?i. Would the judge be sympathetic?j. Could you have protected yourself from risk? (trust had papers; can’t add

express language to allocate risk)k. What are the relative bargaining powers?

9. Conditon not met/was there a condition?VI. What Remedies are available to P?

A. Sale of furnace, buyer refuses deliveryScenario 1: Seller resells furance, sues for difference between sale & K price (recover incidental damages and additional resources Scenario 2: Seller chooses NOT to resell; sues for different between K and market priceScenario 3: Seller tries but can’t sell; sues for K price but must hold furance for B (Specific performance)Scenario 4: Seller sells furnace to another cutomer, BUT seller would’ve sold 2 bu fo breach; seller sues breaching buyer for lost profit. Argue: I’m not made whole by substiatue sale because could have sold both. Lost volume seller (UCC 2-708 (2))

B. Types of breaches a. Employe breaches

1. What the contract price?2. Have duty to mitigate damges (find new job)

1. job must be comparable/fungible; different or inferior job may not work to mitigate damages (scripts)

2. take job comparable job? -> sue for difference3. don’t take comparable job? -> get difference 4. not offset by unemployment benefits

3. What the benefit of the bargain?1. entitiled to what you were offered

4. Policy: incentive not to fire if have to pay full24

b. Insurance (Rosario v. 666 5th Ave)1. asked other to get insurance, had alternate insurance; pay for the

alternate insurance2. put in position you would have been in by giving benefit of bargain

c. Repudiation1. Common law: don’t require you to cover your damages2. UCC: Difference in market price and contract price when you learned of

the breach1. when other party repudiates, required to find substitute or get to

recover market price (cuz you should have reduced damages)C. Damages checklist

a. causationb. foreseeability vs. unforseeable (at time of K)- no notice of consequential damages

1. Arising naturally (often occurs)1. ordinarily wouldn’t occur?

2. Special factors had to be known to both parties (communicated to breaking parties) Hadley v. Baxendale deliver machine part

1. OR breaching party had reason to know3. NOT liable for foreseeable after K or time of breach

1. not on hook cause couldn’t have taken provision to protect yourself4. Terms like date left open-> look from time fixed for foreseeable factors

c. Can damanges be proven with certaintiy?- can’t calculate damages1. Loss of profits in K year

1.2. Loss of profits for future years

1. show can caluculate and not sheer speculation to recover; show reaonsable certainty

2. can’t be sure breach caused loss could be other factors3. Loss of value on sale of division

1. hard to come up with reaonsble certainity and hard to prove breach led to future damanges and not some other factor

d. avoidability- duty to mitigate1. There’s constructive labor unless there’s reasonable alternative available

D. Limits to damages a. causationb. foreseeability v. unforseeable (at time of K)- no notice of consequential damagesc. Can damanges be proven with certaintiy ?- can’t calculate damagesd. avoidability - duty to mitigate

1. There’s constructive labor unless there’s reasonable alternative availablee. Non-economic loss (emotional anguish/disturbance)

1. when engaging in contract where non-economic motivations are bigger2. usually not recoverable because certainty & foreseeability problem3. UNLESS is foreseeable and failure to operate in good faith

E. Goals of contractual remedies a. Compensation (esp. economic loss not emotional)

1. okay with parties breaching as long as oher side made whole. 2. increase efficiency: we want to allow you to find more efficient use of

your product as long as you make other side whole1. problem: assupmtion other party can be made whole

3. Contract law is promsie to pay damanges NOT to performb. Deterrence (not in K law generally) Punative damages

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1. certain types of breaches expections. when conduct is REALLY bad.2. insurance doesn’t payout intentionally 3. fraud: over pay-> sue for difference in what you paid and market value

c. Punishment (not in K law)1. willful breaches & certain types of K

d. Tort vs. Contract1. Tort about deterrence + punishment UNLESS really extreme2. Contract is about benefit of bargain

F. Steps a. Go to expectation damages first b. If monetary damages not enough, then go to other damages.

G. Injunctions & Specific Performance Analytical Frameworka. Traditional Category (e.g. Sale of Land)b. Adequacty of monetary damages (availability of substiatutes, difficulties in

proving amount, etc)1. damages enough UNLESS special skills & knowledge2. damages not enough then injunction UNLESS no other means &

contract would force the employee back cuz no other reaonsble meansc. Competing Policy consideration (e.g. person, services, etc) (Wolf)

1. Public policy + Equity2. Favor economic competition 3. Negative approach (injunction)

1. otherwise involuntary servitutdeH. Personal Services Contracts: Analytical

a. Unique Skillsb. Trade sercrets or special knowledge?c. Would injunction leave breacjing party with a way to make a living?

I. Potential damages upon Breach a. Higher cost of substituesb. If no substiatues avaialble lost profits for contract season

1. Reasonably forseebale?2. Reasonably certain?

1. past yeat, competitors price, market rates3. Goodwill/reputational effects:

1. lost sales in future yearsc. If hard to be certain, maybe monetayr damages are inadeuqate?

1. difficult proving reaosble certay?1. procuring suitable substiatue2. award of damges could not be collecte

2. Use specific performance1. goods unique2. proper circumstance

a. inabaility to cover (replacement)J. Are Liquidated Damages provided for in the contract? (Southwest)

1. Reasonable forceast of loss? (allow LD)2. Difficulties of calculating/proving loss? (allow LD)

b. if loss clear then penalty1. Are they Unreasonably Large, i.e. a penalty? (Dave Gustafson & Co.)2. Are they Unconscionably Small? (Henningson)3. Policy : not economicla to prosecute every case, so set up damages at time of contract.

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1. more comfortable because someone has agreed to pay you vs. Covenant not to compete where deprived from making livelihood

2. save litigation cost, hard to prove, expectation, on notice3. damages greater than stipulated hold to LD4. damages less than took a calculated risk so held to provision

4. Tactic : Ague it’s a penalty and not a reaonsble forecast of damages of harm or difficult to estimate.

1. purpose of contract is not to punish ppl for breaching or deter . 2. Instead: about compensation/contract law about party gets

benefit of bargainK. Specific Performance ?

1. Are Damages an Adequate Remedy?a. Can damages be proven w/ Reasonable Certainty?b. Availability of Suitable Substitute? (not w/ rare goods)c. Are good unique? (if so, use SP as remedy, “cause no cover”)d. Likelihood Damages will be Collected?e. Was it breach of contract to sell Land?f. Is it a personal service? (can’t use SP because would produce state of servitude

(slavery-like))2. Was Bargain Unfair or Grossly Inadequate? (McKinnon v. Benedict, Tuckwiller)3. If specific performance appropriate, will it be:

a. Specific Performance ?b. Injunction ?c. Rescission? (restoring to status quo, after P makes restitution)d. Restitution? e. Reformation ? (making contract consistent w/ oral agreement)

L. Expectation Damages? (P always entitled to benefit of bargain) (Sullivan v. O’Connor)1. Loss in value + other loss – costs avoided – other loss avoided2. Can D claim the following Limitations?

a. Avoidability? Duty to mitigate. Did P…o Cease Performance ? (Luten)o Make Reasonable efforts to make Comparable arrangements? (Parker)o Claim Constructive Service?

b. Incomplete or Defective Performance ?o Loss in (sentimenta) value to P (ideal but hard to figure). (Peevyhouse

irrational/but what was bargained for. Not about money)o Loss in market/economic value (always possible/reasonable person

standard). (Peevyhouse)o Cost to remedy/complete . Is it grossly disproportionate to loss in value

to P? (Jacob & Youngs v. Kent, Groves) o This cannot be disproportionate to value to plaintiff Jacob &

Young, John Wunder disagreeso Peevyhouse repair cost more than the market value added to

propertyc. Unforeseeability ? (Hadley v. Baxendale)

o Ordinary Circumstances ?o Special Circumstances , and Notice given to D?

d. Uncertainty ? Does P show…1. Fact of Loss ? (Collatz)2. Extent of Loss ? (Fera) (extrapolating past performance)

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3. Value of Loss? e. Is contract divisible? (most K aren’t divisible)

o Is there separate condideration? o Money linked to separate parts?o Is it prortioned to the perfomrance? (linnked to performance and not

disproportionate)M. Equitable Remedies

a. Traditional categories (sale of land)b. Adeequacy of monetary damages

1. eg. when monetary damages not enough specific performance ordered1. injunctive relief (not do something) (Cannery 6-week season)

a. can’t find adequae substituteb. So: prevent D from selling to otherc. Make them pay other for services

2. specific performanceN. Promissory Estoppel: Reliance Damages ? (where P would be if contract never made)

a. Costs incurred-b. Pain & suffering

O. Quasi K: Restitution Damages ? (where P bestowed benefit on D)a. On contract or not on contractb. Ask breaching party when K is bad & weren’t going to benefit under K anyways.

P. Nominal Dam ages ? ($1 or 6 cents)

What are the damages?o Common Law

Can a specific rule be applied? Construction or Personal Services: Cost of completion or

Diminution in Value Real Estate seller breaches = Market Value – K price Real Estate buyer breach = K price – Market Value

Expectation (General) Damages? Farnsworth Formula Damages (LV+OL-CA-LA)

o Loss in value + Other Loss – Cost Avoided – Loss Avoided o UCC

Buyer breaches Seller gets MV – K; or Resale – K price (prob obligation to resell)

Seller breaches Buyer gets MV – K; or Cover price – K price

o Consequential and Incidental – Hadley Rule satisfied (foreseeability)?o Non-recoverable damages?o Did the non-breaching party mitigate?

Lost Volume Seller?o Reliance Damages?o Restitutionary Damages? (Non-breaching party as well as breaching party can

request this.) Benefit Measure Enrichment Measure K price as a cap (or lesser of the above two measures)

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o Specific Performance Can you substitute? Damages are uncertain?

o Liquidated Damages term? Does it reasonably forecast damages? Damages would be hard to compute? Damages lower than amount?

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