CONTRACTS OUTLINE- DOW 2015

Principles:

Contract: K=O+A+C, an agreement between 2+ parties to do or not do something.

1. F-O-C: Freedom of contract

a. No compulsory contracts

b. What did the parties intend? (A.K.A. contract Law is private law.)

c. Cant force someone to be a debtor against their will

2. Master/Mistress of the Offer: offeror defines potential transaction, dictates mode of acceptance. Offers can only be accepted by people to whom the offer has been extended.

3. MUTUALITY or SYMMETRY principle: until both are bound, neither is bound or one is not bound, neither are bound.

4. Offer: Something that creates the power of acceptance, clear, definite, and explicit, such that when someone says I accept, a reasonable person knows what the contract is for.

5. Acceptance: Doing what the master of the offers says.

6. Consideration: (Benefit to Promisor OR Detriment to Promisee) AND Bargained For (Inducement)

7. Moral Consideration; if it was enforceable, it is again. If you intended to be legally bound and then you reiterate that promise, it will be legally enforceable.

8. Every Contract Story: We had a contract to do X. I did my X. He did not do his Y.

9. Material Breach can excuse nonbreaching party from further performance.

10. Mirror Rule: at common law, A must be mirror image of O. Changed partially by 2-207.

11. UCC 2-207:

a. (1) Definite and seasonable expression of A operates as acceptance even w/ addl terms UNLESS A is expressly made conditional on those terms.

b. (2) Addl terms are only a proposal unless (expressly conditional, see (1). For merchants, terms become part of contract unless they

i. Expressly limit A to terms of offer

ii. Materially alter it

iii. Notification of objection has been received/is received in rsn time.

12. Contracts are legally enforceable agreements: a type of agreement where the parties intend for the other party to be able to turn on the power of the state to enforce.

13. Suspension of Revocation: at some point, the rsn person observing behavior of the offeree can infer that the person is going to complete the performance and accept. At that point, the power of revocation is suspended for the amount of time it would take a person to complete performance.

a. This applies any time there a window where theres a gap between performance beginning and being completed.

14. Past consideration is NO consideration!

15. Consideration is as much a form as a seal.

I. Rule/Counterrule

a. Assumpsit: he has undertaken; form of action when contract breached.

b. Demurrer: legal so what?, challenge to sufficiency

c. Legal Realism: Values shape principles; all principles some unwanted/weird results. When principles produces too many bad results, we change/replace it.

d. Subjective/ Will theory: The parties intent rules (for value, etc.)

e. Objective theory: Reasonable person standard.

f. Interpleader: court settles two competing claims for the party owing out the $.

g. Unilateral contract: contract fulfilled by performance

h. Bilateral contract: fulfilled by mutual promise

i. Replevin: action to recover property wrongfully taken

j. Express Contract: Actual spoken/written agreement between two+ parties

k. Implied Contract: implied by actions of parties

l. Quasi-Contract: implied by law (no contract but law remedies unjust enrichment)

m. Cases:

i. Hawkins v. McGee: Breach of perfect hand contract; damages reflect differences between perfect hand and actual hairy hand.

ii. Hurley v. Eddingfield: No duty to act, and no implied contract created by previous doctor-patient relationship.

iii. Cotnam v. Wisdom: Life-saving actions to unconscious man create quasi-contract because reasonable person would want to be saved.

iv. Boston Ice v. Potter: A reasonable person wouldnt care where their ice comes from, but Potter subjectively did; no contract b/c Boston did not make the contract with Potter nor notify him that it took over.

v. Continental v. Chandler: Sending of lumber created unjust enrichment; Chander required to pay difference over the amount of his offset with intended other party.

vi. Taft v. Hyatt: To claim private reward (unilateral C), must both know of reward and not be precluded by special relationship (police duty, atty rel.).

vii. Noble v. Williams: No one can make another party his/her debtor.

viii. Sommers v. Putnam: Act of Beneficial Intervention- party fails duty & other does- can create quasicontract obligation. Noble v. Williams more common.

ix. Davis & Co v. Morgan: Gratuitous promises not enforceable.

x. Scwartzreich v.: Seemingly gratuitous promise was a rewrite of contract and replaced old contract, so enforceable.

xi. Wood v. Boynton: Seller sold diamond w/ both parties believing might be topaz. No fraud from seller nor mistake of identity (same stone); bad deal not enough to set contract aside.

xii. Sherwood v. Walker: Cow sold for hamburger turns out to be pregnant and valuable. Court holds mistake essential and not accidental characteristic, no K.

1. Deliberately acquired info- can be monetized

2. Casually acquired info- cannot be monetized, unfair

xiii. Laidlaw v. Organ: Buyer of tobacco knew info seller did not; K still valid b/c buyer committed no fraud (did not answer but did not lie).

xiv. Hadley v. Baxendale: Mill arm case; cannot recover for special circumstances resulting from breach unless other party knows. Can recover from natural consequences of breach.

xv. Shaw v. Shaw: Marriage/bigamist husband case; breach even if never technically married b/c husband made implied contract that he was free to marry upon proposal (implied warranty).

xvi. Upton-on Seven v. Powell: Fire district case; if you call for something to be performed, you pay (even if you expected it to be free, you pay the fair value of service received.)

xvii. Vickery v. Ritchie: Turkish Bathhouse Case; K determined by parties intent as expressed through actions.

II. Offer and Acceptance

a. Indefinite Contracts

i. Offeror has power of revocation before acceptance

ii. Offeree has powers of acceptance, rejection, and counteroffer

iii. Counteroffer switches offeror/offeree roles

iv. Cases:

1. Lefkowitz v. Great Minneapolis Supply Store: Master of offer can set terms. Subjectively, Lefkowitz thinks he has power of acceptance. Objectively at time, offer was for women.

2. Jenkins Towel v. Fidelity: BAD OPINION. Why? If Jenkins offeror, Fidelity has power to reject. If Fidelity offeror, master of offer, sets acceptable.

3. Moulton v. Kershaw: Salt merchant case; court holds we may offer to you not sell you to be an invitation and not an offer.

b. Modes of Acceptance

i. Master of offer (offeror) sets mode of acceptance

ii. Cases:

1. Prescott v. Jones: Doing nothing is not an acceptable mode of acceptance due to symmetry/mutuality principle. (If insurance sued b/c not paid premium, we run into Noble v. Williams.)

2. Carhill v. Carbolic Smoke Ball: Court holds that there was a contract b/c Carhill performed as desired. (Time of acceptance problems still being revisited; see suspension of revocation)

c. Firm Offers

i. UCC 2-204(3): Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

ii. UCC 2-305:

1. Parties can conclude contract for sale even though price not settled. Price is a reasonable price @ delivery if

a. Nothing is said as to price

b. Price left to be agreed and parties fail to agree

c. Price to be fixed by agency/3rd person and is not so set/recorded.

2. Price fixed by buyer/seller means fixed in good faith

3. When a price to be fixed otherwise than by agreement fails to be fixed by fault of one party, other may at option treat contract as cancelled or fix reasonable price.

4. Where parties intend not to be bound unless price fixed/agreed, and it is not, there is no contract. Buyer must return goods received, or if unable, pay rsn value at time of delivery; seller must return any part of price paid on account.

iii. Revocation must be reliable information; rsn person must no longer think he can accept.

iv. Revocation must be exercised in a manner calculated to reach offeree.

1. Same manner as offer

2. Calculated to reach offeree at least as efficiently

v. Cases:

1. Dickinson v. Dodds: Knowledge of sale of land is revocation; since any K could not be fulfilled, notice destroys meeting of minds, no K.

2. Baird v. Gimbel: Use of bid was not acceptance and there was no contract

3. Drennan v. Star Paving: Under different terms from contract in Gimbel, use of bid did lead to contract. May be terms of offer; court does not quote the terms like it did in Gimbel.

d. Output/Requirements Contracts

i. Requirements contract: a contract where one side sells what the other side requires.

ii. Output contract: flip requirements contract; one side buys what other side produces.

iii. Principle: Material Breach can excuse nonbreaching party from further performance.

iv. Cases:

1. Eastern v. Gulf: Requirements contracts are valid; price index no longer posting as desired still keeps validity of contract.

2. Colorado v. Utah Intl: Split of contract when requirement-needing generators are built; minimum purchase requirement imposes obligation to supply minimum, but any amount above minimum must be actual requirement and is thus cancelled.

3. Schlegel Mfg: Cannot promise to buy or not buy w/out some sort of all our glue/ no one elses glue/etc.; promise to buy glue at this price if I decide to do so is not a valid side of a K.

e. Correspondence

i. Mailbox Rule: Acceptance is effective upon dispatch (default rule, master of offer can change)

1. Favors offeree b/c offeror has right to change it if somethings a problem

ii. Overtaking Rejection: When rejection overtakes acceptance, doctrine is that an offeror who reasonably relies on the rejection is not bound by the terms of the contract.

iii. Cases:

1. Cushing v. Thompson: An acceptance sent before revocation is valid b/c effective upon posting.

2. Rhode Island Tool Co v. United States: A bad case where the mailbox rule was ignored for bad reasons- its not about the technology, its about

3. Note to Dick v. United States: Adams v. Lyndsell: When A is sent, it destroys the power to reject, but the contract does not form until the acceptance is received.

f. Unilateral Agreements

i. Davis v. Jacoby: This contract appeared unilateral/performance, but what Whitehead actually wanted was the promise; thus, Davis performed.

ii. Crook v. Cowan: Whoever you consider to be the offeror, there was a K here.

1. Seller as offeror: Order was acceptance and there was K.

2. Buyer as offeror: Seller did send the carpets to express, which was the A specified; was K.

g. Forms

i. 2-207:

1. Definite and seasonable expression of A operates as acceptance even w/ addl terms UNLESS A is expressly made conditional on those terms.

2. Addl terms are only a proposal unless (expressly conditional, see (1). For merchants, terms become part of contract unless they

a. Expressly limit A to terms of offer

b. Materially alter it

c. Notification of objection has been received/is received in rsn time.

ii. How 2-207 works:

1. Two random people: X for $2500? X for $2000

a. Mirror rule: NO K

b. 2-207: K (2-207(1)) for $2500 (Under 2-207(2), $2000 only a proposal)

2. Two random people: : X for $2500? X for $2000 or I will not buy

a. Mirror rule: NO K.

b. 2-207: K for $2000; expressly conditional on new terms.

3. Two merchants: X for $2500? X for $2000

a. K for 2000 under 2-207(2): for merchants, new terms in K unless one of the 3 exceptions (expressly limiting, materially altering, objection)

iii. Warranty of fitness for particular purpose: implied warranty; seller knows how buyer will use it and warrants it for that purpose.

iv. Last shot doctrine: If dispute arises, the last document exchanged is the one that controls/is the contract. This rule favors the seller.

v. Roto-Lith: The court made a mistake. Here they interpret the wrong material and warranty on paper as expressly limiting the offer- last chance doctrine. But in reality, 2-207 is different, and the wrong bag emulsifier was materially altering the contract, so the addl terms did not become part of K.

1. Expressly means express notice not materially altered so much that of course A is conditioned

III. Consideration:

a. Gratuitous Promises and Reliance

i. When in doubt, try to prove both Benefit to Promisor and Detriment to Promisee (redundancy is good)

ii. Check your work by flipping promisor/promisee rolesshould hold up either way!

iii. Detriment: Giving up something which you are legally entitled to; also described as some sort of harm or damage

1. Change in position of person to whom promise is made, due to the actions of the one who makes the promise.

iv. Detriment and liability: altering position takes on liability; this binding to contract means that youre agreeing on performance or damages, whichever.

v. Benefit: opposite of detriment; gaining something

vi. DETRIMENT AND BENEFIT ARE AT THE TIME OF CONTRACT.

vii. Without consideration, we have a GIFT.

viii. Cases:

1. Siegel v. Spear: No consideration because Spear has no benefit, and Siegal no detriment (in agreement to provide insurance for nothing).

2. Underwood Typewriter Co: Court says consideration; however, Realty gets no benefit; detriment no unless Underwood decides on own cost to do something; seems no consideration.

3. Feinberg v. Pfeiffer: Consideration for annuity: could say detriment was giving up employment.

4. Kirksey v. Kirksey: Court held no consideration in moving case b/c uprooting and moving not detriment enough; note no benefit to promisor. (Result we would reject today)

5. Devecmon v. Shaw: Doesnt matter whether promisee also has a benefit- can still be consideration.

6. Hamer v. Sidway: Giving up legal right is consideration/detriment even if its good for you.

7. DeCicco v. Schwiezer: Timeline of consideration; when does inducement stop and gratuity begin? (The ceremony, the I Do?)

8. Allegheny College: Twirling thaumatrope to blend C and promissory estoppel to make the college get their money; however, technically there was no reliance by college.

b. Adequacy and Peppercorns

i. In advance to: given in advance of when its due; youll pay back

ii. Consideration is as much a form as a seal: Holmes quote; means that a seal and consideration do the same thing: make words from a gift/emptiness to an enforceable agreement.

1. Creating the intent to be bound and allow power of state!

iii. UCC 2-203: abolishes the seal

iv. Asymmetrical inducement is acceptable.

v. Benefit or detriment must serve as inducement at time contract was made.

vi. cessante ratione cessat et ipsa lex when the reason for the law ceases, the law cesases. Substitutes for consideration eliminate need for C.

vii. No unrsn small econ consideration for $ (no $00.01 for $600!)

viii. Option contract: K2 to hold open an offer O1.

ix. Cannot transform a promise from gratuitous to enforceable by threat to sue, else everything would be enforceable.

x. Cases:

1. Haigh v. Brooks: Court holds that the exchange of a piece of paper was adequate consideration in a deal. (possibly b/c there was clear inducement)

2. Real Estate Co. v. Pittsburgh: $1 was valid consideration for option contract w/ indeterminate value.

3. Krell v. Codman: A promise lacked consideration, but was under seal; a seal similarly transforms words from empty to enforceable.

4. Goulet v. Goulet: SKIPPED IN CLASS; A sealed promise is not invalid for want of consideration.

5. Aller v. Aller: skipped in class; promise to pay could be considered enforceable if written; court uses writing as substitute for C.

6. Schnell v. Nell: Promise to pay wifes debts had no C; past affection is past, and cannot have penny consideration for $200!

7. Pillans & Rose: There may not be consideration, but merchants arent in the business of making gift loans. Commercial context acts as a substitute for consideration.

c. Moral Consideration

i. Moral Consideration; if it was enforceable, it is again. If you intended to be legally bound and then you reiterate that promise, it will be legally enforceable.

1. Efficient rule; very clear whether it will apply or not.

ii. Promisor/promisee charts: should be able to flip and see Bpor Dpee, etc.

iii. Cases:

1. Gillingham v. Brown: Debt not paid; statute ran, then offeror said something. Looked like a contract at one point, so enforceable.

2. Eastwood v. Kenyon: When parties are flipped for check, evidence that there is no benefit for which eastwood must be paid, as past C is not C.

3. Mills v. Wyman: Once against, past C is no C (sons care case)

4. C--- v. W----: A promise to support a bastard child was not enforceable b/c no consideration, only moral obligation.

5. Webb v. McGowin: Promise to pay annuity for saving life enforceable despite past c under doctrine of moral consideration.

d. Good Faith and Illusory Promises

i. How LDG and Davis coexist: B/c in LDG, Woods gets no profit unless he works (he only gets a portion of his own efforts back). In Davis, theres no incentive for General foods to actually pay Davis.

ii. Flagpole Rule: cant revoke when someones halfway up the flagpole or partway through performance.

iii. Reliance: person takes actions, (1) that are reasonable and (2) that promisor could rsn foresee, as a result of promise. (leads to estoppel)

iv. Estoppel: person estopped/stopped from denying agreement/promise due to reliance. AKA section 90.

v. Illusory promise: when two parties appear to have promised to do something but really havent. (Gen foods reserved right not to pay, hence never really promised to do something)

vi. Cases:

1. Balfour v. Balfour: skipped in class; Promise between spouses not intended to be legally enforceable, good faith or no.

2. Davis v. Gen Foods: No contract when one side agreed to pay at discretion; usually a bad deal is still a deal, but this was illusory promise.

3. Arm v. MGhee: Question over whether promise in jest to sell horse was illusory/good faith must go to jury.

4. Petterson v. Pattberg: Mortgage-paying case; Court says it was revocation b/c Petterson technically didnt manage to pay, but could argue reliance instead.

5. Wood v. Lady Lucy-Duff Gordon: K when technically no obligation but person is only paid back out of own efforts.

IV. Statute of Frauds:

a. Statute of frauds: certain promises (those with consideration of marriage; transfer of real property; promises to pay debt of another; not performable in a year; executors promises pertaining to estates they administer) must be in writing to be enforceable.

i. DOES NOT MEAN NO K. Only that not enforceable.

b. Suretyship provision: promise to pay debt of another

c. Main Purpose Rule: If mean purpose of suretyship is to benefit self, no need for writing/not surety/not in statute of frauds. If m.p. is for other, in statute.

d. Performability in 1 year: Is so performable if death would fulfill; so noncompetes are performable in a year; performance contract for 2 yrs are not.

e. Writings: Multiple writings can be pieced together to satisfy statute of frauds as long as 1 is signed by party against whom enforcement is sought and the writings contain all the essential terms of the agreement.

f. Modifications: if they keep the promise in the statute, must be written.

i. Mutual rescissions and other promises that take outside statute may be oral.

g. Cases:

i. Eastwood v. Kenyon: Promise to creditor in statute of frauds; promise to debtor is not.

ii. Bader v. Hiscox: Main purpose rule re: land transfer; dropping suit and not marriage was main consideration, so that part not in statute.

iii. Doyle v. Dixon: Noncompete agreements are not unperformable in a year.

iv. Boone v. Coe: If some part of the consideration is exchanged, that C acts as a writing. Must prove that such C is for that item, though.

v. Crabtree v. Elizabeth Arden: Statute of frauds can be satisfied by multiple writings pieced together. See above

vi. Imperator Realty v. Tull: Distinction between duty promisor has as distinguished from mode of discharging.

1. Cardozo sees no tenable distinction.

2. Simply discussing mode of discharge of duty ($1/day/2yrs or $750 at end of 2 years; same sum) does not need to be in writing.

V. Unconscionability:

a. Unconscionable: EXPLOITATIVE. Also can be described as:

i. 1. Unequal bargaining power

ii. 2. Lack of meaningful alternatives etc.

b. Judge Skelly Wright: responsible for this doctrine.

c. Contract of adhesion: offered as take it or leave it w/ no negotiation.

d. UCC 2-302: unconscionable contracts not enforceable.

e. Credit agreements: exist so people who are poor can get stuff; bank does need to protect itself from risk.

f. Cases:

i. Williams v. Walker-Thomas Furniture: Overcollateralized add-on clause that allowed store to recover EVERYTHING it sold a person and not just item as collateral on default was unconscionable.

ii. Patterson v. Walker-Thomas Furniture: See above

iii. Jonas v. Star Credit: Unconscionable; $1230 for $300 freezer sold door-to-door with credit fees more than worth of item is exploitative.

VI. Readjustments on Going Deals:

a. Over-collateralizing: too much collateral so that seller recovers way more than price of item when buyer in default.

b. Cases:

i. Stilk v. Myrick: skipped in class

ii. Foakes v. Beer: Consistent w/ Headley v. Hackley; if you do not put interest into your agreement, you cannot try to forcibly collect it later. Also, a partial sum of money cannot be satisfaction for the whole; if Beer put her damages at x+interest, in that case thered be no K if she allowed installments totaling x! Interest obviously not included in agreement.

iii. Hackley v. Headley: Here the behemoth wins b/c a release is considered effective.

VII. Parol Evidence and Rules of Interpretation

a. UCC 2-202: No contradicting terms of writing by oral agreement. Parol evidence rule applies only to prior/contemporaneous agreements, and parol may be used for subsequent agreements.

b. Parol Evidence Rule: When two parties have made a contract, and expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will NOT be admitted for the purpose of varying or contradicting the writing.

IF WE HAVE

THEN

Contract

In writing

To which parties assent

As complete & accurate integration

NO evidence, parol or otherwise,

of antecedent understandings/ negotiations

admitted to vary/contradict writing.

c. Four Corners Rule (4 corners): To figure out what a K is for, may only look to the 4 corners of agreement and not outside that.

d. Integration: everything the parties were considering/thinking/negotiating about is incorporated into the agreement.

i. Integrated agreement: everything on the left side of T(formation) is IN this.

e. Complete Integration: Contains EVERYTHING have agreed to; full and complete in respect to what parties agreed to.

f. Partial Integration: complete w/respect to terms in the 4 corners of document but does not exclude possibility that other things were agreed to.

g. No integration: s many holes that we cant say it has everything the parties agreed to. Probably not actually a K.

h. Collateral agreement: Must not contradict provisions of writing, and must not be expected to be embodied in the writing.

i. Things the PER does not apply to:

i. Unwritten agreements

ii. Agreements post-formation

iii. Collateral agreements

j. Ambiguity and Vagueness: One factor of integration.

i. Ambiguity: when a word has two or more meanings, but each meaning is clear.

1. Stewing chicken v roasting chicken

2. Patent ambiguity: on the face and should be drafted around, known to parties.

3. Latent ambiguity: Parties do not have reason to know of it, cant draft around

a. Two Peerless ships.

ii. Vagueness: When a term is not clear b/c it bleeds into something else, and there is not a clear distinction of where something begins and ends.

1. When is something orange not red, not yellow?

iii. Draft around these things!

k. Cases:

i. Crawford v. France: Evidence to define suitable needs of hotel owner as including price allowed; held to be explaining and not varying.

ii. Mitchill v. Lath: Ice House Case: Contract for land included no term on ice house removal; parol evidence not allowed b/c the removal held to be close enough to K that it should have been drafted in.

iii. Dannan Realty Corp.: Evidence of oral representations not permitted where contract expressly said no reliance on representations.

iv. Zell: Sham agreements, not intended by the parties to be binding, are not binding. Here, found that writing with no bonus agreement was a sham.

v. Raffles v. Wichelhaus: Peerless Ship Case: Where a latent ambiguity (two identically named ships) existed, court allowed parol to see if it could determine which ship was meant. It couldnt and so there was no meeting of minds, no K, and D did not have to pay.

VIII. Third Party Beneficiaries

a. Privity: a mystical absolute that means nothing.

b. When 3rd-party beneficiaries have been allowed to recover:

i. Close relationship (seaver)

ii. When the parties intended for the 3rd party to benefit.

c. Donee and Creditor beneficiaries- 1st restatement, can recover. Incidental cannot.

d. 2nd Restatement: Intentional can recover, incidental cannot.

e. Exploding contract law- this could destroy consideration and relationships and the def of a K, so we limit it to a subjective standard of parties intended that is STRICT.

f. If third party relies, recovery if contract rescinded/broken.

g. Cases:

i. Lawrence v. Fox: Third-party beneficiary (man promises to pay second mans debt to third, third man sues first) is allowed to recover. Held that parties intended for him to benefit.

1. Farley v. Cleveland: Comparison case w/in Fox; recovery permitted.

ii. Seaver v. Ransom: Beloved niece of deceased aunt allowed to recover when uncle breached promise to benefit her (due to closeness of relationship)

iii. Sacony-Vaccuum Oil Co: Materialman allowed to recover from bond holder when bond purchased to help builder; held that materialmen INTENDED to benefit too.

iv. Lucas v. Hamm: Heirs to will intended to benefit from its being drawn up, so heir could sue lawyer (dismissed on other grounds).

v. Copeland v. Beard: Creditor can collect from original debtor; a third party who bought from debtor does not excuse debtor.

IX. Assignment and Delegation

a. Assignment: transfer of a right to someone else

b. Delegation: transfer of a duty to someone else (D is for Delegation and Duty)

c. Assignor: person doing assignment/ Assignee: person getting the right

d. Delegator: person delegating/ Delegatee: person who is delegated to

e. Common law: Assignment of Right is NOT delegation of duties unless Assignee consents!!!

f. Novation: rights holder agrees to look only to delegatee for performance, cuts original debtor/obligee out of the loop.

g. Obligor: person owing right; Obligee: person holding right.

h. Delectus personae: choice of the person; when choosing person matters, can reject delegatees.

i. Credit/debt

ii. Trade offset

iii. Personal service

i. Assignees and Delegatees are subject to same claims and defenses as original parties.

i. stand on top/in shoes

ii. Better than 3rd party ben for this reason

1. If you can get benefits identically be a 3rd party ben, so that you are immune to defenses of original claim.

j. Cases:

i. Speelman v. Pascal: Rights to musical promised before and developed fter Pascals death could be assigned despite being intangible.

ii. Langel v. Betz: When land assigned to others before being sold, duties not assumed with the right.

iii. British Waggon Co. v. Lea: Repair of coal wagons for mine was not delectus personae.

iv. Arkansas Valley Smelting Co: Coal delivery agreement that had delivery some time before payment (after quality test) relied on credit enough to be delectus personae.

X. Remedies

a. Generally

i. Usually, you get money.

ii. Either performance or money, if money calculable.

iii. Forward contract: for delivery in future

iv. Spot price: price on market now

v. Cases:

1. Acme Mills and Elevator Co: No recovery when breach lead to company paying less for the wheat- only recovery for the bags taken by D.

2. Hawkins v. McGee: If you dont get what youre promised, you get damages, as here (perfect hand hand got = damages)

3. Sullivan v. OConnor: Botched plastic surgery on nose leads to damages; includes unexpected third operation, pain and suffering, etc.

b. Money Damages

i. Expectancy Damages: what you expect to get if contract is performed

1. Benefit of Bargain damages: expected got

2. CAN include consequential damages (type of expectancy d)

ii. Reliance damages: expenses promisee occurred in relying on promisors performance.

iii. Restitution damages: damages that nonbreaching party has conferred on breaching party

1. Disgorgement damages- another name for this

2. Whatever nonbreaching party paid to breaching party, out of pocket, that flowed to someone outside the K

iv. Cases:

1. Hadley v. Baxendale: Can only recover special damages when communicated; loss of mill profits not communicated, cant be recovered (Hadley Rule)

2. Freund v. Washington Square Press: No damages for expected publication benefit for as yet unpublished author, since the damages cannot be estimated with particularity.

3. Jacob & Young Inc. v. Kent: Reading pipe case; since contract specified pipes as standard by other clause, no recovery for use of comparable pipe.

4. Peevyhouse v. Garland Coal: Economic waste permits coal company to simply pay expected-got difference in land value rather than spend 10 times that amount to repair it properly.

c. Sales of Goods

i. Hadley Rule: Special Damages must be communicated to be recoverable.

1. Globe Refining Rule: Must not only communicate, but bring home that other party will be responsible- mere knowledge not enough!

ii. Cases:

1. Gainsford v. Carroll: Difference between market at time of breach and contract price is measure of damages when bacon K breached.

a. Note: can produce 0 damages when prices dont fluctuate.

2. Panhandle v. Agri-service: Covering when wheat not sold presumes a similar shipping price for cover, so that is not recoverable.

3. Globe Refining Co.: Breaching party on sale of oil is not responsible for incidentals like shipping, esp. w/o reason to know.

iii. Cover remedies:

UCC 2-711: Not in the book, but important: 2-711 (1): Where the seller fails to make delivery or repudiates, or buyer rightfully rejects goods or revokes acceptance, then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract

When seller does not perform or announces it will not perform, there is breach under 7-11

UCC 2-712: Cover

When there is breach, the buyer may cover by making in good faith and without unrsn delay, make any rsn purchase or contract to purchase goods in substitution.

So as in Acme Mills where the contract is entered into at T1, and the price is P1, that reflects prediction by buyer and seller that price at T4 that price is more or less than T1.

Seller expects higher, buyer expects lower.

In perfect market, the negotiated price will fall between predictions.

In both Acme and Global Refining, the price goes way up at T2 and then up again at T3.

Seller sells on open market for higher price. Tells buyer not going to perform but there is no breach traditionally b/c not time yet.

There is repudiation! Which, under 2-711, that counts as breach

2-712 (2):

If the buyer does cover, difference between the cost of cover, and the contract price, together with incidental and consequential damages but minus any expenses saved by breach.

Measure of damages: cost of cover, which could be p3-p1. (MD#1)

Buyer MAY but NEED NOT cover.

2-713:

If buyer does not cover, measure of damages for repudiation is difference between market price at time seller learned of breach, to be determined at place of tender, or place of arrival in some cases.

In practice, this measure w/ Acme or Global: difference between contract price and T4 (MD#). Price at time and date of delivery-contract price (p4-p1)

Price could be up or down.

Comment to 2-713: uses market where buyer would have retained cover if he did go for that relief. Place is place of tender, and time when he learns of breach.

As well see on Monday, If the market goes back down after T3 repudiation

If breach at T4, amount buyer will be entitled to is P4-P1;

Buyer will argue it should be P3-P1 if price is higher there; learned of breach at T3

There will be a dispute about time of breach! If breach at T3, buyer wont get the higher P4-P1; but if the price is lower at T4, buyer will argue learned at T3.

And so we have to look at what transpired between parties

2-714:

Incidentals: damages INCIDENT to delay or other breach.

Rsn occurred in inspection, transportation, receipt, commercially rsn charges, expenses, or commissions for effecting cover, etc.

Consequentials: loss from general or particular needs or requirements of which seller has rsn to know and which could not be rsn prevented by cover or otherwise

Where in time buyer covers is going to make a difference.

Buyer can get more profit in reselling if price goes back down and he gets goods cheaper

If price stays up, profit disappears

When buyer thus sues, the seller is going to argue that buyer should have covered immediately rather than waiting. That it was not rsn to wait, so seller should be on hook from smaller difference.

If you have contract to resell and do not choose to cover, and you dont act, and market behaves weirdly, you will NOT be able to recover lost profit as consequential damages UNLESS you act quickly to mitigate your loss.

2-706 and 2-708: Sellers remedies

Seller remedies and buyer remedies are generally symmetrical in terms of measuring damages

2-706: after buyer breach 2-703, seller may resell goods or undelivered balance thereof, and recover difference between contract price and sale price, along with incidentals, less expenses saved by breach.

Think exact mirror image of what buyer may confront. Same thing to be recovered.

2-708: (2): If the measure of damages from ^ inadequate to put seller in as good a position, then the measure of damages is profit (inc. reasonable overhead) which the seller would have made from full performance, w/ incidentals.

So mirror image/equivalent of what buyer gets for consequentials.

d. Specific Performance and Reliance Interest

i. Specific performance: appropriate when damages cannot be calculated

ii. 13th amendment prohibits slavery

iii. Cases:

1. Lumley v. Wagner: Opera singer who broke exclusive contract enjoined from singing elsewhere, cannot be compelled to sing.

2. Stokes v. Moore: Noncompete employment is open to specific performance enforcement, since no adequate damages.

3. Campbell Soup v. Wentz: Carrot case: Should be textbook specific performance but court refuses due to Campbells sharp dealing advantageous contract.

4. Security Stove: Award of unusual damages when specific performance not available (as time to perform is past)

XI. Remedies and Discharge:

a. Anticipatory Breach, Repudiation, Duty to Mitigate

i. If a breach, can demand assurance of performance under UCC

ii. When final repudiation, can then sue. Not if not final, and mind could be changed.

iii. Repudiation can be cancelled and then performance can happen

iv. NBP (nonbreach party) can suspend own performance at repudation

v. Duty to Mitigate:

1. The P/nonbreaching party cannot continue to pile on damages and recover them. (Clark v. Marsiglia)

vi. Cases

1. Daniels v. Newton: Repudiation on land sale does not permit suit before time of performance arrives.

a. Frost v. Knight: there is a right to sue at breach for promise of marriage (final!)

b. Hochter v. delatour: Courier case: held, on Frost, that right to sue about employer existed; a right of assurance

2. Roehm v. Horst: There is a legal right to sue before performance when the repudation is final or self-disabling.

3. Missouri Furnace Co: Cover when market still ridiculously yet temporarily high was not commercially reasonable.

4. Oloffson v. Coomer: When clear that breach was final, should then cover- becomes commercially reasonable.

5. Clark v. Marsiglia: Skipped in class; Restorer of paintings could not recover the reasonable value of finished work when told not to stop work partway through.

b. Controlling Liability

i. Cases:

1. Henningsen v. Bloomfield Motors: Rights might be preserved even w/out privity.

2. Fair v. Negley: Warranty of habitability case

XII. Problems of Performance

a. Mistake, Impossibility, Frustration

i. Implicit condition/impossibility: must be something not in contemplation of parties, happens, makes performance impossible. Cancels contract.

1. Can draft around this- do an act of G-d provision and draft around all else.

ii. Cases:

1. Taylor v. Caldwell: Music hall burning down is implicit condition broken, so contract rescinded and loss where it lies. Parties excused.

2. Krell v. Henry: One of many procession or coronation cases; must determine whether letting rooms was only for the coronation- was it a condition?

b. Conditions and Substantial Performance

i. Perfect Tender Rule: buyer can reject the entire shipment on an imperfection

1. But there can still be a quantum meruit.

ii. Cases:

1. Norrington v. Wright: Very short shipments not substantial performance, were breach. (1000 tons iron =/= 833 tons)

2. Miron v. Yonkers Raceway: Buyer took horse home and did not inspect it for a while; cant prove it was defective at sale so no breach.

3. Britton v. Turner: Quantum meruit to be brought for value of labor if contract not complete but the labor was partly done and accepted by employer.

XIII. Misc:

a. Threat to sue = not consideration unless suit would have merit

b. Altruism/warm fuzzies not C. Inconvenience not C either