Contracts Notes

ENFORCEABILITY OF PROMISES Statute of Frauds & Parol Evidence Rule Statute of Frauds The following contracts must be in writing: land, sureties, big money, outside of a years time. Contract to do a big project that might take more than a year neednt be written. arol !"idence #ule $nce you put a contract in writing, you cant contradict it. $nce its complete enough, you cant change it. Consideration %ef & 'argain: each party gi"es up a legal right in order to obtain the one which the other party ga"e up( contract must ha"e consideration to be enforceable )only re*uirement, according to classical theory, else the +contract, is mere gratuity, donation - new rule re*uires more.. 'ut if there is no consideration and the contract is completed, then it is enforceable )e.g. aunt in Dougherty gi"es nephew the money.. Dougherty v. Salt (aunt promises nephew $ though he didnt promise anything in return: court says not enforceable - 6 !amer v. Sidway (nephew gives up drin"ing# swearing: court says he gave up a legal right $ enforceable - %& Completed contract is completed, whether the parties like it or not. 'hillips v. (oor (parties contract to sell hay# hay burns down# buyer repudiates contract: court says too bad# enforceable $ )*6 hilosophy of classical contract theory )consideration is all you need., accepted by First #estatement, rejected by Second: ositi"ism - logic to law( there are natural a/ioms from which all legal rules can be deri"ed )future results can be obtained by looking at past decisions.. $pposite, modern "iew: law is organic, stemming from a sense of justice Conceptualism - legal rules are basic concepts, abstract and mechanical. $pposite, modern "iew: rules should forward the cause of justice e"en if they are more complicated or mushy. Mutualit same as consideration Conditions placed upon the ac*uisition of a good are only consideration if they are the price of the good )put hand out for money 0 contract. Contract may be conditioned upon an e"ent, but it is still a contract to perform something if that e"ent should occur. Contract from date of pact. Scott v. (oragues (deal to ship goods is on if the one party buys boat: legal right give up + right to buy boat and not ship goods - *,

#ight to sue: gi"ing it up is not consideration if one had no good case anyway 1llusory promises are unenforceable and occur when one party does not actually promise to gi"e up a legal right )e.g. one party can cancel anytime or will buy as much as it +wants,.. The latter are unenforceable because +as much as the party wants, may be 2ero )no consideration., or infinite )unconscionable.. This encourages speculation and is no good. 'ut, such contracts can be made enforceable if buyer agrees to buy all it needs )can reasonably be measured from e/perience., or all it can sell )similar to +needs,., or only from seller )cant buy from others when price lowers., or can only cancel by gi"ing set number of days notice. -ic"ham . /urton 0oal 0o. v. 1armers 2umber 0o. (seller promised to sell buyer all the coal it 3would want to purchase4 at a set price: not enforceable - &5 (iami 0oca-0ola /ottling 0o. v. 6range 0rush 0o. ((iami was able to terminate contract at any time: not enforceable - &7 !ancoc" /an" . 8rust 0o. v. Shell 6il 0o. (Shell could terminate on &5 days notice and had option to renew lease for 9% years: o"ay )& 2indner v. (id-0ontinent 'etroleum 0orp. ('etroleum could terminate on 95 days notice and had option to renew for : years: o"ay - &, ;urfein v. -erbelovs"y (contract to ship plate-glass within 7 months . buyer had option to cancel before shipment: shipper had opportunity to bind buyer by shipping immediately# thus there was consideration# even though little $ enforceable - &, 2aclede ;as 0o. v. <moco 6il 0o. (2aclede could only terminate 75 days prior to an anniversary of contract signing and 2aclede could physically only get oil from <moco: loc"ed in $ o"ay - 95: 3t4will jobs: contested point whether promise to hire someone at a terminable4at4 will job has consideration )worker could be fired at any time.. ;rouse v. ;roup !ealth 'lan# =nc. (enforceable: promise of an at-will >ob entails promise of opportunity to prove oneself# thus consideration: also# estoppel trumps at-will nature of >ob: guy was hired# ?uit his other >ob# was fired at new >ob before he started wor" - 956 -hite v. @oche /iomedical 2aboratories# =nc. (unenforceable: at-will nature of >ob trumps estoppel claim - 95& 5ominal consideration is not okay, under new rule as stated in Second #estatement, e/cept for options and loan guarantees )courts split on whether its e"en re*uired then.. 1t was okay under old rule, stated in First #estatement, e/cept in transfers only of 6 )nominal consideration fine - e.g. 67 for a car.. !arris v. 8ime# =nc. (guy opens envelope: o"ay consideration as his opening the envelope mattered a lot to 8ime - && For! Seals are not necessary today - contracts can be oral

To deed a gift )without consideration., complete an inter vivos document of transfer )donor, donee, gift, nature of interest, manifested intention to use document as means8instrument of gift. $r, establish a trust and make donor trustee and donee beneficiary Contracts should be read in realistic, not literal manner Contracts ha"e different types of terms: erformance - price, object 3u/iliary - relate to performance )e.g. indemnity clause. Reliance %ef: 3s actions are different from those 3 would ha"e taken had there been no promise, and 3 gi"es up a legal right $ld rule rejects reliance as consideration or substitute thereof. Air"sey v. Air"sey (wife moves to brother-in-laws after he promises her land and home# but she doesnt promise anything: not enforceable as no consideration# despite reliance - :7 Second #estatement calls contracts enforceable if there is reliance romissory estoppel - promise w8 reasonable 9 foreseeable reliance, injustice 1einberg v. 'feiffer 0o. (old lady retires after being promised monthly payments for life# payments stop# she gets sic": enforceable $ but what if shed gotten sic" before payments stopped as shedve ?uit by then anyway and not in reliance on paymentsB - :* Davies v. (artel 2aboratory Services# =nc. (0o. promises woman top >ob and $ if she gets (/<# then fires her: enforceable# reliance neednt be 3detrimental4 in ordinary sense# but giving up legal right - 6: ;rouse v. ;roup !ealth 'lan# =nc. (contested point: promise of an at-will >ob entails promise of opportunity to prove oneself# thus consideration: also# estoppel trumps at-will nature of >ob in this case: guy hired# fired before he started wor": but see above - 956 !ayes v. 'lantations Steel 0o. (guy retires# is promised payments# promise uncertain because he "eeps double-chec"ing# didnt change actions in reliance on promise + no estoppel - 77 !stoppel in pais - reliance on fact )e.g. : says +; is true,( < acts, relying on truth of statement( : can not sue < for his act if ; is false - : is estopped from pro"ing lack of consideration in court. =eneral reliance doctrine - promise8fact not necessary( actions can suffice 8imes-(irror 0o. v. 8he Superior 0ourt (2<s eminent domain proceedings $ course of conduct $ were sufficient 3promise4 for 8imes-(irror to rely on - :6 Should #eliance doctrine be e/panded to include cases where 3s actions are not different from those 3 would ha"e taken gi"en no contract> )i.e. if Feinberg had disease8wanted to *uit before promise>. "nconsciona#ilit play this card last, after implied promise, reliance, etc. #$C!%?#3@: meaninglessness of choice, which is either: 7. gross ine*uality of bargaining power, or

A. one guys lack of reasonable opportunity to understand contract terms S?'ST35T1B!: grossly unfair contract terms rice gouging not allowed during times of distress 'eople v. 8wo -heel (0o. sold generators at eCcessive prices during power outage: gouging need not be gross to be unconscionable# it is inherently procedural unconscionability - 69 5o"ation will not make bad contracts enforceable )new contract replaces old one. (aCwell v. 1idelity (poor lady buys bro"en $6#%55 solar home heater with loan that totals $9%#555 then ) years later wants $*55 loan and is given it tied to earlier loan: first loan was unconscionable# thus there was no contract to novate - ,% 3rose with ?CC in 7CDEs /atsa"is v. Demotsis (pre reliance days: promise of %55#555 drachmas D$:%E for $:#555 had consideration Dnot $ for $# diff. currenciesE: today would be procedural and substantive unconscionability - %5 -illiams v. -al"er-8homas 1urniture (contract with poor lady to reclaim everything shed ever bought if she missed a payment: not enforceable as unconscionable - 6: -eaver v. <merican 6il (dumb gas station attendant signed fancy contract holding <merican 6il harmless for any of its negligence: <m6il employee accidentally burned attendant: not enforceable - 6,6 Contracts with both goods and ser"ices included are to be e/amined to see what their main purpose is )primarily pro"ision of goods or ser"ices>. and if goods, then ?CC applies 'ittsley v. !ouser (carpet installation is 3goods4 - ,7 'ad bargain: unconscionability does not sa"e a party from a bad bargain Fraud 9 %uress were only causes to not enforce contracts under old doctrine. Fraud was lying and acti"e concealment. %uress was direct threat. 0houinard v. 0houinard (one partys hard bargaining position is not duress if not caused by other party - %% Faritime law of sal"age helped create unconscionability doctrine: 3 cries +mayday,( all in earshot must come and sa"e people and sal"age cargo( ' may buy cargo at fair market "alue. This pro"ides an incenti"e to the rescuer, but also pre"ents him from taking ad"antage of 3s duress. 'ost v. Fones (rescuers could not "eep salvaged cargo that they had bought from shipwrec"ed crew for unfair prices: unconscionable and unenforceable - %6 Satisfaction contracts where performance is conditional upon satisfaction of ' $bjecti"e: reasonable person would be satisfied )factory. 1mplies consideration because the party gi"es up the right to claim dissatisfaction in bad faith

(c0artney v. /adovinac (private eyes proof is ob>ective - &)9 1orman v. /enson (credit report is ob>ective - &)% (orin /uilding 'roducts 0o. v. /aystone 0onstruction# =nc. (contract to build ;( factory# even though it claimed to be sub>ective# was actually ob>ective - &)9 Subjecti"e: contracting party must be satisfied )artwork., but also good faith 1ursmidt v. !otel <bbey !olding 0orp. (hotel valet and laundry services are sub>ective - &)6 (attei v. !opper (lease is sub>ective and consideration as good faith - &, Factors to determine objecti"e or subjecti"e: )7. @anguage of contract )A. !ase of determining objecti"e )market. standard )G. Forfeiture on behalf of one party, degree )yes & objecti"e. )H. ?njust enrichment of one party, degree )yes & objecti"e. Pre$e%istin& Le&al 'ut Rule 5o legal right is gi"en up when one promises to do what one was already obliged to do - thus no consideration. %octrine meant to discourage parties from using coercion and duress to change pre4e/isting contracts, not to pre"ent them from e"er changing them at all. %uty re*uired by law or scope of officials authority )i.e. police. ;ray v. (artino (police officer: might lead to better protection for rich as cops try to get their rewards - 995 Denny v. @eppert (ban" employees: @estatement Second says employees can claim reward - 99: %uty re*uired by contract 2ingenfelder v. -ainwright /rewery 0o. (2ingenfelder contracted to build a brewery for -ainright# but stopped when -ainright awarded another contract to another builder: 2ingenfelder was bound to build brewery because he had contracted to do it - 997 %uty to pay debt 1oa"es v. /eer (old rule: courts would not allow creditors to accept immediate partial payment of a debt and cancel the rest# as all of the debt was already owed - 996 Fodifications )performance terms. dont re*uire consideration under ?CC )mere good faith is re*uired. or #estatement )when changed circumstances or reliance, so long as no duress.. 'ut a modification that distorts the promisees incenti"es under their pre4e/isting legal duty might not be enforceable - see Fordan below. $ld rule re*uired consideration for them.

SchwarGreich v. /auman-/asch# =nc. (two parties destroy first contract and write new one that is the same eCcept that SchwarGreich now ma"es more money: enforceable modification - 9:* <ngel v. (urray (<ngel signed contract with city to do garbage at set price for five years: city uneCpectedly grew in siGe: <ngel as"ed for more money: city refused: held# for <ngel due to changed circumstances - 97, Sugarhouse 1inance 0o. v. <nderson (<nderson owed Sugarhouse money# agreed to pay less now to clear up debt# and got another loan from a third party: had consideration when he too" on new debt as he had legal right not to do so - 9)5 (ichael Forden !ypo (promising entire /ulls team more money if they win H/< 0hamp doesnt distort incentives for team to win# so o"ayI but promising only (F more money for each point he scores would distort his incentives to win under his pre-eCisting legal duty to the /ulls as a team because now hed want more points and not necessarily the team win %uress: a. one party threatens unlawful conduct, and )e.g. breach. b. theres no reasonable alternati"e for the threatened party <ustin =nstrument# =nc. v. 2oral 0orp. (2oral had contract with Havy to supply parts# subcontracted some to <ustin: <ustin later demanded price increases and right to do another# similar Havy contract 2oral had won: <ustin later stopped wor" on first contract# and 2oral had to agree to its demands: HJ appellate div. found no duress# but cheap antics on 2orals part: HJ0t<pps found duress as <ustin was attempting to cheat more wor" out of 2oral# 2oral had tried to get other companies to do the wor" <ustin was doing# and 2oral should not be forced to go into breach of contract with longtime business partner Havy to prove its duress - 99& Iai"ers )au/iliary clause. do not re*uire consideration, but can be reinstated so long as its not unfair to other party Hassau 8rust v. (ontrose 0oncrete 'roducts (states rule above - 9)* 0lar" v. -est (3no alcohol while writing boo"4 clause was auCiliary and could be waived wKo consideration# even though -est was paying more money to 0lar" if he didnt drin" - 9)7 0assidy 'odell 2ynch# =nc. v. Snyder ;eneral 0orp. (contract to pay within 75 days but 0assidy always paid after &5 days and Snyder never complained: waiver can consist in ac?uiescence to a course of conduct: now Snyder must always give 0assidy &5 days - 9)* Past Consideration ast consideration does not count )e.g. past ser"ices performed not under contract can not be present legal right to gi"e up. Schnell v. Hell (wifes past help in getting property no good - 9)

Balid consideration only when a person makes a promise to repay a debt that was pre"iously "oided because: 7. %ebt was time4barred by statute of limitations A. %ebt was barred as promisor was minor G. %ebt was barred in bankruptcy proceedings Thought is that moral obligation remains, though law protected promisor. 'ut now that protection is gone, so debt must be paid. )G. no longer counts as bankruptcy laws ha"e been changed. %irect Faterial benefit conferred on promisor by promisee, followed by later promise, will count as ade*uate consideration (ills v. -yman ((ills cared for -ymans sic" son till his death and -yman promised to pay for (ills costs: care for son is not direct material benefit to father: not enforceable - 9%7 -ebb v. (c;owan (-ebb hurt himself to save (c;owans life and (c;owan promised to repay -ebb for lifelong in>uries: direct material benefit to (c;owan: enforceable# but see below - 9%, !arrington v. 8aylor (!arrington got in>ured in preventing 8aylors wife from "illing him and 8aylor promised to repay: no consideration despite direct material benefit: not enforceable# but see above 965 OFFER & ASSENT Offer v( Advertise!ent 3d"ertisements arent usually offers, but merely re*uests for offers, unless they firmly state who will get what and how: bait4and4switchers shouldnt be able to abuse doctrine. Factors to consider in deciding if ad was offer include: what was intention of offeror> See language did offeror mean to keep offer open> Could offeror end up selling more than he has> 2onergan v. Scolnic" (<d in newspaper: buyer shows interest: seller responds# saying its a form letter: buyer responds# 3should = desire to buy4: seller tells buyer deal sounds good but buyer must act fast as seller is dealing with many potential buyers: sellers sells to another buyer: no firm offer eCisted $ )5) 1isher v. /ell (displaying an article with a price on it in a shop window is not an offer but an invitation to treat - )5& Hebras"a Seed 0o. v. !arsh (letter sent to buyer said 3;entlemen: = am mailing you a sample of some seed. = want $:.:% per bushel4: no offer as language opened it up for bids only - )5& (oulton v. Aershaw (letter said 3Shall be pleased to get your order4 and seller "new buyer was dealer who bought in large ?uantities and large order was reasonable and usual: no offer eCisted - )95 2ef"owitG v. ;reat (inneapolis Surplus Store (ad stated that first three people to come to store could buy a min" coat for $9: offer eCisted as sufficiently detailed- )56

1airmount ;lass -or"s v. ;runden-(artin -oodenware 0o. (buyer wrote seller# as"ing lowest price: seller responded with price 3for immediate acceptance4: court said it was not >ust price ?uote# but a definite offer to sell - )95 End of offer @apse: $ffers made in a con"ersation lapse when the con"ersation ends. 3ll offers lapse if no acceptance within a reasonable time or within time stated in offer. Jeeping an offer under ad"isement: Jeeping an offer under ad"isement keeps it ali"e, although the offeror can still re"oke the offer during that time. #ejection: rejection of an offer ends it. <"ers v. F./. Sedberry# =nc. (guys offer resignation in conversation# boss re>ects# conversation ends# boss accepts: too late - )99 Counteroffer: a counteroffer ser"es as a rejection of the old offer and creation of a new offer, but a counteroffer that confers a benefit on )asks less of. the original offeror does not destroy the old offer. 3 purported acceptance, if it places material conditions or limitations on the acceptance, becomes a counteroffer. $ld rule was mirror4image rule and it said acceptance had to e/actly mirror offer, but, as seen abo"e, that is not rule anymore. <rdente v. !oran (guy agrees to buy house# but in letter says needs furniture as well: court says counteroffer - )9% @.=. Dept. of 8rans. L. 'rovidence . -orcester @.@. (acceptance by state to buy property wK railroad trac" on it that relieved the train company of the obligation to remove the trac" conferred a benefit on the company and the other changes were immaterial - 7,, 'rice v. 6"lahoma 0ollege (prof signs employment contract but says he doesnt thin" salary was fairly determined: une?uivocal acceptance accompanied by protest is still acceptance - ):5 2ivingstone v. Mvans (seller ma"es offer# buyer as"s for lower price# seller wont change price# buyer accepts: sellers response renewed the offer by implication - ):9 0ulton v. ;ilchrist (une?uivocal acceptance accompanied by re?uest to add more to deal was not a counteroffer but acceptance as offeree did not ma"e acceptance conditional on granting of re?uest - ):: Revocation $ffers are re"ocable until accepted by other party )when they become contracts.. #e"ocation can be implied if an offeree hears that the offeror has re"oked the offer but the offeror has not told him so personally. Dic"inson v. Dodds (guy tries to tender acceptance within specified time offer was to remain open# "nowing from other people that offeror had revo"ed his offer: acceptance no good# revocation good - ):7 3uctions: sale is not final until hammer falls )which is when seller accepts

bidders offer.. 'efore then, bidder can withdraw his bid )which also cancels all lower bids.. 1f the reser"ation )minimum. price is not met, no bid wins( else, the high bid wins. 'ayne v. 0ave (bidder withdraws offer before hammer falls: no A - ):, Firm offer rule: ?CC says no consideration re*uired for an irre"ocable offer if the period of irre"ocability is less than three months )and other restrictions.

"nilateral Contracts %efinition 'ilateral - both parties promise ?nilateral - one party promises, the other performs his end of the promise. 3: 1 will gi"e you 6K if you find my watch( ': 1 cant promise( ' finds watch( 3 must pay - 3 cant sue if ' doesnt find it. erformance )or beginning thereof. is only "alid acceptance of unilateral contracts. reparation for performance is not enough unless there is reliance. $ld rule said beginning of performance was not good enough but new rule says it is. @agosta v. -ilder (seller wants to sell 38he 1or" Shop4 and tells buyer he will sell to him if he goes to the ban" and gives him the moneyI buyer secures a loan: court says loan was preparation# not beginning of performance - )79 Construction Contracts: 3 subcontractors bid is treated as a unilateral contract. 1f a general contractor relies on the subs bid in making his own bid, the sub becomes bound to his bid e"en though there is no consideration on the generals side )promissory estoppel.. 3n e/ception is if the sub makes a mistake and the general should know it was a mistake. 'ut, if the general uses the subs bid and wins the contract, he is not bound to use the sub. Drennan v. Star 'aving 0o. (winning general relied on subcontractors bid in ma"ing his own: subs bid enforceable because general is now bound to the numbers in subs bid - )76 !olman Mrection 0o. v. 6rville M. (adsen . Sons# =nc. (general not bound to use sub after used subs bid to win contract because needed freedom to switch around to meet minority business re?uirements to contract as a whole - ),6 ro this system Con %ue to last4minute way subs call in their promotes bid4shopping, bids, gen doesnt ha"e time to bid chiseling, and process how to meet other re*s bid peddling of whole J )such as in !olman. but just puts down low bid Sub bound to general because of reliance not fair to bind one and not but sub doesnt rely on general the other

Sub has all day to prepare his bid and 1ncreases o"erhead for subs usually submits its bid to many gens Mail#o% Rule Failbo/ #ule: offer is accepted when acceptance is dropped in mailbo/. Can think of it in terms of post office being agent of both parties. <dams v. 2indsell (letter gets lost in mail and offeror never receives it: still acceptance - ))) @.=. 8ool 0o. v. N.S. (only case ever to re>ect mailboC rule: due to new postal regulations of 9&%%: bad decision - ))6 #ejection of an offer is not effecti"e until the offeror recei"es it, e/cept when the offeree then tries to mail an acceptance before his rejection reaches the offeror, in which case the rejection trumps the acceptance. #e"ocation of the offerors offer is effecti"e once the offeree has recei"ed it, not on dispatch. #e"ocation of the offerees acceptance is no good, e"en if it reaches offeror before the acceptance does )e.g. offeree calls offeror and says, +1gnore the letter4acceptance youre about to get.,. Form of acceptance: 1f offeror re*uests a certain form of acceptance without a particular reasonable reason )letter, send boy around., offerees acceptance counts if it is in better form )arri"es sooner than letter would, boss himself comes around.. 'ut, if offeror e/plicitly demands boss to come around and boss sends boy, then no good. olicy: these rules are good because they put the risk on the offeror, they discourage the offeree from speculating, they protect the offeree from an offeror who would re"oke the offer while the acceptance is in the mail, and they pro"ide stability to the system. $ddities: )7. one case held that if two parties mail the same contract to each other at the same time, there is an enforceable promise - but no one knows when it becomes enforceable. )A. (actiers <dmrs v. 1rith (seller ma"es offer to buyer# buyer waits an unreasonably long time but does accept# his acceptance crosses in the mail with a renewal of the offer from the seller: held# renewal trumped the lateness of the acceptance even though buyer never "new about it: the parties minds met - )%)

Modes of Acce)tance Foti"es behind acceptance dont matter. Aloc"ner v. ;reen (fact that two people wouldve cared for old lady even if she hadnt promised them money is no reason why they shouldnt recover the money - )65 Simmons v. N.S. (guy caught the fish called Diamond Fim and sought the promised reward: court gave it to him# holding that if a unilateral offer is "nown to an offeree# his performance is an acceptance even if he performed for reasons unrelated to the offer - )67 Stephens v. (emphis (guy came to state with information about a criminal

but didnt "now about reward: court gave it to him and said that offeree neednt "now about unilateral offer in order to claim upon performance $ re>ecting Simmons rule above as bad policy - )6) %uty to inform offeror of acceptance8performance: if the offeror would otherwise ne"er learn of the offerees acceptance8performance, the offeree must inform the offeror within a reasonable time. !specially if the offeror e/periences changes circumstances in between. /ishop v. Maton (two parties very far apart# offeror promises offeree to pay him bac" if he will help out offerors brother# offeree does so and mails a letter telling offeror of it but the letter never arrives: court said that offeree had done his part $ mailboC rule - )6, 5o duty to inform: if a contract doesnt re*uire a party to inform the other party of acceptance, then there is no duty to inform. =ntl 1ilter 0o. v. 0onroe ;in# =ce . 2ight 0o. (offer said it was enforceable once it had been accepted by offeree and approved by offerors eCecutive officer: offeror didnt need to inform offeree that its eCecutive officer had approved the deal - )6& 1mplied acceptance is okay - no need to be e/plicit, so long as reasonable person would infer an acceptance of the offer from offerees conduct. -ood v. 2ucy# 2ady Duff-;ordon (implied promise of best efforts to sell 2ucys fashions because -ood only earned O of profits - && 'olaroid 0orp. v. @ollins Mnvironmental Services# =nc. (form contract re?uired offeree to return the wor" order# offeree did the wor" but retained the wor" order because it disagreed with the indemnity clause of the contract: held# offeree impliedly assented to the contract by doing the wor" and the indemnity clause by not ob>ecting# despite retaining the wor" order - ),7 Silent assent: silence can only be assent in three cases: 7. pre"ious dealings place duty on offeree to notify offeror of change8end to contract A. offeree takes benefit of offered ser"ices with reasonable opportunity to reject them and reason to belie"e offeror thought offer was accepted G. offeror has stated or gi"en offeree reason to belie"e silence8inaction is assent and offeree intends to assent through silence8inaction Courts careful about calling silence assent, but will to protect a weak party from a stronger partys e/ploitation. Logt v. (adden (sharecropper had contracted twice with landowner to wor" land for one year and then wanted to wor" a third year# but didnt contract and landowner was silent: court said no assent as there hadnt been past dealings as each year the parties had contracted anew - )*& !obbs v. (assasoit -hip 0o. (without any communication# offeror had shipped eels"ins to offeree many times and offeree had paid for themI then when the s"ins were destroyed while at offerees place# offeree didnt want to pay: court found made him pay as there were past dealings and silence was acceptance - )&6

0ole-(c=ntyre-Horfleet 0o. v. !olloway (company too" offer from buyer for barrels of meal at a set price but then mar"et prices increased and company didnt want to ship the goods for the set price but rather than telling buyer it had re>ected his offer# it was silent: court said enforceable as silence in the face of a duty to act# such as a duty to respond within a reasonable time# is assent - )&7 Au"us"a v. !ome (ut. !ail-8ornado =ns. 0o. (guy applies for insurance and insurance company ta"es his application money and sits silent during hail season# then re>ects on day of big hail storms which destroy his crops: court found silent assent and enforced - )&% 2ouisville 8in . Stove 0o. v. 2ay (wife too" goods that her husband had had shipped to her and has them shipped with another company to her husband# and they are destroyed en route: court said shed accepted contract to pay for the goods when she too" them from the first shipping company and now must pay for them - )&6 <ustin v. /urge (guy twice wrote newspaper company to stop shipping him newspapers but they didnt and he continued to read them: court held that his reading was a benefit to him and he must pay - )&, 3ssent by click: 1f a person is gi"en ample opportunity to read the whole contract before clicking +assent, then it is enforceable. 0aspi v. (icrosoft (guy complains about a clause in contract after he had ample opportunity to scroll through contract and had to clic" on 3assent4 to move on: court said it was enforceable because clic"ing was o"ay and the clause was >ust as visible as the rest of the contract - )&* 8ic"etmaster 0orp. v. 8ic"ets.com# =nc. (contract found at bottom of web page and not re?uiring active 3assent4-clic"ing to move on but >ust advancing to neCt page is not enough opportunity for offeree to "now what hes getting himself into: not enforceable - %5: "n*ust Enric+!ent 1mplied4in4fact contracts: see implied assent abo"e. 1mplied4in4law contracts: not really contracts, but unjust enrichment )a.k.a. restitution or *uasi4contracts.. 5o bargain or offer8acceptance necessary. 5o officious intermeddler may foist benefits upon you without your implied consent but there are three circumstances when you can reco"er, and then only if the "alue of the benefit is known: 7. emergency rule: doctor )one with a usual fee, not a boy scout. finds and rescues sick man - person must pay him the usual fee A. bank accidentally puts 67,EEE in your account - must pay it back G. when you accept ser"ices knowingly and "oluntarily, aware that the pro"ider e/pects money in return, then you ha"e to pay )but no good for building chalet when no one knows the "alue to you. Hursing 0are Services# =nc. v. Dobos (old lady put in hospital in

emergency# doctors save her# and she has at-home care as well# she thought (edicare would cover it# but it wont: court said there was no eCpress contract or contract implied-in-fact but one implied-in-law under the emergency rule for the in-hospital care# and the third rule for the at-home care# as Hursings usual fees were "nown $ otherwise Dobos would get un>ust enrichment $ but what about this case# when she "new money had to be paid but thought another was going to pay itB - %56 Day v. 0aton (< builds a wall between two properties# thin"ing / will pay for part of it# / "nows this but doesnt pay: court said he must pay as it saw implied-in-fact assent# but it could also have based the decision on implied-in-law assent without much difference - %9: /astian v. ;afford (architect draws up plans for a building but guy later fires him and has another architect draw up plans and uses those for building: court said no un>ust enrichment because there was no benefit conferred upon the guy - %9% Preli!inar Ne&otiations Bagueness: if substantial details necessary to the functioning of the contract are missing )performance terms as opposed to au/iliary terms., then it is too "ague to enforce. Courts will fill in au/iliary terms but not performance. <cademy 0hicago 'ublishers v. 0heever (contract for boo" didnt include number of pages or stories# date for completion# etc. that was material to performance: no contract - %): /erg <gency v. Sleepworld--illingboro# =nc. (lease that contained terms on price and space and time need not have terms on maintenance# insurance# assignment# etc. to be complete: contract - %)6 Saliba-Aringlen 0orp. v. <llen Mngineering 0o. (sub refused to do the wor" as stated in bid because some terms were missing: court said that standard industry auCiliary terms neednt be contracted over if the performance terms are covered# and enforced the bid - %), @eases: should courts enforce reasonable rents or market prices> Foseph (artin# Fr. Deli v. Schumacher (Deli wanted to lease its premises for another period at the same price with reasonable increase# but landlord wanted to raise it from $6%5 to $&55 per month: court said rent was a performance term and it would not enforce mar"et rates# but declare that there was no contract# but see below - %%9 (oolenaar v. 0o-/uild 0ompanies# =nc. (goat herder wanted to lease his land for another period at the same price with reasonable increase# but landlord wanted to raise it from $7,% to $9,#555 per month: court said it could should enforce a reasonable rent even though that was a performance term# but see above - %%: =ood faith: parties can contract to negotiate in good faith 0hannel !ome 0enters v. ;rossman (if there is an intention to bind two parties in a preliminary agreement to negotiate in good faith# as opposed to wanting to remain completely free# then the terms of

that initial agreement form a contract. =f later# the parties cant in good faith agree to a complete contract# then they can call it off# but if one party acts in bad faith to cancel the agreement# then he can be bound to it or be forced to pay damages - ),6 romissory !stoppel: one case says can be used for preliminary negotiations !offman v. @ed 6wl Stores# =nc. (guy did everything @ed 6wl told him to do to get his store# ta"ing on loans and such# then they told him he wouldnt get a store: court said promissory estoppel can apply to preliminary agreements that are still too vague to be considered enforceable contracts and whac"ed @ed 6wl with damages - %,6 Battle of t+e For!s @ast shot fired rule: in a battle of the forms, the terms on the last form win, assuming both parties continue with the deal, as they are considered a counteroffer, else, the mirror4image rule on counteroffers applies. This is the rule for sales of ser"ices as well. ?CC L A4AEM: for boilerplate language on sale of goods only. Court chooses +additional, or +different, to suit its purposes, and it usually chooses +different, because +additional, is much like last shot fired rule. )7.9)A.: 1f offeree timely accepts offer and acceptance contains additional terms, those terms trump the offerors terms unless: a. the offer limited acceptance to its terms only Nno JO b. the additional terms are material )perf. terms. Nofferor winsO c. the offeror objects Nofferor winsO 1f offerees acceptance is made conditional on offerors assent and: a. offeror assents une*ui"ocally Nofferee winsO b. offeror doesnt assent and a party backs out of the deal Nno JO c. offeror doesnt assent but the deal proceeds Nknockout ruleO d. offeree doesnt really mean hell back out of the deal if the offeror doesnt assent Nofferor winsO )G.: Jnockout #ule: 1f offerees acceptance contains different terms, then the terms both parties agree to rule, along with default rules for what they dont agree on. 0olumbia !yundai# =nc. v. 0arll !yundai# =nc. (if the contracts are not boilerplate forms but specifically drawn up for this occasion# then P :-:5, doesnt apply# but last shot fired ruleKcounteroffer - 6)% ;ardner Qem"e 0o. v. Dunham /ush# =nc. (battle of the forms: two forms differ on warranty terms: court says different terms and applies "noc"out rule - 6), Diamond 1ruit ;rowers# =nc. v. Arac" 0orp. (Arac" never assented to sellers re?uired additional terms but both parties "ept dealing: court held that offerors assent to offerees additional terms must be une?uivocal and went for "noc"out rule - 6%, 'olaroid 0orp. v. @ollins Mnvironmental Services# =nc. (form contract

re?uired offeree to return the wor" order# offeree did the wor" but retained the wor" order because it disagreed with the indemnity clause of the contract: held# offeree impliedly assented to the contract by doing the wor" and the indemnity clause by not ob>ecting# despite retaining the wor" order - ),7 Mista,e Fisunderstanding: semantic difference Fore #easonable rinciple 4 1: if neither party knows the following, but each party has a different interpretation of a contract and one partys interpretation is more reasonable, then the party with the more reasonable interpretation wins. !*ually #easonable rinciple 4 11: each partys interpretation is e*ually reasonable & no contract. Same 1dea8%ifferent Iords rinciple 4 111: each party means the same thing, but uses different words, then there is a contract. ?nfair 3d"antage rinciple 4 1B: 3 knows 's interpretation but ' doesnt know 3s: 3s interpretation wins, no matter how unreasonable. @affles v. -ichelhaus (@affles sells -ichelhaus cotton from the ship 'eerless: @affles thin"s ship 'eerless coming in Dec.# -ichelhaus ship 'eerless coming in 6ct.: no contract: 'rinciple == $ 76* Aabil Developments 0orp. v. (ignot (testimony as to a partys perceptions of contract negotiations can be used to prove whether a contract eCisted or not $ 7*6 Futual Fistake %ef.: same thing, different material *ualities, both parties unaware, not sold with any representations about its nature or an as4is clause, no change in world"iew of e/pert opinion on the *uality )e.g. sold as wine 9 turns to "inegar & enforceable( sold as wine 9 was prepared as "inegar & not enforceable. 1irestone . 'arson# =nc. v. Nnion 2eague of 'hiladelphia (Aey painting sold as /ierstadt when world thought it was a /ierstadt# later world changes mind to say it was a Aey: enforceable - ,5: -ood v. /oynton (diamond sold as roc" but with no representation about its nature: enforceable - 66& Mverett v. Mstate of Sumstad (loc"ed safe sold with no representation about its nature# had $7:#55 inside: enforceable - 6,9 2enawee 0ounty /oard of !ealth v. (esserly (home sold as-is as rental unit but inhabitable: enforceable - ,5% ;arb-Ao# =nc. v. 2ansing-2ewis Services# =nc. (land sold as-is as commercial space# but polluted and federal law held seller liable despite as-is clause: not enforceable as as-is superceded - ,95 ;artner v. Mi"ill (land sold for construction of offices# but Goned for only one building: not enforceable - ,99 ;riffith v. /rymer (room sold to watch coronation after it had been cancelled: not enforceable - ,55

-est 0oast <irlines# =nc. v. (iners <ircraft . Mngine Service (costly engines sold as scrap metal: not enforceable - ,57 /eachcomber 0oins# =nc. v. /os"ett (coin sold as Denver dime but was fa"e: not enforceable - ,97 Qimbalist (violin sold as Stradivarius but was cheap "noc"off: not enforceable $ ,97 Sherwood v. -al"er (parties thought cow was barren $ beef cow $ but it turned out to be fertile $ breeding cow: not enforceable as difference went to the substance of the deal $ buying and selling a beef cowI dissent: buyer thought cow was fertile# so that was not substance of the deal# so enforceable - 66: ?nilateral Fistake %ef.: if 3 errs )clerical mistake of fact, not of judgment. and there is no breach of a legal duty and 3 can put ' back in status *uo )either before damage arises or by paying damages., and sometimes courts re*uire that ' could"e known of the error, then 3 can get out of the contract. $therwise, ' would be taking unfair ad"antage of 3. Mlsinore School Dist. v. Aastorff (contractor made clerical error in bid# school as"ed if he was sure his numbers were right# he said yes# later realiGed they werent# and told school right away# before they had decided winner: not enforceable - ,9% -hite v. /errenda (esa -ater Dist. (contractor misestimates the amount of roc" because he doesnt loo" at the updated figuresI district court said enforceable as mista"e of >udgment: appellate court reversed# not enforceable as mista"e of fact - ,:: C+an&ed Circu!stances %ef.: if a basic and material assumption of both parties pro"es untrue, such that performance becomes impossible, then the contract is not enforceable. 1mpossibility is the same as impracticability, which is when you can only do it for e/cessi"e and unreasonable cost. hysically more difficult can be changed circumstance if impracticable. Commercially more difficult was changed circumstance in 7CAEs =ermany, and almost maybe in ?S3 in Iestinghouse case. #isk allocation is a factor - who can bear it best> !isenberg thinks maybe shouldnt be all or nothing, but maybe costs of risk can be allocated fairly between the parties> 5ot rule now though. 8aylor v. 0aldwell (guy rents music hall for concert but it burns down: not enforceable as both parties assumed its not burning down - ,)5 Arell v. !enry (room sold to watch coronation before it was cancelled: not enforceable as changed circumstances went to heart of deal - ,*9 N.S. v. -egematic 0orp. (-egematic promised a machine it had yet to create: enforceable as impracticability is not fuc"ing up and deceiving others with promises you cant fulfill - ,)* Dills v. 8own of Mnfield (Dills couldnt get financing and contract said if he couldnt then he didnt get his deposit bac"# but he wanted it bac": no changed circumstances when parties contracted over the event - ,%5

(ineral 'ar" 2and 0o. v. !oward (both parties thin" there will be enough roc" above water for pro>ect# but only half is and the roc" under water is eCpensive to dredge: not enforceable as impracticable - ,), 8ransatlantic 1inancing 0orp. v. N.S. (SueG 0anal crisis made voyage more costly to shipper who had to go through 0ape of ;ood !ope: enforceable as 3more difficult4 is not impracticable# and shipper "new situation was ris"y and made contract anyway# was better able to bear it - ,%9 A kinds of obligations: 7. obligation of best efforts - rescindable if party used reasonable means but desired result could still not be achie"ed A. obligation to achie"e desired result - rescindable only if changed circumstances were totally out of control of the party

REME'IES FOR BREACC+oice breachee can choose e/pectation, reliance or restitution for most money

E%)ectation da!a&es . make it as if the promise had been fulfilled 'reach by ser"ice seller %amages & CC - uJp if disproportionate, PFktB cost of completion less unpaid contract price, unless that figure is disproportionate to the change in market "alue between how the thing is and how it would ha"e been if itd been done right, then award that. 2ouise 0aroline Hursing !ome# =nc. v. DiC 0onstruction 0o. (DiC didnt finish the wor": court gave 2ouise no damages because the cost of completion was less than the unpaid contract price - ::6 'eevyhouse v. ;arland 0oal . (ining 0o. (;arland promised the landowner to restore the land after the mining# didnt do it# cost of completion + $:&#555# change in property value + $755: court gave change in value as two values were grossly disproportionate $ bad decision as no accounting of aesthetics of scorched earth land the 'eevyhouses now have bKc of ;arlands laGinessB - ::* !.'. Droher . Sons v. 8oushin (house built with sagging floors: cost of repair + $:5"# much more than change in value: court said give change# especially as breach was not willful or in bad faith - :7& Mastern Steamship 2ines# =nc. v. N.S. (N.S. promised to repair ship after the war: post-war cost of repair + $) million: value of boat postcleanup + $: million: court gave value post-cleanup - :7& ;rossman !oldings 2td. L. !ourihan (house was supposed to face the sun# but faced the opposite direction: court gave change in value as disproportionate to cost of completion - :)9 0ity School Dist. v. (c2ane 0onstruction 0o. ((c2ane built pool

building poorly so that it didnt have the distinct aesthetic the buyer wanted# cost to replace + $7%,#555# change in value + $7#555: court gave cost of completion as breach was material# went to heart of deal# and somewhat willful - :)5 @uCley 0onstruction v. 1orsyth (pool built too shallow# cost of completion + $:9#%65# change in value + none: court gave change in value but added damages for loss of fun because fun matters and although there was no difference in commercial value there was a difference in aesthetic value - :): 1deas: The 'eevyhouse rule goes against the stated objecti"e of e/pectation damages )put the party as if J fulfilled.. 1n commercial cases, only market "alue matters, but in aesthetic cases there is an additional +fun, "alue to one party. Ihat to be done>

3esthetic contract breach: 44444 Q change in "alue to owner, if higher )too much. RRRR J cost to complete )maybe too much. 44444 @ change in "alue to owner, if lower )wont repair. RRRR 6 change in market "alue )too little. !/pectation damages would be: gi"e either @ or J )if Q. Courts currently gi"e either 6 or J 'reach by ser"ices buyer %amages & S T Ci - pJp & Jp - CC - pJp if resold, Jp - Co"p gross profit that seller would"e made plus costs incurred in performance minus payment recei"ed )same as contract price minus costs sa"ed minus payment recei"ed - #estatement. - also for lost4"olume sellers. @ost "olume seller must pro"e it would ha"e produced and sold another unit for a profit. 'ut if not lost4 "olume seller and you get another person to buy the ser"ice, then contract price minus new price. <iello 0onstruction# =nc. v. Hationwide 8ractor 0orp. (construction company stopped wor" because builder didnt pay: court gave standard damages - :)) -ired (usic# =nc. v. 0lar" (guy orders music service# moves# replacement tenant wants to ta"e over contract but has to pay more: court gave damages e?ual to the value of the rest of the first contract as -ired was a lost volume seller and wouldve had two contracts instead of >ust one - :), LiteC (fg. 0orp. v. 0aribteC 0orp. (standard damages include net profit and overhead $ fiCed costs $ because it is a loss incurred when the transactions go into the accounting boo"s - :)* 'reach by goods seller %amages & CC & "alue as warranted - "alue as sold )Fktp - Jp.

Fktp8Co"p - Jp T %i T %c For Co"p &8U Fktp 1f Co"p V Fktp, then a. Fktp, as thats what he paid b. Co"p, as he should get the benefit of the bargain because he could"e paid the lower Co"p and then sold the goods at the higher Fktp for a profit. market price minus contract price plus incidental and conse*uential damages, or co"er price minus contract price. 'uyer must pro"e market price. 'uyer can either co"er or seek damages afterward. 0ontinental Sand . ;ravel 0o. v. A.A Sand . ;ravel 0o. (e?uipment sold for $%5" was damaged: no cover: cost of repair + $955": court gave cost of repair as that is often higher than Ap and because this preserves benefit of buyers bargain if he got the goods at a cheap price - :)& /urgess v. 0urly 6lneys# =nc. (combines sold to someone else# buyer showed an unreliable brochure and possibility of resale to uncle to prove mar"et price: court gave only down payment bac"# but not standard damages# as breachee has burden of proof to show mar"et price and didnt do so believably - :%5 Delchi 0arrier Spa v. @otoreC 0orp. (compressor parts so defective it was material breach# trial court granted usual damages for conse?uential damages such as lost profits on resale and eCpenses incurred in trying to fiC the parts# but denied damages for shipping charges related to the parts# cost of other parts that were obsolete after termination of contract# and labor costs for the days when the factory couldnt wor": court granted these damages because they hadnt been already counted in the 3lost profit4 calculation - :%7 A;( !arvesting 0o. v. 1resh Hetwor" (A;( breached to sell to others at a higher price# 1resh covered# 1resh resold at cost-plus: court gave usual damages and didnt care about cost-plus meaning that price increase from cover was passed onto 1reshs buyer and so on down the line because you dont "now where to stop then and its easier >ust to give cost-plus to breachee even though it doesnt meet the goal of eCpectation damages - :%* 'reach by goods buyer %amages & Jp - Fktp8Co"p @BS & Jp - CC T % & S T Ci T % contract price minus market )or resale. price. For lost4"olume seller, contract price minus cost sa"ed )same as profit plus costs incurred., plus conse*uential8incidental costs. @ost "olume seller must pro"e it would"e produced and sold another unit for a profit. Heri v. @etail (arine 0orp. (guy orders boat# cancels# lost-volume seller

able to resell at same price# with profit of $7#:%7: court gave $7#:%7 as no costs incurred# plus incidental costs such as storage of the boat between cancellation and resale - :6% 8eradyne# =nc. v. 8eledyne =ndusts.# =nc. (if resale buyer pays more than the original buyer would have paid# then the eCtra profit is not subtracted from the damages awarded to the seller - :6& @.M. Davis 0hemical 0orp. v. Diasonics# =nc. (lost-volume seller must prove that it wouldve been profitable to sell another unit and that it would have done so# not >ust that it could have - :,5

Miti&ation %ef.: breachee has a duty to take reasonable steps to mitigate the damages. @oc"ingham 0ounty v. 2uten /ridge 0o. (county cancels bridge construction contract# 2uten "eeps building# incurring costs: court gave it damages only for what itd done before cancellation - :,9 (adsen v. (urray (guy orders custom pool table with weird holes in it# cancels order# builder uses the tables for spare parts and firewood because he thin"s that selling them would hurt his ?uality reputation and eCpose him to liability# eCpert witness denies builders claims and says theyre >ust as high ?uality# court believed the eCpert testimony: court said should have resold at reduced price to mitigate - :,) =n re Aellett <ircraft 0orp. (=n attempting to mitigate damages# breachee bought# from a trusted company# replacement parts to replace those breachor failed to provide# but at higher price than he could have gotten if hed bought them from another company that was dependent on breachor: court said breachee reasonably attempted to mitigate costs - :,% /an" 6ne v. 8aylor (ban" breaches on loan to 8aylor# who needed it to finance a pro>ectI she could have made a personal loan or sold her >ewelry: court said that is not necessary in mitigation - :,% S.F. ;roves . Sons 0o. v. -arner 0o. (both parties "new a third party whose hire could have mitigated the damages: court said breachee didnt have to call him if breachor could do so >ust as easily :,6 !mployment contracts neednt be mitigated with different or inferior or distant work. Foney made at comparable job are subtracted from damages. !mployee can seek as damages money he spends in trying to mitigate. Shirley (aclaine v. :5th 0ent. 1oC (1oC cancels /loomer ;irl musical but offers /ig 0ountry western# but with less artistic control and not shot in 2.<. but in <ustralia# she refuses: court says o"ay as /ig

0ountry is different and inferior: dissent says difference and inferiority were matters for the >ury - :,, 'un"ar v. Aing 'lastic 0orp. (employee neednt ta"e a far away >ob# but can stay within immediate community or neighborhood - :*7 (r. Mddie# =nc. v. ;insberg (employee can recover as damages reasonable costs incurred in attempting to find comparable >ob and money made at such a >ob is subtracted from damages - :*7 Southern Aeswic"# =nc. v. -hetherholt (employee not re?uired to see" different or inferior wor"# but if he ta"es it# the wages are still subtracted from the damages - :*7 %amages for loss of opportunity to practice ones profession in general )such as loss of reputation. are no good, but if someone )Banessa #edgra"e. misses a specific opportunity they would ha"e had if the breach hadnt occurred )concert that now is cancelled., or if a public performer )radio announcer. needs the opportunity to work as a material part of the deal, then good.

Foreseea#ilit %ef.: #estatement: conse*uential damages such as lost profits must be foreseeable at time of contract formation and they may not be disproportionate to the cost of the contract. )?51%#$1T: no disproportionality rule. =ermany: reduces damages by proportion by which breachee caused problem, i.e. foisted too much risk on unsuspecting carrier. ?CC: conse*uential damages not reco"erable if no co"er.. !/ample: guy sends big thing through mail - should he get big damages for paying thirty cents> 5o, because mail prices dont reflect the cost of bearing that kind of risk for e"eryone - rather, mail would charge e/tra for this one time deal as insurance. 1f damages not foreseeable, does the thing at least ha"e rental "alue> !adley v. /aCendale (mill shaft brea"s# guy tells shipper mill stopped but court ignores this fact and pretends he didnt# but also says hurry# shipper misships and replacement arrives late# guy see"s damages for conse?uential damages of lost profit from idle factory in interim: court says conse?uential damages must be foreseeable at A creation and these werent so no damages: but perhaps rule is first fact wasnt ignored and although they were foreseeable they were disproportionate and so no damagesB - :*, Lictoria 2aundry 2td. v. Hewman =ndus. 2td. (laundry orders big boiler# says hurry# it comes late# sues for lost profits: o"ay as foreseeable# reasonable inferenceKnatural outcome - :&9 Aoufos v. 0Garni"ow 8he !eron == (sugar boat comes in late to harbor

and prices have fallen as part of usual fluctuation: captain wasnt given specific date to arrive on but court said he couldve thought about it# and# if he had he would have realiGed that there was an even %5-%5 probability of prices going down: court held that %5O probability is reasonably foreseeable# and that :%O probability li"ely also would have been foreseeable enough - :&7 !ector (artineG 0o. v. Southern 'acific (big piece of e?uipment late in arriving: court held that# different from shaft in !adley# part had value on its own such as for rent and gave rental value for days missing in action - :&% 'anhandle <gri-service# =nc. v. /ec"er (under N00# conse?uential damages not recoverable if no cover for goods $ :&6 =ndpt (ech. 0ontractors# =nc. v. ;ordon 8. /ur"e . Sons (many events might all contribute to breach# in which case all thats necessary to prove is that breachor was a substantial factor# then can award damages under rule below- :&, S.F. ;roves . Sons 0o. v. -arner 0o. (breachee must prove proCimate cause between breach and conse?uential damages# and if the loss caused by the breach cannot be isolated from other attributable factors# then damages are to be fairly discounted according to the proportion of breachors fault - :&* Certaint %ef.: conse*uential damages must be reasonably certain, or no damages at all. 5ew business rule: can ne"er be certain enough. Fodern trend: use best estimates and maybe discount different probable outcomes by the probability of their occurring )e/pected "alue & prob of gain W amt T prob of loss W amt.. 5ew way better because these people go into business to make money )assume good rate of return. and will only do so if theyre reasonably certain of return, and why should court assume rate of return of 2ero if cant pro"e well enough> Faybe jury can do its own deciding based on preponderance of the e"idence )whos numbers are better>. and discounting possibilities by probabilities. Aenford 0o. v. Mrie 0ounty (HJ domed stadium after <strodome# despite eCtensive eCpert testimony court said too many assumptions had to be made andd damages estimates were too speculative $ no damages $ also# 3rational4 is not good enough but 3reasonably certain4 and directly traceable to breach - :&& <shland (anagement# =nc. v. Fanien (new mutual fund# damages compared to previous mutual funds by company: court said new rule and more willing to speculate on new business - 75: @ombola v. 0osindas (really good race horse hadnt run in a while: court estimated with average money horse had won in past years from racing and gave damages - 75) 0ontemporary (ission# =nc. v. 1amous (usic 0orp. (music company

"new probabilities of a song reaching various levels in the charts if it made it to the top 65 and wanted to estimate based on those probabilities and average profit from each level what damages would be: court said o"ay - 75) Li/uidated 'a!a&es enalties are not enforceable )punishment for breach. because of peoples bounded rationality, o"eroptimism, and inability to comprehend the future. @i*uidated %amages are enforceable )reasonable estimate of damages.. 1f damages easy to estimate at contract formation and difficult at breach, then always enforced. 1f hard at start and easy at end, then 2ee says no )penalty, get better numbers. and !utchinson says yes )certainty.. ?CC8#estatement: 1f estimate pro"es reasonable at breach, then li*uidated damages awarded, e"en if they otherwise wouldnt ha"e been. 'ut if estimate that seemed reasonable at contract formation pro"es unreasonable at breach, then court assumes it was unreasonable and no damages. -assermans# =nc. v. (iddletown (li?uidated damages were based on gross revenue instead of net revenue: court said if mista"e then o"ay but the court will then enforce the net revenue and not the gross# but if guy meant gross then not o"ay as penalty and not reasonable estimate of real damages - 75* 2ee 6ldsmobile# =nc. v. Aaiden (lady puts down $%" deposit on $75" car: despite good faith# deal brea"s down and she breaches by canceling: 2ee "eeps deposit as li?uidated damages $ hard at start# easy at end: court says not o"ay as deposit amount wasnt an estimate of what damages would be# because 2ee "new at the time of the contract what they would more li"ely be - 79% !utchinson v. 8omp"ins (guy pays $95" deposit on $9:%" house $ hard at start# easy at end: court says o"ay as limiting damages at deposit amount provides both parties with certainty about transaction# because otherwise it could be large or volatile - 79, @imits on @iability are usually enforced as court assumes parties were trying to efficiently allocate risk. S)ecific Perfor!ance %ef.: only awarded when damages arent ade*uate )rarely for construction., the good is uni*ue )no good substitutes., and there wouldnt be much court super"ision )unless great public interest.. @and: majority rule would always grant specific performance for land, but minority recogni2es e/ception for homogeni2ed housing de"elopments, etc. 5ot awarded for artistic endea"ors or employment contracts. 2ondon /uc"et 0o. v. Stewart (shoddily installed hotel heating system: court said damages would pay for cost of completion by another company which would put hotel where it wanted to be - 7:%

-algreen 0o. v. Sara 0ree" 'roperty 0o. (mall promised -algreen itd be only pharmacy in the mall and then lets another pharmacy in: court says specific performance as damages would be difficult to estimate with certainty and this is better than no damages# and this wouldnt re?uire much court supervision - 7:, Lan -agner <dvertising 0orp. v. S.( Mnterprises (spot for billboard wasnt uni?ue as billboard spots homogeniGed with many substitutes and damages easy to estimate: uni?ue is not 7-D place but absence of substitutes - 777 2aclede ;as 0o. v. <moco 6il 0o. (two companies already hoo"ed up with heavy pipelines: specific performance o"ay as easy to monitor and of public interest# and although not usually for goods# here o"ay as it would be hard for 2aclede to find substitute longterm oil supplier during oil crisis - 77)

Reliance da!a&es . make it as if there were no promise #estatement L CE )such as for promissory estoppel. -estside ;alvaniGing Svcs. v. ;eorgia-'acific (-estside wasnt getting paid# ;' promised to pay# -estside did more wor"# ;' only paid for the post-promise wor": court said o"ay as -estside hadnt relied on ;'s promise when it did the earlier wor" - 7)% Funny #eliance 1f you cant gi"e e/pectation damages or specific performance, then you can grant reliance damages and that is fairer than nothing. =i"es more than +as if there were no promise, because e/penditures were made before promise - but court belie"es this is e*uitable. Security Stove v. <merican @ys. MCpress (guy set up stove show and hired <merican to ship the stove# <merican "new to hurry and why# all arrived but one important part# stove show couldnt happen# sued for his money bac": court said eCpectation damages $ profit from stove sale $ would be uncertain# but at least could grant reliance for outlays that became waste bKc of <mericans breach - 7)5 <nglia 8L v. @eed (movie set up# @eed agrees to act# "nows hes star# cancels# movie cant find replacement: court said eCpectation uncertain so give reliance for what he made into waste - 7)) /eefy 8rail v. /eefy Aing (do funny reliance because court assumes that breachee had done math to ensure that hed ma"e his money bac" at least# and so that much at least seems certain enough - 7)) Restitution da!a&es - promisor must return benefits bestowed on him by promisee %ef.: %amages & FB, capped by: Jp - CC - % and pro rata Jp breachor doesnt get costs incurred but "alue of benefit conferred. 'reach must be material. %amages & least of: fair "alue of benefits conferred( contract price minus cost of completion minus damages caused( pro rata

share of contract price based on proportion of work finished. The latter two are caps on the goal of restitution, the first measure. 6steen v. Fohnson (country music singer records# paid in full# producer puts first album out but not second# material breach: court says he must pay bac" value of services not rendered - 7), N.S. <lgernon /lair# =nc. (if general contractor breaches# subcontractor can stop wor" and recover value of wor" done# even if sub wouldve lost money on completion based on costs and price 7)& 6liver v. 0ampbell (divorce lawyer gives lady deal and wor"s for $*%5# paid $%%5# while >ury out hes fired# ma>ority said substantial performance# granted $755: dissent said appeal li"ely and so no substantial performance and thus breach and restitution of fair value# which was $)#555 - 7%9 /ritton v. 8urner (servant ?uits in ninth month of year long contract# sues for restitution: court grants least of above rule - 7%7

MISCELLANEO"S Su#stantial Perfor!ance %ef.: %amages & Jp - CC8% if disproportionate, PFktB if contract substantially completed )no material breach., breachor gets contract price minus damages caused. %amages e*ual the cost of completion, but if that is disproportionate to the contract price, then courts gi"e change in market "alue. Factors & materiality of breach, proportion completed, willfulness of breach, moti"e of breachee )forfeiture>.. Facob . Joungs v. Aent (builder uses piping of same ?uality but different mar" as in contract# cost of completion + high# change in value + none: court says substantial performance# no damages - &5: 6.-. ;run @oofing v. 0ope (red roof painted wK yellow strea"s: court said roof aesthetic is so different it is a material breach and no substantial performance# gave breachee cost of completion as eCpectation damages for buyer for breach by services seller - &5& Areyer v. Driscoll (house only ,%O finished bKc only R of plumbing# electric# heating# tile# linoleum and S decoration: court said no substantial performance - &56 LincenGi v. 0erro (willful breach doesnt necessarily preclude substantial

performance money: good faith more to the point and even that is not dispositive# as many factors must be considered - &56 ?CC Sale of =oods 5o substantial performance rule L A4DE7 adopts old perfect tender rule )buyer can reject whole thing if any problem at all. unless one of the following e/ceptions met: 7. buyer rejects post4acceptance )e"en then L A4DEX allows for rejection if "alue substantially impaired by material breach - but there are restrictions on that e"en. A. installment contract )L A4D7A says buyer can reject any one installment - but not whole contract, unless material breach kills "alue of whole contract - if material breach, but must gi"e seller chance to cure: if series of bad cures then get ade*uate assurance of performance. G. seller still has time to cure )L A4KEX allows cure when a. seller can cure within contract time limit, or b. buyer rejects goods which seller had reasonable grounds to belie"e would be acceptable - cure often accompanied by price discount. H. seller acted in bad faith )LL 74AEG, 74AE7)7C., A47EG)7.)b.. 8.-. 6il v. 0onsolidated Mdison (shipper contracts for oil no greater than 9O: turns out to be .%O oil: sells it# "nowing buyer can use up to 9O: buyer receives the oil# but it is .&O: buyer re>ects: price negotiations fail even though seller offers a fair discount for the changed# yet still acceptable value# because buyer wants to ta"e advantage of recently reduced mar"et price: court says seller has opportunity to cure as fit under (7 (b - &9) Qabris"ie 0hevrolet v. Smith (sale of new car but has bad engine# seller cures by replacing engine: court says cure must be same thing# and new car so special cause of reliability that new engine in it is simply not same thing - &9* E%)ress Conditions %ef.: unlike promise, cant be sued upon if condition not met, dont pay conse*uential or other damages )instead do what clause says., no +real, substantial performance - but see !/cuse. )Failbo/ rule: if ; is supposed to get acceptance by Friday, not good enough to put in mail by Friday.. 6ppenheimer . 0o. v. 6ppenheimer# <ppel# DiCon . 0o. (contract has clause to get landlords consent in writing by certain day# gets it orally some days late: court says breach of condition because even though condition was substantially met there is no substantial performance for eCpress conditions - &:9 (erritt !ill Lineyards v. -indy !ill Lineyards (breach of condition "ic"s in its clause for whatever damages# or cancellation of contract# but no conse?uential damages for breach of a condition - &:6 1nterpretation: when in doubt, interpret ambiguous clauses as promises, not

conditions. ut the risk on the party best able to bear it. )=enerally, interpret against the contract writer.. !oward v. 1ederal 0rop =ns. 0orp. (farmer wasnt supposed to mess with post-storm crops but reasonableness re?uired him to replant# insurance company couldnt investigate# contract written with prior clause unambiguous that it was condition then this clause which was ambiguous: court said promise# so insurance company must pay but can sue for damages - &79 8hos. F. Dyer 0o. v. /ishop =ntl Mngg 0o. (subcontractor contracts to get paid upon a generals getting paid# or b completion of subs wor": more wor" was added with add-on documents: landowner went ban"rupt and couldnt pay general: did general have to pay subB 0ourt interpreted as (b in this instance as that put the ris" on the general and not the sub: better to put ris" on general as he can bear it better# loo" into whether hes li"ely to get paid by this landowner in first place# etc. - &)* Cooperation: Courts imply a promise of cooperation when they think that the party meant hed make reasonable efforts but didnt want to be held in case it didnt work out, as opposed to when he wanted to keep his options open because he was uncertain about going forward in the first place. Lanadium 0orp. v. 1idelity . Deposit 0o. (guy had to get third party approval# didnt even try and actively wor"ed against: court said condition carried implied promise of cooperation - &76 2ach v. 0ahill (guy had to get mortgage# made many attempts but couldnt: court said there was cooperation - &7& -inslow v. (ell (guy has to get logging rights# doesnt even try: court says o"ay as he had option to do so or not at his pleasure - &7& E%cuse %ef.: 'reachor can be e/cused if three conditions met: 7. boilerplate contract( A. strictly enforcing would work forfeiture( G. breach didnt materially harm purpose behind clause. 1f )A. might not be met, then add )H. e/cuse must be reasonable. 'urden of proof on breachor. This modern trend is basically substantial performance for conditions, which breaks traditional rule such as in 6ppenheimer. #ule: did condition really matter to party> #estatement: if impossible for 3 to comply and clause isnt material, then 3 e/cused. )e.g. 's appro"al dependant on Cs okay, clause is not material, C dies: 3 is e/cused.. <etna 0asualty . Surety 0o. v. (urphy (guy needed to ma"e office damage claim soon but waited two years: court said hes not eCcused because guy didnt provide evidence on whether insurers ability to investigate was materially harmed# in which case the company wouldve eCperienced a forfeiture - &%7 /urne v. 1ran"lin 2ife =ns. 0o. (guy must die within &5 days from

accident# so insurance company can prove causation between it and death# guy was vegetable for four years before dying: court said clause outdated by modern medicine and eCcuse - &%& ;reat <merican =ns. 0o. v. 0.;. 8ate 0onstruction 0o. (company must notify of accident as soon as practicable# doesnt because doesnt thin" it has any liability: court said eCcused as company was reasonable# and despite the eCistence of eCpress condition# it would be read only as broadly as its purpose: to protect the companys ability to investigate# tal" to witnesses# defend itself against false claims# etc. - &%& @oyal-;lobe =ns. 0o. v. 0raven (guy needed to notify of accident within :) hours# was in intensive care for longer: court said eCcused because it was impossible and the clause was unreasonable - &69 Order of Perfor!ance Simultaneous: if both obligations can be fulfilled simultaneously, then must be done so. )pay money for document, etc.. Subse*uent: performance that takes longer must be performed first. )pay for house construction after its finished.. A#ilit to Perfor! %ef.: 'reachee must pro"e that he would ha"e been ready, willing and able to fulfill had breachor not breached, else no damages. Some courts dont re*uire this, and others put the burden of pro"ing breachee couldnt ha"e performed on the breachor. Aanavos v. !ancoc" /an" . 8rust 0o. (guy had option to buy stoc"# wasnt given it: court said guy must prove he was ready# willing and able to pay if hed been given option# else no recovery - &6, Total Breac+ %ef: same as material breach )factors & materiality of breach, proportion completed, willfulness of breach, moti"e of breachee )will it work a forfeiture>.. as well as fi/ability, and should the breachee ha"e to wait for the fi/> 'reach must be really material, not just a bit material to be total( no opportunity to cure if total breach. =ame of chicken: is breach total )1 am "indicated. or not )1 pay damages.> A.; 0onstr. 0o. v. !arris (subcontractor accidentally ruins building# cost of repair is twice the amount of the progress payment for that phase# sub wont fiC it# general withholds progress payment# sub stops wor": court said sub totally breached# gen >ustified# sub breached again by stopping# /N8 if ruining building hadnt been total breach# then gen wouldve been the breachor by not paying &,9 -al"er 0o. v. !arrison (billboard is supposed to be clean but has

cobwebs and tomato stain on it# guy says to fiC it over and over but 0o. doesnt# guy stops paying: court said not material# and thus guy breached by not paying - &,6 Qulla Steel# =nc. v. <.( ;regos# =nc. (chronic delin?uent payment of progress payments to subcontractor is total breach - &,& Stanley ;udy"a Sales# =nc. v. 2acy 1orest 'roducts 0o. (if < owes / money and / owes < and < wont pay# then / can >ust subtract that amount from what / owes < and pay the rest# but / cannot say total breach - &*7 roportional ayment: if building 7E of same thing, such as residences in a new de"elopment, and build H and part of Kth then stop, can be paid HEY of contract price plus fair "alue of work done on Kth building. 'ut if 7E story skyscraper, breachor gets paid fair "alue of work done )restitution., not proportional payment for the H stories completed, as that is a whole thing and not many little same things. Antici)ator Breac+ %ef.: if ' says hell breach contract, 3 can rely on that as an anticipatory breach and doesnt ha"e to wait for ' to actually breach. 'ut if 3 treats the contract as still in force )waiting for ' to actually breach instead of anticipatory breach. and ' retracts, then contract is back on. 'reachee must pro"e that he was ready, willing and able to perform. !ochster v. De 2a 8our (guy hires tour guide for Fune trip# cancels in (ay# guide sues guy for breach of contract: court said anticipatory breach# guide doesnt have to wait until Fune to sue for anticipatory breach $ repudiation of contract $ but if he does# he can sue for actual breach with its corresponding remedies &*% Nni?ue Systems# =nc. v. Qotos =nternational# =nc. (/ demands# on pain of canceling contract# more than what was re?uired of < in contract wKo changed circumstances: court said anticipatory breach - &&7 8hermo Mlectron 0orp. v. Schiavone 0onstruction 0o. (if / merely re?uests more than what contract re?uired# but doesnt demand# then there is no anticipatory breach - &&7 @ecord 0lub of <merica# =nc. v. Nnited <rtists @ecords# =nc. (if < cant prove that he was ready# willing and able to perform had / not anticipatory breached# then < cant recover - &&) Clear Statement: ' doesnt ha"e to make a clear statement that hell breach, actions will suffice, but in that case, 3 should be e/tra careful about suing. #estatement says threat of cancellation alone is enough. -holesale Sand . ;ravel# =nc. v. Dec"er (driveway builder wor"s slow because of bad conditions# hirer guy tells him to hurry up# builder says he will but doesnt# this happens three times# guy finally fires him for anticipatory breach: court said actions amounted to clear statement# /N8 ;ordley says shouldnt court re?uire clear

statement# even if implied $ such as through acts that ma"e performance impossible $ instead of this overharsh punishment for delaying and shilly-shallyingB 0ourt could use material breach doctrine instead of anticipatory breach - &&9 N.S. v. Seacoast ;as 0o. (/ anticipatory breaches through act# < tells / it has three days to retract before contract is cancelled# / lets time lapse: court said waiting was a definite action indicating anticipatory breach: really pounds nail in /s coffin - &&) Co"er: for sales of goods, breachee must co"er within reasonable time of anticipatory breach. This pre"ents speculation. 6loffson v. 0oomer (contract for grain R in 6ctober at $9.9:T and R in December at $9.9:S# / repudiated contract in Fune# < waited until 6ctober and covered at $9.7% and in December at $9.)&# < wants cover prices minus contract prices as damages: court said he should have covered in Fune within reasonable time $ same day for such a well-organiGed mar"et as commodities $ and thus gets Fune price minus contract price: $9.96 minus $9.9:S - &&, Ade/uate Assurance of Perfor!ance %ef.: ?CC says for sales of goods )and some courts allow for other contracts.: if 3 reasonably thinks ' wont perform then 3 can demand a reasonably ade*uate assurance of performance, and if ' doesnt pro"ide it, cancel the contract. 'ut reasons for insecurity and demanding 33 must ha"e arisen after contract was formed, otherwise 3 cant demand 33 as 3 knew of them going in and contracted with them in mind. Can be raised, for instance, to demand performance of multiple4beach installment J. 'ittsburgh-Des (oines Steel 0o. v. /roo"haven (anor -ater 0o. ('D( was to be paid after wor" was finished# heard / was getting a loan so it could pay 'D(# 'D( demanded <<'# / was solvent and fine: court said there was no good reason to thin" that / wouldnt perform# so 'D( cant demand ade?uate assurance of performance and thus breached itself: concurrence said maybe there were reasonable grounds for insecurity# but 'D( went too far when it demanded /s 'resident to ma"e a personal guarantee or to put the money in escrow or to allow 'D( to buy a sta"e in it as that wasnt reasonable <<' but rather material alteration of the contract - 9557 Horcon 'ower 'artners v. Hiagara (ohaw" 'ower 0orp. (even if / is solvent and contract isnt under N00# < can demand <<' upon reasonable grounds for insecurity: court applied N00 rules by analogy but limited application to cases between two corporations with long-term# compleC contracts - 955& T+ird Part Beneficiaries %octrine: $ld doctrine: G ' cant sue as no pri"ity of contract or consideration.

5ew doctrine: G ' was foreseen by 3 and ' as intended beneficiary and it furthers and enforces 3 and 's wishes to allow G ' to sue. 1ncidental 'eneficiary: cant sue. !.g. 3 will build on 's land, impro"ing "alue of Cs land: C cant sue. 3 will buy new car from ': carmaker C cant sue. 3 will build on Cs land, using ' as subcontractor: ' cant sue C and C cant sue '. 1ntended 'eneficiary: two kinds: creditor beneficiary and donee beneficiary. 2awrence v. 1oC (! owes 2 money# ! gives 1 money and 1 promises to give it to 2# 1 doesnt# 2 sues 1: court said o"ay as intended 7'/ creditor beneficiary - ,&6 Seaver v. @ansom (dying wife says give house to S# lawyer misdrafts will and forgets to include that clause# S sues lawyer: court said S was intended 7'/ donee beneficiary - *55 !ale v. ;roce (lawyer is supposed to divide money e?ually between * people# forgets !ale# !ale sues lawyer for money out of lawyers poc"et instead of ta"ing away one share each from the other ,: court said o"ay as ! can also sue lawyer for negligence $ even though normally cant sue under tort for pure economic damage without physical damage - *5& =o"ernment rojects: if the public in general is intended beneficiary, then specific people cant sue, but if specific people are intended beneficiaries, then they can sue. (artineG v. Socoma 0ompanies# =nc. (govt program to help lowemployment communities by teaching the unemployed >ob s"ills and helping them get >obs: ma>ority said general public was intended beneficiary and the unemployed people cant sue# citing li?uidated damages clause that gives remedy only to govt and arbitration clause that is only between govt and Socoma: minority said these people themselves were the directly intended beneficiaries and they can sue - *9) Qigas v. Superior 0ourt (govt program to help poor tenants: court said intended to help those specific people and they can sue# because if not these people# whom was the program to benefitB - *:: !./. Deal . 0o. v. !ead (govt contract had time-and-a-half for overtime: court said wor"ers could sue as they were clearly 7'/s under the contract - *:) (och v. @ensselaer -ater 0o. (city has contract with @ to provide water for city and fire hydrants# one hydrant doesnt wor" and a building burns: court said general public was intended beneficiary and owner cant sue: guy was a rate payer and didnt pay according to the liability he presented to @ but according to his use $ same foreseeability principle as with /ill ;ates hypo from before:

decision widely criticiGed and avoided by courts saying certain ratepayers are 3special4 beneficiaries - *:) 2a (ourea v. @hude (city contracts for sewer construction# contract said company was liable for damages done to private property# company damages guys house: court said guy can sue - *:6 Transferring @iability: if 3 wants to transfer to ' his liability to C, he must get C to assent and e/cuse him, taking ' on as new debtor, or in some states if C sues ' then 3 is automatically off the hook. !lse, C can sue either 3 or '. 1f 3 and ' cancel their contract, then C cant sue ' unless C relied on ' being the debtor. 0opeland v. /eard (creditor beneficiary: < owes 0 money# < sells land to / who sells it to D# 0 sues /: court said not o"ay as < told / he was off the hoo" when / sold to D and 0 hadnt relied on /s being debtor - *:6 Sales"y v. !at 0orp. of <merica (donee beneficiary: 7'/s rights as donee beneficiary vest a instantly upon eCecution of < and /s contract# b not until contract performed and 7'/ gets thing# c if 7'/ relies and changes position he can recover specific performance but not damages# or d instantly unless < and / retain the right to change the contract: court here follows D for things and / for money# life insurance policies# etc.# holding for benefactor as they held right to change: nothing for donee - *:& @ouse v. N.S. (- hires company to install heating in house# - has govt act as surety for his debt to company# - sells house to @ who agrees to pay -s debt by paying - who will pay the company# doesnt pay company# government pays company and sues @: court said @ can plead fraud by - but cant plead that the company did a faulty installation $ even though - couldve argued that $ because @ couldve pled fraud to - to end that contract but couldnt plead faulty installation to - as only could plea that to company: ruling on installation is stupid: court >ustifies by saying that @ promised to pay the money# not to pay the debt - owed company with corresponding faulty installation argument - *7: