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Dougherty v. Salt
Transcript of Dougherty v. Salt
Promisor--Person who makes the promise
Promisee--Person to whom a promise is made
John Rawls--fairness and promises
Thomas Scanlon--Guilty Secret and Principle F
Gardner--Four Ideas of Ethics in Contracts
Doctrine of Consideration
Contract-- an enforceable promise
donative promises, bargain promises, and limits of contracts for social ordering
k = contract
Principle of Fairness
...holds that a person is under an obligation to do his part as specified by the rules of an institution whenever he has voluntarily accepted the benefits of the scheme or has taken advantage of the opportunities it offers to advance his interests, provided that this institution is just or fair....By making a promise one invokes a social practice and accepts the benefits that it makes possible....Thus
an act done with the public intention of deliberately incurring an obligation the existence of which in the circumstances will further one's ends."
Harold's embarrassing story. two reasons not to tell: 1. gratuitously injuring 2. violating obligation to him that you have just incurred. Value of assurance itself, freedom of worry. Desire a principle of fidelity
1. A voluntarily leads B that A will do x (unless B consents to A's not doing x)
2. A know that B wants to be assured of this.
3. A acts with the aim of providing this assurance, and has good reason to believe that he or she has done so.
4. B knows that A has the beliefs and intentions just described.
5. A intends for B to know this, and knows that B does know it.
6. B knows that A has this knowledge and intent; then, in the absence of some special justification. A must do x unless B consents to x's not being done.
B has "Right to Rely"; A must warn of intention to violate
Not a promise if done through coercion or deceit
1. The Tort Idea: Pay for injuries done to another. As applied to promises, one ought to pay for losses which others suffer in reliance on his promises.
2. The Bargain Idea: That one who gets anything of value by promising to pay an agreed price for it ought to pay the seller the price he agreed.
3. The Promissory Idea: That promises are binding in their own nature and ought to be kept in all cases.
4. The Quasi-Contractual Idea: That one who receives anything of value from another ought to pay for it unless it came to him as a voluntary gift.
1 and 4 based on premise that justice is known after the event, and that the court corrects consequences of voluntary intercourse that turns out unjustly.
2 and 3 based that justice is known before transaction, and parties must settle justice beforehand.
Dougherty v. Salt
: 8-year-old promised 3K at or before aunt's death, Trial favor ∆, Appeal favor π, NYCA (1919) reverse for ∆. note was voluntary and unenforceable promise of an executionary gift. "Nothing is consideration that is not regarded as such by both parties." NO BARGAIN.
Second Restatement, Contracts §§ 1, 17, 71, 79
Consideration: broad and narrow
collective set of elements making promises enforceable, malleable
consideration = bargain
Restatement First and Second
2nd, § 71(1): "To constitute consideration, a performance or a return promise must be bargained for."
2 distortions of bargain theory:
many elements other than bargain make promises legally enforceable, 2nd identifies these in "Contracts Enforceable Without Consideration."
If consideration is whole set of elements that make promises legally enforceable, meaning will change to fit situation.
Critique: Bargain theory suggests a closed system, where the law is stifled by non-bargain promises. Not consider reliance.
Gifts: promised is non-enforceable,
given is enforceable.
using deed or gift non-enforceable w/
1. services, 2. not presently own, or 3. a future gift
A Trust is an exception.
Sometimes it's beneficial to give later, emotionally or financially or to spur anticipatory reliant action. Sometimes called
Lon Fuller: 2 process grounds for enforcing promises, donative not fulfill either:
1. Evidentiary safeguards to ensure promise happened.
2. and Cautionary safeguards to prevent inconsiderate action by promisor.
Conditional bargain promises vs. conditional donative promise (pg. 16-17)
If mow -> $20
If you select car under 20K -> I will buy it
view performance of condition as the PRICE of promise
view performance of condition as the MEANS to make gift, rather than the gift itself.
Rich man to tramp: if you walk to store -> I will buy a coat. Walking is not a price, it is a means.
Hawkins v. McGee
verbal promise to "make the hand a hundred percent perfect hand." ∆ say no contract. "Guarantee" is consideration.
There are no "Magic Words" for consideration (promise, guarantee, etc.)
If a machine, damages would be warranty value minus actual value.
reliance vs. expectation damages(*)
$500 to remedy-reliance
amount to remedy hand-expectation
mis-represented skill level.
risk of surgery vs. reasonable expectation
go to store for $2:
If taller person always wins, nobody enters into contract with tallest people. hurts taller people
If you know the rule, you can work around it.
Big Question: Should the state intrude on a breached contract? Which ones?
Contract Law is a cheaper way to facilitate commerce.
Schnell v. Nell
4 concerns to treat transaction type as unenforceable: Evidentiary security, fear of rashness, signature to expedite awareness, unwillingness toward suspect or marginal (evidentiary, cautionary, channeling, deterrent)
No K because nominal consideration (p. 21)--appearance of bargain but no substance.
, give π $200 for 3 things: one cent, love of wife, fulfill her desire.
instead of 1 cent, a peppercorn. enforceable? no.
give 80 for promised 85? yes.
Dodge Dart for 500? yes.
promise to pay for college. enforceable? no
promise sister she can live in NYC for free? no.
pay $1 rent a month? no.
security deposit of 1 peppercorn to think about it? only if consideration is enforceable.
Kirksey v. Kirksey
reciprocal inducement: a bargain.
convention: a structure accepted to express it.
1st Restatement, allow nominal consideration (§84: buy $5000 land for $1). 2nd reversed, say not consideration. Two exceptions: Options and Guarantees (Guarantor in a lease).
P. 23 The Seal
Used to "raise a presumption of consideration," a "natural formality". now it's empty.
2/3 states adopt statutes making unenforceable:
1. can't use seal as defense for consideration
2. abolish distinction between sealed and unsealed.
3. abolish use of seals completely.
4. Limit effects of seal
Some states, all written=consideration
Thel thinks this case is wrong
What about reliance?
Relied upon promise of life in AL in order to make move to AL.
boy buys skateboard in anticipation of receiving inheritance from aunt.
expectation vs. reliance damages
1st. vs. 2nd Restatement
(p. 32) 1st § 90: "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."
2nd: *The remedy granted for breach may be limited as justice requires.
B relies on A to act to do X. If A not act, X enforceable because of reliance.
Reliance is a legal basis for enforcing a promise.
Get expectation damages (p. 30)
more definitions (p. 33-34)
Equitable Estoppel (Estoppel in pais)
: require a misstatement of fact and foreseeable reliance on the misstatement. If A states to B that X is fact, then B relies upon it; B sues A where X is relevant. A is estopped from introducing evidence that X is not true.
Devecmon v. Shaw
boy relies on reimbursement of gift. called a bargain because the Europe trip was a "request".
When an act of reliance is in the initial writing, it is consideration!
no consideration of skateboard
Feinberg v. Pfeiffer
p. 44 Reporter Williston: expectation damages should be used in all §90 cases. Buick hypotheticals. Addition in 2nd change this.
promised pension w/o stipulation.
Relies on pension (p. 37).
Reliance is the act that the promisor knows (p. 38).
she retires b/c of pension = promissory estoppel (p. 38).
remedy is expectation damages.
p. 39 Three Missouri theories for grounds for decisions:
1. Theory of Act for Promise
2. Theory of Promissory Estoppel
3. Theory of bilateral contract
Hayes v. Plantations
Not meet requirements for establishing reliance under doctrine of promissory estoppel.
p. 42 define reliance
and expectation damanges(*)
p. 43 out-of-pocket costs
and opportunity costs part of reliance damages
Buick contract on giving money, not the money itself.
Owen, I will love you forever. Promise? yes.
Owen, David will love you forever, I promise. Promise? no.
Expectation damages should cap reliance.
Encouraged by ∆, incurred expenses.
guaranteed profit if happened:
given expectation in District Court, reliance in appeal.
Stout v. Bacardi
Can π (General) recover 550K through promissory estoppel?
district court say no, S/J for ∆, appeal reverse and remand for trial.
never discussed time length, but reliance proven.
eventually only reliance damages actionable: out-of-pocket costs, moving costs.
Walters v. Marathon
expectation damages given:
reasonably anticipate profit
part of reliance is foregoing some other endeavor (opportunity costs)
Pappas v. Bever, Bissonnette
"I intend" v. "I promise"
1 Corbin on Contracts § 15 at 35 (1963): "A statement of intention is the mere expression of such a state of mind, put in such a form as neither to invite nor to justify action in reliance by another person. A promise is also the expression of a state of mind, but put in such a form as to invite reliance by another person."
Three situations in which a promise to discharge an unenforceable obligation is binding:
1. promise to pay debt barred by statute of limitations.
2. promise by an adult to pay debt incurred as a minor.
3. promise to pay debt discharged in bankruptcy.
original is not void, but "voidable."
When come of age, can "affirm" it.
2nd Restatement: Contracts without Consideration
Mills v. Wyman
25-yr-old rescued by Good Samaritan, π. Father promise pay expenses.
Not rescued by request; voluntary relief. Not a minor, moral obligation not one of three exceptions. Affirm for ∆.
"It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity." (p. 57).
Webb v. McGowin
∆ promise to pay π for crippling injuries in saving ∆'s life. ∆ die.
with or without request of promisor because of material benefit received (saving life)
life, body have monetary value
Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promisor's agreement to pay." (p. 62)
Law of Unjust Enrichment
Obligation in the law of unjust enrichment generally is benefits-based.
professional services do not claim restitution on principles of unjust enrichment.
avoid transforming self-sacrifice into exchange of values.
Harrington v. Taylor
not entitled to consideration for saving life, even if promised. voluntarily performed, not such consideration.
how are these two different?
Restatement, 2nd, Contracts §86
1. Mills v. Wyman. Not binding.
2. A lends to B, who dies. B's widow promises to pay. Not binding.
6. A finds B's bull and cares for it. B's promise for compensation to A is binding.
10. A digs well for tenant on B's land. tenant can't pay, B promises to pay A, binding.
12. A does household stuff for B, without compensation, for years. B is rich, assures will pay A. B writes promise to pay 25K, binding.
13. Same as 12. but oral promise and promise entire estate. A is entitled to reasonable value of services, not estate.
Under law of restitutions, a remedy may be available even if no promise. sometimes because an obligation exists.
THE BARGAIN PRINCIPLE AND ITS LIMITS
Section 1: set out bargain principle
Section 2: limits of bargain principle by principle of unconscionability
Section 3 and 4: doctrine of mutuality and the legal-duty rule
Hamer v. Sidway
1. agree to not have sex until 25. Promise? yes.
2. give $500 to never speed. Promise enforceable? no b/c speeding is illegal, and non-bargainable.
3. "Give me money or I'll kill you." "Ok I'm going to bank." Promise? No,
distress = extortion
Legal v. non-legal detriment:
Though not drinking not a non-legal detriment, it is a legal one b/c limit
Change action as an inducement, may or may not have drank before agreement. Bargain? yes.
p. 85 Desperate Traveler
"'Consideration' means not so much that one party is profiting as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first."
Davies v. Martel
MBA for promotion
similar concept of legal vs. fact detriment.
E-mail saying "I will"
No difference of intent to Pappas, but difference of commitment. Must change behavior if reliance.
π must prove saved life
restitution for Good Samaritan (donative promise) vs. paid professional (bargain)
§90 if action is induced on reliance, §90 different from moral obligation.
Thel disagrees with Eisenberg (author) about differences between bargain, reliance, and past consideration. Read his Yale Law Review article if you can find it.
Why doesn't Goldman Sachs trade and rent out chairs every day, just like Lincoln Center?
cost>efficiency of chair stuff
market carries cost of contract
if cannot reduce cost -> internalize costs -> won't do it
Contracts are expensive. An efficient contract law reduces costs, mechanizes capitalism.
Hancock Bank V. Shell
15 years entitled, can terminate in 90 days notice.
mutuality is a form of consideration
this had mutuality, the agreement. it was not a bad bargain.
"My horse, my horse, my kingdom for a horse!" If give horse, binding contract? No.
Money in TX, loan 500K drachma ($25), for 2K after war, plus 8% interest.
Trial say π gets $750, appeal say full $2K
Question of Unconscionability
"A plea of want of consideration amounts to a contention that the instrument never became a valid obligation in the first place..." (p. 79)
Is it a good deal?
Are there options?
Why take this deal?
What about loan sharks and price gougers?
Duress means the promisee has done something wrong, not about other options, etc.
Sometimes, expectation, reliance, and restitution damages are the same with bargains. p. 80 with the plumber.
p. 80 Municipal water supplier overselling water, there is a difference in expectation for municipal vs. individual sellers, selling say, Thel's unique Acura or a Babe Ruth baseball.
Also, different when contract is only option.
Post v. Jones
fairness and efficiency are the dual pillars of the bargain principle.
Williams v. Walker Furniture
title not passed until everything paid, all tied together.
unconscionable b/c hard to understand.
idea of CONSENT doctrine. Further, it's a draconian remedy to prevent default.
Excessive if remedy is to create punishment, not compensate promisee
Thel thinks rent-to-own properties are a response to judicial striking down of cross-collateral, all-or-nothing consideration.
"Unconscionability has generally been recognized to include an
absence of meaningful choice
on the part of one of the parties together with contract terms which are
to the other party....In many cases the meaningfulness of the choice is negated by a
gross inequality of bargaining power
in which the contract was entered
is also relevant for this consideration." p. 89 (see also: footnote 7 on
question of understanding
Stories about vacuum cleaner salesmen p. 94;
no meaningful choice
manner of entry
Uniform Commercial Code: replace or contribute to common law?
Pittsley v. Houser
carpeting contract. Does UCC apply? Predominant Factor test. Was installation (service) or carpet (good) predominant in sale? installation was supplemental, so UCC applies.
generator. give to:
1. you to do contracts
2. hedge fund for wine cellar
3. hospital for kids (or pitbulls)
willingness to pay, is most efficient, and best.
buy Acura for 1300, find one for 1200. breach contract. remedy? Law not ask if the "price is right"
T-Swift cancels b-day party. Do you get money back and she goes to jail? §364
Uniform Consumer and Credit Code §5.108.b.c.
Unconscionability, induceme with Unconsc. conduct.
Maxwell v. Fidelity
Price gouging defined p. 99
leverage and excess required
Solar heater issues, total cost $15K including interest, $6512 for original.
Procedural v. Substantive Unconscionability
"unfair surprise," fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should. p. 106
unjust or "one-sided" contract. can be sufficient in self to avoid term of contract. or can provide/confirm evidence of procedural unconsc. p. 106
iPhone contract say every 6 months must forfeit all stuff to Apple. Procedural Unconsc. b/c contract nobody reads, cannot negotiate, and contract of adhesion (reasonable expectations)
From Classic to Modern
(nominal consideration, objectively, is a bargain)
Intent and situation don't matter (bargain only necessary for consideration)
small doctrines (self-evident axioms) => larger, deduced doctrines
doctrines justified with normative and policy/morality/experience
(nominal consideration is does not fit the spirit of a bargain)
They do (not just bargain)
(modifications not allowed)
(either no damages or expectation damages)
(none, expectation, reliance, restitution, disgorgement)
Mutuality vs. Illusory Promise
Paradoxical, circular promise for promise. both parties must be bound or neither is
Scott v. Moragues Lumber Co.
: party to contract, though obliged, not under duty to perform unless and until something happens or doesn't happen; or if something doesn't happen, then no duty.
contract conditioned upon will of both parties, void for want of consideration or mutuality of obligation.
If I buy Bob, I'll charter it to you.
What if it's the Jim, not the Bob, but the same boat? some Jurisdictions, yes. some no.
If buy, what if, only charter if earthquake/rapture on Jan 5? no, no bargain.
sell stock to you if Dow Jones at a certain level? yes.
Giving up legal right to look for others, therefore yes. if restriction -> consideration.
Since one side is not bound, neither is bound to keep promises legally.
Railroad and railroad tie company. if you make 50 ties, we'll buy them. enforceable? yes, commitment to sell to lumber mill, could have done something else (legal detriment).
Is it illusory? If gov't say so, they deprive good system of creating efficient contracts.
2-201 statute of frauds
2.306 define output requirements, exclusive dealings
Wood v. Lucy, Lady Duff-Gordon
∆ gave exclusive right, π had duties: his promise to pay 1/2 profits.
from exclusive agency and render accounts monthly was a promise to use reasonable effort to bring profits into existence.
implied promise, like going to Starbucks and asking for coffee. consideration implied in terms of contract.
Grouse v. Group Health Plan, Inc.
at-will job, promised in bargain, not really mutuality. jurisdiction split
terminate before job start, reliance damages. courts are split on this; give moving costs and damages of lost job.
Gray v. Martino
Officer recover for $500. No consideration, it's his job. not a problem of bargain, problem of susceptibility to bribery.
Don't worry about the motive, Talia might paint that portrait of Obama with or without the money.
Give note to jockey. if you win -> $100. Duty to give 110%. enforceable?
leave note promising tip for server. enforceable?
Why not for cops?
Tip at Brooks Brothers for discount suit? enforceable?
Difference b/tw all: does the owner consent to the tips at the restaurant? does it interfere with relationship b/tw the owner and employer?
Lingenfelder v. Wainwright
beer building; extortion to keep going
J contract to build Wainwright, but not get the contract for the refrigerators.
So, J say no to build. Then Wainwright promise 5% to get him to keep working. Second deal enforceable?
no bargain, prevents extortion
Foakes v. Beer
pay in installments sooner for no interest.
part payment not consideration, cannot be consideration on a whole.
UK, House of Lords. Think about
p. 148 Legal Duty Rule:
§73 Restatement 2nd
performance of preexisting legal duty is not consideration.
second deal is unenforceable
improper pressure for second deal
Austin v. Loral
promise 2K, not give 2K, not get it back. yes.
was modification similar to a gift or extorted $200?
refuse work until enter into modification, up $ for radars now and in all future contracts. sub- sue for $. contractor wants $ for extortion. because under duress, CoA give contractor $
Williston on duress: must 1. show victim of unlawful or wrongful act or threat 2. such act or threat must deprive victim of unfettered will p. 152
duress seen as fear of breach, yet "a threat to break a contract does not in itself constitute duress." (151-2).
necessary to prove if sued sub-, all damages suffered to gov. to reputation.
sub liable for expectation damages
THE LIMITS OF CONTRACT
"if he is satisfied" or "if he pleases" or "bargain for a chance to" are all illusory promises
same as "hunting license"
if quantity is completely dependent on will of buyer, void.
Performance of legal duty is excluded from bargain principle.
Mom's deal to give money for not smoking weed is not up for consideration.
NYCA reverse! that threat to breach is duress, that they lost free will. p 155
stay tuned for chico v. schweitzer later in the semester
want to know how to screw people over? Write a check for only part of however much you owe them, on the back write "payment in full" then have them sign. then your debt is fully paid.
must be in a regime under which modifications are enforceable.
Restatement First §406
A contracts to build house for B, at $25K. A realizes partway it's a losing deal, wants to quit, B accepts and doesn't pay. That's sufficient consideration.
Restatement Second §73
legal duty not consideration often applied to cases where duty owed to third person.
is a modified contract (performing Q instead of P, p. 170), an
is one agreed to, but unperformed. 2nd §279, 281. not consideration under classic contract law.
, however, is complete replacement of contract.
Their difference vaguely is of intent
, usually a substitution does not originally involve money. sub: initial contract is void. accord: initial contract is active until fully executed.
Restatement 2nd §89
Angel v. Murray
Legal Duty Rule
The modern trend is 2nd §89:
promise modifying original contract made before contract fully performed on either side is binding if unanticipated change, fair, and reliance remains equal.
Footnote 3, p 176. w/ §89, not enforceable
footnote 2, enforceable with §89
Should ∆ have anticipated price change? not to degree it did. favor ∆.
Clark v. West
pay $2/page; if not drink, $6
NYCA reverse for ∆
∆ drank. ∆ said there was a "express waiver" of drinking stipulation.
must relinquish something, waiver is a way to get around "preexisting duty" issue. if waived, conditions of express waiver apply.
drank in Equitable Estoppel?
if incidental to contract, waiver has consideration. if subject of waiver is the thing granting consideration, waiver not enforceable. Drinking was incidental, pages were still written.
question: what damages here? expectation? $6?
hypo: you paint, give $10K
waive painting, should you get the $10K? no.
2nd Restatement §84
Illustrations 3, 4, 6
3. A overrule architect C in saying B deserves compensation for building house w/ minor defect. A's promise is enforceable.
4. in reporting fire damages w/in 30 days, insurance A tells victim B oral communication is ok. A cannot go back and say written is needed.
6. A can go back and ask for written if there's enough time to do so.
ch. 1 (9-69)
ch. 2 (71-187)
ch. 3 (189-207)
Mention selling organs: some things are not alienable (is this in the US Constitutional context of "inalienable" or the Marxist context of "alienation" or both?)
sell kidneys? no. sell eggs? hmmm...
Hawkins v. McGee Revisited
expectation: promised v. where it is
reliance: hairy v. scarred
restitution: fee back, if there was a fee
Balfour v. Balfour
"It is necessary to remember that there are agreements between parties which do not result in contracts within the meaning of that term in our law." p. 189 therefore, should not have legal consequences.
An Introduction to Contract Damages
Restatement, 2nd §344
protect promisee interests
Dougherty v. Salt
If you make the hand worse
here, expectation doesn't matter, reliance does.
promise now to buy wheat on 12/1
KP = $100 now
expectation = 150
restitution = 100
reliance = 100
MPKD = 150
MPPD (12/1) = 150
This is a gift, K, for $50,this wouldn't happen IRL
If no K, -100, 12/1 wheat $150
reliance and expectation is $150
if market price = K price, expect. = reliance
Don't enter into another contract have to give lost opportunity.
reliance = expectation
. amount given protects reliance and expectation. protect foregone opportuntiy
to protect reliance interest, give expectation damages. in market, all K @ market price, even in reliance
Damages in a Competitive Market
Sullivan v. O'Connor
Give reliance damages for botched nose job
Kuller and Purdue, The Reliance Interest in Contract Damages 46 Yale LJ 52 373
US Naval v. Charter
To get more profits, maximize profits to author. You get more books, author is incentivized to make more books, maximum profits.
Uber take a car from a friend on vacation w/o permission to make $200, put on $30 depreciation. how much?
break into house and rent for $100K. how much for damages?
expect to buy $45 mill., sell to somebody else for $48mill.
expectation is $3mill., value of the disgorged violation of the contract.
Limo takes Joe for $200 @8pm. 7:50pm instead takes woman to hospital for $1K. Joe takes cab. break the contract?
Build a house with ABC in K, mistakenly use XYZ. The same but different brand. $45 mill. notice. $100K to tear and replace.
1st: copyright enfringement, $700K all profits from violated property right.
disgorgment ruled. but on appeal, goes to contract damages, 33K of lost hardback revenues
expectation damages are easier to establish than reliance. Expectation also takes into account externalities
break promise to sell, all get are losses? losses here are 0.
new cost will increase value of house. w/ $100K>expectation
more than expectation raises the price
always going to agree to expectation, promisor wants to commit to it, nobody expects promisee to want more than expectation.
, promisor wants to promise disgorgement: saves money on rights to publish. it's hard in
to get expectation damages correct.
Disgorgment establishes more trust, and is more efficient.
ch. 4 (211-244)
Orange Crush v. Miami Coca-Cola: because there no buying minimum, no restriction.
Waiver, Part of Accords
contract of intent, modification is binding, waiver is not.
Restatement 3rd, Restitution and Unjust Enrichment §39
If deliberate breach = disgorgment, and damages not expectation, promisee has claim to profit.
efficient breach = desirable if promisor's gain from breach, after paying expectation, will exceed promisee's loss from breach.
Richard Posner: "Economic Analysis of Law"
: breach to sell to higher bidder
: widget example on p. 238. with new sale, increase social value, promisor's profit, reimburse original promisee, help new promisee.
Predicates: 1. promisee indifferent to damages or performance;
2. promisee knows value of deal to promisor
Criticism of efficient breach:
1. Is it Efficient? Esp. w/ Overbidder Paradigm. Commodity will
go to highest bidder w/ transaction cost; lots of rewrites; lose TRUST
2. not reward foresight and investment
3. weaken contract system overall
Eff. Br. INCREASE LITIGATION
THE EXPECTATION MEASURE
ch. 5 (245-366)
Pt. 1: Damages for Breach of Services
Peevyhouse v. Garland Coal
jury give $5K. cost of performance (too big) > $5K > expectation value - current value
∆ breach before act, favor π,
value rule (favor ∆ $300) v. cost of performance rule (favor π $29K)
to contract. If
, get performance.
rule for $300
dissent: WILLFUL, bad faith breach. should favor π
Diminution in value
HP Droher and Sons v. Toushin
steel post cause sag
diminished value from expectation grossly<
cost to repair
court favor diminution in value, esp. b/c act in good faith
Also of note:
Eastern Steamship v. US: warship $4mv$2m. favor $2m. prevent get beyond expectation through breach
IDIOSYNCRATIC VALUE: Homes v. Businesses
School Elmira v. McLane: wood deck beams. not good faith, aesthetics: performance
Fox v. Webb: aesthetic difference: performance
Grossman v. Hourian: architecture drawings breach: diminution
Advanced v. Wilks: damages > diminution? sometimes. if property is only an investment, diminution.
Ruxley v. Forsyth: swimming pool intangibles
Laurin v. DeCarolis
favor ∆ if breach is deliberate, willful
what if Thel no show, call cab, late, baby has complication? Medical costs up. over-relied on contract. no $ for increased med costs.
if excessive damages, price goes up. you will excessively rely.
the best contract law drives down the cost of doing business
cannot ever say how much another party values something. consent thru trade. stealing doesn't create consent.
if cost of a contract is low, it is stable.
if cost of contract is high, state manages(negligence, crim. law)
example with JP Morgan and chair switch. buying entails a contract. if it's efficient, it's better.
Cooter and Eisenberg p. 223
will ask for remedy of expectation and receive it.
price terms and non-price terms
contract is efficient if surplus, maximize value
choose expectation b/c expect contract to happen; reliance can be tricky.
p. 246 LOUISE CAROLINE NURSING HOME V. DIX CONSTRUCTION
cost of completion is $10K
value of improvement is $20K
$10K is fine for damages because π will finish it for that and have a $20K home.
Why breach? how much does promisee actually value?
AIELLO V. NATIONWIDE TRACTOR p. 268
∆ stop pay, π stop work
Trial ct: reward = cost of performance + lost profits - expenses + interest
∆ want expectation - part payment 1st § 346(2), ∆ say lose legal freedom
appeal favor trial damages
(d) if performance->πloss, amount deducted, burden of proof on ∆
Wired Music v. Clark
π could have sold 2, had promise been kept. damages = remaining price - expenses. affirmed.
music unlimited, contracts key. not like a house.
The law is a cheaper intermediary for facilitating trade than a letter of credit or trusted 3rd party or bank
*Vitex v. Caribtex (Virgin Islands): Overhead expense is part of lost profit.
PT. 2 BREACH FOR SALE OF GOODS 274
Continental Sand v. K&K Sand
∆ sold $50K parts, warranty breach, π ask for $104K to fix parts
UCC 2-711 giving expectation (cover, expenses, etc.)
Egerer v. CRS West
∆ dirt not delivered, better deal to sell to state. π given hypo-cover, affirmed
COVER= P of substitute good - contract P
recovery harder 4 specific goods
Hypo-cover=MP @ breach - KP
recovery= restitution damages
DELCHI V. ROTOREX
compressors bad, ask for new, ∆ refuse, π cancel. CISG violation.
π damages: ~$1.2mill. = lost P + ∆ expenses + interest. Not get shipping expenses + wasted products + labor, b/c no "double recovery". ∆ say no lost P 'double recovery', π say get more expenses.
CISG: "Fundamental" breach-> buyer get cover or void w/ damages
∆ liable for fundamental, not fixed costs. π get more expenses, not all.
can 2 parties opt out of CISG? yes, replace w/UCC.
choice of law matters. NY Law is base, standard court enforces contract as written.
NY "Clarity" > Other "Good". CA and ID can choose NY law, except in "choice of law" clause, which would choose b/tw the 2, w/ predominant factor.
HWH Cattle v. Schroeder
breach 603 cattle. UCC Iowa §2-711: (712) cover or (713) hypo-cover. π not choose cover, limiting damages. π is middle-man, want hypo-cover. Rejected b/c of "windfall". Get "as if other partied performed." liberal for expectation.
opportunistic breach: bad-faith. it shifts wealth from one to another w/o creating real value.
Thel: 107 Michigan LR 15-17
Neri v. Retail Marine Corp.
deposit back when must breach K?
UCC 2-718.2 Liquidated damages for breach: 20% of buyer's performance or $500. 2-718.3 extent of proving damages. 2-708 if seller sue: MP-KP + reasonable costs + expectation. Credit for proceeds for resale.
Could have sold 2 boats.
π get: KP-offset; lost P; incidental damages.
Childres v. Burgess: one-off purchase, not 2-708.2
Lazenby v. Wright: not with used cars, no guarantee of next purchase.
Rockingham County v. Luten Bridge Co.
Pt. 3 MITIGATION; CONTRACTS FOR EMPLOYMENT
cannot recover for taking further action.
must take reasonable steps to prevent further damages
. post-breach, fail to mitigate -> fail to recover damages you could have prevented. Duty or obligation to mitigate?
"...The plaintiff must, so far as he can without loss to himself, mitigate the damages caused by the defendant's wrongful act." p. 300
no damages awarded b/c then π put in better position than in before, no harm.
put in §§§§§§§, v important
choose diminution over cost of performance to prevent rise in P, also Cost of performance often isn't doing anything.
give warranty price - damage good (if you were to sell as defective)
put person in a position if contract was fully performed
what is market in hypo-cover? when? use higher quality dirt, market price at breach ($8.25).
Judge use reasonable discretion "in good faith" to determine P
Panhandle v. Becker p. 279
Buyer can choose cover or hypo-cover in good faith
Shirley MacLaine v. 20th Century
Not obligation to mitigate because "Big Country, Big Man" is
different and inferior
to "Bloomer Girl," even if same money. S/J for π affirmed
Madsen v. Murray p. 301
pool tables, had obligation to mitigate wood, not just make into scrapwood, b/c not "commercially reasonable."
Pt. 4 Foreseeability
HADLEY V. BAXENDALE
crank shaft replacement. lose money waiting. rule:
lost profit was
"natural," or warned, or in contemplation, or "not too remote."
"The debtor is only liable for the damages foreseen." p. 314
Victoria Laundry v. Newman Indus.
lost profits granted because boilers were foreseeable as making profit.
Koufos v. C. Czarnikow, LTD.
change in sugar price foreseeable, rule for π for lost profits from lowered price. recover difference in revenue
Hypo: DJ wedding $600K, if not there tomorrow, lose $. FedEx planecrash. FedEx pay $600K? raise price courier. Hadley rule: up value, must disclose info (must tell at K time, not performance time), few want to opt out of K, drives down price of K.
type of loss diff from amount
Pt. 5 CERTAINTY
Kenford v. Erie p. 328
∆ to build dome, agreement never made. rule: expectation is unreasonably determined, no proof. not in contemplation, given reliance.
Thel says this is absurd, horrible consequences for investors and risk takers
: π 3 elements: breach direct and proximate caused lost profit, profits contemplated by both parties, rational basis to figure lost profits.
give $10 to buy $2 for lotto, breach, win! calculate damage for likelihood of winning, not jackpot itself.
Pt. 7 Liquidated Damages
liquid damage clause cannot punish.
"The purpose of a stipulated damages clause is not to
the promisor to perform, but to
the promisee for non-performance." p355
p. 349 Wasserman's, Inc. v. Middletown
K for a property. liquid damage clause, first is ok, the second is 25% gross receipts, that's a punishment. affirm in part for ∆
Liquid damages clauses limited because: can over-estimate, (in NJ must be 'reasonable'), mental shortcomings (bounded rationality, irrational disposition, defective capability), optimism of K.
see also: p. 358 compare
Ch. 6 SPECIFIC PERFORMANCE P. 367
trees to be cut, breach when some cut. can you put in liquid damage clause $600/tree (aka lost revenue)? depends: depends type of breach, foreseeable? reasonable? is damage to punish or reimburse. here, no.
Jiselle and Chrstine's wedding catered.
caterers say if breach, $500k.
nail salon says if find better mani, $1000.
Why, if so, are these enforceable? Should they be?
reasonable? purpose? self-imposed punitive? drive out competition?
Elizabeth Warren vs. THEL:
EW say unreasonably small liquid damages treated the same. Thel says it's an illusory promise.
see also: Lee
Oldsmobile v. Kaiden
Hutchison v. Tompkins
Only if...(expectation) damages are really hard to determine, is a negative injunction (never positive), easy to enforce, and cheap (
WALGREEN V. SARA CREEK PROPERTY
not give if can just give damages instead (
LONDON BUCKET V. STEWART
) because that's compelled labor, expensive and hard to enforce for courts
CH. 7 RELIANCE AND RESTITUTION MEASURES
Usually only chosen when expectation is uncertain or too burdensome to predict; reliance is given in donative promises, and should be more accurately called the COST measure.
Security Stove v. American RYS Express Co.
ch. 6 (367-382)
ch. 7 (383-413)
missing one package, could not have anticipated profit, expectation is out. given reliance. pre-promise reliance: hotel, booking, etc. post-promise reliance: express shipping. rule given both pre and post.
you can't force T-Swift to play at your 1st communion, but you can forbid her from playing MSG that night.
by Steve Thel
, no warning given of shipping contents.
Albert v. Armstrong
: L. Hand decision p 389
Restitution from Breach
Osteen v. Johnson
π daughter country singer, is ANY ∆ breach worthy of restitution? third argument breach (not sending second record) only substantial. New trial.
US v. Algernon Blair
breach 28% K done, need additional $37K, but b/c expenses >$37K, expectation would be $0. get rest even if restitution > expectation!
Kutzin v. Pirnie
-- NJ real estate
p. 391 Restitution if: unjustly enriched, substantive right, or there can be remedies. cannot reject rest. even if ∆ prove no profit for π, and in some jurisdictions, rest. may exceed KP
is ANY breach substantial for restitution? Who decides, judge or jury?
p. 409 Restatement, Third §36: Restitution and
p. 395 Restatement Second §370 #2 vs. #5, restitution given to π only if some benefit received by ∆.
rest. given b/c §370 #5
hypo: lawyer says, $500 to help doctor's divorce. taking $4K of Lawyer's time. doctor fires, doctor use his work for divorce. does doctor receive expectation or restitution? get restitution b/c §370 #5 applies. expectation is no cap on restitution.
∆ deposit - π damages = recovered amount (substantive restitution)
p. 406 Corbin doesn't understand evil.
ASSENT: INTRO; OFFER and REVOCATION
CHAPTER 8 &9
Subjective v. Objective
Restatement First §227
Lucy v. Zehmer
$50K for farm. ∆ tipsy, not drunk, thought it was just a joke, coerce wife into signing under that supposition. ∆ think wagering that π doesn't have the money.
issue: who bears the risk, ∆'s wife, or π? was it reasonable? never once said joking, mental assent not necessary.
$50k for car, but fingers crossed. enforceable? yes.
if not, could unfairly extract info, bargaining mechanism might break down, bilateral monopoly facilitates.
Raffles v. Wichelhaus
rule for π
2 PEERLESS, 1 Oct., 2 Dec.
from Bombay to Liverpool, during US Civil War, before Lincoln's re-election and right after India Sepoy Rebellion. Likely cotton price would change.
Contract void, equally unreasonable mistakes. cannot prove K intent more one way or the other. Principle III.
Frigaliment v. BNS Intern. Sales
what is a chicken? 1. narrow industry: broilers only, or 2. broad biological: stew and broilers?
no K like Peerless, restitution for π
4 Principles of MODERN K Law, Restatement, 2nd
Embry v. Hargadine
I. If 2 different meanings, no knowledge of other, rule for more reasonable. §201(2)(b). objective.
. 2 meanings, equally reasonable, no knowledge of other, void. §20(1). Subjective.
III. if same meaning, even if unreasonable, follow that meaning. §201(1) subjective. reverse Williston p. 440
IV. two meanings: A knows B attaches meaning Beta, B not know A attaches meaning Alpha. Beta prevails, even if unreasonable. §201(2). subjective
12/23 renew or quit? ∆ said "Go ahead, you are all right. Get your men out, and do not let that worry you." side with π. If language of employer can reasonably be interpreted as assent, assent.
p. 435 1st & 3rd ¶
Morales v. Sun Contractors, Inc.
no promise translator (hired by ∆) read the whole thing to π. Procedural unconscionability? π not sue for fraud. rule: no language exception, duty to learn?
hypo: if silent, sell car for $700? no.
sell $700? yes. wait...no.
no take backs!
Spaulding v. Morse
issue: ∆ pay child support payment while in Army? What is evident purpose of HS $1200/year? college 2200/year? rule: THE ARMY IS MOTHER
rest. 2nd §204
Beanstalk v. AM General
π license to use ∆ license Hummer, 35% gross π to π.
POSNER: π K is Absurd
∆ sell Hummer to GM, written by π, K is absurd. π not contribute value. GM need not pay π for service employees did.
rule of construction against drafter can help drafter, make things efficient and clear. allows person to know how it will be construed.
Lonergan v. Scolnick
Lawson v. Martin Timber Co.
helps Thel understand
2 years to cut trees, 1+ if floods. floods happened, ∆ not finished, "could have finished in 2 anyway."
rule for π: objective meaning: if flooding prevents work, then 1+ year.
Land $2500 ad in CA Rest. 2nd §24 and §25. conditional offer: "If no delay..." but a delay. No K
"An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it."
Donavan v. RRL Corp.
"Some courts have stated that an advertisement...does not constitute an offer, but rather is presumed to be an invitation to consider, examine, and negotiate.... Nevertheless, certain advertisements have been held to constitute offers where they invite the performance of a specific act without further communication and leave nothing for negotiation."
Lefkowitz v. Greater Minneapolis Surplus Store
463: An offer is an invitation for acceptance. "offer... does not become a contract of sale until accepted by the seller, and until a contract has been so made, the seller may modify or revoke such prices or terms."
issue: was the ad an offer? was π conduct constituting an acceptance? accepting it would complete contract.
rule: yes! sufficient mutuality for K
Invite: ad: car for $1500
Offer: buyer: ok
Contract: seller: ok
fisher v. bell
(UK statute) p. 467
cannot have "offer of sale" for switchblade. rule instead an "invitation to treat." no K rule for ∆.
Akers v. JB Sedberry
offer to resign w/ 90 days pay, bad mgr. says no, sets aside talks. on monday, writes, accepts offer. π sue for breach of underlying K.
not timely acceptance.
"presentee" rule conversation. p. 473 "close of conversation"
§40, Ill. 2 (Corbin response): if in-person, and no time said, "at once." if silence, no longer open for K.
no...wait...yes. gives unfair information.
reliance or information justifies counter. first offer is null.
offer: manifestation of intent. confers power of acceptance.
an ad is not a K.
2nd §42 on revocation
rejection nulls power of acceptance, less likely to say no, encourage and strengthen K
Donavan (p. 465)
: cannot offer a car you don't intend to sell
§39 counter-offers, p. 481 Ill. 1-3
can I wait till monday? send letter "yes," call before delivery "no." enforceable? yes, mailbox rule.
Ardente v. Horan
furniture in home included or not?
b ----offer $250K-------> S
b <------- attorney ok---- S
b <-------writing----------- S
b -signs/investigates letter-> S
<--accepted, or acceptable?
qualified acceptance or acceptance w/ questions?
asking about furniture
rule: letter was counter-offer, terminates K
offeror always has right to retract
counter-offer is reliance of failing to retract
π tried to trick, accept offer and ask for furniture. nothing is acceptance unless clearly acceptance
offer, accept, die ---> K? yes
offer, receipt, accept sent, die, accept received. K? yes b/c K is upon transmission, not receipt;
exceptions with items with the estate.
mirror image rule
cond'l. accept. terminate power of acceptance,
if diff at all, at all, no K. UCC§2-207, §59
Dickinson v. Dodds
buyer wins property, specific performance. court reverse on promise to keep open, not acceptance
No K, was a promise, an offer, but never K
: cannot revoke "hold open" offer so long as consideration; must have extra form.
2nd §42, 43, 45
Ragosta v. Wilder
∆ sell fork shop, π try again two years later. 88K gathering was preparation, not beginning, not in exchange for keeping offer open.
π get §90 P. estoppel:
1st: def. and sub. damages
2nd: anything reliance, reliance only
acceptance effective upon dispatch.
unilateral K: 2nd §45
unilateral: no K until performance completed, just an offer until then.
preparation v. begin.
start performing, can opt out
buy climbing shirt, no K
first step, K, b/c reliance
Drennan v. Star Paving Co.
π refuse paving to ∆ bid submitted
waiting on lowest sub-, hadn't gotten prime bid yet, then retract.
prime is not bound, no reliance. sub is bound b/c reliance.
thel thinks this is messed up, encourages price shopping w/o consequence.
Owen: if can't get <10K w/o price shop, wouldn't have gotten. OK, first bid had nothing to do w/ second
father: son, take care of me for 10yrs for house. son: yes. K? yes revoke? no
2 years: son, FU
son gets performance? or 1/5 of house?
§45 K starts at beginning, conditional on completion
1484-Eight & Mills v. Joppich
does §87(1)(a) apply?
Offer is binding if: in writing, signed by offeror, recites purpose, and proposes fair exchange
buy back option: if no rebuild in 9 months, can buy back for 90%. $10 consideration.
embedded option is in real estate K, like tire is in car K
naked option is a separate thing. was buy back naked or embedded?
reverse. enforce buy back option.
THE MECHANICS OF BARGAINING AT A DISTANCE
revoke = receipt
unless offeror changes it
allows K to start earlier, more efficient
ch. 8 (417-456)
ch. 9 (457-511)
ch. 10 (513-518)
CH. 11: MODES OF ACCEPTANCE
KLOCKNER V. GREEN
Oral K, care for step-mom. step-daughter: property, step-son: real property. CONTRACT
Oral K, part performed, should negate statute of frauds. bilateral better for promissor b/c action for breach
DE CICCO V. SCHWEIZER
"THE SPRINGS OF CONDUCT ARE SUBTLE AND VARIED. ONE WHO MEDDLES WITH THM MUST NOT INSIST UPON TOO NICE A MEASURE OF PROOF THAT THE SPRING WHICH HE RELEASED WAS EFFECTIVE TO THE EXCLUSION OF ALL OTHERS."
BENNY MOTHERFUCKING CARDOZO
motive not matter, but must have ability for motive. different from knowledge.
Simmons v. US
, fishing, no motive, but knowledge, accept offer.
engaged: when u marry, I'll give $1 mill.
first one, couldn't determine price. second one, first come first serve induced action. otherwise:
invite, not offer
UCC food rule*
FTCR--Retail food store advertising and marketing practices
p. 468 Eisenberg
p. 448 supplemental material
amends to say grocery stores must sell at the price advertised.
terminate power of acceptance:
interpretation key, when is end of conversation?
end of subject, or meeting?
p 480 RI Dept. Trans
modify to benefit other, still a K.
b/c no K, no hold open
thel not a huge fan.
the option is an appropriate preliminary step in the conclusion
signed writing is K, desirata
Glover v. Jewish War
if they helped catch, w/o knowing reward, cannot accept offer, didn't get reward.
cannot accept w/o knowing offer. K is done w/ performance, acceptance is the act
Bishop V. Eaton
∆ repay π if π pay ∆'s brother. π send $, never arrive. ∆ reassure will repay if bro not. π sue. hold for π.
in unilateral K, is offeree required to tell offeror? yes, within a reasonable timeframe.
first thing is an invitation to bid because you need executive approval, not an offer. it does not confer the power of acceptance
Int.'l. Filter v. Conroe
signed but not executive not notify, sent offer. didn't have to convey acceptance.
seller invites "furnish" water softener for $1230. if agree, no K. "accepted" by buyer--offeror. approved by executive officer--K.
usually, when marked "approved"--K, or changed by offeror (buyer)--signed by Exec., no K
Polaroid v. Rollins
question: if K where cannot produce written agreement. didn't make promise only way to accept it.
acceptance by conduct
when offeree accepts w/o saying Y/N. request promise. not made. promise? no. Court rule a promise is not the SOLE means of acceptance.
general contractor breach, not liable. but if a sub-contractor breaches, they are liable. the general contractor relies on the sub's implied promise.
Phillips v. Moor
failure to notify offeree acceptance is too late
who's hay was it when it burned? intent and understanding the property passed to ∆. offer must be accepted within reason. rule π. it was ∆'s hay. also UCC 2-509. burden on buyer. §69 on silence.
Silence as Acceptance
Vogt v. Madden
sharecropping previous years. not agree to 1981.
silence => no K. exceptions in §69 not apply. no K, no π damages. use instructions #18
§69: Acceptance by Silence or Exercise of Dominion.
1. offeree fails to reply, silence is acceptance only:
a. benefit incurred w/ reasonable chance to reject
b. offeror gives reason to believe silence is acceptance
c. previous understanding
§70: Effect of Receipt by Offeror or late or Defective Acceptance: late or defective acceptance mayb be offer, but silence is acceptance in cases
generally, late acceptance is a legal counteroffer. "reasonable".
if not say time matters,
silence = yes
drop off $35 microwave, if you don't return you owe $35. offeror cannot CREATE a duty. Silence is not acceptance, but you must say no.
39 USC 3009--it's a gift.
KRU receive apples, say "ok", but wrong ones. w/o asking. must say "no"--duty to inform to prevent loss.
is silence acceptance? no.
but if it's clear, there's a history, and not imposed, gift not obligation, and opportunity to reject.
Insurance rule: no K until accepted by offeror. seller makes form to make offeror, unfair. had given in reasonable time, could have gotten other insurance. RELIANCE
Ganley v. G&W LTD. Pnrshp.
silence induced lower costs. real estate commission. trial 4% commission, then 8%. appeal back to trial ct. agree to 4% w/ silence. silence does not raise estoppel. rule: offeree cannot watch move based on silence and they pay costs from it. Ganley should have clarified costs paid to appellants. DUTY TO SPEAK.
duty of implied K under circumstances
ELECTRONIC AGENT: WE DON'T REALLY KNOW WHAT'S GONNA HAPPEN
CH 12: IMPLIED K AND RELATED NON-K CLAIMS
Nursing Care Services v. Dobos
ch. 11 (519-558) and 12 (559-592)
hypo: give me a cup of coffee. at store? K. at Victoria's home? no K.
Woods v. Lady Duff
: it only makes sense if it's a promise.
doctor saves a life: payment is implied-in-law. if on duty, no pay. if not on duty, unsure.
$ for nursing, doctor's orders. π care, no K. but no consent needed for emergency. ∆ accepted care when awake---> implied promise. rule π.
Vertex v. City of Waterbury
Y2K Update. was new proposal part of old K, or a new thing?
Jury Instructions, rule for ∆, but appeal. implied K => unjust enrichment. appeal: change instructions to implied-in-fact K and unjust enrichment.
squeegee man start cleaning. K? nope.
then there's stuff on the history of assumpsit and other archaic terms on p. 566
Day v. Caton
Brick Wall between neighbors.
π build wall on lot 29, ∆'s is lot 27, vacant. if no promise, no need for ∆ to pay. if you know -> pay. if you don't -> don't. π expects to be paid, think agreement. at some point,
∆ has obligation to say no. silence to + work is assent.
CH. 13 INDEFINITENESS, PRELIMINARY NEGOTIATIONS, AND THE DUTY BARGAIN IN GOOD FAITH
it either is or it isn't
ch. 13 (593-649)
Academy Chicago Publishers v. Cheever
Chicago - K is ok.
circuit - yes.
Sup. Ct. - no
too many ambiguities
delivery date, which stores?
expensive, impossible for perfect complete K
burden. The court says it's not a K if you cannot tell performance or breach. p. 597
UCC gap fillers. p. 603
agree to agree isn't a K.
Saliba-Kinglen Corp. v. Allen Engineering
∆ sub-. bid accepted, tries to get out, just gave a price, no other details.
not §90. invoke Drennan, K there, K here.
giving just price is common practice, so it's a K.
New K must be in good faith.
Joseph Martin Deli. v. Schumacher
renewal clause says "the tenant may renew this lease for an add'l. period of five years at annual rentals to be agreed upon;"
CoA reverse: no renewal clause.
agree to agree not K
the concern is substance, not form (Corbin-y)
what if the landlord knew the renewal clause was unenforceable?
what if it said:
Agree to be determined? no
Agree to talk about renewal? no
Right to renew at determined rate? yes?
UCC 2-204 (3)
intend K and a remedy
agree and fail to agree
agree to third price
Right 1st Refusal
right to buy at price of third party offeror
often pended to another K, observable not enforceable. way to get people to do things you otherwise wouldn't be able to, like avoid a factory being built next to your farm.
"subconscious humor is schizophrenia" -Thel
one party always (drafter, or seller)
-mailbox rule is good, puts burden to change on person easiest to do so
-reduce cost of K
BEST IN-CLASS HYPO EVER:
Agree to sell Hawaiian shirts to Bergdorf at a "reasonable" time, price, quantity, and method. Is this a K?
UCC 2-308, 2-309 date, place. but Quantity is open.
can the court ID breach?
Hoffman v. Red Owl Stores
promissory estoppel §90
sells other store, buys a small one, takes out loans, huge number of looples, sues on reliance. break in negotiations when say father's 13K loan was a gift.
price change, sue in reliance on negotiations
no expectation. but π got some damages.
- not §90, limiting to expectation
quasi-tortious suit. famous, high point of K theory now discredited
CH. 14: PAROL EVIDENCE RULE: TEXTUALISM V. CONTEXTUALISM
What is included in a contract?
What does integration mean?
When does oral vs. written matter?
Ch. 14 (651-749)
Mitchill v. Lath
Mr. π agree to buy ∆ land, Mrs. π add, will buy if you get rid of icehouse.
K to tear down icehouse? no
not meet parol evidence rule:
-must have collateral
-must not contradict original K
-must be beyond what reasonably expect to find in original K (aka not too close)
skis 200? actually,
instead, snowmobile 800? yea
paint 800? actually,
skis 400? yea. paint? yea.
written is better,
not necessary, privilege integrated writing, it's just there, it's clear.
Masterson v. Sine
§228, §237, §239, §240
Corbin: intent, circumstances
Williston: form. writing(s) itself only, otherwise parol evidence is too weak. intent < writing
see also: §209 §210 §213 §214 §215 §216
∆ buy ranch. bankrupt π, invoke buyback clause option. personal, not assignable option. rule yes, ∆.
Justice Traynor -- DRENNAN
UCC 2-202 Final Written Expression
2nd §214 Evidence of Prior or Contemporaneous Agreements and Negotiations
promises vs. terms
hypo: sell $700 land
1866: how much?
(Mitchell) williston: USA--$!
(traynor) Corbin: confederate?
552: Hobbes v. Massasoit; eel skins
person knows that the performer is expected to be paid; therefore, duty to say no?
trying to get around sub- rule.
corbin: option, intent of parties
williston: leave it as is, could be fraud
Snyder v. Lovercheck
if intend to not tear down ice house, barred parol evidence. but fraud => tort => reliance.
π buy wheat farm.
∆ admit infected, all expected more crop, but v infected wheat.
"as is" clause! "don't rely on statements"
waiver not good, no clear evidence. buyer not take precaution, seller didn't misrepresent. rule seller ∆, told what ∆ believed to be true.
want ppl to have incentives to discover information
buy pig farm knowing oil?
never have to tell why buy
selling house w/ termites?
have to tell, depends on Jurdx
forcing to disclose puts burden only if avoids wasted investigatory expenses on buyers
§231: buy means sell
Steuart v. Mchesney
Right of First Refusal. clause states "∆ can buy @ price of county assessment rolls." that price was $7820. $30 and 35K offer, appraised at 50K.
norm: appraise/offer or minimum
rule: plain meaning rule, 4-corners. if no room to interpret, cannot.
dissent: county not update, not fair.
Parol evidence good for big K
not small K.
NY has strong parol evidence rule (4-corners)
Pacific Gas v. GW
provision to perform at own risk
π indemnify against all losses
property was injured, are they doing indemnify to 3rd party? Traynor allow extrinsic evidence. determine concrete facts if ambiguous! extrinsic, only if multiple meanings.
Kozinski on New Literalism
Pacific Gas goes too far! Corbin on Crack, so ultra-interpretive, it breaks up legal system's foundations.
CA has no parol evidence rule, no 4-corners rule, no non-compete clause
writing, matter-of-law; extrinsic factors, fact.
MCC v. Ceramica
decide subjective intent. objective intent is part of many others.
apply CISG? CISG is just rules to have rules. when rules are about efficiency, no differences.
oral K; boilerplate written in Italian
look at subjective intent
Section 4: Oral Mod. of Written K with a "no-oral mod." clause
Patterson p. 718
no K on house until Mrs. assent. oral yes, written K. K can bypass statute of Frauds with oral condition of written K.
boat: "If rent, I'll tow you.
obligation vs. K
ABC wire, oral change to XYZ.
w/ N.O.M. clause? nope.
orally modify N.O.M. clause? yea
Wisconsin Knife Works v. National Metal Crafters
POSNER: spade bits. ∆ missed deadlines, π still deliver then end K, π sue missed date. ∆ modified for more time, π kept working. discharge ∆. ∆ counter: breach of oral K.
NOM ruled valid because relied upon.
EASTERBROOK DISSENT: Oral K can waive w/o reliance
not in Common Law b/c Clark v. West. UCC yes, in (4), or not (5) .
CH 15: FORMING A K
CH 16: INTERPRETATION AND UNCONSCIONABILITY
battle of the forms
punch order v. invoice
punch out the boilerplates
Zemke v. Bush p. 757 §2-207
buys chillers, π purchase order: 1 yr. manuf. warranty. ∆ seller: extensive warranties only if return. silence. ∆ won't fix, ∆ sues.
no mirror-image needed:
1. K can be slightly different, unless EXPRESS
, unless: express, materially alter, objection known
3. If act as K, it's a K WHERE AGREE.
code fills the rest.
confirmation: K terms after K
price is material! difference in price doesn't have to be.
CLICKWRAP AND SHRINKWRAP
DEFONTES V. DELL
Federal Arbitration Act: Did they agree to an arbitration clause? better PR, less $ maybe, bound by law, no appeal, never class action.
2-204: conduct shows agreement; not 2-207(3)
1. was π accepting terms in accepting product? 2. can π reject by sending back, but did consumer know they could? no express disclaimer!
buyer maintain power of acceptance after receive. "rolling process" p. 788
ProCD v. Zeidenberg
phone book licensing. $30 self, $200 commercial. Easterbrook: we like price discrimination.
terms on inside, not outside, with right to return. new market, shape tolerable K rules.
if bound by terms @ order: K of adhesion!
Clickwrap p. 792
Hancock v. American Telephone (U-Verse)
Bexar County, TX arbitration and venue shopping in clickwrap. rule for ∆ K.
when two sophisticated parties, if agree->bound. applies to everybody
see also: p. 801
rule π: AT&T v. Concepcion
Register.com v. Verio: must be clear "I accept"
1. not dickered
2. Not unreasonable
Moscatiello v. Pittsburgh Contractors
concrete paver hidden non-warranty, privity to sue manuf.
π not know, arrive w/o warranty info. UCC 2-719: limit remedy when = parties. consequential damages, is it unconscionable? 1.unfair bargaining power? 2.merchant? 3. unexpected?
integration not enough
if cognitive failure-> solve w/ obviousness
cognitive failure of K.
30-day grace period of credit card K, can waive, but won't. we are not rational.
CH 17 MISTAKE
unilateral, mistranscriptions, mutual, nondisclosure
Ch. 15 753-804
Ch. 16 805-833
Ch. 17 837-896
Ch. 18 897-938
CH 18 UNINTENDED CIRCUMSTANCES
Donavan v. RRL Corp.
advertisement for Jaguar
mistakenly put 25K, when 35K
CA statute says ad is K.
good faith, unaware, negligence. §153, §154
π win would be windfall
If you know mistake, no K
changing mind is never a mistake
seller never responsible for buyer's intent.
Travelers Ins. v. Bailey
$5000 policy, ∆ buy @19
annuity $500/month, but actually $500/year. Ins. not tell. π insurance want to change it, say ∆ had no reliance.
π has evidence, no obligation to tell. Difference is before or after K.
had roles been switched, rule against insured, even if no access to evidence.
(fucked up, right?)
if you don't know, can you get out?? IDK
Sherwood v. Walker
BOTH BELIEVE COW IS BARREN. IT AIN'T. RULE: No K b/c it's a material fact, there was no cow of that description. change the worth of cow from $80-$700.
limited to facts only
Griffith v. Brymer
deposit 100pounds. then coronation cancelled, appendicitis. get it back. no fraud. WHO BEST BEARS RISK? π get money b/c coronation next month. ∆ suffer no harm.
umbrellas, can't see?
sell good horse, it's a great horse!
$600 that night, usually $200
T-Swift cancel. get $400 back?
Probably not. Not ask why staying, or a joint deal with T-Swift. (Note: this is also not how hotel contracts work)
Taxi to the races
: If race cancelled, money back (taxi can mitigate best)
Everett v. Estate of Sumstad (p. 870)
assume $ in safe
cannot assume $ in safe, tougher sell for buyer to keep $
Wood v. Boynton
rock is a diamond.
Even if thinks knows something and it's not true, she didn't know either. rule it's a sale, a K, rule ∆.
Firestone v. Union League of Philly
same story as Wood, but diminutive value of painting. rule it's a sale, a K, but rule ∆ b/c S/L.
Lenawee County v. Messerly
Sewage problem discovered after purchase of land. rule mutual mistake, but no rescission. if known, fraud?
What must be disclosed?
expensive disclosure regime
why not just sue?
seller cannot comply when doesn't know how
seller has incentive to disclose basic information
does Starbucks have to
disclose their coffee is
overpriced and tastes like shit?
sell stock $10/share
incentive to disclose good, basic info.
floor is slightly off-kilter?
buyer in wheelchair?
WHAT IS MATERIAL?
Material is hindsight!
no duty to disclose basic
material fiduciary information
on insider trading:
stealing? deceitful? disrupt competitive market, silence in face of duty to speak is deceptive.
Taylor v. Caldwell
CH. 18 UNEXPECTED CIRCUMSTANCES
FIRE IN THE DANCE HALL
π is tenant, partyer, doesn't get reliance, no fault.
rule void K, no money due, no obligations owed.
not burning a
, a remote contingency. If landlord's (π) fault, that's negligence, different. (MENLOVE, Torts).
To whom allocate risk of tacit assumption? if knew, what would parties agree?
AFTER K HAS BEGUN: IMPOSSIBILITY, IMPRACTICABILITY,
U.S. v. Wegematic
Judge Friendly (like Corbin) (Frigaliment): who bears risk?
fault of ∆, the ALWAC 800 wasn't ready. promise to bear risk in uncertainty.
∆ "fault," create circumstance, bear risk
DILLS V. TOWN OF ENFIELD
tacit contingency of K not met by π, held for ∆.
Transatlantic v. US
Wheat: TX -> Iran, shipper, π, pays extra cost of travel when Suez close from War!
rule: π better to bear risk! could diversify, buy insurance
hypo: what if trapped in Suez canal?
if trapped (§261, p. 913):
no, b/c Weg.
but: how great burden? how remote contingency?
Wright: only large and remote contingencies have excuses.
KRELL V. HENRY
viewing window: written K. 25 pound deposit, implied condition, before surgery. coronation never happening. off market. renter (∆) incurred benefit of
, rule π: keep 25, π not pay 50.
WHY PAY DEPOSITS? credit allocation, hold K accountable, if damages,
1. what as the foundation of the K?
2. why was the performance of the K prevented?
3. was prevented action reasonably in contemplation of parties?
If all YES, parties discharged from K!
La Cumbre v. Santa Barbara
Ambassador Hotel burn down, π sues, held for ∆, hotel owner. implied condition of K of hotel guests.
India provision that freezes export currency, making K illegal/impossible: absolute bar on K, unintended, unknown, allocate to best bearer of risk. tariffs are frustration, not the same.
Ch. 21 Good Faith
Ch. 22 Substantial Performance
Ch. 23 Express Conditions
Ch. 24 Breach Withhold Performance
Ch. 25 Repudiation Misc.
Seggebrush v. Stosor
Gas station, lease K 1.25/gallon to rent. good for tenant, bad for renter (∆). ∆ buy neighbor land. MOTIVE
Wood v. Lucy: GF/FD reasonable effort to bring profit. rule π.
mall: $600/mo + 5% sales
open across street "6% lower prices"
how do you draw the line?
competing GS vs. 2 franchises
what would a single owner do? two?
are the customers different?
4 miles away in Queens? Arizona? 200 miles?
duty to maximize, not shift profit.
Bloor v. Falstaff
BEER Merger: "Best efforts" clause, ∆ experiment in changing market w/ new brand. did bad. π prove intent to max. profit. and did nothing ruinous. rule π.
UCC Art 1 "honesty"
UCC Art 2 "Honesty and reasonable"
change Art 1 to "honesty and reasonable"
Sanders v. FedEx
π right to purchase route, not express ability. told in parol evidence, but not K. π sue. reason: if sell, should buy. other contractors buy. was π ind't. contractor? rule π GF/FD
§205, §302 (3rd Party)
2nd Ave. Subway
Market Street v. Frey p. 1029
lessee can buyout option in shopping center space, or lessor finance it. ask for financing, don't mention buyout. rule π. ∆ fail to read, no trickery found.
negotiation: no K, no GF needed, but must disclose. exact opposite once sign K. more efficient to disclose.
If lessee knows info, low cost says ought to disclose.
CH. 22 Substantial Perf.
Jacob and Youngs v. Kent
Reading v. Cohoes pipe
cost of replacement $33K, nominal value difference. Like PEEVYHOUSE, only get value of completion. no idiosyncratic value. mistake must be trivial and innocent. HADLEY conseq. damages needed upon K.
hypo: pipe heir?
told pipe heir?
warranty value different?
Ch. 24 EXPRESS CONDITIONS
Promise v. Condition
"If buy boat, will lease to you."
condition to the existence of a K, and an obligation. obligation is in condition, whole thing is promise.
conditions b/c sometimes unsure, unable
Oppenheimer v. Oppenheim
"unless and until" written approved by prime landlord in sub-tenant K. ∆ only oral.
substantial performance of J v. K not apply. rule π. doesn't need to show harm!
Merritt Hill v. Windy Heights
title insurance express provision. buyer sue for deposit back, consequential damages. get deposit, not conseq. (Hadley). title insurance was a condition, prevention doctrine! duty: implied promise to try.
prevention doctrine: cannot try to prevent conditions, that is Bad Faith
Howard v. Federal Crop Ins.
Is section 5(f) a condition precedent? no.
tobacco not as good as expected.
Johnson v. Coss p. 1075
condition on Ford Co. consent
. must prove made reasonable effort, cannot benefit from K to benefit from obligation. if BF -> prevention doctrine. rule: no BF, tried.
p. farnsworth 1089. 1090 architects
§227 express conditions and excuses
Section 1: Simple Donative Promises
2: The Element of Form; 3: The Element of Reliance; 4: Promises based on Past Benefit Conferred
breach by service performer
breach by receiver of service
Sale of Goods
subj. and obj. elements
accept by act
acceptance by conduct
effect of subcontractor's bid
If you're gonna benefit and you know they expect to be compensated, you have say no.
promises v. conditions
expectation had there been performance
reliance had there been no promise
restitution: give the money back
KP 12/31 100 paid
MP DDate 150
reliance 100 plus would have bought somewhere else
to protect reliance interest, protect expectation interest. Merely expectation isn’t enough Dougherty.
Aetna Casualty v. Murphy
damage building, not file for two years. sue insurer Chubb. cannot prejudice w/o harm, K of adhesion. but didn't prove lack of harm.
ruling good for insurance, tallest man rule
evolution express conditions:
Jacobs; Oppenheimer (strict conditions, otherwise no duty); promise or condition, when problem leads to forfeiture; promise, condition, interpret away; promise to avoid forfeiture; not apply insist harm (Aetna)
Burne v. Franklin
double accidental death indemnity, but kept alive in vegetative, yes, yes. public policy, medicine ability shift.
§86 p. 186 insurance pay if written 30 days, call 20 days, "Ok, don't send in writing." gotta send writing? no. insurance will pay.
call 35 days? no pay
waiver CLARK V. WEST
waiver require reliance? Posner yes, CLARK no.
A waive, B rely --> B excused
construct rules around express, GF, impossible
Order and withhold performance
Withold Performance in Response To Breach
§233 and §234(1) promises simultaneous (2) if only one requires time, goes first. Default rule. industry parties choose other rules for a reason.
interpretation has consequences
K&G v. Harris
"workmanlike conduct" clause. bulldozer collapse wall, ∆ refuse pay, π keep working, then sub- stops, prime hire. Excused if material breach not immaterial.
substantial breach disagreement, heavy burden on prediction of what will happen, if wrong, owe a lot of money. substantial v. material
Walker v. Harrison
advertisement, neon lamps dry cleaner, tomatoes cobwebs a bit rusty. Pissed. if no clean-> stop pay. rule π
material breach excuses further performance
total breach excuse and cancel K
immaterial seek remedy, no excuse
acceleration clause, liquidated damage, if material breach, can stop performance (excused), if not material, can recover, but not excused.
right to cure §237
Hochster v. De La Tour
Repudiation and Insecurity
courier tour, ∆ cancel before performance 6/1, π sues before 6/1, rule π. Parties should be kept capable of performing. π excused, giving up other opportunities
anticipatory repudiation, assurances have value, time allow to mitigate. how is it communicated, is it unequivocal, intentional?
thel gamble off money, excuse? impossible? allocate to loser.
Vlad lose legs skiing. Vlad bears risk when skiing. if not his fault, excused.
Thel marry 3/1 when promised to marry 6/1
Breach of implied promise not to repudiate
interpretation, implicit in all promises are not to repudiate. "prenup is liquidated damages."
lost wages 6/1-7/1 are damages
best to try not to repudiate, wait till breach, in case it's all okay. or be up-front to allow to mitigate, reduce your damages: "I might not make it."
Wholesale Gravel v. Decker
appeal gravel driveway, no date, think performance 90 days w/ payment, actually two weeks. it's wet. assures thrice, ∆ sues. repudiation through conduct. rule for Decker.
Kanavos 1134: chemical and billionaire
"ready, willing, and able defense."
∆: I didn't repudiate, π wasn't ready, willing and able.
UCC-2-713 sell wheat 6/1
3/1 repudiate, damages?
KP-knowledge of repudiation.
Often to protect when learn of repudiation afterwards.
seller's remedy not have this: split over KP-MPRepudiation or KP-MPDelivery
Pittsburgh v. Brookhaven
1mill. water gallon tank. K pay 100% 30 days after performance, buyer lose loan, ask escrow, not get, ask personal assurance, no, perform? no. assurance switch liability, asking for more security. if buyer have unexpected, intervening loss, can demand adequate assurance.
Norcon v. Niagara Mohawk Power
∆ buy 25 years power, 3 payment periods, 3rd credit or debt is made back, ∆ will owe $610million. couldn't pay. diversity, NYCoA says right to assurances like in 2-609. Won't say how much, not make statute. demand assurances, if not, suspend.
2-609: if no assurance in 30 days, that's repudiation, right of action for other party.
Badsakis v. Demotsis
shipwrecked vessel carrying whale oil was discovered by 3 ships (Ds) and since there was not enough room to take all of the whale oil aboard the ships, P held auction for barrels and bids were extremely low