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Contracts II: Class 12 (§5)-Measure of Damages, Damages under the UCC, & beginning Limitations

April 16 & 17, 2013
by

Chris Osborn

on 2 January 2014

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Transcript of Contracts II: Class 12 (§5)-Measure of Damages, Damages under the UCC, & beginning Limitations

UCC Article 2
An Overview of Contracts I
(and II)

The Perilous Voyage From Bargain to Contract..
DEFENSES
(or Reasons for NOT Enforcing a Contract)
THE SHALLOWS (AND DEPTHS) OF ENFORCEABILITY
Problems in the Contracting Process
Illegality and Public Policy
(WHY) DOES IT STILL MATTER?
THE CURRENT OF
WELL, WHAT ARE THE ALTERNATIVES?
Promissory Estoppel
THE PIRATES OF PERFORMANCE
Alternative Routes to Enforcement
ENFORCEMENT!!
An Opening Exercise:
(a/k/a You Know More
than You Think You Do
About Contracts Already...)

Tiggy and Moussy
Has there been a
"meeting of the minds?

What else would you
want to know?

What basic elements
of an agreement
do you see present?

CONTRACTS II TERRITORY
What other concerns, if any, do you have about enforcing this agreement?
Which are most important?
What about the conditions imposed?
Themes, Tensions,
and Undercurrents


Individual justice
vs.
public policy concerns
(i.e., "the big picture")
Freedom of contract
vs.
uniformity, predictability
Judicial philosophies
Inequities of bargaining power
Stay tuned... cuz here we go
Gleason v. Freeman
Legend
(Sources of Contract Law)
Cases decided in various courts over hundreds of years (England, then U.S.)
The Common Law:
The Uniform Commercial Code (UCC)
Statutes proposed for governing commercial transactions; drafted by scholars, but must be adopted by individual states
The Restatement (2d) of Contracts
Published by the American Law Institute (judges, lawyers, & profs.) as a "distillation of prevailing rules")
Does NOT have the force of law (not binding, but can be persuasive)
Legal Realists (aiming for uniformity, predictability)
Legal Realist view wins out, forsaking bright line rules in favor of more flexible "standards"
Trade Usage
(in the industry or market)
Course of Dealing (Between these Parties, in the past)
(UCC §1-303(b))
Course of Performance (of the promises in question)
(§1-303)
Acts, Conduct, Circumstances, & Situation of the Parties
to Determine Whether
that we can Consider
there has been an Agreement
UCC §1-201(3)
Additional Kinds of Evidence
NO CONTRACTS ON FRIDAY (9/14)
On Friday (9/14), Civ Pro will meet at this time, INSTEAD of 12:30

NEXT FRIDAY (9/21), CONTRACTS at Reg. Time
and
12:30 (No Civ Pro)

REVIEW SESSIONS
THURSDAY (4/25) OR
FRIDAY (4/26)

Sec. 5
: 1:00-2:00 (Room 515)

Sec. 3
: 2:15-3:15 (Room 515)

Sec. 5:
(well, sort of...)
NO WAY
YES
Yes
NO WAY
2
Points:
1 Essay (may be multi-part), worth 10 points towards final grade
Friday, March 1
1 Hour, closed book, closed notes.
10 MC questions, worth 1 point apiece towards final grade.
Correct
Identification
&
Knowledge
of the Pertinent Rules
Correct
Application
of the Pertinent Rules
to facts
1
Point:
4
Points:
3
Points:
Coherence &
Logical Analysis
(Flow of the Argument)
Grammar, Punctuation, Writing Style, Usage
for Final Exam Essays
Through p. 633
Scope of Coverage:
All Commercial Transactions
Governed Primarily
by Common Law
Governed
Statute
by
Special UCC Provisions for
Some Sales Transactions involving

Merchants
Transactions BETWEEN "merchants"
Article 2
Sale of Goods
What is the
subject matter
of the Contract?

Goods
Services
Real Property
Financial Dealings
(loans, etc.)
SOURCE

OF LAW IS NOT DETERMINED BY THE NATURE or TYPE OF THE PARTIES
Inventions
Employment
§ 2-207(2)
(re: acceptance that adds or changes terms)
§ 2-204 "Firm Offers"
CONSIDERATION
WHICH PROMISES ARE WORTH THE TIME & RESOURCES TO ENFORCE?
HOW DO WE DISTINGUISH A CONTRACT FROM A GIFT OR "GRATUITY"?
Forseeable
Detrimental Reliance: Restatement (2d) § 87(2)
Detrimental
Substantial
As necessary

to prevent
injustice
Forseeable
PROMISSORY ESTOPPEL:
Detrimental
Substantial
As necessary

to prevent
injustice
PROMISE + DETRIMENTAL RELIANCE
?
DON'T
BE THIS GUY:
STOP
AND CONSIDER CONSIDERATION
FIRST
(Don't have an itchy trigger finger for promissory estoppel.)
Dargo v.
Clear Channel
Ricketts v. Scothorn
Fortress Systems v.
Bank of the West
“I have fixed something out that you have not got to work any more…. None of my grandchildren work, and you don’t have to.”
“May the first, 1891. I promise to pay to Katie Scothorn on demand, $2000, to be at 6 per cent. Per annum.”
Pavel Enterprises v. A.S. Johnson Co.
Salsbury v. Northwestern Bell Telephone Co.
The Brodericks... (sort of)
WHAT KIND OF WRITING IS SUFFICIENT TO SATISFY IT?
THE STATUTE OF FRAUDS
For what kinds of contracts
is
a Writing Required?
But how do Lucy and Charlie Brown get it WRONG?
And what does
this guy
have to do with
contract law
?
MY LEGS
When a

Surety

guarantees to pay another person’s debt
Marriage
contract
Contract that can't be performed in a
Year
For an Interest in

Land
Executor
’s promise to pay
personally
the debts of an

estate
Sale of

Goods

for

>

$500

(UCC 2-201)
Its Purpose:
1. SoF means a writing is
necessary
, but not
sufficient
for a finding of enforceability!
2.
NOTARIZATION
(or not) is
not

determinative of

enforceability
(SO SOMETIMES ALSO REQUIRED-BUT STILL NOT
SUFFICIENT
TO ESTABLISH A K)
IT JUST HELPS WITH
PROOF OF SIGNATURE
RESTATEMENT (2D) OF CONTRACTS § 110
(a) sale of real property
(b) leases or easements > 1 Year
(c) fixtures
(d) minerals severed from property
(e) mortgages
DF Activities Corp. v. Brown
Radke v. Brenon
McIntosh v. Murphy
"Uh, Houston, we have a problem..."
The promise in question: "Settle with the Brodericks and you'll get your Loan"
Damages: $13.3M?
A REMEDY IS BORN!
But, why not just find consideration in the form of detriment to the promisee?
NO CONTRACT CLAIM (Statute of Frauds)
NO PROMISSORY ESTOPPEL--
BECAUSE THERE
WAS
CONSIDERATION FOR THE PROMISE
SWORD
Carolina Distinction
P.E. is NOT AVAILABLE AS AN AFFIRMATIVE CLAIM
OR SHIELD?
WHEN AND HOW IS P.E. PLED?
$2.2M? $1.6M?
"
RELIANCE DAMAGES
" ONLY
X
30 MC Questions—1 point each
3 Essays (could be multi-part)—10 Points Ea.

10 Points left:

Grammar, Usage,
Punctuation, Style

1 REVIEW SESSION ON FRIDAY, DECEMBER 7
(Room 590)
§3 - 9:45 -10:45
§5 - 11:00- 12:00
NO OFFICE HOURS AFTER OUR LAST CLASS
PLUS: the writing must state identify the parties, land involved, general terms & conditions
Wife's signature?
Price change?
Court
fi
nds this writing
s
uffieient
in this case
, due to Defendant's
admission
UCC §2-201(3)(b): When the party against whom enforcement is sought admits in pleading, testimony, or otherwise in court that a contract fror sale was made.
Did Ms. Brown admit entering a K?
X
Was there a sufficient writing?
X
IT'S NOT ABOUT THE MONEY, MONEY, MONEY!!!
IT'S THE DEFENDANT!!
THE RESTATEMENT (2D) OF CONTRACTS
FRAUD, MATERIAL MISREPRESENTATION, & NONDISCLOSURE
Weintraub v. Krobatsch
Swinton v. Whitinsville Savings Bank
Halpert v. Rosenthal
CAPACITY TO ENTER A CONTRACT
DURESS AND UNDUE INFLUENCE
Kiefer v. Fred Howe Motors, Inc.
UNCONSCIONABILITY
SUBSTANTIVE ISSUES
("THE BIG PICTURE")
misTaKe
IF
IT'S A SALE OF
GOODS
: UCC §2-201:
OR
A writing
from one merchant to another
is presumed sufficient if not objected to within 10 days
THEN
Once
goods are accepted, or paid
for, SoF defense cannot be raised (but others still can)
A BRIEF CLOSING ARGUMENT:
Looking Back...
Looking ahead...
Super-Important
For Me:
For CSL:
For You:
Course Evaluations:
Anonymous
NO impact on Grading
And less formally....
Austin Instrument, Inc. v. Loral Corp. (1971)
Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. (1978)
10X as long to load
3X as much initial payload as expected
Customs, Hurricane
Settlement Agreement & Release of Claims
Alyeska unloads early, terminates K
$ Dispute ($260K- $300K owed)
CREDITORS LOOMING
$97,500.00
ECONOMIC DURESS:
X
WRONGFUL ACT OR THREAT
+
NO REASONABLE ALTERNATIVE
+
INVOLUNTARY ACCEPTANCE
WITHHOLDING PMT. OF ADMITTED DEBT
BANKRUPTCY?
ACCEPTED FAR TOO LITTLE
WRONGFUL ACT OR THREAT
INVOLUNTARY ACCEPTANCE
NO REASONABLE ALTERNATIVE
ECONOMIC DURESS DEFENSE
1st Supply K
2nd Supply K
*Renders contract
voidable
"...a belief that is not in accord with the facts."
Resatatement (2d) of Contracts §151
UNILATERAL MISTAKE
ALLOCATION OF RISK
BILATERAL MISTAKE
DEFENSE OF "MUTUAL MISTAKE"
MUTUAL MISUNDERSTANDING
Parties agree to
same term
,
but attach
different meanings
to it (e.g., "ex Peerless")
May prevent contract formation!
as distinguished from
Parties share a belief about the transaction which proves to be untrue
Renders K voidable
Sherwood v. Walker
Rose 2d of Aberlone
$80.00
X
$750.00
If both parties believed she was barren, then D. had the right to rescind.
Grenall v. United of Omaha Life Ins.
Estate of Nelson v. Rice
Professor Chris Osborn
Gateway 558
cosborn@charlottelaw.edu
(704) 808-4913

CONTRACTS II (Spring 2013)
(Sections 3 and 5)

A (Brief) Word about Contracts I Final Exam Scores
QUICK REMINDER RE: CLASS POLICIES
Have someone else sign the attendance sheet for you when late or absent.
Sign but leave early (without advance permission)
Fail to sign the attendance sheet (in class)
Are more than fifteen minutes late for class.
YOU
ARE
CONSIDERED ABSENT IF YOU:

Attendance Sheet
Info Cards
YOU
MAY
BE CONSIDERED ABSENT IF YOU:

Are "here..."
Or, are UNPREPARED...
YOUR STUDY = PRACTICE
CLASS = THE GAME!
A Word About Cold Calling
LOOKING FOR A
DIALOGUE
, NOT

THIS:

THEREFORE, I WILL EXPECT:
Eye Contact
Loud, audible voice
Show me some thinking!
but not "all here."
CLASS FORMAT:
TEAMS ASSIGNED BY ME, SCHEDULE PUBLISHED IN ADVANCE-STAY TUNED...
EFFORT WILL COUNT TOWARDS 10 % PARTICIPATION COMPONENT
WON'T BE CALLED ON REST OF THAT CLASS
(but others will...)

10 "FIRMS"-EACH WILL HAVE A WEEK THAT YOU PRESENT, PARTICIPATE, ETC.
GROUP PROJECT
WE'LL BREAK IT UP...
110 MINUTES!
EXCUSES:
A. NON-OCCURRENCE
(OR NON-SATISFACTION)
OF A
CONDITION
Damsels in Distress?
When non- parties may have rights in the contract ...
Third Party Beneficiaries
Assignment of Rights
THE EDDIES OF INTERPRETATION
WHAT'S
"THE DEAL"?
THREADGILL v. PEABODY COAL CO.
AMBIGUOUS TERMS
GENERAL RULES FOR CONSTRUING CONTRACT TERMS
(i.e., when you are
stuck
with these terms...)
Contracts of Adhesion
E
C
I
Rogers v. Jackson
TERMS ADDED
BY A COURT
TERMS SUPPLIED BY STATUTE
THE PAROL EVIDENCE RULE(S)
USED TO
ANOTHER
II
Statute of Frauds?
Capacity?
Mutual Assent
(Intent to be Bound)
Consideration?
Duress/Undue Influence
LEFT SIDE:
Advise Savannah about what kind of legal
remedy
she may be able to recover if she proves there was an enforceable contract.
RIGHT SIDE:
What
NEW
issues about the
language
or
terms
of the contract
might
you want to raise on Ella’s behalf?
...AGAIN!
VOCABULARY VIGNETTE
EXTRINSIC:
http://www.planetofsuccess.com/blog
THEREFORE,
EXTRINSIC EVIDENCE
=
ANYTHING

OUTSIDE
A WRITTEN DOCUMENT ITSELF
A word; speech; hence, oral or verbal; expressed or evidenced by speech only; not expressed by writing
PAROL:
THE
PAROL EVIDENCE RULE
NEVERTHELESS GOVERNS
ANY EVIDENCE
THAT
IS
NOT CONTAINED IN THE WRITTEN DOCUMENT(S)
from outside, from without
a/k/a "extraneous" evidence
Dictionary definitions
Trade Usage
Course of Dealing
Course of Performance
Unsigned agreements
Prior signed agreements
Drafts/Prior versions
Correspondence
Contractor
Drilling/Mining
FAIL!
Oral agreement
RISK OF LOSS?
Issue =
BUT: P argues that a "practice or custom in the drilling industry" that driller bears risk
RULE: D must have actual or
constructive
knowledge

of the trade usage
("sufficiently general so that the parties could be said to have contracted with reference to it")
X
COURT SAYS
P'S EV. SUFFICIENT
NOT

QUITE
PUBLIC POLICY!
So, does Threadgill recover?
Colo. law says a party cannot K out of liability for its own negligence.
TRIAL!
Nelson v. Elway
Buy-Sell Agreements
Purchasing 2 Dealerships + Land Parcels
Nelson's Trouble
Side deal:
"Service Agreement"
Low sale price
in exch. for
$50/car sold
7 years
X
X
"Keeper Letters"
OWES $3M
$
Elway takes on $890K in debt
This Agreement constitutes the
entire Agreement
between the parties pertaining to the subject matter herein, and
supersedes all prior agreements, representations and understandings of the parties
. No modification or amendment of this Agreement shall be binding unless in writing and signed by the parties.
Majority:
Merger Clause Controls
DISSENT: WAS BUY-SELL COMPLETELY INTEGRATED?
Clickers!
Relection Cards (end of class)
EXAMPLE of trade custom/usage:
PLEASE GO AHEAD AND TUNE YOUR RF CLICKERS
§3 Ch. 14
§5 Ch. 50

When the parties have not spelled out all the terms of their agreement, a court may look to custom or usage in trade (as well as other sources of information) to fill in terms.
For a custom
or
trade usage to supply terms for an agreement, the parties must have
actual knowledge
or
constructive knowledge
of it
("sufficiently general so that the parties could be said to have contracted with reference to it")
Integrated agreement
:
Merger clause:
"COMPLETELY INTEGRATED"
**However, “integrated” may apply to:
An agreement that is complete and final.
A clause in a written document explicitly stating that the document is intended to represent the
complete understanding
of the parties as to
all the terms of the deal
, and that all prior negotiations or agreements are
merged into the terms
set forth in the writing.
the entire set of terms!
some, but not all, of the terms
or
"PARTIALLY INTEGRATED"
(...
as to
any written term

or terms)
(a/k/a "integration clause")
WHEN THERE
IS
A WRITING, WHAT OTHER EVIDENCE CAN/SHOULD THE COURT CONSIDER?
THE UNDERLYING QUESTION: for what purposes might a party offer evidence other than the written K?
(Ambiguity, confusion, or diagreement as to the meaning of a term)
3) TO
INTERPRET OR EXPLAIN
THE TERMS
(i.e., they left something out of the writing)
2) TO
SUPPLEMENT
THE TERMS
1) TO "
CORRECT
" THE TERMS
(or perhaps to change them?)
Now, let's practice!
X
Says they agreed he’d pay “only if and when he was able.”
P-Note for $3,000
Written K?
Instead, bought back for $10K, plus this note...
The "parol" evidence?
5. Thus, Q of Fact re: this oral condition,
so remanded for trial
4. Ability to pay condition -- “not repugnant to the terms of the note and does not in a real sense contradict them.”
3. PE of additional terms allowed, so long as “not inconsistent” with the P-note.
2. Agreement “partially integrated.”
1. Jackson's Affidavit must be treated as true.
MAJORITY:
"I'll pay when I am able" contradicts the writing:
DISSENT:
Majority misapplied K-law principles
Consequences of failing to pay
Specifies when he'll pay
(1/2 in 1 year, remainder in 2)
Specifies how much
($3K + interest)
"I... promise to pay..."
X
Procedural posture?
Rogers won MSJ
How is it different?
Merger clause is "presumptively valid," BUT whether it closes the door to Extr. Ev. depends on circumstances
e.g., 2 BSAs, 2 Real Estate Ks
(Yes, but...)
And a bigger "but":
When a party to a contract wants to introduce evidence concerning terms either (a) contrary or (b) supplemental (or in addition) to those written in the document, the PER helps determine the extent to which he or she can do so.
WHICH OF THE THREE PURPOSES FOR EXTRINSIC EVIDENCE IS THE P.E.R. MAINLY DEALING WITH HERE?
supplementing
&
altering terms
STEP 1
: IS THE AGREEMENT
INTEGRATED
? (i.e., is there a written final expression as to the agreed upon terms?)
STEP 2:

IF YES,
IS THE WRITTEN AGREEMENT
COMPLETELY
INTERGRATED? (Does it appear to contain the full recitation of all the terms related to the deal?)
"No" means
no PER issue
COMPLETELY INTEGRATED
STEP 3 (APPLY P.E.R.):

all prior or contemporaneous negotiations/communications/or other agreements

WITHIN THE SCOPE of the written agreement
are discharged (i.e., deemed merged into /superseded by the final CI)
STEP 3 (APPLY P.E.R.):
all
prior or contemporaneous negotiations/communications/or other agreements
INCONSISTENT WITH the FINAL TERMS IN THE written agreement
are discharged (i.e., deemed merged into/superseded by the final P.I.A.)
PARTIALLY INTEGRATED
THE TRICKY PART:
OR STEP 2
STEP 1
THERE MAY BE A DISPUTE ABOUT
THUS, EVIDENCE OF SAME MAY BE BARRED
THUS, EVIDENCE OF SAME MAY BE BARRED

(1) Terms
with respect to which the confirmatory records of the parties agree
or
which are otherwise

set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein
may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be supplemented by evidence of:
PAROL / EXTRINSIC EVIDENCE UNDER THE UCC
How much does it matter?
(a) course of performance, course of dealing, or usage of trade (Section 1-303); and
(b) consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement .
(2) Terms in a record may be explained by evidence of course of performance, course of dealing, or usage of trade without a preliminary determination by the court that the language used is ambiguous.
Frigaliment Importing Co. v.
International Sales Corp.
Is there an Ambiguity?
How do we know?
Trident Center v.
Conn. Gen. Life Ins. Co.
So there's an ambiguity: How do we resolve it?
to ascertain meaning of the agreement,
give meaning to specific terms, or supplement or qualify the terms
OR to "supplement" or
"explain" terms in a record
UCC § 1-303(d)
But NOT to contradict terms
(UCC-2-202)
THE SMALLER THE CIRCLE, THE GREATER THE WEIGHT
Aim for consistency, harmony;
but where impossible:
UCC §1-303(e)
(UCC §1-303(c))
§ 2-202. Final Expression in a Record: Parol or Extrinsic Evidence.
= COMPLETELY INTEGRATED!!
= INTEGRATED!!
*
*UNDER THE UCC, Evidence of CD/CP/UofT will most ALWAYS be allowed
PAROL EVIDENCE RULE
Extrinsic Evidence
HELPFUL EVIDENCE FOR THE COURT (TO DO JUSTICE)
UNHELPFUL or UNRELIABLE or BURDENSOME EVIDENCE IS KEPT OUT OF COURT
A (hopefully) Helpful Metaphor (or 2)
SIMMONS FOODS INC. v. HILL'S PET NUTRITION, INC.
The doc in question:
No quantity for 1999 or 2000
Not an "outputs" K (specific Q# for 1998)
Nov. 1997 Fax
"Below are the general terms of our agreement... for the next three (3) years"
Why not enforceable beyond 1998?
-Not when it's quantity
-Series of 1 year deals precludes
-Duration = express term, PE cannot contradict
X
Part. integrated, so CP/CD/TU to explain or supplement?
X
Oral promises of "long term relationship"?
P.E.R. ISSUES
(UCC §2-202)
X
CofD to supply missing term?
"EXCEPTIONS" TO THE P.E.R
Restatement (2d) takes lenient approach
Threshold ?s
Defenses to enforceability
Later...
ALSO:
TO SHOW CONDITION PRECEDENT
(HOLD THAT THOUGHT)
v.
Selling
"e-books" (8 works by 3 RH authors)
Right to "print, publish, and sell the work
in book form"
X
Where (exactly) is the ambiguity?
How do the arguments "stack up"?
K language:
Listing of other types of rights (also granted or reserved) also indicates "in book form" is not all-encompassing
Walks thru other provisions cited by RH & distinguishes each:
Expense of publishing—not a grant of rights
Non-compete clauses (maybe authors in breach?)
Photocopy clause-diff purpose
Custom/usage in the industry is that “in book form” is a limited grant
(In fact, usually means: excl. right to publish a hardcover trade book in English for distr. in N. America)
Ct. must give effect to all language
“the work” distinguished from “in book form"
Dictionary definition:
Licensing Agreements with authors
“Maker shall not have the right to prepay the principal amount hereof in whole or in part” for the first 12 years
Construction Loan:
$56M at 12.5% for 15 years (1983)
The clause in question:
WHERE'S THE AMBIGUITY?
“…in the event of a prepayment resulting from a default hereunder or the Deed of Trust prior to January 10, 1996, the prepayment fee will be ten percent (10%).”
RE-FI!
"EFFICIENT" BREACH
= when a party is willing to pay the consequences of breach, hopes still to come out ahead
THE FLAW:
In the event of default,
Conn Gen has
options:
1. accelerating debt, or
2. collecting income, rent, royalties; or
3. doing nothing
Not on appeal...
SO, DOES LENDER WIN?
but eventually...
US Fresh Frozen Chicken, Grade A, Government Inspected, Eviscerated, 2 1/2 - 3 lbs. and 1 ½-2 lbs. each all chicken individually wrapped in cryovac, packed in secured fiber cartons or wooden boxes, suitable for export
75,000 lbs. 2 ½ -3 lbs. * * * @$33.00
25,000 lbs. 1 ½ -2 lbs. * * * @$36.50
per 100 lbs. FAS New York
"Young chicken suitable for broiling & frying"
Any bird of the genus "chicken" (i.e., not goose, duck, turkey, etc.)
Evidence weighed...
Contract language
Prior cablegrams
Use of English
word “chicken”

(vs. German "Huhn")
Trade usage (experts, ads)
PLAINTIFF
DEFENDANT
Trade usage (experts, regs)
Impossible to supply at that price
Frig’s cable after rec. 1st shipment
?
?
?
Specific provisions
THE GOAL: Intent of the Parties
Where there is a choice, courts will prefer an interpretation:
Express terms
Negotiated/Added terms
CP/CD/TU
General Provisions, recitals
Standardized language /
boilerplate
Result = valid K, lawful, enforceable
Result = no valid K, illegal K, ineffective
Read K as a Whole, try to give effect to all provisions
>
>
>
>
Restatement (2d) of Contracts §203
Wood v.
Billman v. Hensel
TO EFFECTUATE THE PARTIES’ INTENT
FOR REASONS OF PUBLIC POLICY
"LATENT" AMBIGUITY
"PATENT" AMBIGUITY
VS.
(e.g., "Tenant shall pay Landlord $800 rent each month"
(e.g., deed of trust where the legal description does not match with that of the deed)
Ambiguity that is obvious on the face of the K
Ambiguity that is only evident in light of extrinsic evidence
VOCABULARY VIGNETTE
SPECIAL RULES FOR .
.
.
The trade off:
Class on 4/24
(Would be Mon. Schedule)
NO CLASS 2/6
Watch D2L for revised reading schedule
*** CP/CD/TU ARE ADMISSIBLE
UNDER COMMON LAW AS WELL
(UCC JUST SPELLS THEM OUT
MORE SPECIFICALLY)
“Exclusive” right to:
license others to market her designs
sell her designs, or
place her indorsements on the designs of others,
“One-half of all profits and revenues”
Promise to use reasonable efforts can be “fairly implied”
Without such a promise, transaction cannot have “such business efficacy as both parties must have intended that at all events it should have”
What's her defense?
(Think Contracts I)
Justice Cardozo's ruling:
$54,000
"Subject to ability of Buyers to secure mortgage for not less than $35,000"
Talked to only one Lender
No "formal application."
X
(Sellers)
(Buyer)
...impose[s] upon the buyers a an implied obligation to make a reasonable and good faith effort to satisfy the condition
What's the risk if no such duty?
Reasonable expectations of the parties
+
The Implied Covenant of Good Faith and Fair Dealing
Locke v. Warner Bros.
V.
1.02 Grant of Franchise

(a) Franchisor hereby grants to Franchisee, and Franchisee hereby accepts, a non-exclusive franchise...  [N]othing contained herein shall be deemed to grant Franchisee an exclusive territory and Franchisor... may... franchise or license others to locate and operate additional residential real estate brokerage businesses within the market area within which Franchisee conducts and operates...
What is Hobin's argument?
"covenant of good faith & fair dealing" limits CB's discretion
+ No dispute re: consideration
or illusory promise
Why not?
Does he win?
CAN'T USE IMPLIED TERM TO CONTRAVENE EXPRESS TERMS
X
Locke v. Eastwood
"Development Deal " with Warner Bros.
Settlement:
$450K Cash +
1. $250K /yr for 3 year “non-exclusive first look deal” (Studio can approve or reject any project)
2 components:
So what’s her complaint?
How much did she get paid?
2. “Pay or play” deal (Use her as a director or pay her $750K)
What term does the court add to the K?
"covenant of good faith & fair dealing"
Restatement (2d) § 205
What was the evidence of breach?
"They are not going to make a movie with her here."
"We are not going to work with her."
REFUSE TO ENFORCE UNCONSCIONABLE TERMS
COURTS MAY:
EXAMINE HOW THE ONE SIDED TERMS ARE DISPLAYED: UNDERSTANDABLE LANGUAGE, PRINT SIZE & LOCATION
CONSTRUE AMBIGUITIES AGAINST THE DRAFTER (CONTRA PROFERENTEM)
Restatement (2d)
§ 211 (Reasonable terms enforceable)
Meyer v. State Farm Fire & Cas. Co.
Lauvetz v. Alaska Sales & Service d/b/a National Car Rental
UCC Article 2 "GAP FILLERS"
"Default" rules that apply
unless
the parties provide otherwise in their agreement.
SELLER
BUYER
Article 2
Trade Usage (in the industry or market)
Course of Dealing (Between these Parties, in the past)
Course of Performance (of the promises in question)
Acts, Conduct, Circumstances, & Situation of the Parties (Bargaining Process)
to Determine Whether
that we can Consider
there has been an Agreement
UCC §1-201(3)
Additional Kinds of Evidence
UCC §2-309
(Time of Delivery)
UCC §2-308
(Place of Delivery)
UCC 2-305
(Price)
UCC §2-314 (Implied Warranty of Merch.)
**PARTIES MUST AGREE ON
QUANTITY

(however, they do not have to reduce it to a fixed number)
See
UCC §2-306
WHEN IS A PARTY EXCUUUUSED FROM ITS OBLIGATION UNDER A K?
AN EVENT, NOT CERTAIN TO OCCUR, WHICH MUST OCCUR BEFORE PERFOMANCE IS DUE
HOWEVER, a court might, er,
excuuuuuse the non-occurrence of the condition
.
DON'T CONFUUUUSE IT WITH:
Condition precedent
vs.
condition subsequent
e.g.,
Buyer agrees to purchase RE property, subject to the condition that it must appraise for $200,000
(*unless its non-occurrence is... EXCUSED, or the condition is waived, etc.)
"If the property appraises for $150K, I will agree to buy it."
"If you didn't come to party,
don't bother knockin on my door."
"If you will lower the down payment to $5K, I wil agree to buy it. "
NO K AT ALL UNLESS CONDITION IS SATISFIED
e.g., "I will sell you my Tar Heel B-ball season tickets every game
until
they are back in 1st or second place in the ACC"
obligated to perform UNTIL the condition occurs
performance is not required UNLESS and UNTIL the condition occurs
I agree to sell you my Panthers PSL for any playoff game that the Panthers host at BofA Stadium, if their opponent is the Falcons
2. WHEN A PARTY WRONGFULLY
PREVENTS OR HINDERS
CONDITION FROM BEING FULFILLED
1. TO AVOID FORFEITURE / LOSS
[Better to say “extinguish" or "ignore" the condition, or "render it moot”]
Conditional Acceptance
Strict Compliance
--or else party benefitted is excused from performing
B.
MODIFICATION
OF THE CONTRACT
F. FRUSTRATION OF PURPOSE
E. IMPOSSIBILITY / IMPRACTICABILITY
D. EQUITABLE ESTOPPEL
C.
WAIVER
OF A CONDITION (OR ANY OTHER OBLIGATION)
Acme Markets v. Federal Armored Express, Inc.
Moore Bros. v. Brown & Root Inc.
B&R was in on the subterfuge to get around lender's scrutiny
"Pay when paid" clause
Rest. (2d) §229
“Responsibility of Federal… shall begin when said [cash]bags or packages have been accepted and receipted for by Federal or its authorized employees…”
$62,544
Condition precedent?
Yes
BUT: DOES COURT ENFORCE IT?
NO!
TO AVOID DISPROPORTIONATE FORFEITURE
**CONDITION CANNOT BE MATERIAL PART OF THE AGREED EXCHANGE
(No "magic words" required)
importance to obligor of the risk protected against
vs.
extent
of the forfeiture
Clark v. West
Benefitted party’
s
acts

/

conduct
may
preclude
him/her from asserting non-occurrence of a condition to the
detriment
of the other party who,
entitled to rely on such conduct
, has
acted upon it
DETRIMENTAL RELIANCE
+
AVOIDING INJUSTICE
**CANNOT BE RETRACTED UNILATERALLY
USUALLY REQUIRES EXCHANGE OF
CONSIDERATION
BY
MUTUAL

AGREEMENT
CHANGING of the TERMS WHICH MAY DIMINISH OR INCREASE THE DUTY OF EITHER PARTY
BUT
NOT
FOR
SALES OF GOODS
UCC 2-209 (1)
X
Dynamic Machine Works v. Machine & Electrical Consultants, Inc.
May Centers v.
“intentional relinquishment of a known right”
Court will construe language carefully
Voluntary election not to enforce condition (by party benefitted)
Effectuated by 1 party (the party benefitted)
May be express, or implied by conduct
(accepting non-compliance)
CAN BE RETRACTED UNILATERALLY!!!
late payment accepted in April 1988 means no default
Rent pmts. due on 15th-est. by course of conduict
non-waiver provision
means LL remains free not to accept the
next
late one
Taylor v. Caldwell
Force Majeure
Clauses
Contracting around the default rule:
v.
Krell v. Henry
EXCUSES RELATED TO
NON-PERFORMANCE

BY THE OTHER PARTY
("I DIDN'T PERFORM MY PART OF THE DEAL"
(WHICH MEANS YOU DON’T HAVE TO EITHER)
ANTICIPATORY REPUDIATION
("
I WILL NOT BE PERFORMING

THE K

WHEN THE TIME COMES FOR ME TO
”)
A form of “breach,” but
communicated
or demonstrated
in advance

of time for performance

Definite

and
unequivocal
” indication of intent
Unwilling to honor a
material
obligation
OR
may be by
But what about when intent is not so clear?

REMEDIES & TIMING
:
WHAT ARE ITS RIGHTS BEFORE PERFORMANCE IS DUE?
HOW LONG MUST THE OTHER PARTY WAIT BEFORE FILING SUIT?
EFFECT OF A.R.:
NON-REPUDIATING PARTY CAN SUE NOW OR WAIT
NON-REPUDIATING PARTY'S PERFORMANCE IS EXCUUUUSED
FAILURE TO GIVE ADEQUATE ASSURANCES UPON REQUEST
= A.R.
= BREACH
UCC § 2-609
NORCOM POWER PARTNERS VS.
Niagara Mohawk forecasts that Norcon will not be able to pay credits, down the road.
When a party has reasonable grounds to believe that the other party will breach K by non-performance, it may demand adequate assurances
Demands "adequate assurance" that Norcon will perform K
NORCON SUES! (for DJ)
(even though this is NOT a sale of goods!)
You might be penalized for failure to mitigate damages
Restatement (2d) § 251
Mere expression of doubt
as to... willingness or ability toperform
is

not enough
to constitute a repudiation. Restatement (2d) of Contracts §250, comment b.
The Dilemma:
Terminate & sue?
Termination could be construed as a breach
Wait until the time of performance?
May get too late to secure an alternative, and/or
or
Might be doing so unnecessarily (waste $$)
INCOMPLETE OR IMPERFECT PERFORMANCE
COMPLETE NON-PERFORMANCE
SUBSTANTIAL
(or, "Not all breaches are created equal")
Vocabulary Vignette
BREACH
REPUDIATE
EQUIVOCAL
UNEQUIVOCAL
MATERIAL
to break; to fail to perform or comply fully with the terms of a contract; to act contrary to an obligation
(may also be a noun)
(1) Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach under § 243, the obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance.

(2) The obligee may treat as a repudiation the obligor's failure to provide within a reasonable time such assurance of due performance as is adequate in the circumstances of the particular case.
§ 251. When a Failure to Give Assurance May Be Treated as a Repudiation
Constructive Conditions
CONSTRUCTIVE CONDITION: when a court creates a condition, or adds one to a contract, in order to be able to effectuate justice (e.g., prescribing the order in which performance must occur)
"Important; more or less necessary; having influence or effect; going to the merits”
"of real worth and importance; of considerable value; valuable… actually existing, of substance… Something worthwhile as distinguished from something without value or merely nominal”
clear, straightforward, definite
subject to more than one meaning or interpretation
to refuse to perform or honor a contract (usually before performance is begun, or is due)
How would your answers change if the contract also contained the following language:

In order to receive payment, you must present the car to me perfectly cleaned and polished (to my satisfaction) by Wednesday by 5:00 PM sharp, so that I can take my lovely wife, Wendy, on our weekly dinner date, and she will not have to be embarrassed to ride with me.
vs.
Express Conditions
“Close” only counts in horseshoes and hand grenades.
STRICT COMPLIANCE
“Close enough for government work”
“SUBSTANTIAL” PERFORMANCE
Pulman Comley, Bradley & Reeves
"At the closing, on payment of the purchase price as provided above, the seller shall deliver and the buyer shall accept, a full covenant warranty deed..."
SPECIFIC LANGUAGE, AGREED UPON BY THE PARTIES
Payment
construed
as
condition precedent
for delivery of deed)
Restatement (2d) of Contracts §237
EFFECT ON OTHER PARTY’S DUTIES OF A FAILURE TO RENDER PERFORMANCE
… [I]t is a
condition of each party’s remaining duties
to render performances to be exchanged under an exchange of promises that there be
no uncured material failure
by the other party to render any such performance due at an earlier time
Kingston v. Preston (1773)
Court
reads into the K
an
order of performance
:
construes
security for buyer/apprentice's post-sale payments to Owner as a
condition precedent
for transfer of title
Buyer agrees to keep the name of the Inn the same,
as long as Jacques remains alive.
WHEN?
HOW MUCH?
TERMS
WHO?= PARTIES
WHAT?
HOW?
Occurrence or non-occurrence EXCUSES PERFORMANCE OF ALL OR SOME OF THE TERMS
Buyer shall have no obligation to close on the purchase
unless
the property passes its next 2 county health and safety inspections.
CONDITIONS
&
PERFORMED, DEFAULTED ON, HONORED
OCCURRED,
BEEN FULFILLED, BEEN SATISFIED,
Have (or have not) :
Have (or have not) been:
= a TERM
PROMISES EXCHANGED
(WHAT DOES THAT REMIND YOU OF?)
Failure to perform will not excuse the other party's performance:
“...where the significance of the default is grievously out of proportion to the oppression of the forfeiture”
ALL BREACHES ARE COMPENSABLE IN SOME FASHION
NOT
ALL BREACHES EXCUUUUUSE PERFORMANCE
Oppenheimer & Co. v. Oppenheim, Appel Dixon & Co. (p. 666)
Jacob & Youngs v. Kent

MATERIAL BREACH
&
SUBSTANTIAL PERFORMANCE
O.W. Grun Roofing & Constr. Co.
COURT WILL WEIGH:
Purpose to be served (by the term not performed)
The excuse for deviation from the letter (specific terms) of the K
The cruelty of enforced adherence
The desire to be gratified
FAILURE/SHORTCOMING WAS INADVERTENT AND UNINTENTIONAL
"QUESTION OF DEGREE"
FACT DEPENDENT
Suit for balance of $3,483.46 owed on construction K
To determine whether partial or incomplete performance was "substantial,"
court looks at whether:
DEFECTS ARE REMEDIABLE WITHOUT DAMAGING OTHER PARTS OF THE BUILDING
DEFECTS IMPAIR STRUCTURE AS A WHOLE
WAS IN BAD FAITH
Cope
v.
The Contract:
You agree to wash my car Wednesday afternoon, and I agree to pay you $20.00.
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y*
Y
Y
Y
Y
?
N
N
N
Y*
N*
N
N
N
?
?
Y
N
Y
N
?
RW Power Partners, LP v.
DRAFTING EXERCISE (p. 672):
"AND WE REALLY MEAN IT" is quite weak.
Pair up and try your hand at drafting language that might effectively capture the parties' agreement that
every
term or condition is material?
(pp. 671-72)
The breach?
Letter of Credit lapsed for 7-10 days
NOT ACTUALLY TRIGGERED, OR NEEDED
"If Operator [RW power] fails to perform any of its obligations pursuant to this agreement, then Va. Power may cancel this Agreement"
MATERIAL BREACH?
NO!
COURT:
PARTIES CAN AGREE TO ALLOW TERMINATION FOR NON-MATERIAL BREACHES, BUT MUST DO SO VERY EXPLICITLY
Sub-lease for office space,
conditional
on LL’s written consent and agreement to make certain necessary improvements.
If such written notice of confirmation... [is] not obtained on or before 12/30/1986, then this letter agreement and the Sublease... shall be deemed be null & void and of no further force and effect and neither party shall have any rights against nor obligations to the other.
Consent timely provided, but only by telephone
Sublessor sues, citing Jacob & Youngs v. Kent
Cardozo in J&Y said result would be different if parties had indicated “by apt and certain words” that perfect performance of every term was a condition of the K
How does the court distinguish the case?
Written notice follows, but 23 days late
Did the roof perform its intended function?
DIVISIBLE CONTRACTS

USE YOUR TAKEAWAY CARD TO ANSWER THE FOLLOWING QUESTIONS:
1. Summarize the standard for determining "material breach" OR "substantial performance"
2. Write out the best argument that you hear made for Plaintiff (Soft Cell, IT Company)
3. Write out the best argument that you hear made for Defendant (Behemoth Bank)
4. Which party would you rule for, Soft Cell or Behemoth?
IN CLASS EXERCISE:
SOFT CELL v. BEHEMOTH BANK
A Long Term Contract:
You agree to wash my car every Wednesday afternoon for the next 10 weeks, and I agree to pay you $200.00 at the end of the 10 weeks.
0
0
0
0
0
0
Y
Y
N
Y
N
Y
Y
Y
Y
N
Y
N
Y
Y
N
N
Y
Y
N
Y
Y
?
N
Y
?
Y
?
?
?
?
0
0
0
200
200
200, less damages
200
200, less damages
200, less damages
Delegation of Duties
“[when] a promise [is] made to one for the benefit of another, he for whose benefit it is made may bring an action for the breach of that promise.”
Rumbin v. Utica Mutual Ins. Co.
Sally Beauty Co., Inc. v. Nexxus Products Co., Inc.
The General Concept:
Ex Parte Stamey
Hallmont Homes
Midwest Grain Products v.
Olson v. Etheridge
Lawrence v. Fox
ORIGINAL PARTIES CAN DISCHARGE OR MODIFY OBLIGATION TO THE 3PB
UNTIL
the third-party beneficiary, without notice of the discharge or modification:
manifests assent
to the promise at the request of the promisor or promisee.
brings suit
on the promise, or
materially changes position in justifiable
reliance
on the promise,
Restatement (2d) of Contracts § 311
Filet Menu, Inc. v. CCL & G, Inc. (Cal. Ct. App. 2000)
If a party breaches 1 part of a divisible K, he is not barred from recovering for future performance
(i.e., K wil be treated as if each set of promises tied together was an independent K)
(Problems, p. 673)
Restatement (2d) §2
(4) Where performance [of a contract] will benefit a person other than the promise, that person is a beneficiary
Beneficiary = Someone who benefits
***ONLY
INTENDED 3PBs
HAVE RIGHTS IN A CONTRACT
$$
X
Can they sue on my K?
Is there anyone else who benefits from CSL's perfomance of this K?
WHY NOT?
NO!
$$
NO
Arb. Provision
Suit to enforce Bldg. Code
THIRD PARTY
CLAIM
THIRD PARTY
CLAIM
Arb. Provision
“I WAIVE ANY RIGHT TO A TRIAL BY JURY THAT I HAVE IN ANY SUBSEQUENT LITIGATION BETWEEN ME AND THE SELLER”
Hallmont can invoke arb clause ONLY if it was an
intended 3PB
of the Green Tree -- Stamey contract
Was it?
When can 3PB rights be altered or destroyed by the original parties?
Only until 3PB rights
VEST
Serious Warranty Issues
& CMI Corp.
Productization, Inc.
(manufactures grain dryers per K with PI)
Only 2 connections btwn CMI and Midwest:
Payment for dryers made by MW jointly to PI and CMI
CMI knew MW was the end purchaser
Was this enough to establish MW as a 3PB of PI-CMI contract??
NO!
(PI settles part)
Summary judgment for CMI affirmed
Correct Terminology
What are the Effects?
What are the Limits?
Correct Terminology
What are the Effects?
What are the Limits?
Macke Co. v. Pizza of

Gaithersburg et al.
Unless prohibited in the K, a party’s rights and duties under a bilateral contract may be assigned and delegated
Exception: “personal services may not be delegated, nor rights assigned, under a contract where delectus personae was an ingredient of the bargain”
“substantial interest in having that person perform or control the acts promised”
0
?
Sales K
Loan K
THE KEY TO THE RIGHTS OF A 3PB
Created by
Intent
of the parties to the K
Created by/in/as result of the main K (no new agreement or transaction needed)
Beneficiary can sue to enforce rights it has been granted
3PB rights cannot be impaired once vested
FOR BREACH
OTHER REMEDIES
DAMAGE$
&
BETWEEN A ROCK & A HARD PLACE
$
$
Van Wagner Advertising v. S&M Enterprises
Walgreen Co. v.
Sara Creek Property Co.
§359. EFFECT OF ADEQUACY OF DAMAGES
(a) the
difficulty
of proving damages with
reasonable certainty
,
In determining whether the remedy in damages would be adequate, the following circumstances are significant:
RESTATEMENT (2d) §360: FACTORS AFFECTING ADEQUACY OF DAMAGES
(c) the likelihood that an award of damages
could not be collected
(b) the difficulty of
procuring a suitable substitute performance by means of money
awarded as damages, and
VOCABULARY VIGNETTE
DI
MIN
U
TION (in value):
(THINK “DI
MIN
U
TIVE”)
To

di
min
ish, make small
THERE IS
NO SUCH WORD
AS
DIM
-
U
-
NI
-TION
!!
AM
MU
NI
TION
The Contract:
30 year lease—w/ clause that LL will not lease space in the mall to another pharmacy
assess inefficiencies not only in the market, but in the judicial decisionmaking process
Focuses on the costs and benefits of injunction
(as opposed to $ damages)
"Law & Economics" approach:
Parties in better position to negotiate value of breach,
than the court is to determine it
Determination of damages would be “costly in forensic resources and inescapably inaccurate”
Other costs to weigh when awarding injunctive relief?
COST OF JUDICIAL MONITORING & ENFORCEMENT
Here, “value of breach could be fixed with reasonable certainty”
Cancellation of the Lease by new owner
THE BREACH?
WHAT REMEDY DOES PLAINTIFF WANT?
PLAINTIFF'S ARGUMENT:
“the demised space is unique as to location for the particular advertising purpose intended”
Trial court
declines
to award S.P.
SPECIFIC PERFORMANCE
(1) Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
WHAT IS THE STANDARD of REVIEW?
**REMEDY IS IN TRIAL COURT'S DISCRETION
Reviewable only for
ABUSE
of discretion
The K:
3 year Lease for Ad space
KEY DISTINCTION:
UNIQUE PROPERTY =
RIGHT TO S.P.
Question is is not merely PHYSICAL uniqueness, but “the uncertainty of valuing performance”
***S.P. only awardable where $ damages are INADEQUATE to compensate the plainitff
THE THEORY
LIMITATIONS
ON RECOVERABILITY OF DAMAGES
THE MEASURE
OF DAMAGES
Subject to the limitations stated in §§350-53
, the injured party has a right to damages based on his
expectation interest
as measured by:
"Expectation interest" means that contract law remedies are intended to place the nonbreaching party in the same position he would have been in
had the other party performed the contract as promised.
"benefit of the bargain"
Damages = Money awarded as an
economic substitute
for the promised performance
RESTATEMENT (2d) §347
(a) the
loss in the value
to him of the other party’s performance caused by its failure or deficiency,
(b) any other loss, including
incidental or consequential loss
, caused by the breach,
less
(c) any cost or other loss that he
has avoided by not having to perform.
plus
+
__
Hawkins v. McGee
Jury finds breach, awards $3,000 (1929)
Why not a negligence case?
(probably b/c experimental, so no breach of std. of care)
The warranty:
“I will guarantee to make the hand a hundred per cent perfect hand....”
Judge says excessive; gives P oppty. to accept $500.
a DEFECTIVE MACHINE
Court’s analogy:
Value as warranted minus actual value as tendered
CONTRAST W/GOAL OF
TORT DAMAGES
:
RESTORING PLAINTIFF TO POSITION HE WAS IN BEFORE THE TORT
Provability with Sufficient Certainty
Reasonable Forseeability
Avoidable Losses (Mitigation)
Avoidable Costs
Particular Challenges (& Special Rules) in Construction Contracts
Panorama Village HOA v. Golden Rule Roofing
The breach:
In construction contracts, when it is difficult to prove loss of value with certainty, the Injured party can recover
"the reasonable cost of completing performance
or
of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.” --
Rest. (2d) §348(2)
What evidence did roofer provide re: an alternative measure?
Defects , plus...
The Contract:
Re-roof 9 Condo buildings
Peevyhouse v. Garland Coal Co.
The K:
The Breach:
5 yr. lease for strip mining of coal
D's argument:
No diminution in value of the land
P wants costs of performance ($25K) (citing Groves, natch)
"relative economic benefit is a proper [factor for the court to consider]" ON THESE SPECIFIC FACTS
Ruling on appeal:
DAMAGES LIMITED TO DIMINUTION IN VALUE CAUSED BY NON-PERFORMANCE
Jury award:
$5,000
failure to perform restorative work
Groves v. John Wunder Co.
The breach: D removes the good stuff, did not re-grade, left it “broken, rugged & uneven”
In exchange for payment of $105,000, D leases right to remove sand & gravel from P's property
The K:
D was to leave the property “at a uniform grade, substantially the same as the grade now existing at the roadway”
Ruling:

full cost to restore is recoverable; new trial allowed
D's argument: damages recoverable should be limited to resulting diminution in value
Total Value of property, even WITH uniform grade:
Cost to re-grade & restore property?
$60,000.00
$12,160
And now a word from this week's K2 Group...
DETERMINE
THE NATURE OF THE CONTRACT (ESP. WHAT THE BREACHING PARTY WAS SUPPOSED TO
DO
)
MY HELPFUL HINTS FOR APPROACHING DAMAGES ISSUES:
EVALUATE
EACH POTENTIAL MEASURE OF DAMAGES, FROM THE PERSPECTIVE OF
EACH
SIDE
CONSIDER
EACH POTENTIAL
CATEGORY/
TYPE OF DAMAGES SOUGHT
IDENTIFY
THE PARTIES—KEEP THE ROLES STRAIGHT (Buyer/Seller, etc.)
A few examples from NC cases...
70% of final grade
Writing:
(10 Pts.) Organization, Flow, Writing Style, Grammar, Etc.
2 Essays:

15 points each (30 pts. total)
20 MC:

1.5 points each (30 pts. total)
CUMULATIVE!
2 Hours, Closed Book
DAMAGE$ UNDER THE UCC
A Brief Intro to...
BUYER'S DAMAGES (FOR SELLER'S BREACH)
SELLER'S DAMAGES (FOR BUYER'S BREACH)
2 PRIMARY REMEDIES:
for Non-performance
(no goods)
for Defective performance (bad goods)
Value of goods as promised (warranted)
Value as Delivered / Supplied
minus
Damages =
Actual
Cover Price
minus
K price
Market Price
(for same goods)
minus
K Price
or
§ 2-713
§ 2-712
KGM Harvesting v. Fresh Network
What did KGM lose (out of pocket)?
Castellini
Club Chef
"Cost Plus"
"Cost Plus"
$70,000
$655K, less $233K owed
Jury Award:
KGM's argument?
in good faith
w/o unreasonable delay
K Price

minus
Market Price
In a commercially reasonable manner
In good faith
K Price
minus
RESALE Price
IF GOODS DELIVERED & ACCEPTED:
When goods have NOT been accepted:
May be by public
or
private sale
MAKE SURE YOU TAKE COMMERCIAL TRANSACTIONS!!!
Action for the K Price
§ 2-709
or
*USUALLY PLUS INCIDENTAL AND CONSEQUENTIAL DAMAGES
LEINGANG V. MANDAN WEED BOARD
PARKER v. 20TH CENTURY FOX FILM CORP.
HADLEY V. BAXENDALE
R.L. DONNELLY & SONS CO. v. VANGUARD TRANSP. SYSTEMS
MANOUCHEHRI v. HEIM
ESPN v. OFFICE OF THE COMMISSIONER OF BASEBALL
Full transcript