REMEDIES

DAMAGESGOALS:

- Hawkins v. McGee (p.3) where π goes in to get skin graft and comes out with malformed hand: Try to put injured party “in as good a position as he would have been in had the ∆ kept his contract.”

o Don’t allow punitive damages. Damages should already take these into account.

- True measure of damages is the difference btw value to π of what was promised him and that which he actually received.

- Expectation damages = default form of damages, the amount of money that would be necessary to put the victim of the breach into the same position if the contract had been performed.

o Theory of efficient breach explains this default rule. We want to give sellers incentive to breach when it is the efficient thing to do!

o Covering – When seller turns around and sells the no-longer-desired contracted item on the market. The damages would then be the difference btw that market price the seller receives on the market and the price contracted for.

o Lost Profits – Courts reluctant to award damages for lost profits b/c hard to prove what profits are or what they would be. (Fera v. Village Plaza, Inc. p.85 where ∆ gives π’s rental spot to another person, Freund v. Washington Square Press, Inc. p.82 where calculating lost royalties, delay of promotion, etc. is difficult b/c too speculative.)

- Did π REALLY believe the procedure would do what ∆ said it would? (Sullivan v. O’Connor p.7 where doctor says to patient she’ll have a great new nose that will make her face more beautiful.)

o Nose is hard to value.o Solution to patients who misrepresent their beliefs:

don’t believe them give them a high burden of proof

LIMITATIONS: - Commercial actors = diminution of value (b/c they supposedly don’t care about

the goods themselves)- Private actors = cost of performance (b/c there might be other factors going on –

i.e. they really do want the ugly fountain on their front lawn)o Cost of performance = background default rule

- Things to look at in land questions: o Value the land how?o Personally? (cost of performance)o Commercially? (diminution of value)

- Restatement 347, 348 – Injured party has right to damages based on expectation interests if the loss of value is a result of the other party’s breach.

- π is entitled to be made whole and NO more. (Louise Caroline Nursing Home, Inc. v. Dix Constr. Corp. p. 38 – π can’t get any damages b/c π can, in theory, just turn around and use another contractor for the same bargained contract price.)

- Did π mitigate damages? (Rockingham County v. Luten Bridge Co. .41 where π bridge builders didn’t stop building the bridge when ∆ county told them to stop.) Also anticipatory breach in Luten.

o fixed versus variable costso damages denied for costs π could have avoided

- Damages in broken contract for sale of goods (where vendor didn’t deliver) are the difference btw the contract price w/vendor and the market price at the time delivery should have been fulfilled. Damages are NOT the price of the new contract that buyer enters into. (Missouri Furnace)

o UCC §2-712 changes this up a little. Use a spot market technique (take difference btw contract price and the market price as it changes throughout the year).

- Foreseeability “As may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.” (Hadley v. Baxendale, p.70)

o In this case, ∆ had no way of knowing that π needed the damn crank shaft so desperately.

o information forcing – Hadley rule is trying to get the party in the best position to contract for the circumstances. The party with the most information and knowledge (the miller who knows a crankshaft is crucial) to reveal this information in order to get compensation.

o Like the mitigation rule in that both try to reduce the loss.- Uncertainty: Emotional Distress damages NOT cool. (Valentine v. General

American Credit, Inc. p.77 where woman wanted emotional distress damages for being fired from her job, Restatement §353.)

- Unusual market situation where calculating damages is difficult and cost of performance is not the right remedy. Other factors involved such as both parties’ benefiting from the performance. (Freund v. Washington Square Press, Inc., p.82 – publishing house doesn’t publish π’s manuscript)

ALTERNATIVE INTERESTS: RELIANCE AND RESTITUTIONRELIANCE

- Reliance damages – Backward looking: Amount of money necessary to put you in the position that you were in when the contract was entered. Trying to get your expenses back, given that you can’t get any profits. (As opposed to expectation damages, which are forward looking and look at where you’d be if the contract was fulfilled.)

- No recovery for expenses incurred PRIOR to contract.- Expenses incurred after signing of the agreement and before the breach

recoverable “if in furtherance of the general scheme.” (Chicago Coliseum Club v. Dempsey p.95 boxer who breaches contract to fight)

RESTITUTION / QUANTUM MERUIT / UNJUST ENRICHMENT / IMPLIED CONTRACT

- Restitution if ∆ was enriched by π’s actions.o Was benefit conferred?o Measured by $ of benefit conferred.

money paid by him property delivered services rendered in accordance with and upon the faith of the

contract- No award of restitution if ∆ was NOT enriched by π’s actions. (Boone v. Coe

p.101)- Quantum meruit: Allow a promise to recover the value of services he gave to ∆

irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract. (United States v. Algernon Blair, p.103)

o Reasonable value of the performance.o Not affected by any loss which would have been incurred by complete

performance.o Standard for measuring = amount for which services could have been

purchased.- Relevant decision reached before π attempts to recover restitution? (Oliver v.

Campbell p.109, where lawyer whose services were worth $5000 was fired before divorce papers fully go through but after court makes its decision regarding the divorce. Lawyer only recovers the rest of his contract, NOT the restitution amount of $5000.)

- Employment – Default rule: In employment contract (for a term of years), it’s all or nothing. In the situation of a contractor/building a house contract, though, it’s restitution. Oddball outcome: Britton v. Turner (p.115) where worker gets restitution for “service actually performed.” Instead of the default rule, the court follows what it perceives to be the “community norm.”

CONTRACTUAL CONTROLS ON DAMAGESDAMAGES CLAUSE / LIQUIDATED DAMAGES

- Test of enforceability (Pacheco v. Scoblionko p.132 where kid ends up not being able to go to summer camp, Restatement Second §356.)

o difficult to estimate accuratelyo reasonable forecast of what is just compensation

- “Contract damages, broadly speaking, aim at compensation, NOT at punishment.” (City of Rye v. Public Service Mut. Ins. Co. p.133 where city’s contract damages clause doesn’t really measure any monetary damages the city experiences when builder doesn’t complete buildings in time. Court reasons that the penalty is really just an incentive for the builders to get things done quickly. Court questions if liquidated damages are just exploitation.)

- Damage to reputation a difficult thing to measure and when business partners agree not to voluntarily participate in litigation against the other with fixed liquidated damages and one ends up doing so, then the court upheld the damages. (Yockey v. Horn p.135)

- Tricky situation if the contract has a lot of provisions and a single liquidated damages clause. Courts don’t like it when the single clause refers to ANY breach of ANY part of the contract. (Wilt v. Waterfield, p.141)

- Limited liability clause is enforceable and different from single liquidated damages clause (i.e. in Wilt) b/c limited liability doesn’t purport to make an estimate of the harm caused by the breach (it’s flexible; “up to $50”). (Fretwell v. Protection Alarm Co. p. 144 where alarm company had a contract clause that said they’d be liable up to $50)

o Alarm company NOT an insurer against burglary.o Having a limited liability clause allows company to keep rates low.

EQUITYSPECIFIC PERFORMANCE

- Specific performance is less common than $$ damages. To get specific performance, have to show that $$ damages NOT adequate.

- Specific performance for ordinary real estate sales.- Specific performance NOT an appropriate remedy in property lease of “unique”

billboard space. Damages are adequate. Weigh factors: (Van Wagner Advertising Corp. v. S & M Enterprises, p.151)

o How difficult is it to measure the value of it for $$ damages? This can mean uniqueness if its uniqueness means no established market value. (NOT a question of the inherent physical uniqueness but the uniqueness in valuation.)

o Would specific performance create an undue hardship for the ∆?o ALSO, damages are appropriate for the ENTIRETY of the contract, NOT

just up to the breach or up to the trial, etc.- Specific performance NOT common as a remedy for contracts involving

ordinary personal property. o Ordinary personal property that is NOT unique does not merit specific

performance. (Paloukos v. Intermountain Chevrolet Co. 161 where pickup truck sale was NOT a “limited edition Corvette Indy Pace car.”)

o BUT, in case where it’s SO difficult for other party to go out there and get the same product, court might award it. (Curtice Bros. Co.v. Catts p.155 where farmer contracted to deliver a crapload of tomatoes.)

- Court might award when there’s a third party who would be affected. (Laclede Gas Co. v. Amoco Oil Co. p.162 where ∆’s not fulfilling propane gas contract would affect neighbors.)

- Specific performance NOT common as a remedy for contracts involving personal service.

o Specific performance NOT awarded in case where chauffeur and employer are at odds and employer kicks chauffeur out. If specific performance were awarded, they’d be forced to live together when they obviously don’t want to. They’d treat each other poorly. (Fitzpatrick v. Michael p.170)

o BUT specific performance awarded in case where negative injunction prevents football player from playing for another team. (Dallas Cowboys v. Harris p.175)

o Distinctions: Uniqueness of the personal service. Who else is there who can

perform the same work? Fitzpatrick renders basic services whereas Harris is a professional football player, a little more unique.

Personal relationship important. Don’t want employer in Fitzpatrick to employ someone he doesn’t want to employ. The court feels inhibitions in forcing people to have employment relationships that they don’t want to.

Who’s suing for injunction? In Fitzpatrick, it’s the employee seeking an injunction

against employer. In Harris, it’s the employer seeking injunction against

employee. Effect of injunction on Fitzpatrick’s employer would be bad – a

negative injunction would prevent old man from hiring another nurse!

o Courts tend NOT to order specific performance for personal service. Hard to monitor employees to ensure they behave appropriately. Uneasy ordering people to work b/c it’s too much like servitude or

FORCED slavery. Courts might order negative injunction to prevent employee from

working for a competitor.- Covenant not to compete is an attempt to provide in the contract for an

injunction against the seller. (Fullerton Lumber Co. v. Torborg p.177)o Illegal in California.

Actually helped with information sharing. Tech startups did well b/c knowledge spread through Silicon

Valley as ex-employees opened up their own companies.o “After you leave us, you’re not to compete with us for a certain amount of

time.”o Threshold: Must be reasonable. Similar to liquidated damages, the courts

are hostile to covenants not to compete. Courts have sometimes made reasonableness dependent on the

type of industry. Three dimensions to covenants not to compete:

scope of the industry geographic scope temporal scope

Analysis: The narrower the dimensions, the more likely the court will enforce.

- Is it practical? (Northern Delaware Indus. Dev. Corp. p.180 where court doesn’t issue specific performance when π wants to requisition 300 more workmen for a night shift.)

GROUNDS FOR ENFORCING PROMISES

FORMALITYVALID CONTRACT

- According to the UCC, if these are left blank…o quantity blank NOT valido price blank market price usedo date blank reasonable customs (Acme, p.43)

- Consideration – Promise needs to be supported by consideration and bargain or by reliance.

o Consideration = legal benefit for the promisor or detriment to the promisee.

o No enforcement of the promise when there’s no consideration/bargain or reliance. (Congregation Kadimah Toras-Moshe v. DeLeo p.192 where π wanted to enforce oral promise from guy on deathbed for $25K. An oral gratuitous pledge.)

Allocated in their budget NO reliance Name a library after him NO consideration

o If this gift were made inter vivos (when he was still living), then it’d probably be okay. Gifts aren’t necessarily bad; we’re just skeptical about allowing people to make promises to give gifts.

o Idea of detriment-benefit central to contract law.- The Seal used to be employed where you could make a promise w/o detriment-

benefit and it would still be enforceable if it was under seal. BARGAIN

- In consideration, ask:o What’s the benefit to promisor?o What’s the detriment to the promisee?

- Consideration is where one gives up what one has the legal right to do. This is a detriment to the promisee. (Hamer v. Sidway p.204 where court upholds uncle’s promise of $5000 provided nephew stops carousing, drinking, gambling, etc.)

o Distinction from DeLeo – the naming opportunity that congregation tries to say is consideration did NOT induce the monetary benefit.

o In Hamer, the “stop carousing” was accompanied by the promise of money.

o Courts concerned with whether or not there’s an inducement. A return promise, some kind of act, waiving of a legal right that is

the motivation for the promise. How can we tell? Ask question of whether or not the promise is

enforceable by the promisor. ex: Earle v. Angell p.206 where promise is enforceable. Aunt will

give nephew $500 if he comes to her funeral. Benefit: She has peace of mind knowing that he’ll be there.

Detriment: Being at the funeral prevents him from being at another place at that time.

- Restatement (Second) § 71 – To constitute a consideration, performance or a return promise must be bargained for.

o Bargain sought by the promisor in exchange for his promise given by the promisee in exchange for that promise

o Performance can be an act a forebearance creation, modification, or destruction of a legal relation

- Consideration of $1 is NOT valid consideration for the property. This is treated as a joke and completely unrelated to the arrangement. (Fischer v. Union Trust Co. p.210 where $1 “in consideration” for the property and father’s promise to pay mortgage is NOT enforceable. Treat the property as a gift.)

- Nominal consideration (i.e. inadequacy of consideration) ordinarily won’t vitiate the contract.

o Exception: Where the exchange is of unequal sums of money (things of “fixed,” not “indeterminate” value) where fixed or “known” worth is definitely less than the $ given in consideration.

- Situational circumstances might influence enforcement. o Wartime?o Situation in wartime Greece such that a contract to loan 500K drachmae

(worth ~$750) and to repay in the amount of $2000 is upheld. Court doesn’t want to second-guess the parties.

Don’t inquire into adequacy of consideration. “Mere inadequacy of consideration will not void a contract.”

Court doesn’t want to be in the business of figuring out what stuff is worth to people.

Situation in wartime Greece might be one like where a glass of water (essentially free) is worth a WHOLE BUNCH to a man dying of thirst. (Batsakis v. Demotsis p.214)

- Allotments sale against the law when beyond the current crop year. Not allowed to sell allotments for future years. (Duncan v. Black p.220 where π “giving up legal claim to the future allotment” is stupid and worth nothing b/c π didn’t have any way of knowing he’d have those acres to give up.

- Restatement (Second) §74 – Giving up a claim/defense: Forbearance to assert or the surrender of a claim or defense which later proves to be invalid IS consideration if the forbearing/surrendering party believes that the claim or defense given up may be “fairly determined to be valid.” (p.222)

o Why such a hardline rule? Want people to settle. An objective standard of “honest and reasonable belief in possible

validity” (the first phrasing of it) might lead to a lot of litigation and courts want to avoid frivolous lawsuits.

o If court in Duncan v. Black followed this, then Duncan v. Black likely would have turned out differently b/c the π DID believe he had a valid claim to the land.

- Implied contracts: Intentions of the parties could be inferred from their acts rather than expressed explicitly. “An agreement which legitimately can be inferred from the intention of the parties as evidenced by the circumstances and the ordinary course of dealing and the common understanding of men.” (Hertzog v. Hertzog in Martin v. Little, Brown & Co. p.223.)

o Two types implied in fact = parties’ intention, matter of actual fact that this is

what they thought and expected expectation damages b/c it’s a breach of an actual contract

then implied in law = unjust enrichment, π conferred benefit to ∆

restitution for benefit conferredo NO contract btw student who offers information on plagiarism in a book.o Court says that the facts are insufficient to establish a contractual

relationship btw the two parties.o Common business practice to supply work and information and receive

payment for that work/information NOT good here. It’s not clear what amt. that payment would be. The only thing student offered was the finding of the information.

o NOT unjust enrichment b/c unjust enrichment requires it to be shown “by the facts pleaded that a person wrongly secured or passively received a benefit that it would be unconscionable to retain.”

o Student here is just a volunteer.- Time might prove important in determining whether something is an implied

contract. (Collins v. Lewis p.226 where ∆’s lack of action re: π’s taking ∆’s cows makes the care of the cows an implied contract btw π and ∆ to care for them. An implied contract is “inferred from the conduct of the parties though not expressed in words.)

o Distinction from Martin – π in Collins informed ∆ that he was taking care of the cows.

o Need consent for a real contract, and might be able to imply consent from activities.

o π in Collins NOT a volunteer. π was doing his duty/job.PAST PROMISES

- Past consideration under conventional consideration doctrine is NOT valid consideration for a promise. (Mills v. Wyman p.230 where π cared for ∆’s son and then later ∆ offers to help pay for the expenses. There was no detriment to the π – for consideration doctrine to operate correctly, the detriment (caring for the kid) had to be motivated by consideration (offer by ∆ to pay for expenses).

o Exceptions where subsequent promises are allowed and enforceable (where the “renewed” promise is allowable):

statute of limitations runs out, so there’s a new promise

bankruptcy – an “honest debt” still exists even when bankruptcy proceedings progress

infancy – when the minor reaches the “age of majority,” the previously voidable promises can be affirmed, in which event the promise acquires full legal effect

- In extreme cases, court might take out temporal element and look at actual behavior to find that “past consideration” is actual consideration for a promise. (Webb v. McGowin p.235 where worker π falls down w/log instead of hitting ∆, π is seriously hurt, and ∆ promises to take care of π for the rest of π’s life. ∆ dies and ∆’s executors cut off the fixed $15/2 weeks amount. Court says ∆ should pay π still -- ∆ rec’d benefit of living another day AND the actual behavior (ongoing payments) suggest that he intended to keep his promise.)

- Restatement §86 (p.241) – Subsequent promise is “binding to the extent necessary to prevent injustice” except when “conferred…as a gift…or…value is disproportionate to the benefit.”

RELIANCE- Did π rely to his detriment?- Estoppel

o equitable estoppel – representations made as to facts past or presento promissory estoppel – circumstances wherein one promises to do or not

to do something in the future (Restatement §90) Renders a gratuitous promise enforceable as a promise Gratuitous promise made by one to procure insurance on the

promisee’s property is made enforceable by the promisee’s reliance thereon and his forbearance to procure such insurance himself.

- History: Before, a “mere gratuity” is not enforceable. (Kirksey v. Kirksey p.244 where widowed π sister-in-law abandons property and moves to live with ∆ brother in law, ∆ kicks her out later.)

o ∆ argues no consideration for the housing.o π argues that giving up her legal right to keep that property IS

consideration.o Court rejects this argument, saying what she gave up isn’t what motivated

the promise.o Promissory estoppel not available yet (case is in 1845).

- ∆ estopped to deny consideration when π was intentionally influenced to alter position for the worse on teh faith of the promise. (Ricketts v. Scothorn p.245 where ∆ grandfather promises π granddaughter $2000 so that she doesn’t have to work anymore and π quits her job, etc.)

- Acceptance requires “words or other overt action” and a letter that ∆ “would renew the [insurance] policy for another year on the same terms unless notified to the contrary” and subsequent lack of action on π’s part is NOT an acceptance/contract. (Prescott v. Jones p.246 where π didn’t reply to π’s letter and π didn’t renew the policy.)

- Law of charitable subscriptions – courts have adopted doctrine of promissory estoppel as the equivalent of consideration in connection w/law of charitable subscriptions.

o Allegheny College v. National Chautauqua County Bank p.247 where decedent promises donation in return for naming a memorial fund after decedent, and this naming opportunity is consideration.

o Strands re: law of charitable subscriptions that are in tension: Courts have enforced charitable subscriptions. Courts have been reluctant to enforce promises that don’t have

bargain/consideration. ALSO, this seems to be a promise for a gift. Cardozo settles on third option: promissory estoppel.

o Why enforce promises to give gifts in charitable situations and not other situations such as Fischer v. Union Trust ($1 not consideration for father’s promise to give her property and pay her mortgage)?

Convenience: Charities can do whatever it is they want to be done in the future w/the promised gift.

Charities rely solely on donations. Concerned about fraud in non-charitable situations. Charities are otherwise regulated already through gov’t rules, etc.

- Valid consideration when π intends to compute interest on the money π used to pay insurance. “Interest due on any sums paid out by π on behalf of ∆ for insurance represents valid consideration and converts the promise into a binding contract.”

o Court doesn’t rely on promissory estoppel.o East Providence Credit Union v. Geremia p.259

- Part performance doctrine can displace statute of frauds in situations like Seavey. (p.265)

o Part performance is NOT part payment of a purchase price. In situation of part payment, specific performance will not be available.

o Critical element: entry into possession – “conduct provides a kind of evidence that can be said to take the place of a signed memorandum.”

o Restatement (Second) §139 (p.270) Promise “reasonably expected to induce action or forbearance” is

enforceable if “injustice can be avoided only by enforcement.” Restatement lists significant circumstances to determine injustice.

(p.270)o Part performance on a land contract is enough for court to enforce the

oral promise. Seavey v. Drake p.264 where father promises son deed to land, son moves onto land and makes improvements and father witnesses the improvements.

Two things going against son: son doesn’t give anything in consideration NOT in writing (per Statute of Frauds, contracts involving

land need to be in writing) Nevertheless, court enforces:

partial performance

father knew about son’s improvements and didn’t do anything about it

fraud – It would be fraud if father’s testators got benefits of son’s improvements

Restitution NOT good b/c we’re not sure if we can measure the actual value of the benefits.

- Default employment contract is at will. Hiring π fulfills ∆’s promise of “permanent employment” even though ∆ fires π after four months. (Forrer v. Sears, Roebuck & Co. p.271 where π quits work but then is induced to return by promise of “permanent employment” from ∆.)

- In employment relationship, employee’s detrimental reliance NOT enough to show fraud. Have to show by employer’s actions or statements that employer himself committed fraud.

o Statute of Frauds important in employment relationship (where employment contract is for >1 year).

o Stearns v. Emery-Waterhouse Co. p.275 where π didn’t show evidence of fraud Statute of Frauds bars enforcement of the contract.

- π can recover expenses they expended in reliance on ∆ franchiser’s approval of their franchise. (Goodman v. Dicker p.278 where π incur a bunch of expenses in preparation to do business under ∆’s franchise and franchise ends up being denied.)

o Promissory estoppel argument: They did all the preparation and incurred expenses in reliance on the promise.

o Why NOT reliance damages? Reliance damages put you back at the status quo rather than giving

you the benefit of the bargain. “The true measure of damage is the loss sustained by expenditures

made in reliance upon the assurance of a dealer franchise.”- Promissory estoppel remedy: Routine remedy is expectation damages (see:

Allegheny College) NOT reliance damages. (p.283)- Modification of a valid agreement, to be enforceable, must be supported by

consideration or a common-law substitute (p.283). o Any consideration, however insignificant, satisfies this rule.

Consideration = promise or returned performanceo NO consideration for purported modification where π landlord reduces

rent by $25/month for ∆ tenant who can’t pay the rent. BUT, what about ∆ gets lower rent, π keeps a tenant? Levine v. Blumenthal p.286

PROMISES OF LIMITED COMMITMENT- Bilateral contract = both sides of the agreement are the same thing (i.e. a

promise in exchange for a promise)- Promise is consideration if the performance promised, either act or forbearance or

both, would be consideration if it alone were bargained for. - Voluntariness – π volunteers recipe to ∆, and this is NOT a contract to pay her. π

gets nothing in return b/c the recipe was volunteered. (Davis v. General Foods Corp. p.292)

- Cancellation clause generally okay UNLESS it is unrestricted (p.293).- Mutuality = some degree of balance in obligations- Restatement (Second) §77 – Illusory and Alternative Promises: Leaving open

choice of alternative performances okay IFo each of the alternative performances would have been consideration if it

alone had been bargained for ORo ONE of the alternatives would have been consideration and there is a

substantial possibility that events may eliminate the other alternatives, leaving that ONE.

- Ex of illusory promise: Lumber company promises heirs that they’ll resell to heirs if they end up buying the land. Heirs promise to buy if the lumber company does buy the land. Lumber company buys it, but heirs say they don’t want it. Contract is enforceable. Obering v. Swain-Roach Lumber Co. p.295.

- Exclusivity clause upheld. ∆ was a fashion creator/designer and π was an agent. ∆ promises he has exclusive rights to market her name and she will not market herself. π promises to market her name and give her some of the profits. “If I market your designs, then I’ll give you a portion of the profits.” (Wood v. Lucy, Lady Duff-Gordon p.298)

o π promises to use reasonable efforts.o ∆ might have a defense in arguing that, since she was able to bargain

something out with the other company, π was NOT using reasonable efforts to secure her marketing opportunities.

- Exclusivity clause upheld again on promise “If you get the feasibility report and we are satisfied w/the report, then we will buy the land.” Omni Group, Inc. v. Seattle-First Nat’l Bank p.302.

- An output contract is an agreement “to sell all the goods or services a party may produce or perform to another party.” UCC §2-306:

o says this is valid even w/o definite quantity of goods – it’s NOT lacking in mutuality

o provides a “best efforts/good faith” requirement for the seller to continue w/production

Feld v. Henry S. Levy & Sons, Inc. p.308 Violating the promise b/c not making as much money as they wanted to is a question of fact – does it qualify as best effort?

What would be a “good faith” non-delivery of the promise? Maybe massive debt. Maybe a massive depression.

- Court generally unwilling to interfere w/franchising/distributorship contracts. Corenswet, Inc. v. Amana Refrigeration, Inc. p.311

o Finding another distributor is considered valid as a “good reason” to end the contract.

o Making it terminable on ten days notice provides for consideration b/c that means they’re promising to employ them for at least 10 days.

- Employment in at-will contract not broken by retaliatory discharge. Instead, it is a tort claim. Public policy interest. Not a breach of contract – possible breach of contract claims. Sheets v. Teddy’s Frosted Foods, Inc. p.316.

o Promissory estoppel – difficult b/c the promise was at-will employment, basically “we’ll keep you as long as we want to.”

o Implied duty of good faith.- Key doctrinal point: We can make finer, more precise judgments than courts can.

We only REALLY need the legal system when the interpersonal relationship isn’t good enough. When the interpersonal relationship doesn’t work, go to the courts. The courts will look at:

o Seal.o Pattern – i.e. bargain and consideration.o Problem w/formal theory of consideration doctrine: How courts deal with

gifts.

THE MAKING OF AGREEMENTS

MUTUAL ASSENT- Assent contract obligation is voluntarily assumed- How to determine assent?

o Subjective: “To constitute a contract, there must be a meeting of the minds of the parties and both must agree to the same thing in the same sense.”

o Objective: Intention judged by outward expressions. Even if ∆ didn’t intend to employ π, if his outward expressions (i.e. his words and actions) would have been taken as such by a reasonable man, then that is a valid contract.

Contract created if words used would be interpreted as a contract by the reasonable man, regardless of subjective intentions. Embry v. Hargadine, McKittrick Dry Goods Co. p.325.

The manifestation of a party’s intention, rather than the actual or real intention, is controlling. In this case, the testimony re: party’s sense of the state of negotiations = evidence bearing on the behavior and the perceptions of the parties to the negotiation is admissible. Kabil Developments Corp. v. Mignot p.329.

- In the case of a sham transaction, where one of the “parties” didn’t even exist, do NOT look at the outward expression (i.e. the objective theory) b/c the fake party was never intended actually to fulfill the contracts. New York Trust Co. v. Island Oil & Transport Corp. p. 333

- In order for a disclaimer to be effective, it must be conspicuous, which is a matter of law. Clarity is also essential.

o Disclaimer = disclaiming that the document in question is a contract (saying that it’s NOT a contract)

o McDonald v. Mobil Coal Producing, Inc. p. 334 where employer handbook is deemed not sufficiently conspicuous in question of whether employment was at-will or for-cause.

- Is it an offer or an invitation to deal? o In an offer, no quantity specified does NOT invalidate the offer.

o Ask question if there’s a “manifest intention to be legally bound.” Yes offer. No invitation to deal.

o Invitation to deal – Clear difference btw i.t.d. and offer is “language is not such as a business man would use in making an offer to sell to an individual…more in the nature of advertisement or business circular.” (Moulton v. Kershaw p.343)

o Advertisements of goods ordinarily NOT offers. Courts make exception for fur stoles advertisement where the ads

“were clear, definite, and explicit, and left nothing open for negotiation.” Lefkowitz v. Great Minneapolis Surplus Store p.346

Consumer protection statutes say “No bait and switch tricks.”- Traditional common law idea is agreements have to be sufficiently definite for

courts to enforce them. UCC says something different that it’s okay if that’s what the parties wanted and there’s reasonable basis for a remedy. (Joseph Martin, Jr. Delicatessen v. Schumacher p.346 where rent went up over the years and it was too vague for a legally binding contract. Definite would have been to say “reasonable rents” or “rents at market value.”)

- Letters of intent usually not meant to be binding, but if the principle points of agreement are all included and it looks like the parties meant it to be binding, they will be bound by the letter of intent. Empro Mfg. Co. v. Ball-Co. Mfg., Inc. p.352 where letter of intent NOT binding b/c the parties left themselves so many “outs.”

- Continuum:o letter of intento options contract

Options contract = one party has option to buy (stock, for example) at a certain price, doesn’t have to buy it, but if that party does decide to buy it, the seller is obligated to sell it. (See below)

o regular contract- Restatement (Second) §20 – Misunderstanding (p.362)

o No manifestation of mutual assent if parties attach materially different meanings and

neither knows or has reason to know the meaning attached by the other

each knows or has reason to know the meaning attached by the other

o We’ll go along with X’s meaning* if X doesn’t know any different meaning attached by Y and Y knows

the meaning X attached to it. X has no reason to know of any different meaning attached by Y

and Y has reason to know the meaning attached by X. * -- We do this as a means of information forcing so that Y tells

X everything he knows.o No meeting of the minds if π thought “Peerless” referred to October and ∆

thought it referred to December. Raffles v. Wichelhaus p.358.

o “Reason to know” and trade practice generally good measures of whether or not a party probably meant something to mean one thing versus the other. They’re NOT good measures when ∆ is new to the industry. Flower City painting Contractors v. Gumina Constr. Co. p.360 where ∆ was new to the industry and didn’t’ know business practice was to paint both interior and exterior.

CONTROL OVER CONTRACT FORMATION- Contract determined by manifested intent, not subjective intent. Cobaugh v.

Klick-Lewis, Inc. p.363 where ∆ golf course company manifested intent to form a contract even though they did not subjective intend to contract with π casual golfer to give π a car if he got a hole in one. The sign was left over from a previous tournament, but since it didn’t specify such tournament, court holds that it manifests such intent.

o Dissent: Is this a gambling contract, which isn’t enforceable? Court says no b/c it’s a game of skill, not chance. Plus, you’re making a contract based on your own skill, not

someone else’s (such as a jockey’s in horseracing or baseball players in the World Series)

o Public policy considerations always floating around: Gambling Whistleblowing Sexual services

- Even without a formal acceptance, parties can accept by their performance of the contract. Allied Steel & Conveyers, Inc. v. Ford Motor Co. p.369 where a second offer is held to have been accepted by Allied once Allied began performance of the work contracted for.

- Offeror is the master of the offer. The offeror controls the terms under which the offeree accepts the offer. The party who makes the offer gets to establish what an acceptance is.

- In case of doubt it is presumed that an offer invites the formation of a bilateral contract by an acceptance amounting in effect to a promise by the offeree to perform what the offer requests. Davis v. Jacoby p. 372 where response letter by π to come take care of decedent and his wife is held to be a return promise. π need not actually perform (take care of decedent, who commits suicide before π arrives) for π to receive the promise that decedent made in the offer (to make π’s daughter beneficiary of the will instead of the evil nephews).

TERMINATION OF OFFEREE’S POWER OF ACCEPTANCE- Restatement (Second) §36 (p.377) – Offeree’s power of acceptance may be

terminated byo rejection or counter-offer by the offereeo lapse of timeo revocation by the offeror oro death or incapacity of either partyo ALSO: “An offeree’s power of acceptance is terminated by the

nonoccurrence of any condition of acceptance under the terms of the offer.

- If offeror withdraws offer before offeree’s acceptance, then there is no contract. Petterson v. Pattberg p.378 where ∆ offeror tells π offeree that ∆ has sold off π’s mortgage when π offeree shows up at ∆’s door, saying he’s here to pay off the mortgage.

o Timing is key.o ∆ offeror tells π about selling off the mortgage already...o ∆ tells π BEFORE π shows ∆ the money.o Doctrinal point: Performance sought is NOT showing up at ∆’s door. It’s

giving ∆ the cash.- Options Contract – Restatement (Second) §45 p.384

o A makes an offer ($100 if you cross the bridge) and in addition, A promises NOT to revoke the offer. This gives B an option (cross/accept or not cross). A’s promise not to revoke is taken as consideration.

o Preparation Must be part of the actual performance in order to preclude

revocation. Just the beginning preparations aren’t enough. Preparations could possibly be reliance sufficient to make the

promise binding under option contract doctrine §87(2).PRECONTRACTUAL OBLIGATION

- What if, in an option contract, offeror promises that option is available for a stated period?

o Common law background (NOT good law anymore): Promise to hold offer open is not supported by bargain for consideration. Dickinson v. Dobbs p.390.

o Restatement (Second) §87 p.395 – Offer is binding (i.e. a firm offer) as an option contract if

in writing and signed by offeror, recites a purported consideration and proposes an exchange on fair terms within a reasonable time OR

is made irrevocable by statute- Subcontractors who revoke before contractor accepts, evolution of the options

contract.o No contract if offer is revoked before acceptance. Baird v. Gimbel Bros

p.395 where chronology

∆ makes offer to supply π with linoleum π makes bid to city π receives revocation of ∆’s offer city accepts π’s bid π accepts ∆’s offer

π tries to accept after π receives revocation. π should have accepted offer before making the bid to the city.

This was a normal offer, according to Hand, to enter into a bilateral contract. The ∆ can revoke as long as the π hasn’t accepted the offer yet.

Why not promissory estoppel? Hand objects to PE b/c PE requires a promise, and an offer does NOT become a promise until it is accepted, which it was not in this case.

o The opposite conclusion (and the actual doctrine formalized by the restatement!): Drennan v. Star Paving Co. p.399 comes to the opposite conclusion on a seemingly similar set of circumstances.

Court mentions §45 (part performance) but does NOT rely on it. Court uses §90 (general promissory estoppel).

Offeree is relying to his detriment on the offer. Principle: Worried about people relying to their detriment

on a statement.o Differences btw Baird and Drennan:

Practical effect Baird – Hand puts responsibility on general contractor, who

has to make sure the subs are all making good offers Drennan – Traynor puts responsibility on the subs to make

sure the subs have made a good offer. Presumptions

Baird – Assume it’s NOT an irrevocable offer unless you say otherwise.

Traynor – Assume it IS an irrevocable offer unless you say otherwise

Style Baird – formalistic in requiring offer and acceptance,

period. Hand doesn’t like promissory estoppel, which is not a formalistic doctrine.

Drennan – Traynor doesn’t like formalism and wants to make the move towards a less rule-like rule. Wants to move towards a standard.

o Moving further away from formalism, the high point of promissory estoppel – Hoffman v. Red Owl Stores, Inc. p.409 – where all ∆ said to π was “if you put up the money, that’s enough to start up a franchise.”

Previously, Hand said that an offer isn’t a promise. Traynor sasid promissory estoppel DOES apply to an offer. This case, Hoffman, goes even further and says it doesn’t even have to be an offer; it can just be a vague promise.

To protect themselves from promissory estoppel like this, franchises can have their potential franchisees sign waivers at every step.

Compare this to Forrer v. Sears, Roebuck & Co. p.271 where the guy was told to come back to work for Sears and he’s fired soon after leaving his retirement job as a farmowner. These cases were ~same year, but keep in mind Forrer had the issue of employment at-will (larger doctrinal issue).

CONDUCT CONCLUDING A BARGAIN

- “Deviant acceptance” (in common law) is strict. Introduction of “new” or “variant” terms means that the offer is dead and the process of contract formation must start anew.

o Livingstone v. Evans where π sends ∆ back a telegram saying “Will give $1600” and court finds ∆’s response of “Cannot reduce price” to be a renewal of the original offer and NOT a rejection of $1600 counter-offer. “Cannot reduce price” = still standing by it and therefore still open to accept it.

o Moving away from this strict interpretation and showing greater tolerance of incomplete agreements.

UCC §2-204 Authorizes formation of a contract for the sale of goods in

any manner sufficient to show agreement. ID of offeror, offeree, and moment of making the contract

unnecessary. Restatement (Second) §22 takes similar path.

o Events that normally terminate power of acceptance (incl. deviant acceptance) don’t terminate when offer that created the power is a binding option.

- “Battle of the Forms” – printed forms as a method of contract formation.o Std. contracts typically used by enterprises w/strong bargaining power.o Std. contracts frequently contracts of adhesion.

- UCC §2-204, 2-206 – UCC formation issues.o §2-204 = gives effect to “any reasonable manner of acceptance” unless

offeror makes clear that it’s not acceptable.o §2-206 = shipment or promise to ship is a proper means of acceptance

- “Mirror Image” rule (in common law) = acceptance has to match the offer.o Modern law doesn’t like this, see §2-207.o UCC §2-207

§2-207(1) = very flexible view on acceptance – “definite and seasonable expression of acceptance or a written confirmation operates as an acceptance (even if add’l terms or diff. terms stated) unless acceptance is made conditional on offeror’s assent to these add’l or diff. terms.”

Idaho Power refers to Dorton v. Collins & Aikman Corp., where court construed “made conditional on assent” to apply “only to an acceptance which clearly reveals that the offeree is unwilling to proceed w/the transaction unless e is assured of the offeror’s assent to the add’l or diff. terms therein.”

Language used has to “clearly reveal.” “Subject to all of the terms and conditions herein” or

“supersedes all previous agreements” does NOT clearly reveal. (Idaho and Dorton)

§2-207(2) = add’l terms are proposals and become part of the contract unless

a. the offer expressly limits acceptance to the terms of the offer

b. they materially alter c. or notification of objection to them has already been

given or is given w/in a reasonable time after notice of them is rec’d.

§2-207(3) – Conduct by both parties to recognize existence of contract sufficient to est. contract.

o Idaho Power Co. v. Westinghouse Electric Corp. p.422 Distinction

Offer = manifestation of desire to enter into a contractual relation

Inquiry = request for information Chain of events: π inquires, ∆ sends price quote that has terms and

conditions limiting liability, π sends back purchase order w/its own provisions that don’t limit liability and merely say “acceptance of this order…supersedes all previous agreements,” and ∆ delivers the goods.

Liability analysis “Mirror Image” rule

o inquiry (neither offer nor acceptance)o price quote = offero purchase order w/new provisions = counteroffero delivery = ∆’s acceptanceo no limited liability b/c counteroffer and ∆’s

acceptance of such makes that the real contract. Under §2-207

o inquiryo price quote = offero purchase order = acceptance w/add’l terms to

considero delivery = performanceo limited liability

o Revised §2-207 p.430 Conduct by both parties recognizes existence of a contract Contract formed by offer and acceptance OR Contract formed in any manner confirmed by record that contains

add’l or diff. terms from those in contract being confirmed, then terms of the contract:

terms in records of both parties terms (whether in record or not) to which both parties

agreed AND terms supplied or incorporated under any provision of

UCC. - Shrinkwrap licenses = written licenses that become effective as soon as the

customer tears the wrapping from the package.

o Enforceable unless their terms are objectionable on grounds applicable to contracts in general, such as unconscionability. (Easterbrook, J. in ProCD, Inc. v. Zeidenberg p.430)

In Zeidenberg, ∆ purchased data CD from π’s company at a private consumer price, then forms a new company to resell information.

π’s program has license that distinguishes btw commercial versus personal use.

Easterbrook rejects ∆’s reasons why the enclosed license should not be maintained and enforced.

∆ argues the printed terms on outside of box are the contract.

o Easterbrook says that putting the entire contract on outside of box is impractical and would mean taking up space where there would be useful sales information.

Easterbrook says that “transactions in which the exchange of money precedes communication of detailed terms are common.” Interest of accelerated effectiveness and reduced transaction costs.

o insurance saleso airline ticketso concert ticketso consumer goods

electronics w/enclosed warranties drugs w/elaborate package inserts

Nature of software industry is such that “much software is ordered over the Internet.” There is no box. Money, then license is only way to work this out.

UCC §2-204 – Vendor is master of the offer and can propose limitations on conduct that constitutes acceptance. Buyer accepts by performing the acts that vendor proposes to treat as acceptance.

ProCD said buyer accepts by using the software. Zeidenberg did just that accepted the license.

UCC §2-606 – “Acceptance of goods” and failure to return goods – Buyer accepts goods when, after opportunity to inspect, he fails to make an effective rejection.

No requirement of conspicuousness for shrinkwrap licenses.o Hill v. Gateway 2000, Inc. p.435 – Arbitration clause in terms and

conditions upheld following Pro-Cd’s valid “approve-or-return” idea. No notice on box is okay – “approve-or-return” sufficient. “A contract need not be read to be effective.” Practical considerations bar reading the 4 page statement over the

phone. Knowledge – π knew before ordering that there would be some

important terms and they didn’t seek to discover them in advance.- Living in Sin – Morone v. Morone p.453

o Couple lived together, but they weren’t married. He left her and she sues.o Two causes of action she brings forward:

implied in fact contract – domestic duties compensation. express contract – oral agreement

o Court addresses implied in fact contract and does not recognize “an implied contract for personal services btw unmarried persons living together.”

concerned her actions were altruism possible fraud implications no built-in method for dist. btw

valid and specious claims common-law marriage abolished

THE EFFECTS OF ADOPTING A WRITING- Parol Evidence Rule – Anything outside the written contract is considered parol

evidence.o Admissible:

Subsequent parol agreement is always admissible, even subsequent oral agreements as long as there’s no N.O.M. clause (no-oral-modification).

no-oral-modification usually held to be subject to waiver if A induces B to rely on A’s oral statements that some provision of the contract wouldn’t have insisted on. Have to show B relied, though (materially changed position).

Parol evidence admissible if it’s intended to explain/interpret the terms in the writing or show illegality, etc. to make the contract void/voidable.

Meaning/Intent through parol evidence. Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co. p.504 where ∆ rigging company wants to bring in evidence to show that their indemnity clause is meant to cover injury to property of third parties only and not to π’s property.

o Traditional rule = plain meaning/four-corners rule only look at what’s written within the four corners of the document

o Traynor rejects trad’l rule: Test of admissibility for extrinsic evidence to explain meaning of written instrument = whether evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.

o Excluding any relevant, extrinsic evidence is okay ONLY IF it’s possible to determine meaning the parties gave to the words from the instrument alone.

o “Words do not have absolute and constant referents.”

o “…Interpretation in the light of all the circumstances.”

Spaulding v. Morse p.508 – Trust for divorced parents’ son “until the entrance…into college or university.” Son ends up going to the military, father stops making payments.

o Trust didn’t say what would happen if he didn’t go to college.

o Father doesn’t have to keep paying.o Looking at material circumstances of the parties to

give effect to the main end designed to be accomplished.

o Main end is to provide/care for son. His joining the military solves that main end.

o P.E.R. applies to documents which are integrated (final agreement, Restatement §209, 213)

Integration = intend a document to represent the final expression of their agreement, judge decides whether total or partial (Restatement §214).

total = intended to include all details of agreemento parol evidence of prior agreement (oral or written)

not allowed if it would contradict/inconsistent (Restatement §213) supplement

partial = not intended to include all agreement detailso parol evidence of prior agreement (oral or written)

not allowed if it would contradict/inconsistent (Restatement §213)

- UCC §2-202 – matter of intention – writing finalizes only what the parties intend it to finalize

- Mitchill v. Lath p.457 says that the oral agreement to tear down the ice house is one that so easily could have been included in the integration that it makes no sense why it’s not there other than to find that it wasn’t on the table in the first place. Thus the oral agreement here is inadmissible.

o NY law according to the court requires three conditions before an oral agreement modifies the written contract:

agreement must be a collateral one must not contradict express or implied provisions of the integration must not be so clearly connected w/the principal transaction as to

be part and parcel of it (which this ice house agreement fails) – Restatement (First) §240 doctrine.

- Hatley v. Stafford p.464 where parol evidence admitted in case where π is a farmer and wants evidence admitted that ∆ landowner promised π to exercise the contractual buyout provision only w/in first 30-60 days after lease executed and after that ∆ would not.

o total v. partial integration said to be partial b/c not a sophisticated business transaction (handwritten) agreement concluded by parties themselves w/o counsel to advise

o partial integration bars parol evidence that contradicts (“inconsistent”) court finds time limit on buy out parol evidence is NOT

inconsistent b/c nothing contained in the writing to begin witho Court says okay to consider fact that “a literal reading of the written

contract would have led to an unreasonable result b/c “written agreement, standing alone, would have allowed the ∆ to exercise the buy out provision the day before harvest and pay π $70/acre for wheat worth $400/acre.”

o Why is this allowed and Mitchill’s not? Hatley’s was a lease, Mitchill’s was a sale. sophistication of business transaction (handwritten) partial integration v. total integration

o Solution for lessor: Merger clause, which says “This is the entire agreement” and that would be treated as complete integration such that nothing agreed to before could supersede the writing.

- Parol evidence allowed in tort claim but not in contract claim over employment. Lipsit v. Leonard p.485.

o Not clear why.o Maybe parol evidence barred in contract claim b/c oral agreement gave π

equity and there would have been equity in the salary naturally under a contract.

o NY law allows an action in tort (as distinct from one grounded in breach of contract) based upon oral fraudulent promises and misrepresentations which induced the written agreement and permits parol evidence to establish the same.

STANDARDIZED FORMS – WHITHER ASSENT?- Contract of adhesion – situation where one party simply signs or acquiesces in

the standard form prepared and presented by the other.o Policy questions of unconscionability, public policy, fairness, imbalance

in bargaining power.- Duty to read rooted in idea that “inaction with reason to know results in a

preclusion of sorts, a foregoing or waiver of the privilege of objecting to legal consequences.” Courts in the old days unsympathetic to “I didn’t read before signing.” That changed with Henningsen. BUT, before…history:

o Allied Van Lines, Inc. v. Bratton p.511 where ∆ didn’t read document and court says he has to live with the legal consequences.

o Depends on circumstances, though. Agricultural Ins. Co. v. Constantine p.512

∆ parks car in a garage and receives a ticket that actually has a limited liability clause on it.

Court says that duty to read is lowered/extinguished even b/c

o Parking car there creates a bailment.o The ticket was used for ID and retention of ticket

not enough to show π’s assent.

Sharon v. City of Newton p.513 π cheerleader and father fill out and sign waiver form. Court says that duty to read upheld b/c act of filling out the

details in some way indicates having had opportunity to read it or at least should have read it.

o Notice is adequate and should be read (duty to read found) when it’s in big type, big letters. Mundy v. Lumberman’s Mut. Cas. Co. p.514 where insurance company changes policy o limit damages for loss of silverware to $1000 and court says “no way” to π’s attempt to say it was buried in fine print. The policy change was actually in big type and it was included in a one-page summary!

o Catalog disclaimer “property sold as is” upheld where it’s under “Conditions of Sale” in large print and on a page and a half of the opening pages. Weisz v. Parke-Bernet Galleries p.515 where π bought paintings that ended up being worthless forgeries from ∆ gallery, which had an “as is” disclaimer in its catalog.

- Implied warranty of merchantability: If you sell somebody something, you’re implicitly promising that it will function properly.

o Damages consequential damages = cost of injuries that came from breach expectation damages = cost of defective car ($0) versus cost of

functional car ($20K)- The Little Guy – Courts move in favor of the little guy, even when he doesn’t

read the contract.o Henningsen v. Bloomfield Motors, Inc. p.520 where π sues ∆ under

implied warranty of merchantability when π’s new car spins out of control. Contract when car was purchased limited ∆’s liability. Court says contract violated public policy.

unequal bargaining power clause was not brought to π’s attention language confusing

o none of these are full warranties, dealer knows you don’t know so dealer should point it out

Court says all cars should have generous warranty provisions. Shouldn’t be a waive-able option. General policy issue of not allowing people to waive safety.

(Just like people can’t waive having airbags.)o Richards v. Richards p.527 where ∆ truck company made π truck driver

and π wife sign a “Passenger Authorization” in order for wife to accompany husband. An accident w/injury.

Exculpatory contracts not favored by law b/c “they tend to allow conduct below the acceptable standard of care applicable to the activity.” Court here finds contract against public policy and void.

Three considerations for contract validity: Clarity: How clear is it to the passenger that the document

releases the company of liability?

o “Passenger Authorization” is misleading. Broadness: How broad and inclusive is the document?

o Release is broad and purports to release ∆ from liability for any and all injury to the π while π is a passenger in any vehicle (not necessarily one owned by ∆) at any time and while the π is on any and all ∆ property at any time.

o Not limited to a specified vehicle or to a specified time period.

Bargaining: Is there unequal bargaining power?- Restatement (Second) §211, p.537 – Saying they have no problem prima facie

w/standardized writings.- States are trying to combat complicatedness by requiring plain language in

writings. p.541

POLICING THE BARGAIN- When the court intervenes b/c of an abuse in bargaining or defect in the substance

of the bargain.COMPETENCY TO CONTRACTINFANCY DOCTRINE

- Alterable by state legislature.- Allows the minor to disaffirm (make the contract void).

o Halbman v. Lemke p.543 where ∆ minor is allowed to disaffirm on his car purchase.

In an ordinary valid contract, this would be breach of contract and Halbman would be required to pay the balance.

Minor allowed to disaffirm Dispute: Does minor owe π dealer restitution for loss of value to

the car? Olson v. Veum – The restitution spoken of in this case is

just the return of π’s property. In Halbman, court lets π minor get away with not paying

anything. “The minor will not be required to give up what he does not have.”

- Necessarieso Definition of Necessary – flexible term, varies w/facts of each case.

Webster Street Partnership v. Sheridan p.547.o Doctrine of Necessaries

Minor is liable for contracts for necessaries. Must be shown that the minor entered into a contract for the goods/services in question.

Minor is not liable: for contracts for things not necessary for necessaries furnished on someone else’s credit

(parents, guardians) if the minor has a parent or guardian who is willing and

able to supply them (Webster where ∆ minors left home on

their own and rented an apartment when their parents were more than able and willing to house them)

MENTAL COMPETENCE- Historically, total nullity. Mental incompetence contract entirely void.- Modernly, voidable in most states. Voidable = possible for the party suffering

under such disabilit8ies to enforce a transaction that has proved advantageous.- Restatement (Second) §15 – Mental Illness or Defect p.552

o §15.1: A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect

§15.1a: he is unable to understand in a reasonable manner the nature and consequences of the transaction, OR

Farnum v. Silvano p.554 where court finds that “competence to enter into a contract presupposes something more than a transient surge of lucidity…an ability to comprehend the nature and quality of the transaction, together w/an understanding of its significance and consequences.”

o π had mental disease manifested in erratic and irrational conduct.

o Diagnostic test.o ∆ was aware of her inability to act in a reasonable

manner. §15.1b: he is unable to act in a reasonable manner in relation to the

transaction and the other party has reason to know of his condition. Ortelere v. Teachers’ Retirement Bd. p.552 where

retirement board knew she was on medical leave and the standard is “whether the mind was so affected as to render a party wholly and absolutely incompetent to comprehend and understand the nature of the transaction.” Court finds “the choice she made…was so unwise and foolhardy that a factfinder might conclude that it was explainable only as a product of psychosis.”

o §15.2: Where the K is made on fair terms and the other party is w/o knowledge of the mental illness or defect, the power of avoidance under (1) terminates to the extent that the K has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. Court has discretion.

comment d: Performance in whole or in part avoidance permitted only on equitable terms. Might have to pay restitution. (That makes mental incompetence different from infancy – mentally incompetent and disaffirm have you pay.)

UNDUE INFLUENCE- Undue influence = overpersuasion, persuasion that’s coercive in nature. - Undue influence is NOT duress.- Odorizzi v. Bloomfield School Dist. p.557 where π scholteacher charged

w/criminal homosexual activity. He resigns and later asserts that his resignation

was invalid b/c obtained by a number of things, including duress and undue influence.

o Court rejects the other three, including duress.o Court says he did plead undue influence and should be allowed to go

forward w/the trial.o Statutory definition = “taking an unfair advantage of another’s weakness

of mind; [or] taking a grossly oppressive and unfair advantage of another’s necessities or distress.”

weakness of mind dominant applies pressure to servient object

o Characteristics to look for in undue influence: discussion of transaction at inappropriate or unusual time consummation of transaction in unusual place demand that transaction be finished immediately emphasis on untoward consequences of delay multiple persuaders v. single servient no third-party advisers for servient statements that there is no time to consult

- Von Hake v. Thomas p.560 – Confidential relationship is a prerequisite for constructive fraud.

REVISIONS OF CONTRACTUAL DUTY- Economic Duress – K voidable under duress “when it is est’d that the party

making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will.”

o Mere threat not enough.o Availability: “Must also appear that the threatened party could not obtain

the goods from another source of supply.”o Other remedy available? Also must appear that no other adequate legal

remedy was available at the time. Idea that, if there was an adequate legal remedy and the parties

agreed nevertheless to the contract revision, then this must be the GOOD and acceptable revision situation.

Specific performance is still available as a possible remedy for breach of contract. Smithwick v. Whitley p.565 where court says π voluntarily paid the increased price of $50/acre and duress only exists “where the unlawful act of another has deprived one of free will.” π should have sued in equity for specific performance.

o Austin Instrument, Inc. v. Loral Corp. p.562 where Loral has contract w/Navy to provide radar sets and a subcontract w/Austin for Austin to provide parts necessary for radar sets. K1 btw the two for X amt. of money. Austin then wants to do K2 for more than X and for all of the parts π needs (wants to take over). Loral looks for another supplier, nobody available, accepts Austin.

Who’s suing? Austin’s suing for the money outstanding from K2. Loral’s suing for damages – diff. btw prices of K1 and K2.

Court finds in favor of Loral under economic duress. Availability? No other supplier available reasonable for

Loral to consider itself in an emergency, duress situation. Nature of item: Loral was on a super tight time

commitment w/an order for a needed item of military hardware.

o Pre-existing duty and Economic duress Pre-existing duty application of the consideration doctrine Duress ideas in criminal law Alaska Packers Ass’n v. Domenico p.569

Workers on a fishing boat w/contract structured as follows: pay = ab + c where a = 2cents, b = salmon, and c = flat rate.

o K1 = 2c(salmon) + $60o K2 = 2c(salmon) + $200

K2 is the same contract except “c” is higher. Court says K2 is void b/c workers are just promising to do

what they’re legally bound to do based on K1.o pre-existing duty argument = no consideration for

the increase in wageso economic duress argument = the workers threatened

to stop working, the employer had no other options, no other pool of workers lack of free will

Is it an unlawful threat? “Hold Up” = The bad guy (fishermen) get something more

whereas the victim gets nothing back for giving more. Occurs after Alaska has sunk a lot of investment into the

endeavor and now it’s vulnerable to the fishermen’s “hold up” of stopping work until they are paid super lot more.

Exception to pre-existing duty rule is “change of circumstances.” Brian Constr. & Dev. Co. v. Brighenti p.573 where court

okays revision where neither party knew about the rubbish under the concrete and when they discover it, they revise original contract to pay contractor more even though he was contracted to do “everything requisite and necessary to finish the entire work properly.”

- Waiver and modification.o waiver =If you waive something, you have the right to get it back if the

other party does NOT rely on your waiver. waiver of no oral modification clause in Universal builders, Inc.

v. Moon Motor Lodge, Inc. p.580 when Moon’s agent is present at all times to ensure the work is progressing as it should be. Universal approaches Berger to do extra work, Berger agrees, but they don’t sign anything.

Court says Moon has to pay for the work! Oral changes don’t violate N.O.M.

It was a new K when Berger approved the new projects, and Berger’s acceptance effectively waived the written N.O.M. clause.

o modification = Cannot be taken back.- Cannot plead duress on grounds that you were in financial distress at time you

entered into K2 and the other party took advantage of financial distress. Hackley v. Headley p.586 where ∆ tells π they can only pay him $4000, π says he can’t just take $4000 – he needs $2000 over that! ∆ says that’s all they have and π can sue them for the rest. π says he doesn’t have money to sue and ends up taking the $4000.

o duress = unlawful act as inducement to make a contracto duress of goods = compelled to submit to an illegal exaction in order to

obtain them from one who has them in possession but refuses to surrender them unless the exaction is submitted to

o Court finds this is NOT duress because there’s no unlawful thing occurring – the ∆ were just doing what they had a legal right to do – pay their bill. It was up to π whether or not he would accept it.

- Courts like it when parties settle their disputes on their own and don’t need the courts to get involved. Marton Remodeling v. Jensen p.590 where dispute over how much ∆ owes π. Finally, ∆ sends π a check taht says “Here’s my check! this is full payment!” π writes on it “not full payment” and endorses the check.

o Court says “not full payment” means nothing.o Endorsing the check = acceptance of what ∆ says is full payment.

- Scope of employment: In a dispute over who gets reward for apprehension and conviction of bank robbers, the one who has no duty to intervene gets the reward. Denney v. Reppert p.598 where policemen (duty to apprehend the criminals) and employees (duty to protect bank w/in scope of employment) don’t get the reward but the sheriff from an outside county does (no legal duty to make the arrest b/c out of his jurisdiction).

- Duty in marriage: Policy argument against marrying for money made in In re Estate of Lord v. Lord p.600 where if you’re married to someone, you already have a duty to take care of them, and you can’t make a contract to take care of them for money.

MISTAKE, MISREPRESENTATION, WARRANTY AND NONDISCLOSURE- “Defective” bargains and filling “gaps” in contracts (allocating risks the parties

have not themselves assigned).- Relationship

o Fiduciary relationship requires high degree of candor and reliability undertakes to treat affairs of the promisee as if they were the

promisor’s own affairs one person’s ascendancy over another through placing trust and

confidence on one side and the assumption of a position of influence on the other.

o Confidential relationship not so much legal status

result of unusual trust or confidence reposed in fact e.g. blood relationships or marriage proof = parties did not deal in equal terms; there was a high degree

of confidence reposed in the honesty and good faith of the other party

Court finds confidential relationship in Jackson v. Seymour p.601 where brother buys sister widow’s land for $275 and finds out it’s worth $1000s.

breach of confidential relationship = He didn’t find out as much as he could about the land. He did less than he would have if there had been an outside buyer.

constructive fraud- Legal meanings:

o mistake = party has a wrong belief about facts/about the state of the world. If it’s a mutual mistake, then that means both parties have a wrong belief about some fact.

o misunderstanding = parties attach different meanings to the same item (e.g. Sherwood v. Walker would have been misunderstanding if there were two cows and one party thought of Cow 1 while the other thought they were K-ing for Cow 2. Peerless ship case.)

- Mistake – depends on what the difference or misapprehension is about.o Test

mistake of material fact/substance of the thing bargained for no K

mistake is a quality or accident K’s still good and remains binding

o Seller able to rescind K for sale of cow when parties find out the supposedly barren (worth = $80) cow was pregnant ($750) b/c “she was not in fact the animal, or the kind of animal, the defendants intended to sell or the plaintiff to buy.” Mistake went to the whole substance of the agreement. This was a mutual mistake in that both parties had wrong beliefs about fact. Sherwood v. Walker p.606

o Contractor allowed to rescind bid in unilateral mistake where they submitted a bid that was actually $9K under what it should have been. Elsinore Union Elementary School Dist. v. Kastorff p.616

Unilateral mistake cases common in contracting situations. Generally narrow, though.

Things that matter to the court in their analysis. mistake was discovered shortly after K entered into mistake was a clerical matter

o mistake in fact (clerical matter) generally gets relief (accord. to S.T.S. Transport Serv., Inc. v. Volvo and White v. Berrenda Mesa Water Dist. p.620-621)

o mistake in judgment Concern: Suspicious?

Q: Price difference w/new cost added was SO close to the next lowest bid. Was ∆ just trying to scam π for the most $?

A: School board has info that the contractor doesn’t know about. School board knows what the other bids are and the school board would be in a better position to figure out whether or not to be suspicious.

- Warranty UCC §2-313o express warranty = an assertion, an unequivocal statement by seller

Because of absurdity of statement, ∆’s “no buck” guarantee is NOT an express warranty even though the sales brochure’s ad that horse is “gentle” IS an express warranty. Tribe v. Peterson p.625

Court says it’s such a crazy thing to say that a horse will never buck that π can’t take it at face value.

Why sue under warranty and not mutual mistake?o Warranty

expectation damages about enforcing a K

o Mutual Mistake NO expectation damages, only rescission horse goes back to seller, money back to

buyer about getting rid of a K and returning to

status quoo This is an important distinction esp. where value of

the property changes. Strict liability for innocent misrepresentation of goods. Johnson

v. Healy p.635 where house started sinking b/c built on landfill ∆ liable for damages after giving express warranty that

the “house was made of the best material, that he had built it, and that there was nothing wrong with it.”

∆ had no notice not a claim for negligence Measurement of damages under breach of warranty is “to

award the prevailing party such compensation as will place him in the same position as he would have enjoyed had the property been as warranted.”

o implied warranty = warranty that is not expressed UCC §2-314 – implied warranty that goods wouldn’t break In sale of real estate, UCC doesn’t apply, but court uses it to draw

analogy of implied warranty that land can be used for residential purposes. Court finds implied warranty when ∆ sells land to π with a whole bunch of restrictions, including that it only be used for residential purposes. π discovers that it would cost $100Ks to fix a drainage problem before putting in a septic tank to build the residences. Hinson v. Jefferson p.628

Q: What should seller do next time? A: Have an “as is” clause!!

- Nondisclosureo Restatement (Second) §160-161 – if there is a problem that goes to the

basic nature of the contract, then the seller has a duty to disclose, even if the buyer does not ask, unless the buyer should reasonably find out on his own.

Restatement §161 – Look at what seller and buyer both do. What seller says or doesn’t say doesn’t matter when the

seller knows what’s wrong with it. Buyer is less likely to get the K rescinded if the defect

could be discovered under reasonable inspection. In Cushman v. Kirby p.640 (wife says the water is “a little hard”

and husband says nothing), jury finds fraud, awards damages, court affirms.

π sues Mrs. Kirby for fraudulent misrepresentation. Could π sue Mr. Kirby for nondisclosure? duty to speak = based on superior knowledge of a seller It works out weird in that the buyer wouldn’t have to tell

Mrs. Kirby if there were a million dollars worth of minerals below her property.

o Why? B/c the seller isn’t being tricked at all. Even if Mrs. Kirby were to ask “Why are

you buying this house anyway?” and buyer said “I just want a place to live,” that’s not fraud b/c seller isn’t relying on the statement.

o Why does society want the seller to sell for a lot less than it’s worth?

B/c it encourages discovery on the part of the buyer.

Encourages people to look for things b/c if they have to disclose, they don’t get the benefits of their original discovery.

CHANGED CIRCUMSTANCES JUSTIFYING NONPERFORMANCEIMPOSSIBILITY

- In contracts where the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

o Taylor v. Caldwell p.648 where ∆’s music hall burned down, π lessee sues for expectation damages (how many seats, prices) and for cost of preparation (ads, employees, etc.).

o Court finds “the Hall having ceased to exist, without fault of either party, both parties are excused.”

- When a party engages unconditionally, by express contract to do an act, an inevitable accident or other unforeseen contingency not within his control does not excuse performance.

o Tompkins v. Dudley p.652 where school burns down before ∆ contractor had finished building it but AFTER the contract said he should be done.

o Court finds ∆ liable to π for nonperformance of the K to build the school.- When destruction of a building makes performance impossible, and this was not

contemplated by the parties) the owner of the building is liable for the amount of work done which had become so far identified with the building as that but for the destruction it would have inured to him as contemplated by contract.

o Carroll v. Bowersock p.655 where π contractor hired to install concrete floor in warehouse, partially performs and then warehouse burns down. π wants payment from ∆ owner now.

π sues in quantum meruit and recovers for the work that had to do w/the building itself.

Ex: π wouldn’t recover for loss of tools that were destroyed in the fire.

Why? If you can use them for other things, then they are NOT benefiting the owner in their full value.

Keep in mind: If you lose on impossibility doctrine and promisor is excused b/c of impossible situation, remedy might still exist in quantum meruit.

Different from Tompkins in which way? In Carroll the builder had ownership of the lot and the

house when it burned down. In Tompkins, he did not own it.

- Impossibility must be produced by an “unanticipated event that could not have been foreseen or guarded against in the contract.”

o Kel Kim Corp. v. Central Markets, Inc. p.663 where π’s lease required ∆ to have insurance. Find out when it’s expired that ∆ can’t renew it. Impossible for ∆ to get insurance. That’s NOT an acceptable argument b/c fall of insurance market is anticipatable and could have added a suitable clause.

force majeure clause = accommodates for a lot of disasters Why isn’t “or other similar causes beyond the control of such

party” inclusive of the rise/fall of insurance market outside of tenant’s control?

Force majeure clauses are always interpreted very narrowly – what the court is doing here is standard.

Landlord wants tenant to have insurance b/c otherwise the tenant might not be able to pay and the person who trips on the sidewalk would be able to go after the landlord

- Identification of goods as specific goods (i.e. from a particular field, a particular cow, etc.) excuses the seller. If the goods AREN’T specifically identified, then the seller is not excused and seller bears the risk.

o Bunge Corp. v. Recker p.665 where severe storm hits and makes beans impossible to harvest and question of impossibility hinges on whether or not it was that particular field they were talking about or if it was just a general delivery of goods (b/c in that case the farmer could always get the beans from somewhere else).

Court finds that “within the boundry [sic] of the United States” is language that is inconsistent with having it come only from that one field.

contractual interpretation = general delivery- While performance may be rendered impossible if it can only be accomplished

with extreme and unreasonable difficulty, expense, injury or loss, a mere increase in cost alone is not a sufficient excuse for nonperformance

o American Trading & Prod. Corp. v. Shell Int’l Marine Ltd. p.669 where ship can’t get through Suez Canal and ends up having to go around the Horn of Africa.

quantum meruit – shipping company sues to get back some money for the extra money they spent going around Africa

Court says they have to show that performance was impossible, not just that single most speedy way was impossible.

contractual interpretation (like Bunge) = contract did not say specifically that they’d perform using Suez Canal

Looking at it from ∆’s perspective: They don’t care if it goes through the Suez Canal, the Panama Canal, the Martian Canal – they just want the oil to get to Bombay.

FRUSTRATION / IMPRACTICABILITY- Impracticability = UCC §2-615 – It doesn’t have to be impossible – it just has to

become really hard to do.o “non-occurrence of which was a basic assumption on which the K was

made”o In American v. Shell, was the Suez Canal’s staying open a basic

assumption? It does seem impractical, but the loss was only a third of what was

charged, and a loss of that magnitude is pretty much standard and can happen in commercial transactions.

- Impracticability succeeds in case where parties have unequal power to control situation and where it was unforeseeable. Mishara Constsr. Co. v. Transit-Mixed Concrete Corp. p.673 where concrete supplier doesn’t cross picket line to get product to contractor.

o Risk aversion: General can do things about the strike that sub can’t.o Sure, general got the concrete elsewhere so it wasn’t impossible for

supplier to get through, but it was impractical.o Strike was unforeseeable – otherwise would have put a clause in K?

- Where the object of one of the parties is the basis upon which both parties contract, the duties of performance are constructively conditioned upon the attainment of that object. Krell v. Henry p.675 where ∆ leases room for a day to

see king’s coronation ceremony, ceremony gets cancelled, π now wants to enforce, and court says no.

o Features of apt.: They discussed placement of windows at the time of showing.

o Length of K: ∆ just renting for the day and not the night – indicator he’s not using it for another purpose (i.e. as a place to stay).

- Nonperformance can be deemed impracticable if it is by compliance in good faith with any gov’t regulation or order.

- Keep in mind foreseeability. Lloyd v. Murphy p.681 where ∆ cannot claim commercial frustration b/c the war was foreseeable and thus gov’t law to discontinue new car sales was foreseeable.

- Restatement (Second) §265 – “…frustrated w/o his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, …duties discharged…unless language or circumstances indicate the contrary.”

- Commercial Impracticability in UCC §2-615 – Mishara held that 2-615 was consistent w/common law of K regarding impossibility.

o A Δ may rely on frustration of purpose as a defense to a breach of contract claim if the risk of the occurrence of the frustrating event is not allocated by the contract to the Δ.

- Frustration / impracticability – In a K, the seller has a cost (to supply the widget) and buyer has a value (of the widget). Value is always greater than the cost b/c that’s why the K goes through.

o frustration = value goes way down e.g. value of apt. to see coronation ceremony goes down to zero

when coronation canceledo impracticability = cost to supply goes way up

e.g. the cost of bringing the oil around the Horn of Africa is far higher than it is to go through the Suez Canal

Q: How high is too high?- Basic idea: If the cost of performance is high enough, then seller doesn’t have to

pay at all b/c it becomes impracticable for seller to perform.

-UNCONSCIONABILITY

- Restatement (Second) §208 – court may decide not to enforce all or part of the unconscionable K.

- UCC §2- 302 – court may decide not to enforce all, part, or limit application of the unconscionable part of the K.

o Comment tries to define “unconscionable” – one-sided o K judged against facts existing at time of signing K.

- Definition from Williams p.699o Procedural: Absence of meaningful choice on part of one of the parties

together … Terms are vague, obscure, not sufficiently explained, determine

“meaningful choice” by looking at all circumstances surrounding transaction

asymmetric bargaining powero Substantive: … w/contract terms unreasonably favorable to the other

party. What is contract actually for? Is there a price disparity?

- “A hard or unconscionable bargain will not be specifically enforced, nor, if the decree will produce injustice or under all the circumstances be inequitable, will it be rendered.” Woollums v. Horsley p.688 where country bumpkin sells sophisticated rich guy land that alone was worth 40c but w/minerals was worth $15.

o Court reverses lower court that orders specific performance b/c “equity should not be used to enforce such a hard bargain.”

o Factors: price disparity

misrepresentation – the agent who bought the land for the rich dude likely knew

incompetence – farmer incompetent and uneducated taking advantage of farmer

o Implications for future Ks like this Buyer might decide not to make an effort to buy at all next time

since buyer can’t make lots of money on K. Inefficient b/c lucrative land won’t ever be properly used.

Buyer will just pay a little more in order to prevent court from striking down K.

How much is a little more? What if seller sets the price at 40c? Supposed to bargain

up?- Gross inadequacy of consideration may be used to show unconcionability.

Waters v.Min Ltd. p.695 where woman gets tricked by her b/f to exchange an annuity worth $180K+ for $50K up front.

o Court finds gross disparity of consideration = unconscionable.o Other ways she could have recovered:

Constructive fraud? – confidential relationship. problem = there are multiple parties here in Min Ltd.

Undue influence Odorizzi – K signed on hood of car. Done quickly,

pressure, no time to think about it. Min represented by counsel, Waters not. Duress – B/f had been spending all the money, using her credit

cards. Maybe there was a third party offering a wrongful threat – Pay it off or we’ll kneecap you and your b/f!

- Cross-collateral clause is unconscionable. Williams v. Walker-Thomas Furniture Co. p.699 where π buys household item from ∆ and the cross-collateral clause works so that debt incurred by each purchase was secured by seller’s right to repossess all goods previously purchased.

o Unconscionable procedurally = lack of meaningful choice

confusing surprising no reason to expect that’s how it works like Henningsen p.520? – fine print, obscure terms, etc.

substantively = unduly unfair and one-sided Rule Against Forfeiture: As a creditor, you’re not allowed

to collect more than you’re owed. o If seller were to come in and repossess for any debt,

then that means seller could come in if π had $5 left to pay off that she didn’t pay off and take the $500 stove back.

Price disparity: Even if she pays off two of the items, at the end of the day, she still owns none.

- You do NOT need both procedural and substantive unconscionability. If one is strong, then the other is not needed. Brower v. Gateway 2000, Inc. p.701 where arbitration clause (which would require prohibitively high fees) is substantively unconscionable, but there was no procedural unconscionability in the entering of the contract.

o Why doesn’t Gateway win on argument that this was a K and π agreed to it by keeping comp.?

o B/c arbitration clause is obscure and the equivalent of putting it in tiny print. Would have to look through Int’l Chamber of Commerce, etc. to find out true ramifications of the arbitration clause.

o Arbitration clauses: common law was very hostile to arbitration clauses under federal law now, there’s an act that says arbitration is

“presumptively valid”- “Right to terminate” clause for buyer to terminate invalid if it’s unreasonable

and if buyer has superior bargaining power. Gianni Sport Ltd. v. Gantos, Inc. p.709 where court concerned that buyer is much bigger than the seller.

o procedural: asymmetry of bargaining powero substantive – terms themselves?

industry: women’s fashion changes rapidly, and making the clothes and then having nowhere to distribute/sell them is unfair

It’s different from when a termination just means seller puts goods back on shelf.

- Unconscionability cases rarely involve just price disparity. Most cases involve controversial clauses such as Gianni’s cancellation clause and Gateway’s arbitration clause.

RIGHTS AND DUTIES OF NONPARTIESTHIRD PARTY BENEFICIARIESCOMMON LAW

- Creditor beneficiary: A third party for whose benefit a K was made may bring action for the breach of that K. Lawrence v. Fox p.869 where Holly owes π, Holly gives money to ∆, ∆ promises to pay π, ∆ never pays π.

o Court says π can bring suit.o Majority:

Relationship btw Holly and ∆ is a contractual relationship where promise to pay π is consideration for Holly’s loan of $300.

Court doesn’t want to create a situation where π will turn around and sue Holly.

Freedom of contract.o Dissent:

Doctrinal: Three-way relationship only okay in a trust situation. There needs to be privity to sue.

- Donee Beneficiary: If the promisee entered the K for the purpose of conferring a gift on a third party, the third party is the donee beneficiary and is given the right

to sue the promisor. Seaver v. Ransom p.875 where π niece could sue to recover on ∆’s promise to his dying wife that he would leave money to π in wif wife just left her estate to him.

o Concerns in Seaver: They’re both dead, so they can’t refute anything. Also, is this enforcing a gift?

o Maybe court overlooks enforcement of a gift in favor of figuring out what the intention of the parties.

RESTATEMENT- Restatement (Second) §302 – Restatement doesn’t make a distinction btw

creditor beneficiary and donee beneficiary. Instead, makes a distinction btw intended and incidental beneficiary.

o intended beneficiary = intent recognition of a right to performance in the beneficiary is

appropriate to effectuate the intention of the parties AND either performance of the promise will satisfy an obligation of

the promisee to pay money to the beneficiary OR circumstances indicate that the promisee intends to give

beneficiary the benefit of the promised performance.o incidental beneficiary = it just happens that way

beneficiary who is not an intended beneficiaryo Illustration 8: A B (B gets land, promises to pay $15K to C, D, and E)

where C = A’s wife and A wants to make divorce settlement, D = someone to whom A is indebted, and E = insurance company b/c A wants to purchase a plan.

Intended = C, D Incidental = E

Maybe b/c A is indifferent to who “E” is. E could be any insurance company and A wouldn’t care.

TORT SITUATIONS- π has to show intended benefit in order to sue.

o Anderson v. Fox Hill Village Homeowners Corp. p.885 where π slips on ice and tries to sue ∆ tenant for not fulfilling his lease obligation to remove snow and ice from driveway and sidewalks.

Court says no suit b/c π didn’t show the lease obligation was intended to benefit her.

Parties’ intent: Landlord more concerned w/maintenance of property itself rather than liability involved. Valuation of the property and ice damage.

o H.R. Moch Co. v. Rensselaer Water Co. p.887 where contract btw city and water company to provide water, there’s a fire, no water, and citizens of the city sue water company.

Court says no suit b/c they are incidental beneficiaries. How is that?? Court has other worries:

Cardozo worried about contracts btw other parties and liability going everywhere! The people who made the hydrants, the hoses, etc.

RENEGOTIATION- What happens when initial parties renegotiate the K?

o What happens to the third party beneficiary?o If the third party relies, it might be difficult for the original parties to

change the K.- How far does liability extend?

ASSIGNMENT AND DELEGATION- Historically, default rule was that Ks were NOT assignable. Langel v. Betz p.907

where “the law remains that no promise of the assignee to assume the assignor’s duties is to be inferred from the acceptance of an assignment of a bilateral contract, in the absence of circumstances surrounding the assignment itself which indicate a contrary intention.

o Restatement (Second) §328 goes the opposite route now where if it doesn’t say anything to the contrary, then the assignment is “an assignment of the assignor’s rights and a delegation of his unperformed duties under the K.”

- Presumption in law now is that Ks are assignable.o Exception: Personal contracts w/”rare genius and extraordinary skill”

Cochran v. Taylor p.914 says K of extension of credit is assignable and court says to ∆’s argument that it was personal and credit was extended to X specifically that π’s offer of $115K in cash shows money is actually NOT ∆’s concern b/c π undermines the money concern w/his ready cash.

Macke Co. v. Pizza of Gaithersburg, Inc. p.917 where vending K is assignable.

When you buy a company, all their rights assigned to you. Personal K?

o Is servicing a vending machine more like the construction of brick sewers (not personal) or the production of a Shakespearean drama (personal)?

- Solution to questioning assignability = put a provision in the K!

CONDITIONS- General legal policy opposed to forfeitures. When there are doubtful words and

we’re not sure if it’s a promise or condition, then they’re usually construed as a promise in order to avoid forfeiture. Howard v. Federal Crop Ins. Corp p.716 where insurance contract to insure π’s crops has a paragraph saying not to sow land until after ins. company asses situation.

o Promise versus condition precedent? “The provisions of a contract will not be construed as conditions

precedent in the absence of language plainly requiring such construction.” (p.718)

o expressio unius argument that this paragraph doesn’t say it’s a condition whereas a prior provision specifically said it was a condition

o Court says this is a promise. Even though it’s a promise and there’s no forfeiture of the policy,

the farmer is NOT off the hook. He can still be held liable for damages that result from his breaking the promise.

- Insurance company: Big condition is “The moment you have your injury, you have to tell us.”

o Royal-Globe Ins. Co. v. Craven p.737 What’s the condition? Tell us w/in 24 hours (i.e. promptly) in

order to file a claim. π doesn’t have to comply w/24 hours b/c impossibility

doctrine (she was being operated on), but her 4 months is definitely NOT promptly.

Burden on injured insured to give notice promptly.o Aetna Cas. & Sur. Co. v. Murphy p.760 – Leaves open door for insured to

give evidence that the late notice to insurance company was not prejudicial/harmful to insurer.

Insured damages building, impleads his own insurance company a few years later, and insurance company says it was a condition to inform immediately.

Prejudice / harm from late notice: Insured tries to say insurance company has to show harm. Court rejects this, says that if the insured wants to raise the

“prejudice / harm” question, then the insured has to allege lack of prejudice/harm.