Contracts Class Notes.doc

Contracts Class Notes January 6, 2005 You can?t just forget about last semester?s information; you need to remember last semester?s stuff to be able to do this semester?s Last semester was about contract formation; this semester we are assuming that we have a contract This semester remedies, defenses, and etc We will have to take remedies coming up one of these years and it is very hard so I need to learn this very well We have to make the assumption that not only that we have a contract but also that one of the parties breached that contract Hypo: he tells a person that he will tutor them on Saturday?s, and asks for the money up front; the person pays Elser, but then Elser breaks the contract and gives him his money back because he found someone that offered him more money; the person may decide to sue Elser for breaking the contract; remedies is about how a person should be awarded in a lawsuit or how to figure out how much to sue for Remember that a promise/contract is about a person making a commitment; at this moment there is an expectation that something would happen; in the hypo the person was expecting to get tutored; had Elser not been paid then his expectation would have been shattered; in both cases they are disappointed and seek relief/remedy Expectation Interest: remedies are trying to protect the expectation that has been broken Back to the Hypo: what do we think should occur for breaking the promise? To only get the money that you paid is not really enough to relieve you of the loss you may have been expecting or receiving from the contract; however, granting specific performance isn?t exactly the best remedy in all situations Granting Specific Performance: this is making the person do what they promised to do; this isn?t done in all situations, but it can be good in some; for example if you try to buy a house and you make a contract with another for a house, but they break the contract?the court could make them give you the title of the house whether they like it or not; he says that this has little usefulness in reality or in practical matters, and really is good only in theory The three damage interests on p. 60 and slide 3 of outline is very extremely important just like §17 was last semester Expectation Interest: point is to put the promisee in the position he would have been in had the promisor performed or completed the contract (Benefit of the Bargain); this is basically giving money to the person Reliance Interest: trying to put the promisee in the position had the promise never been made; most of the time this is going to equate into giving back the promisee expenses that they have incurred from the detriment due to the reliance on the promise Restitution Interest: putting the promisor into the position that he would have been in had the promise not been made Which one would give you relief for emotional distress from the contract noting being kept (pain and suffering, sadness, depression, and etc)? It would seem as though the expectation interest one would be the one that you used, however, for the most part, the pain and suffering one experiences is not rewarded by contract law; even if there is great emotional trauma, but no monetary loss then there is no remedy in contracts; the only way there will be a remedy is if there is some way or another to convert it to monetary Back to Hypo: the fact that Elser has a good reason for not doing it (such as health problems) or saying that he just doesn?t want to do it has no effect in contract law; contract remedies are usually referred to as amoral because they are blind to all reasons why something does not occur In essence, one may buy his way out of a contract Efficient Breach(a breach is said to be efficient if the defendant?s cost to perform the contract would exceed the benefit that performance would give both parties; as long as neither party suffers a loss then the court calls it an efficient breach, but usually one does get ahead because it wouldn?t make sense to breach otherwise; both people break even equaling what they started with, but usually the breaching party comes out ahead Pro?s and Cons: bad because it may encourage people to break contracts; pro because it allows people to make smart business move to make money Elser?s Economic Spree: it is all about efficiency or allocating all resources or some of the resources to maximize the production of or use of them Back to Hypo: say he has to give the $5 (that was supposed to be in the previous hypo?s earlier), but that is not enough for the person to get a new tutor, therefore he must pay you the extra 2.50 for someone else; this is considered an efficient breach by Elser because he is making $10 an hour off a new person which is a $7.50 an hour profit--$2.50 more than what the man offered him; Something New to the Hypo: the fact that you have to waste the time and do this and that in order to find a tutor; now what is the opportunity cost worth; nothing because for you and Elser the efficient breach works out for both of you because you get a better tutor in the more expensive one for what he has to pay for, and he still is making money January 10, 2005 When we are looking or trying to figure out the remedies all we are trying to do is say is if this was the remedy how much can we collect. We are not worried so much about which will be used, but how much you may for each We must always translate the promises made into some type of dollar sign. How much is that promise worth? Essentially, you must bring in all these people that would come in and say how much it is worth; the experts come in and evaluate it, but in the end it is up to the jury Problems on Slide 5 of Outline Suing in Restitution you are trying to put the promisor back into the position as though the promise was not made and therefore we would give the promisee $11 because we want to give back anything that the promisor gained from the deal. Under Reliance, the promisee would get $13 because that is what would give him all his expenses back. Under Expectation, Hypo: say the notes had a market value of $4, then what would happen? Using Restitution the promisee would get $14 because that is what place the promisor in the same position he had been; using Reliance would not change, and would stay at $13; point of this is to show when reliance would be greater?this is possible but does not occur as often Expectation Interest Formula = (Loss in Value) + (Other Loss) ? (Costs Avoided) ? (Losses Avoided)= General Measure January 14, 2005 Tongish v. Thomas Article one deals with general introductory article that applies to all the other article; foundation for the other articles Article 2 deals specifically with sales §2-713 mirrors the measure of damages in restatements of Expectation Interest He tals about all the § in the book on page 85 Should you be punished if nobody is being hurt? This is what Tongish is arguing?why should the co-op be able to dip into his pocket Tongish?s argument is making the efficient breach promise What?s the Argument Against That? There is a social utility from not allowing people to do as such; Hadley v. Baxendale He says the heading is confusing (C. Three Limitations on Damages); there are some instances that they are going to limit your opportunity to get the extra consequential losses; not the expectation and so forth, but the other losses; this has a lot to do with remoteness or foreseeability of harm; Plaintiff?s in this case operated a steam engine that they relied on for farming; the defendants on this case are the common carriers of mail (the UPS, federal express, or what not of that day) The language of the beginning of the case is somewhat strange; there is also language of the attorney?s of the case that repeats those facts; to understand this case you must understand that the court did not accept those facts and actually rejected them Page 89 midway down is where the court states the facts that they accept They don?t buy into anything that the common carrier knew anything about the mill being shut down Focus on the version that the employee showed up saying I have a shaft and we operate a mill and how long will it take to get it to wherever and back It cost the plaintiff 2 pounds and 4 shillings for the shaft to get there next day granted the plaintiff brought it into the UPS by the next day The plaintiff sues for $300, but what for? They claim they have all these other losses that resulted from the shaft never getting there. They brought the law suit under two counts: promise to deliver shaft and they did not do so breached their duty to act promptly?court says this isn?t a duty that is made out in law, but a duty that comes out of an implied promise January 21, 2005 We were focusing on trying to compensate injured party for direct breach of contract; we were trying to give the equivalent of specific performance At other times a person may be anticipating the contract for other reasons and the breach of screwed it up; the restatement says that we are going to give you damages for things that are naturally foreseeable and occurred as a direct result from the breach. If it?s not naturally flowing out, but you give notice to the person about the reasons then courts will give damages for these special situations because though it isn?t naturally occurring or foreseeable it is foreseeable that these damages will occur because he told you it would occur Limitations: Foreseeability( where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonable be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may be reasonably be supposed to have been in the contemplation of the parties when they made the contract, as the probable result of the breach of it Special Circumstances(if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated; but if they are not made known to the other party then one cannot receive damages for special damages that aren?t reasonably foreseeable Restatement §351: Unforeseeability and Related Limitations on Damages Certainty of Harm( compensation for damages for breach of contract must be established by evidence from which a court or jury are able to ascertain the extent of such damages by the usual rules of evidence and to a reasonable degree of certainty A party can recover only on damages which naturally flow from and are the result of the act compained of Chicago Coliseum Club v. Dempsey Timeline 3/6(they make an agreement for Dempsey to fight Harris Willes Dempsey was to get some money in August And then get more money in September Also, he was to get money after the fight Can a party collect their expenses in addition to their lost profits? They have to choose Lost profits are not a certainty; the regularity of an event allows us to give an element of predictability that we may not have in a one shot prize fight. This begins to the uncertainty aspect of the event. When something is proven to be 2 points of this Case: To show us this limitation; and Leads us to the next case January 24, 2005 Anglia Television Ltd. v. Reed Dates: On August 30th, Reed?s agent made an agreement with Anglia that Reed would take a role on September 8 On September 3 the agent called the television company stating that he had accidentally booked him for another thing somewhere else Anglia does not sue for profits because they know that there is no way that they could get them because there is no way for them to prove what they would have made Instead, they were suing for wasted expenditures Reed objects some of the expenses because they occurred before he was in contract with the company Did the court end up allowing those expenses that were incurred by the television company before Reed had entered into the contract with them? This case doesn?t really play into America Restatements?don?t look at 346 §349: Damages Based on Reliance Interest As an alternative to the measure of damages stated in §347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed Mistletoe Express Service v. Locke Expenditures in this case occurred after the contract had occurred, and Locke testifies that she wouldn?t have done any of these things had she not relied on this; she wasn?t making any profits anyway After months in the contract, Mistletoe breached the contract no longer wanting her to do their deliveries Mistletoe?s main argument is that Locke should only be able to recover what she would have if the contract hadn?t been breached She won?t be able to sue under expectation, but she will be able to use reliance. Why? Does this case or the restatement suggest that one can choose which one to sue for? Yes, they do suggest that you can choose the one that does you the best In this case she is able to take all the money home because Mistletoe never showed what their losses would have been had they stayed in the contract If for example they had said that they would have lost 15000 had they stayed in the contract, then to get her recovery you would subtract that from her expectation Under Reliance, the burden shifts to the DEFENDANT to prove what they would have lost January 26, 2005 January 31, 2005 Neri v. Retail Marine Corp. Lost volume doctrine: the person can get paid twice for the breach of a contract if they are a dealer of quantity of the product Consequential Damages: those that are the consequence of the breech of damages; need to consider whether they are foreseeable or not p. 84-85; 144-45 look at UCC?s 1-106: really states a policy as to expectancy interest/damges to either party the seller or the buyer a more specific statement of expectation damages of buyersdamages?apply 713; another approach 71?this is available even if the buyer never actually goes to te market to go get it himself; cover means if the buyer go and buys something else, he or she is the UCC?s on page 145 is how we are going to deal with the sellers; the seller may resell the on buyers side it is called cover; on the sellers side it is called resell February 9, 2005 The Case of Mary Clark: A Woman of Colour How did the court categorize the remedy that Johnston was seeking? They said that the court cannot or will not enforce or order specific performances because they don?t want to coerce people into doing things that they already don?t want to; you can do other things like get money from them An Apprentice is An Exception to the Rule: this is because they are minors, and cannot or aren?t privileged to make their own decisions; People of legal age cannot be forced to perform period Why does the court say to not enforce specific performance on somebody? They say that essentially the person is in a slave agreement and is forced to do things that they don?t want to It just seems contrary to equity and justice to force people to do things Lumley v. Wagner (English Case) We will distinguish this case, which is English, with Ford v. Jermon which is the next case from America Wagner entered into contract with Lumley stating that for the month(s) singing for Lumley she would not go sing anywhere else without Lumley?s permission What Plaintiff Wanted: an injunction from permitting her to work at other places Rule: this court states that it may grant an injunction for a negative covenant in a contract that states one may not work elsewhere that was similar in nature during their employment at their present job; the court can?t directly force the person in specific performance, but they may impose the negative stipulation which through a moral decision of the defendant might force the defendant to indirectly be coerced in specific performance The court must decide if it is so bad to hold a person to a negative covenant or not Ford v. Jermon (American Case) Extremely similar to case before, but there is no negative stipulation in the contract This court believes that it would be just as bad to grant an injunction preventing a person from working elsewhere because then they are Indirectly forced to have to work at the job she doesn?t want to; this is because she can either not work or work there, and there is no alternative opportunities in which she may get work This court says that even if there was a negative stipulation in the contract, they wouldn?t grant an injunction The tension is what to do with an injunction that we will review next class; but they won?t at all force specific performance February 11, 2005 Duff v. Russell The court implied the negative covenant which is a huge deal because this never occurred before now and is the opposite of the previous case, and this is the modern approach of today Dallas Cowboys Football Club v. Harris My notes are great!!! Injunction, specific performance, and personal services are the key terms The court changes the definition or implication of the word uniqueness from being one in a kind that is irreplaceable to one that is difficult to replace SUMMARY OF THE LAST SEVERAL CASES Specific Performance: is in the family really of injunctions; we usually think of it in the terms of ordering somebody to do something that they would not do that they promised to do; it is very extraordinary to grant specific performance or an injunction for specific performance; burden of proof is on the plaintiff; what they have to prove is that damages wouldn?t be adequate; equity comes into play; person must show that there is no adequate remedy, the subject matter of the suit must be unique; when dealing with property there is a caveat if D doesn?t give P the property?the presumption is reversed and they usually grant the specific performance, and the defendant must show why it shouldn?t be granted; when talking about goods, the uniqueness has been broadened to whether it is commercially feasible to go out and cover or substitute the product, then they will treat it as though you have met the uniqueness standards; personal services (3rd category)-- now it?s really an injunction only; burden of proof is back on plaintiff; the reasoning is simply that there is all kinds of problems with forcing people to perform for someone that they do not want to, and there a bunch of reasons that courts don?t want to enforce specific performance; you have to narrowly tailor the injunction so you do not deprive the person a livelihood in order to grant the negative stipulation Must know this distinction and no cases on it: say he has a service contract with sears to service his dishwasher, but sears does not want to do it; assume that he can prove uniqueness, and he goes into court and says to make sears service his dishwasher; would the court in a service contract cause specific performance?yes they will because we make a distinction between a person and a corporation because this is not a personal services; corporations have to perform the services; THIS Is HIGHLY TESTABLE SAYS ELSER Covenant Not Compete: this says that you when you leave, you will not go to another company of the same nature in fear that you will steal the clients Negative Stipulation: this is while you are working under contract for the contract, you won?t go do the same job elsewhere while you are doing it here February 18, 2005 Remedies Review Session Remedies: you want to keep the code remedies (the ones involved in the sale of goods) and the non-code remedies dealing with everything else; there may differences between the code and non-code, but for most part are similar Damages: simply a specific remedy or smaller subsection of all remedies; you want Expectation Damages: when someone has breached a contract, it is going to put someone in the position had the contract not been broken Common Law Approach Hypo: owner is trying to build a building and his contractor ditched him; he has to get a new one which costs more money; then he would get the money to pay for the new house Consequential Damages: as a consequence of a breech a person may endure other damages because of this; person gets damages for the consequential losses if it was reasonable foreseeable; something is foreseeable either because it was naturally occurring and reasonable person would know or special/specific information before the contract was signed Hypo: you tell contractor from previous that the building is an apartment and you are in the process of getting people to rent them; you have started telling the people so you have given them notice and what not; as a result it ends up you are going to lose rent because of his breech; you get the losses that he already caused you plus the consequential damages of losing the rent; this can be construed as a limitation or an addition depending on how you want to use it Speculative Damages: those damages that you can?t prove with a degree of certainty, then you are not going to get these Certainty of Harm: Can be proven with a certain amount of predictability(in Dempsey case if there is a hotdog stand that depends on the fight occurring; the promoter usually gets a part of the profit; lets say that there is a deal that they would get 20% of the concession sales; how much should they be able to get if the contract is breached; they say that evidence shows that every time there is an event at the Coliseum they sell at least 5000 hotdogs; the regularity of a business isn?t speculative; this would become part of the damages that they would be able to recover (talking about promoter who gets 20%) Hypo: what if in the Dempsey case they had pre-sold 10,000 tickets prior to the breech, then they would have been entitled for damages Duty to Mitigate Damages: you have to try to take away some of the loss of damages?basically you can?t just sit around and do nothing; there is this responsibility to hold the breeching party only to damages that they caused, and if there is a situation where you could have found someone to replace the breeching party you will not get the damages Basically, you must make some type of reasonable efforts to find somewhat equivalent work; Hypo: Code Approach There is a difference when a buyer or a seller is attempting to recover damages Buyer Choices Buyer Option 1: the buyer can recover the differences between the market price and the contract price at the time the breech occurred; doesn?t even have to purchase the good; buyer can recover the difference at the time of breech between contract price and market price Buyer Option 2 ?Cover?: buyer buys at the higher price and gets the difference between what was paid and what was contracted for (85) Sellers Options: person offers to purchase your TV and then backs off Seller can recover the difference at the time of breech between the contract price and the market price?no sale of goods necessary; in the hypo above if you keep the TV you can still sue the person for breeching the contract and say he pays a 1000 and market price is 900, then you get 100; you can?t if market price has gone up Seller has option Reliance: you would only want to try to get these if you can?t get the one before; these are your out of pocket expenses that you incurred after the contract was created; minority view is the WASTED EXPENDITURES doctrine in that you can recover for things that were in the minds of the people Equitable Remedies: Specific Performance: subject matter must be unique; for Rescission: this is calling the deal off; usually a person is trying to get out of a deal because something is wrong or there is a fraud in the deal; Rescind and Restitution: allowed as a matter of equity where person must make Quasi Contract: done to prevent injustice against someone Reformation: you and I enter into a contract where I will purchase his TV for 1000; while writing up the contract he accidentally put 10,000; he can take the contract to the court to get fixed really quick and easy Liquidated Damages: available when the amount is difficult to estimate and something reasonable for recovery if breech is put into the contract (this might be in the wrong place); employee decides to walk off the job and he wants to sue for restitution for the number of months he worked; there is a liquidated damages clause in his contract saying that he is entitled to 50 bucks if he quits in the middle of the job; in a restitution law suit seeking 100, the liquidated damages clause would prevail; specific performance lawsuit is not trumped by the liquidated damages as the restitution is; courts let them to still have the choice February 21, 2005 Contracts II outline Elser!!! February 23, 2005 The one that I use Goddamnit has this days notes!!!!!!!!!! March 30, 2005 Duress(improper threat that induces one to enter into a contract It has to be a wrong p.982 and bottom of 983 in the footnote a threat that allows you to avoid a contract in the common law had to be one that effected you physically that could not be fixed; simply being threatened about having your house burned down does not constitute a reason to be allowed out of the contract Actions that induce duress had to be an illegal act in themselves, and the threat had to be strong enough to overcome a person of ordinary courage; However, there are situations that a person of ordinary courage may not consider something as duress, but because a person has a particular fear or condition that a threat may not fear the ordinary courage person but this person has this condition that it may cause duress in them; in other words this should not be simply an objective standard but can also be somewhat subjective Majority Opinion(separated from the minority in their definition of duress because the minority wants to stick with what is an illegal act; the majority is saying it may not be illegal, but improper then it is sufficiently duress; today duress only requires an act that is improper and not illegal; Dissent seems to want to continue to maintain the old argument that the threat must overcome ordinary courage Today it is enough if it goes against a person?s self-interest or the particular disposition of a particular person that the person that is making the threat knows