Contracts Outline 2

Limitations on Contracts
Statue of Frauds A statute of frauds requirement is a pre-requisite for enforcement of certain kinds of contracts; it requires that the contract be evidenced by some form of writing. The exact nature of the writing required may vary by the type of contract involved. It limits the ability of a dishonest plaintiff with a silver tongue to persuade a jury that his or her neighbor orally promised to sell the family farm for a bargain price. 1. Contracts in consideration of marriage. This provision covers prenuptial agreements. 2. Contracts that cannot be performed within one year. However, contracts of indefinite duration do not fall under the statute of frauds regardless of how long the performance actually takes. 3. Contracts for the transfer of an interest in land. This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement. 4. Contracts by the executor of a will to pay a debt of the estate with his own money. 5. Contracts for the sale of goods totaling $500 or more 6. Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation. This can be remembered by using the mnemonic "MY LEGS": Marriage, contracts for more than one Year, Land, Executor (or Estate), Goods ($500 or more), Surety. Statue of Limitations Requires a person who would sue for breach of contract to commence the action within a specified time period. One motivation for a statute of limitation is to give parties to transactions a period of repose after which an action may not be brought. It forces plaintiffs to bring actions with reasonable promptness following an alleged breach. Freedom of Contract and Private Statutes of Frauds It is often the case that the parties themselves want to establish a procedure pursuant to which agreements between them can only be amended, modified or waived if the amendment, modification or waiver appears in writing. Such a provision often appears towards the end of a contract in standard form language often referred to as boilerplate language. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to Cloud Corp v. Hasbro Inc. (2002) The court held that there was a valid modification of the quantity specifications in purchase orders submitted by the purchaser. Although purchase orders could not be modified without the purchaser's written

consent, emails and other correspondence between the seller and the purchaser indicated that the purchaser wanted an increased quantity. In Florida, the statute of limitations periods for contract actions vary by the nature of the contract. A five year period applies to a suit based on a written instrument. A four year period applies to a suit based on an oral contract. A four year period applies to a suit seeking to rescind a contract. A two year period applies to a suit based on a contract that guarantees the outcome of a medical procedure. A one year period applies to a suit seeking specific performance of the contract. The measuring time for a statute of limitations generally uses the day of the alleged breach as its start date (as opposed to the date on which the contract was entered into or the date on which the breach is discovered, for example) and the filing of the complaint with the court is used as the end date.

Applicable Law
A central problem in choice of law revolves around the determination of whether a contract constitutes a sale of goods transaction that is subject to Article 2 of the UCC. The second conceptual problem arises in classification of certain products as either goods or some other type of product that does not constitute goods. BMC Industries, Inc. v. Barth Industries, Inc. (1998), National Historic Shrines Foundation v. Dali (1967) Words such as: Buyer, seller, equipment, purchase, purchase order often demarcate a goods transaction The sale of a business constitutes a service transaction, not a goods transaction. (D.G Porter Inc v Fridley) Service dependent upon the circumstances of the buyer/seller/product. i.e Shelter v. Store, Farmer v. Girl, Show Dog v. Puppy. Carnival Cruise Lines, Inc. v. Shute, (1991), a case in which the Supreme Court of the United States held that United States federal courts will enforce forum selection clauses so long as the clause is not unreasonably burdensome to the party seeking to escape it. Carnival based out of Florida, Cant be prepared to defend in every state, Printed on back of ticket, Carnival ships out of Florida

Scope of Contractual Obligation

Parol Evidence Rule Because the scope of the contractual obligation is of great significance to the

parties, it is common for the parties to include boilerplate language in contracts that address these issues. First, parties often include an integration, merger or entire agreement clause in their signed contract. The following example attempts to exclude parol evidence from interpretation of the agreement. This agreement expresses the final and complete agreement of the parties with respect to the subject matter of this agreement Plain meaning rule; in cases of ambiguity parole evidence is to be used to provide insight and definition but NOT to supplement or contradict other aspects of the document. Thompson v Libbey: Parole evidence can not speak contradictorily to what the contracts reads nor can it speak where the contract is silent. In contracts you need to be specific, if you want something said then say it. Ambiguity can not be created or asserted when a clear reading of the text exists. (Jenkins v Eckerd) Auto sales agreements. You purchase a used car, and the salesperson tells you it is "good as new". But the contract provides that the sale is as is. Again, in most circumstances the written contract controls. However, this may constitute misrepresentation if it exceeds reasonably accepted standards, In a minority of U.S. states, (Florida, Colorado, and Wisconsin), the parol evidence rule is extremely strong and extrinsic evidence is always barred from being used to interpret a contract. In most jurisdictions there are numerous exceptions to this rule, and in those jurisdictions, extrinsic evidence may be admitted for the following purposes: To prove the parties to a contract. In Gilberto v Kenny [1983] 48 CLR 620, a written agreement to sell land signed by Mrs Kenny at times made reference to Mr Kenny, and the court held that oral evidence was admissible and that she was signing for herself and as an agent for her husband. To prove a condition precedent. In Pym v Campbell (1865) 119 ER 903, Pym entered into a written contract with Campbell to sell an interest in an invention. The court allowed Campbell to include the oral terms of acknowledgement that the sale was subject to an inspection and approval by an engineer. The engineer did not approve the invention. To prove that the written document is only part of the contract as in Hospital Products Limited v United States Surgical Corporation [1984] 156 CLR 41 where the court found for a written contract to be only part of an agreement. In State Rail Authority of NSW v Heath Outdoor Pty Ltd[1986] 7 NSWLR 170, the court held that the parol evidence rule is persuasive and the evidenciary burden is on the party wishing to rebut the claim that the whole contract was not in writing. To prove that an implied term of custom or trade usage or past dealings is part of a contract even if not in a written agreement, as in Hutton v Warren [1836] 1 M and W 466, where the party wishing to add the term bears the evidenciary burden and in this case a lease had to be read in the light of established custom. To prove the term or promise is part of a collateral contract. The court must look to the actual experience and dealings between the parties as they view the status of

such a collateral agreement. (Masterson v Sine) To aid in the interpretation of existing (ambigious) terms. To resolve ambiguity using the contra proferentem rule. To disprove the validity of the contract. To show that an unambiguous term in the contract is in fact a mistaken transcription of a prior valid agreement. Such a claim must be established by clear and convincing evidence, and not merely by the preponderance of the evidence. To show wrongful conduct such as misrepresentation, fraud, duress, unconscionability (276 N.E.2d 144, 147), or illegal purpose on the part of one or both parties.[4] To show that consideration has not actually been paid. For example, if the contract states that A has paid B $1,000 in exchange for a painting, B can introduce evidence that A had never actually conveyed the $1,000.. To make changes in the contract after the original final contract has been agreed to.

Offer And Acceptance

Basic common law contract doctrine holds that a contract is formed in the following generic situation: Omega makes an offer to Alpha at time T1. Omegas offer remains outstanding (i.e. the offer is not revoked by Omega or rejected by Alpha, nor has the offer expired) at time T2. Alpha accepts Omegas offer at time T2 while the offer is outstanding. Under UCC 2-207(1), an acceptance with additional or different terms is still a valid acceptance A bid is an offer which one is entitled to withdraw at any time before the auctioneer signifies acceptance by knocking down the hammer. (Payne v Cave) An open offer to sell terminates when the offeree learns that the offeror has already agreed to sell to someone else (Dickinson v. Dodds) Where a letter of acceptance is posted, an offer is accepted "in course of post". It must be considered that the offerors were making the offer to the plaintiffs during every moment that the letter was in the post. Then when the Offeree has placed his acceptance in the post there is a fictional meeting of minds, which concludes the offer and gives effect to the acceptance. (Adams v Lindsell) A counter offer restarts the cycle, even if it only adds more specificity. (Beaumont v Prieto) Carlill v Carbolic Smoke Ball Company [1892] is an English contract law decision by the Court of Appeal, which held an advertisement containing certain terms to get a reward constituted a binding unilateral offer that could be accepted by anyone who performed its terms. The Court of Appeal held the essential elements of a contract were all present, including offer and acceptance, consideration and an intention to create legal relations.

The company's claim that 1000 was deposited at the Alliance Bank showed the serious intention to be legally bound. Leonard v. Pepsico (2000) Leonard, sued PepsiCo, Inc. in an effort to enforce an "offer" to redeem 7,000,000 Pepsi Points for an AV-8 Harrier II jump jet The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. (Lucy v Zehmer) If two parties are in each others presence and one makes an offer without indicating any time for acceptance, an inference will be drawn that that offer will not extend beyond the time of the conversation unless special words or circumstances indicate a contrary intention on the part of the offeror. (Akers v. Sedberry). o A determination of what constitutes a reasonable time is a question of fact depending on the nature of the contract proposed, usages of business, and other factual circumstances. An offer may be terminated by: 1) rejection, or 2) failure to accept within the time fixed, or 3) failure to accept within a reasonable time if no time is fixed. To form a valid contract there must be a meeting of the minds and both parties must agree to the same thing in the same sense. If a man conducts himself such that a reasonable person would believe that he was assenting to the terms proposed by another party, and that other party upon that belief enters into the contract, that man would be equally bound whether or not he had actual subjective intent. Therefore if what D said would have been taken by a reasonable man to be an employment contract, and P understood it as such, it constituted a valid contract of employment for the ensuing year. Ds subjective intent was not relevant. (Embry v Hargadine) HOWEVER Oswald v Allen (1969) Plaintiff coin collection purchaser filed a complaint against defendant coin collection seller, alleging that a contract had been formed for the sale of a Swiss coin collection. The trial court found that plaintiff thought the offer was for all of the Swiss coins, while defendant thought she was selling only a specific coin collection and not the Swiss coins in another collection also. The court below concluded that a contract did not exist since the minds of the parties had not met.

Additional Terms In Acceptance Or Confirmation.

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it

states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this chapter.

Section 2-207 overrules the mirror image rule and the last shot rule. If the parties exchange writings demonstrating that they intend to enter into a contract, differences in standard terms wont prevent the formation of a contract. The second writing, therefore, acts as an acceptance, rather than as a counter offer, even when it contains different terms. This solves the problem of the unfairness that often results from the last shot rule and it solves the problem of reneging If the parties arent merchants neither additional nor different terms become part of the contract. If both parties are merchants, however, additional or different terms in the second document become part of the contract unless the first document expressly limits acceptance to its terms (my terms only), the additional or different terms are material, or the initial document objects to additional or different terms. section 2-207(3) provides that a contract is formed when the conduct of the buyer and seller recognizes the existence of a contract.

Battle of the Forms

The problems addressed by the UCC s. 2-207 cover two distinct situations in which the parties have failed to sign a single contract. In the first case, the parties have reached a prior oral agreement and one party sends a written confirmation of the oral contract. In the second case, the parties have exchanged writings that are not the mirror image of each other. Such a discrepancy in occurs most often when the parties use pre-printed forms in correspondence. This might occur when a purchaser of goods sends a purchase order form to a seller and the seller responds by sending a purchase confirmation form/invoice to the buyer

It was the express intention of the UCC s. 2-207 to overturn the operation of the mirror image rule for sale of goods transactions. The drafters of the UCC believed that the business reality required a change because in the commercial world parties often exchange forms that do not match. 2-207. Additional Terms in Acceptance or Confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. Material is defined as anything that may cause undue hardship/surprise, or is a significant element of the contract. Acceptance is the end to a battle of forms. X accepted and used product which was shipped with a new warranty precluding liability. When plaintiff accepted the goods with knowledge of the conditions specified in the acknowledgment, it became bound. (Roto-Lith v Bartlett)

Consideration
It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. Consideration to create a legally enforceable contract entails a bargained for, legal detriment incurred by the promisee OR a legal benefit to the promisor. Under the notion of "pre-existing duties", if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense. Generally, courts do not inquire whether the deal between two parties was monetarily fairmerely that each party passed some legal obligation or duty to the other party. The dispositive issue is presence of consideration, not adequacy of

the consideration. The values between consideration passed by each party to a contract need not be comparable. However, a consideration that is so minimal that is irrelevant may fail to qualify as proper consideration and instead as a gift (Schnell v Nell) Generally, past consideration is not a valid consideration and has no legal value. Past consideration therefore cannot be used as a basis when claiming damages. Moral obligation is sufficient consideration under the following circumstances: debts barred by the statute of limitations, debts incurred by infants, and debts of bankrupts. There can be no consideration for a modified contract that arises from a coerced promise for increased compensation for performing what one is already obligated to perform. (Alaska Packers Assn v Domenico) Watkins & Son v Carrig (1941) [excavation problems] o Plaintiff Watkins & Son agreed to excavate a cellar for Defendant Carrig, but Plaintiff encountered solid rock shortly after the work began. o The parties then orally agreed that Plaintiff would remove the rock for a stipulated price. o Despite Defendants contention that the oral contract was not supported by consideration since the plaintiff did not take on any additional duties, the New Hampshire Supreme Court held that the original contract was rescinded and a new contract was formed. This is to be distinguished from the contract being modified to include new terms without consideration. The mere abstention from a permissible legal conduct (smoking, drinking, sex) is sufficient consideration to make a promise based on that forbearance a valid contract. Consideration is not measured as a benefit to the promisor. (Hamer v Sidway) The court stated that consideration may consist in either a some right, interest, profit, or benefit to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. It is immaterial whether the consideration does in fact benefit the promisee or a third party or is of substantial value to anyone. Refraining from something that one is entitled to do is a sufficient detriment to create an enforceable contract. Forbearance from asserting an unfounded legal claim may act as valuable consideration to create an enforceable contract if that claim is asserted in good faith. The law favors the settlement without resorting to court action. Compromise of a doubtful right asserted in good faith is sufficient consideration for an enforceable promise. (Dyer v National By-Products)

Reliance and Seals

Promissory estoppel serves as a consideration substitute in contract law that renders

certain promises otherwise lacking in consideration binding and enforceable. In such cases, the promisees reliance is treated as an independent and sufficient basis for enforcing the promise. Promissory estoppel can be viewed as a legal device that prohibits the promissor from denying the existence of a contract for lack of consideration. Restatement (Second) of Contracts 90 Promise Reasonably Inducing Action or Forbearance (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection without proof that the promise induced action or forbearance. In general, the elements of promissory estoppel are: 1) a promise reasonably expected by the promissor to induce action or forbearance, 2) action or forbearance by the promisee in justifiable reliance on the promise (i.e. detrimental reliance), and 3) injustice can be avoided only through enforcement of the promise. Charitable Subscriptions Allegheny College v. National Chautauqua County Bank: Johnston promised to pay the college $5,000 if it would use the money to establish a memorial in her name. She later withdrew the promise. The court held that the promise to create the memorial created a binding and enforceable contract. Congregation Kadimah Toras-Moshe v. DeLeo: DeLeo died before fulfilling his oral promise to donate $25,000 to the Congregation. The court held that the promise was not enforceable because DeLeo did not ask or expect to receive anything in return. The mere expectation of using the funds to create a library did not amount to detrimental reliance. While charitable subscriptions may be enforced despite a lack of consideration or reliance it is not an absolute requirement. Salsbury v. Northwestern Bell Telephone Co.: Defendant promised to give $15,000 to the college. The college was later closed and the trustees sought to recover the pledge. The court held that the promise was binding. Pledges to charity are enforceable via promissory estoppel without a showing of detrimental reliance. Employment

Alaska Democratic Party v. Rice: Rice made an oral agreement to accept a position as executive director of the Alaska Democratic Party. After she moved to Alaska she was informed that she did not get the position. The court applied promissory estoppel to remove the contract from the Statute of Frauds, not as a consideration substitute. See McIntosh v. Murphy. Feinberg v. Pfeiffer Co.: An employee retired in reliance upon her employers promise to pay her a pension. The employer later sought to reduce the amount of the pension. The promise was held to be enforceable based on promissory estoppel but would not have been enforceable under plaintiffs alternate past consideration argument. Hayes v. Plantations Steel Co.: An employee discussed a pension with his employer after announcing his retirement. The employer stopped paying the pension after three years. The court held that the promise was not enforceable because the plaintiff did not retire in reliance on the contract. McIntosh v. Murphy: Plaintiff made an oral agreement with defendant to work at his auto dealership in Hawaii for one year. He was fired after two months. The court held that where a party has relied on an oral promise and rendered part performance the other party is estopped from asserting the Statute of Frauds. In this case promissory estoppel is used to remove a contract from the Statute of Frauds rather than as a consideration substitute. There was valid consideration to support the contract in this case. See Alaska Democratic Party v. Rice. Franchises Goodman v. Dicker: The defendant encouraged the plaintiff to apply for a franchise and induced him to incur expenses in hiring salespersons etc. Plaintiff ultimately did not get a franchise. The court held that promissory estoppel rendered the contract enforceable and the plaintiff was entitled to reliance damages. If a party has detrimental reliance on the affirmative assurances of another, the promissor is estopped from alleging anything contrary to the natural consequences of his own conduct. Hoffman v. Red Owl Stores, Inc.: Plaintiff sold his bakery and invested significant time and expense in reliance upon Red Owls assurances that he would be granted a franchise. He never received the franchise and sued to recover for his expenses. The court ruled for plaintiff on the basis of promissory estoppel. Damages were only as necessary to avoid injustice and could not exceed actual loss. Gratuitous Promises Alden v. Presley: Presley promised to pay for his girlfriends divorce including the property settlement and to pay off her mortgage. Presley died soon thereafter and the plaintiff sued when his estate refused to pay. The court found for the estate. The estate had refused to pay before the settlement agreement had been approved by the court. Plaintiffs reliance was not reasonable because the amount of the property settlement was

not binding until approved by the court. Devecmon v. Shaw: The plaintiff took a trip to Europe in reliance upon his uncles promise to reimburse him. Evidence of the uncles promise to pay for the trip was admissible and it was irrelevant that the trip benefited plaintiff. The court entered judgment for the plaintiff, finding that the plaintiff had detrimental reliance on the promise and that promissory estoppel rendered the promise enforceable. Greiner v. Greiner: The facts are similar to Kirksey v. Kirksey with the opposite outcome. Greiner left his homestead in reliance on his mothers promise to give him 80 acres of land near her. She later tried to have him ejected. The court ruled that promissory estoppel rendered the promise enforceable. Kirksey v. Kirksey: The plaintiff left her home in reliance on a promise made by the brother of her deceased husband to provide her with a place to live. He later demanded that she leave. The court did not apply the doctrine of promissory estoppel and held that the promise was not enforceable. The dissent stated that her loss and inconvenience constituted sufficient consideration to render the promise enforceable. Ricketts v. Scothorn: A grandfathers promise to give his granddaughter $2,000 to enable her to stop working was held enforceable. A promise can be enforced without consideration if there has been detrimental reliance on the part of the promisee. Option Contracts Berryman v. Kmoch: Berryman gave Kmoch an option contract for real estate in exchange for ten dollars which was never paid. Berryman sold the property before the option expired. The court held that the contract was valid. Option contracts must be supported by consideration, but promissory estoppel applies to such contracts. Subcontractor Bids/Construction Projects Drennan v. Star Paving Co.: This decision by the Supreme Court of California is the majority rule. The facts are similar to Baird v. Gimbel Bros. with the opposite outcome. Acting in justifiable reliance on a subcontractors bid is sufficient to render the bid irrevocable for a reasonable period of time. The contractor must not have reason to believe that the subcontractors bid was made in error. James Baird Co. v. Gimbel Bros. Inc.: This case is the minority rule. Defendant submitted a subcontractor bid which the plaintiff relied upon in calculating the general contract bid. Defendant realized that it had miscalculated the bid and attempted to withdraw it. Plaintiff was awarded the general contract and sued for damages when defendant refused to perform. The court found for the subcontractor. Promissory estoppel does not render a subcontractors bid irrevocable even where the contractor has relied upon it in submitting a bid for a general contract.

Miscellaneous Pops Cones, Inc. v. Resorts Intern. Hotel, Inc.: Defendant gave assurances that it would lease space for a yogurt shop to the plaintiff. Plaintiff terminated its lease in another location and sued when defendant withdrew its offer. The court held for plaintiff under promissory estoppel, applying a relaxed standard regarding the requirement that there be a clear and definite promise. Wright v. Newman: Wright was listed as the father on Newmans childs birth certificate, gave the child his last name, and established a parent-child relationship. DNA tests subsequently demonstrated that he was not the father. The court held that he was obliged to pay child support via promissory estoppel. Ypsilanti v. General Motors Corp.: General Motors sought and received tax abatements to induce it to continue operations in Ypsilanti. Ypsilanti sued when General Motors later decided to relocate its production. The court found for General Motors. The law of promissory estoppel requires that a partys actions be induced by a clear and definite promise. There is no promise where a corporation solicits a tax abatement and persuades a municipality with assurances of jobs.

Remedies: Expectation Damages & Specific Performance

The goal of money damages is to compensate the injured party by a monetary award. It requires the court to make a calculation of loss for the breach. The goal of specific performance is to make the injured party whole by directing the defendant to actually perform the contract. When the court directs specific performance of the contract, the court does not need to make a calculation of loss. Courts use three different measures to calculate monetary damages for a breach of contract action: The expectation measure The expectation measure seeks to put the plaintiff in the same financial position that he would have been in if the contract had been performed. In this sense, the expectation measure of damages is forward looking. Included in expectation damages are special or consequential damages. These damages typically do not arise within the immediate scope of the transaction between the contracting parties. The reliance measure The reliance measure of damages seeks to put the plaintiff in the same financial position that he would have been in if the contract had never been made. In this sense, the reliance measure of damages is backward looking. It often is measured by an amount equal to the out-of-pocket expenses incurred by the non-breaching party; however, reliance damages are not limited simply to out of pocket costs. The restitution measure The restitution measure of damages seeks to return to the plaintiff the value of any benefit conferred on the defendant. In this sense, the restitution remedy attempts to do justice bypreventing unjust enrichment of the defendant.

In general, a court will enforce an agreement setting a liquidated damage amount provided that (i) the agreed amount is a reasonable pre-estimate of damages (ii) the agreed amount is not considered a penalty for breach (iii) at the time of contracting it is expected that it would be difficult to calculate actual damages in the event of a breach.

A plaintiff is free to select the measure of damages that will provide it with the highest monetary award; however, there are certain limits on this ability. Except in very rare circumstances, a plaintiff is not free to seek punitive damages. As a general rule, the measure of the vendees damages is the difference between the value of the goods as they would have been if the warrant as to quality has been true, and the actual value at the time of the sales, including gains prevent and losses sustained, and such others damages as could be reasonably anticipated by the parties as likely to be caused by the vendors failure to keep his agreement and could not but reasonable care on the pare of the vendee been avoided. (Hawkins v Mcgee) No damages in cases of efficient breach of contract (unjust enrichment) A volume retail seller of standard priced goods may recover lost profits when a buyer defaults on a purchase if market damages are inadequate to put the seller in as good a position as he would have been had the contract been performed. (Neri v. Marine Retail). UCC 2-708 governs that lost profit measure + incidental damages is the rule. Appellant's cover of its damages by acquiring fertilizer from another shipper after respondent's breach was reasonable, and thus it was entitled to a damage remedy because its cover was made in good faith and that the fertilizer obtained from the second shipper was a reasonable substitute (Fertico Belgium v. Phosphate Chem) The measure of damages owed to a wrongfully discharged employee is the amount of salary agreed upon for the period of employment reduced by the amount the employer proves the employee has earned or with reasonable effort may have earned from other employment. However, he does not need to accept different or inferior employment. (Parker v. 20th Century Fox) Once a contract is breached, the non-breaching party has a duty not to increase the resulting damages. (Rockingham County v. Luten Bridge Co.) The measure of damages for a trivial and innocent omission is not the cost of replacement but the difference in value. (Jacob & Youngs v. Kent) Plaintiffs may not gain more in damages for a breach of contract that actual performance is worth. (Peevyhouse v Garland Coal) Remoteness or Foreseeability of Harm Hadley v. Baxendale Ps mill was stopped by a breakage of the crank shaft, which they sent away using Ds carriers. The delivery was delayed by neglect, and P lost profits which he otherwise would have earned had the crank been returned earlier. Only

damages that may reasonably be supposed to have been in the contemplation of both parties [were foreseeable] should be awarded. If the parties wanted unforeseeable, special damages to be awarded in the case of a breach, they could have provided for such a measure in the contract. The Hadley rule says that unusual damages must be contracted for in advance; this allows for the outcome of a claim for damages for breach to be more easily predicted and therefore such cases will be litigated less often. Certainty of Damages Chicago Coliseum Club v. Dempsey: Jack Dempsey makes a contract to fight in a boxing match, and then breaks it. The court rejects expectation damages as too speculative, then rejects expenses incurred by the plaintiff prior to the signing of the agreement, then rejects expenses incurred in attempting to force him into compliance with the agreement as those expenses were taken after breach at their own financial risk. The court awards expenses incurred after the signing of the agreement and before the breach a reliance measure.

Kenford Co. v. County of Erie: A party to a contract may only recover damages that were within the contemplation of the parties at the time of formation of the contract. In the present case, Plaintiff purchased the peripheral lands in order to benefit from the expected appreciation in the value of the lands. However, there is no evidence that the defendant agreed to assume the risk that the lands would not appreciate due to the stadium not being built. In fact, the evidence indicates that Plaintiff alone assumed this risk. Hence, Plaintiff is not entitled to damages resulting from its lost anticipated appreciation in the value of its land.

Exceptions to certainty in damages rules:

(a) If the fact of damage is proved with certainty, the extent or amount may be left to reasonable inference. (b) Where the defendants wrong has caused the difficulty of proof of damage, he cannot complain of the resulting uncertainty. (c) Mere difficulty in ascertaining the amount of damage is not fatal. (d) Mathematical precision in fixing the exact amount is not required. (e) If the best evidence of the damage of which the situation admits is furnished, this is sufficient. (f) The plaintiff may recover the value of his contract, and this may be measured by the value of the expected profits. (g) Profits may sometimes be proved as evidence of the damages, when they would not be directly recoverable.

Specific Performance Specific performance and injunctions are equitable, rather than legal remedies: When the plaintiff seeks an equitable remedy, particularly a coercive one, the rule is that he may have the remedy only if the remedy at law is inadequate. A calculation of damages may be problematic when they depend on the subjective valuation of a unique piece of property, which is why specific performance might be necessary . Contracts for land = one reason for the inadequacy of a legal remedy is that the property in question is unique. Traditionally, land has been presumed unique, so the presumption shifts in favor of specific performance. Cumbest v. Harris: [Case of the sentimental stereo] Specific performance for personal property may be ordered if it falls under one of several well recognized exceptions: 1) where there is no adequate remedy at law; 2) where the specific article or property is of sentimental or unique value; and 3) where due to scarcity the chattel is not readily obtainable. Campbell Soup Co. v. Wentz : Carrots markets price triples from original contract price, D stops selling them to P. P is awarded specific perfomace. Injunctive relief can be used to enforce a promise not to render personal services. (Lumley v Wagner). The court cannot compel specific performance to render personal services, but it can grant the remedy of injunctive relief to prevent a party from performing personal services. The court can compel the defendant to abstain from those acts she promised not to commit under the contract. An order of specific performance is generally not granted if any of the following is true: Specific performance would cause severe hardship to the defendant. The contract was unconscionable. The claimant has misbehaved (unclean hands). Specific performance is impossible. Performance consists of a personal service. The contract is too vague to be enforced. The contract was terminable at will (meaning either party can renege without notice). Note that consumer protection laws may disallow terms that allow a company to terminate a consumer contract at will (e.g. Unfair Terms in Consumer Contracts Regulations 1999) The contract required constant supervision Mutuality was lacking in the initial agreement of the contract. Restitution and Liquidated Damages If damages from lost profits are impossible to calculate, the aggrieved party may be entitled to recover reliance expenditures. When any attempt to reach a precise sum for damages would be guesswork. The P is

entitled to recover the expenses to which it had been put in order to secure the benefits of a contract of which D's conduct deprived it. Unless P is permitted to recover the expenses that it went to, which were a total loss to it by reason of its inability to exhibit the furnace, it will be deprived of any substantial compensation for its loss. The law does not contemplate any such injustice. Security Stove v. American Ry. Express: The carrier had notice of peculiar circumstances under which the shipment was made (satisfies the Baxendale standard) and that delay in delivery would result in unusual losses by the shipper. Sullivan v. OConnor: Sullivan (P), an entertainer, contracted with OConnor (D), a plastic surgeon, for cosmetic surgery on her nose. OConnor promised that only two surgeries would be necessary and that the nose job would enhance and improve Sullivans beauty. After three operations Sullivans nose had become asymmetrical and looked worse than it had prior to the operations. Further improvement was impossible. o Pain, suffering, and mental distresses are compensable damages for breach of contract under either expectancy or a reliance damages. o An agreement between a doctor and a patient which calls for a specified result can be enforced. The promisee may recover his outlay in preparation for the performance, subject to the privilege of the promisor to reduce it by as much as he can show that the promisee would have lost, if the contract had been performed (Albert v Armstrong) [Rare case where reliance greater than expectation.] Reliance can only be recovered up to amount you would have received under contract. (Oliver v Campbell) A promisee, upon breach, has the option to forego any suit on the contract and claim only the reasonable value of his performance. o A plaintiff has the option of recovering damages for a breach of contract (which is a losing proposition here since completion of performance would have resulted in a loss) or in quantum meruit for the value of the performance already completed. Hence, the case was remanded for computation of damages in quantum meruit, which are not to be reduced by the loss Plaintiff would have incurred by complete performance. (US v Algernon Blair) The concept of quantum meruit applies in (but is not limited to) the following situations: I. When a person hires another to do work for him, and the contract is either not completed or is otherwise rendered un-performable, the person performing may sue for the value of the improvements made or the services rendered to the defendant. The law implies a promise from the employer to the workman that he will pay him for his services, as much as he may deserve or merit. o The measure of value set forth in a contract may be submitted to the court as evidence of the value of the improvements or services, but the court is NOT required to use the contract's terms when calculating a quantum meruit award. (This is because the values set forth in the contract are rebuttable,

meaning the one who ultimately may have to pay the award can contest the value of services set in the contract.) II. When there is an express contract for a stipulated amount and mode of compensation for services, the plaintiff cannot abandon the contract and resort to an action for a quantum meruit on an implied assumpsit. However, if there is a total failure of consideration, the plaintiff has a right to elect to repudiate the contract and may then seek compensation on a quantum meruit basis. If the party performs more than the damages suffered by the failure to complete services, there is reason to pay the party for the reasonable worth that has been done for the other partys benefit. The party is not required to pay because he is satisfied with the services, but he is required to pay because the circumstances compel him to accept the services completed. Moreover, a hired laborer shall be entitled to compensation for services performed, even though he will not continue until the end of the contract term. Therefore, the Plaintiff can recover for his services in quasi contract. The amount, which the Plaintiff can recover, is the benefit and advantage that the party takes from the labor, in other words the amount of value he receives after deducting the amount of damages. (Britton v Turner)

Deposits & Liquidated Damages

At common law, a liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party (in which case it is referred to as a penal or penalty clause). One reason for this is that the enforcement of the term would, in effect, require an equitable order of specific performance. In order for a liquidated damages clause to be upheld, two conditions must be met. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. Second, the damages must be sufficiently uncertain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages.

The purpose of the exclusive repair or replacement remedy is to ensure that the purchaser receives a product which conforms to the express warranty, I. e., that the product is free from defects, and if the product proves defective within the warranty period the seller is obligated to cure the defect within a reasonable time. If, however, the seller is subsequently unable or unwilling to repair or replace a defective part within a reasonable time, the buyer is left with a defective productnot conforming to the warranty-and the limited remedy has not achieved its purpose. In such circumstances the buyer is permitted to pursue the other remedies provided by the UCC if the defect substantially affects the value of the

buyer's bargain. Florida Statutes, Title VI, Civil Practice and Procedure, Chap. 57, Court Costs 57.105. Attorneys fee; sanctions for raising unsupported claims or defenses; exceptions; service of motions; damages for delay of litigation. If a contract contains a provision allowing attorneys fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorneys fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract.

Excuses, Mistakes, & Conditions

Mistake In the case of a mistake, the mismatch between the promise and the state of the world exists at the time of contracting. The parties made a promise but they did so under a misperception of the facts that existed at the time of contracting. In these cases, a court may find that, though a promise was made, the promise did not result in the formation of an enforceable contract because of the mistake. The mistake prevented the formation of a binding contract. This is one area where the meeting of the minds metaphor may aid understanding. The mistake may have prevented a meeting of the minds. Excuse In the case of an excuse, the mismatch occurs between the promise and the state of the world as it exists after a promise has been made that resulted in the formation of an enforceable contract. The state of the world has changed since the date of contract formation in such a way that the court excuses the promisor from its obligation to honor the promise. For example, a development subsequent to contract formation may render performance impossible or it may frustrate the purpose of the contracting parties in making the agreement. In some cases of changed circumstances the courts may imply a condition into the contract to the effect that the obligation was conditioned on the assumption that circumstances would not change to make performance impossible or to frustrate the purpose of the contract. Condition In the case of a failure of condition, the mismatch occurs between the scope of the contract obligation and the state of the world at the time for performance. For example, a party might agree to purchase a house on the condition that the party obtains mortgage financing. If the party fails to obtain mortgage financing because banks are not offering home mortgages or the purchaser fails to meet the credit standards required, then (other things being equal) the party is not in breach of the purchase contract if the party fails to consummate the purchase. When thinking about conditions, keep in mind that conditions come in three different varieties: express conditions, implied conditions and constructive conditions, depending on the source of the condition.

An express condition is found in the actual language of the contract itself. An implied condition is not derived from the literal words of the contract but instead is gleaned from the intent of the parties by implication from of the express words in the contract, the conduct of the parties or the context of the transaction. Nevertheless, an implied condition is considered to be part of the contract between the parties. A constructive condition is a condition that is imposed by a court to make a contract work or to prevent an unjust result. To impose a constructive condition, a court will also look at the implication of the express words used in the contract and the context of the transaction.

If contract performance depends on the continued existence of a person or thing, and that person or thing ceases to exist, performance may be excused for impossibility of performance. (Taylor v Caldwell) o However, if a party gives an express or implied warranty that that thing will continue to exist, that party is liable for breach if it ceases to exist. Krell v Henry: Defendant is excused from performance because his purpose for entering into the contract was frustrated. Defendants purpose of entering into the contract was to view the coronation of the King. This purpose was understood by both of the parties and regarded as the foundation of the contract. Further, the rooms were taken by their reason to suitability for viewing the coronation processions and thus the purpose of the contract. Performance of the contract was not rendered impossible, since Defendant could remain in the flat even though the coronation procession did not take place. However, Defendant would not receive any benefit from staying in the flat, therefore he must be excused from performing. o Parol evidence is admissible to show that the subject of the contract, which was flats to view the coronation and was known by both of the parties, in order to determine whether the object of the contract was frustrated by the nonoccurrence of the coronation. Therefore, the court held that Defendant was excused from performing under the contract and Plaintiffs claim is dismissed. o The doctrine of frustration of purpose originated in cases called coronation cases, such as this case. The doctrine of frustration of purpose states when a partys purpose is frustrated by intervening events the duties of the parties will be discharged. o However, they are still bound by any obligations that arose before the contract was frustrated. (Chandler v Webster) Something is impossible when it is not practical and a thing is impracticable when it can only be done without excessive and unreasonable cost. (Mineral Park v Howard) [Relaxation of impossibility rule] A mutual mistake regarding the substance of the subject matter of a contract may render that contract unenforceable. (Sherwood v Walker) [Pregnant Cow Case] o There is no contract if there is a difference or misapprehension as to the substance of the thing bargained for, or if the thing actually delivered or

received is different in substance from the thing bargained for and intended to be sold. However, if there is merely a difference as to some quality or accident, even though the mistake may have been the actuating motive of either or both of the parties, the contract remains binding. (Wood v Boyton) [Gem Sale] The only difficulty in such a case is to determine if the mistake is as to the substance of the whole contract. Carroll v Bowersock: Where plaintiff partially completed flooring before destruction of defendant's building, plaintiff was entitled to damages for the value of the benefit inuring to defendant prior to the building's destruction even though D did not intend to rebuild. Where a nonmaterial term, such as mode of shipment, is ambiguous, the contract is still enforceable. (Raffles v Wichelhaus) A party must attempt to satisfy a condition by all reasonable acts in order for it to be deemed to have been in good faith. (Fry v George Elkins Co) Plaintiffs are entitled to bring their action for damages for Ds breach of contract only if D had actually prevented plaintiffs from completing contract. o There was no evidence that D forced plaintiffs to leave in violation of contract; furthermore, D did nothing that was wrongful or outside of her legal rights. (Godburn v Meserve) [Duplex Case] Where the words of a contract raise no duty in and of themselves, but rather modify or limit the promisees right to enforce the promise, such words are considered a condition. o A condition may be excused w/o other reason if its requirement a) will involve extreme forfeiture, or penalty, AND b) its existence or occurrence forms no essential part of the exchange for the promisors performance. (BK v Family Dining)

An agreement that lacks mutuality of obligation lacks consideration and is unenforceable. Mutuality of obligation exists when both parties have assumed some legal obligation. If the agreement leaves one party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is illusory and lacks consideration.

Satisfaction clauses are divided into two primary categories that are treated differently by the courts: 1) In those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously. The standard of a reasonable person is used in determining whether satisfaction has been received. 2) In contracts where the issue of satisfaction involves fancy, taste, or judgment, the promissors good faith determination that he is not satisfied is a defense to breach of

contract. The requirement to act in good faith prevents constitutes consideration and the contract is enforceable. The party is not released from the agreement merely because he has become dissatisfied with the contract itself. He must have a genuine, good faith dissatisfaction with the performance. (Mattei v Hopper)

Unconscionability, Duress & Public Policy

Where there is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to such party, such contract may be set aside. Meaningful choice can be determined by the equality of bargaining power and a reasonable understanding of contractual terms that each party has when entering into the contract. (commercial sophistication of parties) Situations in which there are oppressive clauses hidden in boilerplate language or high pressure sales tactics applied against uneducated or illiterate consumers, and where there is neither bargain nor negotiation are all signals of unconscionability. Violation of statute, state secrets or public policy is grounds for vitiation. Where a seller vastly inflates the price of goods Unconscionable conduct is also found in acts of fraud and deceit, where the deliberate misrepresentation of fact deprives someone of a valuable possession. For the defense of unconscionability to apply, the contract has to have been unconscionable at the time that it was made Duress has been defined as a "threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition". - Black's Law Dictionary Duress in contract law falls into two broad categories:

1. Physical duress, and 2. Economic duress

Contract Language
In determining what a term means the court will consider (in order of importance): (1) the language of the contract, (2) the preliminary negotiations, (3) trade usage, (4) legal standard, (5) course of performance, and (6) maxims. If a writing makes it apparent that the drafter desired a particular result, although that desired result was not expressed by formal words, that result can be read into the writing to conform to the intent of the drafter. If an instrument as a whole produces a conviction that a particular result was fixedly desired although not expressed by formal words, that result may be supplied by implication and the underlying intention effectuated provided that it is

sufficiently declared by the entire instrument. Every instrument in writing is to be interpreted with a view to the material circumstances of the parties at the time of execution in light of the facts at that moment and to give effect to the main goal to be accomplished. An instrument must be construed so as to give effect to the intent of the parties. A best efforts clause imposes an obligation to act with good faith in light of ones own capabilities.

Sun Printing & Publishing Assn v. Remington Paper & Power Co., Inc. rules that a contract will be deemed invalid due to incompleteness if the agreement does not establish the length of time that the terms of the agreement, such as the price, shall apply.

Repudiation & Cancellation

The U.C.C. provides that the measure of damages for repudiation by the D is the difference between the market price at the time the P learned of the breach and the contract price, plus incidental and consequential damages. Courts have interpreted learned of the breach to mean (1) when the P learns of the repudiation; (2) when the P learns of the repudiation plus a commercially reasonable time or (3) when performance is due under the contract. If two parties enter into a contract to be performed at a designated time in the future, and one party refuses to perform the contract before the designated time the parties agreed to perform, the other party may sue before the contract was to be performed. That party need not wait until the time for performance has passed. (Hochester v De La Tour) The Code permits cancellation by rejection for minor defects, and permits revocation of acceptance only for substantial impairments. A buyer can reject goods for non-conformity, but the rejection does not automatically terminate the contract. With appropriate time given to the seller to fix the non-conformity, if not fixed, the buyer may rescind the contract. (Ramirez v Autosport) The UCC provides that a buyer may revoke his acceptance of goods whose nonconformity substantially impairs the value of the goods to him when he has accepted the goods without discovery of a non-conformity because it was difficult to discover or if he was assured that non-conformities would be repaired. The UCC provides that a buyer may revoke his acceptance of goods whose nonconformity substantially impairs the value of the goods to him when he has accepted the goods without discovery of a non-conformity because it was difficult to discover or if he was assured that non-conformities would be repaired.

Assignment & Third Party Beneficiaries

Creditor Beneficiary: A creditor who receives the benefits of a contract between a debtor and another party, pursuant to which the other party is obligated to tender payment to the creditor. Donee Beneficiary: A third party, not a party to a contract, but for whose benefit the contract is entered with the intention that the benefits derived therefrom by bestowed upon the person as a gift Intended Beneficiary: A third party who is the recipient of the benefit of a transaction undertaken by another Incidental Beneficiary: A third party who is affected by a promise made pursuant to a contract although he is not a party to the agreement. A third party for whose benefit a contract is made may bring an action for its breach. The real test as to whether a party is a beneficiary under a contract is whether the contracting parties intended that a third person should receive a benefit which might be enforced in the courts. The parties must have intended that the promisor assume a direct obligation to the intended beneficiary at the time they entered into the contract in order to create a third-party beneficiary. A gratuitous transfer of the right to collect a debt is not valid absent delivery. A party may not delegate its duties to a third party under a contract unless performance by another is substantially the same. (outsourcing) The duty of performance under an exclusive distributorship may not be delegated to a competitor in the marketplace without the obligees consent. (Sally Beauty v Nexxus) Consideration does not have to be between the Plaintiff and the Defendant. There simply has to be consideration between the parties to the contract. (Lawrence v Fox)