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Contract - Promise or set of promises creating a legally enforceable promise, which requires a manifestation of intent to act or refrain
from acting in a specified way, so made as to justify the recipient of the promise in understanding that a commitment has been made.
Promise - manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding
a commitment has been made (Outward manifestation of intent/expression of commitment that a reasonable person would understand)
Agreement – a manifestation of mutual assent (expression of approval or agreement) on the part of two or more persons. May be in
words (oral or written) or inferred wholly/partly from conduct.
Bilateral– promise for promise;
Unilateral– promise for act;
Express - assent is manifested by words;
Executory–not fully performed;
Contract Implied in Fact – where parties don’t expressly agreement but is apparent from a reasonable interpretation of their conduct
- Prior course of dealings, length of relationship, trade practice, behavior of parties, existence of request, transmission of benefit
- Whether reasonable person would think it’s a contract
Quasi-Contract/Implied in Law - Equitable remedy for unjust enrichment where no contract, regardless of intentions (Bailey v. West):
1. Non-gratuitous conferral of benefit (benefit you would expect to be paid for)
2. Acceptance and retention of the benefit;
3. Unjust enrichment not to return benefit.
Bargain – agreement to exchange promises, promise for performance, or performances.
Term of a promise or agreement portion of the intention or assent manifested which relates to a particular matter (whatever the contract
requires the parties to do).
Term of a contract is that portion of the legal relations (the legal relationship created through the contract) resulting from the promise
or set of promises which relates to a particular matter, whether or not the parties manifest an intention to create those relations.
Voidable contract when one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created
by the contract, or by ratification of the contract to extinguish the power of avoidance.
Unenforceable contract when breach neither results in damages nor specific performance but is recognized in some other way as
creating a duty of performance, though there has been no ratification.
Assent - expression of approval or agreement; Void ab initio – No contract was ever created because nothing enforceable was ever
made; Voidable – A contract exists but a court may be willing to roll it back due to equity;
Test for Contract:
- Was there a bargain? 1) What it negotiated? 2) Was there an exchange? 3) Did value pass?
- Inducement? 1) Was there solicitation? 2) Was there a benefit to the promisor?
- Policy – Is there any reason to invalidate contract
Social arrangement or family context? Bilateral or unilateral? Bargain? Consideration? PE? benefit and detriment? Reliance?
forbearance? good faith? manifestation of intent? meeting of the minds? mutual assent? Reasonable person believes it’s a contract/intent?
Moral obligation? good faith? UCC goods?
Sources of Law:
Statute of Frauds (1677) - Requires certain contracts be in writing;
UCC - Governs the sale of goods, except in LA. Use the Predominant Purpose Test to determine if UCC.
UN Convention on Contracts for the International Sale of Goods (CISG) - governs sales of goods between signatories.
UCC §1-103 3(b) - Common Law fills in parts not in UCC.
UCC §2-104 – Merchant is person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge
or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his
employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
UCC §2-105 - "Goods" means all things which are movable at the time of identification to the contract for sale other than the money in
which the price is to be paid, investment securities and things in action.
Contract Breach Damages:
Expectancy – If promise had been performed by both parties; Reliance – If contract had not been made (including out-of-pocket costs);
Restitution – Benefit conferred on the other party; Disgorgement – Restitution + profits made by other party on benefit conferred.
Equitable Remedies – 1) Specific Performance - Requirement to perform (unavailable in employment or personal services contracts);
2) Negative injunction - prevents action. Damage Mitigation – Party must act to mitigate losses; Punitive Damages – usually only
happens when breach is tortious.
Problem – B has contract with S for $200k house. B pays $5,000 down payment, $400 appraisal fee, $600 lawyers fee. S refuses sale.
B buys other house for $210,000 + 1,000 in fees.
Answer - Expectancy: $16,000 = $10,000 + $5,000 + $400 + $600; Reliance – $6,000 = $5,000 + $400 + $600; Restitution – $5,000 2
Chapter 1 – Introduction to Contract Law
§ 261. Discharge by Supervening Impracticability. Similar to doctrine of impracticability
Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless
the language or the circumstances indicate the contrary.
§ 351 Unforeseeability and Related Limitations on Damages Cannot recover unforeseeable damages (Hadley)
(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when
the contract was made.
(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or
(b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.
§2-615 Doctrine of Impracticability
If there is an unforeseen intervening event that changes the performance beyond recognition, renders it impossible to perform, or
impracticable, commercially, to perform, a contract may be deemed invalid.
§2-703 Seller's Remedies in General: Buyer Breach
Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates
with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (Section
2-612), then also with respect to the whole undelivered balance, the aggrieved seller may: (a) withhold delivery of such goods; (b) stop
delivery by any bailee as hereafter provided (§ 2-705); (c) proceed under the next section respecting goods still unidentified to the
contract; (d) resell and recover damages as hereafter provided (§ 2-706); (e) recover damages for non-acceptance (Section 2-708) or in
a proper case the price (§ 2-709); (f) cancel.
§ 2-708. Seller's Damages for Non-acceptance or Repudiation Buyer Breach Damage Calculation
(1) Subject to subsection (2) and to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of
damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and
the unpaid contract price together with any incidental damages provided in this Article (Section 2-710), but less expenses saved in
consequence of the buyer's breach.”
Buyers breach = (Contract Price – Sale Price) + Incidental Damages. If cannot sell despite reasonable effort, no sale price.
(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would
have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full
performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs
reasonably incurred and due credit for payments or proceeds of resale.
§ 2-709(1). Action for the Price.
(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the
next section, the price (a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk
of their loss has passed to the buyer; and (b) of goods identified to the contract if the seller is unable after reasonable effort to resell
them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
§ 2-710. Seller's Incidental Damages - Incidental damages to an aggrieved seller include any commercially reasonable charges,
expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in
connection with return or resale of the goods or otherwise resulting from the breach.
§ 2-712. "Cover"; Buyer's Procurement of Substitute Goods - (1) After a breach within the preceding section the buyer may
"cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in
substitution for those due from the seller. (2) The buyer may recover from the seller as damages the difference between the cost of
cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715), but less
expenses saved in consequence of the seller's breach.
§ 2-716. Buyer's Right to Specific Performance or Replevin - (1) Specific performance may be decreed where the goods are unique
or in other proper circumstances. (2) The decree for specific performance may include such terms and conditions as to payment of the
price, damages, or other relief as the court may deem just. (3) The buyer has a right of replevin for goods identified to the contract if
after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be
unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered.
Bailey (P) v. West (D) – RI
R - Contract requires intention to be bound
F - D received horse that was lame, asked agent to ship to seller, seller refused, D told agent to do what he wanted with horse, and agent
told shipper to bring horse to P’s farm. P wanted D to pay for services for P’s horse. P sent bill and D said he didn’t own horse.
I1 Contract implied in fact? No mutual agreement and intent to promise between parties. P didn’t know with whom he contracted.
I2 Quasi-Contract? Should’ve gotten assent of D because of ownership controversy and bill of lading said horse was sent to seller,
so P was volunteer and services were gratuitous.
Bolin Farms (P) v. American Cotton (D) – LA
R - Parties to contract are bound by terms
F – P entered into contracts to sell cotton at price. Price of cotton rose, and P wanted contracts annulled to prevent loss. P requested
declaratory judgment annulling the contracts.
I - Annul contracts for price increase? - When you make a promise, you are bound to the commitment that you made.
- Price was FMV when made, so price and circumstances prevailing at the time are determinative. 3
- The purpose of a forward contract is to lock in price, which shifts risks to the buyer.
Sullivan v. O’Connor – MA
R - A plaintiff bringing suit against a physician for breach of contract for failure to perform as promised can recover damages for the
worsening of her condition and pain and suffering as part of her expectancy damages.
F - Doctor promised P cosmetic surgery on P’s nose for shorter and less prominent nose after 2 operations. Surgeries bad, nose looked
worse, causing her pain of body and mind, as well as other damages. 3rd surgery required to fix the 2 but botched.
I – Recover other than out-of-pocket expenses also worsening of her condition, pain, suffering, and mental distress from 3rd operation.
Reliance was given because P relied on contracts. Different remedies—reliance, expectation, restitution, disgorgement
Hadley (P) v. Baxendale (D) – UK
R – Only reasonably foreseeable damages are recoverable for breach.
F - P had mill and part broke. P sent part to carrier, told Clerk was urgent but not that that the mill stopped working. Clerk said would
be next day. Was delayed from neglect and mill lost profit because of lateness.
I – Recover unforeseen damages? Recoverable breach damages are damages 1) reasonably considered to arise naturally from a
breach or 2) special losses that are communicated by the parties at the time of contracting (§351).
§ 351 - Cannot recover unforeseeable damages. 4
Chapter 2 – The Bases of Contract Liability
§3. Agreement Defined; Bargain Defined Contract requires commercial nongratuitous exchange and something bargained over.
Agreement is a manifestation of mutual assent on the part of two or more persons.
Bargain is agreement to exchange promises or to exchange a promise for a performance or to exchange performances
Consideration - exchange of bargained promises or transactions that must be exchanged for each other. Consideration must have legal
value/quid pro quo.
- There is some right, interest, profit, or benefit accruing to the promisor, and some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the promisee.
- Consideration is evidence of intention, evidence of bargain, sufficiency of bargain
Consideration Rules – legal detriment to the promisee (Hamer) and exchange/bargain (§71), conditional gifts not consideration.
§17 Requirement of a Bargain - Bargain requires manifestation of mutual assent to exchange and consideration.
(1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent
to the exchange and a consideration.
§21 Intention to be Legally Bound - Unless parties manifest contrary intention, their agreement is enforceable
Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract but a manifestation of
intention that a promise shall not affect legal relations may prevent the formation of a contract
§23 Necessity that Manifestations have Reference to Each Other Past consideration not consideration.
It is essential to a bargain that each party manifest assent with reference to the manifestation of the other.
§71 Requirement of Exchange; Types of Exchange Bargain requirement
(1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is
bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. (3)
The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction
of a legal relation. (4) The performance or return promise may be given to the promisor or to some other person. It may be given by
the promisee or by some other person.
§ 71 Comment (a) – Love and affection are not consideration.
§ 71 Comment (b) - Nominal consideration is not consideration.
Nominal/Recited Consideration—mere pretense of bargain doesn’t suffice where there is false recital of consideration or where
purported consideration is merely nominal.
§81 Consideration as a Motive or Inducing Cause Consideration doesn’t need to induce promise
(1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for
the promise. (2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or
return promise from being consideration for the promise.
§90 Promise Reasonably Inducing Action or Forbearance Promissory Estoppel
A promise that the promisor should reasonably foresee will be relied upon, that is relied upon to the detriment of the promisee, will be
enforced to the extent necessary to prevent injustice.
178 Unenforceable on Grounds of Public Policy – contract cannot break up family.
§2-313 Express Warranties by Affirmation, Promise, Description, Sample - (1) Express warranties by the seller are created as
follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the
basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. (b) Any description of the
goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall
conform to the sample or model. (2) It is not necessary to the creation of an express warranty that the seller use formal words such as
"warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or
a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.
§2-314 Implied Warranty: Merchantability; Usage of Trade. - (1) Unless excluded or modified (Section 2-316), a warranty that
the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.
Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. (2) Goods to be
merchantable must be at least such as (a) pass without objection in the trade under the contract description; and (b) in the case of
fungible goods, are of fair average quality within the description; and (c) are fit for the ordinary purposes for which such goods are
used; and (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all
units involved; and (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promise
or affirmations of fact made on the container or label if any. (3) Unless excluded or modified (Section 2-316) other implied warranties
may arise from course of dealing or usage of trade.
Louisa Hamer v. Franklin Sidway - NY
R - A legal detriment or forbearance can constitute adequate consideration
F - Uncle offered nephew (P) $ if he didn’t drink, use tobacco, swear, or play with cards or billiards until he was 21.
I – Is forbearance consideration? - Forbearance from legal right is a detriment and valid consideration
- Seriousness of intent communicated through reiteration, rebutting presumption of non-contract because of social context.
- Not a conditional gift because the forbearance was bargained for and was something the offeror regarded as desirable.
Langer v. Superior Steel Corp. - PA 5
R - A promise is supported by consideration if the promisor derives some benefit from the promisee’s act or forbearance.
F - Defendant wrote letter to P, retired employee, offering pension if didn’t work for competitors. P did not respond but complied. D
paid pension for 4Y, then stopped.
I – Sufficient Consideration? 1) Unilateral contract that had consideration because P did not work for promisor and made in work context.
2) Detriment to D forbearance on legal right and promise was made in work context.
Pennsy Supply, Inc. v. American Ash Recycling Corp. - PA
R - Bargain theory of consideration doesn’t require parties bargain over the terms of the agreement; what is required for consideration
to exist is that the promise and the consideration be in the relation of reciprocal conventional inducement, each for the other.
F - D provided P with free AggRite for construction project, Aggri...
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- Summer '11