Contracts II - Schooner - Spring 2011_4

8/20/2019 Contracts II - Schooner - Spring 2011_4

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CONTRACTS II SCHOONER SPRING 2011 1

THE MEANING OF THE AGREEMENTI. PRINCIPLES OF INTERPRETATION

a. Assume an enforceable K exists or at least have a bargainb. Three basic theories:

i. Subjective1. Meeting of the minds

a. What parties thinking at moment they entered into K b. About protecting autonomy

2. Raffles v. Wichelhaus !ng."a. #ig K for delivery of cotton$ t%o ships called &eerless b. & thought cotton %as coming on earlier &eerlessc. 'olding( no meeting of minds so no K

). &roblems(a. *ften prevents Ks from being enforced+ not %hat most %ant b. ,oesn-t recognie %ords that have certain meaning in normal usage

ii. Objective1. What reasonable person %ould conclude based on %ords and conduct of parties

2. /ophisticated business and attorneys often like+ 0udges favor as %ell). &roblem(

a. Neither party may have thu!ht "hat rea#$ab%e per#$ thu!ht. and-s !nd 'ypo(

a. /pecific industry definition of red b. 3ou didn-t get red you %anted and and-s !nd red doesn-t follo%

industry definitioniii. M&i'ie&(bjective

1. Most identified %4 &rof. 5orbin2. Three #tep apprach R )*+,

a. -+ I' partie# attach #ame mea$i$! t term it ha# that mea$i$!

b. -) A i# the i$$ce$t party/ u#e A0# i$terpretati$ "he$,i. 6f A didn-t kno% # thought different+ but # kne% %hat A

thoughtii. 6f A had no reason to kno% # thought different+ but # did have

reason to kno% %hat A thoughtc. -1 I' $either 2$"# "hat ther "a# thi$2i$! the$ $ 3 e4i#t#d. Kno%ledge 7at the time agreement %as made89

c. :oyner v. Adams ;5"i. & :oyner originally K %4 #ro%n 6nvestment 5o. to develop office park

1. #ro%n has financial difficulties+ lease amended to substitute , Adamsii. K includes term if fail to develop by end of /ept.+ then rent escalates under price index

formula1. Partie# &i#a!ree a# t "hat &eve%pme$t mea$#

iii. Adams claims 7developed8 means get lots ready for construction %ater+ se%age+ etc"1. All lots 7developed+8 but one has no building

iv. :oyner claims development means constructing buildings on all lotsv.


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ii. Ambiguity should be resolved against , Adams as drafter ofamended lease

vi. #oth parties on appeal disagreed that there %as no meeting of the mindsvii. Memo from accountant saying Adams agreed to completion of buildings %4in five yrs

or rent escalatesviii. , Adams talks about trade usage$ sophisticated parties in real estate business

understand develop means get lots ready for constructionix. 'olding( reversed and remanded$ trial court didn-t error in finding no meeting of the

minds on rent escalation term1. #ut need to determine %hat parties kne% about each other-s meaning

a. 5ourt takes side of innocent party b. M&i'ie&(bjective apprach ' R )*+-)

2. Re0ects interpreting term against drafter contra proferentem"$ R )*5a. Ambiguous as to %ho chose the language for the rent term b. ;ot an adhesion K+ both parties %rote K and arms length negotiation

x. *n remand(1. Fu$& i$ 'avr ' 6 A&am# b7c $either 2$e" $r ha& rea#$ t 2$"

&eve%pme$t mea$t #tarti$! c$#tructi$ $ a%% bui%&i$!#2. & :oyner-s testimony reveals t%o versions of her meaning). & lack of communication %4 negotiations didn-t give , reason to kno%. ack of evidence , assented to K in reliance on completed building meaning

a. , re0ected completed building language b. ;one of &-s negotiators informed , that & kne% of re0ection+ disagreed

%4 it+ or %ould not accept it=. !xtensive experience %4 real estate gave , no reason to kno% development

meant constructiond. Maxims of Interpretation not in order of importance+ shouldn-t be used all at once"

i. Noscitur a sociis( meaning of %ord affected by others in same series

ii. Ejusdem generis( general term > more specific terms includes only like specific termsiii. Expressio unius exclusio alterius( if one or more specific times listed %4 more general

terms+ other items+ although similar in kind+ are excludediv. Ut magis valeat quam pereat ( prefer interpreation that makes K validv. ontra proferentem( if t%o reasonable meanings+ interpret against drafter

vi. 6nterpret K as %holevii. &urpose of parties

viii. /pecific provision ?ualifies more general one states exception to it"ix. 'and%ritten or typed provisions control printed provisionsx. &ublic interest preferred

xi. R )*1-a, pre'er i$terpretati$ ma2e# a!reeme$t rea#$ab%e/ %a"'u%/ a$& e''ective

1. &osner( 7common sense approach8e. I' curt# 'i$ 'ai%ure t a!ree $ materia% term/ may be apprpriate t 'i$& $ 38 R 11

i. *ther cases+ may supply reasonable term$ R )*9 f. @rigaliment 6mporting v. 6nt-l /ales 5o. ;3"

i. 6ssue( %hat is a chicken1. & @rigaliment says chicken means young chicken+ broiler 2. , 6nt-l /ales 5o says chicken means any bird of genus meeting K

specificationsii. Action for breach of %arrant on second K

1. @irst K( B=+CCC lbs. 2.=D) lbs E F)) and 2=+CCC 1.=D2 lbs. E F)G.=C


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2. /econd K( same except =C+CCC lbs. of heavier chicken called for+ price ofsmaller birds F)B

). #oth for 7H/ @resh @roen 5hicken+ Irade A+ Iovernment 6nspected8iii. 'olding( & @rigaliment-s complaint dismissed$ failed to meet burden sho%ing

7chicken8 used in narro%er rather than broader sense1. P%ai$ %a$!ua!e( in cables & used !nglish %ord chicken instead of Ierman+

7'uhn+8 %hich includes both 7#rathuhn8 broilers" and 7/uppenhuhn8ste%ing chicken"

a. , asked if meant 7any kind of chickens+8 and & said yes2. Tra&e u#a!e( & claims chicken means young chicken

a. ;o evidence seller kne% about trade usage b. *ne %itness says %hen he %ants broiler he says broiler c. ,efendant-s %itness says a 7chicken is everything except a goose+ a

duck+ and a turkey8). Le!a% #ta$&ar&( , claims government regulation should be dictionary$ has

several categories of chickena. K doesn-t say if in doubt use agriculture regulations

. Price( , claims impossible to obtain broilers at F))a. & must have expected , to make some profit b. Sch$er, $t rea%%y !& ar!ume$t b7c 3# are ta2e$ 'r a %##

=. Cur#e ' per'rma$ce( , points out that after it received 1st shipment oflarger birds+ , confirmed it %anted 2d shipment

a. 6f & sincere+ %ouldn-t have allo%ed 2d shipmentG. 6#0 #ubjective i$te$t ci$ci&e# "7 bjective mea$i$! ' chic2e$

iv. :#i$! R )*+-)-b,1. ;o ob0ective evidence seller had reason to kno% buyer meant young chicken2. Iiven statements+ government regulation+ and price+ buyer had reason to kno%

, meant larger chicken

v. Par% evi&e$ce ru%e "u%&$0t app%y b7c partie# &i&$0t i$te$& "riti$! t be 'i$a%e4pre##i$ ' a!reeme$t

g. !mbiguit" # Extrinsic Evidence

i. 5ourts often state plain meaning of K should govern+ and extrinsic evidencesurrounding circumstances" admissible only if court finds K ambiguous

ii. M&er$ c$te4tua% apprach,1. R )*)-+ reject# ambi!uity a# prere;ui#ite 'r e4tri$#ic evi&e$ce

a. Words and conduct interpreted in light of all circumstancesi. imited by parol evidence rule see belo%"

2. Hnless different intention manifested R )*)-1(a. Words given generally prevailed meaning

b.


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iv. A%% curt# a%%" u#e ' e4tri$#ic evi&e$ce t i$terpret 3 "7 pate$t ambi!uityh. $egulations

i. Modern vie%( definitions in statutes or administrative regulations not determinativei. Trade Usage see belo%"

i. !xistence of relevant trade usage can overcome even apparently unambiguous 7plainmeaning8 of K language

ii. :CC +()*


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a. ;ot fine print must be ob0ectively reasonable std.

b. &urpose of clause to stop inside 0obsc. @armer kne% disputed provision in policy b4c 70ust like one 6 have on

my farm8viii. %even haracteristics of !dhesion &

1. &rinted form %4 many terms > meant to be a K

2. ,rafted by only one party).


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ii.


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vi. C%%atera% a!reeme$t#1. R )+5-)

a. /eparate and independent considerationi. ike going to #est #uy and being offered chance to buy

%arrantyii. Where %as consideration for %arranty on logs

b. Term i$ circum#ta$ce# "u%& r&i$ari%y be mitte& 'rm "riti$!2. :CC )()*)-b(

a. More admissible+ only exclude if find that if terms had actually beenagreed upon %ould certainly have been included in %riting

h.


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1. 5lassical 7Willistonian8 vie%( great %eight to formal %riting both to parolevidence rule and ?uestions of interpretation"

2. M&er$ @Crbi$ia$ vie", much !reater u#e ' e4tri$#ic evi&e$ce i$&etermi$i$! the cmp%ete$e## a$& mea$i$! ' "ritte$ 3

iv. 5ases sho% relationship b4% 7four corners8 approach to integration under parolevidence rule and 7plain meaning8 approach to interpretation(

1. Curt# re%yi$! $ 'acia% cmp%ete$e## ' "ritte$ 3 t c$c%u&e cmp%etei$te!rati$ mre %i2e%y t re%y $ p%ai$ mea$i$! ' "r t bar e4tri$#ic

evi&e$ce t ai& i$terpretati$

a. *ccurs even though parol evidence rule explicitly states rule doesn-t bar use of extrinsic evidence to explain or interpret9

b. !xistence of merger clause may further compel such courts to assign plain meaning to %ords

2. 7&lain meaning8 doesn-t allo% extrinsic evidence to uncover latent ambiguitysee above"

v. M&er$ apprach i$ Tay%r a%%"# u#e ' e4tri$#ic r par% evi&e$ce i' &i#pute&%a$!ua!e @rea#$ab%y #u#ceptib%e t &i''ere$t pr''ere& mea$i$!#

1. 6n making determination+ court %ill consider at least preliminarily extrinsicevidence and need not find agreement patently ambiguous

2. E$&r#e& by R )+9-c j. /herrod v. MorrisonDKnudsen M


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). Ma0ority eliminated fraud exceptionxv. :$i%atera% mi#ta2e/ $t c%ear bi%atera% mi#ta2e

1. Morrison( no mistake+ told them %hat they %ere getting into9xvi. Le## #trict par% evi&e$ce ru%e ' Tay%r "u%& a%%" 'rau& evi&e$ce K )+9-&

*. ;anakuli v. /hell *il th 5ir."i. ;anakuli second largest asphaltic paver in '6 only t%o co. in '6 though"

ii.


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ii. 5ourse of performance$ :CC )()*8 R )*)-91. Must be consistent %4 express terms2. 'ere+ evidence /hell price protected ;anakuli in 1BC and 1B1 see above"

iii. 5ourse of dealing$ :CC +()*


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1

1. , says agreement is not a K b4c no consideration$ & didn-t have a performanceminimum no mutuality

iii.


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2. Nature ' bu#i$e##a. ,istribution relationship+ but vera%% purp#e i# #a%e ' !ara!e &r#+

not about being paid commissions). I$tri$#ic "rth

a. ;ot clear from facts+ but sales 7primary essence8

II. THE IMPLIE6 O=LIGATION OF GOO6 FAITHa. :CC +()*1( obligation of good faith performance and enforcement for every K covered b. :CC +()*+-+D( honesty in fact in the conduct or transaction concernedc. :CC )(+*1-+-b( for mercha$t good faith O honesty in fact and b#erva$ce ' rea#$ab%e

cmmercia% #ta$&ar ' 'air &ea%i$! i$ the tra&e

i. /ub0ective( honestyii. *b0ective( reasonable$ can be %rong+ but not intentionally

d. R )*


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vi. 'olding( reversed and remanded$ bad faith determined by , state of mind and context1. 6ncludes the $ature of the alleged breach and applicable i$&u#try #ta$&ar

a. 5an find a breach even %hen an express K term %as not violated2. G& 'aith per'rma$ce e4pectati$ ' partie# purp#e ' 3 ). Par% evi&e$ce ru%e r&i$ari%y ha# $ impact $ !& 'aith c%aim b7c

imp%ie& termvii.


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2. 7,ecision of architect in matters relating to artistic effect final8). C%au#e# came ut ' 'rm 3 . &roblem( ho% much discretion does o%ner have

iii.


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i. 5lassical rule( 5handelor v. opusii. ;o% implied %arranties in K-s for sale for sake of high speed+ high volume commerce

1. 6mplied by legislature b. Warranty of merchantability( :CC )(1+9

i. Ioods ?uality and fit for ordinary purpose

c. Warranty of fitness for a particular purpose( :CC )(1+<i. Ioods are not fit for the buyer-s purposes

d. !xpress %arranties( :CC )(1+1i. 1"a" Any affirmation of fact or promise made by seller to buyer that relates to goods

and becomes basis of bargainii. 1"b" Any description of goods made part of basis of bargain

iii. 1"c" Any sample or model made part of basis or bargainiv. -) 6e#$0t have t u#e 'rma% "r ca$ be ra%

1. Mre tha$ @mere pu''eryv. Cmme$t 1, buyer &e#$0t $ee& t re%y $ 'act/ ju#t $ee t #h" a''irmati$

e. Warranty of habitability

i. :avins v. @irst ;at-l #ank 5orp ,.,.5."ii. HR


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i. 5ro%-s intended usage is irrelevant$ fulfills the expectation of areasonable buyer

d.


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=. ,isclaimers can be used+ but vie%ed %4 suspicioniv. !xtensions and limitations(

1. ,oesn-t apply to nonDmerchant o%ner %ho sells home2. May extend to lenders %hen involved in construction). ,ivided on %hether applies to commercial buildings

I. AOI6ING ENFORCEMENTa. %ometimes other)ise enforceable bargains are voidable

i. *ne party lacked ability to assent b4c of lack of capacity age4mental infirmities"ii. &rocedural+ process unfair to one party duress+ undue influence+ misrepresentation+

fraud"iii. /o unfair shouldn-t enforce unconscionability"

b. Minorit" or infanc" doctrine/i.


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vi. Minor must disaffirm %4in reasonable time1. ,epends ho% fast %ill depreciate

vii. /tatutory limits(1. /till bound to checking account if under 1L2. 6f statute says age is irrelevant+ cannot use minority to avoid K.

viii. 5ourts split on preDin0ury exculpatory agreementsix. 5ourts split on effect of marriage and capacity to K x. Mills v. Wyman reconsidered(

1. Make evi a minor+ different case2. Wanted compensation for alcohol+ lodging+ necessaries). ;o% a K+ instead of restitution

c. Mental Incompetencei. 'auer v. Hnion /tate #ank of Wautoma W6"

1. Motorcycle accident results in brain in0ury2. Iuardianship eventually terminated after physician %rites letter ). iving off mutual fund of FLCK

. #ank loans !ilbes FBGCC to start small business+ defaults on loana. /uggests to 'auer that she take out shortDterm loan and invest in

company using stocks as collateral b. &romises to give 0ob+ pay interest on loan+ and pay loan off %hen due

=. /chroeder banker" called 'auer-s financial advisor a. 5oncedes possible told him about 'auer-s brain damage b. Was told 'auer needed interest income to live on

G. When loan matured+ 'auer sued and trie& t &i#a''irm a. :ury finds 'auer lacked capacity and bank failed to act in good faith

B. #ank claims lack of evidence+ asserts estoppel based on end to guardianshipob0ective standard"

L. 'olding( affirms incompetence$ adopts tra&iti$a% c!$itive te#ta. Whether person involved 2$e" "hat he r #he "a# &i$! a$& $ature

a$& c$#e;ue$ce# of the transaction$ +


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1. Adopts traditional cognitive test+ but a%# i$crprate# a rea#$ab%e te#t$+


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ii. Alternative sources of goods+ services+ or fundsiii.


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i. ,idn-t sleep for forty hours b. C$#ummati$ at u$u#ua% p%ace

i. ;egotiation terms of employment at his housec. I$#i#te$t &ema$& bu#i$e## be 'i$i#he& at $ce

i. /aid he needed to resign immediately

d. E4treme empha#i# $ u$t"ar& c$#e;ue$ce# ' &e%ayi. 6f didn-t resign at once+ they %ould fire him and publish

%ouldn-t get another 0obe. Mu%tip%e per#ua&er# by &mi$a$t party a!ai$#t #ervie$t party

i. &rincipal and superintendant v. *doriif. Ab#e$ce ' thir&(party a&vi#r#

i. :ust *doriig. Stateme$t# $ time t c$#u%t 'i$a$cia% a&vi#r# r attr$ey#

i.


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a. 5an then assert tort claim for damages based on fraud in inducing herto enter dancing Ks

). 1st release( manager of studio convinces her at home to &i#char!e her cu$#e%a$& a!ree t #ett%e for refund of FG+CCC

. 2d release( signed note to pay them F+CCC9

=. 'olding( 0ury needed to find 1" c$certe& e''rt+ 2" %ac2i$! i$ prpriety+ to)" obtain releases as to constitute a 'rau&u%e$t verreachi$!

a. !vidence %as sufficient to find fraudulent representationsi. Mr. 5arey told her at her 0ob she still had ability to be

professional dancer ii.


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b. *dorii elements(i. ,iscussion of transaction at unusual time

1. Mr. 5arey sho%ed up at Ms. /yester-s %orkplaceii. 5onsummation at unusual place

1. 6a$ce& t!ether 'r 9< mi$ute# ri!ht be're

#ett%eme$t "a# #i!$e&iii. Hse of multiple persuaders by dominant party against servient

party1. Mr. 5arey and Mr.


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4

L. 'olding( seller has duty to disclose material facts$ merger clause cannot freeone from o%n fraud parol evidence exception"

a. R +5+-a( nonDdisclosure is assertion if kno%s disclosure of fact isnecessary to prevent some previous assertion from being a fraudulentor material misrepresentation

b. 6f Mr. :ones doesn-t disclose past termite damage+ then assertion thathouse is free of termites and4or ripple %as %ater damage %ould befraudulent and material

i. @raudulent R +5)-+-a( kno%s about termite damage past and present

ii. Material R +5)-)( kno%s it %ould likely to induce them from buying home b4c Mr. 'ill said he %as going to rely on termitereport9

c. More generally+ court adopts @ rule( seller of home under &uty t&i#c%#e 'act# materia%%y a''ecti$! va%ue ' prperty "hich are$0t

rea&i%y b#ervab%e a$& u$2$"$ t buyer

i. !xistence of termite damage past or present is materialix. R +5+

1. a" Kno%s fact necessary to preve$t previu# a##erti$ from being fraudulentor material misrepresentation

2. b" Kno%s fact %ould correct assumption and nonDdisclosure is breach '!& 'aith a$& 'air &ea%i$!

a. =ra&er ba#i# 'r re%ie' ). c" Kno%s fact %ould correct mistake as to contents or e''ect ' "riti$!. d" !ntitled to kno% b4c of 'i&uciary re%ati$#hip=. 6e#$0t cver i$$ce$t $$(&i#c%#ure#

a. ,ifferent case if :ones didn-t kno% about termite damage

b. &ossible tort liability for nonDdisclosures thoughx. aidla% v. *rgan

1. 1L1B large sum of tobacco2. War ends+ tobacco %orth more+ seller %ants out of K ). Asked if any information calculated to enhance price or value

a. R +5+-b( not responding is bad faith+ should-ve %ritten back and toldseller to do more research

. 5ase sho%s ho% courts are inclined to &i#ti$!ui#h b7" i$'rmati$ that $eparty #hu%&0ve 2$"$ 'rm i$'rmati$ ther partie# have

xi. &rof. Keeton fairness factors( applied to 'ill"1. ,ifference in degree of intelligence of parties

2. Relation of parties to each other ). Manner in %hich information ac?uired

a. 'ills discovered hard %ay+ didn-t hire somebody to do their o%nresearch

. ;ature of fact not disclosed latent defect not reasonably discoverable"a.


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i. Would expect seller to disclose past termite damage thenB. 6mportance of fact

a. Wooden home+ termite damageL. Active concealment

a. !vidence used boxes and plants to conceal

xii. !conomics1. Kronman says courts should 'avr $$ &i#c%#i$! i$'rmati$ btai$e&

thru!h &e%iberate a$& c#t%y i$ve#ti!ati$

a. As opposed to ac?uiring by chancexiii. ,isclaimer or merger clause

1. Hnlike 'ill+ some courts find if disclaimer is specific then can-t rely on oralrepresentations

xiv. @iduciary relationship$ R +5+-&1. /pecial relationship of trust and confidence$ R +1

a. a%yerDclient+ trusteeDbeneficiary+ etc. b. Mere friendship not enough

i. *ne party reposes trust+ other accepts and fostersxv. &ark 1CC 6nvestors v. Kartes 6;"

1. Kartes o%ned a video store+ KQ5$ &ark 1CC leases commercial real estate2. Kartes Ks %4 &ark 1CC to lease space for gro%ing business.). &ark 1CC brought suit to collect unpaid rent from Kartes under signed personal

guaranty. &-s rep. came day before lease began for ,s to sign 7more lease papers8

a. &otential issueit-s been yrs. ho% do ,s remember exactly %hat &-srep told them they %ere signing

=. ,s called their la%yers %ho told them to signa. ,s had a rep. negotiate lease for them

G. ,s 0ust leaving to go to daughter-s %edding rehearsal and %ere running latea. Rep. told ,s their signatures %ere needed in order to move in the

follo%ing dayB. 6# #i!$e& a per#$a% !uara$ty8 P0# rep $ever t%& 6# thi# "a# "hat #i!$i$!L. After some yrs. go by+ & sends , their 7tenant agreement8 and ,s refuse to

affirm the personal guaranty. ,s then sell KQ5 and buyers fail to pay &$ & sues ,s1C. 'olding( affirm fraud b4c papers misrepresented to Kartes %ho relied believing

only signing a leasea. Rep had a duty to inform the Kartes of %hat they %ere signing b. !lements of fraud( must prove all"

i. -+ Materia% mi#repre#e$tati$ ' pa#t r e4i#ti$! 'act by theparty char!e&/ "hich,

1. /aid more lease papersii. -) Fa%#e

1. Weren-t lease papers$ %as personal guaranteeiii. -1 3$e" r #hu%&0ve 2$"$ "a# 'a%#e

1. Appears kne%$ did it right before ,s leaving for%edding rehearsal

iv. -9 Re%ie& up$1. Relied on la%yer+ not &ark 1CC


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v. -


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1. 'idden in long K iv. Reasonable opportunity to understand terms

1. !ducation of parties may be significant b. Sub#ta$tive, 3 term# u$rea#$ab%y 'avrab%e t ther party

i. *utcome of enforcing K term

1. Hnable to pay her kids %ill sit on floor b4c going to takeall her furniture

ii. @airness of terms considered in light of commercial backgroundand needs of trade

1. ;obody %ants used furniture$ Walker


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G. !'M took threeDbedroom house and turned it into nineDbedroom house one bedroom for each orphan+ plus family-s children"$ also paid off mortgage

a. /ho% first aired on !aster /unday$ eomitis said home theirs$ kickedorphans out after%ard

b. !'M continues to air episode any%ay

B. 6ssue( arbitration clause unconscionablea. *rphans %ant 0ury trial b4c more sympathetic party

L. 'olding( arbitration clause unconscionablea. -+ A&he#i$ 3

i. Frm 3 1. #ig company %4 long form$ B2 paragraphs

ii. 6i#parity i$ bar!ai$i$! p"er1.


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iii. &ickles inspected land and purchased it for F2=K iv. /ix days after buying land+ &ickleses discovered ra% se%age seeping out of ground

1. &revious o%ners the #looms installed nonconforming septic tank %4o permit2. 2=CC s?uareDfeet of property needed for threeDunit d%elling9

v. ena%ee 5ounty condemned property( in0unction prohibiting human habitation until

sanitation unit is brought up to codevi. &ickleses stopped paying and Messerlys filed complaint seeking foreclosure

vii. &ickleses cu$terc%aime& 'r re#ci##i$+ misrepresentation against #arnesesviii.

i.


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xi. Reasonable under circumstances to bear risk xii. 5orrectly decided

1. Most people expect reasonable inspection of improvement to real propertya. ;ot septic tank unless inspector involved"

c. 1a) and Economics

i. More modern la% is if nobody kno%s put on seller ii. ack of consistency in mistake cases

iii. Iartner v. !ikill M;"1. &urchaser of land sought rescission by mutual mistake2. 5laimed unkno%n that land %as sub0ected to past oning restriction

a. K said seller %ould convey marketable title sub0ect to oning la%s). 5t. allo%ed rescission+ relying on /her%ood in part9. ,ifference b4% ena%ee(

a. &ut on notice by oning la%s+ should-ve checkediv. &ossible cases are back%ards

1. 5ould argue everybody should-ve seen it in Iartner

2. atent in ena%eev. Risk allocation b4% cases right

d. onscious Ignorance$ R +


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1

1. Wants F1CCK security deposit back viii. I##ue, re#ci##i$ &ue t u$i%atera% mi#ta2e

ix. 'olding( WilD@red-s granted rescission and gets security deposit back 1. !lements for rescission due to unilateral mistake(

a. Mi#ta2e at time 3 ma&e

i. 5iaglo thought could use heavy e?uipment b. Re%ate t materia% 'eature ' 3

i. Resulted in 1BS decrease in WilD@red-s bidii. /evering ramifications v. magnitude

1. *ther cases ,rennan" combine elements t%o and threec. Rea#$ab%e care e4erci#e&

i. WilD@red-s never %ithdre% bid ?uote beforeii. Worked %4 5iaglo on 12 previous ocassions

iii. 5iaglo inspected 0ob site and examined specs. %4 WilD@red-sestimators

iv. WilD@red-s made t%o separate revie%s of bid

d. E$'rceme$t u$c$#ci$ab%ei. 5iaglo not financially able to sustain F1=CK loss bankruptcy

ii. WilD@red-s %ould lose F2D) million in bonding capacity if lostsecurity deposit

e. Other party ca$ be p%ace& i$ #tatu# ;ui. Mistake discovered %4in L hr. of bid opening+ /anitary ,istrict

a%arded K to next lo%est bidder 2. Mi4e& mi#ta2e ' ju&!me$t a$& 'act

a. &lastic pipes %ould support trucks 0udgment

b. #ut predicated on misleading ad by sanitary district fact

c. Fact# #urru$&i$! errr are "hat i# imprta$t

d. Mu#t be !e$ui$e i&e$ti'iab%e mi#ta2e/ $t a pr pre&icti$ "rtutcme ' 3

h. Unilateral mista*e elements$ R +


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1. ;auga attorney added to proposed agency agreement clause re?uiring Westelto pay F2=CK for settlement of all claims

2. Westel-s attorneys didn-t notice and signed). 5ourt enforced even though 7seemed harsh8. ;o ambiguity+ fraud+ or mutual mistake present

k. Unilateral Mista*e in !dvertisement i. ,onovan v. RR 5orp. 5A"

1. Hsed :aguar for sale in ne%spaper ad for F12K less than F)LK due to errorsmade by ne%spaper

2. Ad %as considered offer ads not usually offers though"). 'olding( K+ but sub0ect to rescission by unilateral mistake

II. CHANGE6 CIRC:MSTANCES, IMPOSSI=ILIT/ IMPRACTICA=ILIT/ AN6

FR:STRATION

a. Superve$i$! eve$t a'ter 3 e$tere& i$ti. ,eprives party of apparent benefit fairly expected from original bargain

b. Impossibilit"( R )5)(598 :CC )(5+1

i.


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a. Occurre$ce ' eve$ti. @allout in farm e?uipment market

b. N$(ccurre$ce "a# ba#ic a##umpti$ ' 3 i. 5ontinuation of strong farm e?uipment market not basic

assumption

c. :$%e##,i. Hi# 'au%t

1. ;ot responsible for do%nturn+ but responsible forchosen remedy

2. What if economists said @*/ farm e?uipment businessgoing south

ii. La$!ua!e ' 3 1. Agreement had detailed G mo. termination clause$ :CC

)(1*D-1

iii. Circum#ta$ce# #ay ther"i#e1. 6' %ould avoid liability and 5ase %ould pick up only

dealerships it sees fit2. Bi$&'a%% 'r IH

d. Must be extreme and unreasonable difficulty+ expense+ in0ury+ lossi. Mere lack of profit due to market do%nturn not excuse$ R )5+

cmme$t b$ :CC )(5+< cmme$t 91. 6' claims losing F2 million a day and if division not

sold %ould-ve had to declare bankruptcyii. Severe #hrta!e ' ra" materia%# r #upp%ie# &ue t "ar/

embar!/ %ca% crp 'ai%ure/ u$FOS #urce #hut&"$

iii. ,ifferent if corp. 7dead8 b4c no longer N of profitability2. ;o frustration of purpose under R )5


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a. 6' argued that reserving right to terminate certain lines from dealershipagreement O right to go completely out of business

b. 3 prvi&e& 'r termi$ati$ 'r cau#ec. ;either party anticipated 6' %ould go out of business completelyd. &laces all risk on dealer

ix. ,issent( N of fact for 0ury %hether no do%nturn %as basic assumption of K 1. =ut u$&er Re#tateme$t ' %a" 'r ju&!e

f. 2ar and natural 'isaster i. Ienerally not allo%ed as excuses

ii. American


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viii. !nd of *ct. ,iD5hem vacates premisesix. Mel @rank sues for breach of lease %orth F==K+ ,iD5hem raises several defensesx. 'olding( no impracticability or frustration of purposes

1. @rustration due to government regulation uses R )5


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ii. Most courts uniformly re0ect reformation so performance obligation continues1. Aluminum 5o. of America v. !ssex

a. Iranted reformation of longDterm K for supply of aluminum processingservices to account for costs increases

b. 6ncreases not reflected in negotiated price increase formulas

2. ;o longer binding precedent b4c opinion vacated as part of settlementIII. MO6IFICATION

a. Ns to ask(i. Was there separate consideration for the modification

ii. ,id the parties agree to the modification under legitimate circumstances b. (reexisting dut" rule$ R 1

i. &erformance of legal duty $either &ubt'u% $r #ubject t h$e#t &i#pute is notconsideration

ii. /lightly different performance if reflects mre tha$ prete$#e ' bar!ai$c. Modification binding if( R D

i. E;uitab%e b7c u$FOS circum#ta$ce#

1. May apply even if impracticability defense %ouldn-t %ork ii. Prvi&e& by #tatute

iii. ?u#tice re;uire# &ue t materia% cha$!e ' p#iti$ i$ re%ia$ce $ prmi#e1. &romise means accepting reformation

d. :CC )()*D-+ &i#mi##e# pre(e4i#ti$! &uty ru%ei. Modification must abide by /*@

ii. Attempt at modification may amount to %aiver of limitation on modifications or /*@iii. 5an retract %aiver %4 reasonable notification that strict performance re?uired

1. :$%e## u$ju#t i$ vie" ' materia% cha$!e ' p#iti$iv. Modification doesn-t need consideration to be bindingv. G& 'aith bar t @e4trti$ ' a m&i'icati$ @"ithut %e!itimate cmmercia%

rea#$e. Alaska &ackers- Association v. ,omenico th 5ir."

i. @isherman picked up in 5A and taken to AK for summer seasonii. &romised FGC bucks per summer > 2 cents for every fish they catch

iii. About a mo. in they stop %orking and demand an additional F1CC for the summer 1. 5laim given rotten nets

iv. ,ocument signed by shipping commissioner in AK %ho claimed he didn-t haveauthority to enter into K

v. o%er ct( improbable that nets %ere badvi. 'olding( no consideration+ curt a&pt# pree4i#ti$! &uty ru%e

vii. ;otes( historical research sho%ed that nets may actually have been rotten

viii. What about the K terms+ 7to do any other %ork %hatsoever %hen re?uested81. !ither it-s unconscionable or it should be read in context2. *n a ship+ everyone depends on each other for survival$ if the ship is sinking

and the captain orders you to do something+ you-re agreeing to this ahead oftime

). :ust read %4 7regular ship-s duty8ix. &osner( not fair to allo% a party to 7use a threat of breach to get the K modified in his

favor8 %hen nothing has occurred re?uiring a modificationf. 5ontempo ,esign v. 5hicago 5arpenters Bth 5ir. 2CCC"


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i. Hnionied employees %ent on strike despite 7no strike8 provision at same time co.%as about to ink ne% K %4 ma0or client #ank of America

ii. !mployer agreed to pay raise and other benefits+ but reserved right to sueiii. Ma0ority relied on Alaska &ackers and adopted preexisting duty ruleiv. ,issent( %ould enforce b4c %orkers had good faith belief not bound by no strike clause

g. Mutual rescissioni. /ome courts allo% mutual rescission follo%ed by ne% K

ii. Re#tateme$t #ay# @'ictitiu# i' re#ci##i$ a$& $e" 3 #imu%ta$eu#h. KelseyD'ayes v. Ialtaco M6"

i. K' makes brake assemblies for auto manufacturers including big co. like @ord"ii. I supplies K' %4 castings to make brake assemblies$ I is only supplier to K'

iii. 1LB( three yr. re?uirements K( 76 %ill make as much as you need8iv. 1L( I experiencing losses$ K' a%are of this$ May 1L( I-s #*, makes decision

to cease producing castings.v. May 1C( I says it %ill stay in business for K' if agree to )CS F increase

vi. K' agrees$ %ould not be able to get a ne% supplier soon enough

1. Would halt brake production halt @ord-s vehicle production2. K' reserved no rights to sue

vii. :une ( I %ill operate solely for K' if agree to additional )CS F increase1. /till no other supplier+ so K' agrees2. Again+ K' reserves no right to sue

viii. 2L2 shipments made$ K' pays for first 12+ but fails to pay for last Lix. K' says F increases breach of 1LB K$ seeks an in0unctionx. I counterclaims for breach of 1L F increase Ks

xi. 'olding( sufficient evidence that K' %as under ec$mic &ure## %hen agreeing tomodify to present triable issue of fact

1.


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I. RIGHTS AN6 6:TIES OF THIR6 PARTIES AS CONTRACT =ENEFICIARIES

a. A##i!$ ri!ht#8 &e%e!ate &utie# b. ,uties can exist through a K c. !asy to figure out %ho is a beneficiary+ but must &ra" %i$e# b4% )d party beneficiaries

allo%ed recovery under the la% and those not permitted

i. R 1*) distinguishes intended and incidental beneficiaries1. *nly intended beneficiaries can recover @i$te$t t be$e'it te#t

d. Must be able to &e#cribe the type of rights the )d party hase. &ublic la% has the po%er to invade4destroy the rights of nonDconsenting personsf. &rivate la% cannot destroy4impair the rights of anyone not a party to agreement or impose

duties on such a personi. #ut may create by K a right in a )d party

g. a%rence v. @ox ;3"i. loaned F to '

ii. ' loaned F to @+ %ho promised to repay directly1. intended )d party beneficiary

a. Cre&itr be$e'iciary( performance of promise satisfies obligation of promisee to pay money to beneficiary$ R 1*)-+-a

iii. @ never pays $ sues @+ but J @ are not in privityiv. 'olding( ct. allo%s to sue any%ay

1. Advantages( efficiency b4c one la%suit2. ,isadvantages( may be contrary to intentions of the parties

h. /eaver v. Ransom ;3 11L"i. ,ying %oman %ants to leave her niece something in %ill

ii. 'usband tells her to sign %ill+ and he promises that he %ill leave niece something inhis %ill

1. Afraid she %ill die before the %ill can be changed and sign.

iii. 'e dies %4o putting niece in %illiv. 'olding( ct. allo%s niece to recover

1. ;iece is a donee$ aunt doesn-t o%e her anything$ R 1*)-+-b2. )d party standing on basis of close relationship

i. Qogan v. 'ayes Appraisal Assocs. 6A"i. :une 1L( prospective homeo%ner Q" gets a mortgage from MidAmerica #ank to

build houseii. MA 3# "7 Haye# t & apprai#a%# a$& m$itr c$tractr0# pr!re## # MA ca$

&i#bur#e pr!re## payme$t# t c$tractr -ma2e #ure %a$ !et# repai&

iii. ;ov. G( purchase lot for FGGK not from loan"iv. ,ec. 2L( 2=S complete$ @eb. 1C( only F2CCC left of F1BCK loan

v. /econd mortgage for F2+C=C > some of Q-s o%n F gets paid to contractor vi. March 2C( GCS complete$ L days later( appraised as CS complete

1. Q saying this report L day later %as in error vii. *ct. 1C( still substantial %ork needs to be done

viii. 5ontractor defaults and all of the mortgage F is gone1. Another contractor says FGCK to finish

ix. Q stops making mortgage payments and MA sues1. Q counterclaims( MA supposed to keep )CS of loan until house completed

a. Q settles %4 MA


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x. Q sues 'ayes for negligence in certifying appraisal$ trial ct. grants Q a 0udgment$appellate ct. reverses

xi. Q and 'ayes not in privity$ Q suing for breach of K b4% 'ayes and MAxii. 'olding( reinstate 0ury verdict$ erroneous report in March 1C caused bank to

disburse F to contractor

1. &urpose of reports %as to assist MA in kno%ing %hen to disburse funds tocontractor

a. Recovery for this doesn-t violate 'adley v. #axendale rulei. Rule says can only recover for actual breach of K unless

damages resulting from breach %ere reasonably contemplated2. )d party %ho is not a promisee and gave no consideration has an enforceable

right by reason of a K made by t%o others if(a. &romised performance %ill be of a pecu$iary be$e'it to )d party b. K expressed to give promisor rea#$ t 2$" that be$e'it i#

c$temp%ate& as a mtivati$! cau#e 'r ma2i$! 3 i. 'ayes kne% about Q$ reports contained their name9

0. 3ariation of 'ut" to a 4eneficiar"$ R 1++i. 2" 6n absence of term$ promisor and promisee retain po%er to discharge or modify

duty by subse?uent agreementii. )" &o%er terminates %hen+ before notification+ beneficiary(

1. 5hanges position in 0ustifiable reliance on promise2. #rings suit on it). Manifests assent to it at re?uest of promisor or promisee

k. Three T"pes of ourt !pproaches(i. 6ua% i$te$t( %hether both promisor and promisee intended to benefit )d party

1. M#t ct. u#e thi#2.


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2. ,oesn-t conflict %4 performance ob0ectives and supported by policy or moralreasons

n. igas v. /uperior 5ourt 5A"i. 5lass action(


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2. Relevant @actors(a. Iov-t control over litigation J settlement of claims b. ikelihood of impairment of services or of excessive financial burdenc. Availability of alternatives+ i.e.+ insurance

vi. 5t. split %rt %hether


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i. Sub#ta$tia% i$tere#t i$ havi$! b%i!r per'rm act# prmi#e&. 5ourts likely to enforce clause prohibiting delegation of duty$ R 1))-+8 :CC

)()+*-9

iii. Tta% a##i!$me$t ' bth ri!ht# a$& &utie#$ R 1)-+8 :CC )()+*-


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g. Ca$ a##i!$ 3 ri!ht# eve$ i$ 'ace ' 3 %a$!ua!e e4pre##%y prvi&i$! ther"i#e8 R 1))8:CC )()+*-)

i. R 1))-) first interprets 7no assignment8 clauses in Ks to mean 7no delegation ofduties8 unless language is strong enough to sho% that it meant the rights could not beassigned.

h. /ally #eauty v. ;exxus &roducts Bth 5ir."i. #est has an exclusive distributor agreement %4 ;exxus

ii. ;exxusD#est distributor agreement is in form of a personal letter from #est-s &res. to ;exxus-s Q&

1. #est-s &res. claims he signed it as &res. rather than as a personal agreementiii. #est is then ac?uired by /ally #eauty+ subsidiary of AlbertoD5ulver

1. AlbertoD5ulver is /ally #eauty-s competitor 2. #ut ;exxus sells to beauty salons+ %hereas /ally #eauty is marketed to%ard

retail stores). Ge$era% a##i!$me$t, bth ri!ht# a$& &utie# !ive$ a"ay

iv. 5an terminate agreement once a year %4 12C days prior notice

v. ;exxus decides not going to %ait$ terminated K %4 /ally #eauty against K terms aftertransfer

1.


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a. 5lassical approach( per'ect te$&eri. Must do everything in the K or you breach

b. Modern approach( distinguishes bet%een tta%/ materia%/ a$& partia% breachi. #reach O any nonDperformance of K duty at time %hen performance of duty is due$ R

)1


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a. < never delivered %ritten consent$ instead+


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*. (revention of condition

i. R )9


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i. Almost uniformly agree that failure to comply %ith time period for an pti$ tpurcha#e is not excusable

II. MATERIAL =REACH

a. A material breach means that nonDbreaching party can suspend performance$ R )1i. #ut if you #ub#ta$tia%%y per'rm+ nonDbreaching party still has to perform

1. 5an still sue for damages92. ,epends on the industry

a. 5onstruction tends to be about substantial performance b. :acob J 3oung v. Kent ;3"

i. & is general contractor %ho builds a house for the ,1. & sues for balance o%ed for construction

ii. K says that all the pipe used for plumbing %ork should be 7of Reading manufacture8iii. 5ontractor checked first 1CCC ft. of pipe+ but stops checking after first 1CCC ft. is all

Reading1.


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i. ,efects cannot be throughout entirety of building or so substantial that K price is nolonger reflective of bargain

ii. Sma%% v. %ar!e &ama!e# $t the i##ued. Mansfield5s ovenants(

i. Mutual and independent

ii. 5onditions and dependentiii. Mutual conditions to be performed at same time

e. onstructive onditions

i. Restatement keeps rules of 7constructive conditions8 developed by Mansfield+ butchanges terminology

1. N" have e4pre## c$&iti$# a$& c$#tructive c$&iti$#ii. 5onstructive conditions( 0udicially created as opposed to express"$ %hat parties

%ould-ve bargained for$ R ))51. Imp%icit bar!ai$ that there be $ u$cure& materia% 'ai%ure ' per'rma$ce

by ther party8 R )1

iii. &rinciple of substantial performance one part of constructive conditions doctrine

f. -rder of (erformancei. Mutual conditions to be performed at the same time8 R )19-+

1. 5an only sue other party for breach if you per'rme& r ''ere& t per'rm$R )1-+

a. /ame goes for :CC )(


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1. Agrees to pay balance by /ept. 22+ plus interest along %4 F)+.2G as anadvance for %orking capital

a. #uyer fails to payiii. *ct. =( /eller-s attorney sends letter say there %ill be no sale of balance of stock

1. Hnless can offer seller cash

a. /eller needs capital2. #uyer never makes another meaningful tender

iv. :uly 1G2( sold full shares for F22K v. #oth sue each other for breach of K

1.


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i. 1" 'arm caused by breachii. 2" 'arm breaching party suffers if nonDbreaching party excused from performing

iii. )" Iood faith of partiesm. Material v. Total 4reach

i. Material breach O performance suspended$ tta% breach &utie# &i#char!e&

1.


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a. , declines lo%er amountiv. :une 1( & sends another letter saying %ill take land in current state for original pricev. , says & repudiated the K+ returned &-s F+ but doesn-t %ant to sell & land anymore

1. Say# 60# &utie# "ere termi$ate& by May )+ %etter 'rm Pvi.


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1. :CC )(5*D$ if @rea#$ab%e !ru$ 'r i$#ecurity party can demandade?uate assurance and if cmmercia%%y rea#$ab%e can suspend performanceuntil received

a. #4% mercha$t# reasonableness of grounds determined by cmmercia%#ta$&ar+ rather than legal standards

i. 'ere+ /pry had no financing in place+ bounced checks+ andfailed to sell small fraction of product

2. Rea#$ab%e !ru$ may i$c%u&e #%e 'act that a buyer ha# 'a%%e$ behi$&$ accu$t

a. Hnreliable rumors and insignificant risks don-t b. 5t. significantly influenced by /pry-s lack of credibility

). 6f demands assurances and receives them+ bound to proceed %4 duties unless afurther change of circumstances

a. /pry argues received assurances %hen 'ornell talked to Metro andMetro then paid balance of FBK

. Here/ 'urther cha$!e ' circum#ta$ce# cmmercia%%y rea#$ab%e t #ee2

'urther a&e;uate a##ura$ce#a. /pry placed order over credit limit %4 Metro @actors and not long

enough to kno% if /pry %ould meet 1Dday payment terms b. &lus misled about scope of /pry-s operation had no trucks or staff"

=. @ailure to respond to demand for confirmation of line of credit and personalguarantee O repudiation$ :CC )(5*D-9

a. Must %ait )C days or less if circumstances dictateix. Fai%ure t prvi&e @a&e;uate a##ura$ce# i$ a @rea#$ab%e time i# a repu&iati$

&epe$&i$! $ the circum#ta$ce#8 R )


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b. Why is it the max amountii. Reliance$ R 199-)

1. K and nonDK remedy2. &osition had promise never been made

iii. Restitution$ R 199-1

1. ;onDK remedy2. @ocus on un0ust enrichment of breaching party

iv. /pecific performance is highly uni?uee. Str$! pre'ere$ce 'r e4pectati$ &ama!e#

i. @ed cts. don-t like the speculative nature of expectation damagesii. 5ommon la% of the states do

f. R 19i. ,amages O loss in value of other party-s performance > other loss incidental or

conse?uential damages" cost avoided or other loss avoided"1. Net E4pectati$2. /ub0ect to limitations of R 1


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2. &s say about FK b4c net proceeds only about F=2K a. Sayi$! %#t $ up2eep ' hme 'r yr. be're re#a%e

v. 'olding( F1+=CC+ plus 1CS interest1. ;ot going to include any losses not directly correlated to purchase price

a. ,oesn-t provide full compensation to nonDbreaching party

2. 5osts 7incidental to o%nership8 maintenance J utility" cannot be included b4ctoo many variables and too speculative to be buyer-s concern

a. ,on-t kno% ho% long seller is going to remain in house b. Must be reasonably expected 7as a probable result of breach8 O

rea#$ab%y FOS

). ,amages O F1+=CC plus interesta. 6Q( FG=K K price of home b. 5t. doesn-t include 7other8 lossc. 5ost avoided( FG).=KD sale of house 1 yr later

i. 5t. uses this as 7market value8 b4c $e yr. t re#e%% "a# $t a$u$rea#$ab%e time !ive$ mar2et c$&iti$#

vi. :#e Re#ch t ar!ue i$ci&e$ta% &ama!e# r $ti. 1imitations on incidentalconsequential damages

i. Reasonably @*/ to breaching partyii. &rohibition on speculative damages

1. Rea#$ab%e @certai$ty re;uireme$t8 R 1


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a. 6Q( C b4c actually gained valuei. =ut $t "hat "a# bar!ai$e& 'r

ii. Greater va%ue 'rce& up$ it b. 6ncidental( F222.=C for costs of finding a replacementc. 5ost Avoided( F1CK D F11K O F1K

d. R 19 &e#$0t rea%%y "r2 hereviii. ,issent( resignation %as 0ustified+ medically certifiable

1. !ven if selfDinduced+ still a medical conditionk. American /tandard v. /chectman ;3"

i. Am. /td. operated a manufacturing plant and K %4 / for all buildings and structures onland if promise to remove and demolish structures and grade the property at F2B=K

1. / to remove all structures 7to a depth approximately one foot belo% gradelines8

ii. Removes all the e?uipment and demolishes the structures+ but doesn-t do subsurface%ork

iii. Am. /td. sues / for not doing subsurface %ork

iv.


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b. 5t. applied diminished value measurei. ,ifferent if land %as o%ned by a nature conservatory

ii. ,ifferent today %4 environmental concernsc. &osner agrees %4 this measure b4c says costDtoDrestore damages

overcompensate o%ner

vii. R 19-)"( if breach results in unfinished construction and 6Q cannot be proven %ith7sufficient certainty+8 damages should be measured by either(

1. a" ,iminution in market value2. b" Reasonable cost of completing performance or remedying defects

a. A# %$! a# $t c%ear%y &i#prprti$ate t prbab%e LIII. RESTRICTIONS ON THE RECOER OF EPECTATION 6AMAGES,

FORESEEA=ILIT/ CERTAINT Q CA:SATION

a. 'adley v. #axendalei. 5raft shank breaks on mill+ needs ne% shaft

ii. Must send old shaft to manufacturer to get a ne% one made1. Mill can-t operate %4o shaft

iii. 'ires carrier to bring old shaft to manufacturer iv. 5arrier gets delayed in delivering old shaft to manufacturer

1. Mill sues for lost profits b4c delayv. :ury a%arded damages

1. 5arrier says lost profits are 7too remote8vi. 'olding( lost profits %ere not a reasonable conse?uence and special circumstances not

communicated or kno%n to carrier 1. 5an only recover for &ama!e# @ari#i$! $atura%%y 'rm breach of K

a. Ari#e# $atura%%y %## i$ va%ue b. ,irect result of breach

2. Also recover damages reasonably supposed to have been in contemplation of

bth partiesa. Must be FOS b. /pecial circumstances must be communicated

b. M&er$ %imitati$ $ c$#e;ue$tia% &ama!e#8 R 1

i. @ is a flo%er order via telephone companyii. @ Ks %4 #ellerose+ a leading flo%er marketer+ to direct all orders to @lorafax via 1D

LCCD@*W!R/iii. @ then Ks %4 I

1. I

bu#i$e## %#t if K is terminated or I


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a. Sai& @F%ra'a4 may #u''er treme$&u# %##. I

iv. I

v. @ terminates K %4 I

1. /ues for profits lost from #ellerose K vi. :ury a%arded @lorafax FB=CK for lost profits and FL2CK incidental damages for other

costs and setting up call center vii. 'olding( profits of the #ellerose K %ere in I

%4 I

profits9a. 5t. 0ust enforcing express agreement b. I

2. ,amages O FB=CK for lost profits J FL2CK for incidentalsa. 6Q( difference b4% %hat I

b. 6ncidental( FLCCK for setting up call center ). 5onse?uential( lost profit under #ellerose K nothing to suggest that

#ellerose %ould have terminated but 'r GTE0# pr per'rma$cea. Cau#ati$ 3 i$terpretati$ b. ,espite GCDday termination clause in @lorafax4#ellerose K

i. i. :ury split differencee. I

. -+ Fir#t prve &ama!e# happe$e& "7 certai$ty a$& breachi$! party

cau#e& &ama!e#a. 'igh standard

=. -) The$ ;ua$ti'ya. *nce prove fact of damage+ 0ury given %ide latitude in amount

G. 5ost4loss avoided( mitigated damages by setting up call centerviii. R 1


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). 5ompensate builder for %abr a$& materia%# e4pe$&e& prir t Cu$ty0#repu&iati$+ plus profit that %ould-ve been realied

a. After repudiation+ builder-s loss %as economic %asteiv. 'ypo 1( stop building right after repudiation no expenses on bridge"

1. *Q( F1 million bridge K

2. 5ost avoided( FCCK ). ,amages O F1CCK

v. 'ypo 2( spend F2CCK on materials be're repu&iati$1. *Q( F1 million bridge K 2. 5ost avoided( FBCCK ). ,amages( F)CCK 5ounty pays more+ but uten pockets same F1CCK"

b. 'avill v. Woodstock /oapstone 5o. Q


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i. American rule( each side bears the cost of their o%n attorney feesd. ;o nonDeconomic in0uries

i. K liability doesn-t care if the lost 0ob led to a divorce %hich led to you needing psychiatric care+ %hich led to . . .

e. ;o punitive damages

i. 6n Ks+ no deterrence+ not trying to send a message0ust expectationsf. ;o specific performance u$%e## F %on-t suffice$ R 1


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2. /tarted to assemble product and not commercially reasonable to completemanufacture

iv. Acti$ 'r the Price8 :CC )(*D1. #uyer fails to pay+ three situations for recovery(

a. 1" buyer has accepted goods$

b. 2" goods damaged after risk of loss has shifted to buyer$c. )" essentially force goods on buyer and make pay if unable to resell

v. I$ci&e$ta% a$& C$#e;ue$tia% 6ama!e#8 :CC )(+*1. *ut of pocket expenses2. ,oesn-t actually reference conse?uential b4c sellers rarely suffer conse?uential

damages as can 0ust resell

Documents

Contracts II - Schooner - Spring 2011_4