Contracts
Henry Gabriel
Fall 2009
Class 1 – Contracts – enforceable promises, based on Common law. Legal Method – the way we study and analyze as lawyers. Hawkins V. McGee – operation fails for repaired hand. Case about Promisory estople. “Guarantee to make hand 100% perfect,” and “will be in hospital 3-4 days and can go back to work.” Court says 3-4 days is estimate, but promise about hand is just that. Court says he chose to get the operation on the guarantee statement and not 3-4 days (opinion,predition). One promise is potentially enforceable and one non-enforceable.
· Common Law – legal system based from England on tribal courts that didn’t have any extensive written law, and made it up as they went. Case Law. Common law of England is our common law. England, Ireland, US, India, Canada, Australia all common law. Common law term called Consideration – A promises B, B promises something in return, A<->B.
· Civil Law – comes from Roman law. Byzantine Empire – Justinian said he wanted to codify all the laws (Code of Justinian). The basis of all civil law. Code law. Everyone but the English.
· Promise (p.195 restatements) – a manifestation of intention to act or refrain from acting in a specified, so made as to justify a promisee in understanding that a commitment has been made. Things a reasonable person would intend to be a promise.
· Bayliner V. Crow – bought boat that didn’t go as fast as he wanted. Issue – whether there is evidence they breached expressed and implied warranty. Did they promise the boat would meet those expectations? Can’t breach a promise unless you promised something in the first place. Seller didn’t promise, so they didn’t breach. They are only bound to what they agreed to be bound by (model, boat will work), not that it will go 35 mph.
· Bound to contracts only if we choose to be bound (unlike torts). If we enter into contract, we are only bound by what we agree to be bound by.
· Remedies (4 types) –
Class 2
When you enter into a contract you are going to have to give up something, contracts are an exchange, not a gift. Both parties give up something. The law of contracts says you do not have to perform, it requires you to either perform or pay the value of non-performance. It often makes economic sense not to perform, and pay the damages. Efficient Breach – decides to breach and pay damages in lieu of performance. Faulty Performance – give you something that doesn’t quite work right. Ex. Promise a computer in a given condition for 4K, 1K software, no software worth 3K. Breached contract. Have a claim for 1K. In the law of contracts, no one cares why it is you did not perform. If you didn’t do it, you’re responsible for the consequences of non-performance. You choose to enter in a contract, you assume risk that you perform as promised or pay the cost of non-performance. If given the 1K for the software, are you made completely whole? Assume she is. Contract Damages – the difference with what you promised and what you delivered. The difference between the value of what was promised and the value of what was received, that difference is called the expectancy interest. Expectancy damages – difference w/ what was promised and what received. The value of what would be expected, had there been no breach. Four measures of Damages – specific performance(actual performance), (Expectancy, reliance, restitution) -substitutional, monetary damages over specific performance. Usually the damages are expectancy – measure of damages that achieves the goal that the party does what they promise to do, either perform or pay cost of non-performance. Ex. Naval Institute V. Charter – If sale paperbacks early, the aggrieved party lost profits. Expectancy – what is the value of the breach? Difference of value of what was promised and value of what was received. Findings of fact vs. finding of law. Finding of fact will only be overruled by an appellate court if the appellate court find there was no reasonable basis for that finding. Assume the findings of fact are true. 35K is what Navy lost/would have made in profits from hard back books had there been no breach, 7K represents the profit that breaching party made. Plaintiff gets 35K because that’s the expectancy damages of what they would have made, had there been no breach. The breaching party pays the other part what they would have been in, if there was no breach. 7K is punitive, buts them in a better position, don’t want to put them in a batter position. When you enter in a contract you promise that if you breach you put the party in the position they would have been in. Sullivan V. O’Connor – P ugly, D promised her to be less ugly, P got uglier. How would you measure expectancy? Difference between promise of being less ugly and actually getting uglier. * Restitution and reliance are both measures of damages and causes of action and when there’s one there’s not the other, difference from traditional contracts. Restitution – I gave you something and you give me back the value of what I gave you. The return of the value of what the breaching party received (ex. medical fees). Reliance – give me the value that will put me back in the position I was in before the contract. Was uglier, put me back to ugly (not less ugly).Expectancy would be I’m uglier, make me less ugly than before. * Expectancy is not necessarily greater than reliance and reliance is not necessarily less than expectancy. The court chose reliance. If we start with the proposition that when I enter into a contract, the risk I assume is that I shall either perform or pay for on, the assumption is expectancy is the only proper measure of damages. The burden is on the court to explain why expectancy in this case is not the correct measure of damages.
Class 4 – Sullivan v. O’Conner – expectation damages = diff with what was promised and what was received, uglier <-> not so ugly. Reliance isn’t any easier that expectation. There is an assumption that reliance is worth more than expectation. The Dr. made a contract and promised one thing, but delivered another. Should pay value of non performance, expectancy. The court fudged on the issue. * This case violates basic issue, if bound to contract, assume risk that will perform or pay value of non-performance. Don’t have to perform, can do it or pay the damages. White V. Benkowski – Whites contracted to use Benkowski’s water supply, Benkowski turned water off. They suffered a legal harm, you can put a value on it. Court says entitled to $10, not 2K, that’s punitive damages. You don’t punish people for breach of contract. Pay damages for non-performance (compensatory damages). Formation of Contracts – 3 elements – Offer, Acceptance, Consideration. Consideration – has to be an exchange of something. A <->B, not one sided, bi-lateral. If don’t have consideration, not a contract. Hamer v. Sidway – Uncle promises to give nephew 5K to not drink. Uncle dies, Executor of estate says he’s not entitled to 5K. Executor says no consideration because the things Nephew would do is beneficial to him and not a detriment. Consideration (benefit/detriment) -Promisor suffers a detriment by giving something to B, B gets a benefit. B gives A something so suffers a detriment, and A benefits from that detriment. Does uncles benefit from nephew’s detriment (legal right to smoke/drink)? Does his warm/fuzzy feeling of doing good constitute this? It doesn’t matter. In the book, the court says, Consideration may consist either of a benefit or a detriment, as long as uncle makes promise to give nephew something and he gives up something, whether the uncle received a benefit or not. All we care about is uncle made a promise to get nephew to suffer a detriment. We don’t care about the Uncles intent. It is enough the nephew suffered a detriment. Main issue – no intent.
Ex. Give 2k for a car, person doesn’t give it to you. Reliance – give back 2k. Car is worth 2.5K. Expectancy is giving back the value of the car, the value of the contract, what you would get. Ex. Car worth 1.5K, give 2k for car, reliance is 2k, expectancy is 500. Restitution is 2k, would want that as opposed to expectancy. Restitution is same as reliance. * Expectancy does not need to be greater than reliance.
Class 5 – Oliver Wen
e, which is a promise to induce her to do something. They didn’t make a promise to induce her to do anything. Cant induce her to do something she’s already done (worked in past). They didn’t induce her to retire or to work. If they said they wanted her to keep working for pension, and she said she wanted to work anyway, there is no consideration because they didn’t induce her to do anything.
Class 7 – Mills v. Wyman – Guy takes care of sick guy, father promises to pay for his care. Father decided not to pay. Something done in the past is not enough consideration to make it a valid contract. Court takes on moral obligation though. When you make a promise to do something you are morally obligated to do it., but court says no because if everyone enforced a promise, there will be too much litigation, need to put a limit, only enforce situations where there is an exchange. Where’s the line with contract/no contract? Has to be a benefit/detriment to find an exchange, give up something for something in return. Bargain for exchange, promise which seeks to induce return promise. Class of enforceable contracts need to be defined, need certainty. Wyman didn’t take care or mills, took care of his son, has to to do something for the person for it to be enforceable in section 86. Webb v. McGowin – Section 86 of restatements. This is a contract without consideration. Guy saved guy from falling machinery and was crippled. He promised to pay him for the rest of the crippled guys life. Guy who promises dies, so crippled guy sues his estate. This was non-intended as a gift. This case is inconsistent with the general principles that moral obligations are unenforceable. Section 86 of restatements. If statute of limitations, and unenforceable, if you then say you do what you promise to do in the original contract (second promise), not consideration, one sided promise. Is enforecable according to section 82. Section 83 – valid contract but no longer enforceable because in bankruptcy. You don’t have to perform but you tell them you are going to perform anyway. Section 84 – voidable contract, promise to do something you promised to do in the past that was voidable. Webb v. Mcgowin – no prior contract/consideration. Section 86 is the rule here. “A promise made in recognition of a benefit previously received by the promisor (McGowin) from the promisee(Web/injured party) is binding to the extent necessary to prevent injustice.” This section doesn’t talk about contracts or consideration. This is an enforceable promise, not supported by consideration, and not by definition a contract. 86 says there might want to be promises we want to enforce anyway even though there is no contract/consideration. This rule needs to be narrow or else everything would be fair game in regards to moral obligation. Promise to pay money not intended as gift but obligation to pay for something earned. The restatement gives you no answers it gives you a series of questions to ask. Section 83 – Was there justice? Was there a gift? Was value disproportionate to benefit? Promises – support those promises supported by consideration, a few exemptions, such as shown here. Case for Moral Obligation – Made a promise so should abide by it. Case against – moral obligation arising out of benefit previously received is not enforceable.
