CONTRACTS KELSO FALL 2016
TYPES OF DAMAGES:
Net profits you would have made if contract wasn’t breached (where you should have been if contract performed as expected; where would you have ended up)
Protects expectations that the promise generated in the promisee, that is, protects the benefits, profits or gains the promisee would have earned had the contract been performed
Difference between market price and contract price at the time of breach
Difference between cover price and contract price
The “cover price” measure is a relatively recent innovation in contract law, introduced by the UCC, which governs contracts in goods, but now adopted mode widely in non-UCC cases, like construction contract cases or employment/services cases.
Where you started before the contract vs. where you ended up
Compensate for losses caused to the promisee by reliance onthe promise, that is, put the promisee in as good a position as if the contract had not been made
Focuses on loss/ suffering
Restore party to the status quo ante
“How much worst off are you?”
Includes: Out of pocket expenses, value for loss/ suffering, loss of earnings
Cases Where the Reliance Measure is Typically Used:
Contracts Supported by Consideration:
Cases Where Expectation Damages Are Too Uncertain
Cases Where Expectation Damages Would Impose Undue Burden
Applies when one person has done something to enrich another person and it would be unjust not to pay for it
Example: Person running down the street is knocked over by another runner and becomes unconscious. A doctor walks by and provides care to the unconscious man. The doctor will be paid for rendering that care through restitution.
Prevents the unjust enrichment that would result if the promisor retained benefits conferred by the promisee because of the promise
Includes: Out of pocket expenses
Typical Cases Raising Issues of Restitution
Doctor/Nurse Assistance Cases
Living Together Cases
Preparing Plans/Proposals That Don’t Ripen Intoa Contract
Contract Not Enforceable Because of Indefiniteness
Contract Not Enforceable Because of the Statute of Frauds
Restitution Factors Generally
Though whether a court will grant restitution is based on the consideration of whether some enrichment is”just” or “unjust” based upon all the facts before the court, most courts will emphasizea few factors in making it decision. Among these factors are:
(1) whether the plaintiffcouldreasonably expect remuneration from the defendant,
(2) whether some direct or other special relationship exists between the plaintiff and the defendant,
(3) whether the plaintiff conferred the benefit as a mistake and it would be inequitable to let the plaintiff bear the risk of that mistake;
(4) whether the defendant induced the plaintiff to confer the benefit and it would be inequitable to let the defendant keep the benefit without paying for it;
(5) the availability and efficacy of other remediesthat the party may have; and (6) the reasons why a formal contract does not exist, and is one party more at fault for a formal contract notexisting.
Specific Performance – As an alternative to money damages
Where goods are unique or in other proper circumstances.See UCC 2-709, 2-716.
Where damages at law are inadequate because of uniqueness of skill contracted for or in other proper circumstances. See Rest. 2d sec. 357-69
Where money damages are inadequate, courts, using their equity powers, can order the promisor to perform the specific action promised or enjoin the promisor from performing inconsistent acts. In most cases, such specific relief is unavailable. Where damage from the broken promised performance can be estimated monetarily, and thus damages are a sufficient remedy, specific performance will not usually be available. Where money damages are not adequate, however, as when goods or services involved in the contract are unique (such as goodwill of a radio station, a unique portrait, a piece of jewelry with unique senitmental value, goods where there is no ready substitute market), or in cases of land (on the theory that every plot of land is unique), specific performance will be ordered.
The civil law European legal systems are quite ready to grant specific performance. In general, in common law systems like England and the United States, specific performance is routinely granted only if the goods and services are unique or in land cases on the presumption that every plot of land is unique.
While traditionally it was very
if integral (fundamental) to thecontract
A liquidated damage clause may override all above rules if reasonable in light of expected damages at the time the contract was made. Under the modern approach, a liquidated damage clause may also be enforceable is reasonable in light of actual harm suffered.See UCC 2-718; Rest. 2d
ARBITRATION AS A SUBSTITUTE TO LITIGATION:
In an increasing number of situations today, and especially in international businesscontracts,
there is a marked tendency for parties to specify that disputes should be submitted to arbitration as a substitute to litigation in court.
Arbitration clauses typically provide that a court will enforce the arbitrator’s decision. This is true even if the decision is not one which may have been granted by a court. However, courts typically will not enforce an arbiter’s award of punitive damages in a contractaction.
CONSIDERATION & CONTRACT ENFORCEABILITY
A. Means of Enforcing a Contract
There are two main methods today of contract enforcement in addition to completed transactions:
Contracts supported by consideration and
Those not supported by consideration, like promissory estoppel.
Each is discussed briefly here:
Typically, and traditionally, consideration is required for contract enforceability. Under the bargain theory of consideration, this means that for an agreement to be enforceable as a contract, two requirements must be met:
a bargain between the parties; and
To constitute an exchange,in response to a promise or performancefrom the promisor,the promisee much either
give (or promise to give) a return benefit or
take on (or promise to take) on a detriment.
Where such an exchange of obligations occurs, courts will say that consideration has been given for the promisor’ s action, and thus will enforce the agreement as a contract.