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Contracts
St. Johns University School of Law
Borgen, Christopher J.

Borgen
Contracts
Fall 11


I.       Damages
A.    Compensatory (Money) Damages
1.      Expectation Damages
i)        Amount intended to put the π in the position he would be in if the contract had been performed.
2.      Reliance Damages
i)        Amount intended to put the π back in the position he was in before the contract → compensates him for the detriments he suffered in reliance upon the agreement.
3.      Restitution Damages
i)        Amount corresponding to any benefit conferred by the π upon the Δ in the performance of the contract disrupted by the Δ’s breach.
B.     Specific Performance
1.      Requirements:
i)        Money damages are not adequate to give expectation
ii)      Specific performance should not require too much supervision by the court
iii)    Terms of contract must be clear enough so that court can write a clear order of specific performance
iv)    Court will not grant specific performance if it forces antagonistic individuals to associate with each other
C.     Damages for Sale of Goods
1.      U.C.C. Article 2
i)        § 2-711 – 713
a)      If a seller breaches or the buyer rightfully rejects or justifiably revokes acceptance, the buyer may cancel and in addition to recovering so much of the price as has been paid the buyer also has the right
(1)   To “cover” by making in good faith and without unreasonable delay any reasonable purchase of goods in substitution for those due from the seller.
(i)     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, but less expenses saved in consequence of the seller’s breach.
(2)   Buyer who has suffered a breach but has not covered can recover damages for non-delivery or repudiation (threatened breach of k)
(i)     Recoverable damages for non-delivery or repudiation is the difference between the market price at the time when buyer learned of the breach and the contract price together with any incidental or consequential damages, but less expenses saved in consequence of the seller’s breach.
D.    Punitive Damages
1.      Punitive damages are not available in breach of contract actions.
II.    2 Types of Contracts – the person making the offer gets to choose the terms of the contract → can ask for a promise or a performance.
A.    A contract is formed when it is accepted by the offeree
1.      Unilateral Contract (1 promise)
i)        When an offeror seeks a performance
a)      Acceptance is made when performance is complete
2.      Bilateral Contract (2 promises)
i)        When an offeror seeks a promise
a)      Acceptance is made when promise is made
III. What makes a valid contract?
A.    Consideration – whether parties agreed to make an exchange          
1.      There is consideration when there is a bargained-for (mutually desired) exchange in which each party receives something that is either a benefit to that party or a detriment to the other.
i)        Ex. – Hamer v. Sidway
a)       Nephew receives benefit of money, so there is consideration on his part.
b)      Uncle receives a detriment to the other party (nephew) so there is also consideration on his part → nephew gave up his legal right to smoke, drink alcohol, etc.
ii)      Courts do not look at the size (relative values) of the consideration, they assume that both of the parties are mentally capable – this is called freedom of cont

that consideration for the promise is past or executed, if the consideration is expressed in the writing and is proved to have been given or performed and would be a valid consideration but for the time when it was given or performed.”
iii)    Illusory Contracts
a)      A contract where there is an illusory promise, and therefore no consideration
(1)   An illusory promise is a promise that reserves full discretion in the promisor whether to perform or not (lack of mutuality in obligation).
b)      Types of Contracts that are not illusory in themselves but may seem illusory
(1)   Satisfaction Clauses
(i)     A clause in a contract making the duty of performance of one of the parties conditional upon his satisfaction
(ii)   2 categories of satisfaction clauses that are not illusory:
(a)    Commercial value – standard of a reasonable person is used in determining whether satisfaction has been received
(b)   Personal Taste (artistic value) – standard of good faith, must be honestly satisfied
Ex. – Mattei v. Hopper – satisfaction clause making contract conditional on buyer of property obtaining satisfactory leases prior to purchase →
Court holds that factors in determining whether a lease is satisfactory more appropriately falls within the second (personal taste) type of satisfaction clause – factors are too numerous to permit the application of the reasonable man standard.