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

Fall 2010

Contracts I

Professor Borgen




























Ch.1 Sec. 1 Enforceable Promises: An introduction
1. Contract (Restatement) – a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

2. Promise (Restatement)- A promise is a manifestation of intent to act in a specified way that would justify the promisee in understanding that a commitment has been made.

a)A promise is enforceable if a reasonable person would:

i.                    consider the promise to be an inducement of activity(i.e. agreement) on the part of the promisee.
ii.                  believe that what is promised is actually within the control of the promisor.(has to be something that the promisor can actually accomplish-is capable of doing)

3. Implied Warranty – underlying statutory rule concerning what someone buying a good can reasonably expect from that good.

4. Express Warranty – specific promise being made in regard to a product.
i.                    the product in question should be a member of the class of products intended to be protected under the warranty.
ii.                  a statement including the seller’s opinion or commendation of the product does not create a warranty. (Bayliner)
iii.                 
Section 2. Remedying Breach

-Breach of contracts are usually measured by actual measures; punitive damages are not available in breach of contracts (USNI and White v. Benkowski)
-Disgorgement as a punitive measure is not allowed (USNI)

UCC § 1-106. Remedies to Be Liberally Administered.
(1) The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this Act or by other rule of law.


Three Protected Interests of Remedies:
Expectation interest:
A. right to expect the benefit of the bargain sought by the plaintiff who is the non breaching party
B. to get it, the promisee is worse off than if the promise had been performed
C. goal is to put the promisee in the position they would have been had the promise been performed
Note: Expectancy is the default rule of contract in the United States

Reliance interest
A. the promisee has a reliance interest if it has changed its position to its detriment in its reliance on the promise
B. because of the promise the promisee is now worse off
C. the goal is to put the promisee in the position as if no promise by the promisor had been made

Restitution
A. Promisee has a restitution interest if it has not only relied on the promise, but has conferred a benefit on the promisor as well
B. A return to the promisee of whatever benefit the promisee gave to the promisor
C. The goal is to put the promisor in the place they had been had no promise been made
D. We look at position of the promisor and not the promisee when awarding restitution
-restitution is not the same as disgorgement of profits, it is simply getting back what one has given
Ex: Buyer gives seller $100 but seller books to x for 125, under restitution buyer would get back 100, under disgorgement seller would have to give back 100 plus 25 in excess profit

Note: Both reliance and expectation are compensatory and assess where the non-breaching party is. Restitution focuses on where the breaching party is instead.

See statement 344 for a codification
§344. PURPOSES OF REMEDIES
Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee:

(a) his “expectation interest,” which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed,

(b) his “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or

(c) his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party.

Damages Hypo (Note 1, P. 19)
Doctor’s Fee: $300
Hospital Fee per Operation: $100 (x3)
Pain and Suffering Per Operation $3000 (x3)
Increase in value of appearance: 20,000
loss in value of appearance: 10,000

Restitution Interest: $300–put the promisor where they had been prior to when the promise had been made–doctor has to return the fee to the promisee-doctor and the hospital are not the same entity
Reliance Interest: $600+$9000+$10,000=$19,600–it is the worsening in total of the plaintiff
Expectation Interest: $20,000–how much of the amount is she down–$33,100 compensate for the ways in which t

unilateral contract, one party pays the other party to perform a certain duty. If the duty is fulfilled, the party on the other side of the contract is obligated to transfer the specified funds. Only this party is under obligation of the contract, whereas the acting party is not legally obliged to perform the duty

4 Parts of Consideration
Fundamentals of Consideration
Consideration – something bargained for and received by promisor from promisee.
Examples:
i.      Forbearance of legal right – drinking, gambling, smoking (Hamer v. Sidway); right to sue (Fiege v. Boehm)
ii.      Peppercorn – nominal consideration; seen by courts as no consideration at all – invalidates “contract”
iii.      Bona fide dispute/ reasonable claim settled in good faith is basis for consideration even if claim turns out to be false (Fiege v. Boehm – wasn’t his kid, reasonable to believe it was; kissing makes you pregnant is unreasonable claim)
iv.      Gratuitous promises – promise made in exchange for nothing (Kirksey v. Kirksey – gave her land etc for free. Not benefit/detriment because to get gratuitous item, lodging, had to go to it-logically prior)


Requirement of Exchange
Past acts – not valid consideration, lack mutuality (Feinberg v. Pfeiffer Co.) – her past employment was not induced by pension, pension not predicated on future work)
Moral obligation – not usually valid consideration; generally for past act and benefit already received, nothing promised for (Mills v. Wyman). Can be valid if a material benefit received (Webb v. McGowin). Also if to prevent injustice – § 86
In New York, if past act is put into writing and proved to been performed, then valid consideration


Requirement of Bargain