Contracts I
Prof. Movsesian
Fall 2016
I. Background
Contract: A contract is a promise or set of promises for the breach of which the law gives a remedy or in some way recognizes a duty
Promise: a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a p/ee in understanding that a commitment has been made.
Type of Promises in K
Express Promise: intention is manifested by words
Need not be written, it can be oral
Implied in Fact Promise: intention manifested by conduct, not words
Meaning parties conduct implied in the circumstances
Implied in Law Promise (Quasi): no manifestation of intent, express or implied
Law infers a promise in the interest of justice
Court declares there needs to be reimbursement
Elements:
P confers a benefit on D
D appreciated benefit
Knew about the benefit and did not decline it
Its unjust for the D to retain the benefit w/o reimbursing P
The Difference
Implied in fact is a real K: reasonable person will understand that actions imply a deal
Implied in law K: under the circumstances, it is reasonable to think justice requires D to pay P
++ Bailey v. West >> Not implied in fact because no mutuality of ownership
* Pacta Sunt Servanda: agreement must be kept
Impracticability Exception: something you can’t reasonable foresee
++ Bolin Farms >> Can’t get out of K because circumstances have changed in a way that is unfavorable to one party
Breach of K
Damages
Expectation Measure: put the injured party in as good a position as if the K had been performed
(usually reliance + profits loss = EM)
Reliance Measure: put the injured party in as good a position as if the K had not been made – status pro quo ante
(reimbursing for cost incurred in reliance of a K, except for loss profits)
Restitution Measure: restore to P the value of any benefit the P has conferred on D àImplied in Law
(could be well above at capped at EM), only includes direct benefit
Generally, Emotional Distress is a tort and is not usually recoverable unless P tells D prior to entering in K that a breach will cause them anguish and the distress now becomes foreseeable
++ Nose Case >> granted damages except for med bills b/c she would have paid that regardless
P was promised 2 operations; needed 3; beyond repair; sued
Jurisprudence Law
Why do we enforce K’s?
To facilitate trade – encourages people to be better off without making anyone worse off
(promotes free trade, increases welfare of so
should enforce substantively “fair” bargains
Presence of formal bargain not determinative
Was this an adequate exchange?
Unilateral K: a promise exchanged for a performance of an act
Example ~ I promise to give you my book if you give me $50, I don’t want a promise just money
K exists when you give me the cash, not before
Until you give me the cash, I have no obligation to give you the book; no breach
Bilateral K: a promise is exchanged for another promise
Example ~ I promise to give you my book tomorrow, if you promise to give me $50 the day after
K exists the moment we exchange promises today
If I fail to give you my book tomorrow, there is a breach
II. Consideration: The Bargain Requirement
Rationale for the Bargain Requirement
Cautionary: ensures that parties do not incur liability accidently or impulsively ( to avoid accidental gifts)
Evidentiary: relates to the courts who deal with it later
Channeling
Economic: bargains are the only way for exchange and letting products go to the highest bidder
