I. Relationship between Contract and Promise
Introduction: Relationship between contract and promise
· Restatement §1 Contract: Promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes as a duty.
· Result of a contract: legal relationship involving rights and duties
· Agreement v. Contract
o §1-201(3) Agreement: Bargain of the parties in fact as found in their language or by implication from other circumstances including
§ Course of dealing
§ Usage of trade or
§ Course of performance
o §1-201(11) Contract: The total legal obligation which results from the parties’ agreement as affected by this Act and any other applicable rules of law
· What’s the difference?
o Contract is legally enforceable
o Agreement is of factual situations; contract is the legal ramification of those situations
· Difference between contract and agreement
o Promise is between 1 party
o Agreement is between 2 + parties
· §2-105 Definition of Goods: All things which are movable at the time of identification to the contract for sale other than money in which the price to be paid, investment securities and things in action. Also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty.
o Goods must be both existing and identified before any interest in the can pass. Goods which are not both are “future” goods. A purported present sale of future goods or any interest therein operated as a contract to sell.
What is a promise?
· Bailey v West: Quasi-Contract
o Facts: D bought horse from seller in NY. Trainer finds horse to be lame and ships it back to seller who refuses delivery. Kelly, who was not an agent of D or the seller, gives the horse to P. P sends bill to D and seller for care of the horse. Immediately after receiving bill, D tells P he would not be responsible for boarding the horse.
o TC held that D owned the horse based on an implied in fact K
§ formed when one party accepts something of value knowing that the other party expects compensation
§ Base on the intentions of the parties
o D appealed and SC agreed:
§ Not a quasi contract (implied in law) either: based on unjust enrichment
· NOT a contract—even though parties never reached an agreement, and regardless of their intentions to do so either way, it would be inequitable for one party to retain a benefit conferred by another
ses cause by breach must have been reasonably foreseen by D
· P has duty after breach to make all reasonable efforts to avoid the consequences of breach. If D, who has burden of proof, establishes a failure to mitigate, P may not recover
· Parties have power through agreement to expand or narrow the remedies normally avail for breach
· Victorious party may recover interest and litigation costs, but attorney fees are generally not awarded in the absence of an agreement
Measuring and Compensating Loss
· §344. Purpose of Remedies
o Expectation §347—Place P in position they would have been in had D performed
§ Recover net gains prevented by the breach
§ Other uncompensated losses resulting from breach
o Reliance §349—Put P in the position they would have been in had the promise never been made
§ Out-of-Pocket costs incurred because of reliance on promise
§ Opportunity costs such as the cost of substitute performance
Cannot collect lost profit or expectancy damages had the K been performed