I. The Relationship Between Contract and Promise
Restatement- This is not law but rather a summary of the law. It must be adopted by the court in certain jurisdictions. According to the restatement, “A contract is a promise for the breach of which the law gives remedy, or performance of which the law in some way recognizes as a duty.”
b) Uniform Commercial Code-UCC- This is only law where it is adopted.
-Law in 49 States, so we consider it as law.
-Vernon’s Annotated Missouri Statutes §400
-Applies in cases involving the sale of goods, can’t be applied elsewhere even though the restatement is mentioned elsewhere because it is persuasive.
-Contract means the, “Total legal obligation which results from the parties’ agreement as affected by this act and any other applicable rules of law.”
c) Default vs. Immutable Rules
-Default rules are rules that are left up to those writing the contract. Often called gap filling rules.
-Immutable rules are mandatory rules.
d) Problem- What if a farmer is paying someone to spray pesticide? Is that a contract for the sale of goods or service (delivery of pesticide)?
UCC-2-105 involves contracts for the sale of goods.
Legal Ruleà A good= things movable at time of contract.
Applicationà Spraying pesticide (=/≠) thing that is movable at time of contract.
Conclusionà Spraying pesticide (=/≠) to a good.
Must look for the dominant factor as to whether it is a good or service.
Pesticide Case: The primary factor was the service provided.
e) Dominant Factor Rule for Mixture of Goods and Services- Is contract rendition of service, with goods incidently involved or is it a transaction for sale of good, with services involved.
f) What is a Promise?
i. Bailey v. West- 1969-D and trainer bought horse and it was found to be lame when shipped and the trainer did not accept. Kelly called trainer who said D would not pay for any care. Driver took horse to P who accepted when shipper would not, and assumed he was to take care of the horse. D received bills a few months later and sent them back saying he would not pay. Court held that there was no express or implied contract since there was no manifestation of intent to promise or mutual agreement. D also did not send horse to P and told P he would not pay.
-Unjust Enrichment Test- Benefit Conferred? -Did recipient appreciate that which was given?-Was offering accepted and retained if inequitable?
-Since West did not want this, he did not appreciate it or retain it, it was like a gift.
ii. Bolin Farms v. American Cotton Shippers Association- 1974- 11 farmers make a contract to sell their crop at a certain price. The price rose greatly, so they sued to get out of the contract. The court found for D stating all parties entered the contract willingly and assumed the risks thereof. A valid excuse for breach would possibly be hurricane, if the defendant had a hand in the price change (insider trading), or other such things.
II. Contract as a Legal Relationship: An Introduction to Remedies
a) Enforcement of Contracts- This means remedies.
i. Without remedies only the honor system would enforce contracts
ii. Remedies promote economic exchange.
iii. Types of Remedies
-Monetary- Most common. Type of remedy for Efficient Breach. This is the case when a party backs out to pursue another opportunity which yields more poten
ould not be collected.
vi. Coase Theorem- Parties can negotiate on everything; economics will balance all things. Parties essentially will bribe each other until the most societally productive thing happens. Theorem assumes: 1) No transaction costs (false) 2) Rationality 3) Perfect Information (false)
– Restatement §351- Damages are not recoverable if the other party cannot foresee. Loss may be foreseeable if: occurs in the ordinary course of events or occurs as a result of special circumstances that the party in breach had reason to know. The court may limit damages for foreseeable loss by excluding recovery for loss of profit, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.
-Hadley v. Baxendale- 1854- CHECK IN BOOK! P ran mill and shaft broke, forcing them to shut down. They needed to send the old mill away to be used as a template for a new one to be made so they hired a courier service. The courier did not know that the mill was closed and waiting and the shipment was delayed. Find for the D saying that if the special circumstances are known by both parties, the breach calls for special damages. If the damages were unforeseeable to the breaching party, then they are not liable for special damages. The breaching party must know!