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Contracts
St. Louis University School of Law
Baxter, Teri Dobbins

Contracts Outline
Bases for Enforcing Promises
I. The Meaning of Enforce
a. Types of Damages
i. Expectancy- puts the parties back in the position that they would have been in if the breach had not occurred and the contract had been performed as promised
ii. United States Naval Institute v. Charter Communications, Inc.- idea behind contract law is to redress the breach (return what the party lost) rather than punish the party that breached
1. Issue: What are Naval’s actual damages, based on what they would have made had Berkeley not breached?
2. Holding: Berkeley will give other party the difference between hardcover sales in Sept. and Aug.
a. Naval objected- wanted injunction but court said damages would be adequate
b. Main idea is to determine plaintiff’s loss, not defendant’s gain
c. Calculation of damages is an estimate that should favor P
3. The court held this way because although the number is speculative, the court has the right t speculate in favor of the injured party
iii. The breaching party should have to pay regardless of whether the other party would have sold as many books because there was a contract
iv. Err in favor of non-breach party
1. Efficient Breach Theory- when party decides it is more profitable to breach a contract and pay damages than perform
v. Restitution- Awarded when one party confers a benefit on the other and has received nothing in return (out of pocket expenses). Put promisor back in position he or she would have been in if no promise was made
vi. Reliance- puts the plaintiff back in position that he would have been in if the contract had never occurred (if it has changed his or her position to his or her detriment in reliance on the promise). Compensate for losses because they relied on agreement
b. The Economics of Remedies
i. Sullivan v. O’Conner- Reliance damages may be awarded in breach of contract case; damages for pain and suffering are usually not awarded
1. Issue: Breach of contract for failure to achieve promised result in nose job. Judge instructed the jury to consider defendant’s occupation as entertainer and pain and suffering for third surgery in determining damages
2. Court held: She is entitled to anything she paid out, plus payment for worsening of her appearance, and compensation for pain and suffering caused by third surgery she didn’t expect to have
3. Why that holding: you can get reliance even if you haven’t given anything
a. Court talks about the three measures of damages
b. Court says that expectancy is the standard measure for breach of contract
c. Restitution alone seems too meager (fees and expenditures) but Expectancy was too excessive (whole difference between condition as promised and actual result)
d. Must consider subject matter and background of contract- psychological distress and physical injury over disfigurement in case
4. The case of request for restitution: Not all courts agree that restitution alone is too meager. In case of two oil companies, court found government broke its promise and must give company their money back and do so whether contract would or would not have ultimately benefited companies
5. The court does not apply expectancy because too hard to put a figure amount to expected appearance
c. Specific Performance for Breach of Contract- specific performance is an equitable remedy, where instead of money damages, the court enforces the actual promise
i. Court will not usually order specific performance of contracts unless the remedy at law (monetary damages) would be inadequate as a remedy, since contract law seeks to redress breach rather than punish the breaching party by compelling performance
ii. Mostly ordered for contracts involving sale of land contracts/real property/real estate. Courts have said no money value because land has special unique value outside of money
iii. Restatement Second § 359 – Effect of Adequacy of Damages
1. Specific performance will not be granted if damages would be adequate to protect the expectation interest of the injured party
2. The adequacy of the damage remedy for failure to render one part of the performance due does not preclude specific performance or injunction for the contact as a whole
3. Specific performance or an injunction will not be refused merely because there is a remedy for breach other than damages
iv. Restatement 2nd § 357- Availability of Specific Performance and Injunction
1. Specific performance of a contract duty will be granted in the discretion of the court against a party who has committed or is threatening to commit a breach of that duty
2. An injunction against the breach will be granted at the discretion of the court against a party who has committed or is threatening to commit a breach of duty if
a. The duty is one of forbearance
b. The duty is one to act and specific performance would be denied only for reasons that are inapplicable to an injunction
d. Punitive Damages for Breach- punitive damages are not usually awarded for breach of contract, unless accompanied by fraudulent conduct or outrageous, tortious behavior
e. Arbitration- an alternative dispute resolution process; tribunals have 1-3 judges and are temporarily established for each specific case; procedure is more flexible and informal and arbitrators do not have to give reasons for each decision;
i. Parties must agree to it
ii. Arbitrators can give relief a court can’t, less constraint
1. Subject to only very little review by courts
f. Contract Remedies in Practice
i. Important to know what one cannot get; if all you can get is money damages then remedy is limited in important ways
ii. Expectation measure gives you cost of court but not attorney fees that can be higher
iii. Often not prudent to pursue in court, better to settle cause not worth it
II. Consideration as Basis for Enforcement
a. Bargained-for exchange- sought by one party in return for a promise and given by other party in exchange for that promise
i. Unilateral contract- promise in exchange for performance
ii. Bilateral contract- promise in exchange for another promise
b. Consideration- promise is only binding if supported
i. Restatement 71- Requirement of Exchange
1. To constitute con

ontinued performance was not sought by the company in exchange for their promise, thus performance was not given in exchange for the promise
a. Also the bargain was for the past work not the continued and future work
b. No moral obligation because she had already received income for her past services
iv. Restatement 2nd § 86- Promise for Benefit Received
1. A promise made in recognition of a benefit previously received by the promisor from the promisee in binding to the extent to prevent injustice
2. A promise is not binding under subsection 1
a. If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or
b. To the extent that its value is disproportionate to the benefit
b. Moral obligation- is not a valid form of consideration on its own but moral obligation with material benefit is valid consideration
i. Common law sometimes will enforce a promise on the ground that it was made in recognition of what could be viewed as a moral obligation
ii. Mills v. Wyman- Moral obligation and past performance are not enough for consideration; plaintiff’s nursing the defendant’s son back to health not valid consideration for the defendant’s promise to pay
1. Issue: sea voyage, Wyman ill and Mills treated him. Wyman’s father wrote and said he would pay expenses but then changed mind. Was performance of care bargained for?
2. Holding: just because someone has a moral obligation doesn’t mean you can change rules of consideration
3. Why holding: the court is seeking to protect people from themselves, because someone might promise something but not see the promise as entering into a legal obligation. There was no benefit to the father at all in this case, service was bestowed upon the child
iii. Exceptions to the Moral Obligation Rule- don’t hold people to things they would not have been held to anyway
1. when promise was once enforceable but has become unenforceable
2. when promise made with minor is later affirmed when minor is viable adult
3. when it was made in recognition of moral obligation. If promise to pay old debt past statute of limitations and minor is adult
iv. Webb v. McGowin- moral obligation and material benefit is enough for valid consideration. In saving McGowin’s life, Web conveyed a material on McGowin and suffered a detriment himself.
Issue: webb injured in preventing death of McGowin. McGowin offered to care for Webb and gave him $15 every two weeks for remainder of life. McGowin