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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 consideration, a performance or return promise must be bargained for.
2.       A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
3.       The performance may consist of
a.       An act other than a promise or
b.       A forbearance or
c.        The creation, modification, or destruction of a legal relationship
4.       The performance or return promise may be given to the promisor or to some other person. It may be given by the promise or by some other person
                                                              ii.      Restatement 79- Adequacy of Consideration, Mutuality of Obligation
1.       If the requirement of consideration is met, there is no additional requirement of
a.       A gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or
b.       Equivalence in the value exchanged; or
c.        “mutuality of obligation”
                                                            iii.      Hammer v. Sidway- Uncle offered to pay nephew $5,000 in return for his nephew’s performance not to drink, smoke, or gamble until 21. Nephew gave that promise in exchange for his uncle’s promise to pay him the money (forbearance)
1.       Issue: was the uncle’s promise enforceable, based on Hammer forbearing?
2.       Holding: consideration may consist of forbearance, giving up a right to do something; waiver of

ving McGowin’s life, Web conveyed a material on McGowin and suffered a detriment himself.
1.       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 died and payments stopped
2.       Holding: benefit to promisor ro detriment to promisee is consideration. As long as there is a material benefit then moral obligation connected is sufficient consideration
3.       Why holding: because in saving his life, Webb bestowed something worth more than any monetary compensation
4.       No bargained for exchange before the treatment was given either
IV.                The Requirement of Bargain- the consideration must be the thing that induces the promisee to give his promise or performance
a.       Conditional Gratuitous Promise- a promise given without consideration, where the promisor urges the promisee to do something, but does not give a promise in exchange for it
b.       Restatement 76
                                                               i.      A conditional promise is not consideration if the promisor knows at the time of making the promise that the condition cannot occur
                                                              ii.      A promise conditional on a performance by the promisor is a promise of alternative performances within § 77 unless occurrence of the condition is also promised
c.        Courts do not enforce gratuitous promises- usually made between family members, friends, etc.
d.       Kirksey v. Kirksey- when the promisor makes a gratuitous promise and asks nothing in return from the promise, the contract is not legally enforceable although it may be a moral obligation
                                                               i.      Issue: plaintiff gave up her property, moved, based on brother in law’s promise and then after two years required her to give it up. Is this promise enforceable?
                                                              ii.      Holding: no, there is no consideration
                                                            iii.      Why: he didn’t ask for anything in return for his promise to take care of her. Because the only condition was visiting family that she would have visited anyway, the court construed the promise as a gift.
1.       an argument that there was a bargain for exchange is the language about open land she can tend
2.       dissenting opinion looked at her loss from moving and said the bargain was for her to sell property and move
e.        Rewards- when a reward is promised in return for a specific performance, the contract will not be performed unless the person who does the performance makes his knowledge of the reward known before he performs
                                                               i.      Broadnax v. Ledbetter- no contract where there is no promise; if he had known about the reward prior to his performance, essentially it would have been a unilateral contract that could have been accepted by a member of the public
1.       Issue:  Ledbetter offers a cash reward for the return of a prisoner. Broadnax captures the prisoner and returns him but was unaware of the reward and when he learns of it they won’t give it to him
2.       Holding: no consideration
3.       Why: although the promise to pay was made seeking return of the prisoner, the capture and return was done without the knowledge of the promise to pay
a.       if he had found out about the promise anytime before returning the prisoner he could have accepted the offer by completing the performance and would be entitled to the reward