Contracts Outline

I.                  Introduction
 
§2 Promise (oral, written or inferred from conduct): a manifestation of intention to act or refrain from acting in a specified way so made as to justify a promisee in understanding that a commitment has been made.
a.       Agreement: manifestation of mutual assent on part of two or more persons
b.       Bargain: agreement to exchange promises or to exchange a promise for a performance or to exchange performance
 
overriding themes in Contracts –
        economic efficiency
        parties’ intentions about the economic allocation of risk
        fairness
        game theoretic approach to contracts, esp. default rules
        whom does policy encourage/dissuade/prefer?
        extra-legal sanctions — especially reputational damage
        regarding enforcement (of any type), tradeoff between:
            judicial discretion in interpreting and enforcing and
            individual freedom to contract
        asymmetry of information
        lopsided bargaining power
 
        Case 1: Shaheen v. Knight – failed vasectomy, unplanned child                                             p.9
I: does a failed vasectomy operation constitute a breach of contract between Physician and         Patient?
                            R: If patient and doctor contracted for a particular result and result not obtained, patient
 has a cause of action for breach of contract – in absence of a special contract in writing, health care provider is never a warrantor or guaranteer of a cure.
H: No damage done to P, so none rewarded
 
 
II.   Damages
A.    Expectation, Restitution, Reliance
                in general, damages must be determined with certainty
courts don’t commonly make parties adhere to contracts, usually makes one party pay other party for damages caused
punitive damages are not usually given in breach of contract disputes
 
        i. reliance:damages that put promisee in position had he never entered contract at all
used in noncommercial settings, puts P back in the status quo ante position
 
incorporated when
–          profits are too uncertain to determine but P can show expenses
–          no enforceable contract, but P entitled to something under promissory estoppel
–          failure to perform on land contract and jurisdiction doesn’t allow expectation damages
 
§349.                       reliance = expenditures made in prep. of performance – expenses saved in breach
p.139
                includes essential and incidental reliance .     reliance damages < expectation damages                           Case 2: Sullivan v. O’Connor, botched nose job on entertainer                                                       HO                                 I: What measure of damages should be used? R: Contracts usually issue expectation damages except here, where the court makes an exception for medical breaches of contracts   ii. expectation(compensatory): damages that put promisee in condition that he would have been if transaction occurred, the normal damages offered in contract law. Expectation measures are preferred because it causes people to breach only when it makes at least one party better off and no one worse off, i.e. encourages only efficient breaches   §347: measure of damages in general (default) p. 78                 expectation =                      loss in value to him of the other party's performance caused by its failure or deficiency                  + any other loss, incidental or consequential, caused by the breach                  - any cost or other loss that he has avoided by not having to perform   promised original current b a   Case 3: Hawkins v. McGee – hairy hand skin grafting, promise of a 100% perfect hand p. 69         I: Can oral guarantee of 100% success in operation hold a doctor liable when operation fails? i.e. when a special contract is made?         R: Yes, utterance of words are done with the intention that they would be taken at face value by patient inducing them to consent to operation. D went beyond offering a medical opinion when offering a “perfect” hand   Expectation damages = value of perfect hand (a+b) – value of current hand + incidental cons.   iii. restitution: damages that relinquish benefits provided to promisor derived from promise         covers any benefits conferred by P on D in the performance. NOT available when P has fully performed   §371, p. 287: Measure of Restitution Interest – If a sum of money is awarded to protect a party’s restitution interest, it may as justice requires to be measured by either -          the reasonable value to the other party of what he has received in terms of what it would have cost him to obtain it from a person in the claimant’s position, or -          the extent to which the other party’s property has been increased in value or his other interests advanced. p.97 §1-106: damages = expectation damages, not consequential, special, or penal damages   B.     Limitations on damages          i.      Remoteness or unforeseeability of harm §351, p. 120: Unforeseeability and other limitations on damages                 - not foreseeable by party in breach              no damages - foreseeable if:                                                                i.      loss follows in ordinary cause of events (consider separation in time and space between breach and consequences, customs of the trade, etc)                                                               ii.      party in breach knows of special circumstances -    exceptions to forseeability damages:                                                                i.      excluding loss of profits, paying only reliance damages                                                               ii.      if giving damages exults in overcompensation -      damages can be curtailed by excluding recovery for lost profits, 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   a test of foreseeability is to determine whether D would have agreed to the contract price had he known of the extent of his liability   Case 4: Hadley v. Baxendale, N‘l failed to deliver on time shaft that runs mill                                p 102         I: is D liable for loss of profits?         H: no, damages limited to what was contemplated at the time of contract. R: must be foreseeable. For special situations, damages can be awarded only if P informs D of the special situation or if the damages were reasonable foreseeable. Note that this encourages information sharing when deviating from a default rule.        Case 5: Hector Martinez v. South. Pac. Trans., delay and damage of dragline transp.      p 116 I: Due to delay and damage of P’s machinery, should D be liable for P’s loss profits without and conveyance of “special circumstances” notice? R: Yes, as long as it’s foreseeable and not remote to a reasonable person         ii.      Uncertainty of harm § 352, p.140: Uncertainty of loss – limitation on damage