CONTRACT AND RELATED OBLIGATION
What is a Contract?
A promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.
Agreements can be expressed or implied
Agreement generally means two or more persons have expressed themselves in harmony.
Standard form of agreements, oral agreements, and informal agreements.
Quasi contracts – a way to avoid unjust enrichment
Formation of a Contract
offer (2) Acceptance (3) intent (4) Consideration
A theory of obligation is a recognized general basis for imposing legal duties.
Legal duties arise from a valid agreement with consideration (contract).
5 Basic Questions:
(1) What body or bodies of law apply (2) Under what applicable law, do the parties have an enforceable contract or contract like obligation? (3) What are the terms of this obligation? (4) Has either party unjustifiably failed to perform those terms? (5) What remedies are available to the aggrieved party? Law, K?, terms?, breach, remedies?
Bilateral Contract: A contract exists where there is an offer, acceptance and consideration; usually this is a mutual exchange of promise.
: An offer is a communication that (1) expresses the present intent to be legally bound to a contract (2) contains concrete and definite terms (as to price, quantity and subject matter), and (3) permits the recipient to form a contract by accepting it.
White v. Benkowski
Facts: P, the Whites, entered into a written contract with neighbors, D, in which they agreed to pay $ monthly and half of the cost of any future repairs for use of water from D’s well to supply their home. The relationship between both parties went sour and D periodically turned off the water, causing inconvenience to the Whites.
Issue: May punitive damages be awarded on a breach of contract?
Doctrine: Theory of obligation; punitive damages; compensatory damages
Compensatory Damages: Damages that arise naturally and directly from the breach.
Tries to compensate the non-breaching party. To put you back to the place you would be if the promise was fulfilled.
Punitive damages: available for an independent tort associated with a breach of contract.
Holding: No. Punitive damages are not awarded on a breach of contract claim. Only damages available are those that compensate the non-breaching party.
legal duties arise from a valid agreement with consideration — an enforceable contract.
In White, the general theory of obligation is an agreement with consideration – an enforceable contract.
SULLIVAN v. O’CONNOR
Facts: P, professional entertainer, contracted w. plastic surgeon (D), to perform two operations on her nose to make it more attractive. Both surgeries failed to improve P’s nose and worsened her appearance. D performed a 3rd surgery which failed to improve her appearance. P sued for negligence and breach of contract. P won on breach count.
Issue: Whether Pain and suffering and emotional distress available as contract damages under either an expectancy or reliance measure.
Doctrine: Reliance and Expectancy Damages
Reliance Damages: Put P back in the position he occupied just before the parties entered upon the agreement, to compensate P for the detriment suffered in reliance upon the agreement.
If P never entered into the contract.
Expectancy Damages: Seek to put the P back in the position they would have been in if the contract had been performed and no breach.
Holding: Yes. Pain & suffering & emotional distress are compensable as either expectancy or reliance damages. P’s pain and suffering, disfigurement and emotional distress are compensable as expectancy damages bc she expected to have two surgeries and a more attractive noise if the contract had been performed without breach. Reliance damages bc P relied on D’s promise.
Rule of Law: Pain and suffering and emotional distress that flow naturally from a breach are compensable contract damages under either an expectancy or reliance measures.
UCC 1-305(a) Remedies to be liberally Administered
The remedies provided by UCC must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in UCC or by other rule of law.
GENERAL THEORIES OF OBLIGATION
THEORY OF CONSIDERATION
RESTATEMENT (FIRST) OF CONTRACTS 75 Consideration:
A bargained for an exchanged.
(1) Consideration for a promise is:
An act other than a promise, or
A forbearance, or
The creation, modification or destruction of a legal relation, or
a return promise, bargained for and given in exchange for the promise.
(2) Consideration may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
for consideration is whether the performance of the request would benefit the promisor. D derived a benefit from P’s attendance, which is sufficient consideration.
Hamer v. Sidway
Facts: P was promised money by his uncle if he abstain from drinking, using tobacco, swearing, and playing cards until he reached 21. P brought suit against the executor of the uncle’s estate, Sidway (d).
Issue: Whether adequate consideration sufficient to form a valid and enforceable contract requires the promisor to actually receive a benefit and the promisee to incur a detriment?
A valid and enforceable contract may consist of either a right, interest, profit, or benefit accrued to only party, or some forbearance, detriment, loss, or responsibility given, or suffered.
Adequate consideration does not depend so much on a promisor’s benefit from a contract as it does on the promisee’s voluntary limitation of his legal rights or freedoms in exchange for the promise.
Incur limitations constitutes adequate consideration
Holding: No. P’s forbearance on his legal right to engage in certain activities is sufficient to constitute adequate consideration to form a valid and enforceable contract.
A promise is supported by consideration if two requirements are met:
Gave up something of value or;
Circumscribe his/her liberty in some way.
Bargain of Exchange
Principle ground for an enforcement. Supported by consideration because the promisor gets something in exchange for his/her promise.
RESTATEMENT (SECOND) OF CONTRACTS 81:
Consideration as Motive or Inducing Cause
(1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise.
(2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise.