Introduction to Contract Law
I. RST § 1 (p. 11): Contract=promise or set of promises for which the breach of the law provides a remedy, or the performance of which the law in some way recognizes a duty.
II. RST § 2 (p. 11): Definitions
A) Promise=manifestation of intention to act or refrain from acting in a specified way, that justifies s promisee in understanding a commitment has been made.
B) Promisor=person manifesting the intention
C) Promisee=person to whom the manifestation is addressed.
D) Beneficiary=person other than promisee who benefits from performance.
III. RST § 3 (p. 11): Definitions.
A) Agreement=manifestation of mutual assent of 2 or more persons.
B) Bargain=agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
IV. RST § 4 (p. 11): Promise can be made 2 ways
A) W/words-either orally or written OR
B) May be inferred wholly or partly from conduct
Public Policy (PP) and Contract Law
I. Shaheen v. Knight (1957): P contracted w/D, a doctor, to be sterilized b/c financially P did not want anymore children. P sues D after wife becomes pregnant w/5th child.
A) Holding: Although a contract for sterilization and between patient-doctor is not against public policy, awarding damages for child rearing cost is b/c public sentiment believes sole purpose of marriage is to have children/P could have always put child up for adoption/can’t treat children as commodities.
B) Rule: If there is “virtual unanimity” of public sentiment, court acts as a community voice declaring an action void against public policy.
II. In the Matter of Baby M (1987): P, a man whose wife couldn’t conceive, contracted w/D to conceive and carry to term Ps child to term and forfeit custody so Ps wife could legally adopt child. Baby was born and D refused to give up custody.
Before Ps wife adopts court still has to approve her fitness as a parent.
State has a right to determine best interest of child. Duties of state to children can’t be contracted out of i.e. child support.
Adoption more exploitive b/c woman is already pregnant; surrogate has time to contemplate decision to become pregnant.
PP says 2 parents better than 1; statute says both parents have equal rights.
Urge to procreate universal regardless of socioeconomic status.
$$ allows unfit parents to have children by surrogate. ($ not permitted in adoption)
P can’t purchase what is already his.
Contracts exploit the poor.
Adoption statutes not applicable b/c surrogate tech. wasn’t available then.
Lack of consent and surrogate req. (legal and psychological) counseling.
Fulfills traditional notions of family
Don’t want to create a baby-market.
Surrogate has until conception to terminate contract/abortion rights still protected.
Surrogate contracts not irrevocable, like adoption agreements.
Specific performance based on fitness of parents.
Degradation to women.
Johnson v. Calvert (1993): Embryo made from J’s genetic material implanted in C. C contracted to give up all her parental rights. J’s pay $$ for this. Who are the parents? Is K enforceable?
A) Holding: For Johnsons. Natural parents. 1) But for Johnson’s intent, child not be born. 2) K for personal services (gestation) valid, not buying baby 3) Mutual assent; no duress 4)Best interest of child to be w/intended parents
Introduction to Damages
I. Expectation Interest-“benefit of the bargain” (lost profits)-promisee put in the position they would have been ha the promise had been performed.
A) Granted in most cases.
B) Gross Expectation Interest-only available once performance has begun.
C) Net Expectation Interest-before performance-P doesn’t have to incur any risk. Why not just have reliance damages?
1) P feels deprived
2) Will Theory (discredited)-parties came together; must enforce or risk destroying wills.
3) Expectations of future values become present values. Makes future more certain.
4) Parties must understand the consequence of breach.
D) Exp. Interest=Lost Profits+Costs
1) In it is a losing contract for nonbreacher, damages are usually awarded using the reliance or restitution interest instead.
II. Reliance Interest-“reimburse costs incurred”-promisee put back in the position it wo
Remoteness of Foreseeability of Harm
II. Hadley v. Baxendale 86 (Eng., 1854): P, a mill owner, alleged D, a service carrier, guaranteed to have shaft fixed next day. It took several days and the mills operation was halted the entire period.
A) Rule: Consequential damages only awarded if D knew or had reason to know the damages were foreseeable when the contract was made.
B) Burden of giving notice to special conditions is on the party most able to foresee the costs. (P knew he only had 1 shaft/cost of lost operation).
III. Martinez v. Southern Pacific Transportation Co. 97(1979): P sued D, a R&R, for deprivation of the use of their dragline (a machine) as a result of their late delivery and damage to the dragline.
A) According to Hadley, late delivery foreseeable consequence, so no damages.
B) Physical damage to dragline, not foreseeable, so damages awarded based off of the rental value of the machine.
IV. Restatement 351 p. 101: Damages not recoverable for losses the breacher did not have reason to foresee as a probable result. A probable result follows if it is in the ordinary course of events or special circumstances that the breacher has reason to know.
V. Morrow v. First National Bank 102 (AK, 1977): D, bank, failed to give notice to P, a coin collector that his safety deposit box was available. P alleged a tacit agreement.
A) Court concluded b/c of the size of the damages unlikely that D assented to responsibility to give notice to P.
B) Court followed Hooks (Minority) Rule: P needs to prove more than Ds knowledge of special circumstances, but it must also appear that D tacitly agreed to responsibility. Large damages raise doubt whether D would agree to such huge liability.