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Contracts
University of California, Davis School of Law
Hunt, John Patrick

 
CONTRACTS HUNT FALL 2015
 
1.      SOURCES OF CONTRACT LAW
–         Uniform Commercial Code (UCC)
o   Has been enacted by legislatures in every state (except Louisiana)
o   Article 2 applies to all contracts for sales of goods, which are movable things
§  Does not depend on whether someone is a merchant
§  “Goods” are “[T]hings … which are movable at the time of identification to the contract” § 2-105(1)
·         Goods not yet in existence (‘future goods’) § 2-105(1)
·         Growing crops § 2-105(1)
·         Unborn animals §2-105(1)
·         Money ‘other than the price to be paid’ § 2-105(1)
·         Electricity and software
§  Not “Goods”
·         Money in which the price is to be paid § 2-105(1)
·         Investment securities: stocks & bonds § 2-105
·         Assignments of legal claims (not ‘movable things’)
·         Real property (not ‘movable things’)
·         Services (not ‘movable things’)
§  Article 2 covers (Realty):
·         Minerals/structures removed from realty by seller § 2-107(1)
·         Other things attached to land sold apart from the land & can be severed from land w/o material harm § 2-107(2)
o   Hybrid Transactions (Jx Split)
§  Majority Rule: Predominant Purpose Test: UCC applies if the transaction is “predominantly” one for the sale of goods.
·         Factors: contract language (“sales contract”), nature of seller’s business, relative value of goods and services, possibly whether goods are to be physically transformed (construction transactions).
§  Minority Approach: Apply UCC Article 2 to the sale-of-goods portion of the transaction and common law to the services portion.
–         CISG: Convention on Contracts for the International Sale of Goods
o   Federal treaty that governs many/most international sales of goods from/to the US
o   UNLESS (1) parties opt out expressly of CISG (simply choosing CA law doesn’t opt out) or; (2) the fact that the parties are in diff. countries does not appear from the contract, the parties’ dealings, or from info, disclosed by the parties or; (3) the contract is for goods bought for personal, family, or household use (consumer goods)
§  Exception to exception: the consumer goods does not apply if the seller neither knows or should have known the buyer’s purpose
o   How to identify when to use CISG?
§  If a party has more than one place of business, the place of business is that which ahs the closest relationship to the contract and its performance
–         Restatement Second of Contracts (R2K)
o   Secondary source, NOT statute
o   Contract law is mostly a common law discipline, mostly caselaw, with some important exceptions.
§  If the UCC is silent, case law controls
2.      DEFINITIONS
–         R2K § 2 Promise: Commitment to act or refrain from acting in a certain way, so made as to justify a promisee in understanding that a promise has been made (§ 2)
§  Note: emphasis on the promisee’s justified understanding not the promisor’s intention.
§  Objective Theory of Contract: focuses on what someone reasonably understands what I say to mean, rather than what I actually meant.
§  R2K § 4  A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct (§ 4). Do not need magic words
o   R2K § 2  Promisor: The person who makes the promise
o   R2K § 2  Promisee: The person to whom the promise is made
o   R2K § 2  Beneficiary: When the performance of a promise will benefit someone other than the promisee
o   Consideration: A benefit received by the promisor or a detriment incurred by the promisee
§  Why enforce certain promises? (a) protect reliance (b) respect private autonomy (c) avoid unjust enrichment
§  Why not enforce certain promises? (a) not understood as legally enforceable (b) not clear enough the promise was made (c) ill-considered [Policy] –         R2K § 1  Contract (K): a promise or set of promises the breach of which the law gives a remedy the performance of which the law in some way recognizes as a duty (NOT voluntary transactions or exchanges)
o   Express Contracts: May be oral or written; consists of
§  Offer
§  Acceptance
§  Bargained-for Consideration
o   Quasi-contract: not a contract; term used by the court to denote a recovery imposed by law where justice so requires
§  “implied in law” recovery
o   Theories
§  Contract as Promise: theory holds that law is justified in enforcing a promise when an individual intentionally invokes a convention whose function is to give grounds, moral grounds for another to expect the promised performance; looks to promisor’s will.
§  Consent theory: grounds K enforcement less in general moral duty to keep promises than in consensual undertakings that reveal an intention to create a legally enforceable obligation; looks to promisor’s will.
CHAPTER 1: BASES FOR ENFORCING PROMISES
1.      ENFORCEABLE PROMISES
o   The Bargain Principle: A promise is enforceable if it is part of a bargain.
§  “Inducement for the granting of consent.”
§  It has to be given with the intent of getting someone to do something, and the other party must do that thing because it receives the promise.
§  HAWKINS v. MCGEE (1929) [pp. 2] “Hairy Hand” Case: D performs experimental skin-graft operation on P’s hand “guarantee to make the hand 100% perfect hand” then hand condition worsens. Court finds promise enforceable. Rule: The Bargain Principle
·         Generally doctors’ predictions of medical outcomes are not understood as promises b/c unable to control outcomes
·         “I guarantee” is not sufficient to make an utterance a promise; the promise here is recognized through surrounding facts (Doc’s use of promise to secure consent, position, repeated solicitation etc.)
o   Medical promise plus special circumstance make it a promise
·         Note: possible tension w/objective theory of contract—doc’s intent to be taken seriously makes utterance a promise even if it was unreasonable to do so.
·         Policy Consideration: judici

cupied if the contract had not been made
·         Limitations
o   If P made a “bad bargain” he shouldn’t get out of it just bc ∆ breached
§  Sometimes said to be available “only where expectation is not.”
·         P’s choice whether to seek damages based on the reliance interest instead of the expectation interest.
§  R2K § 349: Includes expenditures in preparation for performance and in performance; π’s reliance damages are reduced by the loss on completion that the ∆ can prove (where B should be – where B is = reliance)
§  SULLIVAN v. O’CONNOR (1973) [pp. 15]: Dr. O’Connor promises P her nose will be made more pleasing in 2 operations; he performs three ops & disfigures her nose, making it worse, not better. O’Connor appeals from a jury award of $13,500 for breach to P for out-of-pocket $$ for all 3 ops, disfigurement, and pain & suffering for the 3rd op—Doc. argues that the award should have been limited to out-of-pocket expenses.
·         Issue: What damages candidates are compensable?
·         Full expectation damages might be excessiveà Reliance as an alternative to expectation damages
o   P did not make a clear election b/w reliance vs. expectation
o   B/c procedural posture of the case the court didn’t have to choose b/w reliance & expectation to measure damages
·         Rule: Reliance damages are to be applied
o   P can recover for out-of-pocket $$, disfigurement, and the pain & suffering & emotional distress involved in 3rd op.
·         Illustrates that elements of expectation damages won’t be awarded if too speculative
o   RESTITUTION
§  R2K § 370: restoration of benefits (to the extent) P conferred on breaching party through part performance or reliance
·         Covers only benefits conferred on the breaching party
·         Contrast reliance, which covers the costs the P incurred, regardless of whether they benefited the breaching party
·         Generally involves the breaching party’s paying a reasonable value for benefits conferred by nonbreaching party.
§  R2K § 371: if a sum of money is awarded to protect a restitution interest, it may be measured by either
·         The reasonable value to the other party of what he 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