I. General Rules of Contract Law
a. Default vs. Immutable Rules
i. Default Rules: Rules that will govern a relationship unless parties stipulate otherwise
1. Expectation damages
2. Mailbox rule
3. Ads are not offers
ii. Immutable Rules: Rules that parties can never set aside
1. Duress: No Ks can be made under duress
2. Children: No Ks can be made with minors
3. 3 months on firm offer
II. Expectation and Reliance Interests
a. Expectation Interest
i. Definition: Put you where you would have been had the contract been performed
1. “Back to the future standard” à What would have been had everything gone right
2. Hawkins v. McGee (“Hairy hand”): Patient cannot get surgeon’s fees or pain and suffering damages, but can get value of a good hand.
a.PROBLEM: How to measure value of a good hand? à Many ways to measure à Go for the higher value
i. Diminution of intrinsic value?
ii. By cost of a more skilled surgeon fixing it?
b. Court focuses on rules and promises
ii. Difference between where you were and where you should be
iii. Default rule for measuring damages in breach of contract cases.
b. Reliance Interest
i. Definition: Status Quo Ante: Put you back where you were as if I had never made a deal with you
1. “I wish I’d never met you” standard
2. Usually some intervening better deal that you passed up because of your deal with the first guy
a.E.g. Widgets to A for $20,000. Turn down widgets to B at $21,000. Market price drops to $18,000. A reneges. Sell for $18,000. Under reliance (as if I had never met A and made the deal with B) I get $3000.
3. Sullivan v. O’Connor: Patient can recover for all fees paid, pain & suffering, and making the nose worse. She cannot recover for the failure to make the nose better, as the operation would never have occurred had they never met.
a.Expectation damages were difficult to calculate in that nobody could prove what the value of a good nose to a performer was
b. Expectation would be too harsh à Sympathetic runaway juries
c.Court focuses on policy and relationship of doctor-patient
ii. Special circumstances alternative to expectation damages
1. Where expectation measure is difficult to calculate (e.g. valuing
equirements contracts involving particular or peculiarly available source or market.
3. Circumstances here: Memorex goods are of unique quality, there is no other supplier, and Copylease could not cover its contracts otherwise.
4. Court will not speculate on reconciling California law with UCC unless Copylease proves its argument.
a.Copylease: California law allows requirements (monopoly supplier) and output (monopsony buyer) contracts à Long term specific performance may be required à California law ought to allow specific performance in these situations
b. Memorex: Even in CA adopted UCC, it does not require specific performance à Nothing in UCC would displace CA’s common law reluctance to engage in specific performance
III. Agreed Remedies and Restitution
a. Liquidated Damages
i. Definition: Damages agreed to in a contract.
1. Immutable cap: Damages cannot be unconscionably high.