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Contracts
University of Dayton School of Law
Gerla, Harry S.

 
Contracts
Summer 2015
Prof. Gerla
 
Contract:
·         Def: a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty (Restatement § 1)
·         Can be oral or written or inferred wholly or partly from conduct
·         Bilateral: both parties make a promise to each other in the contract
·         Unilateral: only one person makes a promise, the other party does not agree, instead, accepts by performance (simultaneous.)
·         output contract: contract to purchase entire output of seller during specified period of time
·         Purpose: avoiding risks that come with fluctuation in market prices (hedging)
·         QUESTION TO CONSIDER: What does the contract mean?
Uniform Commercial Code:
·         not the same as common law
o   common law uses only fair market value – raises the possibility that someone might overpay
o   UCC uses the cost paid versus the contract price in UCC cases only
 
Promise:
·         Executory: a promise which has not been performed
·         Some promises are enforceable, some are not and therefore not contracts
 
Verbal: Words (Latin)
 
Breach:
·         failure of a party to fulfill their part of the contract
·         repudiation: one party anticipates the other party will not fulfill their part of the contract and stops fulfilling their promise to prevent a larger breach
·         § 224: Condition: an event not certain to occur, which must occur before performance under a contract becomes due.
o   EX: delivery of items must occur before the receiver is obligated to pay the supplier
·         § 237: Effect of failure to render performance: it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time
o   “uncured material failure”: serious matter (vs. trivial) that was breached and not corrected
 
Remedies:
·         If a party is entitled to damages, the injured party is responsible for avoidance of consequences (mitigating actions)
·         central in the definition of a contract
·         indicator of where a contract stands in the eyes of the law
·         Damages
o   punitive damages not available in a contracts case – no punishment
o   only entitled to compensatory damages – only entitled to make the breach of a contract right
·         Specific Performance
o   equitable remedy
o   court enforces the breaching party to perform under their portion of the contract
o   available when the legal remedy (damages) is not adequate
·         UCC §§ 2-701 through 2-725
·         Calculating Damages
o   UCC §2-711: In addition to recovering so much of the price that has already been paid plus and damages
o   UCC §2-715: incidental damages resulting from the seller’s breach include expenses reasonably incurred incident to the delay or breach (Rule of Hadley v. Vaxendale: consequences must be foreseeable and based on consequences that the seller should have or did know)
o   UCC uses the cost paid (“cover”) versus the contract price when calculating damages (cover – contract price = damages)
§  Common law uses FMV vs.

  Debt: used to enforce unsealed promises to pay some sum of money (indebitatus: “being indebted”)
o   Assumpsit: used to recover physical damages to person or property on the basis of a consensual undertaking
§  “he promised”
·         Categories of contracts/transactions:
o   contracts for sales of goods
o   real estate transactions
o   construction contracts
o   employment agreements
o   family agreements
o   LESS COMMON: franchise and distributorship contracts, publishing contracts, government contracts, consumer contracts
·         Unilateral vs. Bilateral
o   Uni: one promise: “I’ll pay you X if you…”
§  generally minor transactions, private transactions
o   Bi: two promises: “I’ll pay you X if you promise to…”
§  bilateral contracts provide both parties reliance that they will receive the goods/payment
·         § 71: (1) to constitute consideration, a performance or a return promise must be bargained for.
o   (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
o   “Reciprocal conventional inducement”: motive must exist to have consideration. The essence of a consideration, the terms of the agreement must be given and accepted as motive or inducement of the promise