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Contracts
University of Florida School of Law
Harrison, Jeffrey L.

Contracts

Professor Harrison

Fall 2010

I. Types

a. Contracts: promise supported by consideration (paid)

i. Unilateral- promise for performance

1. Finishing is acceptance. Not obligated to finish.

ii. Bilateral- promise for a promise

1. Beginning performance is acceptance. Accept when you begin.

2. If unclear, then it is bi. Bi is default unless specified.

iii. UCC 2-204 Formation in General- (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

b. Gratuitous promise: free promise

II. Types of Law

a. Restatement: summarizes common law

b. UCC: sale of goods

III. Remedying Breach

a. Purpose of Remedies- Re. 344- Remedies protect these interests:

i. “expectation interest,” being put in as good a position as he would have been in had the contract been performed,

1. Where I expected to be – where I ended up

ii. “reliance interest,” being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or

1. Started with pre contract – result post contract

iii. “restitution interest,” having restored to him any benefit that he has conferred on the other party.

1. Value of what the other party got from you

b. US Naval v. Charter- Berkley shipped paperbacks early, made top paperback bestseller list, and sales of the hard copy books fell. Naval could recover the lost profits of the hardcover books (could not recover money for infringement because Berkley was licensed to sell the books.) Court looked at past sales for recovery.

i. Uncertainty is in favor of the non-breaching party. Sometimes the remedy is to place you in as good as a position as you would’ve been had the contract been performed (expectation).

c. Sullivan v. O’Connor- Sullivan entered contract to enhance her beauty and improve her nose with defendant surgeon, but he botched her nose up. Expectation damages were too speculative to award, so the court tried to go for reliance damages. She recovered: out of pocket expenses, the worsening of her condition, and the pain, suffering, and mental distress. Where defendant promises a specific outcome and pain and suffering go beyond that, plaintiff may sue for breach of contract.

i. If you use leverage to get a bonus, it is probably not as enforceable.

ii. Once you execute a gift, you do not get it back.

d. Economics

i. The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it, and nothing else.

ii. Efficient Breach Hypothesis- an option where the promisor will exercise an option to breach and pay expectation damages instead of performing when it is in her economic interest to do so.

iii. Pareto-Improving- transactions that make no one worse off while making someone else better off

iv. Kaldor-Hicks efficiency- compensating the promisee for the breach is irrelevant if the promisor’s gains from the breach exceed the promisee’s loss.

IV. Consideration

a. Re. 71 Requirement of Exchange; Types

i. To constitute consideration, a performance or a return promise must be bargained for.

ii. It is bargained for if it’s sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.

iii. May be:

1. an act other than a promise, or

2. a forbearance, or

3. the creation, modification, or destruction of a legal relation.

iv. The performance or return promise may be given to the promisor or to some other person. It may be given by the promise or by some other person.

b. Shadwell v. Shadwell- Uncle told nephew he would give him 150 pounds yearly for marrying certain woman. The court held that since the marriage was of interest to the uncle that there was consideration. If you want it, it can be consideration.

i. Peppercorn: to describe consideration that is of trifle value. In general, courts will not look into how adequate the consideration is in terms of value unless it is really suspicious (a car for $1).

ii. Re. 79 Adequacy of Consideration; Mutuality

1. If the requirement of consideration is met, there is no additional requirement of

a. a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

b. equivalence in the values exchanged; or

c. mutuality of obligation.

c. Forbearing Legal Right

i. Hamer v. Sidway- Uncle promised nephew that if he refrained from drinking, swearing, and gambling, then he would give him $5,000 on his 21st birthday. Uncle never gave him money. The nephew could recover. If you give up a legal right to do something, it counts as consideration.

d. Forbearing Legal Right that’s an Invalid Claim

i. Fiege v. Boehm- woman agreed not to pursue bastardy proceedings against man she believed to be the father of her child in return for child support. The man was found not to be the father. Party can recover even though they have an invalid claim if it is made in good faith.

ii. Re.74 Settlement of Claims-

1. Forbearing a claim or defense that’s invalid isn’t consideration unless:

a. claim or defense is doubtful because of uncertainty as to the facts or the law or

b. forbearing/surrendering party believes that the claim or defense may be fairly determined to be valid.

V. Past Actions

a. Feinberg v. Pfeiffer Co.- company told woman they would pay her an amount each month when she

e appears to be a substantial possibility that before the promisor chooses, events may eliminate the alternatives which would not have been consideration.

ii. Illusory if in your control

iii. Strong v. Sheffield- Wife promised to pay her husband’s debt to her uncle. Uncle said if she signed, he would not enforce to collect the money until he was ready. No agreement to forbear for a fixed time (only for a time that he should elect) so no consideration.

c. Mattei v. Hopper- Man had written into contract that he would buy the land if Coldwell Banker and Company obtained leases satisfactory to himself. Enforceable because it was not based on the arbitrary choice of the promisor. He must be genuinely dissatisfied with the performance.

i. Objectively determined, reasonable personàconsideration

ii. Fancy, taste, or judgment in good faithà consideration

iii. “If I feel like it…”àillusory (opportunistic behavior)

VIII. Requirements

a. UCC 2-306 Output, Requirements-

i. Such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be demanded.

b. Eastern v. Gulf Oil- both had a requirements contract that Eastern would buy all of Gulf Oil’s oil at a certain price. Price skyrocketed. Gulf Oil had to sell the oil requirements to Eastern at the set price they had agreed to. The essential test is if the party is acting in good faith. Here, operating business with objective proof that they needed a certain volume of goods to operate in business.

i. An outputs contract is where the seller has to deliver all of their goods to the buyer.

IX. Exclusive Dealing

a. UCC 2-306 Exclusive Dealing

i. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

b. Wood v. Lucy, Lady Duff Gordon- Lucy had contract with man that she would give him the right to use her name to endorse outfits if he would give her ½ of all profits. She placed her name on outfits without his knowledge. There is consideration if one party would get nothing out of other party’s effort. (Implied).