Contracts Outline (Fall 2016)
Llewellyn p.58 “The rule follows where the reason leads, where the reason stops, there stops the rule”
Authoritative Reasons:
Terms of K, precedent, persuasive authority
Reflects substantive values (freedom of K and formal rule of law values – certainty, predictability)
Argue distinguishable
Argue substantive content unsound (ie. Punitive damages do not affect willingness to K)
Substantive Reasons
Moral, economic, political (priest v economist etc)
When used:
Issue not previously decided in jur
Authorithy in conflict
Overrurle prior case
Goal reason (promote King)
Attack à
Decision not in fact serve the goal
The goal is not a good one
Rightness reasons (fairness, disprop, liability should be proproritonate to other party’s expected gain)
ATTACK à
The norm is inapplicable to the facts
Norm is unsound
Institutional Reasons
Jury will be overly sympathetic, only leg can adequately investigate, specific performance monitoring over judicial budget, difficult to measure dam for pain and suffering
Section 1: Introduction
Intro to K Law (Remedies)
Expectancy Damages
Puts the P in the position he would have been in had the K been fully performed (ORDINARY DAMAGES FOR BREACH OF K)
Reliance Damages
Puts the P in the position he would have been in had the agreement of promise not been made
Restitution Damages
Sum equivalent to the value of any benefit given to the D by the P
UCC Implications
UCC 1-305(a): Remedies to be liberally administered
As good a position as if the other party had fully performed but neither consequential or special damages or penal damages may be had except as specially provided in the UCC by other rule of law
Sullivan v O’Connor – bad nose job
If a doctor expresses promises that a procedure will produce certain results, a patient may recover damages if that promise is not fulfilled
Restitution (doctor’s fees) and reliance (loss of value of the organ operated on) will be given, but not expectancy damages
Reliance damages can be used when expectancy damages are too hard to gauge – non commercial case
$622
P&S 1st Surgery
P&S 1st and 2nd surgery
Worsening
Non-improvement
Expectancy
No
Yes
No
Yes
Yes
Reliance
Yes
No
No
yes
No
Restitution
Not hospital expenses; only doctor expenses
no
no
no
no
White v Benkowski – water K
Benkowskis shut off water supply for short periods of time after relationship got hostile; Whites sought compensatory and punitive damages
Rule – Compensator damages need not be proven with precision; evidence of damages shall be reviewed in the light most favorable to P
Punitive damages are not available for breach in K actions
Intro to K Law (K-Making)
Elements of a K
Offer – reasonable person test
Acceptance – reasonable person test
Elements for Breach of K COA
Must be a legally recognized K
K must be broken
Nature of Assent
Rule – if one’s words/actions, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind (i.e. expressed intention matters not unexpressed intention)
Rule – to determine whether parties have formed an agreement, a jury will use anto ask whether a reasonable man would have considered either the words of the action of the parties sufficient to form a K. The purpose of the objective standard is to encourage reliance and not to force parties to read each other’s minds
To constitute a K, there must be meeting of the minds of both parties, and must agree to the same thing in the same sense
K law – discover the intention of the parties
Lucy v Zehmer (drunk K)
RULE: the intention of a party to a K is judged by his words and acts (objective standard), not by his unexpressed state of mind (subjective standard)
“The Law imputes to a person an intention corresponding to the reasonable meaning of his words and acts
there must be a meeting of the minds of the parties and both must agree to the same thing
Zehmer signed a memo agreeing to sell his family farm to Lucy. Lucy claimed that it was part of a joke he was playing on Lucy
Intention is irrelevant – Embry v Hargadine, McKittrick Dry Good Co- “Go ahead, get your men out, you’re all right” – Embry took this statement as a promise to renew Embry’s employment K
Rule – If a party outwardly manifests assent to the K by a promise and the other party reasonably understands that manifestation to be a promise, there is a K. Embry’s belief was believable;
P gave ultimatium that he would leave work – so it would distinguish from the HYPO in which coach said go ahead you’ll be okay when Betsy didn’t make the bb team
Pre-existing relationship (employer-employee) makes it a stronger case
chill dude hypo – would a reasonable person say this is a K – prob not
Coach Hypothetical – would a similar K be found from a statement in which a coach ensured a student distressed over making the basketball team, “don’t worry about it”
No…circumstances suggest that a reasonable person could conclude that the coach simply wanted to comfort the student
Timing: the coach acted in the spur of the moment
“A K has nothing to do with the personal, or individual, intent of the parties. A K is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent”
General Theories of Obligation
Agreement with consideration
Justified reliance on a promise (PE)
Unjust enrichment
Promises for benefit past received
Statutory warranty
Things to Look that Indicate a K –
rrow v Morrow – court upholds general rule and will not enforce a general agreement to provide care for mother
Corbin: “if the subject matter and terms of a transaction are such as customarily have affected legal relations and there is nothing to indicate that the one now asserting their existence had reasons to know that the other party intended not to affect his legal relations, thus the transaction will operate legally”
BUT…”if the subject matter and terms are not such as customarily have affected legal relations, the transaction is not legally operative unless the expression of the parties indicate an intention to make it so”
Distinguish between an announcement and a promise
This is why a promise for a social center hypo is not enforceable bc such statements are usually given without the expectation of forming a binding K. Announcement = present declaration of intention
How would a reasonable person interpret an allege offer?
Big Picture: there is no K if there is a mutual misunderstanding by both parties as to the meaning of a term of an agreement
RSC 20: Effect of Misunderstanding
(1) there is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the other
(b) each party knows or each party has reason to know the meaning attached by the other
(2) the manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party ahs no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party
No Mutuality of Assent – Raffles v Wichelbaus – buyer and seller agree on sale of cotton to arrive on ship named “peerless” but buyer means the “peerless” arriving in October and seller delivered on another in December
Court finds there was not mutuality of assent bc parties meant different ships and neither had reason to know of the other’s belief(RSC 20(1)(a)
Patent ambiguity v latent ambiguity: patent: courts ask what is the more reasonable interpretation of the language in the light of background circumstances
When there is a latent ambiguity as to meaning, the parties may offer parol evidence to explain the terms
