Contracts I
Fall 2007
Contract
§ 1 A promise or set of promises for which the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
Three fundalmental assumption
1) Relief of promises to redress breach, no punitive damages, not compelling performance
2) Relief granted to the aggrieved promissee should protect expectation. Put promisee in position whould have been had promise been performed.
3) Appropriate form of relief is substitutional not specific
United States Naval Institute v Charter Communications, Inc. (page 2)
Nature of case: Appeal and cross-appeal from a judgment on remand awading damages and profits in an action for breach of contract.
Facts: When Charter, the exclusive licensee for a paperback edition of a book, for which Naval was the author’s assignee, shipped the paperback edition to retail stores prior to date set in contract, Naval filed suit for damages and Charter’s profits on the hardback edition of the book.
Rule of law: Damages for breach of contract are generally measured by Plaintiff’s actual loss, not defendant’s gain.
R § 1: Contract Defined:
“A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”
2 Types of K
1. unilateral K—(def’n) a promise on one side, a duty on the other. neither side is obligated until there is actual performance rendered. (ex. A promised to pay B $15 if B mows A’s lawn on Saturday. A has no duty until B mows the lawn, B has no duty to mow the lawn).
2. bilateral K—(def’n) a promise on both sides. both sides are bound by the promises, regardless of whether or not performance has yet occurred. b/c both sides are bound immediately, this type of K receives greater legal protection. this type of K has much more utility in the business world. (ex. A promises to pay B $15 to mow A’s lawn on Saturday, B promises to mow A’s lawn on Saturday.)
C. Interests Protected (FY 7-18; R 355)
Types of Interests
1. expectation – put promisee in the position he would have been in had the K not been breached, should reflect the difference.
2. reliance – put promisee in the same position they were in before they entered the K. used mainly in promissory estoppel cases where no actual K existed & no benefit was conferred upon the promissor. How was the person worse off before the breach.
3. restitution – take away benefits that have been unjustly reaped or received from breach of K (have to have come directly from profits/actions against promisee, ex. disgorgement of profits). Used mainly in promissory estoppel cases where no K actually existed & a benefit was conferred on the promissor. Any benefits that the breachor made they have to give it back.
Sullivan v O’Connor (page 7) reliance interest
Nature of case: Action for damages for breach of a contract
Facts: Sullivan claimed that O’Connor, a surgeon, had failed to fulfill his promise to enhance her appearance by the plastic surgery he performed on her nose.
Rule of law: Where the proof is clear, a patient can maintain an action for breach of a doctor’s agreement or promise to cure or bring about a given result. Sullivan had to pay the doctor, hospital, and had pain and suffering. She can recover these under reliance Interest
White v Benkowski (14) no punitive damages for breach
Nature of case: Action in damages for a breach of contact
Facts: The Whites contracted with the Benkowskis to supply water for their house.
Rule of Law: Damages may be awarded for inconvenience for breach of contract, but no punitive damages may be awarded.
R § 355: Punitive Damages:
“Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are available.”
D. Substitution Presumption (FY 38-41)
Substitutional v. Specific Relief
Substitutional relief is a legal remedy, and is preferred by law for several reasons, including the fact that the law does not want to coerce parties’ action, and the fact that it is difficult to supervise specific relief in most cases.
There are cases in which specific relief is a proper remedy, especially in sales of land.
Basis For Enforcing Promises
A. Consideration
Common law enforces:
Covenant underseal
evidentiary
cautionary
Debt
Assumpsit
R § 17: Contract Requires a Bargain:
A contract requires a bargain in which there is both a manifestation of mutual assent (an offer & acceptance) and consideration (bargained-for exchange).
(1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
(2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94.
Consideration §71
A performance of a returned promise must be bargained for.
Hamer v Sidway (47) def’n of consideration
Nature of case: Action on appeal to recover upon a contract which is supported by forbearance of a right as consideration.
Facts: Story promised to pay $5000 to William Story 2nd is he would forbear in the use of liquor, tobacco, swearing, and playing cards or billiards for money until h
er rules of R 1st. See R 2nd, §74 for current status. also, P could have theoretically enforced such a promise against more that 1 man.
Note: P failed to mention that she’d had sex w/another man. A duty to disclose facts when entering into a K. Ct doesn’t address this b/c D never raised the issue.
§74 (1) Forbearance is not consideration unless
a) the claim is doubtful because of uncertainy about the law believes that the claim is valid (good faith)
71 (3) (b) guides us, 74 (1) & (2) are limitations to 73 (3)
Pt. are forebearing from a legal right is consideration and good faith at time of K.
R § 74: Forbearance of a Legal Right: When is it Consideration?:
It is not consideration to give up a claim that you know to be invalid. it is consideration to give up a claim that you have a bona fide, good-faith belief is valid. R 1st required that the claim be reasonable and in good-faith. R 2nd requires that claim “may be fairly determined to be valid.” less objective.
(1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless (a) the claim or defense is in fact doubtful b/c of uncertainty as to the facts or the law, or (b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
(2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.
Bargained for Exchanged (62-67)
Feinberg v Pfeiffer Co. (62) past consideration, gratuitous promise
Nature of case: Action on appeal by defendant to show failure of contract due to lack of consideration.
Facts: Feinberg was given a pension for life by Pfeiffer based upon her past service to the Pfeiffer Co. Pfeiffer refused to pay the pension claiming lask of consideration for its promise to do so.
Rule of law: Past services are not a valid consideration for a promise. Gratuitous Promise. Must be bargain for to not
