CONTRACTS FROST FALL 2015
DAMAGES FOR BREACH OF K
Damage Interests (Restatement § 347)
– put the promisee in the position he would have been had the promise been performed/had there been no breach
Restatement § 347: Injured party has right to expectation interest measured by:
Loss in value to him of other party’s performance + any other incidental or consequential loss caused by breach – any cost/loss that he was avoided by not having to perform
General Damages-Difference b/t cost of a new deal compared to K price; (Hooker v. Roberts)—Cabinet storage dispute
Incidental Damages- expenses incurred by the injured party as a result of the other party’s breach of contract (ex: cost of finding a new buyer; subsequent medical cost, etc)
Consequential Damages: damages that do not derive directly from the breach, but from the result of the breach (more indirect in nature, don’t always occur)
()—“hairy hand” case; doctor pursues Hawkins and promises to give him a new hand, then botches the surgery
Used expectation to restore P to position if K had been fulfilled
Sometimes comes into play, and when it there are conflicting statutes, REMEMBER is NOT for service or property, only for goods and when there’s a statutory conflict, choose the more specific statute and look at legislative intent.
-put the promisee back in the position in which the promisee would have been in had the promise not been made
Compensation given to a person who suffered an economic harm for acting in reliance on a party who failed to fulfill their obligation
Does not take into account lost profit; generally less generous than expectancy
()—Dr. promises to give P a perfect nose
P recovered Reliance damages, whichmeant he was able to recover for pain and suffering
– put the promisor back in the position in which the promisor would have been had the promise not been made
Generally used when promisee did something for promisor, such as delivering something or improving the promisor’s property, promisee would get money designed to deprive promisor of this benefit
Limitations on Damages
Remoteness or Forseeability of harm
()—P’s mill was stopped by shaft breakage; delay in the sending/receiving/mailing of a new shaft, and P lost profits; R: Only damages that are foreseeable should be rewarded; profits are foreseeable
As in Hooker v. Roberts above, storage cost of cabinets is far too remote and not foreseeable; too theoretical; only award the foreseeable damages
()—Coin collection is stolen from home while owner waits for bank to let him know of a safety deposit box. Further refined Hadley rule and adopted the “tacit agreement test”
TAT—P must prove that a breach of K will entail damages to the P, AND it must appear that D at least tacitly agreed to assume responsibility
Restatement § 351: General damages are awarded only if injury from breach were foreseeable to a reasonable man and consequential damages are awarded only if breaching party had reason to know of special circumstances
REACHING AN AGREEMENT-OBJECTIVE THEORY OF ASSENT
Formation of a contract requires (1) the mutual assent of parties and (2) some showing that this assent is the kind that the law will enforce (consideration) Restatement § 17
Mutual assent means that the parties appeared objectively to be agreeing to the same thing, NOT the subjective “meeting of the minds” standard.
Objective Test
Manifestations of assent are interpreted, not in light of what the utterer actually meant or the other party actually understood, but from the standpoint of a reasonable person in the position of the party to whom the manifestation was made
We ask not what the words or actions did mean to either party, but how they should have been understood if interpreted reasonably, in the context of the transaction, by a person with the knowledge and attributes of the party to whom they were directed
()—P argues that D store manager promised a renewal of job contract, court finds that a reasonable person would understand conversation to be a renewal of contract if it was as P said, question of fact for jury. Case finds that we use objective theory of contracts, not subjective.
Subjective evidence (testimony by a party as to what he/she thought, intended, or believed) may have some role, but is likely not given very much weight
ASK: Did communications rise to the level of mutual assent in an objective light? K can be enforced even if a party intended their conduct as a joke if objectively their conduct indicated they intended to K ()
If conduct would have assumed to be a joke by a reasonable person, no K (
Do not take into account conversations that were not known to other party (conversation with wife in Lucy v. Zehmer [case about writing on the back of a notepad drunkenly in a diner] and letters between Texaco and Getty in Texaco v. Pennzoil)
Offer and Acceptance
Rules to O and A are useful when:
Determining if a K came into existence at all where the parties dispute whether their communications resulted i
ing agreement between Pennzoil and Getty; court finds binding agreement
Different results than in Empro
Texaco has the burden of showing that the merger agreement was not a contract – party who is resisting K must show there is no K
Certainty
Restatement § 33 – To form a contract, terms must be reasonably certain (even if intended as an offer). Reasonably certain terms are those that provide a basis for determining a breach and remedy. If one or more terms of a bargain are absent/uncertain, it may show that it is not intended to be an offer or acceptance
UCC § 2-204(3) – Contracts for sale can be formed with one or more terms left out, if parties intended to contract and there is reasonably certain basis for giving a remedy. “Essential terms must be agreed on but “routine details” can be left out.”
Expiry of the Offer by the Passage of time
Offeror can specify time within which the acceptance must be made; if not stated then offer must be accepted within a reasonable time
Court determines reasonableness by the amount of time that would be needed to receive, consider, and reply to the offer under all the circumstances of the transaction
Generally, it is assumed that if the parties are in each other’s presence, the reasonable time for acceptance concludes when they part company
Late acceptance may be treated as a new offer, which the original offeror has the power to reject, or offeror’s failure to object may make the acceptance effective despite its tardiness.
Termination of the Offer by Passage of Time
Offer may terminate even before the duration of the offer expires based on four circumstances in :
Once rejected, the offeree can’t recant the rejection and accept, because the offer has come to an end
A counteroffer is treated as a rejection of the original offer and a new offer by the original offeree
Death or incapacity of offeror or offeree
Only applies when the death occurs before acceptance
