1. Fundamentals of Contract Law
A. Nature and History of Contract
B. Doctrines and Important Tools of Contract Law
i. Three dimensions of law
1. Doctrine: rules and principles of law–justification for judges’ decisions
2. Facts: application of doctrine by courts and way it affects contracting parties and public-at-large
3. Theory: reasons and rationale for legal doctrine. Tells us why we have chosen the rules we did or why to choose what new ones
ii. Restatement
1. Reflection of contract law provided through common law in cases
2. Not statutory like the UCC
3. Persuasive but not authoritative
iii. Universal Commercial Code
2. Damages for Breach of Contract
A. What Remedies Tell Us
B. Three Damage Interests
i. Expectation Interest Damages: put the promisee in the position they would have been in had the promise been performed
1. Always the most
ii. Reliance Interest Damages: put the promisee back in the position they would have been in had the promise not been made
1. Opportunity lost not taken into account
2. Less than expectation damages
iii. Restitution Interest Damages: put promisor back in position they would have been in had the promise not been made
1. Done when promisee has already conferred benefit upon promisor
2. Done to recover unjust enrichment of the promisor
C. Limitations on Damages
i. Remoteness or Foreseeability of Harm
1. Hadley v. Baxendale: Party who breaches a contract is liable for the naturally arising losses that occur, as well as any special damages that the breaching party could have foreseen
a. In this case, the defendant is not responsible for lost profits because he could not have reasonably foreseen that those damages would have arisen from his breach
b. Court is establishing a mechanical rule; a way to systematize the ever increasing amount of litigation– modernization of the courts
2. Martinez v. Southern Pacific Transportation: Damages were foreseeable in this case because the center of the controversy, the dragline, was the whole machine, not just an integral part as we saw in Hadley v. Baxendale
a. General rule does not require P to show that actual harm suffered was the most foreseeable of harms, but rather P only needs to demonstrate that P’s harm was not so remote as to make it unforeseeable to a reasonable man at the time of contracting.
b. Distinguished from Hadley v. Baxendale because the dragline was the whole machine, not just an integral part, thus the breach of contract affecting it was reasonably foreseeable to shut down its whole use.
3. Restatement sec 351 Unforeseeability and Related Limitations on Damages:
a. Damages not recoverable for losses that the party in breach could not have reasonably foreseen at time of contracting
b. Loss may be foreseeable as a result of a breach if:
i. It follows breach in ordinary course of events
ii. Because of special circumstances the party in breach had reason to know beyond the ordinary course of events
4. What to put about Morrow v. First National Bank of Hot Springs?
ii. Certainty of Harm – not covered
iii. Avoidability of Harm – not covered
3. Mutual Assent – Reaching an Agreement
A. Objective Theory of Assent
i. Every contract requires two things:
1. Mutual assent of the parties
2. Some showing that this assent is the kind that the law will enforce
ii. Objective Theory of Assent: A contract has, strictly speaking, nothing to do with the personal, or individual intent of the parties. A contract is an o
ard v. Pepsico)
2. Mere advertisements are not offers; similar to the Nebraska Seed case, they are simply invitations to negotiate
ii. Restatement:
1. Sec 22 – Mode of Assent: Offer and Acceptance
a. The manifestation of mutual assent to an exchange usually takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties
b. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined
2. Sec 24 – Offer Defined
a. Offer is the manifestation of willingness to enter into a bargain in such a way that a persons assent to that bargain is invited and will conclude it.
3. Sec 26 – Preliminary Negotiations
a. Manifestation of a willingness to enter into a bargain is not an offer if the other party has reason to know that the offeror does not intend to conclude the bargain without further manifestation of assent.
4. Sec 33 – Certainty
a. Offer cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
iii. UCC – 317-319
D. Written Memorial Contemplated
i. When parties enter into a bargain on the understanding that a formal contract will be executed, and such execution does not occur, must look at what role the parties intended the writing to serve
ii. Letters of intent are not binding unless they incorporate all of the terms that are to be found in a contract. Empro v. Ball-Co
