Contracts Gross Fall 2014
General Contract Information
What is a contract?
· R 2d §1 – Contract Defined
o A contract is a promise or 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.
Types of Contracts
· Express
o Parties expressly agree to certain words and terms.
· Implied in Fact
o No express agreement
o Conduct of the parties implies an agreement from which an obligation in contract can be said to exist.
o Treated the same way as express contracts .
· Implied in Law (Quasi Contracts)
o Not a contract at all.
o Recovery is where justice so requires.
o No reference to intentions or expressions of the parties.
o Duty based on concept of unjust enrichment.
· Bilateral Contract
o A promise is exchanged for a promise.
o Must be mutuality of obligation.
§ Either both parties are bound or neither are bound.
· Unilateral Contract
o A promise is exchanged for a performance or something else.
o Only one promise is present.
o Person performing is not bound to perform the act, but if she begins, the promise becomes enforceable.
Required Elements of A Contract
· Bargain (R 2d §17)
o Formation of a contract requires a bargain which includes manifestation of mutual assent and consideration.
· Mutual Assent
o Takes place through offer and acceptance.
o Requires that each party makes a promise and/or begins to render a performance.
· Consideration (R 2d §71)
· A performance or return promise must be bargained for.
o May consist of act, forbearance, or changing legal relation.
Remedies
INTRODUCTION
i. Restitution: Recovering values conferred on the other party through efforts to perform a contract
ii. Reliance: Recovering losses suffered by virtue of reliance on the contract, whether or not there was a corresponding gain of the opposite party. (Measurement=difference between post-action and pre-action, put the plaintiff in the position s/he was in before the contract)
iii. Expectation: Realizing the value of the expectancy that was created by the other’s promise (Measurement=difference between post-action results and the promise action results, put the plaintiff in the position s/he would be in had the contract be performed). BASIC STANDARD IN CONTRACT LAW
DAMAGES: EXPECTATION & RELIANCE
EXPECTATION DAMAGES
R. §347—Measure of Damages in General
Hawkins v. McGee (1929)—“Hairy Hand Case” (p. 2)
Groves v. Wunder (1939) & Peevyhouse v. Garland Coal & Mining Co. (1963) (p. 6, p. 13)
· Both use Rest (2nd) of Contracts §348
· No party can gain a greater amount in damages for breach of contract than what the party would have gained had the provisions of the contract been followed through!
Landis v. Willian Fannin Builders, Inc. (2011) (p. 16)
· For damage to property, either the cost of the remedy or the diminution in value is used, whatever is seen to accomplish the goal of making the party whole w/in bounds of reasonableness.
Acme Mills & Elevator Co. v. Johnson (1911) (p. 22)
· If a plaintiff would have actually benefited from the breach, s/he cannot recover
Neri v. Retail Marine Corp. (1972) (UCC §2-708(2)) (p. 30)
· Volume seller argument: As a result of the breach, plaintiff sold a lower volume of boats in the time it could have taken him to sell more.
Illinois Central R.R. Co. v. Crail (1930) (p. 34)
· Generally, damages for a shortage in delivery amount should be calc. by the wholesale amount rather than price for smaller quantities. CREATED NEW GENERAL RULE.
RELIANCE DAMAGES—common law, Restatement §349
**If the expectation of profit is too difficult to measure of if it is zero, reliance alone can be the measure (putting you in the position you were in before the contract)**
Chicago Coliseum v. Dempsey (1932) (p. 38)
· Court listed 4 possibilities for relief
o Loss of profits that would have been received by P if fight occurred
o Expenses incurred by P prior to signing the contract
o Expenses incurred in attempts to restrain D for preparing for/fighting in other matches
o Expenses incurred by P after the signing of contract and before breach (reliance)
· Court said loss of profits=too speculative. Court said damages had to flow naturally from the breach, be a result of the breach. Court said option 3 wasn’t good because P sought injunctive action a
e contract.
· If the losses the plaintiff sustained are disproportionate to the fee the defendant received, the defendant is off the hook.
Valentine v. General American Credit, Inc. (1984) (p. 87)
· Job security may be written into a contract, but it is not guaranteed as a provision by law. Mental distress is secondary to the basic principles of the contract.
· In contract law, the basic standard is market standard; however, if a contract has “elements of personality” one can recover emotional damages (p. 88) unless you can calculate adequate compensation by terms of contract.
Mindgames, Inc. v. Western Publishing Co. (2000) (p. 91)
· The Court is saying that the “new business” factor is something to consider; however, it is not a definite reason for ineligibility (it’s a standard). Also, MITIGATION!
· If lost profits are too speculative, expectation damages cannot be given
· Expectation damages is the general rule; however, there are limitations: mitigation, foreseeability, speculation.
RESTITUTION—R §371
Restitution is NOT based on the contract!
Boone v. Coe (1913) (p. 98)
· Per the Court: general rule that damages cannot be recovered for violation of a contract w/in the statute of frauds.
· One exception: under a contract for personal services w/in the statute, an action may be maintained in quantum meruit; however, the defendant is to have received some benefit.
· QUANTUM MERUIT: reasonable value of services; damages awarded in an amount considered reasonable to compensate a person who has rendered services in a quasi-contractual relationship.
Mobile Oil Exploration & Producing Southeast, Inc. v. U.S. (2000) (p. 101)
· Law entitles contracting party to restitution if the other party “substantially” preaches contract or communicates its intent to do so.
