a. All of law is based on duties that a person voluntarily undertakes (contracts) or duties that are imposed by law (torts). A high % of civil law is a function of Contracts.
b. People enter into contracts
i. To create the law to govern their relationship.
ii. To bring into existence a world they can imagine.
c. Society pays for enforcement of contracts so it has a right to ensure that resources are being used properly. Society has decided on certain values which it will not allow to be impaired.
d. Five General Categories of contracts
i. Creating Contractual Obligations
1. Formal written contract à Parties negotiate & sign written contract.
2. Formal oral contract à Parties orally agree to all terms of contract.
3. Informal oral contract à Parties Orally agree to basic terms of contract.
4. Contract by actions à Actions show that parties agree to a deal.
ii. Interpreting Contract Terms
1. Resolving ambiguities.
2. Contradicting terms in a written contract.
3. Adding terms to a written contract.
iii. Performing Obligations & Breach
1. Absolute promise v. conditional promise.
2. Demand for adequate assurances of full performance v. Anticipatory repudiation.
3. Minor breach v. major breach.
iv. Excuses for non-performance.
1. Improperly obtained consent – Fraud, duress, mistake, unconscionability.
2. Changed circumstances – Impracticability, impossibility, frustration of purpose.
v. Court Enforcement
1. Specific Performance à Court orders defendant to perform
2. Damages à Court orders defendant to pay damages.
3. Restitution à Court orders defendant to return any benefit received but not paid for.
e. Three types of contracts
1. Commercial – involving 2 businesses.
2. Semi-commercial – involving business & consumer.
3. Personal – involving 2 non-businesses.
f. From status to contract – People’s rights used to be determined by their status in society (serf-duke-earl, whatever) but when commerce developed, it became important for people (buyers & sellers) to rely on each other so freedom to contract became essential to make $. And contract became the basic determinant of a person’s rights and place in society. After industrial revolution, however, some people had abilities to understand contract provisions, some had more money or power to negotiate so the legislature has stepped in to protect people. And so status has returned in a more ltd way to foster specific social policy.
g. What is a contract?
i. 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. Restatements Contracts 2d §1. You can limit liability but there must be some liability b/c if there is no remedy it is not a contract b/c a contract is a promise for which the law provides a remedy if breached.
h. What is a promise?
i. A manifestation of intention to act or refrain from acting in a specified way so made as to justify a promisee in understanding that a commitment has been made.
– There needs to be something else to connect this manifestation w/ that the promisee knew about àDon’t look at promises too narrowly, consider them in a broader context. Consider the totality of the manifestation.
i. What is an agreement?
i. A manifestation of mutual assent by two or more persons.
j. What is a bargain?
i. An agreement to exchange promises or a promise for a performance or performances.
k. Contract rules are normally default rules, meaning you can contract around them.
(Absolutely no punitive damages can be awarded for Breach of Contract. You don’t want unforeseeable consequences b/c that wouldn’t be efficient economic policy when there are an infinite # of things that could go wrong. The only way to get punitive damages is if you can sue under a tort.)
Three interests underlying the award of damages to the aggrieved party for breach of contract: restitution, expectation, and reliance interests. The interests are the reason why we’re going to give damages in a particular case. As long as there isn’t duplication, there can be multiple interests remedied.
a. restitution damages – Restitution compensates a party for the benefit conferred on the other party as a result of partial performance or reliance, and is aimed at preventing unjust enrichment
-A benefit has been conveyed on so whatever was given is given back. Generally th
to conclude the parties allocated it.
-Only “loss of profit” needs to be foreseeable since “loss of use” is obvious. (Martinez v. Souther Pacific RR)
Three ways to view Forseeability
1.) No recovery unless the loss was in the contemplation of the parties when they contracted. Hadley v. Baxendale.
2.) No recovery unless breaching party had reason to foresee the specific loss as a probable result of breach when they contracted. Rest. of Contracts, §351. Doesn’t have to be the most foreseeable, just foreseeable.
3.) No recovery unless damages result from buyer’s general or particular needs of which the seller had reason to know when they contracted. U.C.C. 2-715(2)(a).
The Avoidable Consequences Rule (Common law limit on consequential damages.)
Not really a defense to a claim of breach of contract but a limit on the damages recoverable for breach. The Avoidable Consequence Rule helps avoid economic waste and avoid over-compensation.
A. Rest 2nd §350. AVOIDABILITY AS A LIMITATION ON DAMAGES
1. Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided WITHOUT UNDUE RISK, BURDEN OR HUMILIATION
2. The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that HE HAS MADE REASONABLE BUT UNSUCCESSFUL EFFORTS TO AVOID LOSS
B. Employment Contracts. – employment contracts are the only place in the whole law of remedies where the Avoidable Consequence Rule is part of the measure of General Damages, normally Avoidable Consequence rule is part of Consequential Damages.
-The law is trying to strike a balance between an employee’s personal freedom against forced employment and a policy against remaining idle a and unproductive. The balance is struck by requiring that the employee accept an available comparable job.
C. Main factors in determining whether two jobs are comparable.