Contracts Master Outline
ENFORCING PROMISES – CHAPTER 1
SECTION I – REMEDIES
*damages assessed by breach of contract NEVER include punitive
Breach of contract = damages measured by plaintiff’s loss, NOT defendant’s gain. Since Naval, the promisee, is in a worse position after the breach of contract, law dictates that they should receive a sum equivalent to loss of their sales to put Naval back in the position that Naval would have been if the contract were never signed.
*note one exception to plaintiff’s loss rule is based upon Cincinnati Siemens-Lungren in which the defendant’s gains greatly exceeded the plaintiff’s loss after enormous business growth. Breach of contract damages were awarded by using evidence of the profits. The judge DOES NOT assume, however, that the promisee could ever make as much money from the profits as the promisor did by breaking the contract.
. (Naval Institute)
Expectation Damages – Compensation to put the promisee in the
position s/he would have been in IF the contract went as the promisee expected.
Reliance Damages – Compensation for the detriment caused in
reliance upon the agreement. LOSS to get the
promisee back to where s/he would have been
had the contract not agreed to.
Restitution Damages – Compensation for a benefit that the promisor
may have retained after breach.
(Sullivan)
Expectation is favored under the court. But to determine how the damages should be calculated, the court should look at:
1. how reasonable was the contract
2. how solemn was the contract?
3. how comfortable was consideration?
4. Was there a good faith action?
5. Is there a great disparity between reliance damages v. expectation
damages v. restitution damages?
Specific Performance
Punitive Damages
Arbitration
SECTION II – CONSIDERATION AS ENFORCEMENT
New Restatement
1. Promise?
2. Was it reasonable or foreseeable to that an action would be induced
3. Would it be an action of the promisee or a third party?
4. Is the action induced?
5. Can injustice be avoided by action?
6. Remedy can be limited as justice requires
A. Consideration Definition
Consideration = bargained for exchange that makes a promise enforceable.
forbearance of right [is] sufficient to sustain a promise.
(Hamer v. Sidway)
Measure of how enforceable consideration: Sufficient consideration may pass the subjective test at the time of contract by what was honest and reasonable perception of the claim. Enforceability of a false claim is whether the false claim had a “reasonable base of support (neither absurd nor unlawful)” (Fiege v. Boehm)
Restatement §74 to pass the consideration test
B. The Requirement of Exchange
Past Performance does NOT induce a promise. Without present performance there is no exchange. Without exchange, no consideration and any benefit obtained from the promisor is a gratuitous gift. Contract Consideration requires reciprocal interest for the promise (Feinberg). Consider details, written, intent, other circumstances.
Moral obligation is not an exception for consideration.(Mills v. Wyman), Moral obligation is sufficient for consideration when there are extenuating circumstances like saved his life. When the only defect in the contract of one of failed consideration due to timing, perhaps a tamed doctrine of consideration can be viewed as valid. (Webb v. McGowin). Restatement §86 contracts w/o consideration, BUT prevents injustice.
Restatement § 71 consideration must be sought by the promisor in exchange for the
similar question of whether there is consideration and a valid contract. Under the U.C.C. § 2-306, contract requirements are NOT indefinite [to dissatisfy consideration of a contract] since they it is held to mean the actual good faith output or requirements of the particular party.” (Eastern Airlines v. Gulf Oil)
Promise can be implicit and serves as consideration for an exclusive agreement. Base upon conduct and the outcome as a result of the contract being in place. Lucy still made money on the deal. Best effort standard(Wood v. Lucy)
SECTION III – RELIANCE AS ENFORCEMENT
Reliance can serve as consideration for a contract. This is limited, however, to certain circumstances. Otherwise, people could simply perform and always expect a return favor.
Justification of reliance is gauged by the intent of the promisor. If the promisor intended to give gift, and the person reasonably thought that the promise should induce behavior despite a lack of bargaining, then reliance is OK to enforce a contract (Ricketts v. Scotthorn) Offer should be expected to reasonably induce an action.
A. Promissory Estoppel
When a promise is made that reasonably induces an action on behalf of the promisee, that promise can make a contract binding if the promisee suffers significant detriment by relying on the promise. (Feinberg)
In an estoppel even though they may have relied on an illusory promise that reliance is enough.
