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Contracts
Wayne State University Law School
Findlater, Janet

Big Picture
Someone (or both parties) will say other guy breached K

Focus on Breach of K
Whether they have a K is not likely to be focus of Contracts B
If breach, what if any is the remedy.

Whether party said to be in breach has a defense to enforce the K
1. SoFr (not on exam)
2. Policing Devices
a. Fraud
b. Misrepresentation
c. PXD
d. Duress
e. Unconscionability

Enforce K or particular provision of K

If there are no defenses, what are the terms of the K?
1. PER

When figure out what terms are, what do they mean
1. Interpretation
2. What does this K require the parties to do
3. What are the parties rights and duties under the K

Did party do it (performance) or are they in breach?

If in breach, what remedies are available to the aggrieved party.

Policing the Bargain (Defenses)

I. Overreaching: Conventional Controls

Types:

These are not mutually exclusive.

Status

Substance

Behavior

Capacity

Minors/Infants
Mental Disability

Unconscionability

Misleading

Coercive

Misrepresentation

Duress

Concealment

UI

Fraud

Pre-existing Duty (PXD)

Remedy:

Rescission – voiding K
Stop enforcement of K

A. Pressure in Bargaining:

ARGUE…

WHEN party seeking…

PXD

Prevention of enforcement
e.g. AK Packers

Duress

Rescission and restitution
e.g. Austin Inst.

1. Pre-Existing Duty Rule (lack of Consideration)

Rule:

Doing or pr to do that which you are already legally obligated to do is not consideration.

FAddress coercion indirectly by using Consideration

Alaska Packers:

K1 (written): Workers pr’d to do regular ship’s duties & any other work whatsoever when requested. Empl pr’d to pay $50 for the season and $.02/salmon in the catching in which he took part.
K2 (written): Workers stopped work when reached Alaska, demanding $100/season and $.02/fish. No substitute workers avail.
When home, Alaska Packers pd per K1.
Ee’s sued to enforce K2. AP arg’d coercion to enforce K1.

Consent under circumstances = coercion

No other workers
$$ invested by empl
Short season
No valid cause

AP used PXD b/c cts didn’t recognize ec. duress at this time.
PXD b/c one-sided modification

Trigger:

· One-sided modification To an already existing k
o = lack of Consideration
· When seeking orig pr to be enforced
o N/a when you are seeking return of money that has been paid
o Once performance is done, you can only seek rescission and restitution => argue Duress. Austin Instrument
o Does not arise when rescission is sought
· When seeking pr to pay more to be unenforceable

Consider:

1. When is the modification of an existing K properly seen as resulting from a genuine assent of the party to whom performance is owed?; and
2. When is a renegotiated deal more likely the result of coercion?

Remedy:

Vs new pr not enforceable

a) §73 Performance of Legal Duty – Third Parties

Rule:

· Performance of a legal duty is not Consideration
“Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not Consideration.
But, a similar performance is Consideration if it differs from what was required by the duty in a

ances when the K was made.

Alaska Packers – no
Watkins – yes
Schwartzreich – yes

2. To the extent provided by statute; or
3. Reliance: to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

Analysis:

1. Is new agreement fair?
2. Is there a statute that deals w/ PXD?
3. Does justice require enforcement b/c of reliance?

c) §2-209 Code Abolishes PXD (Duress Rule)

Rule:

· Where there’s a one-sided modification, you don’t need Consideration
· Focus on REQUIREMENTS of GOOD FAITH and LEGITIMATE COMMERCIAL DEALING
· Plus for merchants: there is no duty to bargain in good faith, there is only a duty to renegotiate in good faith

(1) Abolished PXD (only applic to movable goods)
(3) Some modifications must be in writing under §2-201

Duty to bargain a K modification in good faith.
Extortion of a modification without legitimate commercial reason is ineffective as a violation of the duty of good faith

Trigger:

· Code applies
· Whether modification was done in good faith

Requires:

1. Good faith; and
2. Legitimate commercial reason for change
a. Reason beyond the control of the party seeking the modification
b. e.g. drastic market shift

FNo duty to negotiate in good faith, unless it’s for a modification

Good Faith is the policing device under the code

Relation to Duress:

· Duress can still be brought in
· If no code rule to displace, common law rule comes in §1-103 e.g. duress.

(1) Remedies

Remedies

· Rescission (Avoid the modification); and
· Restitution
· Damages (for breach of duty to negotiate modification in good faith)