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Contracts
Wayne State University Law School
Wellman, Vincent A.

I. Introduction: Concepts and Methods of Argument
A. Definition of Contract
1. Definition (from Restatement (Second) of Contracts § 1)
A contract is 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.
B. Deference & Standards of Review
1. Deference – Willingness to accept a decision of one legal decision-maker by another legal decision-maker
2. Types of Deference
a. Courts to Legislature
(1) Courts will often defer to legislature in their interpretation of a law; however, courts can do a lot to interpret legislation in order to shape it
(2) Supreme Court is final arbiter of Constitutional meaning
b. Legislature to Courts
(1) Legislature recognizes decisions from courts
(2) Can show deference by not acting
c. Appellate Court to Trial Court
(1) On questions of fact; more so for jury than bench trial
(2) Standard of Review: reasonable jury or clearly erroneous
d. Trial Court to Appellate Court
(1) On questions of law
(2) Standard of review: non-deferential or de novo
3. Issues of Institutional Competence-
Must determine if institution is qualified and/ or authorized to issue the policy or rule of law at issue;
Pay attention to separation of powers issues and federalism
C. Rule vs. Rationales
1. cessante ratione legis cessat ipsalex: If the reason for the law ceases, then the law itself ceases. Rules should be applied only when it serves the rationale.
2. “The letter kills, but the spirit of the law gives life” Supreme Court’s late 19th c. decision to construe a law by its intent, rather than its content
D. Inference to the Best Legal Explanation
Facts
If Θ were the legal explanation, then Θ would explain the facts
[Confirm or disconfirm] no other legal explanation better explains these facts
Θ is the best legal explanation.
E. Argument by Analogy (and Disanalogy), SEE HO 3 P5
1. Target premise: y
2. Source premise: x
3. Shared (or unshared) characteristic: F
4. Inferred characteristic: H
5. Analogy Warranting Rule: e.g.- Any F is (or cannot be) also H
6. Analogy Warranting Rationale: Some good for society, etc.
F. Three Overlapping, Overarching Themes
1. Autonomy” v. “Heteronomy” – whose judgment of preference, policy, or principle is to be given effect (parties, trial court, appellate court, legislature, administrative agency)?
2. Fact of Unequal Capacities
3. Allocation of Risk
G. Classical vs. Romantic Approaches to Three Themes
1. Classical Approach
a. “laissez faire”
b. anti-paternalistic
c. parties as autonomous and self-insurers and self-protectors
d. obligation as a matter of “objectively” provable deliberate clear bargained for promises
e. closer adherence to stare decisis
f. Judicial role is as a neutral referee
h. Rule Interpretation
(1) Rules seem to have very high levels of “formal efficacy”
(2) Tend to prefer formalistic interpretation of rules
(3) Generally favor rules over standards
(4) In application, tend to go for answers that follow literally from rules
2. Romantic Approach
a. paternalistic
b. parties as “heteronomous” guardians with (enforced) fiduciary duties toward one another
c. obligation as a matter of benefit conferred (“quasi-contract”) or reliance foreseeably induced – including reliance on bargained for exchanges (thus “contract” special case of tort – “contort” idea, contracts as civil liability for promissory behavior
d. every man “his brother’s keeper”
e. Judges willing to change power imbalances, social engineering, paternalistic
f. Judicial Role: judge as roving arbiter of fairness and “field-leveling” commissioner
g. Rule Interpretation
(1) Romantic rules seem to have very low levels of “formal efficacy”
(2) Generally, romantics favor standards over rules
(3) In application, romantics tend to be more variable

H. Fuller’s Three Bases for Contractual Liability, P 25
1. Private Autonomy- b/c he contracted to bear such liability
2. Reliance- where breach of promiseà injury
3. Unjust Enrichment- pty end up w/ property or services they are not entitled to
I. Functions of Legal Formality- Consideration & Form, 1941, Fuller
1. Evidentiary- Provides evidence of the existence and purport of the contract, in case of controversy
2. Cautionary- Acts as a check against inconsiderate action; seal no longer in use
3. Channeling- Serves to mark or signalize the enforceable promise; furnishes a simple and external test of enforceability
J. Formal vs. Non-formal Interpretation
1. Reasons for high formal efficacy: rule of law values of predictability, notice, constraint on government.
2. Reasons for low formal efficacy: values of flexible decision making, doing justice in the individual case.
3. McIntosh- court’s romantic rationale for non-formal interpretation. Looks to the background rationale rather than formally interpreting statute.
4. Mills v. Wyman, promissory restitution. Opening paragraph is paradigmatic statement of classical approach. Saying judges need to interpret rules like consideration formally. Maryland National Bank case from promisee reliance, statement about judicial fiat – this is a court of law, not a court of equity.
II. Monge Trilogy: Structure of Legal Arguments
A. At-will Employment: Wood’s Rule
1. Rule:
a. If there’s a hiring for an indefinite period of time, then that hiring is “presumed to be at will and terminable at any time by either party.”
B. Wrongful Discharge: Monge v. Beebe Rubber Company (N.H. 1974, Supp) à Romantic
1. Facts-
a. П fired after harassed by foreman and refused to go out with him.
2. Holding-
a. Overturned Wood’s rule (employment at will) à if there’s a hiring for an indefinite period of time, then it’s not necessarily terminable at any time
b. Adopts wrongful discharge law
3. Rule-
a. If (P or M or N) then (Q and R) Disjointly Sufficient Conditions
*Ifthere is a termination by the employer of a contract of employment at will which is motivated by (P) bad faith or (M) maliceor (N) based on retaliation, then {[Q] it “is not in the best interest of the economic system or the public good” and [R] constitutes breach of employment contract.
Rationale-
a. Such firings are not in the best interest of the economic system or the public good.
b. Claims to be balancing employer v. employee v. public
Notes:
a. Dissent: Grimes disagrees about facts and that there is ample reason to lay down broad new rule
b. Brewer: prongs of rule are too vague; allocates too much risk to employer; questions institutional competence of ct to make judgment about how best to balance socio-eco interest of public, employer and employee
c. Meta stare decisisargument: makes argument by analogy that as feudal laws that overly favored landlords were overruled, so should at-will doctrine which overly favors employer
d. Romantic b/c both tries to re-balan

by their plain meaningà no reason not to enforce K
c. Brewer: interpret a contract by what a reasonable person thinks it would have meant rather than by subjective intent of the parties. Parties as autonomous self-protectors.
Notes:
a. P 33 Learned Hand’s quote: only meaning that matters is one law attaches even if “twenty bishops” prove that one of parties meant otherwise
b. Appellate ct seems to put some weight on credibility of witnesses
c. Ct holds Δ to higher stnd of self-protection b/c knowledge of businessà some disparity in bargaining power; ** Probably not huge reason b/c classical
C. Duty to Read/ Fraud:Park 100 Investors Inc. v. Kartes (IN Ct App 1995, P 36) à ROMANTIC
1. Facts-
a. Kartes agreed to lease space from Park 100 for KVC; Representative of Δ (Scannell) showed up the night before KVC is to move in and says they have “lease papers” to sign; Kartes calls lawyer to make sure “lease papers” are OK; Papers turned out to be a personal guaranty; Kartes signs without actually reading it
2. Holding-
a. Duty to read vitiated by misrepresentation of what documents are
While a person must use ordinary care and diligence to guard against fraud, the requirement of reasonable prudence in business transactions is not carried to the extent that the law will ignore an intentional fraud practiced on the unwary
If there is intentional fraud practiced on the unwary, then the contract is not enforceable. To recover, one must prove intentional fraud on the unwary
3. Rules-
a. Limit on Duty to Read v. 1- “[W]here one employs misrepresentation to induce a party’s obligation under a contract, one cannot bind the party to the terms of the agreement.”
b. If P then Q Sufficient Condition for not binding to prima facie K
* IF [P] one party employs misrepresentation to induce another party’s obligation under a contract, THEN [Q] that party cannot bind the other party to the terms of the agreement.
c. Limit on Duty to read v. 2- “[A] contract of guaranty cannot be enforced by the guarantee, where the guarantor has been induced to enter the contract by fraudulent misrepresentations or concealment on the part of the guarantee.”
d. IF the guarantor (of a contract of guaranty) has been induced to enter the contract of guaranty by fraudulent misrepresentations or concealment on the part of the guarantee, THEN the contract of guaranty cannot be enforced by the guarantee.
e. Actual fraud- If (P and Q and R and S and T) then U
[P] (1) A material misrepresentation of past or existing fact by the party to be charged, which
[Q] (2) was false,
[R] (3) was made with knowledge or in reckless ignorance of the falsity,
[S] (4) was relied upon by the complaining party, and
[T] (5) proximately caused the complaining party injury.