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California Bar Summer 2014 > Contracts > Flashcards

Flashcards in Contracts Deck (75):
1

 

Applicable Law

Contracts for the sale of goods (all things movable at the time that they are identified as goods to be sold under the contract) are governed by the UCC. Certain provisions apply to the UCC when both parties are merchants. A merchant is one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved.  

 

All other contracts, including those for services and real estate, are governed by common law. 

 

If a sale involves both goods and services, a court will determine which aspect is dominant and apply the law governing that aspect to the entire contract. It does not matter what part of the contract is in dispute. If the contract divides payment between goods and services, the UCC applies to the sale portion, and common law applies to the services portion.

2

 

Formation

A contract is a legally enforceable agreement. It requires valid offer, acceptance, and consideration.

3

 

Types of Contracts


 

The offer determines the type of contract. A unilateral contract is one where acceptance is accomplished only by performance, but there is a duty to notify the offeror of the acceptance within a reasonable time. With a unilateral contract, start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete acceptance. Unilateral contracts are generally silent as to method of acceptance.

 

 

Bilateral Contracts are all created with all other offers, and there is a strong presumption of a bilateral contract unless the offer expressly requires performance as the method of accpetance. Bilateral contracts are generally silent as to method of acceptance.

 

Quasi-Contracts are those agreements where contract law does not apply, but the agreement produces an unfair result and a party is entitled to an equitable remedy.

 

4

 

Offer


 

An offer is (1) a promise, undertaking, or commitment to enter into a contract (intent element); (2) with the essential terms certain and definite; and (3) communication of the promise and the terms to the offeree.

 

 

5

 

Offer: A promise, undertaking, or commitment to enter into a contract


 

The test is whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract. The offer results in a legal obligation for the offeror and an opportunity for the offeree.


 

  • Offer that gives offeree a choice of terms does not make it uncertain.
  • Advertisement or price quotation is not an offer -- but invitation to offer
    • Exceptions:
      • It is in the nature of a reward
      • Specifies quantity and expressly indicates who can accept (e.g. purchase forms to limited merchants in the industry)
  • Price quotation can be an offer if sent in response to an inquiry  
  • Construction bid is an offer
  • Illusory Promise: promise that is revocable at any time
  • Binding promise of offer: Requires separate consideration to create an option contract.

 

 

6

 

Offer: With the essential terms certain and definite

Essential terms are the identity of the offeree and the subject matter, the price, time of payment or performance, quantity, and the nature of the work to be performed.

 

  • Missing Price Term in Sales Contract
    • Sale of Real Estate (common law): price and land description required, otherwise not an offer
    • Sale of Goods (Article 2): no price requirement
  • Vague or Ambiguous Material Terms
    • Invitation to negotiate
    • Not an offer under either common law or UCC
    • Magic words to look for: appropriate, fair, reasonable
    • Not sufficiently specific to be a commitment
  • Requirement & Output Contracts: a contract for the sale of goods that states the quantity of goods to be delivered under the contract in terms of the buyer’s requirements or seller’s output (all, only, exclusively, solely).
    • Constitutes an offer
    • Requirements Contract: Buyer commits to buy exclusively from that seller
    • Output Contracts: Seller has committed to sell exclusively to that buyer
  • Increase in Requirements
    • Buyer can increase requirements so long as the increase is in line with prior demands. No unreasonably disproportionate limitation on increases.

 

7

 

Termination of Offer


  1.  

    Lapse of Time: Offer must be accepted within specified time period or, if none stated, a reasonable time.

  2. Revocation: Words or conduct of the offeror that would indicate to a reasonable person that the offer is terminated. Offers not supported by consideration can be revoked at will, subject to come exceptions.

    • ​Irrevocable Offers:

      1. ​​Option Contrat

      2. Merchant’s Firm Offer

      3. Detrimental Reliance

  3. ​​Rejection: Words or conduct of the offeree rejecting the offer terminates the offer

  4. Termination by Operation of Law

    • Death or insanity of either party prior to acceptance

    • Destruction of the subject matter of the contract

    • Supervening illegality of subject matter of the contract

8

 

Option Contract


 

An offer cannot be revoked if the offeror has also:


 

  1. Promised not to revoke (or promised to keep the offer open); and
  2. This promise is supported by payment or other consideration

 

 

 

9

 

Merchant's Firm Offer


 

If no time stated, can be held open for a reasonable time up to three months if:


 

  1. Offer to buy or sell goods
  2. Signed, written promise to keep the offer open, and
  3. Party is a merchant (generally a person in business)

 

 

There does not need to be an express time stated. Common law does not have firm offer rule.

 

10

 

Detrimental Reliance


 

  • Must be reasonably foreseeable
  • Start of Performance makes offer irrevocable for a reasonable time to complete performance

  • BUT mere preparation does not make offer irrevocable

     

11

 

Acceptance


 

Acceptance of an offer is an unqualified assent to the terms of an offer that is communicated to the offeror. Acceptance may be made by any medium reasonable under the circumstances, unless the offer limits the form of acceptance.

 


  •  

    Common Law: acceptance must include acceptance of each and every term of the offer (Mirror Image Rule)

  • Conditional acceptance is not an acceptance = rejection

  • Counteroffer: differs in its terms from the offer, and operates both as a rejection of the original offer and a new offer under the common law

  • Under the UCC, an acceptance that varies the terms is a valid acceptance

     

     

 

 

12

 

Methods of Acceptance


 

  • Unilateral Contracts: full performance by offeree who knows of offer
  • Bilateral Contracts:

    • Common law: either a promise or beginning of performance

    • UCC:

      1. ​​Promise to ship

      2. Shipment of goods

      3. Shipment of nonconforming goods is acceptance and breach, unless it is an accommodation

13

 

Mailbox Rule


 

  • Acceptence is effective upon dispatch
    • Exception: the offer stipulates that acceptance is not effective until received or otherwise controls the form of acceptance
  • Option Contract: acceptance is effective only on receipt
  • Offeree sends rejection, then acceptance: first received is effective
  • Offeree sends acceptance, then rejection: acceptance effective unless rejection received first and offeror detrimentally relies

 

 

14

 

Acceptance with Varying Terms (2-207)


 

Under 2-207, the UCC does not require offer and acceptance to be mirror images of one another. Additional or different terms in sale of goods contract (offer made, response adds terms or puts in different terms) is still acceptance (unless the terms are made a condition of acceptance) and there is a contract.

 

 

15

 

2-207: Different Terms


 

Different Terms → Knockout Rule (Majority Rule)

  • Different terms contradict each other
    • Some courts construe the different terms as proposals for additions
    • As between merchants, different terms are analyzed as additional terms
  • UCC Gap filler
    • Conflicting terms are both knocked out and replaced by UCC Gap Fillers
    • If there are none, course of performance between the parties

 

 

 

 

16

 

2-207: Additional Terms


 

As between merchants additional terms become part of the contract UNLESS


 

  • Offer expressly limits acceptance to the terms of the offer; OR
  • They materially alter the offer; OR
  • Notification of objection to the additional or different terms is given within a reasonable time after notice is received

 

If both parties are not merchants, the Buyer’s proposed change would not be effective unless Seller did something to accept the “proposal.

 

17

 

Consideration


 

Consideration is a bargained-for exchange (not a gift) and a detriment to promisee or legal benefit to promisor. The adequacy of the consideration is generally not relevant.


 

Bargained for


 

  • Detriment to the promisor and a benefit to the promisee
  • Requires a bargained-for exchange

 

Legal detriment


 

  • Refraining from something that person had a legal right to do
  • Promise to perform a preexisting legal duty is not good consideration
  • Forbearance to sue on a claim that the claimant knows to be invalid is not good consideration if: (1) the claim is invalid and (2) claimant is aware the claim is invalid.

 

Promise as Consideration


 

  • One promise is generally consideration for another promise

  • Exception - Illusory Promise: With a right to terminate at any time without notice (illusory promise is usually the wrong answer) 

 

 

 

 

18

 

Promisory Estoppel


 

Promise is enforceable, even without consideration, to the extent necessary to prevent injustice if the promisor should reasonably expect to induce action of a definite and substantial character, and such action is in fact granted. The promisor should reasonably expect to induce definite or substantial action or forbearance; and such action or forbearance is in fact induced.

 

 

19

 

Mistake (defense to formation)


 

Mutual Mistake: Contract may be voidable by the adversely affected party if the:


 

  1. Mistake concerns a basic assumption upon which the contract was made;
  2. Mistake has a material effect on the agreed-upon exchange; and
  3. Party seeking rescission did not assume the risk of the mistake

 

 

Unilateral Mistake: Contract is voidable if nonmistaken party knew or should have known of the mistake (majority of jurisdictions) or the mistake is basic and the mistaken party’s hardship outweighs the detriment to the non-mistaken party’s expectations under the contract (in the minority of jurisdictions).

 

20

Fraud and Misrepresentation (defense to formation)



 

With the intent to induce reliance, defendant misrepresented or omitted a material fact that the defendant knew (intentional) or should have known (negligent) was false, and upon which the plaintiff actually relied. 

  • Preventing another from learning a fact is the equivalent of asserting the fact does not exist. 
  • Non-disclosure without concealment is not misrepresentation unless the non-disclosure is material or fraudulent.

 

 

21

 

Illegality (defense to formation)


 

Contract is unenforceable if either the consideration or the subject matter of a contract is illegal, such as where the agreement is: in restraint of trade, obstructing the administration of justice, inducing breach of fiduciary duties or relating to torts or other crimes; gambling contracts; or usurious contracts. When the subject matter is legal at the time of the offer, but becomes illegal before acceptance, the illegality operates to revoke the offer.

 

 

22

 

Capacity (defense to formation)


 

Those who are infants (under 18), mentally incompetent (lacks the ability to understand the agreement), or intoxicated (if the other party has reason to know) have right to disaffirm the contract. Contract will not be enforced against an “infant” but as a plaintiff, an “infant” can enforce a contract or can subsequently ratify the contract after obtaining majority by retaining the benefits of the contract.

  • Necessaries: A person who does not have capacity is legally obligated to pay for things that are necessary (food, clothing, medical care or shelter). This liability is based on quasi-contract, not contract law.


 

  • Measure of recovery is not contract price, but the value of the benefit conferred

 

 

 

23

 

Statute of Frauds (Defense to Enforcement)

Statute of Frauds is a statute designed to prevent fraudulent claims of the existence of a contract. Proof required to satisfy SOF is generally proof of either (1) performance or (2) a writing signed by the defendant. A contract must be in writing if it involves: (1) promise to pay the debt of another (suretyship); (2) transfer of any interest in land; (3) service contract that cannot be performed within 1 year; or (5) sale of goods of $500 or more. 

 

 

24

 

Statute of Frauds Writing Requirement


 


 

Does not need to contain all terms of the contract, but must be evidence that there is a contract that state the essential terms with reasonable certainty. If it does not satisfy the requirements, extrinsic evidence cannot be submitted to supply the missing terms.

 

 

 

  • Not every writing suffices
    • Common Law:
      • Material terms (who and what)
      • Signed by the person who is asserting the SOF (person being sued)
    • UCC:
      • Some signed writing indicating contract and specifying quantity
      • Merchant’s confirmatory memo: written confirmation sufficient to bind one will bind the other if not objected to within 10 day

 

 

 

25

 

Statute of Frauds Exceptions


 

  1. Admission
  2. Performance

    • Sale of goods

    • ​​Performance contracts that cannot be performed within 1 year

  3. If contracts for real property, any 2 of 3:

    • Performance by payment (whole or part)

    • Possession

    • Making of valuable improvements

  4. Estoppel (possible CA essay issue)

    • ​​Rule: When a D’s conduct or promise foreseeably induces a plaintiff to change position in reliance on an oral agreement, courts may use the doctrine of estoppel to remove the doctrine completely from the Statute of Frauds

    • Applies in cases where it would be inequitable to allow the Statute of Frauds to defeat a meritorious claim

    • Some cases hold that the P’s reliance on the D’s oral promise can estop the defendant from asserting Statute of Frauds defense

26


 

 

Unconscionable Contract


 

 

 

 

 

Empowers a court to refuse to enforce all or part of an agreement. Policy is the prevention of oppression and surprise.

 

Look for:


 

  • One-sided contract at time it was formed (especially pre-printed)
  • Unequal bargaining power

27

 

Third Party Beneficiary


 

Third-party beneficiary is someone who, either intentionally or unintentionally, benefits from the contract at its inception.

 

 

28

 

Third Party Beneficiary: Parties


 

Promisor: the party that makes a promise that benefits the third party. to perform in favor of the third party beneficiary

 

Promisee: the party who in the contract obtains the promise from the promisor to perform that benefits the third party beneficiary

Third Party Beneficiary: Although not a party to the original contract, the party who receives payment from the promisor or an obligation of the promisor. Third party beneficiaries are able to enforce the contract.  

 

 

29

 

Intended or Incidental Beneficiary?


 

  • Intended beneficiary (will always be named in the contract)

  • Only intended beneficiaries have contract law rights 
  • Whether the third party is designed in the contract (intent of the two parties to contract makes the determination)

  • Whether performance is to be made directly to the third party

  • Whether the third party is given rights under the contract

  • The relationship between the third party and the promisee

 

 

 

30

 

Creditor or Donee Beneficiary?


 

  • Creditor: promisee’s intent was to discharge an obligation. Look for whether the third party beneficiary was a creditor of the promisee before the contract.
  • Donee: promisee’s intent was to bestow a gift

31

 

Third Pary Beneficiary Vesting Rights


 

Vesting: third party beneficiary can only enforce a promise if their rights have vested. Rights vest when the beneficiary:


 

  1. Manifests assent to agreement in manner requested by the parties;
  2. Brings suit to enforce the promise;

  3. Materially changes position in justifiable reliance on the promise

32

 

Third Party Beneficiaries: Who Can Sue Whom?


 

  • Third Party Beneficiary v. Promisor

    • Beneficiary can recover from promisor 

    • Promisor can raise against the beneficiary any defenses he could raise against promisee 
  • Third Party Beneficiary v. Promisee (if promisor fails to perform)

    • Donee: cannot sue the promisee (unless the third party beneficiary can claim detrimental reliance on the promise)

    • Creditor: may sue promisee on underlying obligation

  • Creditor beneficiary may sue both the promisor and promisee but may only obtain one satisfaction

33

 

Assignment of Contract Rights


 

Assignment is a transfer of rights under an existing contract to someone else. All contract rights are assignable unless assignment materially alters the obligor’s duty or risk or it is prohibited by law. Offers cannot be assigned. A contract provision prohibiting assignment bars only delegation of duties.


 

Contracts that materially alter the obligor’s duty or risk:


 

  1. Personal service contracts
  2. Requirements and output contracts (although assignment may be ok under UCC)

  3. Assignments that substantially alter obligor’s risk (assignment of insurance contracts if the nature of the covered property would change)

     

     

     

  4.  

34

 

Parties in Assignment



 

  • Assignor: party to the contract who later transfers rights under the contract to another
  • Assignee: not a party to the contract. Able to enforce the contract because of assignment.

  • Obligor: other party to the contract

     

35

 

Requirements for an Assignment


 

Consideration is not required, but gratuitous assignments (and only gratuitous assignments) can be revoked.

 

  • The right being assigned must be adequately described in the manifestation of assignment
  • Assignor must indicate an intent to completely and immediately assign the interest to the assignee
  • Assignment does not require a writing, except:
    • Wage assignments
    • Interests in land
    • Choses in action > $5,000
    • Security interests

 

 

36

 

When is an assignement revocable?


 

  • Assignment is irrevocable when it vests
  • Irrevocable if given for consideration

  • Revocable, except:

    1. If the obligor has already performed;

    2. On delivery of a tangible claim (such as stock certificates or a passbook);

    3. Assignment of a right to sue in writing;

    4. Estoppel - foreseeable detrimental reliance

    5. The assignment is gratuitous

       

37

 

Assignor’s Warranty Liability to Assignee


 

Assignor impliedly warrants:


 

  1. He has made no prior assignment of the right
  2. The right is not subject to limitations or defenses other than those disclosed or apparent

  3. He will do nothing to defeat or impair the right

38

 

Successive Assignments


 

  • Revocable Assignments: subsequent assignee prevails

 

  • Irrevocable Assignments: first assignee has priority

     

     

39

 

Delegation of Contract Duties


 

Party to contract transferring work under that contract to a third party.

 

 

40

 

Delegable Duties


 

Generally, contractual duties are delegable. Delegations are permitted unless:

 


 

  • The contract prohibits delegations or prohibits on assignments; or
  • Personal services contract that calls for very special skills

 

 

41

 

Non-Delegable Duties


 

  • Duties involving personal judgment and skill (e.g. an actor)
  • Situation involving “special trust” in the delegator (e.g. doctor, lawyer)

  • Situation where delegation would materially change the obligee’s expectancy (e.g. output contracts

     

42

 

Liability of Delegation Parties


 

  • Delegator remains liable
  • Delegatee liable if he assumes the duty

  • Assignment of “contract” or “rights under the contract” construed to included delegation and assumption of duties

     

43

 

Novation v. Delegation


 

Novation requires the agreement of both parties to the original contract, and excuses the person replaced from any liability for nonperformance. Delegation does not require the agreement of both parties and does not excuse.

 

 

44

 

Parol Evidence


 

Where the parties express their agreement in writing, with the intent that it embody the full and final expression of their bargain, any other expressions, written or oral, made prior to the writing, and any oral expressions made contemporaneous with the writing, are inadmissible to vary the terms of the writing.

 

 

45

 

Parol Evidence: Integration 

 

  • Look for a merger clause - reciting the agreement is complete).
  • A complete and final expression cannot be contradicted or supplemented.
  • A partially integrated writing cannot be contradicted, but it can be supplemented

    • Fully written agreements are considered to be either a complete or partial integration

    • Need to determine if the expression varies or contradicts the written agreement

    •  

      If the writing is found to be a partial integration, it CAN be proved up with additional terms

46

 

Exceptions to Parol Evidence


 

  • Formation defects

    • Fraud 
    • Duress

    • Mistake

    • Illegality

  • Condition precedent

    • If a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred (or performance - an event that must occur before an absolute duty of immediate performance arises), all evidence of that understanding may be offered and received.

  • Interpretation of ambiguity

    • To allow in evidence of an ambiguity, there must first in fact be an ambiguity in the language.

  • Showing of true consideration

47

 

Parol Evidence: UCC Difference


 

Consistent additional terms are admissible unless:


 

  • There is a merger clause (provision in a contract that declares it to be the complete and final agreement between the parties) or
  • Court finds the parties intended the writing as a complete and exclusive statement of the terms of the agreement

Bars evidence contradicting the terms of a written contract, but the terms may be supplemented by showing course of dealing, usage of trade, or course of performance

 

48

 

Types of Warranty


 

  • Title
  • Against Infringement

  • Implied Warranty of Merchantability: goods are fit for ordinary purpose; implied in every contract by merchant of goods of kind sold

  • Fitness for Particular Purpose: implied whenever any seller has reason to know particular purpose for which goods to be used and that buyer is relying on seller’s skill and judgment to select goods, and buyer does in fact rely

  • Express: Look for words that promise, describe or state facts. Distinguish from sales talk which is more general, an opinion. Or, look for a sample or model.

49

 

Warranty Disclaimer


 

  • Title: specific language or circumstances putting buyer on notice that seller is not claiming title
  • Merchantability

    • Specific disclaimer must mention “merchantability” and, if in writing, must be conspicuous

    • Also can be disclaimed by “as is,” refusal to examine, or course of dealing

  • ​​Fitness for Particular Purpose: only by conspicuous writing or general disclaimer (“as is,” refusal to examine, course of dealing)

  • Express: disclaimer usually not given effect

  • Damages: difference between goods tendered and warranted

50

 

Conditions


 

  • Promise v. condition

    • Promise: commitment to do or refrain from doing something 
    • Condition: an event, other than the passage of time, which will extinguish, modify, limit or create a duty to perform

    • A condition modifies a promise

    • Provision can be a promise for one party and a condition for the other


      •  

        e.g. A agrees to sell a book to B if B pays A $25

    • Basic test: whether the provision goes directly to the root of the contract’s consideration

      • If so, it will generally be considered a condition

51

 

Types of Condition


 

  • Express Conditions: expressed in the contract
  • Implied Conditions: fairly inferred by the parties’ conduct

  • Constructive conditions: read into the contract by the court, irrespective of the parties’ conditions


    •  

      e.g. A can’t demand payment for a book without delivering the book.

52

 

Breach

A breach occurs when a promisor has a duty and fails to perform it

53

 

Anticipatory Repudiation

Unambiguous statement or conduct (1) that the repudiating party will not perform (2) made prior to the time that performance was due. Anticipatory repudiation by one party excuses the other party’s duty to perform.

54

 

Minor v. Material Breach


 

  • Minor breach: obligee gains the substantial benefit of the promise, and their duty is not discharged.

 

  • Material breach: the nonbreaching party does not gain the substantial benefit of the promise, and has the right to all remedies.

    • Generally, failure of timely performance will not be considered a material breach unless the contract specifies that time is of the essence

    • This is particularly true in land contracts, where more delay is required for materiality

55

 

Implied Covenants of Good Faith & Fair Dealing


 


 

  • Exists in every contract
  • Requires that both parties do nothing to prevent performance by other party

  • Employment contracts: Breached by termination for refusal to do illegal act 

  • Insurance contracts: Bad faith denial of coverage 

 

 

56

 

Discharge by Impossibility

  • Objective test
  • Requires objective impossibility (e.g. the building cannot be built)
    • Death or physical incapacity
    • Illegality

    • Destruction of the subject matter

  • All duties for both parties still to be performed are excused
  • Part performance prior to impossibility

    • Party that has partially performed can seek recovery in quasi-contract for the reasonable value of his/her services

  • Must arise after the contract has been entered into

  • Not created by the parties

 

 

57

 

Discharge by Impracticability

  • Subjective

  •  

    Arises when performance is extremely and unreasonably difficult, and the nonoccurrence of the event causing the impracticability was a basic assumption on which the contract was made.

  • Not created by the parties.

     

58

 

Discharge by Frustration of Purpose


 

(1) Unforeseeable supervening event; (2) that destroys the purpose or value of the contract; and (3) the purpose was understood by both parties when the contract was made.


 

  • e.g. sudden unexpected storm prevents travel into the area where the contract was to be performed.

 

 

 

59

 

Discharge by Accord and Satisfaction


 

Accord is an agreement to accept a different performance than originally agreed upon in the contract. It requires consideration or a bona fide dispute. Satisfaction is performance of the accord, which discharges accord and the original contract. If the accord is not performed, then the other party can recover on either the original obligation or the accord.


 

  • e.g. Check tendered with phrase “payment in full”

 

 

 

 

60

 

Discharge by Waiver


 

Condition of a contract may be waived by words or conduct indicating that the party will not insist on the condition being met. The issue is often whether a one-time waiver will waive the condition on future occurrences.

 

 

61

 

Remedies 


 

General Rule: Contract damages are to compensate the plaintiff, not punish the defendant. Damages should put the nonbreaching party in the position he would have been in had the contract been performed. This is usually calculated as expectation damages, plus consequential damages, less any loss or cost saved by not performing.

 

 

62

 

Legal Remedies

 

  • Money Damages
  • General Rule: Contract damages are to compensate the plaintiff, not punish the defendant. Damages should put the nonbreaching party in the position he would have been in had the contract been performed. This is usually calculated as expectation damages, plus consequential damages, less any loss or cost saved by not performing.

63

 

Consequential Damages


 

 

Expectation Damages - Benefit of the bargain or out of pocket damages

 

 

64

 

Consequential/Future Damages


 

  • Special damages reflecting losses over and above expectation damages. They are usually lost profits and arise because of a nonbreaching party’s particular circumstances, and are reasonably foreseeable at the time of the contract.

  • Analysis (e.g. lost profits, cost of purchasing extra equipment as a result of defendant’s breach
     

65

 

Reliance Damages


 


 

  • Reimbursing nonbreaching party for out of pocket expenses spent in reliance on the promise . Same dollar position as if no breach.
  • Where other damages difficult to calculate

  • Can be recovered even if no contract completed

 

 

66

 

Employment Contract Damages


 

Employment Contract: standard measure for the employee’s damages is the full contract price

 

 

67

 

Land Sale Contract Damages


 

Land Sale: difference between contract price and fair market value

 

 

68

 

Liquidated Damages


 

  • Reimbursing nonbreaching party for out of pocket expenses. Same dollar position as if no breach.
  • Where other damages difficult to calculate and stipulated amount is a reasonable forecast of the damages (look at proportionality between the stipulated amount and the reasonable forecast of damages)

  • Can be recovered even if no contract completed

     

  •  
  •  

69

 

Nominal Damages

 

No real harm

70

 

Specific Performance

  • Equitable remedy

  • A party is entitled to specific performance when:

    1. Valid and enforceable contract, definite and certain; 
    2. All conditions met

    3. Inadequate legal remedy

    4. Feasible

  • Employment Contracts: Generally, employment contracts are not specifically enforceable by either the employee or the employer because of the difficulty of enforcement and adequacy of damages

  • Land Contracts: Land sale contracts are always specifically enforceable by the buyer because land is unique and damages are therefore inadequate

    • But if the land has been sold to a bona fide purchaser who purchased it for value and in good faith, the right to specific performance is cut off

71

 

Quasi-Contract


 

  • General Rule: Even if the contract were to be found unenforceable, nonbreaching party may be entitled to some time of restitutionary recovery. Restitution is a remedy used to prevent unjust enrichment.
  • Quantum Meruit: restitution for unjust enrichment damages awarded in the amount considered reasonable to compensate a person who has provided services in a quasi-contract relationship.

    • Action for quasi meruit is usually one to recover the reasonable value of services rendered by one party to another

       

       

  •  
  •  

72

 

Recission


 

  • undoing of the contract (restitutionary remedy)

  • General Rule: Plaintiff effects a cancellation of the contract by prompt notice of the recession and tender back of the consideration, or by lawsuit in which the plaintiff seeks rescission and offers to tender back the consideration. 

  • Key is whether performance is still remaining from each of the contract parties (executory)
     

 

 

 

73

 

Grounds for Recission


 

Grounds for rescission (must exist at time of making the contract):


  • Mutual mistake

    • Mistake to be a basic assumption on which the contract was made; and 
    • The assumption must have a material effect on the agreed-upon exchange

    • The party seeking avoidance must not have assumed the risk

  • Unilateral mistake


    •  

      Need a fact showing the nonmistaken party had reason to know or a very or a very extreme mistake

    • Must be as to a material fact

    • Only grounds for rescission if the nonmistaken party knows or should know of the mistake

    • If the mistake is basic and the mistaken party’s hardship outweighs the detriment to the nonmistaken party’s expectations under the contract

  • Misrepresentation


    •  

      False representation;

    • Intentionally, negligently, or innocently made;

    • With the intent to induce defendant into relying on the representation;

    • Which defendant in fact relies upon to their detriment

74

 

Reformation


  • General Rule: Remedy by which the court alters or modifies a written instrument, such as a contract or deet, to make it conform to the parties’ previous understanding 
  • Requires a valid prior agreement

     

75

 

Grounds for Reformation


 

  • Mutual mistake of fact regarding whether the instrument conformed to the parties’ intentions

    • Scrivener’s error 
  • Unilateral mistake where one party knows the instrument contains an error but the other party does not

  • Mistake of law as to the legal meaning of terms

  • Fraud