Notes starting Sunday, August 28, 2011

CONSIDERATION
Reading for Monday, August 29, 2011
Pg. 60-70 Consideration: is the interaction between the parties productive and worthy of any effort of enforcement? So what about gratuitous promises? Are they unproductive? Donative Promise Principle Eisenburg our social world is richer when donative promises remain outside the scope of legal intervention. Gifting cannot be mandated by law! Contracts are alienated and impersonal values, reducible for the most part to commodities and prices. The world of gift should be protected.

Maughs v. Porter Viriginia Supreme Court of Appeals, 1931. 157 Va. 415, 161 S.E. 242. Parties Plaintiff is the winner of a new Ford car by way of raffle at Frys Spring in Charlottsville, Va. The defendant is the advertiser of the Frys Spring Real Estate sale. Facts A person over the age of 16 years old and white won a new Ford by way of drawing after attending a real estate sale at Frys Spring. She paid the auctioneer $3 for consideration of the promise to give her the car. The car was never delivered, nor was the money that the car was worth. This case is for a breach of contract. Procedural Posture The plaintiff filed a notice of motion to sue for breach of contract, and at this motion the defendant filed a general demurrer. The demurrer was sustained. The plaintiff has been allowed a writ of error. Issue Does this contract, through a listing of an ad in the newspaper, appropriate any consideration for the proper deliverance of the car promised? Is the transaction constitutive of a lottery? Holding This contract DOES include sufficient consideration to support the giving of the gift by the advertiser, BUT the lottery system that was in place to award the car was an illegal method of giving a gift, so therefore the method was illegal.

Reasoning The defendant demurrer to the notice of motion, allgeging TWO GROUNDS FOR SUMMARY JUDGMENT: 1. The matters alleged in the plaintiffs notice of motion fail to show a sufficient consideration for the defendants promise. 2. The scheme alleged in the notice of motion is a lottery or raffle, and any contract which might otherwise arise therefrom is illegal and unenforceable. Is there consideration? They use the example of the tramp. If a rich man tells her to go buy new clothes, is her walk to the store enough consideration? Was this the PRICE OF THE PROMISE, or a CONDITION IN A PROMISE. Is the walk to the store a legal detriment to the tramp? This walk is just enabling her to receive the gift. The object of the defendant unquestionably was to attract persons to the auction sale with the hope of deriving benefit from the crowd so augmented. THE ATTENDANCE AT THE SALE WAS A SUFFICIENT CONSIDERATION, BUT THE LOTTERY WAS ILLEGAL. As for the first ground of demurrer, it is found in favor of the plaintiff, but for the second, it is in favor of the defendant. Consideration consists of either a benefit to the promisor or a detriment to the promisee. To constitute consideration, the benefit of detriment must be bargained for. sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. Hamer v. Sidway Court of Appeals of New York, 1891. 124 N.Y. 538, 27 N.E. 256 Facts William E. Story, 2d, was promised by his uncle at Samuel Storys wedding that he would give him $5,000 if he did not drink, use tobacco, swear, or play cards or billiards for money until he was 21 years of age. In a letter to his nephew, he outlined all of this and told him he would also pay him interest until the day he felt that he was eligible to receive the money. The claim against the estate was denied by the executor. Parties The plaintiff in this case is the nephew of William Story, Sr. The defendant in this case is the executor of the estate of William Story, Sr. Procedural Posture In a court at special term in the county clerks office of Chemung county, the court entered a judgment for the plaintiff. In the general term of the supreme court in the 4th judicial circuit, there was a judgment for the defendant. This is an appeal from the general term. Issues Was there sufficient consideration in the promise of William Story Sr. to his nephew to give $5,000 plus interest at the behest of his request for him to abstain from gambling or alcohol before 21? Holding

Yes, there was sufficient consideration that the nephew restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncles agreement. Judgment of the special term is affirmed. Reasoning The defendant executor contends that the contract was without consideration to support it, and is there invalid. He says that the nephew was not harmed by not using drugs and alcohol, but instead he benefited, but the uncle received no benefit. English law defined consideration as something that consists of a right, interest, profit, or benefit accruing to the one party. The many definitions of consideration are the waiver of any legal right at the request of another party. The plaintiff abandoned for a period of years upon the strength of the promise of the testator to get the $5,000. Order appealed from should be reversed. Baehr v. Penn-O-Tex Oil Company Supreme Court of Minnesota, 1960. 258 Minn. 533, 104 N.W.2d 661 Facts Plaintiffs leased a gasoline filling station to Kemp, doing business as Webb Oil Company, under leases. Kemp was purchasing the company. Kemp became unable to meet payments due to defendant and the defendant took over the business. Plaintiff was owed rent money for the lease of the filling stations, but he never received the money. While in Florida, he tried to contact the defendant on several occasions but never received the money. He threatened to sue, but never did. The case started on December 1st and did not begin lawsuit until June 2nd. This case arises out of the obligation to pay the rent. Parties The plaintiff is the owner of the gasoline filling stations, and the defendant is the owner of Webb Oil Company. Kemp was the agent working for Webb Oil Company and was purchasing the company from defendant until his financial situation precluded him from doing so. Procedural Posture The district court tried all issues and held that the plaintiff should win. Then, the district court granted the defendant a motion for judgment notwithstanding the verdict, and ordered a new trial. This is an appeal of that grant of motion NWSV. Issue Was there any consideration for the promises to constitute a contract that said that the defendant was to pay the rental fees to use the filling stations? Was there a contract for the plaintiff to pay the defendant for use of the filling stations? Holding No, there was not a valid contract because no consideration was involved. Reasoning There was a promise, as there was assurance that the rents would be paid. This doesnt necessarily mean that a contract was made. The test is one of consideration, or a promise that is the product of a bargain. In other words, a negotiation resulting in the voluntary assumption

of an obligation by one party upon condition of an act or forbearance by the other. This ensures that the promise has been uttered intentionally. Plaintiff said that his failure to institute suit immediately upon learning of Kemps assignment to defendant permits an inference of an agreement to forbear from suit in consideration for defendants assurance of payment of rents to plaintiff. Plaintiff said he was NOT going to sue because the defendant said he would pay. But it must rest on something more than this. The court found that this just suited his own personal convenience. The defendant did not think he was securing forbearance by plaintiff to pay. Basically, the plaintiff didnt commence an action against the defendant in timethey just lazed around and did it at their own convenience.

Class Notes for August 28, 2011

Consideration: Lets suppose that Aunt Tilly gives the boy cash, $2,000. Lets say two days later she is wanting the money back. Can she get it back? But there is NO consideration. Pg. 62 Spooner v. Hilbisch Hamer v. Sidway There was consideration in this case. The uncle promised that if the nephew gave up certain rights he had, that he would pay him money with interest. These were drinking, using tobacco, swearing, and playing cards and billiards for money. So what about pg. 67, where Gilmore says that NY rejects the so-called bargain theory of consideration. When is a bargain present? When is a bargain present? When is there a bargain for exchange? When something is sought by the promisor and given by the promisee in exchange for the promise. Why is the refraining sought by Uncle Bill in exchange for his promises? There is the words used on pg. 64, IF What if the nephew had previously vowed to himself that he was not going to do this anyways? It would not have been consideration because there was nothing sought. Argue against yourself Well, you could say the uncle was paying the boy to CONTINUE to refrain from these. There was SOMETHING SOUGHTthe continuance of the refrainment. This nephew was going to refrain anyways But still made a resolution? So can we say it was GIVEN?? What authority are we going to consider? See Page 65Pars. Cont. *444. In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise. What about pg. 66 on the Restatement of Contracts. Does is show that it is consideration? It does not OF ITSELF induce a performance return promise does not prevent the performance or return promise from being consideration for the promise. This could be seen as the motivator of the refraining. So it is consideration. So lets say we had exactly the same case except that the uncle just said you have to refrain from tobacco. The nephew DID refrain from tobacco. Consideration or not? Yes

considerationit doesnt matter the extent which rights have been given up. Pg. 63 Carlisle v. T&R Excavating ?????????-----Give me an example of pretextual consideration: A subject touched on in the comments of restatementspg. 66Unless both parties know that the purported consideration is mere pretense, it is immaterial that the promisors desire for the consideration is incidental to other objectives and even that the other party knows this to be so. A situation in which Napoleon gives Aunt Tilly something BEFORE she makes the promise that has nothing to do with the promise. Lets say the nephew gave Aunt Tilly a new diamond necklace. The promise wasnt made for the diamond necklace. Maughs v. Porter Runs a newspaper ad that says white people over 16 have an equal chance of winning a new Ford. This is about the consideration doctrine. A NEW FORD CAN BE YOURS IF YOU COME AND WIN THE DRAWING. The winner must not come to the auction. What about the tramp hypothetical? She must just walk around the corner to get the clothes. Courts do not inquire into the adequacy of the right given up. There was no consideration just because she walked to the store. So should there be consideration just for coming to the auction? There is a difference: A mere condition of the gratuitous promise vs. a request for consideration . Why Is Maughs distinguishable from the tramp case? The lot seller benefits from the people to coming to the auction, but the giver of the clothes to the tramp does not benefit from the womans walking around the corner to the store. What if the winner went to this thing, was definitely not going to buy a lot, would there be a benefit? Yes, there would be a benefit even if that person wasnt going to buy. The more people that came to the event, the more important and exciting the event would look. What if the man who told the tramp to get clothes owned the store? Would there be a benefit from the tramp going into the store? Well, she is making the store look busy, so this may be a benefit to him. This is not a recipe book! It must be decided per case. Lets say the court says in this case (about the Ford) that the tramp hypothetical is NOT DISTINGUISABLE. Is there any other consideration in this case? Yes the man could be taking the tramp out on a date? What happened when the winner got to the auction? She placed her name in the ballot box. This was a something, because she did something by placing her name in the box. So is this consideration? NO IT WAS NOT SOUGHT BY THE PROMISOR. Was the lot seller really seeking people to put their name in a hat to win a car? What else did the winner do? She gave the auctioneer $3. Was this a something? Yes. Was it sought by the promisor? No it was given to the auctioneer. This wasnt sought by the lot seller. Was it given by the promisee? Yes. Was it in exchange for the promise? Who did she pay the $3 to? The auctioneer. Maybe the auctioneer was an agent of the auction-holder. Maybe this $3 was pretextual. So does the Winner of the car win?

No, because it was non-enforceable because it was a lottery. Lets say that my mom is in Columbus and she is very sick. She calls me and says if you come over to visit me the hospital I will give you my gold-plated Packer helmet. I drive over, and she says Im not giving you the helmet. I sue her, do I win? Yes, you have consideration because you drove to see her in exchange for this. Argue against yourself. Use the case of the tramp there is no benefit to the defendant. Because in the case of the tramp, the tramp had to go to the store to get the coat. To get the helmet, I had to drive to Columbus to get the helmet. They are both transportative means from getting to a place to receive a benefit. Argue against yourself. There is an obvious benefit to your mother for the visit that you paid to her. How else do you distinguish the two cases? You will have to pay for gas to get to Columbus. How does this relate to Maughs? In the case of the tramp, she just had to walk around the corner. I had to drive all the way to Columbus, so I incurred greater risks. What if I didnt hear the message but went anyways? What is different about Maughs v. Porter and Hamer v. Sidway? In Maughs, the court says that it must benefit the defendant. In Hamer, it must just be a right that is given up. Maughs is about a gratuitous promise. Quote: It is important to have as many arrows as you can in your quiver.

CONSIDERATION IMPLIED FORBEARANCE, UNILATERAL CONTRACTS

READING NOTES for 8-28
Pg. 70 81 What is pretext? Or PRETENSE

A desires to make a binding promise to give $1000 to his son B. Being advised that a gratuitous promise is not binding, A writes out and signs a false recital that B has sold him a car for $1000 and a promise to pay that amount. (invalid, sham) A desires to make a binding promise to give $1000 to his son B. Being advised that a gratuitous promise is not binding, A offers to buy from B for $1000 a book worth less than $1. B accepts the offer knowing that the purchase of the book is a mere pretense. (invalid, nominal)

Pg. 70

Neuhoff v. Marvin Lumber and Cedar Co. United States Court of Appeals, First Circuit, 2004. 370 F.3d 197.

Facts The Neuhoff family alleges that Marvin breached an oral contract to provide replacement windows for free. Marvin never replaced the windows. Procedural Posture The US. Court of Appeals held in Marvins favor. Parties The plaintiffs are the Neuhoffs, and the defendant is the Marvin company. Issue Was there sufficient consideration, as the plaintiffs contend, in the improvement of Marvins reputation by giving replacement windows? Was there sufficient consideration given to the contract when the Neuhoffs forbore to assert their legal claims? Was the time and labor expended in assisting Marvin a valid consideration for the contract? Holdings The court held that there was no consideration in the forbearance for not asserting the legal claims, there no was no consideration in the forbearance for the assistance to Marvin, and there was not consideration in the improvement of Marvins reputation. Reasoning The court said that the abandonment of a claim believed to be well founded is the surrender of a thing of value and is sufficient for consideration. BUT this promise to forebear to sue must be written or in express terms or by fair implication. There was no promise to replace the windows to induce the Neuhoffs to relinquish a claim against Marvin. Thus, there is no implication that a forbearance has occurred. Springstead v. Nees Supreme Court of New York, Appellate Division, 1908. 125 App. Div. 230, 109 N.Y.S. 148 Facts The children of Nees, a deceased individual, are quarrelling over the inheritance of their fathers properties. The father held by deed to him as trustee for the Atalnic Avenue Property. He was the trustee holding the property for the benefit of Sophia and George. The children thought the father owned the property in fee, and not by trust. Sophia and Georgia said they would give their share in the Sackett property if they dont bother them about the Atlantic Avenue property. But then they sued the other children to recover their proportion of the money from the sale of the Sackett Street Property which they gave up the rights to. Procedural Posture The trial court gave judgment for the defendants dismissing the complaint with costs.

Parties The plaintiffs are the three children who did not have in trust the property at Atlantic Street, and the defendants are George and Sophia. Issues Did the promise of Sophia and George to the other children of the testator have adequate consideration? Holding The court held that the promise did not have adequate consideration because the plaintiffs and defendants had made no compromise between the parties affecting rights which the plaintiffs might have in that property. Reasoning The plaintiffs had no right in the Altantic Street property ANYWAYS, because the father had it in trust to the specific children. So they werent actually giving up anything, therefore the promise was no good, and the land still belonged to George and Sophia. There is no evidence that there was a compromise of a disputed claim. The consideration must rest on FORBEARANCE TO EXERCISE A LEGAL RIGHT. But no legal right existed. Dissent The dissenter said that based on the reactions of everyone at the meeting, that there was some color of a valid claim by the plaintiffs to the atlantic avenue property. Also, he said there might be a claim that the title was never passed or the deed delivered.

Corbin on Contracts Forbearance NOT consideration IF the forbearance is made with knowledge that the claim is invalid. If this were the case, we could make claims against everyone and then forbear to sue. The claimant must be asserting the claim IN GOOD FAITH. must not be threatening suit for purposes of vexation, or in order to realize on its nuisance value. Promise for Promise as Consideration: Baehr v. Penn-O-Tex Oil --- a bargained for PROMISE is a sufficient consideration. He promised to forbear to sue in exchange for defendants promise to pay the rents. Springstead v. Nees a bargained for promise not to bother the children about their property would have been sufficient consideration. Fuller, Consideration and Form Bilateral contracts Half completed contracts need courts Executory contracts (ones that are either COMPLETE or INCOMPLETE) --does not need courts. We must know the kind of exchange in a bilateral exchange.

Von Mehren, Contracts in General Sequential character of much economic activity. The absence rights would bias those which happened first. Not efficient De Los Santos v. Great Western Sugar Company Supreme Court of Nebraska, 1984. 217 Neb. 282, 348 N.W 2d. 842 Facts There is a Hauling contracted executed by the plaintiff and the defendant of this case. The contract said the contractor should transport as many beets as may be loaded by the company. The terms of the contract were from October 1, 1980 to February 15, 1981. In December 1980, the defendant fired the plaintiff from hauling the beets. The plaintiff claims that he was entitled to continue to haul until all of the beets had been transported to the factory. Parties The plaintiff is the contractor, and the defendant is the hirer or the contractor, or Great Western Sugar Company. Procedural Posture Issue Did the Company breach the contract that they made for the plaintiffs to haul the beets when they fired them from the service of delivery? Holdings The court held that there was no contract that could be enforceable because there was unilateral power by the hirers of the contractors to decide how many beets were to be delivered. Reasoning The dates specified did not constitute a promise to allow the plaintiff to transport all the beets during that time, but outlined a time period in which the contract would be in effect. The court said that an agreement, which depends upon the wish, will, or pleasure of one of the parties is unenforceable. The agreement does not specify a quantity of beets to be transferred. So, there is no enforceable contract and the promisor is not obligated to accept any services from the promise and may terminate the relationship at any time without liability other than to pay for the services accepted. The right of the defendant to control the amount of beets loaded was a right to terminate the contract at any time. Wood v. Lucy, Lady Duff-Gordon Court of Appeals of New York, 1917. 222 N.Y. 88, 118 N.E. 214 Facts

The creator of fashions hired a man to license others to use her as endorser for their product He had the exclusive right to place her own designs on sale, or to license others to market them. He received half of all profits from any contracts he made. The exclusive right was from April 1, 1915 for one year, and renewed unless terminated with notice of 90 days. Without his knowing, the defendant placed her endorsements on items and withheld the profits. Parties Defendant is a creator of fashions who licenses others to use her name as endorsers of a product. Plaintiff is the man who the plaintiff hired to turn her vogue into money. He had the exclusive right to place her endorsements on the designs of others. Procedural History The Appellate Division held in favor of the defendant, an the special term of the Supreme Court said that the plaintiff should win. The Court of Appeals said that the plaintiff should win. Issues Does the agreement of employment between the creator of fashions and the marketer constitute a valid contract? Holdings The court held that a contract existed because there was a promise to use all reasonable means to place the defedants endorsements and market her designs. Reasoning The court says that if there is a promise to use reasonable efforts to place the defendants endorsements and market her designs, there is a contract. The court holds that this is fair to be implied. Since the defendant gave an exclusive privilege, and the acceptance of this was an assumption of duties. Also, the terms of the defendants compensation are significant. If he didnt do this, she would never get any money!

Class Notes 8/30/2011

Baehr v. Penn-O-Tex Oil Company Owner of a filling station contacted to collect rent on the property, but the agent running the property never paid. When the owner returned from Florida, he initiated a plan to sue. If you want widgets and contract with someone to provide you with widgets for a certain amount of money, there is consideration. SERVICE FOR A PROMISE. Is there a promise? The creditor of Kemp promises to pay rent to the lessor of the filling stations. Is it enforced? o No. Why? o There is no consideration in the promise to pay the rent. o What is the something sought by the promisor and given by the promisee in exchange for the promise? o The lessor said that the consideration in this case was NOT TO SUE.

There is no indication that the promisor didnt want to be sued. It was given by the promisee. The promise to pay rent was made independently of the lessor suing or not suing. This promise doesnt make consideration. o Why else is this something not the sort of something that constitutes consideration? The promisor didnt sue because of his convenience. o In thinking about Baehr, two things should be in view: 1. The court alludes to the underlying policy of the consideration doctrine. What would Fuller have done? o Substantive reliance? o Formal cautionary and channeling functions How do we distinguish this from the Aunt Tilly case? How does this fit together? Formula for considerationand Fuller. o Something sought by promisor and given by the promisee in exchange for the promise -- This is the legal text o There are some cases where the legal test is ambiguous! o Sometime you might want to write into your brief this underlying purpose. Does the underlying purposes of the doctrine cut against the reasons for enforcement? 2. Is this court right? Restatement on pg. 66. Was not suing something that was done SOLELY as a matter of personal convenience in the lessors mind? May the promise had a little bit to do with it? Springstead v. Nees Heirs to fathers property are fighting to determine who has the rights to the property left by the father. The Atlantic Avenue property has been given to only 2 of the kids through a trust. The other kids werent happy. Sophia said If you dont bother us about the Atlantic Property, we will let you have our share of the Sackett Property. Was this promise made? It doesnt matter. There would have been no consideration even if the promise were made. Start: There was no consideration, so we dont have to give up the property. The other kids say they had to give up something. They Didnt bother the kids about Atlantic. They didnt assert any claim to the trust property. Why was there no consideration? Because the promise wasnt worth anything? No. Because the other kids had no right to the Atlantic property. Dissent: Why does he dissent? He says possibly the other siblings did have a claim. Corbinpg. 73

Its good enough that if you forbear on a claim its good enough if you believe you have a claim. Forbearance as consideration has special rules! 1. Honest belief test 2. Honest belief plus a colorable claim Which rule does the court use in Springstead? Honest belief test Which rule does the court use in Neuhoff? Honest belief plus a colorable claim Marvin v. Marvin Lumber and Cedar Co. Marvin promises to replace the windows if they become in disrepair. Consideration alleged: 1. I wont sue. a. If you have promised in express terms, and it is made in good faith. b. What if he just said I will help you repair the windows. i. Is there any consideration? Well---1. Why was the lumber provider going to help them? 2. He was going to help them, not do it for them. 3. Condition of a gift? ii. Is the helping being sought? 1. No its a gift. 2. Time and labor expended 3. Benefit to reputation. De Los Santos v. Great Western Sugar Company The plaintiff is a contracted hauler that was loading beets to haul for the Great Western Sugar Company. The contract had terms: Haul beets as loaded by company from piles at the stations of the company, and unload beets at factories. Terms are 10/1/1980 02/15/1981. Who is suing whom? The trucker is suing the beet owner, because he felt that he should be able to haul beets for longer, and therefore there is no breach of contract. What is the defense? There is no breach of contract. If the situation was flipped. If the trucker did not fulfill the promise, the beet owner can sue because the trucker agreed to haul such tonnage of beets as may be loaded. Why is there no consideration? There is no mutuality of obligation, so there is no consideration! It was illusory. The beet owner didnt have any obligation to call the trucker at all.

Reading Notes for 8.31.2011

Pg. 81-90 Hiring prima facie a hiring at will. Burden is on the plaintiff (servant) to renew by proof an extended period of servancy. Weiner v. McGraw-Hill, Inc. Court of Appeals of New York, 1982. 57 N.Y.2d 458, 457 N.Y.S.2d 193, 443 N.E. 2d 441 Facts A man who worked for Prentice-Hill for four years was looking towards joining the staff of the defendant McGraw Hill. The McGraw Hill representative ensured Weiner that he would not terminate employees just cause, and he would be ensured job security. Weiner then signed an application on a form that said his employment would be subject to the provisions of the handbook on personnel policies and procedures. They said, the company will resort to dismissal for just and sufficient cause only, and only after all practical steps toward rehabilitation or salvage of the employee have been taken and failed. HOWEVER, if the welfare of the company indicates that dismissal is necessary, then that decision is arrived at and is carried out forthrightly. Weiner placed reliance on this contract by forfeiting accrued fringe benefits and a salary increase proffered by Prentice Hill to convince him to stay. He worked there for eight years, all the while turning down other job offers. In 1977, he was fired. Weiner seeks damages for breach of contract by wrongful termination. Procedural Posture The trial court upheld the complaint and overruled the motion to dismiss, then the Appellate Division reversed and dismissed the complaint, and now it is in appeal at the Court of Appeals of New York. The Court of Appeals says that the plaintiff stated a cause of action. Issues Did the plaintiff, though not engaged for a fixed term of employment, plead a good cause of action for a breach of contract against his employer? Did a legal, enforceable contract exist between McGraw Hill and Weiner? Holding Yes, there was a legal, enforceable contract between McGraw Hill and Weiner. Yes, the plaintiff made a valid claim of breach of contract against his employer. The motion to dismiss is overruled. Reasoning Defendant says that the form signed by the parties was just an application for employment and nothing more. Defendant also says that its oral promise of job security was in no way binding on it. The court says that the plaintiff stated a cause of action. The need for mutuality is not ALWAYS ESSENTIAL to a binding contract. Just because the plaintiff was not bound to stay on at the firm doesnt mean that the contract is void because of lack of mutuality. The court says mutuality is not necessary when a promisor receives other valid considerations. The court gives four reasons why there was evidence of a contract. 1. Plaintiff was induced to leave Prentice Hall with the assurance that McGraw-Hill would not discharge him without cause. 2.

This assurance was incorporated into the employment application. 3. Plaintiff rejected other offers of employment in reliance on the assurance. 4. Appellant alleged that, on several occasions when he had recommended that certain of his subordinates be dismissed, he was instructed by his supervisors to proceed in strict compliance with the handbook and policy manuals because employees could be discharged only for just cause. In this case there was other consideration, specifically the passing up of other job opportunities and the giving up of his original job.

Mattei v. Hopper Supreme Court of California, 1958. 51 Cal.2d 119, 330 P.2d 625 Facts Plaintiff was a real estate developer planning to construct a center on a tract adjacent to defendants land. Finally, after many tries, there was an agreement to sell the land adjacent to the developer. Defendant submitted an offer, and plaintiff accepted the offer. The agreement was written on a deposit receipt. The plaintiff wanted the clause about Subject to Coldwell Banker & Company obtaining leases satisfactory to the purchaser. And that there was 120 days to examine the title. He did this so he could make sure he got tenants before he paid the full amount. Defendant then decided he no longer wanted the deal, and after plaintiff found tenants the defendant refused to sell. Issues Was there a breach of contract by failing to convey real property in accordance with the terms of a deposit receipt which the parties executed? Did a contract exist at all between the developer and the adjacent landowner? Procedural Posture In the lower court, the defendant was declared the winner. The plaintiff then appealed. The Supreme Court of California found in favor of the plaintiff, showing that a contract had been made and breached. Holdings Yes, there was a contract, which was not illusory or lacking mutuality of obligation. The contract was then breached by not selling the property. Reasoning The inclusion of the clause Satisfactory to the plaintiff raises the basic question whether the consideration supporting the contract was thereby vitiated. The promises must be mutual in obligation, meaning both parties must have some legal obligations. Without this, it lacks consideration and no enforceable contract has been created. If one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration. In satisfaction claims, one cannot claim dissatisfaction arbitrarily. This is determined by the reasonable person standard. The second kind of satisfaction clauses are those involving fancy, taste, or judgment. The court then said that a contract is not illusory if one is dissatisfied with the contract, but only if it is disappointed with the performance of the contract.

Kirksey v. Kirksey Supreme Court of Alabama, 1845. 8 Ala. 131 Facts The plaintiff is the wife of defendants brother. The defendant wrote a letter to the plaintiff expressing sympathy for the death of the plaintiffs husband and child. In this letter, the defendant asked the plaintiff to move in with him, and if so, he would provide a place to stay. After abandoning her property the plaintiff moved in. After two years, he moved her into an uncomfortable house in the woods and then finally told her to leave. Issues Was there a valid contract through the letter send by the defendant? Should the plaintiff receive compensation as she had relied on the contract to her detriment? Holding The court found that the judgment for the plaintiff should be reversed because the letter was not a contract, but merely a conveyance of a gratuity. Rule A gratuitous promise is not enforceable even when a person has relied on this to their detriment.

Class Notes 9.1.2011

Consideration Doctrine: The rule is : For a promise to be enforceable, there must be consideration for a promise. Also, consideration is something sought by the promisor, given by the promisee, in exchange for a promise. In applying, there are various categories of problems that arise, and the law speaks to it. Sometimes, with a rather ambiguous voice, sometimes in complicated, sometimes ambiguous. There are various categories of cases that pop up involving the consideration doctrine. These categories of cases might be put together in somewhat different ways. You must make a list: put your head around the idea that certain sets of facts may present a past consideration problem, and others may present a problem of pretextual consideration, or so-called pretense consideration. Others may present a preexisting duty rule. You want to think about Paradigm Cases: --Offer and acceptance. --Consideration. --etc. Articulate classic cases. It isnt memorization; it is flexing your mental muscles. Think of FIVE CLASSIC CASES OF CONSIDERATION.

Subtlties may emerge because there are various classes of cases where there are not consideration: --pure gift promise Gratuitous promise. -Recitation of consideration? Napoleon case. -A conclusive presumption that consideration was given. Review:------------------Gift promise w/ consideration Tramp hypothetical it was a step someone had to take. Thank-you consideration The tumbleweed caseNapoleon gave a tumbleweed to thank someone. Pretextual Consideration Restatement 81 about pretense. Pg. 66 mere pretense. Phony bologna! What about the worthless lamp case. There is no consideration because what is transferred is not valuable? NO. Worthless consideration Hardesty case Lamp invention. Was it worthless? Pre-existing Duty Rule You cant use this as consideration because you already had a duty to do it! Use the Ajax case on page 87. Situations where something was not sought Situations where the something was not given. In the Baehr case, the not bringing suit, was not sought by the promisor. Pg. 67the forbearance of suit was just out of convenience! Forbearance of legal claims In this category, we have forbearance of a legal claim, there is a Special rule, or an exception. Now it is not enough for a Something to be promised and given in exchange Also, some jurisdictions have different variations of this exception. The claim has to be at least colorable--At least objectively non-frivolous. Is it a good idea to have this exception to the general consideration rule? For example Corbin says in his excerpt, there probably isnt any difference in the subjective and objective rule. The factfinder is likely to conclude that the claim was no believable. Corbin says this claim is frivolous, therefore forbearing on that claim is not consideration. If you have a subjective consideration, then it needs to go to the fact-finder. Illusory promise Sub-categories of the consideration doctrine. Mutuality of obligation Sub-category of the consideration doctrine. See graph in notebook for Contracts.

Lady Duff-Gordon There consideration is not there, Lady Duff-Gordon says. She gave the promise not to place endorsements, but what about the representative? He didnt give anything??? COURT SAYS NO They say it is not illusory, but there was an implied promise by the representative to use his best efforts to place endorsements. Mattei v. Hopper The employee/employer agreement Was there any consideration? The employer gave a promise to dismiss only for cause, but they say the employee didnt promise anything! The court says YES HE DID GIVE SOMETHING! He gave up other jobs, his old job, etc. It is implied.

--Past consideration cases I will give you this book because I like people who sit here. Or the case of Napoleon and his aunt giving him something because he has been a Good boy. -Quote: Oh no! Im supposed to be like him? What an abhorrence of fate worse than death!

CLASS NOTES 9.6.2011

Mattei v. Hopper Subject to Coldwell Banker and Company obtaining leases satisfactory to the purchaser. Does this give the purchaser so much power that it makes the contract illusory? What about the $1000 deposit? Pg. 85, P2 It is important to see what the exception is. The court says there is an offer and acceptance. Deposit receipts are CONTRACTS. Even if the promises they include are conditional. The court is saying that a reasonable person would conclude that the signing of this paper is a contract. Last paragraph switches to consideration o Pg. 86 the court grapples with the issue of consideration. o The court says that this is NOT A CONTRACT LACKING MUTUALITY! o What is the limitation: Now the court goes to contract interpretation. The court says that in evaluating what commitment somebody like the buyer made, by incorporating a satisfaction clause, it is an embellishment of the reasonable man standard. o The court then says there are TWO CATEGORIES ON CONTRACTS: Reasonable person satisfaction as to commercial value or quality, operative fitness, or mechanical utility. Those that dont involve mechanical utility, but instead involve taste, fancy, or judgment, the buyer does not have to act reasonably.

What about pre-existing duty? They may have had a duty already! 1. pre-existing contract 2. law! What about the Hammer case What if it was against the law for the nephew to gamble, drink, and smoke. Then, he already had a duty to do those things! Forbearance on a legal claim is consideration only if the right forborn on had some merit.

Why the rule of Haigh v. Brooks surrendering a piece of paper should matter? Does it present an added level of certainty to the law? Corbin on Contracts: What about the lamp invention case ? This is VALUELESS CONSIDERATION. No, this is PRETENSE. A peppercorn really isnt desired by the promisor. Problem 2.5 Unconscionablity. These cannot be consideration, and the contract may not be enforced.

Kirksey v. Kirksey The defendant is the plaintiffs brother in law. The defendant promised the plaintiff that he would give the plaintiff a place to live since her husband died. It is given in express terms. If Then Why is this gift not completed? What do you have to do to complete a gift? You must deliver the deed! But she gave consideration! She moved 60 miles and sold her house. If you were a justice in the majority, what authority would you rely on? The case of the hooker/tramp Condition to a promise. This was just a condition to receive the promise. How would you distinguish this? The conditions arent the same! Less rights were given up. The tramp just walked, the widow moved and sold her land. What about comparing this to Maughs v. Porter? Was it actually a benefit to the promisor? The brother in law didnt not receive a benefit. Argue against yourself. Yes he received a benefit! Emotional health for his brothers wife. Also, the tending of the land will benefit the promisor. Puffendorf Suppose a man has trusted anothers word, and has in some way or other neglected to look to his own necessities. He would say that there was a reliance on the promise! It should be enforced! Back in 1845 the court says NO CONSIDERATION, it is a GIFT.

Ryerss v. Trustees of Presbyterian Congregation of Blossburg The church case Was there reliance on the promise? Yes. Then enforce it. Seavy v. Drake You have a promise of the dad to convey land to the son. The son is suing for specific performance for the executor to give him the deed. The son gave up a note to the father. Is that consideration for the promise? The court is nervous about letting the note being consideration, because he may have give it to him later. JUST LIKE THE TUMBLEWEED CASE. So how can the court enforce this promise? There was consideration in the money he expended in building and constructing o BUT. THIS IS NOT SOUGHT BY THE PROMISOR!... NOT BARGAINED FOR. What would Maine say? o This is LEGAL FICTION. What separate defense does the estate assert? o Is the statute a fraud? o Can you make improvements upon a land, which have been transferred by an oral promise? o How would Fuller have decided Seavy v. Drake? Cautiously? Yes He helped the son, conveyed more land, etc. Well-evidenced? No There is no paper, but YES the son is working on the land! Surely he isnt making this up if the dad watched him build the house. Substantive justifications In particular, sorting between cases of more fair, and less fair. The son has relied a lot. The LAW responds to LEGAL FICTIONS over time by finally, in Restatement Section 90, recognizing a new cause of action. PG. 100. Use this to determine Kirksey v. Kirskey: Is the promise enforceable? ELEMENTS: 1. Promise? 2. Promisor should reasonably expect to induce action a. Or forbearance 3. Of a definite and substantial character 4. On the part of the promisee 5. Which does induce such action or forbearance What about the tramp hypothetical? WAS IT DEFINITE AND SUBSTANTIAL?

Wheeler v. White Was the reliance reasonably foreseeable? Yes Because he told him to go tear down the buildings! So whats happening in this case? The court concludes that there is no contract. Why? Because the contract was too indefinite! YOU DO have a promissory estoppel cause of action Pg. 105 the court quotes restatement section 90.

Class Notes 9.8.2011

Cause of action is available in promissory estoppel even if no consideration. Rules having to do with form: Pg. 189 we learned that sometimes people have a cause of action even if there is not consideration and even if there is not promissory estoppel. That is, there is a promise that is enforceable because of the form in which it is made. Fuller underlying ideas for consideration doctrine and related doctrine. Form based liability is RARE. Seal is no longer used for consideration. EVEN THOUGH IT IS FORMAL. Problem 2-10 pg. 191 Requirement of Exchange: o --a performance or return promise must be bargained for. Option Contact o --In writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time period. Why start this conversation with statute of frauds? What you see here sometimes a promise without consideration will be made because of the formality of the promise. What the statute of frauds teaches us that sometimes a promise even with consideration it cant be upheld because of the absence of formality! Wheeler v. White There is a dissent He thinks the plaintiff should have a cause of action for breach of contract and not just promissory estoppel. There are different remedies for breach of contract and promissory estoppel. Introduced here to indefiniteness.

Some causes of action for breach of contract will not succeed because the alleged contract is too indefinite to qualify as a contract. Back to Promissory Estoppel: Hoffman v. Red Owl Stores He can get past the summary judgment stage When the law is against you, argue the facts!! --Thats what the attorney here did. What is the alleged promise? Red Owl promised Mr. Hoffman that he would have his own Red Owl store under the circumstances that he dedicated certain money. What are the other causes of actions? Breach of Contract? Wasnt there originally a promise? The original promise was too INDEFINITE! (pg. 113) Indefinite Promises: How to distinguish Wheeler v. White? 1. Wheeler v. White was far less indefinite. 2. The Wheelers actually demolished their building, whereas the Hoffmans didnt actually incur any loss. a. Red Owls side: Mr. Hoffman did have a loss! He had to lose his job. b. The jury argued that there was a $2,000 loss in selling the building. 3. At what stage in the contracting process were the parties in Wheeler v. White when they went to court. a. In Wheeler v. White, they had a WRITTEN CONTRACT! b. In Hoffman, they were not even in the contract process. They were still in the negotiation process! What if there had only been ONE assurance in Hoffman instead of a series of assurances? --Well, WHO WOULD SELL their whole home and livelihood based on ONE assurance? --The promisee cannot REASONABLY rely on the promise if the promisor has only made one assurance. --It doesnt matter whether they WOULD or MIGHT set up a store for Hoffman. Lets say youre the general counsel for Red Owl. You get a call in your office from the president of the company. Hes really ticked off because the company has just incurred a substantial financial loss due to the series of events that have occurred. You have to plan for the future, and make sure that this problem doesnt happen again. You got off easy here because the damages werent that great. Tell your agents not to make promises! o How do you tell them? o Put it in their employment contract that they are liable. o You can stipulate what agents can and cannot do.

o Prelimiary contract No contract until we finalize the contract No contract until circumstances are met o MAKE A DOCUMENT! Maybe say INITIAL MEETING You can say No oral agreements are to be binding o What are you going to say?! This initial proposal and any oral agreement is not a promise. Any losses incurred by reliance on any oral agreements are not the responsibility of Red Owl. No reliance on oral agreements is reasonable. No statements made by any agents of Red Owl. No cause of action for promissory estoppel or otherwise. GET IT SIGNED! What is a stronger case for promissory estoppel Elvin Associates v. Franklin or Hoffman v. Red Owl Elvin Associates v. Franklin In the Aretha case, the agreement was written down. Mrs. Franklin should have reasonably expected the producer to rely on her performance. Elvis Presley Case (*IMPORTANT*) Why not a good cause of action for promissory estoppel? It is not reasonably foreseeable to rely on a divorce. There was a second divorce, even AFTER THE ESTATE REFUSED TO PAY OFF THE MORTGAGE. Was there something sought by the promisor? Done by the promisee? In exchange for the promise? Did the mother in law rely at all on Elviss promise prior to it being withdrawn?! Yes, she did! She had already relied on it in the first divorce. She got the divorce in the first place because of the PROMISE BY ELVIS. Local 1330, United Steel Workers v. United States Steel Corporation --Promissory estoppel --taking a property (conversion) --Breach of Contract --Antitrust law --Promissory Fraud Was there a promise? That is the question: pg. 120 Promissory Estoppel Must be a breach.

You cant just move seats. It causes extreme confusion in my mind. Quote

Class Notes 9.12.2011 Quasi Contracts, Implied Contracts In-Fact

Promissory Estoppel I read the wrong thing. Should I leave? Wrapped up last time by talking about 1330 case Bloomgarden introcues business law. Bloomgarden sues for a finders fee. Is he seeking specific performace? Hes seeking financial reward. Hes seeking restitution. What is he seeking? 1. Reliance 2. Expectancy? 3. Etc. In the view of Coenan, it can be seen as reliance, restitution, or expectancy damages. We must focus on the remedy? Or the cause of action? There is an implied in fact contract. There is also a quasi contract. How are these causes of action different? BREACH OF IMPLIED IN FACT CONTRACT. It is a subset of breach of contract. What is a quasi-contract? Usually, if implied in fact contract is rejected, so is the quasi-contract. What is an implied in fact contract? A breach to this is the same as a breach of contract. Court says there are two problems with this cause of action. There was no offer for contract . Why does the court conclude that there is no evidence of an expectation of compensation on the part of Bloomgarden here? He had two opportunities to mention the fee. Not even a peep. Good lawyering happens here! What other evidence suggests that Bloomberg didnt expect compensation here? There was nothing. He didnt say anything and had plenty of time to tell Defendant. Who is Carley? A large shareholder in Bloomgardens company.

Does Bloomgarden want to keep Carley happy? Yes because Carley has a say in whether Bloomgardens business does good. He is the majority shareholder. Does Bloomgarden have any obligation to keep Coyer happy? Bloomgarden wasnt doing this to make moneyhe had many other reasons to do this. What if Bloomgarden told Coyer that he wanted a finder fee? There would be reason to believe, if he told them in advance, that he was expecting compensation. Argue against yourself: (argue that there wouldnt be compensation anywhere): [How is a contract formed that is implied in fact? Pg. 129. When did the cab ride occur? Why does that matter? The cab ride was after the agreement had already taken place. Lets say when they are first sitting down at the table, Bloomgarden is sitting there and says that he likes putting the deals together because that is how he makes his living. Yes there is a contract!!! They should reasonably be able to understand. (argue against yourselfSince he doesnt follow up on the finders fee, ask for it to be arranged in the contract, etc, there is no reason for them to understand.)] Lets say a reasonable person believes that to be I expect a finders fee. This means that there should be an implied contract. Argue that this is wrong. Bloomgarden has already performed the service by bringing them together before there was an offer and acceptance. Think about the timing issue. What about compensation to SDI rather than to himself. Does this matter in the sense that it is an implied contract? He cant make this his own personal claim on SDIs behalf. HYPO: Barney is a painter. He negotiates with Homey, and Barney agrees to paint Homeys treehouse for $1000. Homey agrees to pay. Barney mixes it up on accident by going to the next door neighbors house to paint the treehouse. Does Barney have a claim against the neighbor? There is an implied in fact contract? Barney isnt giving a gift. He is doing it to be paid. The next door neighbor has reason to believe that he isnt doing this as a charitable act. Contract is a function of two people having a meeting. This isnt possible in this case. Might be tough to establish that there is a contract at all. Does that mean the painter looses when he sues the neighbor? NO. HE HAS QUASI CONTRACT TO SUE FOR. Would it be fair for neighbor to benefit by these services without paying for it? He received the services. So it was beneficial. It would not be just. What is What was the treehouse owner doing while he was conferring this benefit? Watching. One setting in which unjust enrichment occurs? Emergency situations. A patient is having a heart attack. The person in the emergency had no opportunity to accept. Very hard for the doctor to assert a breach of contract claim. Can he assert an unjust enrichment claim? Does one have to incur an expense to assert an unjust enrichment claim? If one incurs expense, then there is unjust enrichment. Was the doctor a volunteer? o No o Was he an officious intermeddler?

 YES! Therefore he loses. He cannot assert the unjust enrichment claim. o Why was this a case where we shouldnt get involved? We dont want to discourage doctors. o How about as a matter of fairness. Typically intermeddlers dont get compensated because we dont want to force a benefit on someone. If the person could wake up and decide, He would. But he could not, because he was unconscious. If he was conscious he wouldve asked the doctor for help. Sparks v. Gustafson Plaintiff was a manager for the property of defendant. No claim for unjust enrichment or any claim for a contract. Why a different result here than in Bloomgarden? In Bloomgarden, the helpful friend does not get a recovery. In this case, the helpful friend does get recovery. In Bloomgarden, he said the helpful services was for his company, but in this case, no analogous situation other than getting paid. Did the friend here have any motives for doing the work other than getting paid for it. Did he have any self-interest in this case? He was interested in buying the property, and entered the contract eventually. The property is operating at a loss. There are facts that indicate that the services are being delivered as a gratuity. The court says you have to pay anyways. Is the court applying the same test? Maybe the different result is because the court is not applying a demanding test. Maybe the standard is Alaska is a bit more flexible than D.C. Also there is a different procedural posture. Here, it had won in the court below. Maybe the court thinks this is a factual dispute. In Bloomgarden, this wasnt a factual dispute. What facts distingu

BLOOMGARDEN v. COYER (implied in fact & quasi contract)

FACTS: P met D while arranging to lease office space. D revealed to P that he and his partner planned to develop a waterfront complex but lacked the financial resources. P offered to put D in touch with a majority stockholder in this company.

P put D in touch with Carley and arranged a meeting. At the meeting there was no mention of P being compensated. P arranged another meeting and at the end of the meeting was asked by D what P hoped to get out of this. P replied that he hoped his own company would garner some work. Several months later P asked for compensation for the first time, on behalf of his company, and was denied. He then asserted a claim for himself and was again denied. P then wrote directly to D claiming a fee and was again denied. At that point P commenced suit. PROCEDURAL HISTORY: Ds claim proceeded on the theory that he is entitled to a finders fee by virtue of a contract that was factually implied by custom or recognized as a legal consequence of the transaction. D moved for partial summary judgment on the issue of liability and P moved for summary judgment on the entire case. The court denied Ps motion and granted Ps motion on the grounds that 1) P did not hold the required real estate license; 2) It appears that at the time of dispute P did not expect to be personally compensated. ISSUE: Do Ps transactions with D establish a quasi contract or an implied in fact contract? HOLDING: No. The court is unable to perceive any factual basis on which it could be asserted that, at the time he introduced the parties P looked forward to any finders fee for himself. His silence on the matter during both meetings as well as well as his own statement in the deposition it was always my intent that SDI should benefit not myself personally indicated that at most P hoped to gain some work for his company. It was not until P had done his service to the parties that they were put on notice that a fee was required. D bore their burden as to the nonexistence of any genuine factual issue, and P offered nothing substantial to bar their request for summary judgment. For P to recover on the basis of a contract implied in fact, he would have to show additionally that he looked forward to personal payment for his services, and that the circumstances under which he introduced Coyer and Guy to Carley were such as would reasonably have put them on notice that he had that in mind. There is no basis on which a jury could rationally have found that when he brought the parties together P entertained any thought of a finders fee for himself or that those with whom he dealt held the payment of such a fee in prospect. These circumstances defeated both his implied-in-fact and his quasi-contract claim. Judgment affirmed. REASONING: An implied-in-fact contract is a true contract, containing all necessary elements of a binding agreement; it differs from other contracts only in that it has not been committed to writing or stated orally in express terms, but rather is inferred from the conduct of the parties in the milieu in which they dealt. Such a contract will not be implied unless the recipient knows or has reasonable grounds to believe that the beneficial acts were performed in anticipation of remuneration therefore. A quasi-contract is not a contract at all, but a duty thrust under certain conditions upon one party to require another in order to avoid the formers unjust enrichment. The principles

governing the two remedies differ, though in particular cases they may dictate the same result. SPARKS v. GUSTAFSON (unjust enrichment) Sparks executor of fathers estate. Defendant. Gustafon plaintiff (management services that Gustafson rendered to the estate for maintaining and improving estate property. Unjust enrichment.

FACTS: P was a close friend of the decedent. D represents decedents estate. Decedent purchased an estate which P managed without charge until decedents death. Thereafter he continued to manage the property without compensation with the knowledge and consent of D. Ds property operate at a loss and P often provided his own money to do repairs and pay expenses. D & P signed a purchase agreement to sell the building to P contingent on final details. These were never worked out and building was sold to a third party at which time P ceased to manage it. P filed suit against D claiming that D had breached the agreement to sell the building to P and that P was entitled to recover the funds and services expended on the building under a statutory or equitable lien theory. PROCEDURAL HISTORY: the court found that P had no enforceable lien but that it would be inequitable to allow D to retain the benefits that P has conferred upon the building at his own expense. D appeals courts decision ordering estate to pay $65K damages to P in compensation for management services of decedents property claiming that P failed to prove either element of unjust enrichment. D argues that P gave his services gratuitously without the consent of the estate. ISSUE: Is it unjust to allow the estate to retain the benefits of Ps property management without having to pay for them.? HOLDING: Yes. There is no question the P conferred a benefit upon D. The services that P provided are not the type that one would ordinarily expect as a mere gratuity. His services were the type for which one would ordinarily expect to be paid. Decision affirmed. REASONING: Unjust enrichment exists where the defendant has received a benefit from the plaintiff and it would be inequitable for defendant to retain the benefit without

compensating plaintiff for its value.

Class Notes: 9.13.2011

Posner v. Seder Pg. 142 Consideration court applied in a variety of different contexts. Specialized cases General Cases Unjust enrichment court also applies in a variety. General unjust enrichment Special cases Doctor helping unconscious person case This isnt an intermeddler because there can be no acceptance if the other person is unconscious. Gustafson there was no requisite agreement Can such persons recover? Yes, it can be in Sparks because the acts were not a friendly type of behavior. He expected to get paid. Posner v. Seder: Employee gets paid $17 per week. There is a contract, and there is a breach when he gets fired. But the employee doesnt use the breach cause of action, he uses the quantum meruit cause. Can think of it as breach with two different kinds of damages restitution or expectancy. o The non-breaching party gets to choose. Or you can think of it as breach of contract OR quantum meruit.

One important addendum for restitution to be available, there must not only be a breach, but there must also be a material breach. The question in Posner not if he is entitled to restitution damages or unjust enrichment recovery But what is the proper measure of such recovery? Contract: He can work for $17 per day with no extra pay for overtime. He can work up two hours extra per day for overtime. The court says they are both wrong. 1. If you think about it, the overtime work under the terms of contract doesnt go hand in glove with the other work. Maybe he did all the two months of overtime work before he was fired. Then that would be unfair for the employee. 2. It could be that he hasnt done any of the overtime or maybe just a little bit!

The court says maybe on remand, the jury should figure out what the value of all the work the employee did prior to discharge. It may be worth more than $17 per week, not even including overtime. The critical thing to be done in this case is how to measure the restitution interests. How much did the employee enrich the employer prior to discharge. Is there available unjust enrichment at all? Gay v. Mooney Uncle leaves no will, and thus does not devise a dwelling house to the nephew in laws children. The nephew in law sues. What does he sue for? He seeks compensation for the board and lodging furnish. Why doesnt he sue for specific performance to deliver the dwelling house. OR why doesnt he sue for expectancy damages? Because land cannot be decided on by a contract. It is disallowed because of the Statute of Frauds because it was not in writing. SO. He sues on quantum meruit. The kids were supposed to get the dwelling house, but it is the nephew that gets the recovery. Why does this happen? Why is the suit not in the name of the kids? The estate is being sued for quantum meruit. This is otherwise known as unjust enrichment. The nephew is the one who enriched the uncle!!!! NOT THE KIDS! Hypo: Lets say the nephew bring the uncle in and treats him horrible. Makes him eat bread and listen to Barry Manilow all day. Can the nephew in law recover for unjust enrichment then? o Uncle is still enriched by having a place to live. o The terms of the agreement between the uncle and the nephew in law He should receive as a member of the family. What does it mean to be treated as the rest of the family? Assuming that the nephew hasnt held up his part of the deal, there is no benefit. But has the uncle been unjustly enriched if he accepted it? Why a different result in Gay v. Mooney and Bloomgarden? o Gay v. Mooney is unjust enrichment. Bloomgarden is also unjust enrichment. How would Dobbs answer this question?? Pg. 135 o Why would you say that Bloomgarden is a volunteer and Gay v. Mooney is not? Bloomgarden never asked for anything. Nephew asked for a house for his services. Even though Gay v. Mooney is family, it wasnt a mere gift! o Was the nephew an officious intermeddler? No. He wanted it. o Was Bloomgarden an officious intermeddler? Argument for he is: he introduced the parties, even though Guy and Coyer didnt necessarily want it. He just wanted the money once they accepted this offer and met with Carley. Argument for he isnt: Guy and Coyer wanted it! They needed this to make money Could the plaintiff in Gay v. Money sustained a claim for promissory estoppel?

o There must be a promise made. It must be relied on by the nephew. It must have been reasonably foreseeable for the nephew to rely on the promise. There must be a breach. All of these are met for the nephew. o There may be a problem. Was the promise enforceable since it wasnt in writing? Britton v. Turner Kelley v. Hance In both cases, the plaintiff is the breacher of the contract. In one case, the breacher wins. In the other case, the breacher loses. These cases remind us: very different things happen in different opinions.

Kelley v. Hance, pg. 144 Concrete sidewalk builder starts working on a sidewalk. What if the builder had built 120 feet of the 140 feet sidewalk?

In this case, there would have been substantial performance. A case in which a breaching party may recover is when there is substantial performance. Other rhetoric? Breaching party may recover if the non-breaching party has retained or ACCEPTED the benefit. But what about land? You cant just give up the land. There is a contract for PER RUNNING FOOT. Cannot recover because there is no divisible contract. The trench isnt the end product that the homeowner is looking for Its just not all there. You may be able to say there is acceptance if there is some sort of use or employment of that trench.

The critical move in this case is that the builder doesnt fall into any of the categories. NO RECOVERY!
Britton v. Turner In this case, there is day to day work. In Kelley, there is a contract for an item A sidewalk. In Kelley v. Hance, the court sets up all of the possible claims, and then rejects them. Then, in Britton v. Turner, the court asks a question and then answers it. Then they gave a series of reasons, and decide the best answer is to allow the employee tor recover even though there was a breach. Is what the employee in Britton did substantial performance? o We need to do research. He worked for 9 months! In Kelley, he just dug a trench. What about divisible contract? o Yes, it would be easier. The employee cannot recover on a breach of contract theory. o They can recover on a divisible contract theory. It is unequal not to say unjust. To treat a person who has done a little to a person who has done a lot is not fair. It is perverse. The naughtier person is treated less than the less naughty person.

Allowing unjust enrichment isnt unfair. All they have to do is hire someone to do the rest of the work.

Hypo: I promise to build you 600 statues of Peter Appel. I build and deliver 400 of the statues, but then I quit. You pay me nothing and I sue you for recovery. You can return the statutes! Yes, I can win. There is acceptance by retention of the statues. Land cannot be given back. There is a trend in the law. It is not to say you breached so you get nothing. We are massaging the rules to allow the breaching party to recover. Read the Perillo excerpt: pg. 137

Class Notes: 9.15.2011

Mills v. Wyman -- jurisprudential reflection of Parker. There is a struggle between adherence to defined rules and the pressures to accomplish fair results. Son who is 25 years old returns from a voyage on a ship and is extremely ill. The plaintiff caregiver cares for him for a little more than 2 weeks at which point the son dies. The father wrote that he will pay the expenses. In a class sense, is there any consideration? In a classic sense, NO. It had already been promised. Did the caregiver give something? Yes. Was that sought by the promisor? We dont know, because he didnt know what was going on. Was the caregiving given in exchange for the promise? No, because he was just being cared for. Hypo: Lets say Mrs. Newberry is 50 years old. 20 years ago, Newberry and Coenan agreed that he would lend her 1,000 dollars that she would repay in a year, 20 years ago. He never collects, and she never pays. Twenty years later he sees her, and asks about the money. She says go ahead, do not let that worry you, I will pay you the $1,000 dollars. Is this contract enforceable? No, because the statute of limitations has run. Argue against yourself. Use Mills v. Wyman. If you have a debt that has been discharged by bankruptcy, but you promise to pay it, is it enforceable? Yes. If the statute of limitations has run on a debt, and later you say you will pay it, is that enforceable? Yes. The court says that even though there is no classical consideration, the later promise reviving the debt makes the contract enforceable. In this case, it isnt like a statute of limitations or a debtor in bankruptcy.

Pg. 164 Boothe v. Fitzpatrick A bull has escape, and a good Samaritan finds the bull and takes care of it. The bull owner discovers the bull in the care of the Samaritan and say he will pay him for the services. Is that promise enforceable? Yes There is material benefit. Would there be unjust enrichment, assuming there was no promise to pay. Yes- because the finder took care of it for the owner. Argume against yourself the finder of the bull is an intermeddler. Argue from Boothe v. Fitzpatrick that Webb v. McGown is correctly decided out of a fiortiori. Saving someones life is far more important than saving someones bull. Which would you rather have? Bull or son? So use Booth v. Fitzpatrick to decide Mills v. Wyman. I would rather have my son than a bull. Use Restatement 86 to decide Mills v. Wyman. Wasnt the care for the son a gift? What about Booth? It was a gift to him There is no promise he would show up. Fuller pg. 171 Even in the absence of an unjust enrichment claim, a promise for past benefit received claim will succeed. In the Bull case, was the benefit received by the promisor? Yes. In Mills v. Wyman, was the benefit received by the promisor? Yes, NO, maybe. The father got the benefit of the son. Webb v. McGowin Could there have been an unjust enrichment? 1. It was forced officious intermeddler a. Seems like a non-doctor who helps in the street. b. He was a volunteer. 2. It was a benefit received by one Maybe this is one of those cases where even though there wouldnt be an unjust enrichment case, there would be a breach of a promise for past benefit received. There WAS a subsequent promise!

The court enforces the promise to pay the block navigator. So why a different result in Herrington v. Taylor? (The injured ax diverter) o The distinguishing factor is that the plaintiff Webb was dependent on the income. o What authority do you rely on that the probability of reliance makes it a stronger case of authorizing a breach of contract. You could use promissory estoppel claim. Reliance on a promise for a benefit. Must be enforced. o Why else might it matter that there had been more than 8 years of payment other than the likelihood that there was an induced sense of reliance? It shows a moral obligation that he wanted to pay him! He kept paying every week for a while. What would Fuller say is the purpose of the consideration doctrine? o Is there evidence that he acted cautiously? Yes he thought about it after the man got hurt for him. He paid for eight years! Yes he acted cautiously. The promisor has both acted with caution AND theres evidence that the promise was made. Comment to Restatement of Contracts 86 Various factors that court should take into account. Notice how different this is from Aunt Tilly. (there is either consideration or not) Part performance Webb and Herrington --Some of the payment had occurred in Webb. --A small sum had been paid in Herrington. Formality of the promise Webb and Herrington --Almost a month had passed after the action in Webb. --he had time to think about it. --immediately, the promise was made in Herrington. Specificity --It is more specific in Webb (block navigator case) --Why does this make Webb better? The specificity shows the caution that was used in the making of the promise. Pg. 166-- Oberer o No two cases are exactly alike. o There is language in Herrington v. Taylor, but we can distinguish cases. o My case for past benefit received is distinguishable from Herrington v Taylor because no two cases are exactly alike. Weve seen that Herrington v. Taylor is distinguishable from Webb v. McGowin even in jurisdictions that recognize consideration for past promises. How about Mills and Webb? Lets assume that Webb has already occurred. Is Mills reconcilable with Webb? What about in light of Restatement 86.

o Part performance? There is part performance in Webb v. McGowin. No part performance in Mills. o Character of benefit? The benefit in Webb was better. He saved the life of someone. The benefit in Mills was just a son that he saved. o Formality In Webb, there was more formality. o Passage of time In Webb, he cautiously thought about the promise. In Mills, he wrote the letter immediately. What if in Bloomgarden, a month after the cab ride home, Coyer called and said well pay you 50,000 dollars. Would Bloomgarden have a contract for past benefit received? If you you dont sit in your seat, Ill never get to know who you are!... Oh well, who cares. --Professor Coenan

Class Notes 9.19.2011

Edson v. Poppe Promisor loses. There are two Poppes in this case. William Poppe is the one that makes the promise. George Poppe is the promisee. Defenses asserted by the land owner 1. there was no consideration 2. There was no cause of action. The well is dug without the knowledge of the land owner. There is past consideration. Did the promisor make any other promises? What was the response? He denies generally and specifically each and every allegation in the said complaint, except such as is hereinafter specifically admitted. What is the theory of the well-digger in suing the land owner? The land owner made a promise to pay! The defendant denies that he made any promise at all. The case goes to the jury that finds for the driller. Would the well-digger be able to sue for unjust enrichment? He didnt get a chance to reject this! Officious intermeddler! The landowner cannot recover on an unjust enrichment claim. How do you respond? The landowner specifically ratified the acts of his said tenant in having the said well drilled. As far as I knew, the tenant invited me on and I could do it! The landlord didnt know. There is a full year between the well digging and the promise. He had plenty of time to respond!

The court precedes on the assumption that there isnt an unjust enrichment claim, but maybe there is a past benefit received. Should they have enforced it? Would the drafters of the restatement have enforced this promise? Are all promises for past benefit received as long as they werent a gift? They also say it cannot be disproportionate to the benefit. THIS CASE IS NOT A GIFT AND IS NOT DISPROPORTIONATE. Apply the restatement: (Factors for past benefit received) 1. Is the benefit received substantial and definite? a. Yes, the benefit received was! b. Argue against yourself Use Webb v. McGowin Substantial would have been to a human life! Here it is just a well. 2. Is there a formal contract? a. He just saw the well and promised to pay for it. b. There is no indication that the promise is in writing or notarized. c. Why do we care about formality? i. Fuller would say: It is more reasonable to enforce promises. He has to deal with fairness. Is that why he is concerned with formality? Cautiously Yes it was a year! Well-evidenced not very well evidenced. Not very detailed. Substantive justifications 3. Part performance? a. No part performance. 4. Reliance of the well-digger a. No reliance. He just built the well. It is so close to an unjust enrichment claim! The promise just tips it over. Boothe v. Fitzpatrick The bull case Would this be unjust enrichment? No He had no chance to accept the benefit.

Contracts and Torts

Lets say that Coenan makes a promise to fix my turtle aquarium. He promises to fix it for free while I am out of town. He never shows up, the turtles freeze, and he sues me. Can I recover for breach of contract? What do you need for breach of contract? 1. Promise 2. Breach 3. Consideration No cause of action for breach of contract. Do I have a cause of action for torts? It must be a duty imposed by law. How do we determine this? What such promises do impose duties and what are those duties.

Yes! If he is a professional who is licensed to fix turtle machines. Lets assume that he is a professional turtle repair person. The court differentiates between nonfeasance and misfeasance. So no, I could not win for no performanceonly if he did it wrong. There is discussion about the plaintiff electing between contracts and torts. Could I have sued for promissory estoppel? 1. a promise reasonably expected by the promissor to induce action or forbearance 2. action or forbearance by the promisee in justifiable reliance on the promise

(i.e. detrimental reliance)

3. injustice can be avoided only through enforcement of the promise. Why did he sue for negligence? Because there was a misfeasance. Did he do the contract? Yes What if the contract did not say he had to adhere to the law of physics. Breach? What if you went to a car repairperson to have a repair done, but he doesnt fix what is broken. Is this a breach of contract? Some contractual duties are implied. So yes! In cases like Lucy v. Lady Duff. As I read the Prosser and Keeton excerpt on page 179, how did I feel? Wow, it might make a big difference if I sue in contracts or in torts. Why in Mauldin v. Shefferd does he sue in torts? He can get punitive damages. In White v. Benkowski, we learn this. In Mauldin, there is a case for $500,000. He hopes we felt: 1. How would you have felt reading this excerpt before you started law school? 2. There are still some things we are shaky on. You should focus carefully on the first sentence. The American courts have extended the tort liability for misfeasance to virtually every type of contract where defective performance may injure the promisee. Going back to Torts and Contracts: Hargrave v. Oki Nursery Pg. 180 Know the elements for fraud: a representation of an existing fact; the speaker's knowledge of its falsity; the speaker's intent that it shall be acted upon by the plaintiff; plaintiff's ignorance of its falsity; plaintiff's reliance on the truth of the representation; plaintiff's right to rely upon it; and consequent damages suffered by plaintiff. What is the representation: there is a representation that the vines would be sold without disease. The false statement has to be made with the knowledge, recklessness and regard of the falsity of the statement.

If you have elements for a broad cause of action, assert it. If you have elements for a breach of contract, assert it. If you elements for a tort, assert it.

Class Notes 9.20.2011

Statutory warranties Express warranties (2-313) Merchantibility warranty (implied warranty) (2-314) Warranty of fitness for particular purpose (2-315) There may be state regulatory laws in place, Strict liability for torts Federal regulatory laws in place for consumer trade. Keith v. Buchanan What causes of action does the buyer assert? 1. breach of express warranty a. The court says yes. b. Why? The court says that there was an affirmation of facts. i. There was a brochure that says that it is seaworthy! 1. Lets say the brochure says that the vessel is awesome. Is this an express warranty? a. No, because this is merely an opinion. 2. Why is seaworthy different from awesome? a. The buyer wanted a seaworthy boat. He relied on this. b. Argue the other side. i. Why does it matter that a statement in a sales brochure? Opinion or affirmation of fact? 3. Is this an affirmation of facts or just an opinion? (seaworthy) a. What law makes us realize that this is a description? b. In the comment of the uniform commercial code, it says that a presumption as any affirmation of fact is intended to become a basis of the bargain. 4. See pg. 194 opinion indicators a. Specificity? i. Seaworthiness isnt specific? ii. Seaworthy is kind of like awesome! iii. You must talk to experts to see what seaworthy means. b. Equivocal? i. There is a lot of testing It is for sure a good boat. c. Experimental in nature? i. No, it has been tested already! It works good. 5. What if it was an oral statement by the seller? a. Stronger case or weaker case for the buyer? b. There needs to be a written document.

c. Now argue against yourself i. If a salesperson is talking to someone who is buying the boat, he is being very specific about this boat. This is a warranty. c. The fact needs to be a part of the basis of the bargain. i. Is this an affirmation? ii. What are the sellers argument that this is not an affirmation of fact? 1. The buyer had an expert come on! 2. Why didnt this waive the express warranty? a. There was no testing in the water! b. He cant say by just looking at it it is not seaworthy. d. What about the breach of implied warranty of fitness for a particular purpose? i. What is the particular purpose? 1. To use the boat in the ocean? ii. In this case (particular purpose), you need reliance! 1. Reliance in express warranty = not an element. 2. Reliance in implied warranty = an element! iii. Did he rely on the seller? 1. Call your client to the stand, and ask him whom he relied on! 2. At least, even if they dont believe him, you have enough evidence there. iv. Did the buyer here tell the seller that he was relying on him? 1. He didnt tell the seller! 2. Argue against yourself a. He is selling it with a brochure! 3. Say you are at a hardware store to buy some tulip bulbs. You say you need some tulips that wont die or freeze during the winer. You buy them, and they freeze during the winter. Do you have a breach of implied warranty of fitness for a particular purpose? a. Did you rely? i. Yes you relied. 4. Lets say you need 16 Zippo 65 tulip bulbs so they wont freeze during the winter, and you tell the store clerk that you need these. He gets them to you. Do you have a claim now? a. Maybe, he knew your purpose b. Did you rely on the seller? i. No, you knew what you wanted Webster v. Blue Ship Tea Room Cause of action: breach of implied warranty for merchantability (2-314) Are they a merchant? Yes, they deal in the goods of what they are selling in this case. Are these goods merchantable? Are they fit for the purpose of eating? The courts say the goods are merchantable. Why? This is history! They are relying on the history of what fish chowder is. How is fish chowder ordinarily served?

If the court does this now, then the historical food fish chowder will be dulled down into an insipid broth The haddock and potatoes were in chunks Does this matter? She saw they were in chunks, so she could have expected it! What if it had been a piece of gravel? The court says we should be able to anticipate a fish bone. But gravel should not be expected to be in your chowder. The oyster case it is so well known that there might be some oyster shells What if the pebble would have entered in the side of the fish? The whole reasoning here is NOT JUST ABOUT FISH BONES. What about products liability?

2. breach of implied warranty of fitness for a particular purpose 3. Could he have sued for breach of warranty for merchantability? a. Are these goods ones that would pass without objection in the trade under the contract description? i. There is an objection! b. Also, was the boat fit for the ordinary purposes for which such goods are used? i. This was not fit for ordinary purposes. It was a yacht but cannot be driven in water. c. Was he a merchant? i. Is this business one that sales sailboat? He is not making an isolated sale of goods. What about crunchberries? Does the court settle this right? Well, a Crunchberry isnt real. If it was a crunch berry maybe things would have been different. Are these little things berries? No Argue against yourself Yes, if it looks like a berry it is! Sleepnumber beds? Pg. 199 o What about the statement that says they are maintainence free? o There is a presumption that statements are going to be representations of fact. o How would you distinguish the crunch berry case? (we are arguing that maintenance free is an affirmation of fact) When we argue that something is maintenance free, we are being very specific. Even assuming that we have an affirmation of fact, it still has to be a basis of the bargain. What is the basis of bargain? If it is one of the inducements for the purchase, it is a basis of bargain. Give me an example when there is an affirmation of fact but it is not a basis of bargain.

Class Notes 9.23.2011

approximately 10.468 x gross income estimated income 1,600,000, price $16,750.00 The Statute of Frauds Hawaii statute of frauds is on page 206. 2-201 sets out of the requirements for a sale of goods (UCC) How is this statute of frauds different from the basic statute of frauds. Questions on page 207: 1. does the statute of frauds apply or is the case within the statute? 2. If the case is within the statute, does a memorandum, note, or other writing satisfy the statute? 3. If the case is within the statute and there is no writing, is there an exception? 4. Does any other doctrine mitigate what would otherwise be the effect of noncompliance?

When there is a typo, the court can correct it. Here is Sterling v. Taylor, there is a typo. The buyer doesnt agree with it.
Sterling v. Taylor: Does the statute of fraud apply to this? o Yes, it is a contract for the sale of lands. o GIVE AN EXAMPLE OF ONE THAT IS NOT WITHIN THE STATUTE OF FRAUDS The case of the fish chowder that was tainted Tea Room case The first case the nose job case in Sullivan v. OConner did not fall within the statute of frauds. Is there a writing that satisfies the statute of frauds? o The majority says there is no writing. o But there is a memorandum here. o Is there a writing at all? At least two. The Memorandum and the letter o Do the writings in this case evidence a contract? There is evidence of a negotiated price. There was a document called the Contract o Was there signature? Yes, the letter was signed. No, the memo was only signed by the party looking to sue. So why isnt the document passing the statutes of frauds here? o There is a price term. But why doesnt it satisfy the statute of frauds? o The two parties are asserting two different things

o The price is ambiguous! o What if two bishops came into the court and testified that the buyer was right? Would the buyer win in this case? The court says that the plaintiffs testimony cannot be suffice to let them win. This is extrinsic evidence. The majority says that the writing is totally clearthe purchase price is what it says! The dissent disagrees. What facts support the conclusion that the contract can fairly be read to see purchase price that isnt fixed but that is sliding? o This new price that the buyer is looking to get is contrary to the stated price. o We have the word APPROXIMATELY. o Also, the word estimated is there. How else would you argue that reading this language in the contract does not clearly lead to the fact that the purchase price is not what the specific words are? o The seller gave to the buyer the rent rolls. So they determined the price based on the rent rolls So why did the parties put this price term in the contract at all? o If there is no price term, there could be no contract. o Why did they put the price in there then? o If the parties meant to fix a specified price, why would they put a formula!? Should we just disregard all of that language? The dissent says the contract language isnt clear! Parol evidence rule o A case that involves not being able to contradict the plain unambiguous terms of the contract. o Would this case come out differently assuming there wasnt a statute of frauds? The prices are still at odds with each other. What if, the writing didnt say what it said. What if it said that the seller will sell pursuant to the formula agreed on by the parties? o Buyer says there is a writing that satisfies the statute of frauds. o Why is this hypothetical case stronger for formula? There is no contradiction in this case, if there is just a saying that there is a formula. o Do we have another problem? You are the seller. Argue that the contract is still unenforceable. What has to be set forth with reasonable certainty? What is the essential term? THE PRICE. Is this set out?! o If you are arguing for the buyer, what is your best case? Extrinsic evidence set out in Preble v. Abrahams We could admit other evidence outside the writing. o How could you distinguish Preble (pg. 220)? In this case, it is showing that the portion of land that was LEFT was the land in question. o What about Cal. Lettuce Growers v. Union Sugar pg. 219 The formula here was derived from industry custom and parties past practice. o Argue against yourself for Cal Lettuce Growers. There is more extrinsic evidence here. There is past practice from the parties, and it is industry custom and parties past practice.

o o

o o

o o o

o o

The purpose of the statute of frauds is to prevent frauds. In the case of the sale of the land in Sterling, there is more chance for frauds. Extrinsic evidence can only remove ambiguity. It cannot set the elements for the contract. What if the writing said: Seller agrees to sell the five parcels for the least income multiplier formula previously agreed to by the parties. Is this a better case? Yes, it is a better case. But not much better. We dont know what the multiplier is. We need reasonable certainty. The court here suggests that there could be an exception. If the seller admits that this is the price, then it could be! Also, if the seller said the price was meant to be left open, it could be had. What if the buyer had already paid $5,000 as a down payment. Would that change the result? Like Seavy v. Drake Part performance on the contract But this wouldnt be substantial. The down payment doesnt prove what the buyer wants. Can the buyer get the $5,000 back? Yes, pursuant to unjust enrichment. GAY V. MOONEY Is the majoritys opinion consistent with the underlying policy of the statute of frauds? Even if the statute of frauds is satisfied here, that doesnt mean the buyer wins. The buyer still has to prove that the agreement was what he wanted. Distinguish the Rooster case. Pg. 205 There is no writing at all in the rooster case. Here, we have writing. How would you respond if you were the seller? We dont want the party not being charged to contribute the evidence that is important. There is a lot of language in this case that says the statute of frauds shouldnt be applied in an overly-formalistic way. What if this case was shifted around and the buyer was being sued by the seller? Could the seller win against the buyer?

Uniform Commercial Code 1-103 Construction of UCC to promote its purposes and policies; Applicability of supplement principles of law a. the UCC must be liberally construed and applied to promote its underlying purposes and policies, which are: a. to simplify, clarify, and modernize the law governing commercial transactions b. to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties c. to make uniform the law among the various jurisdiction

A memorandum of a contract for the sale of a real property must identify the buyer, the seller, the price, and the property. Promissory Estoppel 1. a promise reasonably expected by the promissor to induce action or forbearance 2. action or forbearance by the promisee in justifiable reliance on the promise

(i.e. detrimental reliance)

3. injustice can be avoided only through enforcement of the promise. Everytime someone does something good, Im going to eat a doughnut.

Class Notes 9.26.2011

TA: (Teaching Assistant) Jacob Reif, 2L Next class 1. warranty and 2. statute of frauds pay particular attention to the UCC statute of frauds (2-201) being careful to read the comments. Also, read 1-103. Last time, we worked through the Sterling case by direction attention to the four questions that Summers and Hillman suggest we focus on as we grapple with the statute of frauds. Now, lets do the same thing with the Schoor case. Schoor v. HHCC Is the attorneys alleged promise to pay the developers debts within the statute of frauds? o No. This is a promise for his own benefit, and no contract can exist. Applying the text, is this case within the statute of frauds? o No. What provision of the SOF is said to apply here? o Is a will a contract? There is a characteristic that a will shares with a contract. Commitment to give something to someone else, but of course this doesnt make a will a contract. o Which one of the categories of contracts on pg. 206 is this within? To charge any person upon any special promise to answer for the debt, default, or misdoings of another. o Lets assume that this is a contract within the SOF. Is there a writing that satisfies the SOF? o No writing is there It was an oral promise. It was conceded by everyone that the promise was not in writing. o That was not smart for the creditors in this case. He should not have conceded that there was no writing. It is there and signed. o Argue that the letter does satisfies the SOF.

He gives the check and the letter which say there is good faith and there had been a promise that had been made. The letter doesnt supply the specific terms of the contract. There was no price terms that had been agreed upon. The letter does not indicate that he would honor all the debts of the corporation. Would the Sterling court decide this case the same way? Here, the alleged promise isnt contradicting what is in the writing. Does the letter evidence a promise to pay all of the debts? How would you distinguish the Fiste case? There was no written contract and it was just overheard by witnesses. Is that the key distinction?

How far does the writing have to go in providing evidence of a promise? Pg. 213 and pg. 223 Assuming that this contract is within the statute of frauds and assuming that the writing does not satisfy the statute of frauds, is there an exception to the statute of frauds that applies here? In this case, the statute of frauds should apply because it was mainly desired for the promisors benefit. o We have to look at the facts. One fact that the court relies on is that the lawyer was an owner of the debtor Development Company. What other facts? Also, the corporation owed him money as an attorney. He wanted this money! What other facts does the court rely on? The future profits that he will make are large. What other facts? o There are tests out there, but the court finds them not very useful. So the court turns to legal materials for more discreet guidances and finds pg. 212 184 restatement. Make an afortiori argument that the exception should apply and it was correctly decided on the comments pg. 213. Because S wants repayment of himself, he is acting out of selfinterest and the statute of frauds should apply. The statute of frauds says that it cannot enforce a promise to answer for the debt of another if it is not in writing, so why is this promise enforceable? It is enforceable because he is obviously acting out of his own self-interest. In which case is this same situation stronger? o It is stronger in Schoor because he had many more reasons that show his self-interest. In the comment on pg. 213, there is only one reason that would show that he is acting self-interested. o In this case, he has interest as a creditor, attorney, and owner as opposed to just a creditor; hence, he has a case for enforcement of the contract as an a fortiori argument.

He had the intention in keeping the corporation afloat. Why can you argue that he had a stronger more justified reason to keep the corporation afloat than he did just want to be nice to the corporation? Why did the surety agree to guarantee the debts of the factory operator? o Maybe he had both interests in mind. o Here, we have a different situation because the maker of the surety is a minority shareholder but he is a lot more. He is a creditor, an attorney, and a manager for the corporation. One thing that shoud be going through your mind is does this main purpose make sense? It is in tension with the text of statute of frauds! The SOF is about evidence, caution, and distinguishing enforceable and nonenforceable contracts. McIntosh v. Murphy Question 1: Is this promise within the statute of frauds? o The question is the question of time. The performance of an agreement not performed within one year. o We know that this is a contract is an alleged contract to employ someone for one year. o The oral promise was made, but it didnt begin until one day later. But, he didnt start until that Monday. So when was the actual contract made? o The trial judge says that Sundays do not count. The Statute of Frauds does not say dont include Sundays. o Assuming the contract is within the Statute of Frauds, is there a writing here that satisfies the statute? No. There is no contract in writing. Lets say youre the contract for the employee. What are you going to look for? What are you going to investigate? Is there any sort of writing at all? o Paycheck Was there an employment application? Was there a note put in the employees file? The question then becomes Is there an exception to the statute of frauds? Yes There is equitable estoppel. Was working for the employer for 2 month the relevant reliance here? No, it was moving to Hawaii. How did the plaintiff employee rely here according to the majority? By moving 2000 miles to Hawaii. How do you respond? The plaintiff moved all the way to Hawaii! He was already going to go to Hawaii. The court says that one thing were going to do in cases of this kind is that were going to look at the factors set forth in the restatement 139. Give me a case when there would be clear and convincing evidence of the making of an oral promise. --

Lets talk about Elephants Unlike McIntosh v. Murphy, the person in California calls a person in Hawaii. The person in Hawaii is a pet wholesaler. The person in California says, I want to buy your elephant Blumble. The seller says, I will sale you Blumble for $5,000, and the buyer says, I accept. The buyer goes onto explain that the buyer is planning to move to Hawaii to open an elephant zoo to display Blumble, he relocates in Hawaii, he goes to the seller to tender the purchase price, and the seller says no sale. Can the buyer sue the seller for breach of Blumble contract? o No, because the sale was not in writing. The Statute of Frauds applies here. o Blumble is a moveable good. o It was just an oral contract, and Section 2-201. There isnt much you can do with this. Look at exceptions: Specially manufactured? Admitted in the pleading that a contract was made? Payment has been made and accepted? NO TO ALL EXCEPTIONS. o Whenever you interpret the UCC, you should be thinking hard in terms of liberal construction. o Which case does an exception apply to the statute of frauds? McIntosh v. Murphy! Can the buyer in the hypothetical about Blumble rely on McIntosh v. Murphy? Yes He relies on the seller, and he can sue for estoppel. o What about the Dumas doctrine? This is the case about the radio station saying they are going to hire the DJ for the radio, but then his case for promissory estoppel and breach of contract didnt go through because there was no promise! o Why did he assign 1-103? o We must be able to demonstrate and construct a fortiori arguments. o The most important part of 1-103 is subsection B! Buyer can assert a promissory estoppel!... This sucks in all the principles of law and equity. o Argue that the buyer cannot assert a promissory estoppel case. UNLESS DISPLACED BY THE PARTICULAR PROVISIONS OF THE UCC Is a promissory estoppel a principle of law that has been displaced by article 2? If you are the buyer, then NO. If you are the seller, then YES. Look at Uniform Commercial Code 2-201 It is displaced by the Formal Requirements and the Statute of Frauds! o 3 A,B,C are there for exceptions. This case has met none of these. None of these set forth a promissory estoppel claim.

o Promissory estoppel is inconsistent with the particular provisions of the act. o What other language o Expressio unios the expression of one thing implies the exlusions of the other. o Except as otherwise provided in this section 2-201 o There is nothing in this section that allows promissory estoppel. Argue against yourself. o Argue you that the buyer should be able to assert a promissory estoppel case under 1-103 o There are no other exceptions provided in 2-201 for promissory estoppel. How can you still assert this? o You could look at the underlying purpose, but you need some text! o There is nothing you can see in 2-201 that says promissory estoppel cannot be asserted. Look at subsection 2B. It says the contract is not enforceable under this provision beyond the quantity of goods admitted. o The promise of sale needs to be in writing. o 2-201 is beside the point because it talks about what is necessary for a contract to exist and be enforceable. WE ARE TALKING ABOUT A PROMISE IN PROMISSORY ESTOPPEL!!!!!! NOT A CONTRACT!!!!!!!!!!!!!!! o The critical role in the statute the actual words of the statuteare very important. So what is the right result? Should the buyer be able to assert the promissory estoppel? Even though it is enforceable through a promise in a contract? Can you disagree? Theory should be that promissory estoppel precludes the claim of statute of frauds. Are courts going to view promissory estoppel as a free standing cause of action or will they view it as a substitute for a contract? Courts are divided on this point. Is promissory estoppel a contract? What kind of damages should the buyer get? In McIntosh v. Murphy, there were expectancy damages awarded.

Example: Lets say that in McIntosh v. Murphy, the contract wasnt for 1 years employment, but it was for employment for the rest of your life. Would that contract be within the statute of frauds? The statute of law does apply. This contract is for more than 1 year. Is a person going to live for more than one year?? Lets say that in the Blumble case, the buyer gets off the phone and writes a check for 1,000 to the seller by overnight mail, and the seller deposits the check. The buyer, 5 days later, moves to Hawaii. Does this satisfy the statute of frauds? --Is this a contract within the statute of frauds? The sale of Blumble for 5,000? --Is there a writing to satisfy the statute of fraud? The check is a writing.

--The writing has been signed by both the buyer (on the check) and the seller (the endorsement of the check) --Lets assume that this isnt a contract. --What now? --Does any exception apply??? --Yes Look at Subsection 3C. There is a payment that has been made and accepted! --Argue against yourself Well the check was only for 1,000. This wasnt the total amount of the price for the elephant. --BUT there is part performance! See Comment #3 on 2-201 on pg. 29 of the UCC. --Is the kind of case that the framers had in mind? They talk about just apportionment. Blumble cannot be divided! So this does not mean that this does not apply to the sale of Blumble? Does the 3C exception apply then? Look at 2201 3C. Questions pg. 232 1. If consideration is satisfied, is it necessary to satisfy any otherwise applicable statute of fraud requirement? a. Yes Consideration requirement is just one requirement for all contracts to be enforceable. 2. How many theories of obligation have we studied? A lot. 3. Is the statute of frauds applicable to breach of contract? a. Yes. 4. Is the statute of frauds applicable to promissory estoppel? a. Not in every jurisdiction For example, Illinois. Dumas pg. 230 5. Is the statute of frauds applicable to unjust enrichment? a. No Look at Gay v. Mooney. The unjust enrichment cause of action is assertable precisely when the statute of fraud precludes the breach of contract cause of action. 6. How about the warranty cause of action? a. No Warranty can be implied. Implied warranty. b. There is no writing requirement. 7. What about the express warranty cause of action? a. No, there can be an oral agreement or a written agreement 8. How about for negligent malfeasance? 9. How about the cause of action for promissory fraud? a. I promised orally to sell you land, and at the time of making that promise, I am lying and know I will not make that promise really. You rely on this promise. Uniform Commercial Code 1-103 Construction of UCC to promote its purposes and policies; Applicability of supplement principles of law a. the UCC must be liberally construed and applied to promote its underlying purposes and policies, which are: a. to simplify, clarify, and modernize the law governing commercial transactions b. to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties c. to make uniform the law among the various jurisdiction

b. Unless displaced by the particular provisions of the UCC, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provision. Which case does an exception apply to the statute of frauds? McIntosh v. Murphy! Can the buyer in the hypothetical about Blumble rely on McIntosh v. Murphy? Yes He relies on the seller, and he can sue for estoppel.

Class Notes 9.29.2011

Today we take a sharp turn. Remedies Remedies are the reason you go to court. We need to have a strategy. Dont sue if its not worth it. Lets shift from the different causes of actions to the remedies assuming you can establish a cause of action. Pound, pg. 236 1. Money damages substitutional redress a. Reliance damages b. Restitution c. Expectancy Do the majority and dissent disagree about which damages they should get? No They both think that the owner of the land should get expectancy damages. Everyone agrees! Not like fixing someones face. They disagree about how to measure the expectancy recovery. Groves v. John Wunder Lessor of land is leasing the land and the gravel plant for $105,000 to the lessee, grader. The promise is for the rocks and the lease of the land, and the grader says he will grade the land while he is on it. The lessee breaches. There needs to be a contract. There is a contract. There needs to be a breach. There is a breach. What damages does the owner seek? Cost of completing the grading. It is in the range of $60,000 What is the purpose of expectancy damages? To put the person in the position as if the contract had been fulfilled. The lessor is saying that he is in the position he was in before. If the contract had been fully fulfilled, the land would be worth approximately $12,000.

The court itself is not very careful here. In reality, if the purpose of expectancy damages is to put the non-breaching party in the place they wouldve been in if the contract had been performed, what is it? The court here is saying that the land now is worth $0! They are saying that the land would be worth $12,000 if the contract had been fulfilled. So they are saying to get them to what it is worth now is to pay him $12,000. The difference between getting $60k and $12k is huge. The majority decides that the proper measure of damages is the cost of completion measure. The dissent says that they should apply the difference in value measure. They both give reasons: Pg. 245 Challenge the last paragraph: The owner of the land wanted to have it graded so he could possibly sell the land for $12,000. Pg 251 The trouble with the prevailing opinion is that here plaintiffs loss is not made the basis for the amount of his recovery but rather what it would cost the defendant. This just assumes the conclusion. How do we measure the plaintiffs loss? The majority feels that we need to come up with more elaborate reasons that it is just a loss. The dissent says in measure the value of the loss relies on the Bigham case. Pg. 245. How does the majority get around it? The measure of damages of the earlier tort case was used in one for breach of contract without comment or explanation to show why. How does the majority deal with Bigham? Why? It was tort damages, and it shouldnt be! It is a breach of contract. Did the court in making this extension applying a tort measure of damages give close attention to what it was doing? No. Why would you want to use Morgan v. Gamble? The court says that substantial performance was correctly stated. The court applies the WHOLE value of the work that was supposed to be done. Why do we care? Morgan is more recent, and it represents the Pennsylvania. We need to look at the cases that they used. The majority says that Bigham isnt even persuasive! There is a newer case. What about the City of St. Paul case? Those with municipal corporations are no exception to the general rule. How does the dissent distinguish this case? What is different between a contract made with the government and a contract made like this one? What are the measure of damages the dissent advocates? Expectancy measured by the value of the property. The court says if we call this differently than others, then we wouldnt be treating people the same, they would have different treatment. There must be equal treatment of litigants. If you are the dissent, you would say they are not on equ al footing! One is governmental and one is private!

Hypo: I make a contract with you, you are going to build a life sized statute of Paul Kurtz on the top of my chimney in my house, and you go out there and start working and Im paying you $1,000. You think oh this is more expensive than I thought, so I just quit. Lets say the cost of completion is $5,000. If you actually complete this work, though, the value of your house would be significantly reduced. So do you know get $0 of $5,000? You should get the $5,000. Would the majority agree that you should get the $5,000? Yes. Would the dissent agree that you should get the $5,000? Yes. How is this case fundamentally differentiate than John v. Wunder? The value of the statute doesnt necessarily exceed the value of the land. In the Wunder case, he wanted to decrease the value of his property. In the hypo, we wanted to decrease the value of our house. The majority distinguishes the case in which you build an ugly monument on your land. This case, Wunder, has value outside the market value of the property. It has value of the rocks. What about the manure case in Minnesota? Pg. 243 The court says that the tenant cant decide what is best for the land. How would the dissent respond in the Wunder case? But The court says I dont care manure spreader, you have to pay!... If youre the dissent and youre trying to get around the manure case, how can you argue? You could say there is a more precise identification of purpose. What if the farmers put the manure out there to make the land better? That purpose is advanced ZERO if the work is done. The owner of the land wants the manure spread, because he is a farmer. Should we second guess the farmers judgment about making the land more fertile? What is the best case for the dissent? What about the dry oil well case on pg. 249? What would the majority say? B cant get the costs for sinking the well. In the oil case there was no performance on either side. Does that matter when we are measuring the proper expectancy? In the oil well case, the owner has made the land available to the oil well digger. The owner may have even paid the oil well digger. What troubles the majority about locking in the land owner about getting only the $12,000, which is the value of the land when the suit is brought? It is in Minneapolis St. Paul. If this grading work isnt done, is the $12,000 going to take care of possible future appreciation? NO. That wont help the cost to fix it to its normal usage. How would you decide the Groves case and why? Why is Peaveyhouse stronger than Groves for awaring cost of completion damages and make a list of why it is a weker case than groves.

Class Notes 9.3.2011

Usual damages for breach of contract is expectancy damages. BUT Groves is a new question because it involves expectancy damages that are much more and disproportionate. In Peevyhouse, we see the court going the other way. Think about Groves. You are looking at Groves from a long distance; what do you see? You see that there isnt any statute that answers the problem or case directly on point. Remember the point from Oberer no two cases are alike. There are some analogous cases the manure case. Pretty good case to argue from. The dissent has the oilwell case from the restatement illustrationthe case in which the court awards the difference in value damages. So with the authorities being inconclusive, decision-makers have to look some place else to figure out how to decide this controversial question. So where else do decision-makers look? Lets start from the perspective of an economist that is concerned with efficiency or social utility. Which measure do they prefer? o They would prefer the $12,000 figure because it is less. They would want to award $60,000 because there is an incentive for the grader to complete ones work. Why? That is what the grader had agreed to do. An efficiency minded economist wants to persuade people to do what they contracted to do because there wont be any litigation to sue to get the money back later. o Efficiency minded economist would say that 12,000 would be better! If you spend 60,000, youre only getting a 12,000 benefit! That is not economical. o What about an economist who is interested in making contracts? Contracts create value and get gains from trades. Such a person wants to encourage the making of contracts. This person is going to focus on the 60,000 measure of damages because it gives more of an incentive to complete your contract and it would encourage people to make more contracts and makes contracts less meaningful. If you want to encourage A to enter into a contract in the first place, you may not want to hold down the recovery. But!!!! A isnt going to be discouraged because 12,000 doesnt compensate him for his loss! BUT!!!! The 12,000 isnt really the value of the land that is outside of a major metropolitan city. The law doesnt give me what I wanted. o What about the lessee/lessor? Which will discourage the lessee grader from entering into the contract? The $60,000 because if it will cost them that high amount to fix it and they will make sure they perform the contract. o The dissent says that the $60,000 is punishment or punitive. What happened to the $48,000? It is just punishment The land if the contract was performed is only $12,000. o Tort law and contract law are different. o What if you are a bishop? How would you decide? You would say that $60,000 would be the correct figure because you want people to keep their word. This high amount of damages would encourage people to keep their word and not breach the contract. o What indication is there in the majority in Groves that it is treating this case like a bishop? They say that the decision handsomely rewards the victim of the breach. Pomponius unjust enrichment minded.

It would be unfair or unjust to give the land owner more than what the land is worth. The skillful lawyer will utilize the rhetoric effectively. This would be a windfall. Argue that the unjust enrichment minded person would favor the $60,000. This person would have contracted with the landowner to do what they wanted for $105,000. If the landowner knew they werent going to complete this, they would have contracted for more than $105,000 to take into account of fixing the land. He would have moved it up to $165,000. So what argument that the lessee is unjustly enriched if the lessee only has to pay $12,000? It might be better to say that the landowner has been unjustly de-enriched by $48,000. The landowner would be in a contract to devalue their land. The landowner would have to pay $165,000 for all of this work. Had the landowner negotiated just for cash rather than cash services? Is the landowner really going to be deprived of $48,000 worth of value if the $12,000 is awarded? What would Eisenburg say? In Groves, this problem arose because there were circumstances not anticipated before the contract was made. The lessee grader only took certain gravel because the mine was not extended across the entire property. Maybe if we knew that not all of the gravel was taken, then maybe the landowner would not have charged the lessee the full $165,000 for the services. Not all the gravel that was promised was taken?! If you were an environmentalist, you would say the $60,000 would be the best value to compensate and give an incentive for the restoration to be finished. Bishop? Unjust enrichment? Environmentalist? What values do you bring to this case? There is another thing happening in this case that is fascinating. There is an interesting final paragraph of the majority opinion. The majority in this case does not order the award of $60,000. They say that the jury should look more carefully at what the contract specified that might cut the lessee a break given the surprise about the overburden. What does a substantial street grade mean where there is more overburden than anticipated? Maybe there is room to cut the lessee a break and not impose the full highly costly measure of damages that requires taking away and relocating all of this overburden. Peevyhouse pg. 251 Same basic problem totally opposite result. The good lawyer is going to look for ways to distinguish these cases. What is the argument that the Groves case is stronger for awarding damages for recovery damages? In the Peevyhouse case, the primary objective is to get the coal from the land. In Peevyhouse, the secondary objective was just for remedial restorative work. You could say that in Peevyhouse, the primary objective was also to have it fixed in the end because farmers need the land to work! They both require the land to work again. In the Peevyhouse case, the difference in 300 and 25000 is a great amount different. This is outrageously disproportionate.

In the Groves case, the restorative work was part of the primary objective for the contract. The land was to be resold later for a profit.

Does it matter in Peevyhouse that there are statutes involved where in Groves there are no statutes involved? --It does matter but the statute is only for tort damages. --But, the court says that it applies to torts and contracts. What about Groves? What if this statute was used? --The court in Groves only gave $60,000 where as with full performance they would have gotten $12,000. What is another argument that the Peevyhouse landowners should win? The fact that in the negotiations in the Peevyhouse case, the landowners insisted that there be this restoration work done. So what? So we can make this a main purpose! But wasnt it a big deal in this other case of Groves? In Peevyhouse, they lived on the land and it doesnt take into account the future value of the land and the value of the crops they may grow. But doesnt it just make it similar to Groves? In the Peevyhouse, the landowner is contracting to make the land worse off on purpose. There is more of a harm or deprivation in Peevyhouse because they are putting themselves in a worse position than when they started off. Which case is more like the Paul Kurtz on my chimney case? The Peevyhouse case is more like this because the owners are contracting to make their land much worse than it really started. You cant sue someone for making your house worse if you wanted it! They knew that the coal mining would make the land less valuable. IN which case is the environmentalist going to be more concerned? Peeveyhouse because strip-mining is much worse to the land. How would the business development person look at these cases? Which is a stronger case for holding down damages? Peeveyhouse because it concerns the industry of coal. This is an area of economic activity, so we dont want to slam it to coalminers. What about the Rock Island case? Keep your eye on the Eerie Doctrine. Federal court that has to apply state law? The court says they are not going to apply Peevyhouse because in the wake of it, the Oklahoma legislature passed a statute. Argue the court is wrong in Rock Island. Does the court require the reclamation of the land on the lessee? The lessee didnt actually do the mining operations. Could the state legislature put a duty on the lessee? No. Which way does the statute cut here? Is the court changing the rules in a way that the legislature could have done but decided not to? Which way does the statutory intervention cut? You should see the arguments on both sides.

A fortiori argument for Groves and Peevyhouse: Peevyhouse SHOULD be a better argument because it was a primary purpose! The dissent pg. 253 said it! Peevyhouse SHOULD NOT be a better argument because 300 is GROSSLY disproportionate to 25,000. Groves SHOULD be a better argument because the value in the land is going to improve in the future because of its location in the Twin Cities. The land is only worth 12,000 now, but it has the potential to increase. Therefore, the value given of 12000 may not reflect its true value as investment property. Groves should NOT be a better argument because the agreement to grade the land was only a secondary purpose to the primary purpose of the contract to get the sand and gravel.

Class Notes 10.4.2011

Often unstated in decision-making are values that inform the judges work. Perhaps the judge is not even aware of this at least in hard cases. The court overturned the Peevyhouse because of the values! There were things outside of the courts own mind that at least gave it the opening to deal with the Peevyhouse problem than the way the Peevyhouse court did because of an intervening statutory development. The law is hard in a lot of different ways. It is hard because the problems that arise in life are infinite and ever changing. They are hard because there is a lot of ambiguity in the law (what would a reasonable person decide?). Another reason? It forces you to deal with concepts that arent entirely congenial to you. We get that in the subject of damages. Which one is right? Peevyhouse or John Wunder? Lets launch into it. Thorne v. White New roof for White. The work is to be done for $225. Builder starts, takes the materials away, and never returns. The owner is forced to hire another company for $582. There is to be given expectancy damages, which is the amount that the owner would have had to pay if the contract had been fully fulfilled. We need to give the owner $357. So is this an end of the case? No. The second contract had different terms. The new contract put a new roof on and used a better material. If we give them this money, we are putting them in a better position than had the contract not been performed.

What if the second roofer had agreed to do exactly the same worker as the first? o The owner would have then been awarded the $357 difference. What if there had been a third roofer that had been willing to do the work for $482? o Well, look then at the case about the teacher and the school. Look for cheapest. What if it turns out that there is no other roofer in the area except the 2nd roofer, and the 2nd roofer refuses to do the work unless they have those terms? What result? o Then the owner would be entitled to $357 because of Handicapped Childrens Education v. Lukaswevski. There, the only employee was the more expensive one. Lets say you have the same facts as Thorne and it is exactly the same work for the price of $582, but the value of the house is only increased by $100. How much would you award to the owner? o Well, you would give them the cost of completion. Typically, the value in doing the work isnt wildly different. How would Peevyhouse decide?

Morello v. JH Hogan The trial court didnt give the contractor enough to put the general contractor enough to be in the same position as if the subcontractor had fully performed. The critical thing to do is see why the appellate court is right and the trial court is wrong given the proposition that the proper measure of damages is expectancy damages. In this type of case, the general measure of calculating that amount is the cost of completion. COC exsts independent from what has already been done towards completion. Freund v. Washington Square Press Publisher breaches contract and does not publish the book. The court said the book author gets nothing. How do you distinguish the case involving the building contractor and here you have a book publisher not doing the book publishing work? The money in this case wasnt for the publishing of the books but the royalties of the sales. The author hasnt proven any damages! What if the publishers obligation wasnt to sale the books but just to publish them for the writer of the book? Then, it would be like a building contract. The promised performance is for the delivery of the books, kind of like the promised performance in the roof case is to have a new roof. The promise of the publisher is to deliver royalties and not books. Thorne involves the common situation where there is a breach by the builder and the owner of the property sues. The Warner case is the flipside. Warner v. McLay In this case, the owner breaches by running the builder off of the property. What does the builder get? The builder says that he is entitled to get the money he had spent on the materials and forbearance and the total profit he would have gotten for the contract. Lets say he spend $5,000 already. Now, lets say the total contract was for $10,000. 10% of this is $1,000. The appellate court says that this is not right; 10% cannot be the measure, but instead it must be calculated with the formula. How do we put the builder in the place he would be if the contract had been fully performed? Give him profit plus costs. What would the builder have gotten in net profit? The total contract price minus what they thought it would cost to do ALL the work. So lets say it would cost $4,500 to finish it out. Therefore, he would get $500 for the profit. The builder should be able to recover $5,500. The 10% the builder said is a reasonable profit isnt the REAL profit

HYPO: Lets say I hire you to build me a mosaic of Jed Clampet and Granny installed on my driveway while they are eating clam chowder in a strip mine farm. You start working, and I run you off. What damages do you get? You get whatever profit you should make Plus what you costs you have incurred.

Lets run the numbers. Lets say that the contract price is $700. Lets say that you started working and you have done $600 worth of work. Lets say it will cost $10 more to complete. So now you can recover $90 as your profit. You recover a total of $690. What if you had bought some materials and because of the breach you get to take the materials back home with you. Lets say that was $25 worth of tiles you had not installed. Now, you get $665. Lets say I have already have paid you $50. Now you get $615. Now lets talk about Handicapped Childrens Education Bd. Of Sheboygan County v. Lukaszewski : Here, the court doesnt talk about just damages, but it talks about was there a breach at all. Was Lukaszewskis performance excused because of medical difficulties? The court says NO! The medical problem was her own fault, and it wasnt the real reason why she resigned. The difference in this and the 5-ply roofing case is that the employer HAD to employ the better qualified teacher at a higher rate. The employer didnt want the benefit that came along with a more expensive teacher, but that was all that was available. There is a deeper question lurking: Should Lukaswevski, the teacher, be able to breach? Luk pays damages to the School District of $1026 but We Care Daycare, she ends up getting paid $2,240 because of her breach. So one question is should Luk be able to do this? What would Posner say? He would say she be able to breach because it is efficient. What would a Pastor say? He would say she shouldnt be able to breach. Posner says that the measure of damages is expectancy damages. We should encourage breaches. She is maximizing her wealth! Groves v. John Wunder says we shouldnt let people breach! Its bad! Pg. 271 Problem 3-2 If you were the attorney for Janis, you would want to sue for 10 months at $1,500. You could also sue for the cost of moving or the cost of looking for another job. Problem 3-3

Class Notes 9.6.2011

Damages shift from the common law of damages to the statutory treatment of damages in the UCC. Look at the comparison between the common law and the UCC. How does it improve them? Cooper v. Clute Seller breaches the contract to sell cotton for 10 7/8 because he finds another buyer that is willing to pay 11.03. Buyer sues for the difference in 11.03 and 10 7/8. So what does the buyer recover? NONE. The buyer sustained no actual damages. What could the buyer have done? o He could have gotten cotton from someone else. Weve already touched on the Posner excerpt on pg. 270 there are efficient breaches! You measure damages for buyer by saying MP CP. If Cooper v. Clute arose today, the court would not apply the common law rules (in sale of goods has been replaced by Article 2 of the UCC.) o We need to know whether there were any incidental damages. That would be the only difference. o IF he had to drive somewhere, etc o What if the buyer didnt discover the breach for 2 days? The deal was the buyer had to pick up the cotton at a warehouse, but it was 2 days later. Two days later the market price has moved to 11 7/8. What would be the result? Under the common law, it would be still 0 because it would be the market price at the time and place of the breach. Under the UCC, it would be 1 cent per pound of cotton. At the time when the buyer learned of the breach is the standard. At this time, the buyer didnt learn of the breach until he went to pick it up. o The UCC would be better in this case, because if the buyer didnt know of the breach, he didnt have a chance to minimize his damages by buying from someone else. Lets say the contract was entered into on January 26th for delivery on February 26th. Lets say that on February 1st, the seller calls the buyer and says I am not going to deliver. Lets say that on February 1st, the market price of the cotton is .11$. Then, on the date of the delivery, the value has gone back down to 10 7/8. When is the contract breach? The seller told the buyer and said Im going to breach! So on that day, he gets the difference between 11 and 10 7/8. o Argue against yourself. The contract wasnt actually breached until February 26th. You cant learn of the breach until it has actually occurred! This introduces us to an important concept: Difference between breach and anticipatory repudiation. Interpretive question: When does the buyer learn of the breach? o 2-713 and the treatment of damages of repudiation cases. See UCC 2-723. The UCC is an integrated statutory scheme. Pg. 104 UCC

Problem 2: Seller repudiated the deal before delivery. At this time, the market price was 11 cents and the buyer bought cotton in substitution at this price. o Now he is out 1/8 of a cent per pound. Seller must pay. o Lets say you had the same case, but he waited for 1 day. At this time, the market price is 11 1/8. Would this be an unreasonable delay? Probably not. If the court concludes that there has been no unreasonable delay, then to put the buyer in the position that the buyer would have been if there had been full performance, then we have to give them 2/8 because the buyer is out more. o What if the market was trending down? What if in covering, the buyer had spent $25 in sending overnight mail packages to potential sellers? What is the non-breaching party able to get in addition to cover and contract price? Then the buyer could recover consequential or incidental damages. o Lets say the buyer covers immediately on the delivery date. And, at that time, the price of cotton is 11 3/8 for the market price. What does the buyer get under 2-713? The contract price is 10 7/8. The difference is 4/8. Lets say he goes out and gets a good deal! He gets it for 11 1/8. This is a difference of 2/8. (2-712) You want to recover for the higher amount 4/8! You want to say that you can get the amount of the market value! Since the goal is put the buyer in a position as if the contract had been fully performed (1-305(A)), then we need to use the 2/8. If we gave them the 4/8, it would be unjust enrichment. He would be put in a better position than if the contract had been fully performed if we give him 4/8. 2-712 says a buyer MAY cover In this case the buyer did and 2-712(2) the buyer MAY recover from the seller If the buyer does recover, that is what he will get. o What else will you look at beside the text of the UCC and the policy? Look at the comments This applies only when the buyer has not covered. Question 3: Assume that the seller tendered the cotton, but buyer refused to take and pay for it. The market price was 9 cents and the contract price was 10 cents. What would the seller get according to Cooper? What would the seller get according to 2-708? The seller gets the difference between the market price and the unpaid contract price. 10 9 = 1. What if the seller didnt learn of the buyers breach until 2 days later, and by the time the market price has changed. Note the language that says the market price is at the time and place for tender.

o When does he learn of the breach? WE DONT KNOW. There are arguments on both sides of the question. For those of you in the search of the answer, look at the Horn Book. The UCC Hornbook.

Question 4: Assume seller tendered the cotton but the buyer refused to take it. At the time and place for tender, the market price was 9 cents, and the contract price was 10 cents. The next day, the seller resold at 8 cents per pound. What are the damages? He would get 2 cents per pound. Is the seller a LOST VOLUME SELLER? What if the seller has an unlimited amount of cotton to sell? Question 5: Now we have not a failure of delivery, but the buyer takes the goods. The buyer sues for breach of warranty. o He agreed to buy quality grain, but he was delivered the smutty grain. o He had a case of express warranty. It was an express explanation of the goods. o So what damages does the buyer get? o The buyer can receive the difference between the value of the goods accepted ($0.05) and the value of the goods contracted for ($0.17). Why is it $0.17 and not $0.15? The buyer made a good deal! If he was in this position that the contract had been performed, he would have grain that was worth $0.17. $0.12 Neri v. Retail Marine Corp The buyer has paid to the seller $4,250 as a downpayment to a boat. The buyer then says, No I wont buy. Was there a contract? Yes. Was there a breach? Yes. Then the question becomes damages. The trial court says you get it all back except $500. This comes from 2-718. It says that where the buyer breaches, the buyer may get the deposit back but the seller can take out $500. The court of appeals takes a different approach. They said that the $500 wasnt enough because it wasnt enough to put the seller in the place he would have been had the contract not been breached. The court says we should cross reference 2-718(3)a to 2-708. Here it says if this isnt enough, we can give him the profits. THIS IS A LOST VOLUME SELLER. WERE IN THE WORLD OF MEASURING DAMAGES FOR THE SELLER UNDER 2-708(2) RATHER THAN 2708(1). Otherwise, we dont put the seller in the position the seller would have been if the contract had been fully performed. This seller would have two profits if the buyer had performed. If the seller is a manufacturer and doesnt complete the work, ALSO profits are taken into account. For next time, go through all the measures of damages that the court did take off and think about how can I argue that even the court of appeals didnt adequately compensate the seller. What argument that the court of appeals should have assessed even more? Read 2-718 ALL TOGETHER.

Class Notes

10.11.2011 Class on Thursday at regular time. Practice exam at 4:30. That will be in room A. Last time we discussed the various provisions of the UCC that deal with damages. Even though they deal with UCC, they also include much learning, they also work outside the UCC. What youre doing now is youre seeing how this principle of expectancy damages spins out in a wide variety of contexts. Teaches you there are two contexts: Neri lost volume seller o This problem presented by the boat case is a specialized one. The buyer had already sort of made a downpayment. The case is actually structured under 2718. It deals in section 1 with liquidation damages damages spelled out in contracts the damages. This case uses 2-718(2) the buyer should get back the amount paid so far MINUS the lost profit MINUS the incidental damages. Here, the seller gets back $997, much more than the trial judge allowed. No attorney fees in here! The court says no following the general American rule litigation expenses are not recoverable by the winning party. Manufacturer of goods before the manufacturer is finished, the buyer says DONT FINISH. The measure is the exact same thing as the manufacturer of a construction project. The manufacturer gets back the expenses incurred plus what would have been the net profit. This is the measure of damages which puts the partial producer in the position that he would have been in had the contract been fully performed. Back out the value of any scrap or portion of the price that had been paid. Should the buyer get back even less than $997 pursuant to ap ropert interpretation of 2-718. Argue that the buyer should get back even less. What about the $500? The trial court says that this is the amount that is needed using 2-718 -- also look at 2-718(b) The buyers right to restitution under subsection 2 is subject to offset. What is the right to restitution under subsection 2? The buyer gets his money back MINUS $500. His right to restitution may be the amount of the profit. o What is the underlying purpose of the Code? To put the seller in the place that he would have been if the contract had been fully performed. Which would be better? The measure of damages that doesnt include the additional $500. How would you respond to that? Which is more important? Text or purpose of statute? o The purpose may help in interpretation, but the text is the text! Lets say that does not persuade the court? o What argument in giving $500 comports with the idea that we are putting the seller in the position that the seller would have been in if the contract was fully performed? o What happens when somebody breaches a contract? What happens to the non-breaching party? The non-breaching party has to resell the item. They are sad! o Punitive damages are directly contrary to 1-305. Not for breach of contracts!

o We want to argue that this $500 is helping put that person back in the place he would have been in.

Qualifications and Limits

Hadley v. Baxendale There is a broken crankshaft. The owner of the crankshaft contracts with a deliverer to deliver the shaft to someone to fix it; there is a breach of the contract. The tiral court awards $25. The appellate court said that this is wrong. The trial judge didnt tell the jury that lost profits were not recoverable because they werent forseeable. There are general damages and special damages. The special rule applies that the damages have to be foreseeable. What if there had been a national crankshaft shortage in England and everybody knew about it. Same result of different result? Same result? Yes there are special circumstances. Why? There was a special circumstance that the breaching party knew about. What if the UCC applied? Lost damages are not recoverable because the only circumstances communicated were that the millers are millers and that the article to be carried was the broken shaft. BUT that is not what was said! The clerk said in the facts that the plaintiff requested that it be sent immediately and the mill was stopped. What about Armstrong? Pg. 286 It was decided opposite from Hadley. In Armstrong, recovery is permitted! How on earth can that be the case? The carrier did not do their work right either! It was not reasonably skillful and workmanlike. Why would a repairperson have a different responsibility? Hadley v. Baxendale is the most famous case in contracts. It deals with lost profits, and here the Armstrong case doesnt talk about Hadley at all! Maybe repair people just generally know. What about problem 3-7? The Farmer Lampkins case The lights are not delivered. Is there are particular requirement. Are these damages that could not have reasonably been prevented by the farmer? Maybe the farmer could have a duty to mitigate. In Restatement 351(3) It limits because if the damages are disproportionate. In the Farmer Lampkin case be disproportionate? A $20 light and a $450 damages for planting soybeans disproportionate. Argue against yourself. The tractor costs several thousand dollars. This is not disproportionate. Disproportionate to what?!

Lets say a court agrees with the first argument$20 lights $450 damages? Disproportionate! Does that mean that the buyer cannot recover? What he can recover CAN be limited. What kind of case is this? Breach of contract. What kind of contract? Oral contract for the sale of tractor and lights. UCC governs this because this is the sale of moveable goods. Does section 351(3) apply in sale of goods case? 1-103 is the most important. Does the common law come into the Code by 1-103(b) or not? It is worth noting that the Hadley rule is bedrock contract law. The duty to mitigate is bedrock contract law. Lets assume that 351(3) is part of your common law. Does it come into the UCC through 1-103(b)? No it is displaced by 2-715. There is nothing in there about disproportionateness? NO. What about the comments? What do they suggest about whether or not the principle of 351(3) is displaced? Does putting a disproportionate limit do what is said in 1-305 (liberally administered to put one in the place he would have been in had the contract been fully performed)? No. This messes that up! Hadley introduces the forseability limit on the recovery. Now, Restatement 351(3) places a limit on the disproportionate recovery.

In Clark, we have an owner who delivers paintings to a repairperson. The repairperson starts in on the work and the owner says stop. The repairperson keeps going and charges the full contract price. The trial court says recoverable. The applellate court says no that is wrong because there is a duty to mitigate because it comports with fairness. It avoids piling on damages. It also makes good economic sense because you arent wasting resources on a person who doesnt even want the work anyways. The rule is that the promisor has to stop. What damages does the promisor get? o You stop your work! o You get expenses incurred o Net profit o MINUS Value of scrap o MINUS amount already paid What about the Shiavi case? He could have sold it. Clear enough. The offer is too vague and too conditional to trigger any sort of duty on the side of the seller. Was there an offer at all? Lets say that immediately after the conversation with the father the seller said I ACCEPT. Would there then be a contract for the father to buy if the son defaulted? The son asks. There is testimony from the father that says that is the way we do things with out family. What is the argument of the family that the seller didnt have to deal with the father? What the court ultimately says is whether or not there was an offer to pay, it doesnt matter. The duty of the seller is to mitigate loss. What if the father had said maybe Im interested in buying that thing!? No, because it doesnt seem reasonable.

Class Notes 10.13.2011

Pg. 290 Shiavi

Twentieth Century Fox In Re Worldcom DO Problem 3-9, pg. 293 Parker v. Twentieth Century-Fox Film Corp. There is a duty to mitigate! MACRO: There is a subrule in the context. o An employee doesnt have to take a job of a different or inferior kind. MICRO: What did the court decide in this case? o Do not do this The facts arent really that important. o The court decided that there was no duty to mitigate because the jobs were different. METHOD: You are learning the method of the argument. How does it work? o Looking beyond Macro and Micro. o What other arguments might I make in the case? Other than, the employment was a different or inferior kind? What is the right result in this case? How would I decide it? Shouldnt it just go to the jury? What if Big Country was a porno movie? NO! Thats just fundamentally different. That would be employment of a different kind. In this Parker v. Twentieth Century case, the facts play a critical role. What are the differences? o You have a musical dance film v. western film. o You have movie in California v. movie in Australia o You have approval rights v. no approval rights, only consultation. Its trickier than that though! As the porn movie case illustrates, difference in facts can be different in degree. The dissent says that yeah these are differences, but they arent the sort of thing that remove the opportunity of 20 Century-Fox to contract someone else. The DISSENT says this is wrong. They say that it should just be DIFFERENT in any way, but it should be different in kind. There is a richer conversation to be had here. Methodological. Dont forget about Llewellyn! What are the reasons behind this principle that employees who are terminated dont just have to take any substitute job that is offered but they do have to take some of them. Some of the most important information is in a footnote in the dissent. See Footnote 2 it is inhumane to force someone into a job where he has no experience or training. So what about this case now? She has this experience! She can play dramatic roles. Menial and arduous to fulfill another role? The majority, using the methodology, shows that they are different, but the dissent says NO look at the underlying policies! Or is it? o What about the last difference. One could say that the dissents policy says you shouldnt make one take a job of a lower rank that makes you a menial worker.

o Here, all of these different law learning skills are being put to work. One thing that is also important is the factual detail. The majority relies on the facts. You as the inquiring lawyer always wants to know more. What else in this case? o How big of a deal is it to Shirley McClain is it to be in a Western than in a Musical? The note on pg. 294 says that she had already expressed her desire to be in Big Country Big Man. You want to think about all possible arguments that you could make. o Macro arguments what different and independent theories am I going to rely on? She wins on the theory that it is a different and inferior kind. o What other arguments might Shirley MacLaine have relied ON? Did the parties by agreement provide that she would GET $750,000 regardless, thus contracting around the duty to mitigate? o Now Look at Hillman, pg. 301 As a matter of law, there is no duty to mitigate to take substitute employment from the employer has already breached. The court in this case operates under the assumption that one shouldnt have to take a job from the same employer.

See Problem 3-10 What other things might you want to know before you can help Alan Turlway? You may conclude that he has no duty to mitigate in his jurisdiction for not taking the job. You may say that his odds are good, But it still may be a stupid thing not to do to take a job. The common sense logical thing to do is to take the job. Michael Jordan doesnt have Alan Turlways problem. See In Re Worldcom, Inc. He was not a loss volume seller because he wasnt going to lose any volume! You cant be a loss volume maker of sales when you dont try to have a larger volume of sales. This is totally different from car salesman or the boat dealer. They are trying to sell as many as they can. Michael Jordan is saying I dont want anymore! The court still has to ask whether Michael violated his duty to mitigate. The court concludes yes. Does it depend on what the new endorsement would be? Does it have to do with the same thing as endorsing products. The jury is still left with some discretion. What would he have been able to take? What position would he now be in if he could mitigate.

Class Notes 10.17.2011

What are the limits on expectancy? Mitigation Foreseeability Disproportionality (Restatement)

Today, we touch on two more limits, limits weve actually encountered before. Uncertainty, or speculative limit, on recovering lost profits in particular other forms of damages And the mental distress limit Like in Sullivan v. OConner Evergreen Amusement Corp. v. Milstead Theatre Company that isnt working because the construction contractor didnt complete the work in time. Here, the profits that they would have made had the contractor not breached is around $12,500. Was the exclusion of evidence of the expert rightfully excluded? The expert was testifying to the profits that were lost. He said he would look at the second year, and see what the profits were in that period. The expert also says that in the experts opinion, the profits would have been the same in the first year. The court cites that the court cites the new business rule. Given that the court doesnt categorically reject the new business rule, what rule does the court apply? The court uses the words definite and non-speculative. Pg. 309 you get other ways to describe the award. How helpful are these tests? Of course they arent helpful! What is a rational basis? What is reasonable certainty? Why isnt this reasonable certainty?! There was an expert! o You cant tell based on the next year. All the settings were the same. Why isnt this the same? o How would you respond if you represented the builder? o What had happened during the period from August 15 of year 1 until June 1 of the second year? The business was active! That is much different. o Year 1 is a startup situation, and Year 2 is an established business. How do you try to address this problem thinks is apples and oranges? What are you going to have your expert say on the stand? We want him to say that profits are the same both years! The newness of the building doesnt affect the profits from one year to another. We might could even get him to say that he would get MORE profits from a new business! We dont want to impose the loss on the non-breaching party that is caused by the breaching partys causing of a situation. This is part of the macro law we want to cite. How else might you attack this problem? Why doesnt the expert just attack it by comparing the hypothetical start up with the actual startup? Use August 15-October 31, instead of the same period the next year. But then the defense is going to say that the weather is different or the seasons are different and the profits made wont be the same.

Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Management, Inc. The campaign brought in $88,000. But the jury still awards $35,000. Why did the lawyer for the fundraiser appeal the award of $35,000? o Are you persuaded that the evidence was too speculative? o What evidence did the girl scouts put on to show that they were entitled to damages? They have 2 experts to prove that more money should have been made. o This is a case about a lawyer putting on people as witnesses. The lawyer called Ed Breen and James Harrison Ed Breen was the campaigns general chairman. What did Breen say on the stand? James D. Harrison was a director of campaigns for Havey Fundraising He says it was an excellent chance that they could raise the money o Francis Havey also testified! He was the headman in charge! o THIS IS WEAK EVIDENCE?! o So why does the defendant appeal here? Under Iowa law, there is a lost profit test. BUT THEY SAY THAT IOWA FOLLOWS THE NEW BUSINESS RULE. There is a fixed star in Iowa law that says a new business cant recover lost profits! o The court says this is a unique single venture. How do you respond to this? This isnt really unique, this is part of what the girl scouts do. It doesnt matter that it is a single venture! It is still someone who is trying to make a profit where no one was operating before. Do new businesses have goals? o Yes Do they have goals to be established within a specific time frame? o Yes. Do you think when they went to the bank, they wanted a business plan? o Yes! So where is the difference?! There is no reason to distinguish this case! Lost profit damages are permitted in Lakota whereas they are denied in Evergreen Amusement even though there it says it is not strictly adhering to the new business rule. What arguments that these cases are backwards? o The expert showed that the next year made a certain amount! In Lakota, you dont have this. Now argue that the case is stronger in Lakota for awarding lost profit damages. o In Lakota there are very good witnesses! o That is a powerful fact supporting the award in Lakota! Excerpt from Corbin He says that if the court is sure that there would have been profits made if not for the breach, then there will be a greater degree of liberality.

It seems that the Lakota case is a better option to give money to! The theatre case is weird because they could have lost money the first period. If the Havey had performed the contract, had a director on sight, paid attention to what was happening, would there have been LESS earned? NO! 1. Would there have been any loss at all? 2. If so, then how much? Chrum v. Charles Heating and Cooling Did you get a warm and tingling feeling when you read this? No. It was more like a nightmare. The Chrum case is an unusually rich case to go back and go through the case and think about the progression of the courts thought. There are special restrictions on ones ability to recover. So here the court sets forth the macro rules: 1. There is difference between personal contracts (Sullivan) and other contracts, particularly those involving property loss 2. The consequences are profound Only if you have a personal contract can you recover this significant form of expectancy damages. In this case, what type of contract do we have? We have a commercial contract Under the analysis of the court in this case, how would Sullivan be decided? o Would the person in Sullivan be able to recover damages for emotional distress? Yes. It was dealing with her body it was physical o The court talks about the case of the caesarian section. How about White v. Benkowski come out if the plaintiff in that case had sought mental distress damages? Would they get them or not? o Make an a fortiori argument based on Chrum o The Chrum people didnt just lose their water they lost everything. o White v. Benkowski just lost their water they wont get it either, duh! The court reminds us that there may be more than one way to peel an orange. Even though the contract fails, at least under some circumstances, a person who suffers mental distress damages can recover them in tort including when there has been not even any physical impact on the person. Its pretty narrow! Not very often! What does the plaintiff have to show to recover mental distress damages for misfeasance in the installation of the furnace? They must have to show that the defendant acted negligently in installation of the furnace And a reasonable person would have been upset about it. In Daley there had to be an actual physical injury! So it wasnt JUST that one was mentally distressedalso they have to show a physical injury as a result of this mental distress. You want to show things that have happened to the plaintiff that were physical injuries. Why does the court insist on proof of a physical injury?

What is it concerned about if people arent associating physical injury with their claim of emotional distress? Too many lawsuits! People who dont have mental distress!

Class Notes 10.18.2011

new business rule creates limits for damages We also returned to the earliest stages of your law school career Sullivan v. OConner special limits on ability to recover mental distress damages. We also, on pg. 320, learn about other limits and qualifications 1. denial of lost expectancy recovery in medical contexts 2. denial of loss of reputation or goodwill 3. denial of lost expectancy to attorneys 4. denial of attorneys fees and interest a. The case involving the lost volume seller, they wanted the attorney damages as part of the incidental damages. b. If attorney fees were recoverable, that would create a discouragement of the bringing of suit by plaintiffs because the defendant could recover attorney fees. c. There are two significant exceptions: i. 1. If the agreement provides for the recovery of reasonable attorney fees, then they are recoverable. ENFORCEABLE BECAUSE THEY ARE CONTRACTUALLY AGREED TO! ii. 2. Even in the absence of agreement, attorney fees are sometimes recoverable for plaintiffs who sue for breach of contract because there is a specific statutory law that trumps the common law and provides for the recoverability of attorney fees. 1. Magnus and Moss consumer product warranties, a person can recover attorney fees if they have breach covered by this federal act. 2. The Truth in Lending Act also provides for the recovery of attorney fees. 5. Denial of pre-judgment interest a. This is in contrast to full-scale expectancy damages! b. Not limited to clear calculations. In NC, there was no limit on the ability to get prejudgment interest if one could recover damages for breach of contract. c. As the casebook author suggests, that is not true in every jurisdiction. Even if a person seeks expectancy damages (the standard) the ability is limited in a number of ways! Some of them apply generally across the board, some of them apply in particular contexts such as the promise to improve ones medical condition set of cases.

Chicago Coliseum Club v. Dempsey Jack Dempsey had been contracted to perform at a boxing match. This case is really about damages. What kind of damages does the court permit them to recover? Reliance. To see this, we have to start at the beginning. He divides them into four groups: 1. loss of profits which would have been derived by the plaintiff in the event of the holding of the contest in question a. Speculative and indefinite. b. Are they an established business? Yes, but are they experienced in hosting boxing events? 2. expenses incurred by the plaintiff prior to the signing of the agreement between the plaintiff and Dempsey a. Pre contractual expenses. b. $50,000 for the other fighter Wills. The Wills contract was made before the contract with Dempsey! It was made beforehand! Therefore this is not part of the reliance damages. c. What about the Anglia case on pg. 329? d. Wills can still fight in another fight! e. Also, he has still never been paid! $50,000. Why does that distinguish Chicago Coliseum Club from Anglia? It is not a loss or quasi reliance loss. 3. Expenses incurred in attempting to restrain the defendant from engaging in other contests and to force him into a compliance with the terms of his agreement with the plaintiff a. Wants attorney fees for the separate Indiana action! b. What is the purpose of reliance damages? Put the party in the position they would have been in if the contract had never been made. c. It was at plaintiffs own risk. d. What the court finally says is that once somebody breaches, you cant pile on damages There is the argument that this is a responsible effort to cut losses and have the contract performed. There is a separate rule that says people may be reimbursed to mitigate damages. 4. Expenses incurred after the signing of the agreement and before the breach of July 10, 1926. a. Expenses of Weisberg i. THERE WERE NO EXPENSES. b. $10 to Dempsey i. RESTITUTION! c. $300 to Architect i. YES, recoverable d. Wages to asst. secs. i. If they were necessary in the furtherance in the undertaking, then YES. e. Salaries of regular co. officials i. Not recoverable. They would be paid regardless. ii. Argue that the court is wrong in the treatment of this element well they were retained because there was an expectation that there would be a lot of profit coming in iii. There was a lost opportunity cost.The secretaries could have been working on something else.

iv. The COURT COULD BE WRONG HERE. They might not have been paid regardless. What about the wages of regular salaried people and the assistant secretaries. f. Special expenses i. build a platform g. Hoffman/Colorado/Dempsey physical expenses i. If before the breach and reasonable!! ii. Mitigation of damages iii. Kind of like the painting repair case. You dont get to keep going if the other party breaches. h. Fare/L.A. trip to get Dempsey signature i. NOT recoverable ii. They were in order to get a signature on the contract. iii. What if the Anglia rule applied? 1. If you sign the contract, you are taking responsibility for the losses incurred, not matter before or after. i. Shark RR expenses i. They must be carefully considered to see whether they were incurred in a furtherance of the general plan and properly proven Lets say you can prove that every one of Jack Dempseys previous fights had generated at least $1,000,000. Would that be different? Well what if there was a weather condition? What if there were any other factors that precluded this? What if tickets were purchased in advance? What specific facts does the court point to in support of its conclusion that the damages are too uncertain here? There was a quote on pg. 326 where the plaintiffs said that there would be no way to compensate them! (Marion County bill) It was not compensable! Whenever you draft anything as a lawyer, you must ask yourself what effect these will have in the future: particularly on your client. Another MACRO RULE: First encountered in Sullivan v. OConner Footnote 3 where court observed that reliance damages are recoverable when expectancy damages cannot be proven with adequate certainty. Reliance to put one in the position he would have been in if the contract had never been made. Would they have been able to recover all the damages if there had been a hurricane? What is the principle of the Albert case? o Could Dempsey prove with clarity that the promoter would have lost money if there was a hurricane? At least assuming that the tickets had not been bought in advance. What if prior to the breach lets say Chicago Col. Officials goes out to Colorado to get Dempsey to sign the contract, they come back and throw a birthday party for Shank. What is the purpose of reliance damages? To put the person in the positions they wouldve been if the contract had not been completed. So can they recover damages for the birthday party? NO! They would not have been reasonably foreseeable. o What case would you rely on? Hadley v. Baxendale.

o Coppola v. Kraushaar the marriage case. There were $500 damages for the wedding and $10 for the price paid towards the dress. Could the jilted groom in Coppola have incurred expectancy damages? He seeks reliance just like in Dempsey. The same principle that applies to lost expectancy damages is also applicable to lost reliance damages.

Class Notes 10.20.2011

McGrath v. Wisner The court distinguishes between liquidated damages provisions and penalty clauses. Liquidated Damages = ok Penalty clauses = no! This takes us to the macro world of rules The court cites the Restatement of Contracts 339 a. amount is reasonable forecast b. the harm that is caused by is hard to estimate Courts dont think they should be enforcing damages that they dont think are proportionate to the breach. Why should the courts jump in and say no?! What would Hillman say? Pg. 354 Can one recover punitive damages for breach on contract? o penalty and punitive are similar, but the penalty are agreed to by the parties o They make an agreement that includes this breach. All tomatoes grown on 6 acres at $28 per ton. The liquidated damages clause says that if there is a breach, then one must pay $300. Why does the court invalidate this clause? o They said that it is invalidated because it is no way proportionate to the possible extent of the prospective breach, nor do they find that the prospective damages for failure to deliver tomatoes having a ready market are incapable or difficult of ascertainment. o Weve already gone through how you measure damages. The difference in the contract price and the market price. This is not the type of breach that is the type for liquidated damages at all. o Its not entirely clear how many tomatoes the farmer failed to deliver. o The court assumes that the number of tomatoes is something that will later be able to be determined. o The second prong of the test has failed. o How about the first prong? o Is the measure here a reasonable forecast of just compensation for the breach in the eyes of the court? o What big problem with the clause does this court point to?

What would the liquidated damages be if one failed to deliver 6 tomatoes or all of the tomatoes? $300. What problem in saying a clause that operates in this way is a reasonable forecast? It doesnt take into account how many tomatoes have been delivered. It is like an all or nothing treatment of damages. You get $300 no matter what?! That cant be right. That is not a reasonable forecast.

Argue the court is wrong: 1. Argue the reasonable forecast prong is okay. a. When the parties entered into their contract, they specifically included this clause. b. Where did the parties get $300 from? Did they just pick it out of thin air? What if this contract arose today? It would be governed by the UCC. UCC 2-718(1) It would probably be the same result. Anticipated harm will vary at the loss. Argue against yourself. Does the UCC provision just focus on the reasonableness of the clause with respect to the anticipated harm? An amount which is reasonable in the light of the anticipated or actual harm caused by the breach If the canners actual damages were $275, was the liquidated damages clause unreasonable? The test here is a fundamentally different test. The common law test says there are two qualifications a test must me to be enforceable. The UCC test says here are a bunch of factors that you take into account, but we arent going to tell you how relevant they are! Always be looking at the nature of macro rules. Is it a brightline rule, a rule of balancing, a multifactor analysis rule (2-178), safe harbor rule? What result in White v. Benkowski if the parties had stipulated damages of $5 per day of every day the water was turned off. Enforceable or not? Is water a good? Then maybe we can use the UCC. But. It is being extracted from the earth. What argument that this clause would be more reasonable than the one in McGrath? Whats the big problem with the clause in McGrath? That its not proportionate. In White, $5 per day is MORE proportionate. No matter how much it is turned off in a particular day, it is still subject to the $5 rule. This isnt a market situation. The proven damages were an inconvenience in White v. Benkowski.

Lets say a contractor makes a contract to build a bridge but is ten days late but it doesnt make any difference because the road hasnt been built yet. But there is a clause that stipulates $1000 for delay. Would the bridge buyer be able to recover? It depends. Does it meet the common law standards? It is not a sale of goods case. Problem 3-11 Lets say that the Chrum people made a clause that said they had to pay liquidated damages. Does it automatically follow that the nonrecoverability of mental distress dictate that you cant liquidate for them in a contractual issue? Lets say this case has never arisen before in your jurisdiction. How do you decide it? Why do courts disallow recovery of mental distress damages? What are the reasons for denying mental distress damages? Do the reasons apply where the parties have stipulated? The reasons for denying mental distress damages are that they arent foreseeable. Well in this case, they are foreseeable because they were contracted for. Vanderbilt v. DeNardo Would the judge that struck down liquidated damages in the tomato case have upheld the liquidated damages clause in Vanderbilt? Very difficult to ascertain the damages of the premature fleeing of the head football coach at Vanderbilt. The liquidated damages are a reasonable forecast Are they in this case? Do you have the blunderbuss problem (Why does the court strike down the liquidated damages in McGrath? Because they arent proportionate. They dont relate at all to the extent of the breach. Its just a blunderbuss, unrefined treatment) in this case? Sometimes rules have a superficial appearance of being very different. When you move closer, there may be more similarity than meets the eye. The more difficult it is, the more discretion the parties have to liquidate them. Did the drafter of the contract in Vanderbilt follow the advice of Dunbar? Pg. 346) Why does the majority uphold the clause? 1. They believe that the partys intent was to have the liquidated damages. Thats why you right it in the contract. Was there negotiation about the liquidated damages clause? See the eparagraph that starts During contract negotiations pg. 348. 2. The University makes this clause because they see it is an investment to hire the coach, and if he terminates, the university will incur great expenses. 3. Do the damages agreed upon vary with the extent of the breach? a. Yes. It isnt a blunderbuss. It does vary! In direct contrast to the situation in McGrath. By the way, one thing that is interesting in this case is that the liquidated damages were reciprocal! Vanderbilt had to pay too! Does that matter? b. It was fairer! It is a two way street!

Why does the dissenter dissent? 1. He says that the damages would only be there if he took a job elsewhere! Why only that?! If he wants to go to the beach or go somewhere else, that doesnt matter. a. Attack! . Argue against dissent. It may have something to do with fairness. Sensitivity to the coach? Not trying to stick it to him. The court says this is horrible. This part of the clause was put in to help the coach. Does it injure the stability of the program more if he takes a job elsewhere? Maybe there is more instability if he takes a job somewhere else. 2. No reason to believe that there is no way the cost of a breach varies with the amount of years left on a coachs contract. What is the purpose of the liquidated damages clause? What interests is the school trying to protect? Why is Vanderbilt insisting the liquidated damages be provided? a. They want to keep the program stable. Does it matter whether he leaves in year one or year four? Which departure injures the stability of the program more? The earlier departure. 3. What about the take-home pay? a. The coach wanted that. 4. The dissent says this is just not a reasonable estimate. There is no reason to believe that it is a reasonable estimate. a. It worked out! The majority showed that the calculation came out pretty close. Whats a better alternative? How would you measure instability? Its not a blunderbuss. It may have some correlation to the value of the coach. Two things: 1. Should these special limitations exist at all? 2. Drafting. Why is this clause in Problem 3-13 drafted just very poorly? Redraft it. 2-719 Limitation of remedy

Class Notes 10.24.2011

Section Seven: Monetary Remedies where the theory of obligation is promissory estoppel Limitations of remedies: Pg. 353 Rinaldi and Sons, Inc. v. Wells Fargo Alarm Limitation of damages to $50 must be distinguished from a liquidated damages clause. Limitations of damages are to be distinguished to liquidated damages. Liquidated damages clauses are subject to attack by defendants who argue that the contractual stipulation of damages is too big and thus a penalty. Limitations of remedies clauses are attacked by plaintiffs who challenge the specification of remedy or ceiling on the remedy as too small, or too low, and thus subject to challenges being unfair. How to do you determine? The Rinaldi Whether the clause in unconscionable. Special rule for limitations of remedy where you have injury to the person in a consumer good.

By the way, note how the nature of the rules are different. The nature of the traditional common law test as to the foreseeability, two different clauses must be met. The UCC says here are various factors one must take into account Not a two step test but sort of a multifactor balancing test. Limitation of remedies -- Here we have rules. Is it unconscionable? Well what is unconscionable? The focus is on both substantive fairness and also on procedural unfairness. Were there elements that caused one to wonder about its underlying unfairness? Promissory Estoppel The separate cause of action that one might assert in a promissory case. The authors pose the question: What is the remedy? Assuming this cause of action can be established, what does my client get? Pg. 356--- Johnny . Should get $1000 or $500? Maybe Mr. Williston He relied on $1000 so he should get $1000. He would be getting reliance damages Expectancy to put one in the position had been fully performed. $1000. Reliance to put one in the position you had been in before the contract had been made. $500. So Coudert is right. What argument that theyre both wrong? Assuming we want to give Johnny his reliance damages, what are his reliance damages? o Reliance to put one in the position he would be in the contract had never been formed. If the contract had never been made, he wouldnt have been out any because he wouldnt have bought a car. o How much is Johnny out because of the uncles promise? $500 He is in a car because of the promise. So how much is he out overall because of the promise $0. o What if the car is worth $300? He made a bad deal. Then he is out $200. Goodman v. Dicker What promise was made? The franchisee said I would give you a franchise with an initial delivery of 30-40 radios. As in Hoffman v. Red Owl store (the mom and pop who circled through Wisconsin) this case involves much the same thing. The case involves no finalized contract but allows the assertion of promissory estoppel because the store relied! How did the would-be franchisee rely in this case? They had to spend money in the amount of $1150 to prepare. They spent it on things to get ready for the contract to be performed. The trial court says they would have made a profit of $350 if the contract had been carried out. The appellate court says thats wrong. You cant give expectancy and reliance damages! That is awarding double damages. The $350 would have been made because of the outlay of the $1150.

What argument that the court should not have awarded the $1150 but should have awarded the $350? Why go with expectancy damages? One thing is to say: There are materials youve encountered (Wheeler v. White, Bacardi v. Stout) proper damages for Promissory Estoppel is reliance. Here, though, it says this isnt the automatic rule. In many cases, full scale is the appropriate remedy. What would Judge Learned Hand say about this case? (He who wrote the opinion in the Albert case) Is it appropriate if your expectancy damages are $350 to recover $1150? The court says we are going to award reliance damages. Here the task for you is to come up with reasons. Walters v. Marathon Oil Why is this an interesting case? Here they are awarding expectancy damages instead of reliance damages. But I thought you couldnt do that in promissory estoppel cases? Why does the court think it is appropriate to award expectancy damages here to mom and pop even if the goal is protect the reliance interest? What if you had the exact same facts of this case except it is crystal clear that mom and pop would have retired if they didnt open this particular gas station? Would mom and pop recover then? Isnt it entirely reasonable for mom and pop to try to go around and find damages above and beyond what theyve already looked for? They did mitigate!... Mom and pop pursued this particular gas station site and only this one, and theyre going to retire. What fact does the court emphasize in allowing recovery here? They forewent their opportunity to invest elsewhere. They didnt have a lost opportunity cost here! . Didnt they have a loss when they bought the property? o No The property was worth exactly what they spent on it. o Kind of like Johnnys care He is out $500 but he has a car that is worth $500. Here we have this very interesting situation in which the court awards both expectancy and reliance damages. Here it is both Expectancy because you are getting the profits made. Here, though, the profits are both expectancy and reliancereliance because they relied on the profits to open the store. They would have pursued another business opportunity if they hadnt bought the gas station. Remember Dempsey when you cant figure out the expectancy damages. Here, expectancy are given when you cant figure out the reliance damages. There are other issues that are floating around here. o Even assuming the mom and pop might otherwise be able to recover loss of profit as surrogate, they shouldnt be able to recover because they didnt mitigate damages. They did mitigate! They shouldnt be expected to try ALL possible, because they arent experienced with the gas station business.

o In deciding whether the trial judge made a mistake in the form of a reversible error is the standard of review. They say the standard of review is clearly erroneous. They say that the judgment was not clearly erroneous. Why does the court conclude that it shouldnt overturn that determination? A little bit like the Girl Scout case like the lawyer marshaling evidence The lawyer does a really good job. He puts together these different forms of proof supportive of the conclusion that the mom and pop would have sold 370,000 gallons of gas and gotten $.06 per gallon as a profit margin. What are argument might you make if you represented the franchisor that these damages speculative as a matter of law? (What are argument might you make that these damages are speculative as a matter of law if this case had arisen in Iowa?) Was this gas station a new business? Yes they hadnt been open before; they hadnt been owners of the store, etc. One of the people that witnessed is Time Oil who had been previously owned. It was a gas station before. It had been pumping 378,000 gallons. D&G Stout, Inc. v. Bacardi Imports Reliance to work with someone in an at-will relationship. What argument that General should not be able to recover at all? There was no mutuality of agreement. Wait that is a requirement for the breach of contract cause of action, and this is a promissory estoppel cause of action. Also, are you sure there is no mutuality of agreement? Promise made? Bacardi promised it would continue to employ General as distributor. Promise? I promise to have you be my distributor for as long as I want, including zero. The court says it is a promise! Is it the sort of promise that one should reasonably rely on? In this case yes, because Bacardi continued to call General to inquire whether they had made a decision. Bacardi knew that General was making a decision between going out of business and selling the business. During these communications Bacardi kept saying that we will continue to provide for you. At least in this context, reliance on this non-promise promise, reliance was reasonable. Of course the $64,000 question raised by Stout and cases like it is how long does the promisee get to keep relying? The court here ducks that question. In the second to last paragraph, the court says how long is not a matter we can decide here. So how about Alice White? Problem 3-14 Does alice white have a good cause of action for promissory estoppel? Does she have a duty to mitigate? Last time we skipped over Problem 3-13 What errors were made in drafting here? How would you have drafted this that would be much much better than Darlene Brown did? Here the court says there is a lost opportunity because of the promise was made. What is the purpose of the reliance damages? To put one in the position as if the promise had never been made. That is a cost. They forewent the opportunity.

Class Notes 10.25.2011 Problem 3-15 Contracts: $350,000 K Spends: $105,000 Salvage Value: $5,000 Cost of completion: $255,000 Increased Land Value: $100,000 Cost of Completion: $270,000 Lawyers must be remedy minded. Expectancy Damages: Expectancy damages are measured by: Look at how much has been expended so far, and then to add to that, the lost net profit. What profit the contractor would have made if the overall contractor would have been completed. So to give expectancy damages: You must do this: $105,000 - 10,000 ___________ 95,000 - 5,000 ___________ $90,000 Expectancy: Take contract price, $350,000, and say our goal is to put them in the position they would have been in. $350,000 - $255,000 = $95,000 - $5,000 = $90,000. This is where the lawyer has to start. Restitution pg. 366 One way to measure restitution is the last way what ever the builder spent to build the first half of the house.. That isnt the only way to measure the restituionary interests. Craswell tells us FOUR WAYS. a. increase in market value b. price homeowner would have to pay someone else c. half of the contract value d. whatever the builder spent. Restatement 371a 1. The reasonable cost that it would have cost him to obtain it from a person in the claimants position. a. But no contractor is going to do work just to capture his expenses. He wants his profits too! So to hire somebody to do the work you have to include them with profits. 2. Increase in value of property (Groves v. John Wunder)

Comment B to Restatement: We give the more generous value to the victim of the breach. What if the increase in value is more than the cost of the work? Lets say that the increased value of the property in the Problem is $140,000, and we back out $5,000. It is $135,000. Argue against yourself B says that a party seeking restitution for part performance is commonly allowed the more generous measure of reasonable value. Is the more generous value the more reasonable value? Pg. 366 How would the court that decided the RealMark case? They would say that the more generous value should be given! Reasonable value? This is an authority argument. It is relying on the restatement to see that the larger value is the more appropriate one. Another possibility is to take the value that it would cost another contractor to perform into account. $270,000. How much the builder got the owner towards having a house. If you take this approach, you would do $350,000 - $270,000 = $80,000 - $5,000 = $75,000 Should the builder take the settlement offer of $60,000? Litigation costs A bird in the hand is better than two in the bush. The owner is going to have a defense! The builder may get nothing if it goes to trial. Weve identified various ways of calculating restitutionary interests, but we still havent addressed one thing that is talked about in the materials. At least some courts in at least some jurisdictions will cap or put a ceiling on the amount of restitutionary recovery that one can get. On pg. 374 in the case of Johnson v. Bovee, it talks about capping the restitutionary recovery. It gives two ways to cap: 1. Impose a cap of the total contract price. a. Can you really recover MORE than the value of the actual contract even though youve only completed 25% of the work? 2. Take a prorated amount of the contract price. a. Builder did 29% of the work under the contract. b. One possible way is to take 29% of the full contract price. Susi v. Zara Bad soil conditions for a subcontractor who was contracted to do work for a runway. The contractor has to do more than just the normal amount of work. There has been a breach by the general contractor the breach is material (remember Sullivan v. OConner) not just a breach, but a material, substantial breach of contract thus justifying cancellation of the contract. That does exist here says the court. The runway preparer says: 1. Im entitled to the extra pay for the extra work under the contract itself!

The runway preparer didnt look at the contract! Article 5 says you cant claim for extra damages. There is a separate claim You materially breached, and therefore I can elect to recover restitutionary damages rather than expectancy damages. The court says YEAH YOURE RIGHT. IF there is a material breach, then WITH THE BREACH FALLS THE CONTRACT.

WITH THE BREACH FALLS THE CONTRACT

The contract has fallen, therefore, there is no cap on the contract amount! You can get in effect the reasonable value of your work for all you did, even if that value exceeds a prorated amount or a total contract amount! The court cites Williston for that statement. Restatement 373 No caps on recovery! Apart from the limits which might be imposed as a general rule in some jurisdictions, there is the specialized possibility of the imposition of a cap on the restitution award. See Oliver v. Campbell pg. 372. What if in the Zara case it wasnt the case that the contractor had done 80% of the work, but the subcontractor had done 99.9% of the work and the contractor ran him off? In that kind of case, all the subcontractor can get is the total contract price. Why is there this rule that the restitutionary value will be capped when the work is completely done? Then it is really easy to calculate But The rule is weird. The person who does more work gets treated worse. Bausch and Lomb v. Bressler Illustrates that restitutionary questions can arise in any case not just building and excavating work. Here, the distributor paid the manufacturer/supplier paid $500,000 to be the exclusive distributor of a high tech product. We know that the distributor and manufacturer does TWO bad things. 1. It sells into the exclusive territory of the distributor. 2. Sinamed, the manufacturer, terminates the contract. What does the distributor get? What do they get on an expectancy theory? Can the distributor as he is seeking to do, recover $500,000. The court says NO. Why not? Well, because there is no proof that the lost profits from these breaches caused ANY damage, far less $500,000. This number just isnt connected up with putting the non-breaching party in the same position he would have been in if the contract hadnt been performed. The nonbreaching party just cant recover. Can the nonbreaching party recover on a reliance theory (Jack Dempsey case, if damages are hard to show, then you can just recover on a reliance theory) THE COURT SAYS no. (principle of Albert case if you have a losing contract, at least the breaching poarty bears the burden of proving the contract, the reliance damages will be held down.) Here to put the nonbreaching party in the position he would have been in had the contract never been made, do you have to give them $500,000? Yes. Maybe not if there had been some benefit Would Judge Hand have reached the same conclusion (Hand suggests there is a burden on the breaching party to prove and how much would represent the loss that would have been

incurred had the contract been fully performed) The critique here is that there is no suggestion that the manufacturer had proved this stuff. At least for this court in this jurisdiction, that is good enough to apply the Albert principle. Here, there was a material breach! The entitled distribution rights were wiped out by the manufacturer. The distributor sues for restitutionary damages. The court says yes. Can the distributor get $500,000 on a restitutionary theory? The court breaks this down into 4 questions: 1. Can you get restitutionary damages EVEN if you cant get reliance or expectancy? (Sullivan v. Oconner) a. Yes. 2. Are restitutionary damages limited because this was a losing contract? a. No. No cap! No restriction, see Restatement 373. Even if that amount puts the non-breaching party in a better position. 3. Does the non-refundability clause limit the ability to get the refund of the $500,000 a. No! The court hints at two separate reasons This isnt a refund! It is for damages. And if you do characterize this as a refund, with the breach falls the contract. REMAND! The court says in effect YEAH $500,000 is a good place to start, but dont forget the nonbreaching party got a benefit in the years it could sale and make some money on it! One thing you might do is look at the fact that there are two years of operation, maybe it should be $200,000 The $500,000 should be reduced by the percentage of time it was in operation. But the manufacturer was breach and selling into the territory. The full value of the contract wasnt realized by the nonbreaching distributor.

Class Notes 10.27.2011

Osteen v. Johnson This is a case for a breach of contract with a girl who sings who hired a man to promote her. 1. defendant didnt promote Linda a. this action is brought WITHIN one year. How do you know?! b. So was there a breach at all? It doesnt seem that way. 2. defendant wrongfully caused another party to be on the record a. defendant said it would be more likely to be played on the radio with the other name listed. b. The court says no because it might help the sales of the CD. c. It might help sales, but it is still a breach of contract! d. Lets assume this is a breach of contract, perhaps a breach of an implied warranty that he wasnt going to put some random person on Lindas record. Would Linda be entitled to restitutionary damages assuming that was the breach? i. Well is this a substantial breach that goes to the essence of the contract? One is entitled to elect restitutionary damages if the breach goes to the essence of the contract. ii. Why would you say that listing someone elses name on the record is a substantial breach? If the defendant were giving someone else credit for

the work she was doing, then this is pretty substantial. Argue against yourself: well, the point of the contract is to sale records, so the listing of the other name helps to do this so it is not a substantial breach. iii. Assuming that its a breach, and not a material breach, SHE WOULD BE ENTITLED TO BREACH DAMAGES. Even if you arent entitled to restitutionary damages, you can still get expectancy damages. She would have been hurt if the name wouldnt have been on the record. This is too speculative. 3. Defendant failed to press and mail second record a. does have merit. b. The first album was successful, so why didnt he mail out the others c. This cuts at the essence of the contract, so restitution should be allowed. This is the point of the contract. This is its underlying purpose or goal. d. The point of the contract is to distribute the recordsthis qualifies as a material breach. So can she get back the full $2500 for the contract? No The defendant did something! Sort of like the Bausch and Lomb case. There the restitutionary damages are reduced by the value of having access. Lets say that Linda instead of being hired by the promoter was hired as a talent scout for a month. She is to be paid a particular amount. She goes out, and during this month long period she discovers REM. The promoter fires her during the month after discovering REM and doesnt pay for the $1000. Can she sue for restitutionary damages? Yes, there was a breach! He fired her and didnt even pay her. Can Linda talent scout get expectancy damages? Yes. Subject to duty to mitigate. There is a breach. Can she seek restitutionary damages? Yes There is a breach, and it is material. The whole contract was to be paid $1000 and she didnt even get to work for the full month and didnt get paid at all. So if it is a breach, and it is material. Did she confer a benefit on the promoter? Yes By going out and discovering REM. So how much does she recover? How much is REM worth? Lets say the case goes to trial THREE YEARS later, and in the meantime REM has cut THREE smash albums. Theyre worth millions. Does Linda get to recover that? Isnt she entitled to restitutionary damages? Maybe you would talk about foreseeability. BUT this isnt like suing for expectancy damages. This is restitutionary damages. Lets say the jurisdiction doesnt have any caps. The court will have the discretion to decide what they will give the talent scout under the theory of restitution.

Now lets talk about when the plaintiff has breached the contract after conferring a benefit. The breaching party can still seek restitution. Here, the owner is the victim of the breach. The builder is the breaching party, and the builder turns around and sues. The question is what if anything can the builder get? Use the example case of Britton v. Turner. The builder cannot get $8000! The $8000 is only how much was expended. That would be the greater of the two measures, and the breaching party cannot get this. The lesser measure, the increase in the value of the owners land, would trump the $8000. So is the builder entitled to recover $4000? If the builder can recover $4000, then the owner will have spend $13000 to build what he was supposed to get for only $10,000. Would it be fair to force the nonbreaching party to pay $3000 more because of the breach?! NO. So then what does the breacher get here? Is this a cap on the restitutionary recovery? The most he should get is $1000! We dont want to put the nonbreaching party in a worse position than he would have been had the other party fully fulfilled the contract? Think through this same problem with TWO different variations. One: What if it wasnt the builder who breached but it was the owner who breached? That is what we worked through last time: In terms of calculating the nonbreaching builders expectancy and restitutionary claims.

But there is another type of case too: What if neither party breached? What if the contract was unenforceable? (Violate statute of frauds, indefinite) Who gets what? There are FOUR QUESTIONS here: 1. is there an entitlement to restitutionary recovery? (Gay v. Mooney) 2. How do you measure restitutionary recovery 3. Is there a cap on the restitutionary recovery? 4. If there is a cap, what is it? Kitchen v. Herring Specific performance: What is the normal rule? Contracts for the sale of land are specifically enforceable. Corrollary for a broad rule: equity will order somebody to do something when there isnt an adequate remedy at law, when damages dont work to adequately compensate for the wrongdoing of the defendant. Does this justification apply? o Yes, why? o There is no other just remedy. o Argue against yourself. Why does the defendant say that the plaintiff should not get specific performance? The defendant claims that the chief value of the land is in timber.

o The plaintiff had already taken away the timber, and that is the value of the land. o Monetary damages why does the defendant say there IS an adequate remedy of money damages? There is $325 dollars for the value of the timber of the land. The timber has monetary value. The court rejects this argument. o Should we honor the philosophy of Llewellyn? The rule goes where the reason leads, the rule stops where the reason stops. o This court is brightline rule minded Its land dont care! Here the court opts for ipso-facto view. Contrary to the court in Idaho.

Lets say that instead of selling land, the seller sold to the buyer under a contract a chinese bonsai plant carved in the image of Aaron Rogers and then fails to deliver. Can the buyer get specific performance of this contract? Yes, because providing someone with money wouldnt necessarily allow them to buy another bonsai plant! What body of law would control this question? UCC! This is a sale of goods! UCC 2-716: Is the contract for the deliver of a Chinese bonsai plant that already exists or is a contract for making a Chinese bonsai plant? Lets assume that nobody else can make this. It is a work of art. In Curtice Brothers v. Catts If this arose today, it would be controlled by the UCC. Would the canning plant operator be entitled to specific performance? No, this is just a sale of the tomatoes on a land. Assuming this is not the case, you cant argue that the tomatoes are unique. The court says that there are other factors. Argue that the court is wrong. If the defendant could prove that the plaintiff could get the tomatoes on another piece of land, then he could just pay money damages. So why does the court deny the argument that there is an adequate remedy at law here? o They cant be guaranteed to get these on the open market. o Were tomatoes available on the open market? o If so, how can they argue successfully that there is no adequate remedy of law? o If you can buy a portion, doesnt that suggest there are tomatoes out there? There are two things going on here: There may not be an adequate remedy at law, because even if there are tomatoes available on the open market, we cant determine the value. What is the court saying? The fact that the company had to make the sale of the contracts is indicative that the open market is not sufficient. So maybe the court is concerned wit discouraging breaches in concerned where fulfilling the contract is very important.

So weve seen in the bonsai case and the Curtice v. Catts case where specific performance is permitted in light of the breach. Example of a case where a buyer of good could not get specific performance: Contract for 50 boxes of oatmeal cream pies from Little Debbie.

Dont forget ALBERT CASE If your expectancy is ZERO, maybe you wont be get reliance damages.

SUBSTANTIAL BREACH. JUSTIFIES RESTITUTION Exam Review: See Practice Exam 10.27.2011 Its not about getting the right answer. It is about spotting the contestable issues and then discussing them in a well thought-out way. First, its not like saying things that are wrong. Another thing is to talk about matters in a well-organized fashion. Another thing is to argue against yourself. Do not miss opportunities to address issues from the vantage point of both parties. o You are sorting through the information. So as you read the question, you want to be alert to things in the question that raise issues, that help resolve issues, that bring into play particular rules or doctrines. o Another thing you want to do is read the question and answer the question. For example, does Sally have a good legal question against the defendant? You dont want to be talking about specific performance. You need money damages if it is asked for. o Pay very close attention to what the question is. One trap that students can get drawn into is all the facts in the question. Well you do want to be looking at all the facts. There may be red herrings in there that arent very important. The world of law is a world in which facts are critical. Details make all the difference. Thats the stuff of analogy and distinction. Use the facts! Particularly in light of underlying policies. o Clarity of expression. Taking law school exams is not an exercise in phoniness or sounding smart or using big words. It is an exercise in thinking clearly, breaking a problem into parts, and then clearly in a logical point by point answer analyzing the different issues in the problem.

Particular problems on several exams: Some people spend a fair amount of times in writing introduction and conclusions. You arent being tested to memorize the rules. This is a matter of judgment talk about older cases In the model answer, there is some discussion of model cases, but there is a lot that isnt about that. What youre trying to do is deal with the question on the general level (elements of cause of action) and a micro level which may bring into play particular apt authorities like the tramp hypothetical. Also, the rules

of law the presumption that someone who acts in reliance on a promise acts in consideration not like someone who is given a gift. In this question, some people said this is an illusory promise case its a promise to do something if I feel like it. But it isnt! The consideration isnt a promise at all. It is an act. I offer you the stock certificate IF YOU COME. Not a lack of mutuality!

Class Notes 10.31.2011

Laclede Gas Co. v. Amoco Oil Co. For the sale of goods governed by 2-716 What is the best fact for the plaintiff seeking specific performance in this case? He wasnt sure whether he could obtain a contract to receive propane gas in the long term at least another contract that is at least as good This is like Curtice Bro v. Cats a long-term contract of a similar nature (futures oriented contract) is specifically enforceable. Do note that in Curtice Bros v. Cats it wasnt entirely clear whether it could be covered. Lets go back to Curtice Bros v. Cats (tomato case) lets say that in that case in the earlier tomato case) the parties had agreed to a liquidated damages cause and it was enforceable because it was calibrated to the damages that would occur. Lets say that the canner sued for specific performance if there is this liquidated damage clause in the contract. Does he get specific performance? Is it a unique good? Is there an adequate remedy at law? If there is a liquidated damages clause, then there is an adequate remedy at law. o Yes. The canner wants the tomatoes. There is a remedy at law, but we can argue that the remedy at law will not compensate for this loss. o No. Because there is an adequate remedy at law! The liquidated damages clause was an adequate remedy at law. Are the damages difficult to determine? Yes! So we shouldnt give specific performance here because it was just a shot. Liquidated damages wont preclude automatically that there is no specific performance. BUT the parties could specify in the contract that the liquidated damages were exclusive and no specific performance could be awarded. Lets talk about the Jack Dempsey case we know Jack Dempsey breached (the boxer). Could Chicago Colliseum club have gotten an order of specific performance forcing Dempsey to fight Wills? o Yes, he is unique. o No, it is a contract for personal services. Pg. 397 What about Shirley McClain. Suppose Shirley breached and the film company sought specific performance against Shirley McClain. Could they get it? Shes the one and only Shirley McClain. What about in Pingley v. Brunson? Pg. 397. So can 21st Century get specific performance from Shirley McClain if she breaches? NO. So if they cant get specific performance, then maybe they can get enjoinment for her not to perform anywhere else. What might Chicago Colliseum club have put in its contract for Jack Dempsey? Maybe that if he breached then he couldnt perform for anyone else.

One of the arguments that the tomato grower makes is that it is forcing me to do stuff! Go out and pick them and put them on a truck! The court says no. Thats not what is precluding the relief. The court can appoint someone else to do that. o But you cant always get a receiver Like Jack Dempsey or Shirley McClain. o But where it is ministerial, then you can get a receiver to do the work to get the tomatoes. What if 20th Century Fox breaches, and Shirley McClain sues. I would have gotten a lot of good publicity and good will if I had gotten to play the part. There is all this incalculable good will! o Have the parties contracted around that result by way of clause in the contract? o Another question is there an adequate remedy at law in any event. o Even assuming there is no adequate remedy, is there a clause that prohibits mastertude like servitude? Do courts want to get in the middle of the tiffs? Lets say that I induce my secretarys 100-year-old grandmother to sell me her country estate for $1000 and an REM poster. She later declines to perform. I sue for specific performance. Can I get it? Its like the case of Wollums v. Horsley. Pg. 396 The court of equity thinks that it has more room to do justice. You may not have all of the facts present in this case as Wollums, but it doesnt really matter. Lets say she is quite sophisticated. Suppose you cant get specific performance, so you sue for damages: The value of the estate minus the $1000 and the REM poster. You arent suing in equity, you are suing in law! o How else may you argue that the buyer loses? There is an actual contract. You want to find out if it is in writing Statute of Frauds You could say that it was a gift and the $1000 and poster was a pretextual consideration. Dont forget about the unconscionability doctrine It applies in equity and law. Gross inadequacy in price. Pg. 160 an exception to the consideration doctrine when specific performance is sought. By the way, go back and read Lucy v. Zehmer and keep your eye on this set of materials about special rules in courts of equity.

Pratt Furniture v. McBee Supreme Court of Hampshire Buyer sells seller for breach of contract. Contract was to sell 90,000 chairs. The lawyer for the buyer seeks an injunction to keep the seller from making tables, specific performance on the contract, or alternatively the damages. The buyer seeks general damages of $90,000 plus $80,000 because the breach would leave the seller enriched due to the breach. This is an efficient breach. Why cant the buyer get specific performance? o The court cites that the chairs are not unique.

o The buyer also had other avenues to get other chairs. The cover can happen easily. o Why do these limitations exist? Why dont we just award specific performance all the time? There is a difference between legal remedy and equitable remedy. You want efficient breaches to go forward. o Why else are courts worried about routinely worried about specific performance? Simply handing over money to another person is very administrable. It supports judicial economy. Most people make most contracts to make money, so why not just give them money? o The plaintiff cant get specific performance, so he says he wants to get the illgotten gains of the breacher ($80,000). Not only does he get the $900,000, but he also gets the additional increment of profit that the seller got because the seller breached. The majority says that it is not recoverable. Why not? Expectancy damages are the general damages usually awarded to breach of contract. So what do we need to give the buyer here in the position they would have been in if the contract had been performed? o Now of course Judge Posnier and Judge Rawls address this question (should they buyer be able to get the $80,000) in fundamentally different ways. Economic considerations vs. encouraging contract making. Would judge rawls agree that no one is worse off if we give the buyer the $90,000? No. Rawls believes that there are transactional and incidental damages that occur. What is he most like? The efficiency minded economist? The rabbi? The economist who wants people to keep making contracts? There is the macro efficiency argument. Look at the big picture. Im nervous that if we dont encourage performance of contracts, there will be lots of advantage taking, lots of uncertainty introduced into the contracting process, etc. That is bad. Encouraging efficient breaches might encourage contract making. it takes two to tango. This debate is a rich one. So far, weve only been talking about instrumentalist opinions. o There is another subject to be addressed here: o Did Mr. Hanks give the chair builder good legal advice? Look at the rules of Hampshire. There is a clause in the UCC that says that a reasonable time after it can still be figured. Look at 2-610 and 2-713 Why else is this advice wrong? Well if they would have mitigated their damages, then the seller would have had to pay the mitigation. How much time does the Code give the buyer to cover? o A reasonable time o This isnt the same thing as the date after he learned of the repudiation!

o Review: Dont forget our discussion about remedies when the seller breaches, focusing on the date of performance rather than the date of repudiation, which is a naughty interpretation problem. Can a buyer learn of a breach prior to the date of breach when the buyer learns of the repudiation? o Hanks also talks about the doctrine of efficient breach. There is no such thing as this! This is just a concept. In Hampshire it is disputed. We see in these hypothetical case very practical lessons about learning.

Class Notes 11.1.2011

What is a contract? How do you make a contract? Pg. 454 Tilbert Case Is there a contract? Has the employer made a contract that imposes on it enforceable duties? Whats the argument that the employer did not make a contract in Tilbert? In the Form Schedule B, they said it does not constitute a contract and confers NO legal rights. When one is crafting an argument, one wants to not only collect all the facts, you need to leave out all the extraneous facts. Notwithstanding the fact that the document says it constitutes no contract, it does! There is a binding contract such that the employer has to pay the insurance benefit! How can the court get around this language? o What does the document say immediately after citing that the document constitutes no contract? o The employee can leave at will and the employer can fire at will. o In deciphering the meaning of ambiguous contract language, the court applies maxims of interpretation. Why is the court uncomfortable with reading this document as not constituting a contract? o If this wasnt a contract, it would be misleading! What background rules does the court cite? o There is consideration! o But this isnt about interpreting the language. The court looks at the intent of the parties. o We have to identify with particularity what cuts against the argument that there is a contract here. Argue that there is a contract here. To put the matter more accurately, that a reasonable person would so conclude. o This is a benefit. Is the employers agreement to do nothing constitute a benefit? NO! So they cant just take it away or it wont be a benefit. o Would you appreciate the employers promise to do NOTHING? No! o The word void suggests that SOMETHING is there. o There is an appeal to a recitation of purpose! o The word OFFER was used! This is contract language! o THIS IS A CONTRACT!

Here as elsewhere, the court deals with other cases Paradigms of situations where there isnt a contract. For example, the court at the bottom of 457 says this case is different from one in which the employer makes a social center or a friend gives you a Christmas gift. o So wheres the consideration in the social center case? o What argument that even if the court can find implicit consideration in the social center case (workers will stay, etc) that there still is not a binding contract here? Is this an agreement? Corbin would say no. By the way, take a look at these documents on pg. 455. o How are these different from a social center? o It talks about the individual employee. o How else do the documents look like a contract? o It says Certificate of Benefit o These types of things are typically not without some kind of legal significance. How about this other example, Im going to give you a present. o Enforceable contract? o No its a gift! It brings into play the consideration doctrine. Its just like Doughtery v. Salt. o What argument no contract? Its not the kind of thing that would normally be contracted for! Exchange of Christmas presents? Its not in the feel of making legally binding arrangements. Even in the exchange we talked about it being a gift. o So if it isnt a contract then what is it? We both indicated that we were going to give each other presents. It sounds like a promise. In my hypothetical lets exchange presents it looks like a promise. Its just an arrangement between friends. Well one can choose different phrases, but its important to distinguish between a promise versus what we might call an expression of intention, or of a plan. There is an indication of this in the material itself. o Stronger or weaker case for finding a contract in the Daniels Coenan Christmas present case than in the Morrow case? Weaker case! Stronger! Because in the case of Coenan and Daniels, they are friends, but in the Morrow case they are family! Morrow is a better case because they are family, and it is a normal contract that can be made. On the other hand, the argument could made that our exchange with regard to trading Christmas presents is one in which the court will be more likely to find a contract. o What argument that the court would be less likely to find a contract? In the family case, people sometimes do in fact pay for a caretaker. Gay v. Mooney

Even in a family context, the court proceeds with the assumption that in an arrangement where kids had made a contract to care for family would be established if the statute of frauds had been met. Trading Christmas presents is kind of a silly thing. So this may not be a contract.

Tilbert v. Eagle Lock, Certificate of Benefit case o How can you have drafted the contract better? o The last paragraph needs to be taken out. o Get rid of the language about substantial manner o There is a foundational problem. The lawyer wants to issue these fancy certificates to their employees. But at the same time, not assume any contractual obligation. There is an internal tension there! o But if your client still wants to do it, you need language that is more specific.

If I didnt call on Mr. Daniels after we agreed to call on him, could I be sued for breach of contract? Did I make an offer that could only be accepted by actual performance, or can it be accepted by just saying yes. This has to do with interpreting the nature of the offer. But is this really the context in which people make binding legal arrangements? Expressions of intentions to do things can exist without rising to the level of contract not only in the family context or the giving of gifts context, but in other miscellaneous contracts as well. Raffles v. Wichelhaus There is an oral argument in court. The lawyer hardly gets a word out and the judges jump down his throat. There is a contract for the delivery of cotton by way of the Peerless. The trick is there are two ships named peerless. One left in October and one left in December. How would you analyze under Restatement 20? If there are any ambiguous terms in the contract, then the contract would be invalid. Which section of 20 applies here? 1A There are two ships, but they have no reason to believe that each other are thinking about different ships. What would Simpson say? According to Simpson, did they attach different meanings to Peerless? Is it like a contract for wine. Were there two estates. Was the cotton in Peerless number 1 any different from Peerless number 2? No, they should have just taken it. Dickey v. Hurd There is a contract pursuant to acceptance. Contract or no contract under restatement 20? The parties had different subjective understandings of when the contract was to start. Apply section 2B.

Class Notes 11.3.2011

In the Lefkowitz case, the court confronts a situation in which a store runs a newspaper ad. Assuming there was an offer in this case, was there an acceptance? Yes, because the person came to the store to get the item for sale. How many offers and acceptances were there? Two separate transactions: With regard to the fur coat ad, is that an offer? The value in this case was speculative. There is an offer, it is just not enforceable. Why were the damages too speculative? o It just says worth to o This might be $1, it might be $100. Could the plaintiff have recovered nominal damages for the fur coat contract? Was there an offer for the Lapin stole? The FMCC case that follows this case indicates that some advertisements are just invitations to bargain. I invite you to make a bargain. I am not making an offer myself. How do you distinguish FMCC from Lefowitz? Why is there an offer in Lefowitz but not in FMCC? There is a matter of credit in the FMCC case. It is not reasonable that a person could believe that saying I accept gives rise to a contract. There is a question about credit worthiness. It is completely clear in the Lefowitz case. Why are courts nervous about characterizing advertisements as offers? What problem if it is treated as an offer? o Well how many Ford Escorts does the seller have? o Not an unlimited amount. So there is a problem with those people that only have a limited amount of items. Was this a problem in Lefkowitz? o The buyer was the first person to come to get the item. Of course once we determine whether an offer was made, we still have to decide what the terms are. What argument that with the terms, this buyer could not properly accept? o The store says that there is an underlying house rule that the person to collect the item must be a male. o What argument that the store is right? That the Lapin stole buyer should lose in light of this house rule? o What fact are you going to rely on if you are the store owner representation that the store was only open to women buyers? o What happened before the buyer tried to buy the Lapin stole? They were told initially that they must be a woman to receive the item. How do you argue under Dickey v. Stole or Restatement20 that they should win? The buyer had reason to know on the second time that there was a house rule. There was nothing in either advertisement that said that. The courts unwillingness to find in the language of the offer any sort of ambiguity that leaves room for this sort of

interpretive argument. The court in the end does say that there was an offer, the scope of the offer extended to the buyer, and the buyer did accept. Courteen Seed Co. v. Abraham The SC of Oregon finds that the October 8th writing of the seller which says that Im asking .29$ per pound does not constitute an offer such that the buyers purported acceptance doesnt constitute and agreement. The court says this is true as a matter of law. The trial court should have dismissed the claim. What facts are critically important to the court? It relies on the language I am asking. They said it was an invitation to negotiate. (Nebraska Seed Co. v. Harsh) I am asking is a little tentative. What other rule is violated by I am asking? You must read the terms in light of the contract as a whole. The other part of the telegraph says that they have another offer. There is an implication that if offers are to be made, the buyer must make the offer. It is the buyer that is in the position to make the offer, not the SELLER! Another point to be made is to read ALL the documents as a whole. What did the seller say in the first document? Its like the FMCC case. It is just a chance to bargain. In the previous telegram, with the sample, it said, we are asking. (previous case) Nebraska Seed Co. v. Harsh If you represent the buyer, how do you distinguish the Nebraska Seed case? Here they said I want Want is less offer like than asking What is your best distinction? There is no context behind the situation. How else to distinguish Nebraska Seed? In Courteen Seed, this is more offer like than the ordinary advertisement than a general circular. The context is one of a transaction incrementally moving forward from a vague and general conversation to a more focused and more specific exchange of communications. The factual detail is very important. Southwest v. Oliver The court reaches the opposite conclusion. That is, the communication sent out on June 17th do constitute an offer. In Courteen Seed, there is a lot of definiteness! So what more do you want in that case?! Lets say that hypothetically you are a law student and you have a law professor who says to you How could you as a lawyer done a better job of drafting this June 17th set of writings than did the defendant seller? o You could write THIS IS NOT A CONTRACT IT IS JUST AN OPPORTUNITY FOR NEGOTIATION. o Lets say Im the seller, Oliver. Here are these documents I drew up Im about to send them to the buyer, I only have 10 minutes, is this okay?

WHAT IS AN OFFER? Are you intending it to be a document that if they accepted it would be a final sale? An acceptance is when they say Oh yes I want that. o You need to ask the client all these questions! . Do you want to send this to a lot of people? Do you want to include the cows? I send this to several people, each of them say I accept Ive made two contracts! But I cant fulfill two contracts. He wants to sell all the lands and permits together The court says that a reasonable person would understand this offer as being one that permits the buyer to pick and choose. It is like FOUR offers. At the very least, it is an offer that permits the buyer to accept just an offer to sell the land in Bear Valley. What argument that Courteen Seed is wrongly decided in not treating ads as offers? IT wasnt an advertisement sent to the public. There is no danger of multiple purchasers. What is the best argument that this wasnt an offer? They dont say Offer There is a risk that the seller will run out of the land, and not be able to fulfill. Does it matter that the buyer knew the circular had been sent to multiple parties? Since it was sent to more people, it seems more like an informational. The court responds by saying in mechanical fashion that an offer may be made to more than one person. But is this a sound case in which to apply?

Class Notes 11.7.2011

Note that Lefkowitz and Southworth raise questions not only about is this communication an offer, but also what are the terms of the offer? A related problem is raised by the cases today, including the Ardente case on pg. 478. Ardente v. Horan Buyer is seeking specific performance for the sale of a house. The seller initially advertised the house for sale, the buyer made a bid on it, and the seller made it clear that it was okay. The seller prepares a written agreement and then sends it to the buyer. The buyer executes the agreement with a check, but there is a cover letter that asks for inclusion of a few items. Argue the other side why isnt this an offer? The seller had not signed the offer, because the sellers attorney sent it. So it is an invitation to the buyer. There is no proper acceptance. What if at the time the buyer wanted to enter into a contract? The buyers intentions dont matter. What matters is the language of the document. What a reasonable person would conclude based on the writing is what matters. It is the same

principle as the high as a Georgia pine case. The problem nubs down to one of characterization. There are two ways to characterize what has been done: 1. The buyer says it is acceptance, but with an ASK or REQUEST 2. Not an acceptance, but it is a counter offer. In answering this question, saying that we dont have an acceptance but a conditional acceptance, the court relies on nuggets of law and fact. An acceptance must be definite. It must indicate pretty clearly that it is an acceptance. What actual facts does the court find important in viewing in which a reasonable person would take it as condition acceptance in conclusion of the deal? Part of the transaction it matters a lot because a reasonable person could conclude that the means that they wont buy it if this isnt a part of the transaction. The two parties see the transaction as completely different. Given the underlying premise that these arent included, the implication of describing these items as part of the transaction equates with Im not going along with this deal unless these items are included. What if the letter sent by the buyer said here is the signed contract but we would like you to include the following items with the sell. The buyer doesnt include part of the transaction. But that is in affect what the buyer is saying. Now argue the other side. Look at what is apparent! It wont make or break the deal. What if we had exactly the same facts as this but before sending this to the buyer but before sending it the seller signs it. Argue the other side: If the seller had signed it, it would be the same as in the first circumstances. The court mentioned nothing about whether there was a signature on the document. Lets say the buyer doesnt include the letter at all for the request. So would this be a contract? Lets assume that the seller HAS made an offer. What other defenses would the seller have when the buyer sues for specific performance? We are already rejecting the fact that the paper was not signed. Here there is a statute of frauds claim. This contract is subject to the statute of frauds. It is for a sale of land! The court concludes that the seller waives the right to bring up the statute of frauds by never raising it. You have a problem if you are the buyer if the seller raises the statute of fraud argument. Did the letter constitute a signature? Eliason v. Henshaw Why as a matter of law is there no effective acceptance? There was a time lapse between the contracts. There are two possibilities: 1. The offeror is the master of the offer. If the offeror says you have to put your head on the table and say I worship you, you must do it! 2. The other possibility is that a reasonable person would understand the language to include any return message that would be ask quick as the wagon itself. Dickie v. Hurd the offerree would have reason to know that literal acceptance by way of wagon wasnt what the offeror had in mind. Was there an offer made at all? There must be both an offer and acceptance. It was explicit. The buyer said accept our offer.

White v. Corlies Not a sale of goods case. You have a problem of how to accept. Accept by I accept or can you start performing? The court is open to the possibility of saying that by way of performing is sufficient, unless the offeror says you can only accept by saying I accept. Here the court says even by assuming the builder can accept by performance, the builder was only preparing to perform. The builder didnt go into the building and start working. Also, how else would you argue that there was no proper acceptance here? What if the builder had gone onto the property ?

Class Notes 11.14.2011

Exam Questions Weight of exam this exam counts approximately 1/3. This exam counts 2/3 Dickinson v. Dodd pg. 502 Acceptance is not effective. Offeree accepted within the time period. One is not bound to keep an offer open until a certain time. One can revoke an offer at any time. Consideration is needed to make a promise binding. Marsh v. Lott Consideration applies to option contract Option contract a contract that gives someone the option to make a purchase. In Dickinson v. Dobbs, one could say that is an option contract, because in addition to the offer there is a phrase that says that the offer will remain open until a certain date. The offer has the option of accepting within this period of time. In Marsh, the offeror says there is not sufficient consideration. What was the alleged consideration? TWO ARGUMENTS: $0.25 why isnt it sufficient? They are arguing that it is pretext. o Court says they wont look into this. Even assuming this is a pretext, it may not be adequate consideration in equity to support the remedy of specific performance. o Court says they wont look into this. Look at Restatement how would Marsh come out? 1. it is writing 2. it is signed 3. It recites a purported consideration for the making of an offer 4. Proposes an exchange on fair terms 5. The exchange is within reasonable time. a. It allows an extension of the time from one period to another for 30 days. The original option was 3 months. b. Maybe reasonable maybe not. Would Marsh come out differently under Restatement if the $0.25 had never been paid? No, because all the Restatement says is that there must be a RECITATION OF consideration. What about under UCC 2-205?

What is required to make an option contract under 2-205? 1. Signed writing 2. Does the writing give assurance that it will be held open? 3. Does the period of irrevocability exceed 3 months? a. This is a potential issue! b. The controlling amount of time 3 months? c. Was the option exercised within three months? Why does the payment of $0.25 not matter under Restatement? All it requires is a RECITATION of consideration. It doesnt really have to be consideration at all. How about Dickinson v. Dobbs is there any consideration? No offer, because there is no recitation. This makes no consideration promise to keep the offer open. Also not under the UCC. Brackenbury v. Hodgkin Is the contracted offer bilateral or unilateral? The offeror is the master of the offer. He can specify any way of accepting the offer. When he offers a bilateral contract, how does acceptance occur? All the offeree has to do is AGREE. At this point, both parties are bound. How is a unilateral contract different? The other party must PERFORM. In this case, the offerror specified that acceptance could only accept by performance. How would Wormser have decided Brackenbury? Brooklyn Bridge case Lets say you say to me I offer to give you $1000 if you cross the Brooklyn bridge. IF YOU CROSS. According to Worsmer, you can revoke it! Restatement You would not have to go all the way to the end of the bridge. This is an option contract. You can also revoke the promise before he starts walking across the bridge. There is a presumption that there is a bilateral contract. The law prefers bilateral contracts. If acceptance occurs, then both parties are immediately and fully bound. Neither is at the mercy of another at all.

Class Notes 11.17.2011

Option contracts grapple with the language of restatement 87(1) pg. 506 We have purported consideration as opposed to real consideration and recites which is different from giving consideration and in particular giving real consideration. One of the hard things in reading this is that the comment is supposed to provide clarity. To help explain the legal text. But sometimes it will introduce ambiguities of its own. Be that as it

may, always remember that for purposes of the restatement the operative legal text, the controlling legal text is the rule itself. The comment is of secondary importance. 1. OPTION CONTRACTS: when is a promise to keep an offer open binding or enforceable? a. Operative in such a way that the offeror can revoke at will is meddled with. 2. DIFFERENCE BETWEEN BILATERAL CONTRACTS AND UNILATERAL CONTRACTS: a very different topic, but maybe not that different. There is an tie between the two. Under the old fashion, one could withdraw or revoke an offer of a unliteral contract until performance was complete. This is like a formalistic review of law. He didnt finish crossing the bridge so he never really accepted; therefore the offeror can revoke. The offeree has an option to finish the conduct or not. These are all default rules. The offeror is the master of the offer. He can set up any conditions he wants. Another thing that happened in the assignment last time is that with respect to the law of options, the casebook authors in effect point out that the law has developed rules with respect to option contracts that depart from the traditional and ordinary approach reflected in Dickinson v. Dodds that a promise to keep an offer open is not binding unless it has consideration. Why does the law take this approach? Legal thinkers think there is commercial utility in allowing people to keep offers open that are not escapable because this serves the cause of planning, real world business doing, greasing the wheels of commerce, etc. So how does the modern approach to option contracts work? Well we learned that the law has developed these different approaches that all pursue the same endof making promises to keep offers open, but they achieve that end in different ways. The marsh rule, the liberal rule from the common law, we learn that if there is consideration, however small or pretextual the promise to keep the offer open is still binding. In Marsh v. Lott, even though you have only .25$, that is good enough say the court. But things dont stop there. The Restatement authors go even further. They dont overrule or retreat from the rule of Marsh v. Lott, but they add something. They indicate that you dont have to even have teeny-weeny consideration to make a promise to keep an offer open binding. You need form. There must be a writing, signed by the offeror, and must simply state that there is consideration. This departs markedly from Doughtery v. Salt Napoleon case. Recitation for a general contract (not option) doesnt do the trick. Of course the UCC Rule operates only in a particular set of cases only sale of goods not land or services but in this realm of sale of goods cases, the law is liberalized even more. Now you dont even need a recitation of consideration. All you need is a writing that is signed. 2-205 deals with this problem in a different way more mechanical. It may not exceed three months. Petterson v. Pattberg Clearly the letter by the defendant proposed a unilateral contract. Here, I agree to accept cash suggests that you have to turn over the cash to accept the offer. I cant just say that I accept and promise for later. As a reader of an opinion, do I agree? How might can I critique that? What about the presumptions that if the offer isnt clear we must view it as bilateral rather than unilateral. The offeror didnt say I revoke, but they said I have sold the mortgage. The offeror

was no longer in a position to accept the money. Courts often talk with great confidence about the operation of rules in light of the facts of the case. Sometimes, though, they might be a little too confident. The writer said, I agree to accept cash If the offeror can revoke even after the person sticks the money in the offerors face, is this an offer at all? If the offeror has to TAKE the money, then there really is no acceptance or offer. This is not an offer of a bilateral contract. So we see this principle of having to begin performance rather than to just have begin to prepare. Promissory estoppel James Baird Co. v. Gimbel Bros. The bidder goofed and sent in a bid that was based on a miscalculation. When we used the suppliers bid, we accepted it. The contractors did not accept by sending in their bids. He goes on to say that it is obvious that if the offeree general contractor had become bankrupt the linoleum supplier could not sue. Why not? How do you get to that conclusion? Luckily for judge hand, he has a lot more to work with. Namely, the language of the offer and he turns to that language towards the end of that paragraph. He said acceptance AFTER the bid had been awarded. Learned Hand said he could not rely on promissory estoppel He goes through the element. There must be a promise. And an offer is NOT a promise. What about an option? No. Drennan v. Star Paving Can there be promissory estoppel? Justice Traynor says yes. I can characterize an offer as a promise. He identifies exceptions. Pg. 531

Class Notes 11.21.2011

Mailbox rule may seem quaint, but some people still deal by mail. Adams v. Lindsell gives rise to analogous questions. Hypo: Mrs. Timmons sends to Mrs. Anderson that says I offer to sell you my pet tiger Parakeet, please reply promptly. Mrs. Anderson writes a letter that says I accept. In the meantime while waiting, Mrs. Timmons has sold the tiger. Is this a contract? The problem is that the offeror doesnt know Mrs. Andersons situation. There is a time lag that complicates things.

Before receipt of the acceptance, the offeror has dealt with a third party. The mailbox rule says too bad, the risk is on the offeror. As you saw when you read Adams, the case is a little more complicated. Acceptance occurs at the time of posting the acceptance. One question is whether the offeror being the master of the offer has limited the way in which the offeree could accept by putting in the writing by receiving your answer in the course of post. This would be different than just letting someone send it. The court in the end says NO. Note, the mailbox rule is something the offeror can work around. The offeror can exclude the Mailbox Rule by excluding it in the offer. That is one of the rationales. Another hidden issue even assuming the offeror could revoke the offer prior to receipt of acceptance, did the offeror revoke the offer here? No indication that there was a communication. No revocation! The mailbox rule is a default rule. The offeror as the master can work around it. That is the principle that is applied in the Lewis case on pg. 537. As the drafter of a contract, you can do a lot better than that in drafting to clearly indicate that receipt of the letter is required for acceptance of the contract offer. So how would you draft this offer, to leave no doubt whatsoever the intention of the drafter? One of the things with the mailbox rule is that it applies in many contexts. You might get confused or at least think when does this rule apply, in what settings, etc. Some questions need to be answered by looking at a book. IN real life, you may run into problems of application. The book wont solve all of your problems. Sometimes the offeror may extend the offer in another way other than by letter But then the mailbox rule applies if it is by letter. We see even in the materials for today that the courts have extended the mailbox rule to communication other than letters, such as communication by telegram. These sort of mechanism questions are important and tend to recognize the validity of a mailbox rule or be willing to allow application as long as you have a mailbox type problem. Its also important to recognize that mailbox problems arent just of the type that we see in Adams v. Lindsell and the classic case such as Anderson/Timmons where there is acceptance by posting. You may have a situation in which acceptance is sent by the offeree changes his mind. There is an effort to take back the acceptance. That is what happens in Morrison v. Thoelke pg. 537. You have an overtaking rejection. I sent my acceptance but I changed my mind and I hereby reject. There is A CONTRACT!!! THE LAW SAYS that there is a single moment of acceptance for everybody, and so once the offeree has accepted by posting, the contract is formed and the offeree cant take by the acceptance. What if the offerree posts the acceptance but then literally runs to the post office and gets it back? Contract or no contract? Pg. 538 this is the problem involving the star football player who did just that. Well technically there is a contract. The acceptance has been posted. But in the real world does it matter? The offeror never knew. Overtaking acceptance case the offeree sends out a rejection after receiving the offer and then the next day sends an acceptance. Contract or no contract? Neither one has yet arrived in

the hands of the offeror. Well the general rule is that a rejection doesnt operate until it is actually learned of or heard by the offeror. So if the acceptance gets there first, then the rejection is therefore inoperative. Worms v. Burgess Presents the issue of whether the mailbox rule applies to option contracts. Mailbox rule does not apply to option contracts, BUT.this court disagrees with all of them. The Supreme Court of Oklahoma says were not going with the majority. This case really provides a wonderful case in which to close the study of contracts. Its a model. In fact, you should copy this case and keep it with you. It gives very good illustration of effective legal reasoning. Different types of arguments. Arguments about how to get around prior adverse authority. Arguments about finding and using good authority. And also, arguments based on policy. They arent going to follow this because there is a statute in Oklahoma. Why isnt the court persuaded by these cases? The reasons that these earlier authorities give are weak. They are conclusionary and say that it doesnt apply to option contracts. Another point: It could have been written even better. Its a wonderful model, but it couldve been better. The reason circles us all the way back to the consideration doctrine. Can we construct an a fortiori argument to applying the mailbox rule to option contract? What is an option contract What is the difference between an offer and an option contract It gives a timeline, but that is true in ordinary offers too. Why is the promise to keep the offer open for a certain amount of time enforceable? What does the court say in footnote 1 there must be consideration. Should the offeree give something for the offer be treated worse than the offeree who gave nothing? Well you at least see the seeds of an a fortiori. If we are going to apply the mailbox rule to ordinary offers which give no consideration, shouldnt we also let the mailbox rule apply to a case which consideration was given?? The offeree argues that even if the mailbox rule did apply, in my offer I said that there had to be notification by registered mail by a certain day. Doesnt that mean that the offeree has to receive the acceptance? You werent clear enough in stating!! A reasonable person would understand shall be notified by registered mail as notice by posting. Why? That is the mailbox rule.

Class Notes 11.22.2011

Statute of Frauds Hawaii statute is very standard as the way that most of the statutes of fraud look. Be aware of the background tradition of how statute of frauds is interpreted. The SOF is kinda weird. There are some specialized statute of frauds out there in particular states, so that in some states a real estate contract has to be in writing.

Sale of land you can assume there is a statute of fraudsmust be in writing. Proceed on the assumption that statutes like the Hawaii statutes are enforced in every jurisdiction that might even be a hypothetical jurisdiction. UCC should be liberally construed. If you can make an argument that builds on 1-103, then more power to you. Remedies may provide ammunition for resolving a contestable issue about remedies one way rather than the other. The rule follows where the reason leads. Where the reason stops, there stops the rule. You may get a question about damages it may be that the standard measure of expectancy damages. But youre a little nervous about whether the calculation is attackable on the grounds that it is too speculative or too rough an estimate of actual damages of the expectancy sort. I have a hard time thinking of a situation in which a court blurs expectancy and reliance damages, but even assuming that was true, in an exam type answer you want to be very specific about that. Say here is the expectancy damages, here is the reliance damages, etc. If youre going to do something that is breaking away from the usual rules, then state that overtly. Another example: Promissory estoppel Youve seen multiple instances in which courts have indicated that the proper measure of damages for promissory estoppel is reliance damages. This goes back to Wheeler v. White, one of the first promissory estoppel cases we looked at. What about Drennan v. Star Paving, where the court applies promissory estoppel where they have relied on an offer The court awards expectancy damages. So one thing is this This isnt totally without underlying authority to support it. In the restatement, as we saw, the rule is not categorical for sure There is language that might be an appropriate remedy But the drafters of the restatement didnt preclude the possibility of expectancy damages if it is promissory estoppel. What about Marathon Oil where the court doesnt either award expectancy damages OR mechanically award reliance damages, but instead the court in keeping with Llewellyn, The proper theory of prom. Estop. is to protect the reliance interests, but well give the expectancy because it is kinda like reliance damages. So were going to give this expectancy damages award but in this specialized context to protect the reliance interest. One thing to think about as you review is what were reliance? What were expectancy? What sort of proof would you have put on it? What if the situation is if the general contractor hadnt relied on a low bid, it wouldnt have got the contract at all? What damages do you award then, if any, on a reliance theory? How in this case would I measure restitution damages, etc. Dont be mechanical about that! Weve seen multiple ways on how restitution damages may be measured. Be client centered. Option contracts recitation of consideration

I was much troubled in spirit, in my first years upon the bench, to find how trackless was the ocean on which I had embarked. I sought for certainty. I was oppressed and disheartened when I found that the quest for it was futile. I was trying to reach land, the solid land of fixed and settled rules, the paradise of a justice that would declare itself by tokens plainer and more commanding than its pale and glimmering reflections in my own vacillating mind and conscience. As the years have gone by, and as I have reflected more and more upon the nature of the judicial process, I have become reconciled to the uncertainty, because I have grown to see it as inevitable. I have grown to see that the process in its highest reaches is not discovery, but creation; and that the doubts and misgivings, the hopes and fears, are part of the travail of mind, the pangs of death and the pangs of birth, in which principles that have served their day expire, and new principles are born.