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Contracts Law Student Outline

Contracts Law Notes

Four Contract Questions
1. Is there a contract?
2. What are its terms?
3. Was it extinguished?
Did the parties perform as they were supposed to?
4. What are the damages?


Position Damages
Quasi Contractual Relief
Reliance, Restitution, Reformation
Specific Performances – do what one has promised
Punitive/Penal Clauses

Substitution, Damages - Pay money to compensate for the breach of the promise
Common law did not historically like specific performance. Specific remedy only given as exception in England Common Law – because of Law and Equity Courts.

Specific remedies are the preferred remedy in the LCC

1986 If the obligor fails to deliver the thing or not to do an act, or to execute an instrument, the court shall grant specific performance plus damages for delay if the obligee so demands. If specific performance is impracticable, the court may award damages to the obligee.

If the obligation had another object, such as an obligation to grant specific performance is at the discretion of the court.

Law and Equity Courts
A. King’s Courts were common law courts
Remedy there was damages Law Cts. – damages or title “Legal remedy”

B. Equity courts were a branch of the courts
Chancellor presided and granted writs of access to common law courts
Chancellor compelled individuals to do or not to do things.
Chancellor was a religious counselor or the King’s conscience. Equitable Remedy – injunction – particular jurisdiction e.g. bankruptcy
1485 – 1776 – Development of the Royal Courts
Writ – breve – brief

Hawkins v. McGee
P suit of negligence is non-suited. Goes forward on contract theory. Pain and suffering not recoverable.
Ct. looked at the value of the good hand (Promised hand)
Value of the hand after the operation
Expectation Damages
To put in the position the promisee would have been if the promisor had performed as promised
Physician statement that he would make the hand a 100% good hand was a guarantee and enforceable as such.

Hadley v. Baxendale
Several different case reports
P presents two theories of the case. Nolle proseque – don’t want to prosecute
1. Contract claim – I was promised by a date certain to deliver a shaft Employee made the promise did he have agency or authority to do so. P gave up contract claim
2. Common carrier claim – goes forth on that theory
25 pounds into the court + jury awarded another 25
Today we assume insurance
This case is not about enforcing a promise but about common carrier liability

Nurse v. Barnes
Recover reliance damages - not what he would have earned.
pure reliance v. restitution
Restitution – getting back what was given.
Common law contracts cases were reported by lawyers for money
often there were errors
This is a strange case

Rule Nisi – Unless P can show cause why new trial should not occur
A new trial should occur.
New rule comes from the French Civil code Art 1995

A breach + B. profit he has been deprived of
Dammnum Loss sustained
emergens lucrum cessans

Only liable for what is foreseeable when the contract was made
as a direct consequence of the breach.
Damages are recoverable even if not foreseeable at time contract occurred.
Frau – Sedgewick translation closer to duress or violence than our definition of it.
If communicated then special damages can be had.

If you take an additional risk you would expect to make more profit. Justification for the rule for extraordinary service you should pay an extraordinary price.
Is this call mutual benefit?ASK********************

Louisiana Case – Guy was told by boss to move his residence then boss changed his mind. Cause was defeated. Both known by buyer and seller. If seller had said well that’s not my risk then he would not be liable.

Photo example – not liable for consequential damages. Boxtop contracts – read the paper given to you.***********ASK

Morrow v. FNB of Hot Springs
Coins stolen from safety deposit box. Nothing was given in exchange never an acceptance There was an acceptance by silence. Offer was request. Must prove more than mere knowledge - there must be an agreement.
Nonfeasance – failure to act
Misfeasance – wrongful act

Hector Martin v. Southern Pacific Transportation Co.
Unreasonable delay in transportation.
Dragline used in strip-mining equipment
Commercial context is different than Hadley v. Baxendale
What is foreseeable today is different than what was foreseeable then.
Not so remote as to make it unforeseeable
Held – New Trial
Tacit agreement
Jack Dempsey Case
Anglia v. Reed
TV show – double booking case
Reliance damages – expenditures
Did not dispute liability only damages. Wasted expenditure was not recoverable
Expenditures before contract or after contract was realized.
Appeal dismissed
Reliance and Expectation meet here. You will make back your investment you need to show that you would have profited.

Mistletoe v. Locke
Could terminate by thirty-day notice.
Jury awarded damages at 19,400.00$
Mitigation of damages P shows foreseeable
No duty to mitigate damages
P not at liberty to make D pay for damages that P further inflicts on himself.
D says you could have avoided these extra expenditures by stopping work.
An affirmative defense.

Three Interests
1. Expectation
2. Reliance
3. Restitution


Hooker v. Roberts Cabinets
Hooker – General Contractor Roberts – Subcontractor
Hooker Breaches. Dispute arose over who would dispose of cabinets. . Dispute not about sale of goods but of a service installation and removal. Hooker let him go but offered to buy the cabinets already made.
How to measure Robert’s damages?
Roberts had to store extra cabinets during the dispute, pay employee whose time was spent on breached contract. Roberts demanded an additional 23,000 as installation neared. Trail Ct. found Hooker had no right to unilaterally terminate the contract.
$42,870 found damages
storage costs – 1440
administrative costs 1760
lost profits 30,000
Held – received all damages but the amount he wanted to recover for storage. He would have had that space empty anyway so he could not recover for it.

Tongish v. Thomas
Farmer/seller breaches contract to sell sunflower seeds at fixed price when market price went up.
But co-op/buyer itself had a contract to resell each unit for cost + 55 cents
Assume sale price $4, market price at 10$, what are damages per unit 55cents or 6 dollars?
2 sources of distinguishability
Seller argues 55cents puts him in same place if he had performed the contract buyer argues – difference in market price and contract price is what he should get because the prices a have increased so dramatically.
106 says – I should give you exactly what you need to be if the position you would be if I had performed.
Trial Ct. applied 713
Appellate – reversed and applied 106
Supreme Ct. back to trial ct. 713 applied
Contest between general principle (expectation) and specific damages measure when seller breaches (contract market difference)
S.Ct applies specific measure overcompensates PP?

1. Remoteness of harm
2. Certainty of harm
3. Avoid ability of harm

Kemble v. Ferren
Action to recover for liquidated damages for the violation of appearing for 4 seasons at Covent Garden.
Jury awarded with a sliding scale.
D. Needs to show cause why verdict for P should not be increased from 750 to 1000.
Held – increase not allowed.
Rat – Action was brought for breach of a clause of an uncertain nature.
Issue – Penalties clauses – unenforceable
Liquidated damages – enforceable

Historically – penal bonds are defeasable
Ex. – I owe you 200.00 but if I pay you by a certain date I only have to pay 100.00.
Theory began to be held in disfavor. Promisee is put in a better position by the other party’s breach of the contract.

Wassenaar v. Towne Hotel
General manager for the hotel sued for breach of contract for employment.
Is clause stipulating liquidated damages enforceable or is it really a penalty clause and thus unenforceable.
The Efficient Breach Theory – you should have the possibility of breach for a better deal. When all three come out ahead.
***********When you elect specific performance as a preferred remedy you are using the efficient breach theory?
They serve several purposes
1. Allow parties to control their exposure to risk by setting payment for breach in advance
2. Avoid uncertainty
3. P., 179
4. P.179
Trial Ct. – 24,640 awards to P
Appeal – reversed
Supreme Ct. – back to Trial Ct. decision

Buyer breaches because of sellers theory – in order to put me in position I would have been I need the profit I would have received from the buyer
Lost volume rule – seller is in better position if buyer breaches
1. Contract price does not work
2. Lost volume measure
Damages that cannot be mitigated.
Rule on mitigation – Section 350
LCC 2002

Garrity v. Lyle Stuart, Inc.
Issue – Does arbitrator have power to allow punitive damages?
Even though the punitive damages were agreed upon by contract this goes against public policy. Awarding of penalties does not go against public policy. Punitive are a social sanction reserved for the court.
Rat – under arbitration rules the court does not supervise
Arbitration – mostly outside of the legal system
No judge or state employee supervises so no punitive damages allowed
LCC – damages – 3546

If you have a thin contractual skin I should raise my price.
Wedding dress example
Damages – Common law tort actions
Loss of consortium, pain and suffering
Contract has barrier to this

Willoughby Roofing v. Kajima
Rat – Federal policy does not prohibit arbitrators from awarding punitive damages if stipulated in the contract
If bias plays a part in the award it can be vacated.
1) Deterrent
2) Punishment
Reasons –
1. Defendants could escape punitive damages by simply agreeing to arbitration if Garrity were upheld.
2. Also. Arbitration would be disfavored if you could not allow punitive damages.

Common Law – everything beyond compensation is punitive
Civil Law – not to punish but to compensate for harm suffered just difficult to determine for damages
Eggshell – sensitive P
Tough – doesn’t suffer
These prior two do not suffer the same
Common law says we can’t determine what to give so make sure you bargain more money from the sensitive P
Different states have different measures of damages

Loveless v. Diehl
Loveless owns 79-acre farm. Leased it to Diehl. Was an option contract to purchase.
Land is a liquid market but in the law it is still considered unique.
Specific performance is the preferred remedy.
We need to enforce option so they will be desirable?

Contracts for Goods

Cumbest v. Harris
Unique stereo
Courts of chancery do not usually decree specific performance.
Security interests not a sale.
Decided by analogy

Scholl v. Hartzell
Just because he put down a deposit does not mean the contract was completely executed.
Rat – Specific performance should only be when there is no adequate remedy at law.
Not replevin (give it back) but assumpsit.

Sedmak v. Charlies Chevrolet
Put 500.00 deposit on Corvette used as a pace car.
Oral contract
Specific type of engine and stereo
Dealer asked to keep car as a model.
P agree
D had to give specific performance

Mary Clark
Indentured servant
She is free to contract but not to be a servant involuntarily

Lumley v. Wagner
Grove’s heirs
Pepper pot painting Sumpter Priddy III figured out Crimmel was very valuable.
Bought it for 1,300 sold it for 385,000.
Veneer – fraud

Cowboys v. Harris


Bush v. Canfield
2000 barrels $7 barrel superfine wheat if only fine grade then 50 cents less
P paid in advance 5,000
3,000 at 4 months
1000 4 months at interest
Failed to deliver flour
Trial ct. found for P $6,771
Appealed – affirmed
Defendants owed 7 barrel plus interest notwithstanding that the price had dropped to 5.50 a barrel
Restitution damages – Field codes – precommon law codification of procedures
Quasi – contract – is a remedy not a type of contract
Act as if it were a contract
Disgorgement – Cough up the profits not merely the value of the thing in her hands.
What was the contract?

Discussion on earnest money - ??????????
Detrimental reliance
Promissory estoppel
Contract made but failed
Vice of Consent
LCC 1967 – Detrimental Reliance
P not relied upon a remedy of offer and acceptance cause is illicit – quasi contractual
Warranty of redhibition/ fit for particular use

Britton v. Turner
Common counts certain kind of writ to get into court increased # of writs decreed every now and then they would try to decrease writs.
Equity Chancery v. Common Law Quantum Meruit Indibitatis Assumpsit
Was indebted and promised to pay – provided services have not been paid.
Amount of value things rendered (services) meruit – what the goods are worth in the market.

Restatement 1
Contract Defined – is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty

Restatement 2
Promise is a manifestation of intention to act or refrain from acting in a specified way so made as to justify a promise in understanding that a commitment has been made.
The person manifesting the intention is the promisor
The person to whom the manifestation is addressed is the promisee
Where performance will benefit a person other than the promisee that person is a beneficiary

Restatement 3
An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.

Restatement 4
How a promise may be made

Restatement 347
Measure of damages in general
The injured party has a right to damages based on his expectation interest as measured by
(a) The loss in value to him or the other party’s performance caused by it’s failure or deficiency plus
(b) By other loss, including incidental or consequential loss caused by the breach
(c) Any cost or other loss that he has avoided by not having to perform


Lumley v. Gye
Wagner breached contract with Lumley to work for Gye.
Lumley sued Gye on tortious interference of contractual relations.
Common law action of enticement
P wins but only nominal damages
Section 766 of Restatement of Torts
Is subject to liability to the other for the pecuniary loss resulting from the failure of the 3rd person to perform the contract
What did the judges look at?
Intentional v. Negligent
Original – theater owner
First person – new theatre owner
Third person – singer

Texaco v. Pennzoil
Other – 3rd person
Texaco – First Person
Basic remedy for breach of contract
Common Law – damages expectation are there to say what will be the harm suffered by the person not in breach
By giving P $ value of expected performance

Civil Law
Specific performance is a preferred remedy
Action for tortuous interference Makes no sense??????????????
If the party in breach gives expectation damages
Any remedy against a third party will be over compensatory
Efficient Breach Theory – Damages at common law
Encourages breach
Should someone benefit by a breach
If person who interfered with an existing contract is competing the court will place emphasis on
this. Remedy in damages which included lost profits.
If party coming in is willing to breach and still make $ common law is saying go ahead and do it.

768 of Torts
Rest-Torts (Contents) s766
Usually they will mesh?
P needs to figure a more generous measure.
LCC has a test - Impracticability
Ring is not there to be delivered
1967 Detrimental reliance

Mutual Assent


White v. Corlies and Tiff
D gave P specifications for building offices and asked for an estimate.
D took the estimate altered and returned it to P.
P began the work before the contract was fully formed.
P never accepted in the correct form. He began performance. Acceptance must be by an appropriate act.
Held – No Contract

Crook v. Cowan
Facts – D ordered carpet from P. Refused delivery because he purchased from another the carpets. D never received confirmation of his order.
P received award for breach of contract
Appellate – affirmed
Issue – Order was unconditional
Rat. – Merchant (p) offer was advertisement (d) Cowan placing order was an acceptance. So the contract was formed at that time.
Note – D should have made the acceptance conditional. Intent to be bound by the offeror.
The offeror is bound before he knows he is bound.


Advertisements are not normally offers but when the offer or advertisement is very specific and sets out all elements of offer then performance can be acceptance.

Leftowitz v. Big Store

Carbolic Smoke Ball – bargain to pay for the ball. Benefit to the offeror. Bargain for the promissee to do something he doesn’t have to do.

Changing his position detriment top promisee. Flag pole case if you walk across the Brooklyn Bridge I will pay you 100.00. Seems hard to see the
a. Benefit to the promisir – one kind of consideration
b. Detriment to the promisee – another kind of consideration

Consideration – benefit to the promisor
1st Restatement kept it split
2nd Restatement – tried to do away with the split. One or another or both.

Did the offeror get what he wanted?

Common Law – Based on idea of bargain or exchange
Gifts are not contracts they are unilateral
Civil Law – We don’t look for bargains we look for agreements. Loan for use, unilateral agreements offers can be irrevocable. Option contracts can be irrevocable.

Mailbox Rule and acceptance by performance have a common characteristic. The offeror may be bound before he knows he is bound.

Buyer is making an offer – Evertite Roofing
Chicago Refrigerator – selling refrigerators in the south. They are not bound until they get back to their offices in Chicago
Section 30 – Acceptance in any manner and by any medium reasonable. In the circumstances.
Section 32 - as the offeree chooses.
Mortgagor/creditor says pay me a discount of the mortgage in cash
Creditor says you have to perform to accept but then sells the debt to a third party.

Dickerson v. Dodd
In LA you can make an irrevocable offer by saying so
An option unilateral contract

In Common Law you can’t do this
You must get paid for it.
This is a valuable right and must be paid for.
Offeree must give consideration.. Nothing done gratuitously at common law.

Offeror hiding because he has changed his mind.
Talking heads – agreement?********************

Section 45
Option Contract created by part performance or tender
Benefit is to detriment of offerree not benefit of the offeror
Section 50 acceptance of offer defined
Acceptance by performance
Acceptance by promise

FLA/ ALABAMA job offer

Objective theory of contract
1. Subjective belief there is an agreement
2. And that belief is reasonable
Baron Bramwell – one party must intend an agreement

Lucy Zehmer
I was only joking?
I was drinking.
If you were joking you let the joke go on too long.

UsGovt. v. Braunstein
Error Clerical slip
Offer and acceptance
$1 offer per pound Braun $1 accept ton gov.
Government loses summary judgment granted
Mutual assent based on third party error
Neither party was at fault
Land surveyor
There is no contract because there was no acceptance
“Insufficient unequivocal”
Language of contract
Ambiguous language is different
Reformation – fix the contract
Preliminary Negotiations p. 356

Nebraska Seed Co. v. Harsh
offeror offeree
Invitations to negotiate or bargain thinks he is accepting
Mutual assent – offer and acceptance

Empro Mfg. v. Ball Co.
Mailbox rule –
Langdell – worse to be in a deal you did not know you were in.
Llewellyn – offeror is in the stronger position he can draft and protect himself.
Talking Silence –
Tacit Acceptance –

Hobbs v. Massasoit Whip Co.
Jury instructions – Was there a contract if the buyer had reason to believe that the seller would understand buyers receipt of skins and silence over several months was acceptance. YES
See R2dKXs69
LCC ditto
LCC reprealed 1816

Owner of property mortgagor/debtor tries to accept
Shows up with money


Sun Printing
What’s missing is length of time for price. Could be fixed by quarterly or monthly.
They knew they were contracting and thought that they were bound but the court found that no contract existed. Would be decided differently today agreements to agree.
Vague terms in law of sale.

Quantity – LCC 1974
Detrimental Reliance
Mechanical Computation
LCC 1973
By determinable third person
May be detrimental reliance if the third person does not supply the price.
You can survive summary judgment.
Parties have stipulates reasonable price only for movables.
Agree to negotiate. Or reasonable price. They survive a summary judgment.

Eastern Airlines
Gulf wanted to increase their gas prices Eastern filed for an injunction for breach of contract. Gulf said a lack of mutuality and impracticability. Issue – Is the contract binding? Yes.
Good Faith demands are what is important. Consideration is adequate from the seller to sell only to that buyer and for the buyer to buy from only that seller.??????

Iron Works v. Radiators – If market price goes way up isn’t good Faith to turn around and resell when before you were simply making radiators?

LCC 1770 – Suspensive and resolutory conditions.
Can’t be bound by a whim. Potestative. Future uncertain event. Suspensive condition is a loan. Frustration of purpose/ mistake as to assumption of the contract
LCC 1975 – Output of performance
Requirements contract
Measured by good faith

Lady Duff
No mutuality does this mean mutually advantageous? Contracting her name for selling goods. She is held to her promise.
Titanic Lady

Carbolic Smoke Ball
Offer held out to the public. 100 Pounds. Offer was accepted by performance. Co. had to pay Carlill.

Good Faith in the UCC

Good Faith in the LCC

UCC is not applicable to construction contracts or immovable sales.

New York radiator would be decided wrongly under the 306 Comment 1

Ratio in infinity
Look at past performance for good faith. If buyer requirements last year were 100 units could the parties think that the order the following year would be 0.
Is there good Faith?
If buyer wants to argue good faith does he have authority to do so? Yes


X Infinite regression?


Garrity v. Lyle Stuart Inc
Royalties were withheld from a book publisher
Arbitrator could not award punitive damages
Against public policy Contract Law
Prohibits unless TioC and can only be found by the court
Arbitratorsa are subject to pressure by the parties.
Dissent – Weve allowed treble damages which is similar
P alleges done to coerce here too drop 1971 case suit

Federal law allows punitive awards from arbitrators
Federal Policy says arbitrators lawful does not undermine judicial system
Punitive punishes wrongdoer deters others who might engage in similar conduct.
By agreeing to arbitrate escaping punitive awards
Free to spevify in contract to exclude the possibility of punitives


Raffles v. Wichelhaus
Understanding was P would sell to D 125 bales of cotton. 2 Peerles ships/ Bombay to Liverpool. D would not accept because he thought he had contracted for the Oct. ship. The Seller thought he had contracted for the December ship. Parol evidence was allowed. If ambiguity is to an ambiguous term there is no contract Material term. No meeting of the minds. Standard of reasonable expectation. Therefore there was no contract.

Read what Gilmore and Simpson have to say
One term used that became ambiguous because there were 2 ships.
If you can tell from outward manifestations that they wanted to be in a contract, then the court can resolve tha mbiguous term.
Contract formation
Breach D refused to accept goods or pay.
He thought Oct.
D thought Dec.
P demurrs in the plea (so what)
Milward – time of sailing no part of contract
Mellish – Peerless “latent ambiguity”
Ex Peerless means risk of loss on neither party contract is over.

Oswald v. Allen
Two Swiss coin collections. Dr. Oswald thought he was purchasing the coins from one Swiss collection. They were really coins form both collections. They were using an interpreter. Ambiguous so No Contract. (Mutual Error). Rescinded contract .
LCC unilateral error – one party may owe damages to the other
2474 - Seller


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