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Contracts #3
Contracts
| Question | Answer |
|---|---|
| Extrinsic Evidence | Evidence of content when considering if a contract between parties actually exists or not. Usually consider this type of evidence at the end, when all else fails to determine contract existence. Also referred to as Parol Evidence. |
| Ambiguous | Open to more than one interpretation; one word or phrase has multiple meanings. Obscure or vague. |
| Unambiguous | Only has one meaning. Only open to one interpretation. Clear and concise. |
| Patent Ambiguity | When a contract is unclear or ambiguous in its face, within the text itself. |
| Latent Ambiguity | Where the document is clear on its face but application causes ambiguity. |
| Parol Evidence Rule | When applicable, the PER bars admission of extrinsic evidence including prior or contemporaneous agreements that contradict or create a variation of a term in a writing that the parties intended to be completely integrated. UCC §2-202, R§214. |
| Integration | writing is the final expression/ agreement of the bargain or deal between parties. |
| Total integration (complete/full) | Writing is a complete and exclusive expression of all the terms on which the agreement was reached. PER admissible to explain terms of the writing only. Ex; real estate contract to purchase a home is usually this type of integration. |
| Partially integrated | Writing is an expression containing some but not all of the terms of the agreement. PER admissible to supplement or explain the writing or record but not to contradict it. Ex; restaurant check. Parol Evidence more likely to be admissible these cases |
| Unintegrated | Writing is not final, rather it is a draft and is not intended to be the final agreement between the parties. |
| Parol Evidence Rule Steps/Elements | 1)Is there a writing?, 2)UCC or Common Law apply? -UCC §2-202 or R§214, 3)Merger clause, 4)partial or total integration |
| UCC §2-202 | Extrinsic evidence is admissible to explain or supplement by course of performance, course of dealing, and or usage of trade. |
| Restatement §214 | Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible to establish: 1)whether writing is integrated, 2)whether it is partially or fully integrated, 3)the meaning of the writing, 4)illegality, fraud, etc. 5)$ |
| Restatement §210 | Explains whether a writing is a full or partial integration. |
| Interpretation | Addresses the meaning of the parties intent in a contract and whose meaning is to being given effect with respect to certain contract terms. Second step after Parol Evidence Rule. Is contract: reasonably susceptible to multiple meanings/ambiguous? R§212 |
| Restatement §212 | Interpretation of an integrated agreement. Objective and subjective meanings. Plain meaning, Frigaligment method, canons of construction, interpretation against the draftsmen, broad meaning over a narrow one, etc. |
| Restatement §200 | Interpretation of Promise or Agreement. Interpretation of a promise or agreement or a term is an ascertainment of its meaning. |
| Restatement §203 | Standards of Preference in Interpretation. Includes the most reasonable and lawful meaning, express terms are given greater weight, etc. |
| Restatement §205 | Good faith and Fair dealing. Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. |
| Restatement §206 | In choosing among the reasonable meanings of a promise or agreement or a term thereof that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds. Interpretation against draftsmen. |
| Restatement §207 | Interpretation favoring the public. A meaning that serves the public interest is generally preferred. |
| Restatement §210 | Governs completely and partially integrated agreements and explains their differences. |
| Restatement §209 | Defines what an integrated agreement is. |
| Course of dealing | A sequence of previous conduct between the parties to a particular transaction which is fairly to be recognized. R§223. |
| Course of performance | Where the contract for sale involves repeated occasions for performance by either party w/ knowledge of the nature of performance, same transaction. |
| Usage of trade | Method of dealing has such regularity of observance in a place, vocation, or trade as to justify an expectation. What is typical in a particular industry. R§222. |
| implied in fact | agreed to by the parties implicitly rather than explicitly. |
| implied in law | selected by the court to fill in the gap, consistent with but not representing the parties choice. |
| Gap fillers are also called this: | gap fillers are also called default provisions and are derived from statutes and case law. |
| Duty of Good Faith | R§205. Generally every contract carries with it an implied covenant (promise) of good faith and fair dealing. UCC is §1-304. |
| UCC §1-303 | Course of Dealing , Course of Performance, Usage of Trade defined in UCC. |
| Condition(s) | R§224. An event not certain to occur, which must occur, unless its non-occurrence is excused before performance is due under a contract. Expressed/Implied. Magic words include: "If", "on condition that", "unless", so long as", "until", etc. |
| Express Conditions | terms included or expressly stated in the contract by the parties. Must be performed in full. If condition is not fulfilled it fails and obligation to perform does not become due. |
| Implied Conditions | Not explicitly stated in the contract but is assumed to exist (by a court). Based on agreements nature, parties intentions, and common practices. |
| Wavier | Person for whose protection the condition was placed in the contract has waived compliance with that condition. 1)only party protected by the condition can waive it, 2)waivers must be communicated to be effective, 3)cannot cause material change to duties |
| Excuse | Tool in equity the courts may choose to use. Excusing the condition for an equitable reason. Ex; to avoid disproportionate forfeiture. R§229. |
| Promissory Conditions | When a term is both a condition and a promise it is called this. You can recover damages for breach of promise and bc there is an implied condition of performance other party doesn't have to perform (discharged). |
| Condition Precedent | When something stands in front of the duty to perform. You do not need to do it unless that condition happens first. Creates an obligation to perform. |
| Condition subsequent | when duty to perform is present as soon as the promise is made, duty could "die" before being called on to perform it or may break at some point. Discharges a part of their duty to perform. |
| Concurrent conditions | Conditions to exchange performances at the same time. Most of these conditions are implied ones. |
| Forfeiture | The denial of compensation that results when a party loses his right to the agreed exchange after he has relied substantially as by preparation or performance on the expectation of that exchange |
| Substantial Perfomance | A party to a contract has substantially performed its obligations even if there are minor defects or deviations that are immaterial from the agreed upon terms and may be entitled to compensation. If breach is material, damaged party may be relieved. |
| R§241- Substantial Performance 5 Factors | 1)injured party will be deprived of the benefit which he reasonably expected, 2)extent to which injured party can be adequately compensated for being deprived 3)party failing to perform suffer forfeiture, 4)cure, 5)good faith and fair dealing |
| immaterial | duty to perform under substantial performance, it is not a material breach of the contract. |
| material | obligation to perform may be discharges or relieved by a party bc breach was material to the contract, breach is large enough to not have to perform a duty. |
| C § A Construction Company v. Benning Construction Co. | When parties express their intention in a contract in clear & unambiguous language, it is the court's duty to look at plain meaning. When meaning of a written contract is ambiguous, parol evidence is admissible to explain the writing. Patent and latent. |
| Pacific Gas & Electric Company vs. G.W. Thomas Drayage & Rigging Co. | Reasonably susceptible to multiple meanings. Judge Traynor test. |
| Frigalignment vs. BNS International Sales | Disagreement over the definition of "chicken"; if the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, courts may look to external factors to determine the proper interpretation of the term. |
| UAW-GM Human Resource Center v. KSL Recreation Corp. | Merger clauses are added to usually try and show that agreement is complete and fully integrated. |
| Harold S. Lee vs. Joseph E. Seagrams & Sons | Collateral agreements are admissible under Parol Evidence Rule bc considered separate from main agreement as long as they don't contradict the main agreement. |
| Constructive Conditions of Exchange | Some promises are connected to each other even tho not expressly stated. Conditional relationships implied from the agreement determine the order of the parties performance. |
| 3 Types of promises as in Kingston v. Preston | 1)Mutual and independent promises, 2)Sequential dependent promises, 3)simultaneous dependent promises |
| Mutual and Independent Promises | Either party may recover damages from the other for injury incurred by the breach of others promise; breach of one party's promise is not an excuse for the other party failure to perform. |
| Sequential Dependent Promises | Performance of one party depends on the prior performance of another until the prior promise is performed the other party does not owe a duty to perform his promise. |
| Simultaneous Dependent Promises | To be performed at the same time. If one party is ready and offers to perform his part, upon fulfilling his engagement may maintain an action for the default of the other. |
| Cure | Can cure, or in other words, fix and correct breach, by furnishing the miss performance, re-performing, or repairing the defective item depending on contract and nature of breach. Found in R§241 concerning substantial performance. |
| Restatement §237 | When a condition does not occur, the duty which that condition relies on may 1)performance of the duty may not become due, or 2)duty may be discharged when condition can no longer occur |
| Restatement §242 | If reasonable time passes and a party fails to make any cure, it may result in a discharge of the party of their duty or suspend the other party's duty until cure occurs as agreed by the parties. |
| UCC §2-601 | Buyers Rights on Improper Delivery: If goods or the tender of delivery fail in any respect to conform to the contract, the buyer may 1)reject the whole or 2)accept the whole or 3)accept any commercial unit or units and reject the rest. |
| UCC §2-508 | Cure by Seller of Improper Tender or Delivery; Replacement. As long as time for performance as not yet expired seller may reasonably notify the buyer of his intention to cure and make a conforming delivery. |
| Sackett vs. Spindler | Court can still permit a cure even if its not 100% allowed like in Sackett v. Spindler (call this a permissive cure) |
| Immaterial | if breach is immaterial then the collection of a remedy is the extent of the aggrieved party's rights. |
| Material Breach | Material breaches typically involve failing to perform a key obligation or when the breach substantially defeats the purpose of the contract. |
| Total or Partial Breach? | Partial- After cure, parties resume performances but retain any rights to remedies for past breaches. If breaching party has a right to cure, then a material breach is considered only to be a partial breach. |
| Total or Partial Breach? | Total-If the breaching party has no right to cure, the material breach is a total breach. Aggrieved party retains both the right to a remedy for the breach and the right to suspend/withhold its performance. Aggrieved party also acquires right to cancel K |
| Repudiation | When a party to a contract indicates that they will not fulfill their obligations. This can be done through words or actions. Must be absolute and unequivocal refusal to perform or a distinct and pos. statement of an inability to do so. Is a total breach. |
| Anticipatory Repudiation | If a repudiation occurs before the date on which contract performance is due, this is called an anticipatory repudiation. Breach does not occur until time for performance is due/arrives, usually some slight indication it may occur. |
| Assurance | Refers to a party's right to demand and receive assurance of performance from the other party when there are reasonable grounds to believe that the other party may not fulfill their contractual obligations. Implied terms. UCC §2-609 |
| Impossibility Doctrine | Impossible for contract to take place, performance for all parties is excused when this arises. Ex; hurricanes, pandemic, etc. Force Majeure Clauses- "Act of God clauses". |
| Impracticability Doctrine | Test for impracticability is set forth in Transatlantic Financing; 1) contingency (something unexpected occurred), 2)risk of unexpected occurrence must not have been allocated either by agreement or by custom, 3)performance is commercially impractical |
| Frustration of Purpose | Excuses duty to perform due to some unexpected event which makes one party loose all or most of the value. Usually now a days hotels and such have lengthy cancellation policies to contract around frustration of purpose. (Krell v. Henry). |
| Restatement §237 | To demand performance-must not have committed a material breach which is the same as saying must have substantially performed. Concept of substantial performance focuses on how much the performing party has done and whether it satisfies the condition. |
| Restatement §241 | 1)extent to which injured party will be deprived of the benefit which he reasonably expected; 2)extent to which injured party can be adequately compensated; 3) suffer forfeiture; 4)reasonable assurances, 5) good faith and fair dealing. (Five Factors) |
| 4 Types of Expectation Damages | 1)Direct Damages, 2)Indirect Damages, 3)Incidental Damages, 4)Consequential Damages |
| UCC §2-609 | Right to Adequate Assurance of Performance- refers to a party's right to demand, in writing, that the other party provide adequate assurance of their ability and willingness to perform their contractual obligations |
| UCC §2-611 | allows a party who has repudiated a contract to retract their repudiation until their next performance is due, unless the other party has canceled the contract, materially changed their position, or indicated the repudiation is final. |
| R§251 | addresses the right to demand adequate assurance of performance when reasonable grounds arise to believe the other party will commit a breach by non-performance, allowing the obligee to demand assurance and treat a failure to provide it as a repudiation. |
| R§261 | discharge due to impracticability, stating that a party's duty to perform is discharged if their performance becomes impossible or extremely difficult due to an unforeseen event that was a basic assumption of the contract, and the party is not at fault. |
| R§265 | Frustration of Purpose Restatement |
| R§2-615 | nonperformance may be excused if performance has been made impracticable by a contingency, the nonoccurrence of which was a basic assumption of the contract. |
| Direct Damages | direct and immediate losses suffered by one party due to a breach of contract. These damages aim to put the non-breaching party in the position they would have been in had the contract been performed as agreed. |
| R§270 | Partial impracticability Restatement |
| Jacob & Youngs v. Kent | b/c contractors substantially performed (ie really no difference between Reading and Cohoes pipe), cost of replacement would be grossly/unfairly disproportionate so we have to just give difference in value of Reading and Cohoes (which is little/nothing) |
| McCloskey & Co. vs. Minweld Steel Company | To find a reunification amounting to a breach of contract there must be an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so. |
| Taylor v. Caldwell | contract to have a concert at a music hall, it burns down-- can you have a concert at a music hall that has burned down? (No). In these situations we make an implied condition, that performance by all parties is excused when these circumstances arise |
| Transatlantic Financing Corp. vs. US | Test for impracticability in this case: 1)contingency (something unexpected occurred) , 2)risk of unexpected occurrence must not have been allocated either by agreement or by custom, 3)performance is commercially impractical (co. out of business) |
| Krell v. Henry | rented a room to watch the coronation and parade – no longer needed the room after the parade was cancelled. No reason for the contract BUT for the assumption that the parade would proceed as planned. Frustration of purpose. |
| Bouton v. Buyers | father promised daughter the ranch if she quit her job and came and worked for him. Father sold the ranch and court concluded that Daughter might recover an amount in recover reliance damages. |
| Peevyhouse v. Garland Coal & Mining Co | Yes, Coal materially breached, but Peevyhouse only suffered $300 in diminution in value as opposed to $5000 it would cost for them to complete the work. Peevyhouse only gets diminution in value and not cost to complete. |
| Security Stove Manufacturing Case | reliance damages appropriate in this case bc new product at the formative stage, loss profits cannot really be proved, making attempt to prove them speculative. If you cant prove the damages it would be hard for plaintiff to meet burden of proof. |
| Royalties | a compensation to the owner of intellectual property or natural resources for the right to use or profit from the property. |
| Eker Brothers case | there's a material breach, subcontractor walks off the job. Substantial performance and R§241 factors. Court concluded that they did not substantially perform bc breach was material, willful, and anticipatory |
| Lawrence v. Fox case | Relaxation of privity seen in this case. If one person makes a promise to another for the benefit of a third person, that third person may maintain an action upon it. |
| Expectation Damages | awarded to the non-breaching party to compensate them for the loss of the benefit they expected to receive from the contract if it had been fully performed. Put non-breaching party in position would have been in had K been performed fully |
| Diminution in Value | the difference between the value of a property or object as it was promised in the contract and its actual value after a breach. |
| Punitive Damages | they are awarded in addition to compensatory damages, which are intended to make the plaintiff whole for their actual losses. Punitive damages are typically awarded when the breach of contract involves malice, fraud, or other outrageous behavior. |
| Liquidated Damages | pre-agreed amount of compensation specified in a contract that is paid to one party if the other party breaches the contract. These damages are used to compensate for losses caused by a breach. |
| Reliance Damages | compensate a party for expenses incurred and losses suffered due to their reasonable reliance on a promise that was later breached |
| Restitution Damages | prevent unjust enrichment by restoring a benefit to the party who has conferred it, rather than compensating for losses. |
| Three Types of Equitable Remedies | Specific Performance, Specific Restitution, and Prohibitory Injunction |
| Specific Performance | Requires party to fulfill their contractual obligations exactly as agreed rather than simply paying $ |
| Prohibitory Injunction | a court order compelling a person and/or company to refrain from doing a certain thing. |
| Specific Restitution | remedy that compels a party to return specific property or an asset that was wrongfully obtained or taken from another party. |
| R§90- Promissory Estoppel | Reasonable reliance on a promise. 1) Promisor by the promise expects to induce/forebear promisee 2) Does induce or forebear promisee Only way to avoid injustice is to enforce the promise |
| UCC §2-713 | Use market price to determine damages if repudiation occurs at the time or after performance is due. Only applies to a rising or falling market; in a replacement or hypo replacement transaction. |
| Restatement §86 | a promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. |
| Restatement §129 | Specific Performance Restatement |
| Restatement §346 | Unreasonable Economic Waste. cost of performance is the proper measure of damages if this is possible and does not involve unreasonable economic waste and that the diminution in value caused by the breach |
| Restatement §349 | allowing an injured party to recover damages that would place them in the position they would have been in had the contract never been made, less any losses they would have incurred had the contract been performed. |
| Restatement §355 | punitive damages are not recoverable for breach of contract unless the conduct constituting the breach also constitutes a tort for which punitive damages are recoverable. |
| Restatement §356 | Test for stipulated (liquidated damages clauses). Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach |
| Restatement §371 | Measure of Restitution Restatement |
| Restatement §374 | utlines when a breaching party in a contract may be entitled to restitution for benefits they have conferred on the non-breaching party, even though they are in breach. Based on promissory estoppel. |
| Lyon v. Belosky Construction | Two general requirements: 1)unintentional & 2)good faith and unreasonable economic waste. |
| Khiterer v. Bell | Crown replacement on tooth; not the right one but Khiterer got a crown anyways. Khiterer should get the value back of the crown they contracted for. *Ask for diminution in value damages. Price of new crown and one she contracted for. |
| True or False | True! -Expectation damages are the gold standard when awarding parties in a breach. Comments to R§349 help to decipher when reliance vs expectation damages should be given. |
| True or False | True- We almost never give punitive or emotional distress damages in contract law. We do allow consequential and direct damages especially for buyers |
| Assignment (defined) | transfer of a right under a contract |
| Transfer (defined) | transfer of contractual duties |
| True or False- After assignment, assignor has no more rights | True- After assignment, assignor has no more rights |
| True or False- After delegation, delegator (original obligor) still remains responsible (unless obligee consents otherwise) | True- After delegation, delegator (original obligor) still remains responsible (unless obligee consents otherwise) |
| Privity of Contract | privity means that only the parties directly involved in a contract can enforce its terms or be held liable for breaches. |
| Assignment of Delegation defined | Transferring or assigning rights and duties to another party. |
| Third Party Beneficiaries defined | benefited party (the project owners) is named as the beneficiary of the bond but is not a party to the bonding contract. The benefited party is a third party beneficiary to the bonding contract. |
| There are two steps in a 3rd Party Beneficiary Analysis: | 1)identify a benefited party as a 3rd party beneficiary, 2)ascertain whether the 3rd party beneficiary is an intended or incidental beneficiary |
| UCC §2-210 | Restatement concerning the delegation of performance and assignment of rights |
| UCC §2-318 | Third Party Beneficiaries of Warranties Express or Implied. Lack of privity of contract bars bringing a suit. But relaxation of privity allows some ppl to bring suit regardless. |
| Restatement §317 | defines an assignment of a right as a manifestation of the assignor's intention to transfer that right. It extinguishes the assignor's right to performance from the obligor and creates a right to that performance in the assignee. |
| Restatement §318 | ddresses delegation of performance of duty. It generally allows an obligor to delegate the performance of a duty to another, unless the delegation is prohibited by law, public policy, or the terms of the original promise |
| Restatement §322 | addresses contractual prohibitions of assignment. It clarifies that a contract term prohibiting assignment of "the contract" typically only prevents the delegation of performance duties, not the assignment of rights. |
| British Wagon v. Lea & Company | Assignment of specialized to work is not the same/ comparable; think of getting a family portrait done and then half way through the painting another artist takes over and continues painting. |
| Crane Ice Cream Co. v. Terminal Freezing & Heating Company | Even if there is no express clause in the contract; is there an implied or other way that prevents anti-assignment. Look at bolier plate clause to know if you can assign or if contract prevents it. Assignee doesn't have to pay $ at same time of OG party |
| True or False- we favor the free alienability of property rights | True- we favor the free alienability of property rights |
| Alienability of property rights | Sell, transfer, convey rights without any restriction attached. |
| True or False- you can assign only part of a contract to someone else. | True- You can assign part of the contract to someone, it does not have to be the whole contract (see Lucy v. Zehmer chart on pg 911) |
| True or False- When there is a delegation of duties, the original delegator is still on the hook for the full amount of $ in breach of contract. The OG delegator is not off the hook. | True- When there is a delegation of duties, the original delegator is still on the hook for the full amount of $ in breach of contract. The OG delegator is not off the hook. |
| True or False- You cannot sue a ref or umpire at a sporting event bc they are not the person you are in privity of contract with. | True- You cannot sue a ref or umpire at a sporting event bc they are not the person you are in privity of contract with. |
| Magnuson-Moss Warranty Act | governs written warranties on consumer products, but it also affects implied warranties and service contracts. |
| Consequential Damages | 1) certainty- damages happened, 2)causation- damages caused by breacher, 3)Foreseeability-damages must be foreseeable, 4)mitigation- P had duty to mitigate damages as much as possible |
| True or False- Plaintiff is not likely to argue mitigation - the other party will bring it up and plaintiff will have to respond as needed | True- Plaintiff is not likely to argue mitigation - the other party will bring it up and plaintiff will have to respond as needed |
| Luten Bridge | Plaintiff has an obligation not to increase damages. |
| True or False- Consent of both parties is required for an assignment and delegation, if no consent the attmept to consent is a repudiation! | True- Consent of both parties is required for an assignment and delegation, if no consent the attmept to consent is a repudiation! |
| Efficient breach | Not wondering why someone has decided to breach because we don’t actually give a fuck. We don’t know why they fired him, just want to calculate the damages - agnostic on the why of the breach |
| Perfect Tender Rule. UCC 2-601. | If tender or delivery fails in any respect, buyer can accept or reject the goods. In the meantime, though, performance is not due. |
| When might we allow cure? | When the time for performance has not yet run When the breach is fixable, and the fix is completed within a reasonable time. If there is a material breach and there is a cure, the material breach is resolved. |
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