contract = offer and acceptance + consideration

							contract = offer and acceptance + consideration consideration = mutuality of obligation + reciprocal inducement 4 types of enforceable contracts: 1. promise plus consideration (mutuality of obligation, reciprocal inducement) 2. promise plus antecedent benefit (moral obligation) 3. promise plus unbargained-for reliance (promissory estoppel) 4. promise plus form (statute of frauds) Restatement 2nd of Contracts published 1981 ◊ summarization of common law, courts not obligated to follow ◊ restate law as it is, not as should be Uniform Commercial Code (UCC) 1952 ◊ statute with wide range of commercial transactions ◊ Article 2 – governs sale of goods Consideration – return promise (bilateral) or performance / forbearance (unilateral) Restatement 2nd §71 (1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is bargained for if it sought by the promisor in exchange for her promise and is given by the promisee in exchange for that promise. Definitions (1) legal detriment ◊ party engages in an act that was not previously obligated to perform, or ◊ party refrains from exercising a legal right (Hamer v. Sidway) ◊ pre-existing duty rule – promise for a pre-existing obligation is not a legal detriment (2) bargained-for exchange Mutuality of Obligation ◊ benefit for consideration can flow from third parties – Bogigian v. Bogigian ◊ awareness needed for consideration – Bogigian v. Bogigian ◊ mixed motives are ok in enforceable K – Thomas v. Thomas gift promise (gratuity) – no expectation of compensation ◊ generally not enforceable  Kirksey v. Kirksey – gratuity, no mutuality of obligation, before promissory estoppel ◊ exceptions:  irreversible obligation induces reliance (promissory estoppel) – Ricketts v. Scothorn  forbearance or performance creates bargain consideration – Hamer v. Sidway  Langer v. Superior Steel – mutuality of obligation (non-compete for pension) ◊ gift if other party doesn’t have the opportunity to decline the benefit (e.g. mowing lawn without telling owner first) illusory promise – promisor determines performance or has a free way out (no consideration) ◊ Rehm-Zeiher Co. v. F.G. Walker Co. – buy all they want, not all they need ◊ requirements contracts are enforceable – McMichael v. Price ◊ implied duty to make reasonable best effort – Wood v. Lucy, Lady Duff-Gordon

◊ “satisfaction” condition with good faith not illusory (feasibility reports common in real estate) – Omni Group, Inc. v. Seattle-First National Bank Adequacy of Consideration courts don’t consider adequacy of consideration unless: ◊ unconscionability (procedural or substantive)  unequal bargaining power – Jones v. Star Credit Corp.  fraud, duress ◊ nominal consideration (not sufficient) – Peppercorn theory no longer valid  In Re Greene - $1, “other considerations”, release of claims she didn’t legally have not enough for enforceable K ◊ promise to forgo lawsuit / release claim is sufficient consideration if party believes in good faith there is a bona fide claim – Fiege v. Boehm Pre-Existing Duty – performance or promise to perform pre-existing duty is not consideration ◊ fresh consideration for subsequent promise / modification needed – Levine v. Blumenthal ◊ hold up game – forced consent / economic duress to change K is not enforceable – Alaska Packers’ Association v. Domenico ◊ Modification of K enforceable if: (Angel v. Murray)  voluntary on both sides  modification occurred prior to full performance  modification was prompted by “unexpected change in circumstances” (market shifts?)  modification is fair and equitable Moral Obligation & Past Consideration moral obligation ≠ legal obligation ◊ Manwill v. Oyler (gift) ◊ Mills v. Wyman – benefit was gift b/c Δ did not request it and he was not beneficiary material benefit + expectation of compensation + (support by moral obligation) = consideration ◊ context, intention matter ◊ Webb v. McGowin – employer-employee relationship, Δ was beneficiary and made payments before death (intent to pay) ◊ Harrington v. Taylor – unrequested benefit + no expectation of compensation quasi-contract – law creates / implies K (no bargained-for exchange): 1. Π has conferred benefit on Δ 2. Π rendered performance with expectation of payment 3. Π not acting as volunteer 4. allowing Δ to retain benefit without paying P would be unjust enrichment  recovery usually measured by reasonable value of benefit to Δ or Π’s detriment quantum meruit – recovery based on implied agreement to pay for benefits received ◊ doctor that gives emergency treatment to accident victim – responds to victim’s “request” Restatement 2d §86 promise for benefit received is binding to extent necessary to prevent injustice, not binding if conferred as a gift, promisor is not unjustly enriched, to the extent that its value is disproportionate to the benefit Promissory Estoppel – promise + unbargained-for reliance

◊ induced reliance is sufficent to enforce K  Feinberg v. Pfeiffer – pension payments encouraged retirement, Π quit job in reliance  Ricketts v. Scothorn – reliance on payment induced Π to quit job ◊ applies to charitable subscriptions Statute of Frauds

Agreement Process – Offer & Acceptance mutual assent – two parties reach an agreement of resources to form a contract ◊ objective test – parties’ words and actions judged by what a reasonable person would believe  emphasis on reliance ◊ subjective test – expressed intention may be different from mental intention, which no one knows  “meeting of the minds” – agreeing to the same thing in the same sense  emphasis on intent Embry v. Hargadine, McKittrick Dry Goods Co. – must use objective test to determine mutual assent ◊ reasonable person would interpret employer’s words as assent to Π’s employment demand ◊ Π reasonably understood employer to mean it as such → mutual assent ◊ employer’s subjective intent irrelevant Lucy v. Zehmer – offer made in jest/while drunk may be binding if objective test met ◊ reasonable person would believe Δs acting in good faith to sell farm ◊ Π acted in reliance on Δ’s promise ◊ Δ wrote plain and unmistakable K Offer – manifestation of an intent to be contractually bound upon acceptance by another party distinction between “offer” and an invitation to engage in negotiation ◊ surrounding circumstances are what matter  history of dealings  if bargaining steadily for a while, may be taken as an offer  if no prior bargaining, seller may be putting out minimum selling price  courts likely to say “price not below $$” is basis of an auction, not an offer ◊ manufacturer – retailer dealings can be ambiguous  usually quote from seller understood to be subject to available stocks, price changes  quote for immediate acceptance in response to specific inquiry is enforceable Advertisements advertisements in general (sale ads, catalogs) are invitations for offers from buyers ◊ presume that shoppers understand goods may not be available by the time they buy ◊ until K of sale made (seller accepts), seller may modify or revoke prices or terms ◊ Leonard v. PepsiCo – ad is not binding offer unless it is reasonable and specifies a clear and definite means of acceptance (no way to accept unreasonable offer of Harrier jet) public advertisements that invite a particular performance are offers ◊ Lefkowitz v. Great Minneapolis Surplus Store  Π was first in line with $ for fur stole, clear and explicit offer, MoO)  offeror cannot impose new or arbitrary conditions once offer is accepted

Revocation of Offer ◊ if offeror revokes offer that offeree relied on for his own commitments, offeror must compensate reliance interest ◊ communication from a third party is sufficient to retract an offer (Dickenson v. Dodds) ◊ “indirect revocation” is valid ◊ option needs consideration, or else it is a non-binding nudum pactum Dickenson v. Dodds ◊ Π learned that Δ’s property was sold to someone else despite promise to hold offer open ◊ but the option was w/o monetary or other consideration ◊ circumstances would put a reasonable person on notice, performance impossible ◊ objectively, there was no materialization of Π’s acceptance before the revocation Mirror-Image Rule Restatement § 59 – acceptance is effective only if it is a mirror image of the offer, expresses unconditional assent to all the terms and conditions of the offer Acceptance by Promise offeror sets the terms by which acceptance must be made (time, communication, method) ◊ LaSalle National Bank v. Vega – compliance with terms of offeror’s method of acceptance (Π had to execute the K for it to be in full force) ◊ if no time for acceptance is specified in offer, acceptance within reasonable time frame is valid  Ever-Tite Roofing v. Green – time for credit check (industry standard) not unreasonable delay offeror is free to revoke offer up until the offeree communicates acceptance ◊ Hendricks v. Behee – offeror revoked offer through agent before communication of acceptance ◊ uncommunicated intention to accept ≠ acceptance ◊ notice given to agent (within scope of agent’s authority) is binding on the principal mailbox rule – offer binding when received, acceptance binding when mailed Acceptance by Performance and Silence Restatement 2nd 1. Offer explicitly asks for acceptance by promise  Communicated promise is acceptance (both parties bound)  Part performance is not an acceptance (both parties can back out) 2. Offer explicitly asks for performance for acceptance  Return promise is not an acceptance (both parties can back out)  Part performance creates an option contract (offeree can still back out; offeror bound) 3. Offer allows acceptance by promise or performance  Communicated promise is an acceptance (both parties bound)  Part performance is acceptance creating a binding contract (both parties bound; offeree cannot back out once performance begins) ◊ Restatement assumes offeror wants a promise, not a performance ◊ UCC – if you don’t specify whether you want promise or performance, can accept with either Carlill v. Carbolic Smoke Ball Co. – reward advertisement inviting performance is an offer to accept by performance deposit of reward in bank indicated good faith, sincerity Π performed by buying and using product

notification of acceptance not necessary – unreasonable to expect consideration – legal detriment to Π b/c using product inconvenient, Δ benefitted through sales Glover v. Jewish War Veterans – one must be aware of an offer and act with the intention to accept it at the time of performance to accept through performance offer must induce the performance ◊ exception for government agencies – government equally benefited by performance, however ignorant claimant may be so government should pay in any event Restatement 2nd Acceptance by silence only when: 1. offeree takes the benefit of the offered services w/reasonable opportunity to reject them, and reason to know that they were offered with expectation of compensation 2. offeror has stated or given offeree reason to understand that assent may be manifested by silence or inaction, and offeree in remaining silent and inactive intends to accept offer 3. b/c of previous dealings or otherwise, it is reasonable that offeree should notify offeror if he does not intend to accept Ammons v. Wilson & Co. – silence may constitute an acceptance if parties have established a pattern of accepting by silence through previous dealings shortening maker rejected order/offer after delayed period of silence – silence constituted acceptance reasonable person would have expected notification if offer was declined Parol Evidence Rule – where parties intend a written agreement to be the final, complete, and binding expression of their agreement (integrated), external evidence of any earlier or contemporaneous oral or written expression is not admissible to vary the terms of the writing ◊ parol – alleged earlier or contemporaneous agreement within the scope of the written K ◊ merger clause – indicates that agreement is complete and final, many Ks contain it now Williston traditional view – face of the agreement (hardline position, objective) ◊ integration must be determined from inspecting the writing alone ◊ Mitchill v. Lath – ice house removal should have been included in original land sales K  don’t look at extrinsic evidence or collateral oral agreement b/c ice house removal subject would reasonably have been included in the written K Corbin modern view – writing cannot prove its own completeness (subjective) ◊ writing is integrated only if parties actually intended it to be ◊ any relevant evidence can be admitted to determine intent ◊ takes surrounding circumstances into account ◊ Masterson v. Sine – PE may be used to prove non-written elements of an agreement when only part of an agreement is integrated  written K was silent on assignability of option, did not explicity exclude  boilerplate template for K made it hard to add clauses  not forseeable to include writing to do with assignability in case of bankruptcy UCC § 2-202 (liberal) – parol evidence is admissible unless the matter covered in the alleged parol agreement “certainly would have been included” in the written agreement ◊ Alaska Northern Development v. Alyeska Pipeline – if there is integration as to written K terms, then extrinsic evidence allowed only if the alleged oral/simultaneous agreement would be in “reasonable harmony” with the integrated writing

likely

Admissibility of Parol Evidence Corbin (Masterson v. Sine) court will consider any relevant evidence to determine parties’ intent wrt integration UCC (Alaska Northern Development) PE inadmissible if terms “certainly would have been included in the written agreement” PE admissible if terms are in “reasonable harmony” with the written agreement Restatement 2nd § 216 PE admissible if, under the circumstances, the terms “might naturally be omitted from the writing” and do not conflict with the writing Williston: would an abstract reasonable person naturally have omitted the term in question? Corbin: taking into account all the circumstances of the individual case, might the actual parties have omitted the additional term from the writing? Mitchill v. Lath PE admissible if terms “would not ordinarily be expected to be included in the agreement” in light of the surrounding circumstances

unlikely

Williston PE of additional terms admissible only if K appears on its face to be incomplete (inspect the writing alone) Restatement 2nd § 217 – when parties agree to an oral condition precedent, the written agreement is not integrated wrt that oral condition (even if merger clause exists) ◊ PE to prove a condition is admissible if:  K is silent on the matter  PE doesn’t contradict the writing  may be properly inferred that parties did not intend writing to be complete Luther Williams, Jr., Inc. v. Johnson – approval of financing condition unintegrated, Corbin approach Collateral Oral Agreement – Restatement 2nd § 240 ◊ supported by the consideration of the written K ◊ PE may be admitted to show “collateral” oral agreement if:  it does not conflict with the written agreement  it covers a subject that would not ordinarily be included in the written agreement ◊ judge decides if extrinsic evidence is relevant for the jury to hear Contract Interpretation – when the written K is ambiguous PE is admissible to show the meaning of K terms where the language is reasonably susceptible to that interpretation ◊ Williston – if K looks complete, ask what reasonable persons would think about the surrounding circumstances (but not direct oral communications between the parties/subjective intent)  A. Kemp Fisheries v. Castle & Cooke (plain K)  seaworthiness ambiguity referred to different times  no extrinsic evidence allowed to vary meaning of written K terms ◊ Corbin – all evidence, including evidence of subjective intention such as prior negotiations and statements made by the parties

 Pacific Gas & Electric v. G.W. Thomas Drayage & Rigging  reasonable that indemnification to property damage clause only referred to 3rd party property  extrinsic surrounding circumstances allowed (but only to interpret, not to contradict or add) Restatement 2nd § 206 (Interpretation against Draftsman) – when choosing among reasonable meanings of an agreement, the meaning that operates against the party who drafted the agreement is preferred UCC 2-202(2) – terms may be explained by evidence of course of performance, course of dealing, or usage of trade without a preliminary determination by the court that the language used is ambiguous Plain Meaning Rule – extrinsic and PE not admissible to create ambiguity in a written agreement which is “complete and unambiguous upon its face” Restatement 2nd § 201 (2) Where the parties have attached different meanings to a K or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made, that party did not know (or had not reason to know) of any different meaning attached by the other, and the other knew the meaning attached by the first party; or (3) Except as provided in this section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent court may infer meaning of ambiguous terms by using outside sources if it is unable to arrive at the intent of the parties by examination of the written K ◊ Frigaliment v. B.N.S. International Sales – objectively reasonable “chicken” definition from FDA Hierarchy of extrinsic evidence ◊ Course of performance ◊ Course of dealings ◊ Usage of trade ◊ Gap-filling rules ◊ Standards of reasonableness & good faith Express Conditions – K is only binding when condition met (if, on condition, provided, unless) ◊ condition – fact or event’s happening or lack of creates or extinguishes duty to perform  nonoccurence of a condition is not a breach of K  Restatement § 224  usu. important in bilateral contracts ◊ condition precedent – must occur to create an absolute duty of performance  condition precedent in effect – e.g. submitting notice of loss to insurance company within 30 days is condition precedent to insurer’s duty to pay ◊ condition concurrent – mutually dependent performances capable of nearly simultaneous execution (e.g. sales K with payment and delivery concurrent)  either act is sufficient to make other party’s duty to perform absolute ◊ condition subsequent – occurrence extinguishes a previously absolute duty to perform  failure to sue within 12 months extinguishes insurance’s duty of payment

Dove v. Rose Acre Farms – terms which are clear and understood by the parties must be enforced, even if the party who does not strictly comply with all terms must forfeit Wal-Noon Corp. v. Hill – failure to give notice of a repair need precludes recovery when the notice requirement was implicit in the lease Excuse of Condition ◊ agreement by both parties modifying the contract to discharge the condition ◊ the party for whose benefit the condition was made “waives” the condition by its conduct  Clark v. West (condition not consideration or material, Π relied on “waiver”) ◊ changed circumstances that makes compliance with the condition impracticable ◊ discharge by the court Avoidance of Forfeiture ◊ Restatement 2nd § 227 – In the case of uncertainty wrt the intended effect of a condition, the preferred interpretation is one that will reduce the risk of “forfeiture” ◊ courts will excuse an agreed express condition if there would be an extremely harsh forfeiture Constructive Conditions – arise in disputes over who performs first implied-in-fact condition – parties probably would have agreed if they hought about it ◊ law will imply inherent necessary conditions to performance, conditions of good faith ◊ would a reasonable person feel the parties contracted that certain facts would exist? if so, implied condition to duty to perform.  e.g. promise to deliver goods to loading dock has implied-in-fact conditions of loading dock’s existence, its reasonable accessibility, permission, etc. ◊ fundamental implied-in-fact condition that neither party will act in bad faith so as to hinder or prevent other party’s performance (UCC § 1-203) implied-in-law condition – not expressly provided by the parties, nor which the parties would have necessarily agreed upon, but which may nevertheless be implied by the courts in the interests of fairness and justice ◊ legal effects ordinarily the same as if conditions were expressly set forth in the K early view – bargained for promises not performances, so non-performance immaterial to party’s duty to perform his side ◊ Kingston v. Preston – 3 types of covenants:  mutual and independent – either party may recover in the event of a breach by the other (alleged breach by P is no excuse for D’s nonperformance)  conditional and dependent – performance by one depends on prior performance of the other – until prior condition performed, other party not liable (Kingston)  simultaneous – if one party performs and the other refuses to perform, the first party has a default action against the refusing party modern view – each party’s performance is deemed to be implied-in-law (constructive) condition to other party’s obligation to perform – neither party’s duty to perform arises until other party has performed ◊ Goodison v. Nunn – constructive condition that a party perform before suing for breach of K Types of conditions implied-in-law 1. earlier performance condition precedent to later performance – first party’s performance is implied-in-law condition precedent to the other’s duty to perform whenever one party to a bilateral K promises to perform at a date prior to that on which other party promises to perform 2. simultaneous performances conditions concurrent – wherever a bilateral K fixes the same time for the performance of both promises, and both are capable of simultaneous or nearly

simultaneous performance, each party’s performance is a constructive condition concurrent to performance by the other (have to happen at the same time) Restatement 2nd § 234 – where the performance of only one party under an exchange requires a period of time, his performance is due at an earlier time than that of the other party Substantial Performance ◊ where a K is made to perform work and no agreement is made as to payment, the work must be substantially performed before payment can be demanded ◊ party that has substantially performed can sue for expectation damages minus offset for incomplete performance Jacob & Youngs v. Kent – minor failure to perform (wrong kind of pipes) will be excused where complete performance is a condition precedent to payment, and where substantial performance has been rendered O.W. Grun Roofing & Construction v. Cope – no substantial performance when party materially breaches Restatement 2nd § 241- in determining whether substantial performance has occurred, look to: ◊ purpose to be served ◊ desire to be gratified ◊ the excuse for deviation from the letter (good faith, intention) ◊ cruelty of the enforced adherence UCC § 2-601 – substantial performance is not sufficient in contracts for the sale of goods Reasons Not to Enforce a Contract Mistake – a belief that is not in accord with the facts (Restatement 2nd § 151) mutual mistake – mistake of both parties at the time K was made as to a basic assumption on which the K was made, has material effect on the agreed exchange of performances ◊ K voidable by adversely affected party unless he bears the risk of mistake (Restatement 2nd § 152) ◊ mistake of fact – rescission is usual remedy (parties back in pre-contract position) unilateral mistake – mistake of one party at time K was made as to basic assumption on which he made the K, has a material effect that is adverse to him ◊ K voidable by adversely affected party unless he bears the risk of mistake (Restatement 2nd § 153) ◊ and (a) the effect of the mistake is such that the enforcement would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake Restatement 2nd § 254 – a party bears the risk of a mistake if: ◊ the risk is allocated to him by agreement ◊ he is aware at the time the K is formed that he has limited knowledge, but treats his limited knowledge as sufficient, or ◊ the risk is allocated to him by the court on ground that it is reasonable to do so under the circumstances Beachcomber Coins v. Boskett – when both parties agree on item’s value at time of K, neither assumes the risk that item is worth more or less mutual mistake of fact – both parties mistaken on a fact that the K was based upon either party may rescind the contract if a mistake materially alters his position aware at time K formed that he had limited knowledge, but treated his limited knowledge as sufficient

Sherwood v. Walker – K may be rescinded if mistake goes to the K consideration mistake of substance can void a K mistake of quality cannot significant monetary consequences to disadvantaged party – Δ could get more for not-barren cow Vokes v. Arthur Murray, Inc. – K may be rescinded for misrepresentation of opinion generally only misrepresentations of fact are actionable but misrepresentations of opinion can be fraud when:  fiduciary duty  trickery by representor  no arm’s length dealing – undue influence  representee has no opportunity to become apprised of the truth  may have duty to tell whole truth if undertake to tell part of the truth statement of party having superior knowledge may be regarded as statement of fact Duress – the choice to agree to a K was impaired by threat or coercion (subjective mental condition) ◊ degree of constraint of danger (actual or threatened and impending) sufficient in severity or in apprehension to overcome the mind or will of a person of ordinary firmness ◊ would party have done something else otherwise? ◊ duress per minas – common law, party enters into contract for fear of loss of life, of loss of limb, of mayhem, or of imprisonment ◊ American rule includes threats of battery or destruction of property, moral compulsion, free will Rubenstein v. Rubenstein – prima facie showing of duress in Π’s fear for safety when he conveyed farm title to wife b/c of compulsion, threats Unconscionability – manifestly unfair or oppressive K procedural unconscionability – formation or execution of the K ◊ one party lacks knowledge or understanding of the agreement terms ◊ lack of voluntary assent (e.g. in adhesion K situations – unequal bargaining positions) substantive unconscionability – oppressive character of substantive K terms ◊ present when one-sided agreement deprives one party of all the agreement benefits ◊ or excessive price, lack of breach remedy, unreasonable forfeiture provisions or warranty disclaimers if unconscionability is raised as an affirmative defense, that party bears burden of proof UCC 2-302 – if a court as a matter of law finds a K or clause therein to have been unconscionable at the time K was made, it has the discretion to: 1. refuse to enforce the K 2. enforce the remainder of the K without the unconscionable clause 3. limit application of the unconscionable clause to avoid any unconscionable result Williams v. Walker-Thomas Furniture Co. caveat emptor – consumer not excused from performance if she didn’t read K / didn’t understand its terms no fraud or misrepresentation if Π knew Δ was poor and sold to her anyway ◊ legislature should protect public from exploitive Ks, not courts ◊ caveat emptor – each party entering a K must take responsibility for reading and knowing terms  but this is unconscionable! – absence of meaningful choice

◊ caveat emptor modified by UCC 2-302 (enacted after trial decision) – when a party has no real choice as to whether to accept the terms of the K due to his economic position relative to the other, it makes no difference if he knows of the K terms or not inequality of bargaining position unconscionability present at time K was made Commercial Impracticability – excuse for nonperformance, implied condition impossibility – performance becomes objectively impossible (no one would be able to perform) ◊ unless one of the parties assumed the risk, excuse for performance ◊ exceptions: supervening illegality, supervening act of government, supervening death or illness (personal service Ks), supervening destruction or nonexistence of subject matter Taylor v. Caldwell – music hall subject of lease accidentally destroyed by fire impracticability – event renders performance impractical ◊ existing impracticability – no duty to render a performance which was impracticable at the time of contracting if parties did not know it was impracticable at the time (Restatement 2nd § 266(1) v. § 152(1) K voidable if based on mutual mistake) ◊ supervening impracticability – promisor’s duty may be discharged if the K subject matter or specified means for performance is destroyed or becomes nonexistent after K entered into, w/o fault of promisor (Restatement 2nd § 261) Bolin Farms v. American Cotton Shippers Assoc. – market price changes don’t make performance impracticable Kaiser-Francis v. Producer’s Gas – decline in demand, lost profits are not a “force majeure” that would constitute failure of gas demand which would relieve Δ of its take-or-pay obligation Four Requirements of the Modern Rule of Impracticability 1. The event must have made “performance as agreed impracticable” ◊ more than just increase in expense or lost profits (Bolin; Kaiser-Francis) 2. The non-occurrence of the event must have been a basic assumption on which the K was made (Taylor) ◊ includes illegality, supervening government act, death or disability, destruction of subject matter 3. The impracticability must have resulted without the fault of the party seeking to be excused 4. The party seeking to be excused must not have assumed the risk of the event ◊ foreseeability may be a factor for court to consider ◊ ease of procuring insurance may be a factor Frustration of Purpose - where bargained-for performance still possible, but purpose or value of the K has been totally destroyed by some supervening event Requisite elements: 1. some supervening act or event not reasonably foreseeable at the time the K was entered into 2. avowed purpose or object of K was known and recognized by both parties at the time of K 3. supervening act totally or nearly totally destroys the purpose or object of the K 4. frustration must have resulted without the fault of the party seeking to be excused. 5. party seeking to be excused must not have assumed the risk of the event. 6. foreseeability may be a factor for court to consider; control over the K language may be relevant ◊ many frustration of purpose cases treated as impossibility of performance cases due to destruction of the K’s subject matter ◊ attainment of the K’s purpose becomes an implied condition precedent to performance

Krell v. Henry – clear purpose w/n contemplation of both parties when K made, frustrated by unforseeable event Washington State Hops Producers v. Goschie Farms – termination of goverment program which created market for permits constituted supervening frustration of a K to purchase the permits (not price drop, but irrelevance of permits) Bush v. Protravel International – ◊ impracticability of performance operates to advantage of parties that furnish performances ◊ frustration of purpose doctrine operates to advantage of parties that are to pay money in return for those performances ◊ despite similarity of requirements, courts have been much more reluctant to hold that a party has been excused on the ground of frustration than on the ground of impracticability Breach ◊ material breach  excuses any counterperformance duty from nonbreaching party  immediately entitles nonbreaching party to remedies for breach of the entire K ◊ minor breach  does not excuse any counterperformance duty from nonbreaching party, but entitles that party to suspend it until breach is cured or becomes material  immediately entitles nonbreaching party to remedies but they are limited to damages caused by the breach rather than for breach of the entire K ◊ material v. minor breach  extent of performance – breach at outset (in limine) more likely material  willful breach (e.g. repudiation) more material than negligent or innocent breach  degree of certainty that breaching party will perform remainder of K  extent to which nonbreaching party obtained his bargained-for benefit  extent to which nonbreaching party can be adequately compensated for the incomplete or defective performance through his right to damages  degree of hardship imposed on the breaching party by holding the breach material ◊ remedies:  damages – most frequently available  specific performance – where damages shown not to be adequate and just  rescission and restitution – judicial declaration to rescind K, restitution of whatever benefits were conferred under the K  quasi-contract (quantum meruit) – nonbreaching party renders performance and breaching party fails to pay – nonbreaching party can sue for the reasonable value of the performance rendered  tort action – when risk of harm to a person or his property is reasonably foreseeable in connection with the performance of a K REMEDIES Anticipatory Repudiation – words by a contracting party manifesting his intent not to perform ◊ voluntary disablement – conduct by a contracting party which makes it appear that he is unwilling to perform

Restatement 2nd § 250-57 – if either party, in advance of the performance of an executory bilateral K, repudiates the K by words manifesting apparent intent not to or a voluntary affirmative act which renders the party unable or apparently unable to render the promised performance, the other party may treat such anticipatory repudiation as a present, material breach of K and bring an immediate action for the entire value of the promised performance ◊ anticipatory breach applies only when executory obligations on both sides of the K (nonbreaching party must wait until date of other’s performance for cause of action if one party has already performed and other repudiates obligation for some future performance) ◊ majority view – nonbreaching party has duty to mitigate damages arising from repudiation, and if he fails to do so, is not entitled to recover such damages as he could have otherwise avoided ◊ minority view – nonbreaching party permitted to ignore repudiation, continue performance, then sue and recover all damages incurred ◊ There must be a definite and final communication of the intention to forego performance before the anticipated breach may be the subject of legal action … Mere expression of difficulty in tendering performance, for example, is not tantamount to renunciation of the contract. Restatement 2nd § 251: If the obligor’s words or conduct create doubt, then obligee may suspend performance and “demand adequate assurance” from the obligor. If assurance is not forthcoming, the obligee may treat it as a repudiation and resort to the usual affirmative or defensive remedies. when promisor repudiates before performance date, promisee can mitigate damages, sue for damages immediately (Hochster v. De La Tour) no implied repudiation (w/o distinct, absolute revocation of K) when performance still possible (Taylor v. Johnston) John Hancock Mutual Life Insurance v. Cohen – anticipatory breach cannot be applied to Ks for future payment of money ◊ may a Π claim anticipatory repudiation of a K the other party when the other party is the only one still obligated to perform under the K?  Williston – no, unilateral K where Π does not need to mitigate by suspending performance  Corbin – yes, see note 1, p. 893 Compensatory Damages – primary purpose to compensate Π, not punish Δ monetary damages – favored over coercive remedies (e.g. specific performance) ◊ expectation – put P in position he would have been in if K had been performed ◊ reliance – put P in position before K (out-of-pocket expenditures made by P in performing) ◊ restitution – put D in position before K (avoid unjust enrichment, value of P’s performance) ◊ liquidated – damage amount agreed to in the original K (reasonable estimate)  prior agreement to limit damages enforced depending on whether the provision operates as punitive damages or reasonable forecasts of actual damages punitive damages – courts usu don’t award, K damages primarily compensatory not to deter (tort remedy) ◊ Restatement 2nd § 355: punitive damages not recoverable for breach of K unless the conduct constituting the breach is also tort for which punitive damages recoverable specific performance – usually allowed when K involves unique property (land, art, etc.) ◊ courts usually do not grant specific performance of employment Ks speculative damages – not allowed, P must prove causation and amount of loss future damages reduced to present value nominal damages legal wrong w/o harm

◊ can be awarded without actual loss proven, to establish precedent avoidable damages not recoverable – P has duty to mitigate damages Consequential Damages – result from seller’s breach, any loss which seller at time of K had reason to know and which could not reasonably be covered ◊ proof by P of actual consequential damages ◊ causation – the breach must be the reason for the consequential damages ◊ foreseeability of the consequential damages by D (non-pecuniary generally not) ◊ mitigation – P’s duty to mitigate damages Restatement 2nd § 351 ◊ damages not recoverable for loss that breaching party did not have reason to foresee as probable result of the breach when K was made ◊ loss may be foreseeable as probable result of a breach because it follows from breach in the ordinary course of events, or as a result of the special circumstances, beyond the ordinary course of events, that the party in breach had reason to know UCC 2-719 – limitation of consequential personal injury damages from consumer goods is prima facie unconscionable (but not for commercial losses) Hawkins v. McGee – pain from operation was legal detriment/consideration, damages should only be for ill effects of operation (difference b/t perfect hand and post-op hand) Sullivan v. O’Connor – for botched rhinoplasties – recovered out-of-pocket expenses, also consequential damages flowing directly and foreseeably from breach (disfigurement, pain from last operation, repair) – but doctors can seldom promise specific results in good faith Hadley v. Baxendale – damages from special circumstances may be awarded where Δ is informed of them or they are reasonably foreseeable / in contemplation of both parties as probable breach consequence – jury not allowed to arbitrarily determine damages when actual damages > natural consequences of breach Δ didn’t know mill shut down, lost profits and wages Spang Industries v. Aetna – consequential damages appropriate when K provides for a time for performance and expenses for delay reasonably foreseeable – Π had to delay pouring concrete, incurred extra costs ◊ UCC 2-715(2) – where seller fails to deliver, buyer has a right to “cover” – and if the buyer fails to do so, he will be barred from recovering any consequential damages which he could have prevented by covering ◊ “When the parties enter into a K which, by its terms, provides that the time of performance is to be fixed at a later date, the knowledge of the consequences of a failure to perform is to be imputed to the defaulting party as of the time the parties agreed upon the date of performance.” Bohac v. Department of Agriculture – consequential damages are the damages foreseeable when K formed, not when K breached (non-pecuniary damages generally unforeseeable when K formed) Π awarded pecuniary consequential damages, but not for suffering, damage to reputation under Whistleblower Protection Act when fired Restatement 2nd § 353: recovery for emotional disturbance excluded unless breach also caused bodily harm or the K or breach is of such a kind that serious emotional disturbance was a particularly likely result

Boise Dodge v. Clark – punitive damages appropriate when good reason to deter owners from tolerating employee misconduct (but must be proportionate to actual damages) calculated commercial fraud in car sales – deterrence needed Mitigation - generally a party has a duty to reasonably mitigate damages caused by the other’s breach Employee Remedies constructive service doctrine – wrongfully discharged employee who remains ready and able to perform can recover full amount of agreed wage with duty to mitigate damages (most courts reject) general rule – measure of recovery by a wrongfully discharged employee = amount of agreed salary less amount the employer affirmatively proves the employee has earned / might have earned from other employment with reasonable effort ◊ projected earnings from other employments ops applied in mitigation only when employer can show it was comparable or substantially similar employment to that which Π was deprived of Parker v. 20th Century Fox (question of fact) ◊ employer Δ had the burden of proving that employee Π failed to mitigate damages, that other employment was comparable or substantially similar ◊ employer entitled to deduct income from comparable employment if employee would not have taken it “but for” the breach (cancellation of song/dance production movie) ◊ probably cannot deduct unemployment/etc. benefits ◊ Π awarded recovery of agreed compensation under K for movie Equitable Remedies Injunction – injunctive relief granted when damages inadequate (cost-benefit analysis to grant injunction) ◊ factors affecting the adequacy of damages (Restatement):  calculability – difficulty of proving damages with reasonable certainty  difficulty of procuring a substitute performance with money awarded as damages  solvency – likelihood that an award of damages could not be collected ◊ benefits – burden of determining cost of Δ’s conduct shifts to parties, who are better suited to determine cost, no fact-finding expenses for court ◊ costs – continuing judicial supervision and enforcement (negligible) Walgreen Co. v. Sara Creek Property Co. – exclusivity provision that Δ cannot lease to other pharmacies Liquidated Damages – damage clause in K in case of breach ◊ penalty damages – should not be grossly disproportionate to probably loss (unconscionability)  penalty damages usually not enforced ◊ reasonable estimate at time K made of probable damages from a breach – difficult to estimate XCO International v. Pacific Scientific – Δ did not prove the liquidated damage clause was disproportionate to reasonable estimate of actual damages caused by breach severity of breach, type of breach