Contracts Cohen by mrn14752


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									I.       Performance of a Contract
         a. Promise
                     i. Manifestation of intent to act or refrain from acting in a specified way that justifies
                        the promise understanding that a commitment has been made
                    ii. Substantial Performance Rule
                             1. To enforce counter-performance, must substantially perform
                             2. Factors for Substantial Performance:
Representation:                        a. Purpose of the specification breached
statement of existing                  b. Excuse (reason) for the deviation
fact                                   c. Cruelty of enforced adherence (forfeiture, “don’t pay the builder”)
Warrantee: Promise                     d. Extent of deviation / Fault
(also promise that                     e. Willful / Intentional
representation is good)      3. If substantial performance, other party must perform, but may sue for
                                 difference in “value”
                                       a. Difference in property value with deviation
                                       b. Cost of expectancy (replacing pipes)              Jurisdictional Difference
                   iii. UCC 2-601 = Perfect Tender Rule (substantial performance is not enough)
                   iv. Remedies for breach
                             1. Defensive: Excuse counter-performance
                             2. Offensive: Sue for breach (even if substantial performance)
         b. Condition – Must be performed exactly
                     i. Act or event (but not lapse of time) that must occur before a duty to perform promise
                        in contract arises, unless condition is excused or waived.
                             1. REST 230  If an event is to terminate a K under its terms, K terminates
                                 on event UNLESS:
                                       a. Event is a result of breach of duty of good faith by obligor, OR
                                       b. Event could not be prevented due to impracticability & duty does
                                            not materially increase burden on obligor
                    ii. Can be part of consideration, but normally if part of consideration  Promise
                   iii. Remedies for breach:
                             1. Defensive: Excuse performance of condition
                             2. Offensive: NONE
                   iv. Ways to avoid forfeiture:
                             1. Waiver
                             2. Judicial Excuse
                                       a. REST 229  Court may excuse non-occurrence of a condition if:
                                                 i. Occurance was not a material part of the K AND
                                                ii. Non-excuse would cause disproportionate forfeiture
                                       b. Also look to prejudice caused to party not to perform condition
         c. Avoidance of Forfeiture
                     i. Order of Performance REST 234
                             1. If performance is possible simultaneously, it is due simultaneously (unless
                                 K specifies)
                             2. If performance of one party takes time, that party goes first (unless K
                    ii. Dependant = substantial performance triggers counter-performance (Default in USA)
                   iii. Independent = regardless of performance of breaching party, suing party must
                        substantially perform before bringing suit (mostly in England)
                   iv. Divisible K’s
                             1. REST 240  Divisible if performance exchanged can be apportioned into
                                 cooresponding pairs of part performances so parts of each pair are equal
                             2. Indivisible with Progressive payments
                                       a. Payments not proportionate consideration to progressive work
                                       b. Payments due when stated in K, or breach
                             3. Divisible
                                   a. Payments meant to be proportionate to progressive work done
                                   b. Treat as separate contracts with separate consideration
                         1. yes (Labor policy, incentive for employers to keep employees, incentive to
                              fully perform)
                         2. no  real estate
                         3. REST 374  Restitution in breach UNLESS under assent of parties,
                              performance is to be retained.
                         4. Maximum recoverable = K-price
II.    Duty of Good Faith
       a. Generally
                 i. UCC 2-103 Good faith is honesty in fact and observance of reasonable commercial
                    standards of fair dealing
                         1. Good Faith is:
                                   a. Absence of intent to harm
                                   b. Reasonable contemplation of parties @ time K was formed –
                                        preserve objectiveness
                                   c. Action according to reasonable standards
                         2. Summers: Good faith is all that is not bad faith
                         3. Burton: Good faith is not taking back the economic advantage given to the
                              other party
                ii. Objective: reasonable commercial standards
               iii. Subjective: dissatisfaction must be with the product, and not with the bargain
               iv. UCC 2-306
                         1. In output/requirement K’s no quantity disproportionate to that stated in
                              estimate, or to any normal prior output is good faith
                         2. In exclusive K’s, must use best efforts to produce, and best efforts to sell
                v. Output K’s  must continue to produce unless dire economic harm to continue
               vi. UCC 2-209
                         1. Modification to a K must be done in good faith
                         2. Look to method of modification AND Content of modification
       b. Good Faith Termination
                 i. Mutual (Accord and Satisfaction)
                         1. Accord is offer to accept a specified performance for future discharge of
                              existing duty PLUS acceptance of the offer
                         2. Satisfaction is performance of the agreement
                         3. Also need consideration
                                   a. Liquidated = NO dispute as to existence or to the amount of the
                                        debt, and it is currently due.
                                   b. Un-liquidated = Some dispute, or debt is not currently due
                                   c. Consideration only in Un-liquidated claims (no pre-existing duty)
                ii. Unilateral
                         1. “At-Will” employment
                                   a. Need good faith, unless stated in K
                                   b. Way around, “Termination at any time, for any reason”
                                   c. Look to circumstances as well.
III.   Parole Evidence Rule
       a. Analytical Steps
                 i. Partial Integration?
                         1. Just needs to be a K.
                         2. If no partial, sure, allow PE. If yes, Move to #2
                ii. Consistent additional terms?
                         1. Hunt Foods Test: need express contradiction in language of contract to
                              exclude (lets lots in)
                         2. Snyder Test: absence of “reasonable harmony” in terms of language and
                              respective obligations excludes (narrow and goofy)
              iii. Total integration? (intent of parties to make total integration, look also to subjective)
                        1. Rest. 216  is agreement such that it would be naturally left out? Then let
                            it in…
                        2. UCC 2-202  if additional term would certainly have been included, and
                            is not, then no let in.
      b. Paradox:
                i. To determine if evidence needs be admitted, it must be heard. If it is heard, how to
               ii. Solution: pre-trial hearing where judge decides if evidence is to be admitted.
                   (question of fact?)
      c. Interpretation of terms: Way around Parole Evidence Rule?
                i. Rest. XXX  Language must be reasonably susceptible to interpretation.
               ii. Sources for interpretation:
                        1. Contract Language
                        2. Dictionary
                        3. Trade Usage
                        4. Negotiations/Communications
                        5. Maxims of Interpretation
                        6. Government Regulations
                        7. Course of Performance
                        8. Market Value Differences
              iii. UCC Hierarchy of interpretation circumstances:
                        1. Course of performance: Same parties, previous similar dealings
                        2. Course of dealing: Same parties, previous dealings
                        3. Trade usage: Other parties, similar dealings
              iv. Contra Preferentum: because stronger party has control, he is responsible for K
                        1. Contracts are interpreted against the drafter.
                        2. Ambiguities are interpreted against drafter.
                        3. Drafting hints:
                                 a. Ask extra $ for extra services to ensure that services are not
                                      covered in K
                                 b. Clear language
                                 c. Clear title
                                 d. Initial and signing
IV.   Breach (Rest 250) – Common law  breach/repudiation MUST be material
      a. Repudiation & Cancellation (termination)
                i. Express – Statement indicating that will commit a breach that would itself give rise
                   to claim for damages for total breach
               ii. Implied – Voluntary Affirmative Act which renders unable or appearantly unable to
                   perform without such a breach
                        1. by conduct: promissory puts it out of his power to perform so as to make
                            substantial performance of promise impossible
                        2. To Cancel, repudiation must be material: NEED Both:
                                 a. Unreasonable burden from repudiation
                                 b. Repudiation causes apprehension as to future installments (pay or
              iii. UCC Repudiation:
                        1. UCC 2-609 concerned about non-performance: may be entitled to
                                 a. no assurances given  repudiation
                                 b. until assurances given, aggrieved party not required to perform
                                      (suspend performance)
                                 c. Need Reasonable Grounds for insecurity
                                            i. Judgments against
                                           ii. Liens
                                          iii. Express
                                     iv. Bankrupcy
                  2.  UCC 2-611: Retraction of Anticipatory repudiation IF
                           a. performance is not yet due
                           b. no cancel was communicated
                           c. must have assurances
                           d. aggrieved party due excuse and allowance for any delay
                 3. UCC 2-612: Breach of Installment K
                           a. Buyer may reject non-conforming installment ONLY if non-
                                conformity is substantial to value of installment.
                           b. Non-conformity that substantially impairs value of K is breach of
                 4. UCC 2-601 – Perfect tender rule: goods fail in ANY respect to conform to
                      K, buyer may:
                           a. reject whole
                           b. accept whole
                           c. accept ant commercial unit and reject the rest
b.   Damages for breach
          i. Analysis:
                 1. Divisible K?
                           a. Divisible K:
                                       i. Treat each part as separate K
                                      ii. Substantial performance will establish who breached
                           b. Indivisible K – substantial performance toward progress payments
                                is NOT substantial performance on whole K
                 2. Order of Performance – Who breached?
                 3. Substantially performed?
         ii. Emotional distress damages if: (mental distress only for corpse mishandling)
                 1. naturally arise from the breach AND
                 2. are reasonably foreseeable at time of formation of K
       iii. Punitive Damages for breach of K?
                 1. Reasons:
                           a. Punish
                           b. Deter
                 2. To get punitive damages:
                           a. Need tort-like claim AND
                           b. Need to serve a public interest in awarding punitive damages
                 3. Amount: Must bear reasonable relation to actual damage. Factors:
                           a. Actual damage
                           b. Deterrent effect
                           c. Motives of Δ
                           d. Calculation of Δ (intent and will of Δ)
                           e. Extent of Δ’s disregard to rights of others
        iv. Damages:
                 1. Post-K damages (expectancy) – Put Π pre-K
                 2. Pre-K damages (reliance) – Put Π post – K
         v. Interests:
                 1. Expectancy – Profits, Sun, Moon Stars
                           a. Expected profit
                           b. Lost Volume: No lost volume damages if buyers breach is the but
                                for cause of the next sale:
                                       i. Buyer has burden of showing capacity constraint
                                      ii. Seller gets loss-of-volume only if buyer’s breach is not
                                          but-for cause of next sale
                 2. Reliance - $ paid to 3rd parties in reliance on K
                 3. Restitution - $ paid to Δ in reliance on the K  Based in Unjust Enrichment
                      (If not unjust enrichment, no damages awarded)
                          a.   Possible calculation (REST 371):
                                     i. Reasonable value of work done OR
                                    ii. Increase in value of property
                          b. Breachor gets lesser of two
                          c. Breachee gets greater of two
         vi. Measure of damages for Builders Breach:
                  1. cost to repair/replace/complete
                  2. Demunition of Value ONLY IF:
                          a. Damage is nor remediable
                          b. Unreasonable Economic Waste
                          c. Breach is incidental to the purpose of the contract
        vii. Incidential/Consequential damages (Rest 351)
                  1. No damages if not:
                          a. Foreseeable
                          b. Ascertainable (certain)
                          c. Unavoidable (causation)
                  2. Ct. may limit for justice  exclude lost profits
                  3. Default rule  may contract around
                  4. If modification/terms of K later decided, impute knowledge gained until
                      time of modification back to time K was formed
                  5. Burden shifting:
                          a. If non-breaching party enters into a losing contract (reliance
                               exceeds expectation), courts cannot give back reliance
                          b. If loose profits on deal, subtract lost profits from the consequential
                          c. Breaching party must show:
                                     i. Losses by non-breaching
                                    ii. (courts assume that k’s are profitable)
       viii. Unconditional, Unilateral K
                  1. non-breaching party has fully performed, other party needs only to pay
                  2. MAY NOT sue early REST 253  MUST wait for breach
c.   Prevention/Hindrance (activities that may constitute breach w/o repudiation or fail to perform)
          i. Bad-faith performance
                  1. MUST use good faith in performance of a condition, or cannot rely on the
                      condition to excuse performance
                  2. can excuse performance of non-breaching OR
                  3. can bring cause of action for damages
         ii. Prevention/hindrance
                  1. to excuse performance, other party must make performance practically
                      impossible AND must intend to hinder performance
d.   UCC remedies for Breach (Repudiation + acceptance, cancellation, termination, etc…)
          i. UCC 2-610: performance not yet due that will substantially impair the value of the
              K, Options:
                  1. await performance for a commercially reasonable time
                  2. resort remedy for breach (2-703)
                  3. suspend performance, and proceed with section 2-704
         ii. UCC 2-703 Sellers remedies
                  1. In General:
                          a. withhold delivery
                          b. stop delivery by bailee
                          c. proceed so as to goods unidentified in K
                          d. resell & recover damages
                          e. recover damages for non-acceptance
                          f. cancel
                  2. 2-708 Sellers damages for non-acceptance or repudiation:
                                                                                                Market Measure:
                          a. Market Measure:                                           K – Market price + Incidentals
                               i. Unpaid K Price
                              ii. MINUS Market Price @ time and place of Breach
                             iii. PLUS Incidental damages (2-710)
                             iv. MINUS any expenses saved in consequence of the breach
                   b. If Market Measure is inadequate to put seller in position as good as
                        full performance: (Get profits if unlimited supply)
                               i. Profit from full performance
                              ii. PLUS reasonable overhead
                             iii. PLUS Incidental damages
                             iv. PLUS costs reasonably incurred
                              v. MINUS credit for payments or proceeds of resale
          3. 2-709 – Action for the price of the K
                   a. If seller fully performs, CANNOT sue for price until due date, but
                        may recover:
                               i. Incidental damages 2-710
                              ii. K-Price of goods if not re-saleable
                             iii. K-price of goods MINUS re-sale price
          4. 2-710 Sellers incidental damages
                   a. commercially reasonable for stopping delivery, transportation,
                        care of goods
                   b. after breach
                   c. in connection with breach
iii.   UCC 2-702 Seller may require cash if buyer is insolvent
iv.    UCC 2-711 Buyers Remedies (must revoke/reject goods):
          1. seller fails/repudiates or rejection/revoke  CANCEL and recover:
                   a. cover
                   b. recover damages for non delivery (2-703)
          2. Seller fails to deliver or repudiates, buyer may:
                   a. Recover goods
                   b. Obtain specific performance/replevin
          3. 2-713 – Non-delivery:
                   a. K-Price
                   b. MINUS Market price
                               i. @ time buyer learned of breach
                              ii. in conflict (?) with 2-610  buyer may wait reasonable
                   c. PLUS incidental and consequential damages (2-715)
                   d. MINUS expenses saved in consequence of breach
          4. 2-714 – Damages for buyer in accepted goods
                   a. After notice: Buyer gets diminution of value
                   b. Unless Special Circumstances
          5. 2-715 Buyers incidental and consequential damages
                   a. incidental = incurred in inspection, receipt, transportation etc…
                   b. Consequential
                               i. From general or particular needs known to seller at time
                                  of K
                                       1. foreseeable
                                       2. ascertainable @ time of K (certain)
                                       3. Unavoidable (causation)
                              ii. Cannot be prevented by cover or other
                   c. If modification/terms of K later decided, impute knowledge gained
                        until time of modification back to time K was formed
 v.    UCC 2-704: ID Goods
vi.    UCC 2-723 Market Price
          1. Determined @ time that non-breaching party learned of breach:
                   a. time of repudiation – not much sense
                                   b. time of delivery?
        e.   Equitable remedies for breach
                  i. Specific performance
                          1. UCC 2-716 – where goods are unique or other proper circumstances
                                   a. Unique = no cover available
                                   b. Proper circumstances = can’t determine lost profits
                          2. Where there is no adequate remedy at law, may get specific performance
                                   a. Expensive
                                   b. Difficult to calculate
                                   c. No way to determine market measure
                          3. Economic analysis
                                   a. look to who was assigned the risk in the contract
                                   b. Look to economic waste if specific performance is granted
                          4. Injunctions
                                   a. Negative = refrain from doing something = favored
                                   b. Affirmative = do something = not favored (servitude?)
                                   c. Non-compete: only if:
                                             i. Express in K or
                                            ii. Threat of tortuous act (trade secretes, etc…)
                 ii. Liquidated Damages
                          1. “Time of Contracting” test: to be Liquidated damages (not penalty)
                                   a. reasonable forecast of just compensation
                                   b. harm must be difficult to estimate
                          2. UCC 2-718 (Rest 356) Liquidated damages must be reasonable as to:
                                   a. Estimate at time of contract OR In view of the actual damages
                                   b. Difficult to prove loss
                          3. Liquidated damages cannot be a penalty
                                   a. Must only apply to material breach
                                   b. Must be reasonable (UCC 2-718 and Rest 356)
                                   c. Must not be unconscionable (procedural and substantive, unfair
                                       surprise and oppressive)
                          4. Limit agreed remedies (UCC 2-719)
                                   a. Agreed remedies may be in addition to other remedies, Π has
                                       option, unless stated in K
                                   b. If agreed limited/exclusive remedies fail essential purpose, can
                                       have any UCC remedy
K Can limit/exclude consequential damages UNLESS unconscionable to do so.

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