Docstoc

13

Document Sample
13 Powered By Docstoc
					          Today’s Lecture:




               Contracts 2




Session


  13
                       Review

1. Basic, skeletal framework of contractual formation
   -- take a look
                     Capacity
                                          Equitable/Fictitious K
• Prerequisites      Subject Matter       (imposed for fairness)
                     Statute of Frauds

                  Offer
 • ―Assent‖                           Mutual mistake
                  Acceptance
                                      Unilateral mistake
                  Consideration
                                      Misrepresentation
• No defense                          Fraud (I) & (II)

                  Modification        Duress (I) & (II)

                  Impossibility
• No excuse
                  Impracticability
                  Frustration
               The Primacy of the Writing

-- Important question
-- There are two very important devices in K-law that make
lawyer services quite valuable
                                           Answer:
                                          Question:contract
-- These devices allow lawyers to defeat many of the
                                 A theoretical understanding
defenses and loopholes that we’ve been looking at.
                                    Why am I showing you
                               what law does (how it is used)
                                             this?
Parole Evidence Clause “Batman” lawyering consists of
                               and what
   -- a clause inserted into the document
   -- that makes prior/contemporaneous understandings about
   the K irrelevant
   -- the writing controls anything that was said prior to or even
   DURING its signing
               The Primacy of the Writing


No Oral Modification Clause      “Robin”
   --this clause makes oral understandings SUBSEQUENT to
   the writing irrelevant
   -- modifications are only allowed to be in writing
-- let’s take a look at how batman and robin work together in a
contract
                      timeline
  T-1



Expectation
  formed

  • I get my security deposit back
  • the walls are insulated well
  • no one lives above me (cool!)
  • The internet service makes the computer really fast
  • They won’t raise the rent next year
                    timeline
  T-1                 T-2



Expectation        Expectation
  formed             formed
              The date of the “execution”
                (The signing of the K)
                      timeline
   T-1                  T-2

                                    Caveat!
Expectation          Expectation    Some difficult maneuvers
  formed               formed       that can be attempted:
                                    Alleging fraud and so forth.
                                    But these are difficult.
Expectations formed here are The point is that these
irrelevant; only the writing controls doctrines make writings
                                           Note how powerful
the terms, not your expectations.     very powerful lawyer
                                           that makes
                                             draftsmanship
                                      It takes away many of the
 Your understanding at T-1 and T-2              services!
                                      defenses we talked about
 cannot vary the written terms that
                                      earlier
 you affix your signature to
                      timeline
  T-1                   T-2                       T-3



Expectation          Expectation               Expectation

  formed                formed                   formed

                                    This expectation arises out
                                    of communications with
        ―Batman‖                    the person AFTER the
                                    signing:
        Let’s look at ―Robin‖ …
                                    Example: Landlord and
                                   1. Modification?
                                        paying rent late
                                   2. Reasonable reliance?
                     timeline
  T-1                  T-2                          T-3



Expectation         Expectation                  Expectation

  formed              formed                        formed



        ―Batman‖                               ―Robin‖

              No oral modifications allowed!
              Any modification must be in writing
              Once again, this makes lawyer
              draftsmanship a valuable service
               The Primacy of the Writing

-- Note: if you are caught within the terms of an aggressive or
unfair writing, and there is no fraud involved, there are really
only two things you can do:

 Unconscionable?
   -- very tough: have to be oppressive and unfair at the time
   of the bargain
-- But there is something else, at least for SOME kinds of
contracts:

 Adhesion Contract?
   -- a contract where the idea of bargaining over terms is a
   fiction, even in theory
   -- example: an insurance contract
          Contract Damages and Remedies

1. What we want to know now is this: what happens if you
breach a contract?
   -- so far, we’ve learned how to form one
   -- we’ve also learned that writings are very important
   -- now we want to know, given that we have one, what
   happens if we breach it?
2. There are two basic kinds of relief you can seek when a
contract is breached:
 ―Expectation‖ Damages                 ―Alternatives‖
   -- calculated (exact)               -- don’t have to be
                                       calculated
Expectation Damages

                The market value of the thing denied in
 Market Value the breach  Mitigation
                        The reasonable avoidance of the
                  Things that are reasonably foreseeable at
                        lost Certainty Principle (substitute
                          The performance
―Consequentials‖ the time of contracting sometimes called
                        performance),
                         Damages
                        ―covering‖ cannot be speculative.
     - OR -              They must be reasonably
                        You cannot sit there and ―bleed.‖
                         certain.
  ―incidentals‖  Cost ofYou must actively work to lessen
                         a substitute performance
                 +      your loss. You have this duty.   -
           Contract Damages and Remedies


―Alternatives‖
-- there are three types of alternatives to expectation damages.
-– these damages do not have to be ―calculated‖
  ―Liquidated Damages‖
   -- damages specified in the contract!
   (e.g., upon breach, party A shall pay party B the sum of $$)

 ―Specific Performance‖
   -- force the person, by court order, to perform
   -- rare, used for special subject matter
   (e.g., Picasso)
           Contract Damages and Remedies


―Quasi-K Damages‖
   -- we already went over this when we talked about fictitious
   contracts
   -- you get your money back, property returned, or
   reasonable value of your services.
You will notice that in each of these three ―alternatives,‖ you
never have to quantify damages. Damages are not a
calculation.
You just get your money back, force the performance, or obtain
a judgment for a sum certain specified in the contract.
                  Summarizing Damages:

Legal Computation:               Alternatives:

Market Value
                                 Liquidated Amount?
    ―Consequentials‖
                                Specific Performance?
       - OR -

+    ―incidentals‖               Money returned?


      Mitigation

-     Certainty                                    Time
                     An Example

1. We need an example that will help us understand how
contract damages are calculated
              • wants the spinach bug immensely
              • last one on the lot
  Green Beetle:                   Blue Jetta:
            • negotiates a $7,000 price, pays $1,000
   $8,000.00                      $8,000.00
              down
  Car Lot 1                           Car Lot 2
                     An Example

1. We need an example that will help us understand how
contract damages are calculated
              • wants the spinach bug immensely
              • pays $9,000 for it, up front, in cash
  Green Beetle:                        Blue Jetta:
   $8,000.00                           $8,000.00
  Car Lot 1                          Car Lot 2
          Hey Dude,
           where is
                  An
           my car? Example

1. We need an example that will help us understand how
contract damages are calculated

                  Here’s your $1,000 back, kid
                  –- you’re out of luck.
                          Certainty
  Green Beetle:                      Blue Jetta:
   $8,000.00                         $8,000.00
  Car Lot 1                       Car Lot 2
                                        Question:
                                  What are the damages
                                  for breach of contract?
immoral to
 breach?
             0
             0
             0
          Hey Dude,
           where is  Market Value                Liquidated?
                  An
           my car? Example
                          Consequentials
                                              Specific P.
                           will help us
1. We need an example thatincidentals understand how
contract damages are calculated               Quasi- K.
                         Mitigation

                         Certainty
  Green Beetle:                        Blue Jetta:
   $8,000.00                           $8,000.00
  Car Lot 1                          Car Lot 2
           Hey Dude,
            where is  Market Value              Liquidated?
                   An
            my car? Example
                           Consequentials
                                                Specific P.
1. We need an example thatincidentals Question: how
                           will help us understand
                                                Quasi- K.
contract damages are calculated What are the damages
                         Mitigation breach of contract?
                                for
                         Certainty           Question:
  Green Beetle:                       Blue Jetta:
   $8,000.00
                                         Why are Quasi-K
                                      $8,000.00
                                           damages out?
  Car Lot 1                          Car Lot 2
why are quasi-
 K damages
    out?         0
                 0
                 0
          Hey Dude,
           where is  Market Value
                  An
           my car? Example
                          Consequentials
1. We need an example thatincidentals Question: how
                           will help us understand
contract damages are calculated What are the damages
                         Mitigation breach of contract?
                                for
                         Certainty
  Green Beetle:                      Blue Jetta:
   $8,000.00                         $8,000.00
  Car Lot 1                       CarQuestion:
                                     Lot 2
                                 What is the market
                                 value of the loss?
          Hey Dude,
           where is  Market Value
                  An
           my car? Example
                          Consequentials
1. We need an example thatincidentals Question: how
                           will help us understand
contract damages are calculated What are the damages
                         Mitigation breach of contract?
                                for
                         Certainty
    Green Beetle:                      Blue Jetta:
• assume the bug is worth
     $8,000.00                         $8,000.00
8,000.
   Car Lot 1                         Car Lot 2
• he was supposed to pay                  Question:
$7,000 to get an $8,000
                                      What can he do to
car.
                                      mitigate this loss?
          Hey Dude,
           where is  Market Value
                  An
           my car? Example
                          Consequentials
1. We need an example thatincidentals Question: how
                           will help us understand
contract damages are calculated What are the damages
                         Mitigation breach of contract?
                                for
                         Certainty
    Green Beetle:                      Blue Jetta:
• assume the bug is worth
     $8,000.00                         $8,000.00
8,000.
   Car Lot 1                         Car Lot 2
• he was supposed to pay                  Question:
$7,000 to get an $8,000
car.                                 What are his damages
                                             now?
•Let’s assume he buys the
Jetta for 8,000
    enter
 participation
from previous    0
    slides       0
                 0
                Hey Dude,
                 where is  Market Value
                        An
                 my car? Example
                                 Consequentials
     1. We need an example thatincidentals Question: how
                                will help us understand
     contract damages are calculated What are the damages
• He spent 8,000 to get an Mitigation breach of contract?
                                     for
8,000 car.
                                Certainty
• He Green Beetle:
          had      originally                 Blue Jetta:
         $8,000.00
bargained to spend $7,000                     $8,000.00
for an $8,000 car.
       Car Lot 1                            Car Lot 2
                                                 Question:
• Therefore,    he’s     out
$1,000.                                 Was it profitable for the
                                         car seller to breach?
• Plus whatever it took to
go to Lot 2 to get the Jetta
($ 25)?
Everyone
 Votes!
           1.   Yes, of course it was, silly.   0
           2.   Hell no.                        0
                         Pay $1,025




                               $7,000 sale
            $2,000 more
                               $9,000 sale



• Just pay the damage and keep the profit!
• Breaching is actually GOOD business sense.
• It promotes optimality, efficiency
                    The Prom Date

1. Let’s consider a hypothetical that will really illustrate a point
that I want to make about this subject
2. This hypothetical will really let us see why I wanted to show
you contracts – not as ―law,‖ but rather as a set of objectives
and behavior.
 The scenario
    -- Let’s imagine two 18 year old students who are coming
    up upon their senior year prom
    -- one is the quarterback of the football team; the other is
    the most popular cheerleader in the class
    Let’s take a look …
           Gosh, I hope
          Buzz asks me to
―Darla‖      the prom       ―Buzz‖
          He’s the most
           popular boy
―Darla‖      around!      ―Buzz‖
            He’s just so
              dreamy!
―Darla‖   Everyone would    ―Buzz‖
           be so jealous!
          Damn, I need to
           find me a date
―Darla‖      to the prom!   ―Buzz‖
           Woo wee, that
            Darla sure
―Darla‖   would be a good   ―Buzz‖
               pick.
          Then one day,
          it happens …
―Darla‖    Darla, will you   ―Buzz‖
           go to the prom
              with me?
―Darla‖    Why sure       ―Buzz‖
          Buzz, I will!
―Darla‖        Why sure         ―Buzz‖
              Buzz, I will!
              Question:
          Is there a contract
                 here?
Everyone
 Votes!
           1.   Yes, of course, silly.   0
           2.   Hell no.                 0
―Darla‖            Why sure            ―Buzz‖
                   Answer:
                  Buzz, I will!
            Yes: You have an offer,
          acceptance & consideration
          In reliance upon the date, Darla
          has to get prepared …

―Darla‖


                             Question:
                      What kind of stuff is she
                       going to have to buy?
what kind of
  stuff?
               0
               0
               0
―Darla‖




             Question:
          How much is the
              dress?
        Question:
      How much for
      accessories?
 ―Darla‖

                            • Dress ……………………… $400.00
… Trendy footwear,          • Accessories …………
garters, tiaras, shawls
and — for those wearing
a two-piece gown —
diamond-stud belly rings.
[source: USA Today]
              Question:
          Have I left anything
―Darla‖           out?

               • Dress ……………………… $400.00
               • Accessories ………… $300.00
               • ―Goop‖ …………………… $ 80.00
―Darla‖

           • Dress ………………………    $400.00
           • Accessories …………   $300.00
           • ―Goop‖ ……………………    $ 80.00
           • Hair …………………………    $ 50.00
           • Grooming ……………     $ 60.00
          Nails, fake tans, teeth
          whitening and brow
          waxing are increasingly
          essential
          [source: USA Today]
(stuffed in her handbag)
Compact with powder
Lipstick
Cologne
  ―Darla‖
Stain-removal wipes
Pain reliever              • Dress ………………………      $400.00
Breath mints or gum
                           • Accessories …………     $300.00
Flip-flops (for dancing)
Band-Aids (for blisters)   • ―Goop‖ ……………………      $ 80.00
Nail file                  • Hair …………………………      $ 50.00
Disposable camera          • Grooming ……………       $ 60.00
Clear nail polish (for
                           • ―Survival Kit‖ ………   $ 110.00
stocking runs)
Bobby pins
Safety pins                Total …………………………       $ 1,000
Cash
[source: USA Today]
 enter past
participation
                0
                0
                0
          Then,      something
          terrible happens …
―Darla‖                          ―Buzz‖
          On the night of the
          prom, Buzz gets
          another offer
  Hey dude,
  screw this
  Yeah baby!
stupid Prom –
   let’s go
   drinkin!
       And so it was, the two
       went off drinking and
       listening to Led Zeppelin
       music, never going to the
       prom …
          • At 6:00 p.m., the agreed time of pick
          up, Darla waits and waits.
          • Finally, she realizes she has been
―Darla‖   ―stood up‖
          • The tears begin to rush in
          • The hatred sets in
          • The parents are immensely angry
          • They immediately call you, their
          lawyer.
                     Important Question:
                      What are Darla’s
                        damages?
 enter past
participation
                0
                0
                0
          • At 6:00 p.m., the agreed time of pick
          up, Darla waits and waits.
          • Finally, she realizes she has been
―Darla‖   ―stood up‖
          • The tears begin to rush in
          • The hatred sets in
          • The parents are immensely angry
          • They immediately call you, their
          lawyer.


                      I tell you what: let’s
                       complicate this …
          There is a boy on the block
          who also goes to this school …
                                     Skippy
―Darla‖
          • Skippy has always admired
          Darla.
                                             Skippy
―Darla‖   • At this moment of crisis, with
          tears in Darla’s eyes, Skippy
          offers his assistance
             Why Darla, I     Skippy
―Darla‖   would be honored
           to escort you to
               the prom
          It just so happens   Skippy
          that I have my tux
―Darla‖      in a closet and
              can proceed
           forthwith toward
             our endeavors
                  Market Value           Liquidated?
          It just so happens
                      Consequentials Skippy
          that I have my tux             Specific P.
―Darla‖               incidentals
             in a closet and
              can proceed                 Quasi- K.
                     Mitigation
           forthwith toward
             our endeavors
                     Certainty




                        Important Question:
                     What are Darla’s contract
                         damages now?
 Darla’s
Damages?
           0
           0
           0
                  Market Value           Liquidated?
          It just so happens
                      Consequentials Skippy
          that I have my tux             Specific P.
―Darla‖               incidentals
             in a closet and
              can proceed                 Quasi- K.
                     Mitigation
           forthwith toward
             our endeavors
                     Certainty




                            Important Question:
                        What does Darla REALLY
                       want to sue for? What is her
                             REAL complaint
what is the
real issue?
              0
              0
              0
                  Market ValueAnswer: Liquidated?
          It just so happens damages. (Feeling
                      Emotional
                      Consequentials Skippy
                                             Specific
          that I havebad). She can still go to theP.
                        my tux
―Darla‖                incidentals
             in a closet and but she is now jilted.
                        prom;                Quasi- K.
              can proceed
                     Mitigation
           forthwith toward        Answer:
             our endeavors
                     Certainty contracts damages do
                      Note that
                               not allow for this

                                Question:
                       How might a clever lawyer
                       get Darla what she really
                       wants (some revenge) out
                         of suing in contract?
  how could a
 clever lawyer
get what Darla   0
 really wants?   0
                 0
           It lost,
          Get just so happens   Skippy
―Darla‖
           that I
          Skippy have my tux
             in a closet and
               can proceed
            forthwith toward
             our endeavors
          • Purchase the contractual
          performance in the
             Hello Fabio
          marketplace?
―Darla‖   • Use an escort service?
          • This is the kind of
          contractual performance she
          had originally bargained for
          (―eye candy, attention‖)
          • This may cost a few thousand
          dollars (rending the limo, etc.)
          • But you can try to sue Buzz for
―Darla‖   the cost of the escort service!
          (caution: I don’t know if it would
          work, but it really is the only
          thing that seems intelligible to
          contract damages)
          • Note two things:
          -- Whether this works is a Jury
          issue
―Darla‖
          -- note that you have to SPEND
          EXTRA MONEY in order to be
          damaged.
          (under the theory that the
          contract is about more than just
          using the dress and so forth)
                Question:
           Why on earth would I
          show this to you? What
―Darla‖    could possibly be the
            point of all of this?
why show you
    this?
               0
               0
               0
           Answer:                            Answer:
    Contracts are about           They are not about the morality
 BUSINESS. They are about          of promises apart from that. If
    MARKET TRADES.
 ―Darla‖                            you play the game of offer,
                                   acceptance and consideration
           Answer:                out of context, ―the law‖ doesn’t
                                           understand it.
 Stated another way, contract
    law has the objective of
 business trades in mind, not
following promises apart from
that. Taken out of context, the              Answer:
  principles become foreign.
                                    Is it immoral to breach a
                                    contract? If it is, it is not
                                  because of anything stated in
                                           contract LAW.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:67
posted:1/26/2011
language:English
pages:71