Semester 2

Question 1

What are contract defenses (general)

Answer 1

defenses that may arise from something happening during contract formation or from certain special circumstances after formation of the contract that allow the parties to cancel the contract or make the contract void.

Question 2

Restatement 151: Mistake Defined

Answer 2

A mistake is a belief that is not in accord with the facts.

Question 3

Restatement 152: When a mistake of both parties makes a contract voidable.

Answer 3

(1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in restatement 154.

Question 4

Restatement 154: When a party bears the risk of mistake

Answer 4

A party bears the risk of mistake when (a) the risk is allocated to him by agree meant of the parties, or (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.

Question 5

Mutual Mistake Rule (summarized)

Answer 5

if both parties are mistaken about a basic assumption of fact at the time a contract is formed, the contract may be avoided by the adversely affected party so long as it doesn’t bear the risk of mistake.

Question 6

Court’s approach to Unilateral Mistake

Answer 6

Courts are more reluctant to set aside agreements for “unilateral mistake” because avoidance deprives the un-mistaken party of the benefits of a bargain that it reasonably expected to get.

Question 7

Unilateral Mistake Defense Requirements

Answer 7

A party seeking relief on the basis of their own unilateral mistake must also show that enforcing the contract would be especially unfair either because it would be unconscionable or because the other party either caused the mistake or should have known it.

Question 8

Restatement 153: When mistake of one party makes a contract voidable

Answer 8

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake of his fault caused the mistake.

Question 9

Misrepresentation definition

Answer 9

statement that is not in accord with the facts and induces an aggrieved party to assent to a contract.

Question 10

The rule of misrepresentation

Answer 10

A contract is voidable by the aggrieved party when:
- the other party made a misrepresentation
- that was fraudulent or material,
- which induced the assent of the aggrieved party,
- the aggrieved party relied on the misrepresentation and
- she was justified in relying on it.

Question 11

Rule regarding silence (misrepresentation)

Answer 11

You can be silent but not when you have disclosed half-truths. Active concealment is also considered a misrepresentation.

Question 12

When is there a duty to disclose?

Answer 12

There is a duty to disclose only if failure to disclose would be a breach of good faith dealing.

Question 13

What is fraudulent misrepresentation?

Answer 13

When the maker either knows it is fake or doesn’t have enough information to make the statement

Question 14

What makes a statement material?

Answer 14

When the maker knows the representation is likely to induce this specific person to assent even if a reasonable person wouldn’t.

Question 15

Actual Reliance

Answer 15

actual reliance is where the representation is a factor that contributed to assent. It does not need to be the only factor that contributed to assent.

Question 16

Fraud in the inducement vs fraud in the factum

Answer 16

Fraud in the inducement is a misrepresentation that induces the other party to enter into a contract whereas fraud in the factum is a misrepresentation about the document itself.

Question 17

Promissory Fraud

Answer 17

A promise is not a representation, therefore, a breach of promise is not a misrepresentation… however, promissory fraud is when someone makes a promise with the intention of never honoring it. This can be difficult to prove.

Question 18

Affirmation

Answer 18

After the influence of the misrepresentation is no longer present, the aggrieved party can affirm the contract. This is sometimes called ratification and the aggrieved party keeps the benefit.

Question 19

Definition of Duress

Answer 19

A wrongful threat that induces a party to agree to a contract or a contract modification.

Question 20

Section 2-209 (1): contract modification made in bad faith

Answer 20

A contract modification made in bad faith is unenforceable.

Question 21

Restatement 175: When Duress by Threat Makes a Contract Voidable

Answer 21

(1) If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.
(A claim of economic duress requires that there was some display of protest against the higher price in order to put the seller on notice that the modification is not freely entered into)

Question 22

Section 2-302 of the UCC (unconscionable)

Answer 22

(1) If the court as a matter of law finds the contract or any clause to have been unconscionable [when] made, the court may refuse to enforce the contract.

Question 23

Sustantive Unconscionability vs Procedural unconscionability

Answer 23

Substantive unconscionability is where the substance of the contract is unconscionable and procedural unconscionability is where the process in which the contract was formed was unconscionable. In most unconscionability jurisprudence, we look at both substantive and procedural unconscionability and the strongest cases are when there is both.

Question 24

What must a court find before invalidating a contract on public policy grounds?

Answer 24

that a valuable societal interest exists and that enforcement of this contract will materially harm that interest, directly or indirectly.

Question 25

Restatement 178: When a term is unenforceable on grounds of public policy

Answer 25

(1) A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by public policy against the enforcement of such terms.

Question 26

UCC 2-204 (exchange goods for a price)

Answer 26

Under UCC 2-204, a contact is formed in a way that manifests the parties’ agreement to exchange goods for a price.

Question 27

UCC 2-201 Statute of Frauds

Answer 27

UCC 2-201 is the statute of frauds that applies to the sale of goods for the price of $500 or more. Such sale is not enforceable unless there is some form of writing. Electronic communications can count and there is a signature requirement. The party against whom enforcement is sought must have signed the writing.

Question 28

UCC 2-201(2) - merchant exception to statute of frauds

Answer 28

The merchant exception: between merchants if within a reasonable time a writing in confirmation of a contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

Question 29

Section 1-201 General Definitions

Answer 29

(37) “Signed” includes using any symbol executed or adopted with present intention to adopt or accept writing.
(43) “writing” includes printing, typewriting, or another intentional reduction to tangible form. “written” has a corresponding meaning.

Question 30

What is a warranty?

Answer 30

A warranty is a contractual promise to be responsible for the truth of a statement of fact.

Question 31

Express Warranty 2-313

Answer 31

Provides that express warranties are created by
(1) any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain, and (2) any description of the goods which is made part of the basis of the bargain.
Formal words such as “warranty” or “guarantee” are not required to make a warranty, but the seller’s affirmation of the value of the goods or an expression of opinion or commendation of the goods does not create and express warranty.

Question 32

Implied Warranty 2-315

Answer 32

An implied warranty arises when a seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods which are fit for that purpose.

Question 33

Parol Evidence Rule

Answer 33

applies only to written contracts. The rule makes the content of a final, or “integrated” writing controlling. A writing is integrated if the parties intended it to be the final expression of one or more terms of their agreement. Completely integrated is where the parties intended the writing to be the exclusive expression of their agreement. If the agreement is not integrated or is incompletely integrated, parol evidence may be admissible to provide additional terms.

Question 34

Steps in Parol Evidence Analysis

Answer 34

1) is there a writing?
2) if so, is the writing integrated?
3) is the writing completely integrated? if so, then any evidence of terms within the scope of the writing is blocked.
4) do any exceptions to the parol evidence rule apply?
(outside evidence may be allowed to achieve certain goals that are distinct from the content of the agreement. Ex: terms are missing or ambiguous in the writing).

Question 35

Restatement 214: evidence of prior or contemporaneous agreements and negotiations:

Answer 35

agreements and negotiations proper to or contemporaneous with the adoption of a writing are admissible in evidence to establish:
(a) that the writing is or is not an integrated agreement;
(b) that the integrated agreement, if any, is completely or partially integrated
(c) the meaning of the writing, whether or not integrated
(d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating clause
(e) ground for granting or denying remission, reformation, specific performance, or other remedy.

Question 36

Exceptions to Parol Evidence Rule

Answer 36

Outside evidence may be allowed to achieve goals that are distinct from the content of the agreement. If terms are missing or a term is ambiguous, then the court may use outside evidence to determine the meaning of a term or fill in a missing term.

Question 37

Good Faith

Answer 37

The notion of “good faith” represents the courts’ attempt to prevent opportunistic exercise of contract flexibility. There is a duty of good faith implied in every contract. It prevents parties from abusing their discretion.

Question 38

What is opportunism?

Answer 38

It refers to a contract party’s use of a contractual power to take advantage of a counter party’s vulnerability in order to gain an unintended benefit at the other party’s expense. A contract party’s opportunism can result in unjust enrichment or in depriving the counter-party of a benefit to which it is morally entitled under the contract.

Question 39

UCC 2-306 (terms relating to quantity of goods)

Answer 39

A term which measures the quantity by the requirements of the buyer means such actual requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate to any normal or otherwise comparable prior requirements may be demanded.

Question 40

The power of reformation

Answer 40

permits the court to rewrite provisions of the written contract if it inadvertently misstates the parties’ actual agreement. Only certain kinds of “misstatements” are correctable by reformation. Reformation is available if one party tricks the other into signing a document that one party has misrepresented. The deceived party is entitled to reform the contract to be as it was misrepresented to her.

Question 41

What are two limitations to the remedy of reformation?

Answer 41

It is not available if both parties are aware of the words that appear in the document, even if they have different understandings of their meaning.
Also - the only mistake corrected by reformation is a mistake in writing.

Question 42

Restatement 166: when reformation is available

Answer 42

If a party’s assent is induced by the other party’s fraudulent misrepresentation as to the contents or effect of a writing… the court… may reform the writing to express the terms of the agreement as asserted.
(a) if the recipient was justified in relying on the misrepresentation, and
(b) except to the extent that third parties such as good faith purchasers for value will be unfairly affected.

Question 43

Restatement 155: When mistake of both parties as to written expression justifies reformation

Answer 43

Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the request of a party reform the writing to express the agreement, except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected.

Question 44

Purpose of Parol Evidence Rule

Answer 44

To simplify the administration of the resulting contract and to facilitate the resolution of possible disputes by excluding from the scope of their agreement those matters that were raised and dropped or even agree upon and superseded during negotiations. - Alan Famsworth.

Question 45

What is non-performance of a conditional contract duty?

Answer 45

Non-performance of a conditional contract duty is not a breach unless and until the condition occurs. If it becomes apparent that the condition can never occur, the conditional duty is discharged.

Question 46

Conditions Precedent (FRCP 9(c))

Answer 46

In a pleading the performance or occurrence of conditions precedent, it is sufficient to aver generally that all conditions precedent have been performed or have occurred. A denial of performance or occurrence shall be made specially and with particularity.

Question 47

Section 224 of Restatement: definition of condition

Answer 47

A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.

Question 48

Rule from Brown-Marx v Emigrant (conditions must be exactly fulfilled)

Answer 48

Conditions which are either express or implied in fact must be exactly fulfilled or no liability can arise on the promise which such conditions qualify. Express conditions must be completely satisfied, close is not enough.

Question 49

Section 229 of Restatement: Excuse of a condition to avoid forfeiture.

Answer 49

To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.

Question 50

Conditions analysis

Answer 50

1) is this provision a condition?
2) has it occurred? Has it been fulfilled? It must be exactly fulfilled.
3) Can the condition be avoided? Conditions can be avoided through waiver, estoppel, and excuse (restatement 229).

Question 51

Evaluating whether a provision is a condition

Answer 51

When asking if a provision is a condition, you look at if the provision is a condition, promise, or neither. Courts will often construe a provision as a promise when it is ambiguous.

Question 52

UCC 2-507; Constructive or implied condition.

Answer 52

Constructive or implied conditions, like express conditions, are events that must occur before a contract duty must be performed.

Question 53

The question of substantial performance/material breach

Answer 53

would the parties have likely agreed in advance that the owner would accept this performance and pay for it at contract rate, subject perhaps to repair or adjustment in price.

Question 54

How to determine whether a failure to render or offer performance is material. Restatement 241.

Answer 54

The following circumstances are significant to this analysis:
a) the extent to which the injured party will be deprived on the benefit he reasonably expected.
b) the extent to which the injured party may be adequately compensated for the part of that benefit of which he will be deprived.
c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture.
d) the likelihood that the party failing to perform or to offer to perform will cure his failure.
e) the extent to which the behavior of the party failing to perform or to offer to perform comports with good faith and fair dealing. If the breach was intentional this weighs in favor of it being a material breach.
(all these factors are to be weighed together and one does not necessarily outweigh the other).

Question 55

Perfect Tender

Answer 55

is another standard used in the sale of goods where sellers have to give exactly what is promised. The doctrine of non-conforming goods in UCC are exceptions that came out of the perfect tender rule.

Question 56

Purpose of the excuses of impossibility and impracticability

Answer 56

While it is now common practice to put conditions in contracts that excuse a party from liability in the failure to perform due to unforeseen circumstances. Parties still may fail to plan for an unforeseen disaster and in that case, courts may construct a condition due to the excuses of impossibility or impracticability.

Question 57

Impossibility rule from Taylor v Caldwell

Answer 57

In contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse performance.

Question 58

UCC 2-615: two requirements for performance to be excused

Answer 58

1) performance must have become “impracticable”
2) the impracticability must have been caused by the non-occurrence of an event which was a basic assumption on which the contract was made.

Question 59

Restatement 271: when impracticability excuses the non-occurrence of a condition

Answer 59

Impracticability excuses the non-occurrence of a condition if the occurrence of the condition is not an agreed upon exchange and forfeiture would otherwise result.

Question 60

Restatement 261: Discharge by supervening impracticability

Answer 60

Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.

Question 61

Doctrine of frustration

Answer 61

Addresses the risk that the consideration a party receives may become unexpectedly worthless. If this risk was taken into account when the deal was made, the contract cannot be avoided.

Question 62

Purpose behind the excuse of frustration

Answer 62

Sometimes events conflict with a basic assumption on which the contract was made and destroy the value of one party’s performance. An unknown-unknown arises that utterly frustrates the central purpose of that contract for that party.

Question 63

Factors for material breach

Answer 63

1) deprivation of benefit
2) likelihood of cure
3) adequacy of damages
4) forfeiture
5) good faith and fair dealing
We apply these to the non-breaching party.

Question 64

Restatement 265: definition of frustration of purpose

Answer 64

Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.

Question 65

Third Party Beneficiary Rule

Answer 65

From the Alan v Schal Associates Case, the rule is that a third party beneficiary may only sue for breach of contract if the contract was entered into for the party’s direct benefit; if the third party’s benefit is merely incidental, he has no right of recovery on the contract.

Question 66

How to determine if a third party is a direct beneficiary of a contract?

Answer 66

whether a third party is a direct beneficiary depends on the intention of the parties, which must be gleaned from a consideration of all of the contract and the circumstances surrounding the parties at the time of execution. (Also rule from Alan v Schal case)

Question 67

Public recovery rule from H.R. Moch Co. v Rensselaer Water Co

Answer 67

In order for a member of the public to have a right of action under a contract where the public is not formally a party, the benefit to the public in the contract must be primary and immediate in such a sense and to such a degree as to bespeak the assumption of a duty to make reparation directly to individual members of the public if the benefit is lost.

Question 68

Definition of Repudiation

Answer 68

To repudiate a contract is to refuse to perform it. A repudiation is either an unequivocal refusal to perform or the doing of an act that makes it impossible to perform as promised. The purpose of communication a repudiation can be to give warning, permitting the other party, to act quickly to mitigate any damage it might suffer from non-performance.

Question 69

Retraction of Repudiation

Answer 69

A party who repudiates a contract may “un-repudiate” by retracting its repudiation and in effect, promising to perform as originally promised.

Question 70

Restatement 250: When a statement or an act is a repudiation

Answer 70

A repudiation is (a) a statement by the obligor to the obligee indicating that the obligor will commit a breach that would itself give the obligee a claim for damages for total breach or (b) a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such breach.

Question 71

Restatement 253: Effect of repudiation as a breach and on other party’s duties

Answer 71

(1) where an obligor repudiates a duty before he has committed a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total breach
(2) where performances are to be exchanged under an exchange of promises, one party’s repudiation of a duty to render performance discharges the other party’s remaining duty.

Question 72

UCC Section 2-610: Anticipatory Repudiation

Answer 72

When either party repudiates the contractwith respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:
(a) for a commercially reasonable time await performance by the repudiating party; or
(b) resort to any remedy for breach (Section 2-703 or Section 2-711), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and
(c) in either case suspend his own performance or proceed in accordance with the provisions of this Article on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2-704).

Question 73

Fundamental Principles of Remedy Law

Answer 73

(1) remedies for breach of duty should aim at restoring the plaintiff to his rightful position.
(2) contract remedies are not intended to punish the breaching party, even if that breach was intentional. Therefore, the remedy must be supplied at the least cost to the defendant.
(3) courts will generally enforce the parties’ specific agreement to fix or limit remedies unless to do so would violate public policy.

Question 74

Hohfeldian relation of right/duty

Answer 74

The rightful position of a plaintiff - the rights holder - is the position he would have enjoyed if the defendant - the duty holder - had not breached her duty.

Question 75

Expectation interest or expectation measure of damages.

Answer 75

Non-breaching party’s rightful position in breach of K cases is the financial position or situation that he would have enjoyed if the defendant had not breached her duty.

Question 76

UCC 1-305 (how remedies are to be administered)

Answer 76

Remedies must be administered liberally to the end that the aggrieved party may be put in as good a position as if the other party had fully performed.

Question 77

2 questions to ask when calculating expectation damages

Answer 77

1) what would the non-breaching party have received if the other party had performed the contract? (calculate the amount it would take to put the non-breaching party in the place they would have been in had the other party performed)
2) Does that amount put the non-breaching party in a better place than they would have been in had there been performance? (If so, something needs to be subtracted because the non-breaching party would be overcompensated for the breach).

Question 78

Restatement 2d section 347: Measure of Damages in General

Answer 78

Subject to the limitations stated in [R2C § 350, R2C § 351, R2C § 352, & R2C § 353], the injured party has a right to damages based on his expectation interest as measured by
(a) the loss in the value to him of the other party’s performance caused by its failure or deficiency, plus
(b) any other loss, including incidental or consequential loss, caused by the breach, less
(c) any cost or other loss that he has avoided by not having to perform.

Question 79

restatement 347 formula

Answer 79

Expectation Damages = Loss in value + other loss (consequential and incidental damages) - cost avoided - loss avoided.

Question 80

UCC 2-711: Buyer’s Remedies in General; Buyer’s Security Interest in Rejected Goods

Answer 80

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid
(a) “cover” and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
(b) recover damages for non-delivery as provided in this Article (Section 2-713).
(2) Where the seller fails to deliver or repudiates the buyermay also
(a) if the goods have been identified recover them as provided in this Article (Section 2-502); or
(b) in a proper case obtain specific performance or replevy the goods as provided in this Article (Section 2-716).
(3) On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (Section 2-706).

Question 81

UCC 2-712: “Cover”; Buyer’s Procurement of Substitute Goods.

Answer 81

(1) After a breach within the preceding section the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.

(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715), but less expenses saved in consequence of the seller’s breach.

(3) Failure of the buyerto effect cover within this section does not bar him from any other remedy.

Question 82

UCC 2-713: Buyer’s Damages for Non-delivery or Repudiation.

Answer 82

(1) Subject to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715), but less expenses saved in consequence of the seller’s breach.

(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

Question 83

Alternative Damages Calculation

Answer 83

Expected profit + Reliance Costs + other loss

Question 84

Direct or general damages

Answer 84

Direct/general damages compensation for harm that arose automatically from the beach and would be the same for all plaintiffs. Direct damages are also those that would occur as a result of a breach in the usual course of events or under ordinary circumstances.

Question 85

Consequential Damages

Answer 85

Consequential damages compensate for harm or loss that arose as a result of plaintiff’s individual circumstances including harm to this person as well as costs he incurred or income he lost.

Question 86

How to recover consequential damages

Answer 86

In order to recover for this type of loss or injury, a plaintiff must prove that the breach was the cause-in-fact of the consequential damages. He must also prove that, at the time the contract was formed, the defendant could have foreseen such harm as the likely consequence of breach.

Question 87

Rule from Hadley v Baxendale (consequential damages)

Answer 87

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of K itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. (this rule resides in restatement 351 and UCC 2-715.)

Question 88

What can contract damages not compensate?

Answer 88

Contract damages do not compensate plaintiff for harm that cannot be proved with reasonable certainty (restatement 352); harm that is speculative or uncertain to occur or to have occurred (restatement 352); emotional harm or mental distress caused by breach (353); and attorney’s fees.

Question 89

General Rule regarding damages and foreseeability

Answer 89

damages cannot be recovered unless they were foreseeable by the party in breach at the time the contract was made.

Question 90

How to tell if damages are foreseeable

Answer 90

• if they arise naturally from the breach or
• if they arise from special circumstances about which the party in breach knew or should have known.

Question 91

Minority Rule/Tacit Agreement Test

Answer 91

This test applies when special circumstances are involved. In a minority of jurisdictions, to be liable for damages, not only must the party in breach know about the special circumstances, the party must have at least tacitly agreed to be responsible for any losses arising from those circumstances. To tacitly agree is to do something short of expressly saying so.

Question 92

UCC 2-706: Seller’s Resale Including Contract for Resale

Answer 92

(Damages = contract price - resale price)
(1) Under the conditions stated in section 2-703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article (Section 2-710), but less expenses saved in consequence of the buyer’s breach.

Question 93

Cause-In-Fact/”but for” causation

Answer 93

The “but for” test of causation is used to determine the effect of the defendant’s breach of contract on the plaintiff’s injury or loss. The contracts causal chain will often include the plaintiff’s own actions and inactions, and the court must take into account their contribution to the injury or loss.

Question 94

Avoidance/Mitigation Rule

Answer 94

Plaintiffs must act reasonably after learning of breach in order to minimize the harm they suffer as a result of the breach. If they fail to act reasonably, their failure will be considered to be the cause-in-fact of any incremental harm that she could have prevented.

Question 95

Rule from Rockingham Case (regarding avoidance and mitigation)

Answer 95

A plaintiff can not hold a defendant liable for damages which need not have been incurred. (damages that could have been avoided).

Question 96

The mitigation requirement for employment cases

Answer 96

there is a more general element of reasonableness. An employee is not required to go to heroic lengths in attempting to mitigate their damages, but only to take reasonable steps to do so. It may be seen that the plaintiff has not property mitigated their damages if they refuse employment that is “substantially similar.”

Question 97

Restatement 350: Avoidability as a limit on damages

Answer 97

(1) except as stated in subsection (2), damages are not recoverable for loss that the injured party could have avoided without risk, burden, or humiliation.
(2) the injured party is not precluded from recovery by the rule stated in subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss.

Question 98

Specific Performance

Answer 98

Is a remedy a court can give when a party threatens to breach a contract. The court issues an injunction ordering the party to perform the contract. If the party disobeys the injunctions and fails to perform, the court can hold the party in contempt. In extreme cases, the party can be fined or even jailed until he complies with the court’s order.

Question 99

Specific performance vs damages

Answer 99

specific performance prevents breach of contract instead of compensating for breach after it happens.

Question 100

Intentional failure to comply with an injunction

Answer 100

This is a crime, however, in practice, criminal prosecution for disobedience of an order in a civil case is exceedingly rare.

Question 101

Efficient Breach

Answer 101

under this theory, the law of contract remedies should encourage promisors to breach their contracts when it would be “efficient” to do so. A breach is efficient in this sense when the total amount of wealth or value following breach exceeds the amount that would follow full performance, taking into account the effects on all parties affected by either alternative. (this is an economic concept not a legal concept.)

Question 102

Restatement 2d section 352: Uncertainty as a limitation on damages

Answer 102

Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.

Question 103

What is a policy problem with damages?

Answer 103

The non-breaching party may not feel fully compensated. Some things are not quantifiable with money.

Question 104

Specific Performance and Real Estate

Answer 104

Real estate is considered something for which money is not sufficient for damages in case of breach. Therefore, when a contract involves the sale of real estate and a party breaches, specific performance may be ordered.

Question 105

Specific Performance under the UCC

Answer 105

The UCC modifies the common law rule for goods. Under UCC 2-716(1), the UCC preserves the common law rule that specific performance can be awarded when goods are “unique.” (Unique goods are not to be restricted to ones that are one of a kind like the Mona Lisa). The UCC further provides that specific performance is also available “in other proper circumstances.” Inability to cover is strong evidence of other proper circumstances.

Question 106

General Rule for Specific Performance

Answer 106

Specific Performance is available when there is “no adequate remedy at law.” No adequate remedy at law means money is not good enough to compensate the non-breaching party.

Question 107

Specific Performance and contracts for services

Answer 107

Court’s rarely ever award specific performance, an order to perform in instances of service contracts.

Question 108

Non-competition agreements

Answer 108

a common contract where a negative injunction is the remedy.

Question 109

Commensurability

Answer 109

When money is the measure of all things, the problem of commensurability arises. How should money damages be calculated when a breach of duty harms human interests that have no monetary value?

Question 110

When are money and human values incommensurate? & how does the court handle those situations?

Answer 110

When they cannot be made equivalent in any meaningful way. If a court refuses to award money damages for harm to a human interest because it cannot be put into monetary terms, the court in effect values the interest at $0.

Question 111

Reliance Damages Restatement 349

Answer 111

As an alternative to the measure of damages stated in [R2C § 347], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.

Question 112

Liquidated Damages

Answer 112

Contract parties can replace the default rules/remedies with agreed upon remedies that will be applied in case of breach.

Question 113

Two ways to make liquidated damages

Answer 113

(1) reduce or eliminate claims for damages or to limit them to a stated amount.
(2) when the parties “liquidate” the damages by fixing a definite sum of money to become due as damages in case of a specific breach.

Question 114

Do courts often enforce liquidated damage clauses?

Answer 114

No, courts often do not enforce liquidated damage clauses.

Question 115

Restatement 339: liquidated damages clauses are upheld if any of the following 2 factors are satisfied

Answer 115

(1) the amount fixed must be a reasonable forecast of just compensation for the harm that is caused by the breach.
(2) the harm must be such that it is incapable of very difficult of ascertainment.
(reasonableness of the estimate of damages and the difficulty of ascertainment of harm should be measured as of the time the contract was formed.

Question 116

General Rule for Liquidated Damages

Answer 116

Damages may be liquidated in the agreement only at an amount which is reasonable in light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and inconvenience or non feasibility of otherwise obtaining an adequate remedy.
[WA has rejected the clause of actual harm since the purpose of liquidated damages is to avoid litigation that would evaluate what the liquidated damages are, they have adopted the UCC].

Question 117

UCC 2-313: Express Warranties

Answer 117

(1) Express warranties by the sellerare created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goodsand becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goodswhich is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goodsor a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

Question 118

UCC 2-314 implied warranty of merchantability

Answer 118

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contractdescription; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goodsare used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreementmay require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

Question 119

Plain Meaning Rule for Parol Evidence

Answer 119

The Plain Meaning Rule states that if a writing, or the term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to extrinsic evidence of any nature.
* hold that extrinsic evidence is admissible as to the entire circumstances under which the K was made
* Restatement 212:
◦ (1) The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in the light of the circumstances, in accordance with the rules stated in this Chapter.
◦ (2) A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.
◦ Comment b:
‣ It is sometimes said that extrinsic evidence cannot change the plain meaning of a writing, but meaning can almost never be plain except in a context. Accordingly, the rule stated in Subsection (1) is not limited to cases where it is determined that the language used is ambiguous.
‣ Any determination of meaning or ambiguity should only be made
‣ 1) in the light of the relevant evidence of the situation and relations of the parties,
‣ 2) the subject matter of the transaction,
‣ 3) preliminary negotiations and statements made therein,
‣ 4) usages of trade, and
‣ 5) the course of dealing between the parties.

Question 120

§ 176. When a Threat Is Improper

Answer 120

(1) A threat is improper if
(a) what is threatened is a crime or a tort, or the threat itself would be a
crime or a tort if it resulted in obtaining property,
(b) what is threatened is a criminal prosecution,
(c) what is threatened is the use of civil process and the threat is made in
bad faith, or
(d) the threat is a breach of the duty of good faith and fair dealing under a
contract with the recipient.
(2) A threat is improper if the resulting exchange is not on fair terms, and
(a) the threatened act would harm the recipient and would not significantly
benefit the party making the threat,
(b) the effectiveness of the threat in inducing the manifestation of assent is
significantly increased by prior unfair dealing by the party making the threat, or
(c) what is threatened is otherwise a use of power for illegitimate ends

Question 121

UCC 2-202 (Parol Evidence)

Answer 121

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreementwith respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
(a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and
(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement .

Question 122

351: Unforeseeability and Related Limitations on Damages

Answer 122

Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
Loss may be foreseeable as a probable result of a breach because it follows from the breach
in the ordinary course of events, or
as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.
A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.

Question 123

UCC 2-708

Answer 123

(1) Subject to subsection (2) and to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article (Section 2-710), but less expenses saved in consequence of the buyer’s breach.

(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.