Week 12 - Test 2 Flashcards
5 examples of UCC’s solutions to contract problems
- measure of damages in case of repudiation
- buyer’s duties with respect to rejected goods
- measure of damages when accepting nonconforming goods
- “substituted performance” when agreed-upon facilities have become unavailable
- reclamation of goods from an insolvent buyer
good faith, reasonable effort to obtain goods from another source
cover
use of commercially reasonable subsitute facility
substituted performance
to settle a dispute other than by litigation, including arbitration and mediation–often used in contract disputes
alternative dispute resolution
neutral helps parties understand each others’ positions and may suggest solutions, but agreement ultimately comes from the parties
mediation
a third party in ADR, mediator or arbitrator
neutral
a neutral hears both positions and imposes a decision
arbitration
use of court system’s own mediators or arbitrators before going to trial (common in contract law to instead include ADR requirement)
court-annexed ADR
4 benefits to ADR
- faster resolution than court
- less expensive than trial
- may salvage relationship
- expert arbitrators > judges
parties give up the right to challenge arbitration result in court
binding arbitration
area within which judicial authority may be exercised – often included as a requirement in a contract
jurisdiction
contract language that defines which state’s law will apply in case of litigation
choice of law
single dispute results in cases in more than one state or in both state and federal courts
parallel litigation
contract language requiring one party to give the other party written notice a specified time before filing suit (has the offshoot of shortening the limitations period for bringing suit)
notice of claims provision
pretrial investigation of facts by questioning, inspection and so on – rules regarding this change by jurisdiction
discovery
electronic recovery of email and documents from computers, servers and handheld PDAs
E-Discovery
Three things a court looks at in awarding a remedy in a case based on breach of contract
- parties’ expectations
- what the parties did in reliance on the contract
- what should be restored to the parties
award of money
legal remedy/ damages
award that is nonmonetary and involves court orders; decided by a judge
equitable remedy
courts can issue orders based on fairness
case in equity
can order acts performed
chancery court
a care requesting damages (money)
case at law
injured party’s choice between remedies available for a single actionable occurrence
election of remedies
damages intended to put nonbreaching parties in the position they would have occupied if the contract had been fully performed
compensatory damages/expectation damages
losses reasonably associated with or related to actual damages; indirect damages
incidental damages
expenses nonbreaching party will not incur
costs avoided
Courts will not award damages that are too (1) or (2) by the nonbreaching party
- speculative
2. unforeseen
losses that do not flow directly and immediately from an injurious act
consequential damages / special damages
that which a reasonable person would anticipate
foreseeable
damages awarded for losses incurred by plaintiff in reliance on the contract; puts party in position that would have been occupised if the contract had not been made
reliance damages
Present worth doctrine
the value, in “today’s money,” of payments to be made in the future
damages agreed o in advance of breach, in the contract itself
liquidated damages
(1) are not generally available for breach of contract, even if intentional. However, if the breach involved conduct (2) under (3), they may be available.
- Punitive damages
- independently actionable
- tort law
A nonbreaching party is entitled to (1) even if no financial loss resulted–parties will sometimes seek these to establish (2).
- nominal damages
2. future contract relationships
minimal amount of damages awarded, even if no financial loss resulted from the breach or if the loss cannot be proven with reasonable certainty
nominal damages
A statute or the contract itself may call for payment of (1) or (2) to the prevailing party. Absent this, (3) are always covered by the parties themselves but (4) may be awarded.
- costs
- attorney’s fees (fee recovery/reversal)
- attorney’s fees
- costs
examples include filing fees, fees for service of process and similar charges incurred in litigation
costs
payment to attorney for services
attorney’s fees
an award of attorney’s fees
fee recovery/reversal
an attempt to reduce the harm – looked at by courts in awarding damages
mitigation of damages
6 reasons courts would use their discretion and avoid equitable remedies
- damages adequately compensate the injured party
- an outside party would have to be involved
- the injured party has delayed in a way that is unfair to the other party (laches)
- remedy would cause unreasonable hardship
- terms of the contract are unclear
- contract involves unfairness
injured party delays in seeking remedy in away that is unfair to the other party
laches
court order requiring a party to perform contract obligations
specific performance
an item that is not readilt available from other sources
unique property
Specific performances is commonly ordered in cases involving (1) but is not appropriate for (2) contracts.
- unique property
2. personal service
court order requiring or prohibiting specific actions
injunction
to return property or its value – restoration to the position occupied by the injured party before the contract was entered
restitution
recovery of property from one who is wrongfully in possession
replevin
rewriting contract, especially in cases of mutual mistake or unconscionabilituy
reformation (blue-penciling)
the relationship between the parties to the contract
privity
liability regardless of fault – often comes into play when a seller sells a defective product that harms someone - no need to show negligence, etc.
strict liability
contract granting the right to operate under a brand name
franchise
ADR consists of (1) or (2) and settles disputes without going to (3).
- arbitration
- mediation
- court
ADR exists largely because (1). It was once used for family law and contracts but is now for (2). It is the equivalent of (3). The advantages are (4) and (5).
- the judiciary has not grown with society
- any area of law
- hiring a judge
- time
- money
Mediation involves both parties going to a (1) who helps them understand the other’s (2) and suggest a (3). The parties can be talked to (4) and together. This can be successful because often parties (5). A mediation neutral must be (6). Neither party in a mediation (7). There is no ethics code for mediation and you do not have to be a (8) to be a mediator.
- neutral
- position
- solution
- one-by-one
- just want to be heard
- impartial
- forfeits legal rights
- lawyer (sometimes experts are used for complex cases)
Unlike with mediation, in arbitration, parties are looking for a (1). Arbitration neutrals are akin to (2). If parties decide to make the arbitration (3), they may not appeal it in court. Arbitration may be specified to in a (4). Sometimes arbitration is just used as a “(5).”
- decision
- administrative law judges
- binding
- contract
- dry run
chooses where issues will be decided, and under whose law
choice of law clause
further limits the statute of limitations - decides when a claim must be made or else waived
notice of claims provision
Statutes of limitations: 1. cause of action from date of breach in AZ
- ” outside of AZ
- ” for oral contract
- 6 years
- 4 years
- 3 years
Parties can agree to a (1) SoL, but not a (2) one.
- shorter
2. longer
3 classifications of legal remedy calculations, and one add-on
- compensatory (put NBP in position as if contract had been fully performed)
- reliance (put NBPin position as if contract never made)
- restitution (BP gives back everything of value NBP has given)
- consequential damages (not a stand-alone–regards extra damages, like gas to look for replacement)
(1) damages can sometimes do more than (2) damages.
- . Restitution
2. compensatory
If a contract to buy a piano for $1,000 is breached, and the NPB has to buy the same piano elsewhere for $1400, how much does the BP owe in compensatory damages?
$400 (amount that NBP is out due to breach). (plus possibly consequential damages–time, gas used to find new piano)
Homeowner hire construction co. to build $500,000 home, pays $250,000 down
Asks construction co. to stop building after $100,000 spent (construction co. now has $150,000)
Construction co. says it could have finished the house for another $200,000. How much does homeowner owe in compensatory damages, without the construction co. finishing the house?
Homeowner pays $50,000 to make $200,000, which would have been the profit incurred by the construction co. under the contract. (500-300 costs = 200 profit)
A homeowner promises to sell a buyer a house for $500,000, but quick inflation makes the house worht $700,000, so the HO breaches that contract and sells the house for the higher amount. How much is owed to original buyer in compensatory damages, without the homeowner selling him the house?
$200,000 (had the buyer bought the house at $500,000 as promised, inflation would have given him $200,000 equity, which he is out now)
If a stadium owner guesses he can pack the stadium for a Bieber concert, making $2 million in ticket sales, and spends $300,000 of a total $1.4 million projected prep. costs, but Bieber breaches, how much does Bieber owe in reliance damages?
(Reliance because ticket sales were too speculative–so is the $600,000 profit that would have come from them). Bieber must pay stadium owner $300,000–put him back as though the contract never existed.
Damages must be proven with (1).
- reasonable certainty
Restitution is related to (1) and seeks to avoid (2). Common in cases where there is a (3) and in cases where you cannot (4). It involves the BP returning money/costs to the NBP.
- quasi-contracts
- unjust enrichment
- discharge for impossibility of performance
- establish damages within reasonable certainty
Contract damages cannot be recovered unless (1) to the parties at the time of contracting–especially (2) damages!
- foreseeable
2. consequential
What was the conclusion in the Hadley v. Braxendale case (re: mill operator who had to suspend operation of a machine until he received a part which was late arriving)
Delivery company not responsible for consequential damages of money lost due to machine being down. Did not know operator would have to shut down machine until part arrived.
2 rules of consequential damages
- the court will impute foreseeability to the defendant as to those damages which any reasonable person would have foreseen whether or not BP actually foresaw them
- court will also award damages as to remote or unusual consequences but only if BP had actual notice of those consequences
payment to be made in the future must be made in present value
present value doctrine (e.g, employment contract breached = pay out in this year’s wages)
damages the party agree on in the contract
liquidated damages
3 features of liquidated damages
- set up in contract in events of breach
- must be reasonable
- does not require a court
(1) are never awarded in contracts because the courts just want to make contract parties (2).
- Punitive damages
2. whole
(1) is REQUIRED in seeking damages from a contract breach!
mitigation of damages
4 examples of equitable damages
- specific performance - make breaching party do what they said they would do (esp. for real estate)(never on labor!)
- injunctive relief - keep party from doing something (e.g., Justin Bieber playing another concert and making more money)
- action in replevin - return in personal property
- blue-penciling - make changes to contract to make fair/enforceable
3 conditions on the awarding of equitable damages
- money damages are inadequate to compensate NBP
- contract terms must be definite enough to allow the court to frame an adequate order
- court’s task for enforcing and supervising relief must not be unduly difficult
One example of an entity that uses liquidated damages (along with waiver) in their contracts is (1). They also use (2) so no direct lawsuits if hurt.
- cruise ships
2. independent contractors (for staff)
