Contracts II Review

Anticipatory Repudiation if clear and unequivocal o can sue them o can wait a commercially reasonable amount of time o can ask them to change their mind o can mitigate damages if reason to believe that the seller will not come through o can have adequate assurance Impossibility

4/25/2011 6:11:00 AM

if not responded to in reasonable time then can treat it as an anticipatory repudiation

once a K and somebodys performance is due, can they excuse that performance? actually show party in breach and why if in breach because they cannot perform, there is a possibility to excuse the contract, not unenforceable o can we excuse his performance? something that happens after the contract has been entered into and tell when the impossibility has arose (specific facts) unforeseen by the parties (subjective test) o almost infer facts from the fact pattern o ex: Sullivan Productions it was unforeseen murder suicide because people typically dont commit murder suicide and contracted with them with basis that they will be alive

has to be objectively impossible o no other person could perform that duty o looking at the contract o ex: ice breaking case, agreement was to deliver in bulk over the ice. o ex: suez canal casek not specific as to how they would get it there same prongs as impossibility except for the last one what can you get? o cannot sue on the contract because excusing the contract and no one is in breach o can only get restitution damages ex: garage case with Hotel Savoy o hotel bankrupt and garage brought suit against Hotel o frustrated purpose but cannot frustrate their own purpose

Frustration of Purpose

o garage chose to close down, not valid purpose argument Damages ultimate goal: put nonbreaching party in position they would have been in if the contract was executed properly Expectation o look at time of contract o foreseeable damages by the other party that they would actually end up incurring the damages ex: Hadley shank craft case reasonable person assume other shank crafts, but if actually knew then could argue for special damages ex: knock down wall, who was in breach? Sub kor or kor, kor got replacement damages, sub kor found in breach

o lost profit or cost of replacing somebody in breach

Reliance: put back to where they were before breached contract o if cannot calculate expectation o only if you partially perform ex: lawyer case, non breaching party and fully performed on the contract without payment of money, then you get expectation damages

o if too speculative, non breaching party, partial performance restitution if restitution > expectation, then go with restitution so breaching party does not get more in value than they contracted for o if no restitution damages and cannot figure out expectation, then can get reliance damages by relying on the contract itself Duty to Mitigate employer has the burden of proving that the employee could have found other work in the same field-high burden to prove o because show that there was a job that employee could have gotten incur expenses based on relying on the contact itself

if employee gets any job, this is mitigation for the time period for the contract talking about employee contract not at-will employment construction Contracts ex: Redding Pipe o immaterial breach by using other pipe

o if immaterial, then do not have right to cancel contract, get damages for difference in value ex: Peevy house o material breach, you promised to fill in the hole and broke the covenant o however, common law says in construction contracts, if the difference between or diminution in value and expectation damages is so great that it is unconscionable then only hold breaching party to diminution value Efficient Breach not a cause of action, but a policy doesnt take into account intangibles that cannot be calculated Restitution get on quasi-contract value of the benefit conferred or any unjust impoverishment to the nonbreaching party if nonbreaching party does something not worth to you but worth to them, then can use as restitution Specific Performance suing in equity because money damages are not sufficient hard to enforce specific performance o typically talking about a service if not hard to enforce o contract is definite and certain know what specific performance is o ex: purchase of real property because it is unique in its own way o ex: sale of original Andy Warhol painting, if you still have it and have not sold it to someone else allow because o expectation damages are not specific o allow parties to bargain for what they said they were going to do o ex: coal mine case continue working or receive a lot of money did not require specific performance because they said it was a bad economy with an overabundance of coal

usually a reasoning for enforcing Liquidated Damages Clause at beginning of contract, but if you are in breach, lets determine the damages now

not enforceable if it is a penalty allows parties to control their exposure to the risk avoids litigation costs allows parties to fashion a remedy based on a competitive market that they know best about intend to provide for damages or penalty o penalty not 4enforceable is the injury caused by the breach difficult or incapable of accurate estimation at the time of K? reasonable forecast of the harm caused by the breach o look at from the time of the contract-theoretically o is it reasonable when the breach happens-courts vies ex: if we dont do x amount, we will pay you for x amount regardless. o minimum guarantee clauses in Ticks case problem: found to be a penalty because to pay regardless and get windfall without accounting for their cost can be enforceable but have to be fair and reasonable

Limitation of Liability ex: burglar alarm case o negligence and because of their negligence they were robbed o in the K, said if we are negligence, we are only responsible upt to x amount Covenants not to compete courts do not like looking to why covenant not to compete o what business purpose? blue pencil rule o court will make rule 4reasonable o encourages a broad non compete clause no blue pencil o rejected by restatement o if not reasonable, kick out of the contract what is reasonable? if arguing for person who wants to keep clause, argue reasonable in time, geographic area, and subject o will have to infer facts o tell professor why ok, as long as not unconscionable and abuse of power unconscionable to the reasonable person

ex: tv case o 6mths. Compared to 2 yrs. o legitimate business purpose? No o couldnt contract any realty show with other tv stations o re-examine case Third Party Beneficiaries If at the time of King, we actually intend to benefit another person that is not in privity of contract, we are creating a third party beneficiary if third vests, he steps into the shows of that promisee of the contract o promisor to the third party beneficiary o has all the rights and subject to all defenses against the original promisee o if third and trying to sue on someone elses contract, third burden of proof to show is an intended third o ex: fox case does not matter if third had no notice of third status at the time of the contract

eventually need notice in order to vest intention determination o plain meaning in the contract o delegation of duties are creating a third you told someone to due something for someone else o look outside of the contract depends on the court could throw parol evidence in

ex. Vrooman v. Turner o assumes mortgage but person before not bound to mortgage that mortgagee is the third split enforcement

ex: Seaver v. Ransom o donee third can vest and jump into promisees shoes ex: Moch o be sure intended not incidental third party beneficiary o city and water company o water company negligent and resident not able to put out a fire resident is third but not intended

o look at public policy because dont want to hold utility companies to such a high degree of responsibility no one would want to do it o solution: resident gets fire insurance if specifically state intent, then third intended Payment bond issue Payment bond: insures that all sub contractors to that contract will be paid o Creates an intended third in all sub contractors Vesting Third If not vested, then original parties can change/modify the contract third requested to acknowledge that it is a third o because promisee wants to make sure that third is vested o ex: wife did not sign will of old man can still vest if he does not change it rely to detriment o reasonable reliance to believe that is third and could o ex: life insurance policy not reasonable dont know when someone would die when to vest---listen to recording

bring a cause of action o have to have one to bring o because original promisor of the contract is in breach prove why he is in breach o listen to recording

ex: Erickson o creditor beneficiary can go after the promisor or promisee third v. promisor o promisor can use any defense that promisee has against the third real defense fraud, misinterpretation, mistake, duress proisor said inducedi n k based on fraud not responsible to pay third because there is not contract breach of promisee in K, then promisor not have to pay third show promisee breach before talking about third getting anything from the promisor

o ex: Alexander Revell Once third vested o Two parties that created the contract cannot modify or rescind the contract because the third is jumping into the shoes of the promisee If promisor tries to get out of K with promisee, then third can sue for conversion against promisor if promisee tries to get out of K with promisor, then third can sue promisee for tortuous interference of contract promisee interrupting thirds contractual relationship with the promisor

if act not completed, can estopp them

promisees rights once third vests o does promisee have rights against promisor o ex: will

all heirs are third party beneficiaries and not negligent if violated RAP listen to recording Assignment and Delegation If assign, assign the rights and delegate the duties cannot if it changes the reasonable expectations of the other party delegation of duties are immediately creating a third o if it changes the obligations o ex: meagan fox, eric, joe, masseuse Meagan and joe contract cannot delegatee a personal service

is there a present assignment? o look to intent of the parties o entitle to this (I kept control over it, not assigned) v. I give you this (intent to give something) o assignee jumps in to the assignors shoes and assignor vests all rights If yes, is it operative Permitted

If it is operative, is it revocable? o One type of assignment, oral gratuitous assignment Delegations o Not permitted

Commercially reasonable, personal service ex: Mack just changing cans ex: Nexxus Case reasonable expectations that this person would actually exclusively sell our products in Texas 2-210 (5) promisee in that situation could demand assurances from the party o nexus could have asked sally for assurance that they were actually going to do when they said

o Revocable Only oral gratuitous assignment written is not revocable o if just say, Im assigning this right to you can revoke at any time o irrevocable if your given a written gratuitous is irrevocable but if some one in good faith comes later and takes for value priority over first written gratuitous could sue original assignor for conversion took away something from you and gave to someone else one paid, then second paid second paid not get but can sue promisor for breach of implied warranty first paid still gets the assignment

4/25/2011 6:11:00 AM

4/25/2011 6:11:00 AM