Contracts Excess

Front 1

Conditions--Definition(3)

Back 1

1. Specifies an event, not certain to occur, that must occur for a party's K obligation to become "due"

2. INdicative Language: "if", "on condition that", "contingent upon", ""provided that"

3. Can be express[agreed to by the parties--strict compliance necessary] or implied[supplied by court.]
-only substantial (not strict compliance with implied conditions is generally required)

Front 2

GR on conditions

Back 2

Condition must be completely +exactly performed and fulfilled--> close not good enough--strict compliance rule

--see Jungmann where notice via letter was not in compliance with the condition that it be noticed via cable

--Often increases the risk of forfeiture loss or harsh results

Front 3

GR on express conditions--exceptions

Back 3

1. Interpreting ambiguous language as a "non-condition"

2. Waiver of strict and literal condition fulfillment

3. Excuse of a condition

Front 4

Exception to GR-- Interpreting ambiguous language as a "non-condition"--requirements

Back 4

1. doubtful or ambiguous condition

2. "condition" outside the obligee's control

3. forfeiture would result if viewed as a condition

i.e. Peacock.

Front 5

Exception to GR--Waiver of strict and literal condition fulfillment--requirements

Back 5

If there are acts, conduct or words demonstrating intentional relinquishment of a known right, then must give reasonable notice to undo "waiver" conduct

BK--building extensions=waiver to insist on stirct compliance with condition.

Front 6

Exception to GR--Excuse of a condition

Back 6

1. Severe or disproportionate forfeiture would occur

AND

2. the condition is non-material or non-critical

Front 7

Conditions with Parties' control--i.e. Express condition on satisfaction of other's performance.

Back 7

--implied duties of GD and FD must determine whether to use objective or subjective standard

Front 8

Objective standard of reasonable satisfaction--i.e. GF and FD

Back 8

-preferred by courts-->acting reasonably in fulfilling condition.

Applied usually to where performance of K involves mechanical fitness or utility

Front 9

Subjective Test

Back 9

When the object of the K is to please the tastes or convenience of a person.

--Good faith test applies--> must be honestly albeit unreasonably dissatisfied. for reasons within the K.

Front 10

Term Implication--2 scenarios

Back 10

establishing terms (albeit implied)
1. Implied "Reasonable terms are omitted from the K

2. Implied duties of GF and FD in performing discretionary K's

Front 11

Signals/Signposts for Term Implication

Back 11

1. No term to interpret--omitted term

2. Meager or zero interpretation evidence or resources

3. Discretionary Language (GF and FD issue)

Front 12

First Scenario--Implied "Reasonable terms are omitted from the K--rule

Back 12

Courts will imply or supply a "reasonable" K term, which effectuates the intent of the parties' clear intent, if such implications do not contradict express terms.

AND the parties would have agreed to the term if it had in fact been brought to their attention

Front 13

Factors in implying a reasonable term

Back 13

1. main purpose of the K
2. community standards of fairness and policy
3. business efficacy--i.e using best efforts in exclusivity K [Lady-Duff Gordon]

Front 14

Second Scenario--Discretionary K terms--implied duties of Good Faith and Fair Dealing--General Rule--> Definition

Back 14

DF and FD are implied in every K
GF--honesty in fact in the conduct of the transaction AND (for merchants) observance of reasonable commercial standards of fair dealing in trade

Front 15

Common effect of implied duties of Good Faith and fair dealings

Back 15

to constrain discretion and reasons for action under discretionary term

A party can only exercise discretion and for "K permitted" reason i.e. no reason outside the K.

Front 16

Common Issue in "Discretionary" K Lawsuit

Back 16

was the flexibility and discretion exercised for K permitted reasons per GF and FD

Was discretion exercised improperly for reasons "outside the K?

Front 17

What if no discretionary terms?

Back 17

impied duties of GF and fair dealing appy to every K.

Front 18

Excuse Cases

Back 18

1. Impossibility or Impracticability Doctrine
2. Frustration-of-Purpose Doctrine

Front 19

Excuse--Impossibility or Impracticability Doctrine

Back 19

K subject destroyed, perished or not exist--supervening impracticability:

when after the K is made:

1. party's performance is made impracticable
2. without his fault by the occurrence of an event 3. the non-occurrence of which was a basic assumption on which the K was made ,

the duty is discharged

UNLESS

the language or circumstances indicate to the contrary

Front 20

Excuse--Frustration-of-Purpose Doctrine

Back 20

K subject exists, but changed state of affairs that may defeat the purpose of the K the non-occurrence of which was a basic assumption on which the K was made ,

the duty is discharged

UNLESS

the language or circumstances indicate to the contrary

if:

1. a party's principal purpose is substantially frustrated by the occurrence of an event

Front 21

Excuse Cases

Back 21

1. Impossibility or Impracticability Doctrine
2. Frustration-of-Purpose Doctrine

Front 22

Excuse--Impossibility or Impracticability Doctrine

Back 22

K subject destroyed, perished or not exist--supervening impracticability:

when after the K is made:

1. party's performance is made impracticable
2. without his fault by the occurrence of an event 3. the non-occurrence of which was a basic assumption on which the K was made ,

the duty is discharged

UNLESS

the language or circumstances indicate to the contrary

Front 23

Excuse--Frustration-of-Purpose Doctrine

Back 23

K subject exists, but changed state of affairs that may defeat the purpose of the K the non-occurrence of which was a basic assumption on which the K was made ,

the duty is discharged

UNLESS

the language or circumstances indicate to the contrary

if:

1. a party's principal purpose is substantially frustrated by the occurrence of an event

Front 24

Party's non-performance excused if

Back 24

1. event or circumstance makes performance a. impracticable or impossible or b. substantialy frustrates principal purpose o the K

2. the even or circumstance is not his fault

3. parties made K on basic assumption that event or circumstance would not have occurred

4. neither K language nor circumstances shift risk of event or circumstance to that party

Front 25

Compensatory Damages--Elements and formula for calculating

Back 25

-General Damages
-Incidental Damages
-Consequential Damages-->Reasonable certainty and Forseeability are key factors

Formula=[loss in value] + incidentals and consequentials - expenses/costs saved (by not having to perform)

Front 26

Compensatory Damages--Limitations(4)

Back 26

1. Alternative Damage Measure(Construction Contracts)
2. Avoidability of Loss and Mitigation
3. Reasonable Certainty of Loss
4. Forseeable Loss

Front 27

Compensatory Damages--Limitations--Alternative Damage Measure(Construction Contracts)

Back 27

If breach results in defective or unfinished construction and there is no reasonable certainty as to pltf's loss damages can be measured by:

1. Diminished Value Rule
2. Cost of Performance/Repair Rule

Front 28

Compensatory Damages--Limitations--Alternative Damages--Diminished Value Rule

Back 28

diminution in the market price of the property

Front 29

Compensatory Damages--Limitations--Alternative Damages--Cost of Performance/Repair Rule--definition and exception

Back 29

Reasonable cost completing performance or remedying defect, unless

the cost of performance greatly exceeds the economic benefit to pltf, then
he may only recover damages equal to the economic loss

Front 30

Compensatory Damages--Limitations--Avoidability of Loss and Mitigation--when [not] recoverable

Back 30

Damages are not recoverable for loss that could have been avoided without undue risk, burden or humiliation.

Damages recoverable if injured party makes reasonable yet unsuccessful efforts to avoid loss

Front 31

Compensatory Damages--Limitations--Avoidability of Loss and Mitigation--Define--Reasonable Efforts

Back 31

duty to seek substantially similar/comparable
opportunities-->No duty to seek opportunities that are different or inferior in kind

AND

Duty to accept such opportunities, if found-->no duty to accept opportunities that are different or inferior in kind

Front 32

Compensatory Damages--Limitations-Reasonable Certainty of Loss--

when are damages [not] recoverable

Back 32

Damages NOT recoverable for loss that cannot be established with a reasonable certainty

Front 33

Compensatory Damages--Limitations-Reasonable Certainty of Loss--

Define Reasonable Certainty

Back 33

not 100% certainty
there must be a reasonable basis of computation that leads to fair and reasonable approximation of damages

Front 34

Compensatory Damages--Limitations-Forseeability of loss

when are damages [not] recoverable

Back 34

Damages are NOT recoverable for loss that were not forseeable as a result of the breach by the breaching party

Damages are recoverable for loss that was a forseeable result of the breach by the breaching party.

Front 35

Compensatory Damages--Limitations-Forseeability of loss

Define forseeability--2 elements

Back 35

A loss is forseeable as a probable result of a breach if:

1. follows naturally and in the "ordinary course of events" of the breach

OR

2. follows from "special circumstances" (beyond ordinary course of events) that had actually been communicated to both parties.

Front 36

Compensatory Damages--Elements--Consequential Damages--emotional disturbance

Back 36

Key factors are Reasonable Certainty and forseeability
-cannot recover for emotional disturbance unless the breach:

caused bodily harm

OR

was of such nature that emotional disturbance would be a likely result

Front 37

Reliance Remedies--definition

Back 37

reimbursement for loss caused by reliance on the K; make Pltf whole as if K had never been made

Front 38

Reliance Remedies--what damages are covered

Back 38

1. reimbursement and recovery of expenses and expenditures made in preparation for performance or in performance
2. Recovery of lost opportunities and profits i.e. forbearance

Front 39

Restitution Remedies--Definition

Back 39

place Pltf in position he would in before the K was made by relinquishing conferred benefit (i.e. specific item or its value) that led to unjust enrichment

Front 40

Restitution Remedies--what damages are covered?

Back 40

reasonable value to the other party of what he received based on what it would have cost him had he been in the other's position

OR

extent to which the other party's property value has increased or his other interests have advanced

OR

Front 41

Security Principle

Back 41

Each party to K formation or performance has an obligation not to impair the other party's expectation interest in receiving future performance.

Front 42

How expectation in future performance is "impaired"

Back 42

1. Anticipatory Breach
2. Material Breach

Front 43

Constructive Conditions of Exchange Doctrine

Back 43

Where each party makes one or more promises to the other, each party's substantial performance of his promise is generally a constructive condition to the performance of any subsequent duties by the other party

Bilateral K: If Party A Anticipatorily repudiates or materially breaches--> generally, Party B's duties under the K are discharged because the constructive condition is not fulfilled.

Front 44

Simultaneous Performances--concurrent conditions

Back 44

each party's duty to perform is constructively conditioned upon the other's manifestation of a willingness to perform-->offers to perform with a present ability to do so

Front 45

Anticapatory Repudiation: Definition[s]

Back 45

1. Statement [by promisor] that he intends not to perform--not enough to express vague doubts--which may entitle the other party to request assurance of performance
2. Action [by promisor] making party unable or seemingly unable [impossible] to perform

3. indication [by the promisor] or by some other means that he will be unable to perform even if he desires to perform.

Front 46

Anticapatory Breach--When a statement constitutes...

Back 46

Statement [by promisor] that he intends not to perform--not enough to express vague doubts--which may entitle the other party to request assurance of performance

Front 47

Effect of Antic. Repudiation--

Back 47

1. breach of K

AND

2. breach of non-satisfied constructive condition that discharged the other party from its K promises/duties. -->discharges non-breaching party's duties under constructive conditions doctrine.

Front 48

Retraction of AB--

Back 48

Retraction is timely and effective if non-breaching party receives notice prior to :

1. materially changing its position in reliance on repudiation

2. indicating that it considers the AB to be final.

Front 49

AB--Right to Demand Adequate Assurance

Back 49

There must be:
1. Reasonable grounds for insecurity i.e. reaosnable grounds to believe that the other party will breach by non-performance--vague doubts e.g.

May only demand adequate assurance of due performance-->can't rewrite the K with demands

Failure to provide properly demanded adequate assurance= repudiation

see PDM steel. Co.

Front 50

Time for Marking Damages for Breach by AR

Back 50

1. Buyer's "non-cover" damages formula
Damages=(Mkt Priceat time when seller learned of breach)- (K price)

Buyer's "Cover" damages formula:

If in GF without reasonable delay...
Cover Price + incidentals/consequentials - [K price + expense saved as a consequence of the seller's breach]
2. If AB by seller: the Mkt price is "marked" and buyer deemed to have learned of breach:

-"at a commercially reasonable time after repudiation"
see cosden oil

Front 51

AB--Considering the Breaching Parties' interest despite the breach

Back 51

-Breaching party's interest are not wholly unprotected--entitled to restitution damages--(quantum meruit or unjust enrichment)--for benefits conferred if in excess of loss caused by breach.

Front 52

MB--relationship bt MB and substantial performance

Back 52

if MB--no substantial performance
if non MB--substantial performance occurred

Front 53

Effects of Breach/MB

Back 53

Breach-->claim for money damages
MB-->remedial right to cancel K & discharge K duties per constructive conditions doctrine

Front 54

Tests for determining MB--5

Back 54

no single touchstone--many factor involved:
1. Extent to which non-breaching party will obtain its anticipated "substantial benefit"-->i.e. essential purpose of the K test

2. Extent to which NB party can be adequately compensated in damages(rather than allowing cancellation)

3. Extent of hardship (or forfeiture) on breaching party

4. Culpability or GF of BP

5. Certainty or likelihood that BP will perform the rest of K (cure for non-performance)

Front 55

MB--Divisible or Severable K's--Partial Performance--Definition of Divisible

Back 55

Divisible K--"several and distinct items" with a price "apportioned to each of them
i.e. construction K's(sometimes) and service K's

Front 56

If K divisible...effect

Back 56

MB as to some non-performed parts do not discharge the duties as to those parts that have been performed

Front 57

If K is not divisible

Back 57

MB discharges duties under the K