Contracts Ii Final Exam

Front 1

What is Misrepresentation and how is it induced?

Back 1

1. An assertion not in accordance with the facts
2. Induced by either:
>fraudulent misrepresentation, or
>material misrepresentation
3. If Misrepresentation is induced, the K is voidable

Front 2

With regards to Silence as Fraud, when does a party have the duty to disclose a fact?

Back 2

Duty to disclose when
1. the fact is Material to the transaction
2. The party with knowledge of fact the fact knows that the other party is about to enter into the transaction under a mistake as to the fact
3. the fact is peculiarly and exclusively within the knowledge of one party, and the mistaken party could not reasonably be expected to discover it
4. On account of the onjective circumstances, the mistaken party would reasonably expect disclosure of the fact

Front 3

What are the elements a plaintiff must show to prove Silence as Fraud by the other party?

Back 3

1. There was a Duty to Disclose a Fact
2. There must be justifiable reliance upon a misrepresentation, mere failure of the duty to disclose is not enough
3. Reasonable inspections by other party not revealing conditions for which they had a duty to disclose constitutes fraudulent nondisclosure

Front 4

What is the difference between Fraudulent Misrepresentation and Negligent Misrepresentation?

Back 4

>Fraudulent Misrepresentation is an assertion made w/ knowledge that it is false (deliberate lie) and w/ the intention of inducing the other party's agreement
>Negligent Misrepresentation is when the misrepresentation is not a deliberate lie, but reflects genuine, albeit erroneous, belief by the party making the assertion (could be innocent)
> A misrepresentation is negligent if the person making it failed to act w/ reasonable care in ascertaining and communicating the truth, but it is innocent if no such duty was breached

Front 5

What are the remedies for Fraud?

Back 5

1. Avoidance, claim rescission
2. Restitution can be claimed by any party who has performed any or all
3. Damages - differences between actual value of the performance and the value it would have had as represented
4. Remedy of rescission and restitution is derived out of K law but the remedy of damages has its roots in tort
5. Punitive damages may be available, including in rescission

Front 6

What is the difference between Fraud in the Inducement and Fraud in the Factum?

Back 6

-FiI is a fraudulent misrepresentation concerning a fact that forms the basis of the K, giving the party to whom it is made a false incentive to enter it

-FiF means the P actually is fraudulently convinced that the K being signed is for something else [renders K void]

Front 7

What are the elements of Duress?

Back 7

1. Improper threat which
2. induces the apparent assent
3. leaving the victim w/ no reasonable alternative

Front 8

What must be evident to show that Duress by Physical Compulsion prevented the formation of a Contract?

Back 8

-If conduct that appears to be manifested of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent

Result: The K is void as there was never a manifestation of assent

Front 9

What is the CL rule regarding Supervening Difficulties and contract modification?

Back 9

1. Post-K, unanticipated difficulties, which are substantial and burdensome may arise
2. party benefitting must conform to standards of honesty and fair dealing (no duress), and
3. the change must be reasonable and manifestly fair in view of the changed conditions (proportional)

Front 10

What are the underlying principles of Contract Modifications under UCC Article 2?

Back 10

1. No consideration needed to be binding
2. Cannot modify or rescind prior signed agreement which excludes modifications
3. SoF must be satisfied

Front 11

What is Undue Influence and what is the factors to be met for relief?

Back 11

UE occurs when duress was not present, but one of the parties had a particularly strong influence over the other and abused this position of dominance to persuade the subservient party to enter a disadventageous K

Relief
1. P had relationship of dependancy, and believed the dominant party would not act contrary to P's interests
2. the dominant party improperly abused this position of trustthrough unfair persuasion to get P to enter K

Front 12

What are the elements of Unconscionability and how is it applied between sophisticated parties?

Back 12

Elements:
1. The transaction must exhibit both bargaining unfairness (procedural unconscionability) and
2. resulted in unfair or oppresive terms

Between sophisticated
>businesses, mere disparity of bargaining power is not enough to constitute unconscionability
>Must look to whether power was abused and will imposed [not whether one party is more powerfull/sophisticated]
>This K considered K of Adhesion - b/c weaker party is seen to have adhered w/o choice to terms dictated

Front 13

What are the 4 circumstances other than improper bargaining that require contract policing?

Back 13

1. Illegality
2. K Violating Public Policy
3. Incapacity through Minority
4. Mental Incapacity

Front 14

What is Illegality?

Back 14

when a contract contravenes a statute or rule of CL

In Pari Delicto sometimes applied

Front 15

Under what circumstances will a court allow severance of a K?

Back 15

When the offending clause does not go to the essence of the agreement and if the parts of the agreement are still supported by consideration and can remain enforceable w/o the offending clause

Front 16

What is the purpose of the Rule of Reason and when may it be applied?

Back 16

RoR - absent a statute, seeks to achieve a balance between firm's economic interests and public policy

Front 17

What is the "As Applied" Analysis?

Back 17

simply looks at what is being claimed and asks if it violates public policy to avoid, contractually, the actual liability being claimed

Front 18

What is the legal definition of Incapacity?

Back 18

A lack of ability to have certain legal consequences attach to one's actions

Front 19

What are some situations that may cause a minor to be held legally liable for contract obligations?

Back 19

1. K for necessaries
2. Minor emancipated
3. Misrepresentation of age by the minor

Front 20

When may a minor disaffirm a contract?

Back 20

any time before reaching the age of majority, or w/in a reasonable time thereafter

Front 21

What are the 2 tests the court may look to in determining a party's mental capacity and what do they require?

Back 21

1. Cognitive Test - requires that at the time of contracting, the party was unable to understand the nature and consequences of the transaction
2. Motivational Test - 1) recognizes the cognitive disorders as well as, 2) an illness or defect that impairs the party's ability to transact in a reasonable manner

Front 22

Who holds the Burden of Proof when a party alleges incompetancy?

Back 22

BoP rests on the alleged incompetent party to prove the disabling mental condition

Front 23

What is the general rule regarding Mental Incapacity, and what is the exception?

Back 23

General Rule: Even when a K is avoidable, that restitution must be paid for what is lost which contrasts with the general rule for minors when lost collateral is at issue
Exception: When contracting party knew or should have known of the mental incapacity, it is not entitled to restitution based on what the terms lack in good faith

Front 24

What is the remedy for Mental Incapacity?

Back 24

Avoidance
• If the K is avoided, the parties must be restored to the status quo ante
• If other party knowingly took advantage of the incapacity, the victim may be excused from paying back the extent of the benefits received thus far

Front 25

What elements must be met for a contract to fail on Indefiniteness?

Back 25

1) There is an incurable uncertainty about what the parties agreed to, and
2) that uncertainty relates to a material aspect of the relationship
General Rule: i) no K comes into being if a material aspect of the agreement is left indefinite by the parties, and ii) the uncertainty cannot be resolved by the process of interpretation or construction

Front 26

What are the different forms of Indefiniteness?

Back 26

1) A term is Vague if stated obscurely in general language so that meaning undeterminable
2) A term is Ambiguous if it is capable of multiple meanings
3) Omitted terms are evident where a gap is in the agreement regarding particular aspect of the relationship
4) Unresolved Terms, unlike vague or omitted terms, occur when the parties have raised an issue in their agreement but have not settled it yet; leaving it for resolution at a later date

Front 27

What are the 4 sources of a contract the court looks to for interpretation?

Back 27

1) Express Terms: the wording of the term in dispute must be read into the document as a whole
2) Course of Performance: the parties conduct in performing the K after formation
3) Course of Dealing: the parties conduct in prior comparable transactions with eachother
4) Trade Usage: the customs/usages of the market in which they are dealing w/ each other

Front 28

In interpretation of written agreements, what may the court look to?

Back 28

• Four Corners Approach – if the words of the K are clear on their face, interpretation is not a question of fact, but of law, and the words should be given their plain meaning, without recourse to contextual evidence [Basically looks for meaning within the four corners of the document
• Courts may admit and evaluate contextual evidence relating to meaning, even though the language appears clear on its face [because where words may have a fixed meaning, contextual evidence could show that parties intended the meaning to be different than what the ct. interprets]

Front 29

What test do courts apply to interpret standard contracts?

Back 29

Courts will apply the Reasonable Expectations Test to overcome the express language of the K by looking at:
1) the relationship between parties over the years,
2) other instances of policy being invoked and paid
3) trade usage
31. When ascertaining the meaning of a contract who typically interprets it and who will use construction for it?
• Interpretation is a factual process, the general approach should be that the factfinder (the jury, unless being tried without one) must ascertain meaning after evaluating all pertinent evidence
• Construction is the process of supplying meaning as a matter of law, this is a legal question for the judge

Front 30

When a contract fails on an expressed term the courts typically utilize gap fillers, what are they and what do the courts look to in determining them?

Back 30

• A gap filler is a provision legally implied into a K to supplement or clarify its expressed language [standard terms supplied by law
• Courts look at:
a) Course of Performance
b) Course of Dealing
c) Trade Usage

Front 31

UCC §§ 2-314 and 2-316 state when goods shall have implied merchantability in their contract. When and how is this done?

Back 31

• a warranty that the goods shall be merchantable is implied in a K for their sale if the seller is a merchant with respect to goods of that kind [3-314]
• to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be in writing and conspicuous [3-316]
a) Unless indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty, and
b) When the buyer before entering into the K has examined the goods as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him

Front 32

What is the general opinion of courts concerning no-cause termination clause?

Back 32

• Ct. characterizes clause as a no-cause termination clause – finding that there is no duty of “good faith” in such a clause as the K can be terminated for good cause or for no cause at all
• Ct. notes that a company cannot operate in “bad faith” with regards to no-cause termination clauses – to prevent “opportunistic advantage-taking

Front 33

What are the 3 areas where the Parol Evidence Rule may be applied?

Back 33

1) Where a K is fully integrated, no PE may be introduced to augment the K
2) If a K is partially integrated, PE can be used to supplement the writing BUT NOT to contradict it
3) If a writing is unclear or ambiguous, PE may be used to clarify the writing, BUT NOT to contradict what is clearly set forth by the writing

Front 34

When does the Parol Evidence Rule Apply?

Back 34

The Parole Evidence Rule applies where an agreement is recorded in writing and one of the parties proffers evidence to prove a term that is not contained in the writing or to explain or expand on a term in the writing

Front 35

What are the 2 stages for a court to evaluate parol evidence?

Back 35

1) The judge decides the admissibility as a matter of law
2) If the evidence is admitted, the factfinder evaluates its credibility

Front 36

What are the 2 Approaches to Parol Evidence?

Back 36

1) 4 Corners Rule [Plain Meaning Rule]: if there is no ambiguity or indication that the K was to be supplemented on the face of the writing then PE is not allowed
2) “Contextual Approach”: to determine if a K is partially integrated or a term is ambiguous, courts should look outside the K in making this determination – should allow in evidence that would not “mislead” a fact-finder
a) Ct. entertains extrinsic evidence that may be helpful in revealing
b) That an apparently integrated writing was in fact not intended as such

Front 37

What are 2 issues that may mislead the factfinder?

Back 37

1) Evidence of an agreement
2) Terms that would certainly been included in the document

Front 38

What is Traynor’s view concerning Parol Evidence and how does he ascertain its application?

Back 38

1) Treats the judge as the “gatekeeper” for what evidence will go forward
2) Everything should be considered in context
3) 4-Corners Rule avoids this by not even considering the evidence

Front 39

What does the UCC establish for Parol Evidence?

Back 39

1) Terms with respect to 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 agreement with 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 [fully-integrated]
2) 2-202(a) – specifically permits an otherwise integrated agreement to be supplemented by evidence of CoD and TU
3) UCC 2-202 differs from CL in that CoP, CoD and TU can come in even if a K is fully integrated

Front 40

What is the difference between a Merger Clause and an Integrated Clause?

Back 40

• Merger Clauses evidenced that the K was fully integrated and the court would not allow parole evidence to try and prove that the K was not fully integrated
• Fully Integrated K: cannot allow in extrinsic evidence to supplement defense

Front 41

The Parol Evidence Rule has restrictions on what is admissible in court, there are exceptions however. What are they?

Back 41

1) Evidence will not be excluded if it is for a valid voidable defense [Example: Fraud, Duress, etc.]
2) PE is admissible to show that a fact recited in writing is false
3) PE admitted to show that the agreement was subject to a condition

Front 42

When there is Misunderstanding, Mistake or Changed Circumstances, there are two primary questions surrounding these problems. What are they and why do courts look to them?

Back 42

1) Materiality – How fundamental is the discrepancy between the expected and the actual exchange?
a) Question is concerned with the impact of the mistake or altered circumstances on the bargain reasonably anticipated by the parties
b) Relief is only available when the impact is so material that it changes the very basis of their bargain
2) Risk – Which party should be made to bear the consequences of this defeat of the original expectations?
a) The fact that the original expectations have been fundamentally upset only justifies relief is the party seeking it does not bear the risk of this upset
b) The allocation of the risk may be clear from the terms of the K, or it may have to be established by interpretation from the circumstances of the transaction

Front 43

What is the difference between Misunderstanding and Mistake?

Back 43

• Misunderstanding: relates to the meaning parties attach to words in a K
• Mistake: relates to the parties beliefs about the factual circumstances underlying the K as they exist at the time of contracting, summarized as…
a) Errors in fact, or
b) Errors about some thing or event that actually occurred or existed and can be ascertained by objective evidence

Front 44

What are the 5 elements of Mistake?

Back 44

1) A mistake relates to facts in existence at the time of the K
2) the mistake is shared by both parties
3) the mistake relates to a basic assumption on which the K was made
4) the mistake has a material effect on the agreed exchange of performances and
5) the complaining party did not bear the risk of the mistake

Front 45

What is the relief for Mistake?

Back 45

• The principle remedy for mistake is avoidance of the K at the instance of the mistaken party
• If the mistake is mutual, the parties share the error [if both parties wish to avoid the K, it can simply be rescinded by agreement]
• Avoidance brings the K to an end and both parties must restore any benefit resulting from performance that was rendered prior to termination
• Otherwise, restitution must be made

Front 46

When there is a Mutual Mistake, who bears the risk of loss?

Back 46

RSTM 2d: A party bears the risk of mistake when
a) the risk is allocated to him by agreement of the parties, or
b) he is aware, at the time the K 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

Front 47

What is a Mistake of Expression and what will the courts do typically in resolving it?

Back 47

1) Where each party agrees to what the terms are but it is transcribed wrong into the K – this is simply a mistake in expression (rather than a true mistake of fact) and in such cases courts will reform, rather than rescind, the K to reflect the true intentions of the parties
2) But – things can get complicated when the mistake is an omission – is this mistake in expression or mistake in fact? ANSWER THIS

Front 48

What is the difference between Mistake, Impracticability, and Frustration of Purpose?

Back 48

1) Mistake applies when the K is based on an erroneous belief at the time of the contracting that certain facts are true [that error causes both parties to manifest assent that would not have been given had the true facts been known]
2) Impracticability & Frustration are concerned with the impact of supervening events on the transaction [NOT focused on defect in assent at time of contracting, but aim to provide relief when the basis of a fully consensual transaction is profoundly altered by some external event that occurs afterwards]

Front 49

How is Impracticability and Frustration of Purpose similar, and how do they differ?

Back 49

• Both focus on circumstances that have unforeseeably (within reason) changed; supervening events
• Where, after a K is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which the K was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary
• With FoP the performance is not impracticable but the principle reason for contracting has become “substantially frustrated” which is distinct from the problem of impracticability because there is no impediment to performance by either party

Front 50

In looking to the components of a contract, what is the nature of a Condition and a Promise?

Back 50

• Condition: An event, not certain to occur, before performance under a K becomes due
• A Promise can exist, such as the promise to pay the insured’s claim once all of the conditions are met, that is not a further condition in the K – it is a pure promise

Front 51

What are the general differences between Condition Precedent and Condition Subsequent, and what is the burden of proof differences?

Back 51

• A Condition Precedent is an event that must occur before the contractual duty becomes due
• A Condition Subsequent discharges a duty that is already in existence
• A condition precedent must be proved as an element of the claim by the party alleging the breach
• A condition subsequent must be proved as a basis for excuse by the party denying the breach

Front 52

What is one example of both Condition Subsequent and Condition Precedent?

Back 52

• Condition Precedent – “Buyer’s duty to pay the purchase price is conditional upon a building permit issued by the county”
• Condition Subsequent – “Buyer’s duty to pay the purchase price is excused if a building permit is not issued by the county”

Front 53

What are the differences between Expressed and Implied (Construed) Conditions?

Back 53

• Express Conditions: states that performance is conditional

Front 54

What is the difference between a Pure Promise and a Promissory Condition?

Back 54

• A pure promise can exist, such as the promise to pay the insured’s claim once all of the conditions are met, that is not a further condition in the K
• The promise to pay a premium by the insured is a promissory condition – the insured has both promised to pay (it is not optional) and it is a condition of the insurer’s performance

Front 55

What are the 4 Uses for Conditions in contracts?

Back 55

1) As an escape clause
2) As a satisfaction clause
3) To allow for alternative performances
4) As a way of sequencing performances such as with the construction K

Front 56

What is the Default Rule for using conditions to Sequence Performances?

Back 56

• Default Rule – if no sequence is laid out in the K, courts will assume the obligations are concurrent assuming they can be performed simultaneously (ex. C.o.D.)
• Caveat – this rule is displaced where one performance is capable of being completed instantaneously, such as payment, while the other will take some time, then the latter is assumed to be sequenced before the payment

Front 57

What are the 4 ways to avoid enforcement of performance of a condition and what is the legal definition of each?

Back 57

1) Waiver: a knowing and voluntary abandonment of a right which may be made expressly or implied from words or conduct [Generally only applies to nonmaterial conditions]
2) Estoppel: operates where the beneficiary of a condition indicates by words or conduct that he will perform the contingent promise despite non-fulfillment of the condition
3) Obstruction/Uncooperative Conduct
4) Unfair Forfeiture: Operates to excuse a condition where the party asserting non-fulfillment is behaving inequitably by relying on a technicality to decline a conditional performance

Front 58

What is the difference between Material Breach and Non-Material Breach?

Back 58

In determining whether a failure to render or to offer performance is material, the following circumstances are significant:
a) the extent to which the injured party will be deprived of the benefit which he reasonably expected
b) the extent to which the injured party can 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, taking account of all the circumstances including any reasonable assurances;
e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing

Front 59

What is the measure of relief available for a party who has done Substantial Performance?

Back 59

1) The proper measure of relief for substantial performance is the loss suffered by the victim on not obtaining exactly what was bargained for
a) commonly the cost of achieving K completion, or
b) of rectifying the defective performance
2) Recall in Jacobs that the ct. refused to grant this remedy and instead awarded the difference in market value of the defective performance
3) THIS IS EXCEPTION – only applied where the breach was not willful or material and the cost of rectifying the damages would amount to economic waste (grossly out of proportion to the harm)

Front 60

What does the court look to for Divisible Contracts?

Back 60

1) Language and structure of the K,
2) its purpose,
3) the manner in which it provides for performance, and
4) the circumstances of its execution

Front 61

What are the buyer’s rights, under the UCC, regarding Improper Delivery?

Back 61

UCC 2-601: Buyer’s Rights on Improper Delivery
1) Subject to the provisions of this Article on breach in installment contracts (Section 2-612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2-718 and 2- 719), if the goods or the tender of delivery fail in any respect to conform to the K, the buyer may
a) reject the whole, or
b) accept the whole, or
c) accept any commercial unit or units and reject the rest

Front 62

When does the seller have the Right to Cure for improper tender or delivery under the UCC?

Back 62

The Seller’s Right to Cure
1) UCC § 2-508. Cure by Seller of Improper Tender or Delivery, Replacement
a) Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then w/in the K time make a conforming delivery
b) Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or w/o money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender

Front 63

What is Anticipatory Repudiation?

Back 63

UCC 2-610: Anticipatory Repudiation
1) When either party repudiates a K with respect to a performance not yet due the loss of which will substantially impair the value of the K 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 K notwithstanding breach or to salvage unfinished goods (Section 2-704)
2) Both of these provisions allow the injured party to withhold performance and gives that party a claim for damages for total breach

Front 64

What is the primary goal of Contract Remedies?

Back 64

• The primary goal of K remedies is to place the aggrieved party in as good a position as they would have been in had the breaching party performed
• However, sometimes the aggrieved party wants to be placed in the position it would have been had the parties never entered into a K in the first place
• Money Damages is the most common award

Front 65

What is the distinction between Expectation, Reliance, and Restitution Interest?

Back 65

RSTM § 344
• His “expectation interest,” which is his interest in having the benefitof his bargain by being put in as good a position as he would have been in had the K been performed,
• His “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the K by being put in as good of a position as he would have been in had the K not been made, or
• His “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party

Front 66

What are the components of Expectation Damages?

Back 66

1) Direct – damages to compensate for the loss of the value that would have come directly from the K itself
2) Indirect Losses – 2 Types
a) Incidental Damages: costs of coping with the breach, such as the costs of inspecting the defective performance or the costs of arranging substitute performance
b) Consequential Losses: those that relate not to the value of the K itself but instead arise as a consequence of the breach
3) Lost Profits – (tricky term) can mean a direct damage, but is more often referred to as a consequential damage

Front 67

What are the 3 limitations on recovering Expectation Damages?

Back 67

1) Damages must be reasonably certain
2) Must be foreseeable
3) Aggrieved party has duty to mitigate

Front 68

What are the buyer’s remedies under the UCC, the measures, and the rule that is applicable?

Back 68

1) 2 Basic Measures
a) Cover
b) Market Rate
2) A buyer that elects cover cannot then proceed under a market theory of recovery
3) Perfect Tender Rule applies
a) Buyer cannot use its own inventory as “cover” – not a subsequent purchase
b) “Opportunity Costs” – Posner states the purpose is to put the aggrieved party in the position they would have been in had the other party not breached
c) The Market Approach accomplishes the “opportunity costs” goal in this case

Front 69

What are the seller’s remedies under the UCC?

Back 69

Similar to buyer, seller can
1) resell and recover damages (Section 2-706),
2) recover damages for non-acceptance (Market Rate

Front 70

What is a “Lost Volume” Seller, and what 2 inquiries are made to determine this?

Back 70

• “Lost Volume” Seller – What is the lost profit?
a) The concept of profit would normally also include a deduction for some proportion of the overhead but the code says we get to include that in our profit margin
b) So to get the profit we merely have to deduct the direct costs from the KP
c) NOTE – we don’t have to worry about all of the details that are fixed costs such as rent, utilities and employee salaries
• 2 Inquiries
a) Would there have been 2 sales instead of just 1

Front 71

What are some assertions regarding Certainty of Damages?

Back 71

• Burden of Proof [BoP] on party seeking relief
• Direct, as opposed to consequential damages, tend to be slightly easier to prove

Front 72

What are the standards of proof for Consequential Damages?

Back 72

• Standard Direct Damages – when existence of damages is certain, the plaintiff must show a stable foundation for a reasonable estimate
• Standard for Consequential Damages – Not only must the claimant prove the fact of loss with certainty, but the “loss must be ‘reasonably certain in amount’” In other words, the damages may not be merely possible speculative or imaginary but must be reasonably certain and directly traceable to the

Front 73

With regards to “Cover” what are the requirements that are often disputed?

Back 73

• Whether the new K was entered into in good faith, without reasonable delay and
• Whether the sub transaction was reasonable

Front 74

When there is foreseeability of damages, what are the 2 categories of expectation damages?

Back 74

• Damages which may be fairly and reasonably considered arising naturally from the breach of K itself, or
• those that may reasonably have been supposed/contemplated by both parties at the time they made the K due to special circumstances

Front 75

What is the Mitigation Principle and how is it be asserted?

Back 75

• A affirmative defense raised by the Δ and is a limitation on the π to receive damages
• Not a true duty and only requires reasonable efforts

Front 76

Where does the UCC stand with regards to Mitigation of Damages?

Back 76

1) 2-710 & 2-715 govern incidental damages
2) Both require the damages incurred be reasonable (or commercially reasonable) which is the nod to mitigation in the UCC
3) UCC 2-715 Mitigation of Damages – Governs consequential damages by
a) applying both foreseeability and mitigation standards in its language
b) incorporates neither BUT only applies to injuries to personal property that are proximately caused by breach

Front 77

What is Reliance Interest?

Back 77

RSTM § 344 – the interest in “being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been in had the K not been made

Front 78

What is the difference between Incidental Reliance Costs and Essential Reliance Costs?

Back 78

• Incidental Reliance Costs – costs incurred in preparing to take advantage of the benefits to accrue under the K
• Essential Reliance Costs – costs the disappointed party incurs in preparing to perform under the K

Front 79

When expectation damages are inappropriate, what alternative can the plaintiff recover and why?

Back 79

• Reliance Damages
• Under Reliance Theory, P could recover money spent in reliance on K including first two surgeries (contrast expectancy) and money paid to parties other than the breaching party (contrast restitution)
• The goal of reliance damages is to put the plaintiff back in the position they would have been occupied prior to the entering into the K and to compensate for the detriments he suffered in reliance upon the agreement

Front 80

What might the breaching party assert under the RSTM 2d when the contract was doomed to fail and is this difficult to show?

Back 80

• Reliance damages in a losing contract
• RSTM § 349 includes an out for the breaching party to reduce the recovery by the amount the K would have lost had it gone forward
• This is not as easy as it seems, as it is the breaching party that has the burden of proving the amount lost with reasonable certainty

Front 81

What remedy is an alternative to expectation or reliance damages, how is it measured, and what are its limits?

Back 81

1) The alternative, Restitution, typically requires the disgorgement of the benefits received by the breaching party is restitution
2) Measurement of Restitution
a) The measurement is to be based on the net benefit received by the breaching party
b) Restitution is Measured Using:
i. market measure
ii. K price as evidence
iii. extent to which the breaching party has been enriched – but this may also take into account subjective as well as objective value
c) In choosing a measure, courts may take into account a number of factors such as the egregiousness of the breach, and the relative benefits conferred – but there is no one right clear way
A. Limits on Recovery of Restitution
1. Limited where the non-breaching party has fully performed and all that is left is for the breaching party to pay – in such a case, rather than look to the benefit conferred, courts choose to award the K amount to be paid

Front 82

85. What does the RSTM state regarding Liquidated Damages and Agreed Remedies?

Back 82

RSTM §356 – Liquidated Damages and Penalties
Damages for breach by any party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty

Front 83

What is the general rule regarding damages for pain, suffering, and emotional distress?

Back 83

• Generally recovery of noneconomic damages such as pain and suffering is not allowed
• Under narrow circumstances, however, courts will recognize a claim for such damages as a consequence of the breach where
a) the nature of the K makes Emotional Distress [ED] particularly likely, and
b) where the nature of the breach makes ED particularly likely
• Where the Nature of the K makes ED Particularly Likely - Typically involves contracts of a highly personal nature, such as with funeral services

Front 84

What do the courts look for when the nature of the breach makes Emotional Distress particularly likely?

Back 84

Sometimes, it is not the nature of the K but the nature of the breach that leads to ED. Sometimes the courts look for a concurrent tort while other courts look for willful or wanton conduct (which is borrowed from the RSTM 1st of K)

Front 85

What is the rule surrounding contracts regarding Punitive Damages?

Back 85

• Basically punitive damages are not allowed for a pure breach of contract claim, but
• may be recoverable if there is an accompanying tort
• Courts have began recognizing a narrow group of breach of contract claims where the willful breach of an insurance claim is involved or where there was a breach and a fiduciary duty was present