Contracts Ii

Front 1

Enhance-It, LLC v. American Access Technologies, Inc.

Back 1

Abuse of Bargaining Process by One of the Parties

Front 2

Sherwood v. Walker

Back 2

Issue: Can a mutual mistake regarding the substance of the subject matter of a contract render a contract unenforceable?

Holding and Rule: Yes. A mutual mistake regarding the substance of the subject matter of a contract may render that contract unenforceable.

A mutual mistake regarding the subject matter of a contract may render that contract unenforceable. If there is a difference or misapprehension as to the substance of the thing bargained for, if the thing actually delivered or received is different in substance from the thing bargained for, and intended to be sold, then there is no contract.

Front 3

Lenawee County Board of Health v. Messerly

Back 3

Mutual Mistake does not void a contract, if one party has assumed all the risk.

Front 4

Totem Marine Tug & Barge, Inc. V. Alyeska Pipeline Service Co.

Back 4

Law or Rule(s): Duress exists where 1) one party involuntarily accepted the terms of another; 2) circumstances permitted no other alternative; 3) such circumstances were the result of coercive acts of the other party. Economic D uses a RP standard to determine if Freewill was overcome.

Front 5

Cummings v. Dusenbury

Back 5

Unilateral Mistake

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Transatlantic Financing Corp. v. United States

Back 6

A company may be required to cover the added expenses of performing a contract in a manner different from the usual and customary method if such usual and customary method becomes impossible subsequent to the signing of the contract. Although the exact parameters of the additional labor and expenses a company may be required to cover are not laid out in detail, the case indicates that labor amounting to 30 percent more than that contracted for and expenses amounting to almost 15 percent more than that contracted for will be the responsibility of the performing company in the absence of any contractual provision for its payment by the other contracting party.

Front 7

Thompson v. Libby

Back 7

Issue: 1) Can parol contemporaneous evidence be used to contradict or vary the terms of a valid written contract? 2) Under what conditions is the admission of parol evidence admissible?

Holding and Rule: 1) No. Parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written contract. 2) To justify the admission of parol evidence, the evidence must relate to a subject distinct from that to which the writing relates.

Front 8

Mitchill v. Lath

Back 8

Rule: An oral agreement to modify a written contract is only enforceable if all of the following are true:

1. The oral agreement must be collateral in form.
2. The oral agreement must not contradict any express or implied provisions of the written contract.
3. The oral agreement must not be of the type the parties would ordinarily expect to put into writing. In other words, the written agreement on its face mustn’t appear to contain the complete agreement of the parties.

Front 9

Masterson v. Sine

Back 9

Issues: 1) Under what circumstances should evidence of oral collateral agreements be excluded? 2) How must the court determine whether a collateral agreement is such that it might naturally have been made as a separate agreement?

Holding and Rule (Traynor): 1) Evidence of oral collateral agreements should be excluded only when the fact finder is likely to be misled. 2) When determining that a collateral agreement is such that it might naturally be made as a separate agreement, the court must look to the actual experience and dealings between the parties as they view the status of such a collateral agreement.

Front 10

Lee v. Joseph E. Seagram & Sons, Inc.

Back 10

Legal Issue(s): Whether the oral promise to provide another distributorship would be an expectable term of the contract for the sale of assets by Capital, in which the Pls only have a 50% interest, considering the history of their relationship with Seagram?

Court’s Holding: No, it is a separate and independent contract.

Procedure: Appeal by df of jury verdict for pl breach of K. Affirmed.

Law or Rule(s): Certain oral collateral agreements are not w/i the prohibition of the parol evidence rule “b/c if they are separate, independent, and complete contracts, although relating to the same subject, they are allowed to be proved by parol, b/c they were made parol, and no part thereof committed to writing.

Front 11

Pacific Gas and Electric Co. v. G. W. Thomas Drayage & Rigging Co.

Back 11

Issue: What is the test for determining the admissibility of extrinsic evidence to explain the meaning of a written instrument?

Holding and Rule: Extrinsic evidence is admissible to explain the meaning of a written instrument if that evidence is relevant to prove a meaning to which the language is reasonably susceptible.

Extrinsic evidence is not admissible to add to, detract from or vary the terms of a written contract; however the terms must first be determined in order to rule on whether extrinsic evidence is offered for a prohibited purpose. Rational interpretation requires a preliminary consideration of all credible evidence offered to prove the intent of the parties. Such evidence includes the circumstances of the agreement. Extrinsic evidence to prove the contractual intent of the parties should only be excluded when it is feasible to determine the meaning of the words from the instrument alone.

Limiting the interpretation to the four corners of the document would presuppose a degree of verbal precision and stability our language has not obtained.

Front 12

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

Back 12

Issues: 1) Does a party who seeks to interpret a contract’s ordinary terms in a narrower sense than is used in everyday trade have the burden of proof to establish that meaning? 2) Is parol evidence admissible to show the meaning of an ambiguous term and its usage in a contract?

Holding and Rule (Friendly): 1) Yes. A party who seeks to interpret a contract’s ordinary terms in a narrower sense than is used in everyday trade has the burden of proof to establish that meaning. 2) Yes. Parol evidence is admissible to show the meaning of an ambiguous term and its usage in a contract

Front 13

MCC-Marble Ceramic Center, Inc v. Ceramica Nuova D'Agostino, S.p.A.

Back 13

Integration Test and Collateral Agreement Rule

Front 14

Wood v. Lucy, Lady Duff-Gordon

Back 14

Issue: 1) May a promise to use reasonable efforts be implied from the entire circumstances of a contract? 2) Can an implied promise to use best efforts be considered valuable consideration? 3) Can the duty of good faith compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties?

Holding and Rule (Cardozo): 1) Yes. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. 2) Yes. An implied promise to use best efforts in contract performance can be considered valuable consideration. 3) The duty of good faith can compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties.

Front 15

City of Yonkers v. Otis Elevator Co.

Back 15

Supplementing the Agreement With Implied Terms
Common Law Implications

Front 16

Keith v. Buchanan

Back 16

the court disagreed and found that the statements were (1) "affirmations of fact" and "descriptions" relating the quality or condition of the sailboat. (they could not be
reasonably construed as anything other than affirmations of fact). Additionally, it appears that the warranty was also (2) "part of the basis of the bargain." The presumption is that the affirmations of fact are part of the basis of the bargain, and the burden is on the seller to rebut that presumption. Here, the seller has not done so.

Front 17

Consolidated Data Terminals v. Applied Digital Data Systems, Inc.

Back 17

Warranty Disclaimers

Front 18

Lockey v. Warner Bros., Inc.

Back 18

Issue: Whether D breached its contract with P by failing to evaluate her proposals on their merits.

Holding: There is sufficeint fact to conclude that D may have acted in bad faith by categorically rejecting P’s work and refusing to work with her. REVERSED, FOR P

Rule: In every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the frutis of the contract.

Front 19

Nanakuli Paving and Rock Company v. Shell Oil Company, Inc.

Back 19

Issue: Under what circumstances can trade usage and course of performance be implied into contracts?

Holding and Rule (Hoffman): Trade usage and course of performance will be implied into contracts if there is evidence that it is not inconsistent with the terms of the contract, and they are so prevalent that the parties would have intended to incorporate them.

Front 20

Dufner v. American College of Physicians

Back 20

Employment Contracts

Front 21

Truman L. Flatt & Sons Co., Inc. v. Schupf

Back 21

Anticipatory Repudiation

Front 22

Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon & Co.

Back 22

Issue: (1) whether the doctrine of substantial performance applies to the facts of this case?

Holding: (1) No. Furthermore, the issue of substantial performance is not for the jury to decided, but rather by the “judges of the law.”

Rule: A condition precedent is “an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.
Conditions can be express or implied.Express conditions must be literally performed, whereas constructive conditions, which ordinarily arise from language of promise, are subject to the precept that substantial compliance is sufficient. When doubtful, and the language is not clear, a court will interpret language as a promise or constructive condition.

Front 23

Buckeye Check Cashing, Inc. v. Cardegna

Back 23

Question:
Under the Federal Arbitration Act, may a party avoid arbitration by arguing that the contract in which the arbitration clause is contained is illegal?

Conclusion:
No. The 7-1 majority (Justice Samuel Alito not participating) ruled that challenges to the legality of a contract as a whole must be argued before the arbitrator rather than a court. The opinion by Justice Antonin Scalia explained that "unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance." The Court held that the Florida Supreme Court had been wrong to rely on a distinction between void and merely voidable contracts, because the word "contract" in the Federal Arbitration Act includes contracts later found to be void. Justice Clarence Thomas dissented due to his long-held view that the FAA does not apply in state courts.

Front 24

El Dorado Hotel Properties, Ltd. v. Mortensen

Back 24

Conditional Promises
Ordering of Performances

Front 25

Jacob & Youngs v. Kent

Back 25

Facts:- ? built country residence for D and due to some oversight, installed some other brand of plumbing pipes than the ones promised. ? sues for the balance due in the amount of $3,483.46.

Issue: Should D be compensated because he didn’t get the same brand of pipes installed?

Holding: No

Rationale: According to the court, “We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence.” In the current case, the measure of the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing. ? performed the substantial part of the performance that he had promised and should be compensated.

Front 26

Mel Frank Tool & Supply, Inc. v. Di-Chem Co.

Back 26

Held. No. Affirmed.
In upholding the lower court’s judgment the Iowa Supreme Court found that the doctrines of impossibility and frustration both stand on the premise that a contract was made with a specific purpose in mind.
In this case, a lease was made for the storage of chemicals; however, the purpose to store hazardous chemicals was never discussed between the parties. The Court based its holding on the fact that non-hazardous chemicals could still be stored on the premises and held for the Plaintiff.

Discussion. When a party asserts the defense of frustration of purpose, they must also be able to prove that their particular purpose was encompassed in the making of the agreement.

Front 27

Holiday Inns of America, Inc. v. Knight

Back 27

Conditional Promises
Excuse, Waiver and Other relief From Effect of Conditions

Front 28

Raffles v. Wichelhaus

Back 28

Issue: 1) If a latent ambiguity arises that shows that there had been no meeting of the minds, have the parties given mutual assent to contract? 2) Is parol evidence admissible to determine the meaning each party had assigned regarding a latent ambiguity?

Holding and Rule: 1) No. If a latent ambiguity arises that shows that there had been no meeting of the minds, there is no mutual assent to contract. 2) Yes. Parol evidence is admissible to determine the meaning each party had assigned regarding a latent ambiguity.

Front 29

Walser v. Toyota Motor Sales, U.S.A., Inc.

Back 29

The Reliance Interest Alternative

Front 30

Hawkins v. McGee

Back 30

Issue: How are damages determined for breach of contract?

Holding: The plaintiff was entitled to expectancy damages plus incidental losses resulting from the breach. Expectancy damages are damages sufficient to put the plaintiff in the position he would have been if the contract had been performed. In this case, P was not entitled to damages for pain and suffering because he would still have endured them had the procedure been successful. P was entitled to the difference between what he sought – a perfect hand, and what he received – a hairy hand. P was also entitled to incidental losses resulting from the breach.

Front 31

Carnival Cruise Lines, Inc. v. Shute

Back 31

Contracts of Adhesion
You can enforce a Forum Selection Clause if it doesn't offend fair play or justice. Kind of a bad case considering P was in in Washington and D was in Florida.

Front 32

Rockingham County v. Luten Bridge Co.

Back 32

Issue: What damages are appropriate where one party gives notice of breach of contract and the other party completes their performance?

Holding and Rule: The amount of damages the plaintiff can recover is limited to the amount of damages that he would have been able to recover as of the time notice was given. Luten is entitled to expenses incurred up until notice was given, plus expected profit from completion of the contract, plus any other losses incurred up until the time of breach. A party who receives express notice of breach has a duty to mitigate damages.

Front 33

American Standard, Inc. v. Schectman

Back 33

Issue: What is the measure of damages for breach of a construction contract?

Holding and Rule: The general rule of damages for breach of a construction contract is that the injured party may recover those damages which are the direct, natural, and immediate consequence of the breach and which can reasonably be said to have been in the contemplation of the parties when the contract was made. The diminution in value measure of damages is only applied when the defects are irremediable or may not be repaired without substantial tearing down; however courts have applied the diminution of value measure even where no substantial tearing down is necessary if the breach is only incidental to the main purpose of the contract, and completion would be disproportionately costly.

Front 34

Wilkie v. Auto-Owners Insurance Company

Back 34

Insurance Contracts

Front 35

Parker v. Twentieth Century-Fox Film Corp.

Back 35

ISSUE: Was the job that Fox offered Parker in Big Country comparable employment and was Parker obligated to accept to mitigate damages?

HOLDING: No. Parker did not fail to mitigate damages by refusing to accept the part in Big Country, as the role was not comparable to that of Bloomer Girl. The California Supreme Court affirms the trial court’s summary judgment. Judge Sullivan dissents.

RULE/ANALYSIS: The general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment. However, before projected earnings from other employment opportunities not sought or accepted by the discharged employee can be applied in mitigation, the employer must show that the other employment was comparable, or substantially similar, to that of which the employee has been deprived; the employee’s rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages.

Front 36

Danann Realty Corp. v. Harris

Back 36

Parol Evidence Rule & Valid Contract Requirement

Front 37

Sedmak v. Charlie's Chevrolet, Inc.

Back 37

CASE: Sedmak v. Charlies Chevrolet, Inc. (corvette seller reneges) - Ct. allows specific performance saying UCC§2-716(1) applies because although car is not unique, its “mileage, condition, ownership, and appearance” would make it difficult to replace w/o considerable expense and delay. (i.e. too difficult to cover).

Front 38

Bd. of Co. Comm. of Adams Co. v. City & Co. of Denver

Back 38

Remedies Specified by Contract

Front 39

Schrier v. Beltway Alarm Company

Back 39

Remedies Modified by Contract

Front 40

United States v. Algernon Blair, Inc.

Back 40

Facts: A subcontractor, Coastal, starting doing work for a primary contractor, Blair. Blair refused to make certain payments and Coastal stopped work. The subcontractor brought suit against the primary contractor to recover for the services rendered.

Issue: Can a subcontractor recover damages for services rendered when the primary contractor breaches a contract even if the subcontractor would have lost money if they had completed the contract?

Rule: If expectation damages are insufficient to cover the plaintiff’s losses, the plaintiff may substitute reliance damages.

Analysis: Coastal is entitled to damages for services rendered because Blair has benefited from Coastal’s loss. The damages should be measured by the replacement value of the labor and equipment provided by Coastal.

Conclusion: The case was reversed and remanded to find out how much the services that Coastal rendered were worth.

Front 41

Cayuga Harvesters, Inc. v. Allis-Chalmers Corporation

Back 41

Remedies Modified by Contract

Front 42

Hadley v. Baxendale

Back 42

Issue: What is the amount of damages to which an injured party is entitled for breach of contract?

Holding and Rule: An injured party may recover those damages reasonably considered to arise naturally from a breach of contract, or those damages within the reasonable contemplation of the parties at the time of contracting.

The court held that the usual rule was that the amount which would have been received if the contract had been kept is the measure of damages if the contract is broken. The court held that in this case however the rule should be that the damages were those fairly and reasonably considered to have arisen naturally from the breach itself, or such as may be reasonably supposed to have been in the contemplation of both parties at the time the contract was made.

Front 43

Florafax International, Inc. v. GTE Market Resources, Inc.

Back 43

Lost profits are recoverable so long as they are (1) foreseeable when the contract was made; (2) they directly or proximately result from the breach and (3) they are capable of accurate estimation.

Front 44

A-S Development, Inc. v. W.R. Grace Land Corporation

Back 44

Certainty Limitation

Front 45

Lumley v. Wagner

Back 45

Issue: Can injunctive relief be used to enforce a promise not to render personal services?

Holding and Rule: Yes. Injunctive relief can be used to enforce a promise not to render personal services.

The court cannot compel specific performance to render personal services, but it can grant the remedy of injunctive relief to prevent a party from performing personal services. The court can compel the defendant to abstain from those acts she promised not to commit under the contract.

Front 46

Dangerfield v. Markel

Back 46

Buyer Monetary Damages for Seller Breach

Front 47

R.E. Davis Chemical Corp. v. Diasonics, Inc.

Back 47

For example, in the case of R.E. Davis Chemical Corp v. Diasonics (826 F.2d 678 (7th Cir. 1986), 924 F.2d 709 (7th Cir. 1991)), a trial was needed to establish that the plaintiff had the capacity to make an additional sale (since the goods were pretty rare), and that it would have been profitable for the plaintiff to have made a second sale.
Basically, R.E. Davis stands for the proposition that sometimes it is not clear if a seller is indeed a lost volume seller. It's important to remember that although UCC §2-708(2) allows for recovery for lost volume sellers, the fact that the sale is indeed lost volume needs to be established.

Front 48

Martinez v. Socoma Companies, Inc.

Back 48

T(gov’t program to help low-employment communities by teaching the unemployed job skills and helping them get jobs: majority said general public was intended beneficiary and the unemployed people can’t sue, citing liquidated damages clause that gives remedy only to gov’t and arbitration clause that is only between gov’t and Socoma: minority said these people themselves were the directly intended beneficiaries and they can sue - 814)

Front 49

Herzog v. Irace

Back 49

Law or Rule(s): An assignment is an act or manifestation by the owner of a right indicating his intent to transfer that right to another, and to be valid and enforceable against the assignor’s creditor, the assignor must make clear his intention to relinquish the right to the assignee and must not retain any control over the right assigned.

Front 50

Sally Beauty Co. v. Nexxus Products Co.

Back 50

Assignment of an Entire Contract