Contracts Part 2

Front 1

Brown v. Cara

Back 1

There are 4 factors relevant to determining whether a preliminary agreement is enforceable as to the ultimate contractual objective:
(1) whether there is an expressed reservation of the right not to be bound in the absence of a writing
(2) whether there has been partial performance of the K
(3) whether all of the terms of the alleged K have been agreed upon and
(4) whether the agreement at issue is the type of K that is usually committed to writing

Front 2

Cochran v. Norkunas

Back 2

• It is universally accepted that manifestation of mutual assent is an essential prerequisite to the creation of formation of a K.
• Manifestation of assent includes 2 issues: (1) intent to be bound, and (2) definiteness of terms
• Failure of parties to agree on an essential term of a K may indicate that the mutual assent required to make a K is lacking
• If the parties do not intend to be bound until a final agreement is executed, there is no K

Front 3

Baer v. Chase

Back 3

A K is unenforceable for vagueness when its essential terms are too indefinite to allow a court to determine w/reasonable certainty what each party has promised to do

Front 4

B.Lewis Productions Inc., v. Angelou

Back 4

There is a general obligation of good faith and fair dealing in ever K. the duty is particularly strong in an exclusive dealings agreement like this one…This general obligation of good faith further assists in filling the gaps in the express terms of the parties’ agreement

Front 5

Family Snacks of North Carolina, Inc. v. Prepared Products Co.

Back 5

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Front 6

Arbitron, Inc. v. Tralyn Broadcasting, Inc.

Back 6

• The clause before us is an acknowledgement that, if certain conditions arise in the future, no new agreement is required before Arbitron may set new license terms, and such agreement is not unenforceably vague
• The escalation clause doesn’t require the parties to reach an “agreement” on price in the future…it is a mechanism for objectively setting material terms in the future w/out further negotiations between both parties

Front 7

Cooke v. Goethals

Back 7

If the court finds sufficient part performance, it will invoke the exception to the statute of frauds

Front 8

Mackay v. Four Rivers Packing

Back 8

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Front 9

Ricketts v. Scothorn

Back 9

“having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, on his executor, to resist payment on the ground that the promise was given without consideration.”

Front 10

Conrad v. Fields

Back 10

• Law school student brought promissory-estoppel action against friend, asserting that student gave up full-time employment and enrolled in law school as result of friend's promise to pay student's educational expenses.
• Student proved the elements of promissory estoppel, and in actions based on P.E., relief may be limited to the party’s out-of-pocket expenses and by this measure she should be awarded tuition plus books minus payment made by friend

Front 11

Allegheny College v. National

Back 11

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Front 12

In Re Morton Shoe

Back 12

• “Hope or expectation” may not be detrimental reliance (e.g. establishment of operating budget), but incurring actual legal liabilities (loans, contributions to others, etc.) is reasonable and detrimental reliance.

Front 13

Universal Computer v. Medical Services

Back 13

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Front 14

Hoffman v. Red Owl Stores, Inc

Back 14

• A party can recover for worsening its position in reliance on promises made by another party through the doctrine of promissory estoppel.
• Three questions must be answered affirmatively to support an action for promissory estoppel:
o Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?
o Did the promise induce such action or forbearance?
o Can injustice be avoided only be enforcement of the promise?

Front 15

Garwood Packaging Inc. v. Allen & Co.

Back 15

• Promissory estoppel in the commercial context
• Garwood exec as businessman should have known about many contingencies involved (promise not definite and reliance not reasonable); damages = business gamble.

Front 16

Tour Costa Rica v. Country Walkers Inc

Back 16

• Promissory estoppel in the commercial context
• Full expectation recovery on Promissory Estoppel; looked a lot like K, but maybe unenforceable b/c should have been under SOF.

Front 17

Drennan v. Star Paving CO.

Back 17

In a unilateral offer, there is an underlying subsidiary promise not to retract once performance has begun! Performance began when Plaintiff entered a binding bid using Defendant’s quote. Promise was implied, not explicit. Court says no consideration and no transparent error, so judgment for contractor.

Front 18

James Baird Co. v. Gimbel Bros.

Back 18

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Front 19

Martin v. Little Brown & Co.

Back 19

• When a person requests another to perform services, it is ordinarily inferred that he intends to pay for them, unless the circumstances indicate otherwise
• Where the circumstances evidence that one’s work effort has been voluntarily given to another, an intention to pay cannot be inferred.

Front 20

Estate of Cleveland v. Gordon

Back 20

• A person who voluntarily and officiously pays another’s debts is not entitled to reimbursement…unless the payment is made under the compulsion of a moral obligation, in ignorance of the real state of facts, or under an erroneous impression of one’s legal duty
• Moral obligation is a duty that cannot be legally enforced but the record shows that ms. Cleveland expected to be reimbursed from the outset in discussion with her bankers and her assistance of her aunt went beyond what would normally have been expected of her

Front 21

Webb v. McGowin

Back 21

• The court enforced the promise not simply b/c of “mere moral obligation or conscientious duty”, but because the moral obligation was connected to the promisor’s receipt of a material benefit
• Although the promise was not exchanged for the services, it was a ratification of the value of the prior services

Front 22

Sarvis v. Vermont State Colleges

Back 22

• P misrepresented material facts related to his candidacy upon which the D relied in making its employment decision, and said misrepresentation warrants rescission of the employment contracts and supports a just cause dismissal

Front 23

Stambovsky v. Ackley

Back 23

• If a seller knows of a condition that is unlikely to be discovered by a careful and prudent buyer and impairs the value of the contract, nondisclosure of this condition represents a basis for rescission under equity.
• Since Ackley knew about the poltergeist problem but did not disclose it, and Stambovsky had no other way to discover it, he was awarded rescission of the contract for sale.

Front 24

Germantown Mfg. v. Rawlinson

Back 24

• Husband embezzled $, wife signed papers under impression that if she didn't her husband would go to jail. She was misinformed as to the contents of what she was signing--this false representation induced her to sign. Court found for P on claim of duress.

Front 25

Odorizzi v. Bloomfield School District

Back 25

• Even though it may have been procedural duress, they were offering him a pleasant way out of a situation where he was going to get fired anyway, so it isn’t actually duress. They had a legal duty to fire him

Front 26

Austin Instrument v. Loral Corp

Back 26

Duress is particularly pertinent to contract modifications because changing performance once a K has begun traditionally requires new “consideration” under the pre-existing duty rule which might be vitiated by duress

Front 27

Feldman v. Google

Back 27

• Under CA law, a contract or its terms may be procedurally unconscionable if it is an adhesion contract
• Courts consider factors such as the buyer’s sophistication, the use of high-pressure tactics or external pressure to induce acceptance, and the availability of alternative sources of supply
• P could’ve taken his business elsewhere
• A k is not necessarily one of adhesion simply because it is a form contract
• A forum selection clause in a standardized, non-negotiable K may be permissible for several reasons, reasons which apply here

Front 28

Lhotka v. Geographic Expeditions

Back 28

Rather than providing a neutral forum for dispute resolution, GeoEx’s arbitration scheme provides a potent disincentive for an aggrieved client to pursue any claim, in any forum—and will guarantee that GeoEx wins even if it loses. Absent reasonable justification for this arrangement—and non is apparent—the arbitration clause is so one sided as to be substantively unconscionable

Front 29

Brower v. Gateway

Back 29

Although the contract was not adhesive or unfairly imposed…the court found that the choice of the ICC as the arbitration forum to be substantially unconscionable

Front 30

AT&T Mobility LLC v. Conception

Back 30

• held that invalidation of the contractual bar on classwide proceedings violated the FAA because it interfered with arbitration
• The principal advantage of arbitration is speed and informality

Front 31

Diversified Group, Inc. v. Sahn

Back 31

(Re-Sale of Knicks tickets) Distinction between illegality and public policy policing is really a uestion of degree and who articulates the policy i.e. the legislature, or the judiciary acting on its own initiative, and balancing both the equities between the parties and also the resolution which best serves the public interest

Front 32

Danzig v. Danzig

Back 32

As a general rule, Ks which are illegal or against public policy will not be enforced by the courts. That rule, however, is subject to an exception where a court determines the parties are not in pari delicto, that is, they are not equally culpable.

Front 33

Woodman v. Kera LLC

Back 33

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Front 34

Stevens v. Rooks Pitts and Poust

Back 34

(1) financial disincentive clause in partnership agreement between attorneys, which required departing lawyer to give up certain compensation due to him if he competed with firm in certain geographic area within one year after his departure, was unenforceable as against public policy;
(2) financial penalty provision would be severed from remainder of partnership agreement, which departing attorney could then enforce as written; and
(3) attorney did not waive his right to challenge financial disincentive provision, simply because attorney was signatory to agreement and had benefited from this provision when several attorneys withdrew before him.

Front 35

Foss v. Circuit city stores, Inc.

Back 35

A minority has voidable contractual capacity. They can sue under the contract, but cannot be sued under the contract.

Front 36

Jacob & Youngs, Inc. v. Kent

Back 36

• Where the breaching party has substantially performed, he is entitled to payment of the K price, which is offset against the damages suffered by the other party as a result of the nonmaterial breach.
• These damages are normally the cost of rectifying the deficiency in performance
• However, if that cost is excessive and disproportionate, the owner could be confined to a lesser amount of damages, such as the reduction in the market value of the performance.
• Judge Cardozo articulated the principle that it is not appropriate to award the cost of rectifying the nonconformity in performance where the breach is neither material nor willful, and the cost of remedying the defect in performance is grossly out of proportion to the harm caused by the breach.

Front 37

Carrig v. Gilbert-Varker Corp.

Back 37

• demonstrates the kind of circumstances that may lead a court to conclude that a K is divisible, and shows why divisibility might matter
• The court awarded the developer expectation damages for the additional cost it incurred in having the remaining 15 houses built by someone else
o The builders failure to complete the 15 houses was a material breach
o The court found this K to be divisible because it treated the houses as distinct units
o The K included plans and specifications indicating which house was to be built on each lot and allocated a portion of the price and the construction financing to each house
o When completed, each house was a self-contained economic unit that be sold to a customer

Front 38

Hochester v. De La Tour

Back 38

Repudiation and breach is a statement or act where a party indicates in advance that they will not perform their obligations when due which gives rise to a claim for total breach and discharges one’s own obligations to perform.

Front 39

Wholesale Sand & Gravel, Inc. v. Decker

Back 39

If a contracting party believes that the other party will breach, it may request “assurances” that performance is forthcoming and a suspension of one’s own performance and the failure to provide such assurances within a reasonable time may be treated as repudiation
*dissent thinks its clear from the circumstances that the P expected to perform the contract as soon as circumstances permitted

Front 40

Hawkins v. McGee

Back 40

Actual damages should be the difference between the value of the hand as delivered by the plaintiff and the value of a the hand as promised

Front 41

Sullivan v. O’Connor

Back 41

(Actress nose job case.) Court held that she was entitled to expectation damages b/c the doctor expressly promised her a perfect nose so she should be placed in as good of a position had the K been performed

Front 42

Mitsui O.S.K. Lines, Ltd. v. Consolidated Rail Corp

Back 42

• The Superior Court held that costs incurred in hiring surveyors were “incidental” damages, not “consequential” damages excluded under shipping contract.
• Concluded that, although such clauses were generally enforceable, the damages were incidental and thus not barred by the clause
• It failed to do so and, accordingly, Conrail is liable for reimbursing plaintiffs for that loss.

Front 43

Rancho Pescado, Inc. v. Northwestern Mutual Life Insurance Co.

Back 43

• Recent cases have eroded the once generally accepted rule against awarding damages for lost profits to a new business. The modern trend is to allow recovery for such lost profits if they can be proven with reasonable certainty
• It is clear that if the claim for damages are entirely speculative and uncertain, the P will not be able to recover
• Courts are particularly skeptical of unsubstantiated claims for loss of goodwill, business reputation, or future profits

Front 44

Sullivan v. Oregon

Back 44

Damages was reduced to loss suffered, b/c their opinions on what their work was worth is not good enough to establish damages

Front 45

Hadley v. Baxendale

Back 45

• Common carrier breached by delaying delivery of mill shaft, causing mill to shut down.
• *Ct. held that the common carrier is not liable for losses caused by shut down mill b/c they were special circumstances (damages that do not foreseeably flow from the breach) and were not fairly and reasonably communicated to the common carrier before they contracted.

Front 46

Rockingham County v. Luten Bridge

Back 46

• The county had breached the K but Luten couldn’t simply just close its eyes to the facts, build a bridge going tom nowhere to nowhere in the middle of the forest and expect to be paid the full K price
• Once you knew the party was going to breach, you should’ve stopped and not try to run up the cost of their breach

Front 47

DeRosier v. Utility Systems of America

Back 47

When one party to the K defectively performs and subsequently offers to correct the breach through a new K, the nonbreaching party may generally decline the offer and still recover its full damages; special circumstances may rebut the reasonableness of the rejection and call for exceptions to the rule.

Front 48

Parker v. Twentieth Century Fox Film Corp.

Back 48

(actress offered "replacement" role.)
Actress did not have a duty to mitigate damages because the new role was different and inferior than what she originally offered.

Front 49

Marshall School District v. Hill

Back 49

He actually takes the alternative job! In calculating damages, the trial court started with the salary he would’ve earned in the three school years preceding suit, which amounted to $93,234 and then subtracted the earnings he made in other employment during that same period