PAROL EVIDENCE CUSTOM TRADE USAGE Voiding DURESS FRAUD/MISREPRESENTATION UNCONSCIONABILITY MISTAKE IMPRACTICABILITY/FRUSTRATION BREACH vs. SUBSTANTIAL PERFORMANCE Damages SPECIFIC PERFORMANCE EXPECTATION/RELIANCE DAMAGES LIMITATIONS PRINCIPLES Josh Principle: Place losses on parties that are in the best position to avoid them Cheapest cost avoider Andrew Principle: Enforce promises that arise out of situations that look like those in which a bargain would have occurred Transaction costs are too high Terms are reasonable Dolly Principle: Don’t enforce indefinite contracts Induce parties to be more specific with their terms Otherwise, always can argue that it’s too indefinite to be considered a contract THEORIES/DEFINITIONS Three Theories of Contract Law: Autonomy – promisors have a moral obligation to keep their promises and promises have a corresponding moral right to the promisor’s promise Generates individuals’ right to form, revise and pursue their own conception of the good – contract law helps justify this right Individual autonomy and trust in the other party Ex-post perspective on enforcement – adjudication is a mechanism of resolving a dispute between litigants Three critiques: Moral obligation is unproved Courts do not enforce all promises Discomfort with state enforcing moral rights/obligations
Damages would be adequate to protect the expectation interest of the injured party (RST §359) Adequate damages for part of the breach doesn’t preclude SP on the contract as a whole Would lead to additional transaction costs/waste, induce poor performance Contract is for services (difficult to gauge the performance) CASES: Sedmak v. Charlie’s Chevrolet: P ordered a limited edition car from D, D breached Klien v. Pepsico: Search for used jet, P contracted with D who breached, 3 others available Damages - EXPECTATION & RELIANCE DAMAGES Expectation Damages: Put the promisee in the same position had the contract been performed RST §347: Loss in the value of the other party’s performance + any other cost (incidental or consequential) – any cost avoided by not having to perform Incidental loss = costs incurred in a reasonable effort to avoid loss Consequential loss = injury to person/property because of defective performance Cost of completion: Pay the amount the have the performance rendered PURPOSE was to have the performance fulfilled (American Standard) Assume the land is meant for personal use OR the original cost was priced into the contract (American Standard) Strongly signal that they care about the clause Diminution of value: Difference of the value of the land as improved vs. unimproved PURPOSE was to have the land be at a certain value (Peevyhouse) Assume the land was supposed to be resold [Peevyhouse is wrong] The clause that was not performed is incidental to the contract Take into account: (Freund) Expectation interest = same position party would’ve been in had there been performance Reliance interests = anything the party does in reliance on the fact the contract was made Restitution interests = return anything that was given in consideration Reliance Damages: RST §349: Expenditures made in performance (or in preparation) – any loss the breaching party can prove that the injured party would’ve suffered has the contract been performed
If you can’t prove profit with reasonable certainty or it was a losing contract Lost Volume Seller: Requirements: Supply is greater than demand so you can service all comers Other transactions are going to be profitable (next sale will be profitable) That buyer wouldn’t resell to one of the subsequent buyers Selling in different market (b/c not professional)? Maybe require that the additional contract was probable absent the breach (Learjet) UCC §2-708 = limited number of buyers that can be sold to CASES: Freund v. Washington Square Press: P wants royalties when publisher doesn’t publish book American Standeard v. Schectman: D contracts with P to regrade his land in exchange for tools Peevyhouse v. Garland: Stipulation at the end of a lease requires Ds to clean up the land RE Davis Chemical Corp v. Diasonics: Contract for medical equip, down payment + breach Rodriguez v. Learjet: Additional contract was probable absent the breach Damages – LIMITATIONS Damages must be foreseeable: Foreseeable damages unless breaching party is aware of special circumstances (Hadley) Idiosyncratic parties have to reveal circumstances to price the risk NOT majoritarian default – forces info out of parties Made sense with 1-1 relationships, but maybe not in the real world RST §351: Foreseeable as a probable result from breach if it follows from the breach in the ordinary course of events or as a result of special circumstances that the breaching party had reason to know about Non-breaching party must attempt to mitigate damages: Express notice of breach = must stop working (Rockingham) Different inferior employment cannot be used to mitigate (Parker) RST §350: Damages are unrecoverable for losses the non-breacher could avoid without undue risk, burden, or humiliation Not precluded if he made a reasonable, but unsuccessful effort to avoid loss Stop performance + take any appropriate affirmative steps to avoid further loss EXTRA INFO: