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Contracts Outline

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Contracts Outline
REV SECTION
UCC – Sale of Goods
Common Law – Services and real estate
Promissory Estoppel – SEC 90 RESTATEMENT. Limitation of remedy to what justice
requires. Most likely no expectation damages. No contract exists in promissory
estoppel.
Hays v Plantation Steel - Under the doctrine of promissory estoppel, acts of
reliance by the promisee to his detriment provide a substitute for consideration.
Modification – Requires new consideration. Consideration has to be different
than original consideration otherwise it looks like an illusory promise.
Parol Evidence – Forbids existence of evidence not in the contract itself.
Exception: Can use extrinsic terms for interpretation of terms in a contract.
Adhesion Contracts – Take it or leave it. Usually preprinted forms. Terms are not
negotiated. Look at disparity of bargaining power. Unconscionability to potentially
back out of adhesion contracts. Arbitration provisions could sometimes be
unconscionable.
Specific Performance – Section 359 restatement. Likely to apply to real property
cases because real estate is unique. Deals with situations where legal money
damages are inadequate.
Expectation Damages – Court awarding difference in value.
Repudiation – Terminate contract.
Anticipatory Repudiation – Party says they will not perform before performance
due on contract. Expressions of some doubt is not anticipatory repudiation. Nor
expressions of dissatisfaction with the contract.
Mitigation – UCC 2-610 allows to sue immediately or until performance was to be
due.
§ 2-610. Anticipatory Repudiation.
When either party repudiates the contract with respect to a performance not yet
due the loss of which will substantially impair the value of the contract 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 contract
notwithstanding breach or to salvage unfinished goods (Section 2-704).
Recession – When a party breaches a contract, the injured party may not be
satisfied with his right to damages or specific performance. Hey may want to
refrain from performance. Injured party has four possible remedies of this type:
termination, recession, setoff, and suspension of performance.
Termination and recession are not the same. Termination affirms the existence of
the contract. Discharges the injured party from the performance of his remaining
promise. At the same time giving him a right to recover expectancy damages from
the breaching party. Recession, disaffirms the contract. He asks not only to be
discharged from performance, but also even the executed portion of the contract
be undone. Recession, viewed like specific performance, as an equitable remedy.
Since he disaffirms the existence of the contract, he has no right to expectancy
damages for breach of the contract by the other party. However, courts are
moving away from the idea of “election of remedies” thereby assimilating
termination and recession.
An injured party will want rescission instead of termination whenever he has
made a bad bargain. In the case of termination, the court will attempt by an
award of damages to place the parties in the place they would be had the
contract been performed. Where a contract is rescinded, the parties will be
placed in a position they would be had there been no contract.
Rescission may occur only by mutual consent or in case of material breach.
[Woodruff v. McClellan – Where buyer in real property refused to sign closing
papers despite repeated extensions, there is no mutual consent, thus no
rescission, so attorney’s fees applicable
Put parties in position as if contract never existed.
Aigner v. Cowell Sales Co. - If a landlord terminates a lease, the landlord cannot
get damages for the portion of the lease term after termination.
Idea illustrated by Aigner v Cowell Sales company that rescission precludes
recovery of damages, based on expectancy has also been invoked in contracts to
sell land. In Bruno Benedilli & Sons v O’Malley, buyers defaulted on an installment
contract. Seller filed a “declaration of forfeiture” in the county recorder’s office
then sued the buyers for the unpaid installment due before they had left the
house. Buyers won because “a vendor may not invoke a remedy based on
affirmance of the contract and also invoke a remedy that is based on
disaffirmance. In Finke V Woodard, buyers who rescinded a contract to purchase
a hose were not allowed to recover damages because purpose of a rescionarry
award is to disaffirm the transaction and restore them to the status quo
inconsistent to both disaffirm the transaction. Where rescission is awarded then,
the proper measure of recovery is restitution of the consideration and other
benefits received by the parties under the contract.
As an “election.” Sometimes silence can have the same effect. In Glen Gilbert
Construction owner got into a dispute with a contractor ordered him to cease
work. Contractor did so and then sue for damages. Court dismissed the suit. He
permitted rescission of the contract by mutual assent. When a contract is
rescinded no action can be maintained for damages.
There is a modern trend against the idea of election of remedies. In Keesee v
Fetzek a seller notified a buyer who had defaulted that the contract would be
rescinded but the seller later “decided to act on the contract. Trial court granted
the buyer summary judgment on the theory that the seller’s notice constituted an
election to disaffirm the contract. Appellate court revered saying: Election of
remedies require a plaintiff to choose between inconsistent remedies for redress
of a single injury. The doctrine originated as a means to prevent double recovery
and to limit potential harassment of defendants.
Election of remedies – If rescission no expectation damages.
STR RL OUTLNE
Merchants – Regularly deals in goods of that kind sold and holds one self in having
knowledge or skill with the good involved. Subject to merchant rules of acting in
his mercantile capacity.
Unilateral Contract – Acceptance by performance. Offeror requests performance
rather than a promise. Offeror promisor promises to pay when the requested act
is completed by the promise. Once act complete, contract is formed.
Modern View is most contracts are bilateral.
Unilateral contract occurs in 2 situations. 1. Offeror clearly indicates completing
of performance is the only manner of acceptance. 2. Offer to the public.
Surrounding Circumstances – Statements made in jest, anger, or bragging may
have no legal effect. However, if statement made in jest but reasonably
understood by the hearer to be made seriously, statement is offer.
Use of Broad Communication Media – Broader the communicating media, more
likely courts view it as merely solicitation of an offer.
Advertisements – Advertisements, catalogs, circular letters, usually construed as
mere invitations for offers. Not considered offers because usually are indefinite as
to quantity and addressed to general public. However, sometimes courts treat
advertisement as offers is language on advertisement can be construed as
containing a promise, terms are certain and definite, and the offeree(s) clearly
identified. Price quotations may be considered offers if given in response to an
inquiry.
Industry Custom- Courts will also look to generally accepted custom in the
industry in determine whether the proposal qualifies as an offer.
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