problems in contract law: cases and materials
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Summary of Contents Contents Preface Acknowledgments 1 An Introduction to the Study of Contract Law 2 The Basis of Contractual Obligation: Mutual Assent and Consideration 3 Liability in the Absence of Bargained-for Exchange: Promissory Estoppel and Restitution 4 The Statute of Frauds 5 The Meaning of the Agreement: Principles of Interpretation and the Parol Evidence Rule 6 Supplementing the Agreement: Implied Terms, the Obligation of Good Faith, and Warranties 7 Avoiding Enforcement: Incapacity, Bargaining Misconduct, Unconscionability, and Public Policy 8 Justification for Nonperformance: Mistake, Changed Circumstances, and Contractual Modifications 9 Rights and Duties of Third Parties 10 Consequences of Nonperformance: Express Conditions, Material Breach, and Anticipatory Repudiation 11 Expectation Damages: Principles and Limitations 12 Alternatives to Expectation Damages: Reliance and Restitutionary Damages, Specific Performance, and Agreed Remedies Table of Table of Table of Table of Table of Table of Table of Index Cases Uniform Commercial Code Provisions Provisions from Restatement (Second) of Contracts Provisions from Restatement (First) of Contracts Provisions from Other Restatements Other Acts, Codes, and Rules Secondary Authorities xi xxi xxv 1 21 215 303 349 437 517 663 741 783 845 965 1047 1067 1071 1075 1077 1079 1081 1095 ix Contents Preface Acknowledgements 1 An Introduction to the Study of Contract Law A. Contract Law in the First-Year Law Curriculum Problem 1-1 B. The Sources of Contact Law 1. Judicial Opinions 2. Statutory Law 3. The Restatements 4. Legal Commentary 5. International Commercial Law C. The Perspective of Contract Theory D. The Lawyering Perspective Selected Bibliography 2 The Basis of Contractual Obligation: Mutual Assent and Consideration A. Mutual Assent 1. Intention to Be Bound: The Objective Theory of Contract Ray v. William G. Eurice & Bros., Inc. Notes and Questions 2. Offer and Acceptance in Bilateral Contracts Lonergan v. Scolnick Notes and Questions Izadi v. Machado (Gus) Ford, Inc. Notes and Questions Normile v. Miller xxi xxv 1 2 4 5 5 7 9 10 11 12 15 17 21 22 23 23 30 33 34 37 38 43 44 xi xii Contents Notes and Questions 3. Offer and Acceptance in Unilateral Contracts Petterson v. Pattberg Notes and Questions Cook v. Coldwell Banker/Frank Laiben Realty Co. Notes and Questions Comment: Remedies for Breach of Contract 4. Other Methods of Reaching Mutual Assent Harlow & Jones, Inc. v. Advance Steel Co. Notes and Questions Comment: Introduction to the CISG B. Consideration 1. Defining Consideration Hamer v. Sidway Notes and Questions Comment: History of the Consideration Doctrine Pennsy Supply, Inc. v. American Ash Recycling Corp. Notes and Questions 2. Applying the Consideration Doctrine Dougherty v. Salt Notes and Questions Comment: The Lawyer’s Role in Counseling for Legal Effect Batsakis v. Demotsis Notes and Questions Plowman v. Indian Refining Co. Notes and Questions Comment: The Power of Agents to Bind Their Principals C. Issues in Applying the Concept of Mutual Assent 1. Limiting the Offeror’s Power to Revoke: The Effect of Pre-acceptance Reliance James Baird Co. v. Gimbel Bros., Inc. Notes and Questions Drennan v. Star Paving Co. Notes and Questions Comment: Contract Law and Business Practice Berryman v. Kmoch Notes and Questions Pop’s Cones, Inc. v. Resorts International Hotel, Inc. Notes and Questions Problem 2-1 2. Irrevocability by Statute: The ‘‘Firm Offer’’ Problem 2-2 Problem 2-3 3. Qualified Acceptance: The ‘‘Battle of Forms’’ Princess Cruises, Inc. v. General Electric Co. Notes and Questions Brown Machine, Inc. v. Hercules, Inc. Notes and Questions 50 51 53 56 58 61 62 63 64 69 69 71 72 72 75 76 78 82 87 87 88 90 93 95 99 104 105 108 108 109 111 112 116 119 122 126 128 134 136 138 140 141 143 144 150 153 159 Contents Problem 2-4 Comment: Battle of the Forms under Revised Article 2 4. Postponed Bargaining: The ‘‘Agreement to Agree’’ Walker v. Keith Notes and Questions Quake Construction, Inc. v. American Airlines, Inc. Notes and Questions Comment: The Pennzoil/Texaco Case Problem 2-5 Problem 2-6 Problem 2-7 5. Electronic Contracting Brower v. Gateway 2000, Inc. Notes and Questions Register.com., Inc. v. Verio, Inc. Notes and Questions Problem 2-8 3 Liability in the Absence of Bargained-for Exchange: Promissory Estoppel and Restitution A. Protection of Promisee Reliance: The Doctrine of Promissory Estoppel 1. Promises Within the Family Kirksey v. Kirksey Notes and Questions Greiner v. Greiner Notes and Questions Wright v. Newman Notes and Questions 2. Charitable Subscriptions King v. Trustees of Boston University Notes and Questions Problem 3-1 3. Promises in a Commercial Context Katz v. Danny Dare, Inc. Notes and Questions Shoemaker v. Commonwealth Bank Notes and Questions Comment: The Status and Future of Promissory Estoppel B. Liability for Benefits Received: The Principle of Restitution 1. Restitution in the Absence of a Promise Credit Bureau Enterprises, Inc. v. Pelo Notes and Questions Commerce Partnership 8098 Limited Partnership v. Equity Contracting Co., Inc. Notes and Questions xiii 163 165 167 168 174 177 183 188 190 191 193 193 195 200 204 210 212 215 215 216 217 218 218 222 222 227 228 229 234 236 237 238 243 244 248 250 253 255 255 262 266 271 xiv Contents Watts v. Watts Notes and Questions 2. Promissory Restitution Mills v. Wyman Notes and Questions Webb v. McGowin Notes and Questions Problem 3-2 Problem 3-3 4 The Statute of Frauds A. General Principles: Scope and Application Crabtree v. Elizabeth Arden Sales Corp. Notes and Questions Winternitz v. Summit Hills Joint Venture Notes and Questions Comment: The Historical Development of Law and Equity Alaska Democratic Party v. Rice Notes and Questions Problem 4-1 B. The Sale of Goods Statute of Frauds: UCC §2-201 Buffaloe v. Hart Notes and Questions Comment: The Merchant Confirmation Exception Problem 4-2 5 The Meaning of the Agreement: Principles of Interpretation and the Parol Evidence Rule A. Principles of Interpretation Joyner v. Adams Notes and Questions Frigaliment Importing Co. v. B.N.S. International Sales Corp. Notes and Questions C & J Fertilizer, Inc. v. Allied Mutual Insurance Co. Notes and Questions B. The Parol Evidence Rule Thompson v. Libby Notes and Questions Taylor v. State Farm Mutual Automobile Insurance Co. Notes and Questions 273 283 286 286 289 291 295 300 301 303 305 306 310 314 320 322 323 329 332 335 336 341 344 346 349 350 352 356 361 366 370 378 382 385 388 394 403 Contents Sherrodd, Inc. v. Morrison-Knudsen Co. Notes and Questions Nanakuli Paving & Rock Co. v. Shell Oil Co. Notes and Questions Problem 5-1 Problem 5-2 6 Supplementing the Agreement: Implied Terms, the Obligation of Good Faith, and Warranties A. The Rationale for Implied Terms Wood v. Lucy, Lady Duff-Gordon Notes and Questions Leibel v. Raynor Manufacturing Co. Notes and Questions B. The Implied Obligation of Good Faith Seidenberg v. Summit Bank Notes and Questions Comment: Requirements and Output Contracts Morin Bldg. Prods. Co. v. Baystone Constr. Inc. Notes and Questions Locke v. Warner Bros., Inc. Notes and Questions Donahue v. Federal Express Corp. Notes and Questions Problem 6-1 Problem 6-2 C. Warranties Bayliner Marine Corp. v. Crow Notes and Questions Problem 6-3 Caceci v. Di Canio Construction Corp. Notes and Questions 7 Avoiding Enforcement: Incapacity, Bargaining Misconduct, Unconscionability, and Public Policy A. Minority and Mental Incapacity Problem 7-1 Dodson v. Shrader Notes and Questions Hauer v. Union State Bank of Wautoma Notes and Questions B. Duress and Undue Influence Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. xv 410 415 418 429 432 434 437 437 438 439 442 445 448 451 459 462 465 468 470 478 480 486 491 493 497 500 504 507 508 512 517 517 519 519 523 526 534 537 538 xvi Contents Notes and Questions Odorizzi v. Bloomfield School District Notes and Questions C. Misrepresentation and Nondisclosure Syester v. Banta Notes and Questions Hill v. Jones Notes and Questions Comment: Lawyers’ Professional Ethics Park 100 Investors v. Kartes Notes and Questions D. Unconscionability Williams v. Walker-Thomas Furniture Co. Notes and Questions Comment: Consumer Protection Legislation Higgins v. Superior Court Notes and Questions Adler v. Fred Lind Manor Notes and Questions Comment: Commercial, Employment, and Consumer Arbitration E. Public Policy Problem 7-2 Valley Medical Specialists v. Farber Notes and Questions R.R. v. M.H. & another Notes and Questions Problem 7-3 Problem 7-4 8 Justification for Nonperformance: Mistake, Changed Circumstances, and Contractual Modifications A. Mistake Lenawee County Board of Health v. Messerly Notes and Questions Wil-Fred’s, Inc. v. Metropolitan Sanitary District Notes and Questions B. Changed Circumstances: Impossibility, Impracticability, and Frustration Karl Wendt Farm Equipment Co. v. International Harvester Co. Notes and Questions Mel Frank Tool & Supply, Inc. v. Di-Chem Co. Notes and Questions Problem 8-1 Problem 8-2 C. Modification Problem 8-3 544 548 554 556 557 565 567 573 578 580 583 584 586 590 596 599 608 610 622 625 632 632 633 642 647 654 658 659 663 664 664 671 674 681 684 687 696 701 709 711 713 713 713 Contents Alaska Packers’ Association v. Domenico Notes and Questions Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp. Notes and Questions Brookside Farms v. Mama Rizzo’s, Inc. Notes and Questions 9 Rights and Duties of Third Parties xvii 715 719 723 728 731 737 741 A. Rights of Third Parties as Contract Beneficiaries Vogan v. Hayes Appraisal Associates, Inc. Notes and Questions Zigas v. Superior Court Notes and Questions B. Assignment and Delegation of Contractual Rights and Duties Herzog v. Irace Notes and Questions Sally Beauty Co. v. Nexxus Products Co. Notes and Questions Problem 9-1 741 745 750 754 760 762 765 767 770 779 781 Consequences of Nonperformance: Express Conditions, Material Breach, and Anticipatory Repudiation 783 10 A. Express Conditions Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co. Notes and Questions J. N. A. Realty Corp. v. Cross Bay Chelsea, Inc. Notes and Questions Problem 10-1 B. Material Breach Jacob & Youngs, Inc. v. Kent Notes and Questions Comment: The Doctrine of Constructive Conditions Sackett v. Spindler Notes and Questions C. Anticipatory Repudiation Truman L. Flatt & Sons Co. v. Schupf Notes and Questions Hornell Brewing Co. v. Spry Notes and Questions Problem 10-2 Problem 10-3 785 786 792 796 802 804 806 806 811 814 817 821 824 825 831 833 839 842 843 xviii 11 Contents Expectation Damages: Principles and Limitations A. Computing the Value of Plaintiff’s Expectation Roesch v. Bray Notes and Questions Handicapped Children’s Education Board v. Lukaszewski Notes and Questions American Standard, Inc. v. Schectman Notes and Questions B. Restrictions on the Recovery of Expectation Damages: Foreseeability, Certainty, and Causation Hadley v. Baxendale Notes and Questions Florafax International, Inc. v. GTE Market Resources, Inc. Notes and Questions C. Restrictions on the Recovery of Expectation Damages: Mitigation of Damages Rockingham County v. Luten Bridge Co. Notes and Questions Havill v. Woodstock Soapstone Notes and Questions Jetz Service Co. v. Salina Properties Notes and Questions D. Nonrecoverable Damages: Items Commonly Excluded from Plaintiff’s Damages for Breach of Contract Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co. Notes and Questions Erlich v. Menezes Notes and Questions Comment: Recovery of Punitive Damages for Bad Faith Breach of Contract Problem 11-1 E. Buyers’ and Sellers’ Remedies Under the Uniform Commercial Code 1. Buyers’ Remedies a. Cover, UCC §2-712 b. Market Damages, UCC §2-713 c. Damages for Accepted Goods, UCC §2-714 d. Specific Performance, UCC §2-716 e. Incidental and Consequential Damages, UCC §2-715 Problem 11-2 2. Sellers’ Remedies a. Resale Damages, UCC §2-706 b. Market Damages, UCC §2-708(1) c. Lost Profits, UCC §2-708(2) d. Seller’s Action for the Price, UCC §2-709 e. Seller’s Incidental and Consequential Damages, UCC §2-710 845 847 851 854 857 861 861 865 868 869 871 874 882 886 887 890 890 899 904 909 911 911 916 920 929 932 935 938 938 938 939 940 941 941 942 942 942 943 943 944 945 Contents Problem 11-3 F. Justifications for the Expectation Damage Rule 1. Protecting the Expectation Interest Under a Wholly Executory Contract 2. Encouraging Breach of Contract: The Theory of ‘‘Efficient Breach’’ Roth v. Speck Notes and Questions Problem 11-4 12 Alternatives to Expectation Damages: Reliance and Restitutionary Damages, Specific Performance, and Agreed Remedies xix 945 946 946 951 958 960 964 965 A. Reliance Damages Wartzman v. Hightower Productions, Ltd. Notes and Questions Walser v. Toyota Motor Sales, U.S.A., Inc. Notes and Questions B. Restitutionary Damages United States ex rel. Coastal Steel Erectors, Inc. v. Algernon Blair, Inc. Notes and Questions Lancellotti v. Thomas Notes and Questions Ventura v. Titan Sports, Inc. Notes and Questions Problem 12-1 C. Specific Performance City Stores Co. v. Ammerman Notes and Questions Reier Broadcasting Company, Inc. v. Kramer Notes and Questions D. Agreed Remedies Westhaven Associates, Ltd. v. C.C. of Madison, Inc. Notes and Questions Problem 12-2 Problem 12-3 983 986 988 993 995 1004 1007 1008 1010 1018 1022 1027 1031 1032 1039 1044 1045 Table Table Table Table Table 1047 1067 1071 1075 1077 of of of of of Cases Uniform Commercial Code Provisions Provisions from Restatement (Second) of Contracts Provisions from Restatement (First) of Contracts Provisions from Other Restatements 965 965 972 975 979 983 xx Contents Table of Other Acts, Codes, and Rules Table of Secondary Authorities Index 1079 1081 1095
