October 1, 1998

Review of contract assignment

unilateral contract: a contract in which only one party makes a promise or undertakes a performance

bilateral contract: a contract in which each party promises a performance, so that each party is an obligor on his or her own promise and an obligee on the other's promise.

Diamond v. University of Southern California review

Contract was bilateral upon formation. Promise of season tickets with option to buy Rose Bowl tickets.

Can’t sue for repudiation where the contract is unilateral.

Acceleration clause - if miss one payment, then you have to pay all the payments at once. This is in most loan agreements. Can get around the doctrine

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October 6, 1998

Anticipatory repudiation

Diamond v USC – this doctrine if contract is unilateral, or has become unilateral, one may not sue for breach prior to the time performance was due. This is why the court found the lawsuit for the Rose Bowl tickets was premature.

Unilateral contracts arise most often in loans, consumer purchases, installments.

In some states a debtor can reinstate, even if lender does not want it (CA). If you pay enough money to bring everything current, you can reinstate original contract. This is an example of a deceleration clause. Some people will write this clause into the contract if there are no statutes that guarantee it.

Damages

Definitions:

• remedies for breach of contract: primary is compensatory damages (also can get an order from the court to perform)
• also punitive damages (punish party that made breach – usually cannot get punitive damages in contracts)
• measurements: what is injured party’s expectation? Mean the same thing:

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October 8, 1998

Petropoulos v. Lubienski

Breach of contract. Homeowner (D) contractor (P). Contract price $43,000.

How can you tell about whether the damages can be mitigated or not? Like if there is a breach of contract. Depends on how easy it is for the person to get another job. Car dealer v a builder.

Costs to date + profit now expected = damages

Contract price – what it costs to complete = damages (should be same amount as above)

Or can use value of services performed to get damages.

Restitutionary measure –

Watson v. Wood

Problem was that there was not termination date specified

Referee – a person appointed by court that is goes through all the documents, and come up with a recommendation as to a factual finding. Sometimes referee has task of reaching a legal conclusion for the court as well.

What if prof got fired? What would he have to do to mitigate circumstances?

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October 15, 1998

Compensatory damages

Expectation (Thorne)

Reliance (Reed)

Restitution (Petroupolous, Watson)

Limitations on Expectation

Reas – certainty: Freund, Center Chemical

Mitigation: Rockingham, Sutherland, Parker

foreseeability: Hadley, Globe

1. must establish amount of damages with reasonable certainty. Where there are cases where damages are not provable, it is as if the contract was unenforceable.

Mitigation: it is generally incumbent upon an injured party to do whatever he reasonably can

§ 353 restatement – recovery for emotional disturbance will be excluded unless the breach also caused by bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.

Hadley v. Baxendale – (REMEMBER THIS NAME) –

consequential damages. Used to describe damages that occur to aggrieved party beyond damages that would naturally occur. This is a limited meaning. Do not mean this type of damages will arise in every case. This is a component of the expectation theory.

351. Loss may be foreseeable as a probable result of a breach because it follows from the breach a) in the ordinary course of events, or b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.

Erie Railroad case - In a diversity case need to apply the state law of the state in which the district court sits in which the case was filed.

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October 20, 1998

Example: If a roofer promises to put on a roof, but then did not finish the roof, and it rained and there was damages to the ceiling. This is an example of consequential damages. The party in breach had reason to know this could happen. See section 351 of the restatement.

Expectation measure of damages has two components:

1. Consequential damages
2. General measure of damages (direct measure of damages incurred)

$332 – cost of roof by builder two

$232 – cost of new roof by builder one

-------- - subtract to get direct damages

$100 – this is direct damages but also have to figure in consequential damages

$250 – cost of damage caused by leaving the roof exposed (rain got in)

------- - Add this to the direct damages to get total damages

$350 – total damages (direct and consequential)y

see page 883 for an example of a consequential damages clause disclaimer

more examples:

real estate salesperson has car totaled – sees a ad in newspaper to buy a new car. Agrees to buy the new car, goes to get money, but then when he comes back, the car is already sold. Salesperson does not find a new car for a few weeks, then comes back and sues seller for damages. What damages can salesperson recover?

$15,000 - Replacement car

$13,000 – price of what seller was going to sell the car for

----------- - subtract to get direct damages

$2,000 -

• buyer had a duty to mitigate damages
• damage might be disproportionate to amount of the cost

Holmes: contract law is an economic mechanism. Once you enter into a contract there is an implied agreement to pay damages unless you follow through with the contract. Just an allocation of resources.

Lake River case: liquidated damages

1. reasonable estimate of damages
2. difficult to measure the damages at the time of the breach

If both of these components are satisfied, then court can make a reasonable estimate of what damages might be. These are the standard tests when figuring out liquidated damages.

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October 22, 1998

1. perception at time of formation that damages will be difficult to measure if breach
2. reasonable estimate of likely damages

In the event of a breach of this contract by Washington Square Press, Inc., Freund shall be entitled to the equivalent of 10% of the retail price of 10,000 copies of the book minus however many copies had been sold before the breach, had they been sold in the continental United States, as liquidated damages and not as a penalty.

If publisher breaches, publisher shall pay ____

Freeman Mills case (handout)

Bad faith breach of implied covenant is a tort.

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October 27, 1998

White v. Benkowski review

Difference between torts and contracts

Tort

• when action is intentional is usually a tort
• breach is accompanied with fraud or conversion
• means use to breach the contract are tortuous, involving deceit or coercion
• on party intentionally breaches the contract intending or knowing that such a breach will cause severe harm
• intention to breach and intention to harm or knowledge of possible harm
• the harm must be severe
• bad faith breach of an insurance contract by insurance company

Contact

• breach of contract is usually motivated by economic reasons
• party knows they can get ahead, and only have to pay to make it right got the party they breached with
• want people to have freedom to commit "efficient breaches" and not have to worry about a breach being a tort

WAY TO ANALYZE ON A TEST:

contracts in which it is clear that the reason for breach is purely economic, that there will not be any tort liability.

In cases, in CA, in which there is a bad faith breach of a contract, or with intention for fraud or conversion punitive damages are available

IN cases where duties are created by contract, where service was contracted for, negligent performance is a tort (doctors, lawyers, accountants, etc)

Will err on side of breach of contract because we do not want to deter efficient breaches. If it is a close call, usually will go to breach of contract.

Mosk opinion tries to bring some order to cases as to what is a tort of not.

General notion is that specific performance is a highly unusual remedy in equity that court will grant where damage remedy is perceived to be inadequate. Usually damages can be paid in money which will make up for breach.

Cases in which specific performance might be a remedy:

1. Parker v. 20th Century Fox – maybe ; courts will say it is hard to give damages where performance is too speculative
2. Case in which you bid for unique goods at an auction but then the goods were not delivered. Here there is nothing that will replace the unique goods, so the specific performance of delivering the goods is the only way to make it better
3. Buy a tract of land. Every parcel of land is unique, so there can be specific performance to deliver the specific piece of land