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Used to define ambiguous term if it DOES NOT COUNTER terms of K.
- Burden of Proof on party wanting to use narrower meaning.
- Ct allows various forms of evidence to prove the meaning.
- Determination depends on success of party meeting their burden of proof.
Horse Scrap Meat and Protein %
Usage of Trade (1-303(d))
- Meanings used in custom and practice often overrule usual meanings of a word.
- Parties participating in industry are assumed to know customs and practices of it.
Usage of trade is written AUTOMATICALLY into K.
Hawaii Paving K w/ Shell
Standard of Industry
- Gov wouldn't allow price increase during project b/c P asked for price protection and D had agreed two times prior.
- Price protection is standard.
Evidence of standard industry practices and prior performance of parties is admissible if it is NOT INCONSISTENT w/ terms of K.
Waiver v. Course of Performance - waiver can be retracted unless relied on by other party. if a waiver for just on occurrence, must be noted in K.
Custom and Usage (2-202)
- D agreed to sell P min amount for 3 years. Prices fell and P couldn't resell and therefore bought less. D sued.
- P wanted to enter evidence showing terms in K were mere speculation dependent on market conditions.
Evidence of custom/usage is NOT ADMISSIBLE if it contradicts express terms fully integrated into K.
Latent Ambiguity/Mutual Mistake
- Both parties thought of different ships leaving port at different times, K never completed.
- K voided b/c Ct can't figure out which ship was intended in K.
- P seller can't sue for breach.
- When both parties are mistaken to essential element of K, Ct attempts reasonable interpretation from context before voiding it.
- K can be voided if latent ambiguity can be interpreted differently by parties.
Envelope Printing Labor Agreement
Party who agrees to term knowing that it is ambiguous may not obtain rescission from K once ambiguity is clarified.
Fire Blanket Fire
Implied Warrant of Merchantability (2-314)
No breach of IWM here b/c not sufficient evidence that ordinary use includes covering huge generator.
- Breach of IWM when product does not perform according to reasonable expectation of ordinary use or consumer.
- P (not the manufacturer) bears burden of showing ordinary purpose of product.
Oil for Fancy Machine
Implied Warranty of Fitness for Particular Purpose (2-315)
Mobil supplied P w/ special oil and knew it was different, so they should have reason to know that it wouldn't work. IWF breached.
IWF: Seller has reason to know and buyer relies on seller's expertise.
South Carolina Electric
Faulty Boiler Hose
Implied Warranty Limitation (2-316)
- Boiler sold to P w/ faulty hose that caused fire and $350k in damages.
- IWM and IWF were supposedly disclaimed in K, but disclaimers where NOT CONSPICUOUS.
- Warranty was found valid only b/c parties had previous negotiations about them.
If a party wants to limit a warranty in writing, it must be conspicuous enough to draw buyer's attention to the exclusion.
Faulty Steering Wheel
- Adhesion K/Unfairness/Express Warranties
- 2-313 and 2-719
- Wife injured when steering machine failed.
- K warranty limited to only protecting purchaser and replacement of defective parts was invalid.
- It was in SMALL FONT and UNCLEAR wording.
- P had no bargaining power: unfairness pub pol.
Adhesion K: no bargaining, not fundamentally unenforceable until something unfair or inequitable goes wrong.
Douche Sells Campground -- Unfair!
K overly oppressive: inadequacy of consideration; small benefit (loan only $5k); restrictions on land use.
Unenforceable K b/c it was overreaching and unfair.
Lifetime Agreement for House - Fair!
Duty of Good Faith (1-304; 205)
- Will and lifetime agreement for niece to take care of aunt conflicted.
- Look to desires of parties at time K was entered into, not retrospectively.
- Adequate consideration ok here b/c aunt didn't know how long she would live at time of K.
Military Product Markup - Fair!
Middle man for goods bumped up price for resale and D sued for unfair markup.
- K enforced b/c markups are common practice.
- K was not illegal, fraudulent, or induced.
Lease Exculpatory Clause
Adhesion K (2-302)
Valid clause relieved LL of any liability from neg claims when P fell and sued.
LL/T K is not monopolistic, fair market competition, no disparity in bargaining power, no negotiation attempts at lease signing.
Boiler Plate Arbitration Clause - Unenforceable!
- K required arbitration in front of biased board for D and when P lost he sued.
- K clause was unconscionable b/c of bias.
- K must be in reasonable expectation of weaker party (P knew b/c he had worked w/ D before).
- K can't be unconscionable or unduly oppressive (biased board was)
Forum Selection Clause - Enforceable!
K on ticket required all litigation take place in FL but P tried to sue in WA.
- Clause upheld as fair for efficiency purposes.
- Passengers from all over U.S.
- Beneficial to passengers to keep prices down.
Credit Attachment - Unconscionable!
- D required buyers to purchase on credit and attached all items so when P defaulted on most recent item all prior purchases were seized.
- Dragnet Clause - takes advantage of low income folks.
Unconscionability determined from circumstances when K was made.
Overpriced Fridge - Unconscionable!
- P bought $300 freezer that came to over $1k w/ additional credit and fee charges.
- K took advantage of consumer.
Employment Arbitration - Unconscionable!
- P signed emp agreement requiring all wrongful termination claims be settled by arbitration.
- Invalid b/c it was only enforceable against employee, not employer.
- P had no negotiating power over clause.
- Procedure and content must be in balance.
- Sliding Scale Test: Where there is a lot of procedural unfairness, there only needs to be a little substantive unfairness (and vice versa).
Scott v. Cingular Wireless
Arbitration Clause - Unconscionable!
- D's arb clause prevented class action suits, requiring resolution in individual arbitration.
- Such exclusion goes against public policy.
- No one would sue for only $30 individually.
Good Faith (1-201(19))
- D challenged P's scores and ignored P's evidence supporting his scores.
- D must exercise good faith in evaluating P's evidence.
Eastern Air Lines
Good Faith -- Usage of Trade
D thought P breached for fuel freighting, but they weren't b/c practice was industry applied.
- Good faith and fair dealing DOES NOT OVERRIDE usage of trade!!!!
- Good faith and fair dealing ARE NOT required during K negotiations.
- Bargain for the best deal you can get.
Market Street (JCPenny)
Buy Out Provision
- Lessee wanted to make improvements and K provision said if their proposal was rejected they could buy out property for less than MV.
- Lessee intentionally made request for amount under required $7M so it would be rejected and they could proceed w/ buy out.
- P was not required to remind D of provision, but they CANNOT INTENTIONALLY use it to take advantage of them.
If a party is aware that opposing party is ignorant to a provision, they are required by good faith/fair dealing to draw their attention to provision.
Bloor v. Falstaff Brewing
Beer Marketing and Sales
- D had K to promote and sell P's beer but started losing $ so they only focused on beer w/ high sales and not P's beer.
- Best efforts K sets a high standard.
- D didn't have to go bankrupt selling P's beer, but they might have to lose some scrilla.
- D was NOT using their best efforts.
P had oral K w/ D to exclusively sell shoes, but D ended up giving dept store distributor rights.
As long as enough time is given to recoup the investment, an at-will K can be terminated if there is no time constraints on the K.
Bongs and Jewelry
Illegal Contracts (178)
- P sold company, purchaser defaulted so Psued and D countered that company was found to be selling bongs too.
- K was voided -- public policy implied from other statutes.
Mob Involvement in Concrete Ks
- D completed performance of K and P refused to pay claiming K was illegal for extortion since mafia controlled who go what concrete Ks.
- K was legal on its face.
Although it was part of anti-trust violation, K was not voidable.
Hopper v. Animal Clinic
Clinic Non-Compete Clause
NC Clauses (188)
- Employee signed one when hired and couldn't open her own clinic after she left.
- NC only required 1 year, NOT UNREASONABLE amount of time in this case. She lost.
- D didn't go for injunction b/c bond required.
- P notified company of FDA violation and was fired.
- P's job was to monitor food violations and could have been found responsible if violation cont'd.
- P was acting as a good citizen...wrongful discharge.
In House Legal Counsel
- P reported defective dialysis equipment to co, but co wanted to sell it anyway.
- When P threatened to report it, he was fired.
- Code of Prof Resp required him to report any illegal activity.
- In house counsel is not protected against wrongful termination if they are required by law to fulfill the duties of their job.
- To extend retaliatory discharge liability in atty/clt relationship could have undesirable effects on communications b/w atty and clt.
Note cases: Attys should be accorded retaliatory discharge remedies when mandatory ethical norms collide w/ illegitimate demands of employer.
- Wife claims she didn't know what she was signing and wanted to get out of it.
- Pre-nup agreements are enforceable as written if they were made after fair financial disclosure.
- Surrogate didn't to give up right to baby after she gave birth.
- Surrogate Ks are NOT enforceable if there is an exchange of $ for relinquishing parental rights.
Goes against public policy and statutory law.
D was to supply P w/ specific carrots, but D sold to another buyer when the price rose and other buyer sold to P for even more.
- Uniqueness of carrots required D's specific performance.
- P lost in the end b/c unfair provision in K prohibiting D from selling to anyone else.
Klein v. Pepsi
Corporate Jet Sale
Specific Performance (2-716)
- D backed out of jet sale.
- Jet was not unique; there were plenty of others out there.
- Other remedies were available to P, so specific performance was not the adequate remedy.
Uniqueness not always based on subjective standards, but can be based on value of product by party requesting relief.
Morris v. Sparrow
Horse as Payment
- P took care of D's farm for $400 and horse that P trained while looking after farm.
- D paid $ but wouldn't give up the horse.
- Horse was unique IN THE EYES OF P.
- P would not have put in time training horsey if he didn't expect to get the horse.
Specific performance was adequate remedy b/c no other calculable damages were available.
Specific Performance (360)
- D was to supply propane to meet P's requirements but oil shortage made it hard and D terminated K.
- Specific performance appropriate b/c there was no guarantee that P could acquire propane under other Ks w/ other companies.
- Too difficult to figure out damages under long term K. Damages would be speculative.
- Not a unique item, but a unique situation.
Pharmacy Exclusion Lease
- P leased from D w/ caveat that no other pharmacy would be allowed in mall but D leased to other pharmacy anyways.
- P's sought injunction denied b/c parties should work it out themselves.
- Damages would be too hard to calculate (speculative) and injunction would cost too much for court.
- Parties have incentive to negotiate amongst themselves...efficient breach.
Wool Lost Profit
Expectation Damages - Overhead
D buyer breached K and P sued to recover lost profits and dispute over what should be included followed.
- Overhead should not be included in calculation of lost profits on individual transactions.
- If overhead was included, it would be included in costs saved or avoided.
Expectation Damages - Cover (2-712, 2-713)
- When D wouldn't sell, P was forced to buy on open market to fulfill another K with a buyer.
- Cover damages were available (replace$ - K$).
Expectation Dmgs - Lost Volume Seller (2-708)
- P backed out of K and D was able to sell equipment to someone else for same price.
- If D was indeed LVS, D could prove they were entitled to damages under 2-708.
Cranes and Steel
Losing Contracts - Quantum Meruit
- D wouldn't pay for crane rental costs so P terminated performance and sued to recover for labor and equipment costs already spent.
- If P had completed K, they would have lost $.
- D argues that no recovery is available b/c there would have been no profit loss to recover.
- P entitled to damages for work already done.
Bridge to Nowhere
Limitations on Damages - Avoidability (350)
- D was building bridge for county when it decided they no longer wanted it. D kept at it.
- If K has been cancelled, the other party must end work on it to MITIGATE DAMAGES.
- No damages available for D after cancellation.
- D entitled only to labor/materials spent prior to cancellation and projected profit.
Goods EXCEPTION: Avoids waste and undue hardship on manufacturer.
- Limitations on Damages -
- Substitute Performance (2-713, 1-106)
- P repudiated K to sell D seeds when price rose.
- If seller breaches K to deliver goods and buyer fails to cover, buyer's damages measured by MP$ - K$.
- When bad faith is involved, market price damages awarded even if in excess of buyer's loss.
- Min rule: 1-106 when party lets them out of K.
Jacobs & Young
Pipe Fuck Up
Limits on Dmgs - Cost of Remedying Defects
P was to install specific piping in D's house but instead used a similar type of pipe for half the project.
- Damages awarded for loss in market value rather than cost of replacement.
- Replacement would require tearing apart walls.
Gravel and Sand Grading
Limits on Dmgs - Cost of Remedying Defects
- P to remove D's gravel and sand then grade land to where it was before lease.
- D WILLFULLY BREACHED.
- Willful breach allows for reasonable cost of what breaching party failed to do.
- Exception to general rule that P should only get difference in value caused by breach.
Coal Mining Leased Land
Limits on Dmgs - Cost of Remedying Defects
- D was to strip farmland and restore it after job was done, but D didn't restore.
- $ award was for diminished value of the land.
- P could have gotten $ through liquidated damages...charge more upfront or make it a condition of K.
Damages can't be so excessive that they cause economic waste.
Hadley v. Baxendale
Broken Mill Shaft
Limits on Dmgs - Cost of Remedying Defect
Baxendale Damages: Damages awarded must be foreseeable by D (consequential damages).
- D failed to deliver mill shaft on time to P which delayed and prevented P from opening up mill.
- P had to prove that not opening the mill NATURALLY FLOWED from not having shaft.
- Ultimately turns out to be judgment call.
- It was not foreseeable that the mill opening depended on shaft, so P could not receive lost profits.
- If P had informed D that shaft was necessary to open plant, he could get $.
Consequential Damages: Have to show lost profit AND both parties were aware of SPECIAL CIRCUMSTANCES that could FORESEEABLY cause lost profits. 2-715(2)(a)
Italian A/C Compressor
- Limits on Dmgs - Cost of Remedying Defects
- Incidental Damages (2-715(1), 351)
- D supplied compressors to P, but they didn't conform to K terms so P returned them.
- Buyer may recover lost profits and other incidental damages if lost profits were FORESEEABLE.
Incidental damages awarded for shipping costs, etc. b/c lost profits were foreseeable.
Fera v. Village Plaza
Book & Bottle Shop
- Limits on Dmgs - Cost of Remedying Defects
- Certainty (352)
- P leased space for 10 years but lease never came to fruition and P sued for lost profits.
- P must be able to prove damages w/ reasonable CERTAINTY.
- Must be very little speculation.
- Experts brought in to determine what possible profits could have been and jury awarded $.
Wasserman v. Township of Middletown
Limits to Dmgs - Liquidated Damages
D cancelled lease and refused to pay damages outlined in cancellation clause of lease K.
Liquidated Damages typically disfavored, but here, reasonable prediction of actual harm was determined at the time of formation.
NP Excuse - Conditions (225, 226)
- P unable to get mortgage at specified rate and when D offered to make up the difference, P refused and sued to get deposit back.
- Condition of land sale K was to obtain mortgage financing w/ specific stipulations.
- P was free to reject D's offer.
Failure of a condition precedent makes a K unenforceable.
Internatio v. River Brand Rice Mills
NP Excuse - Conditions (242, comment c)
- D's sale of rice contingent upon 2 week notice from P telling D where to deliver.
- D rescinded K after no notice was given and term of K was coming to an end.
- Rescission okay b/c condition precedent was not satisfied before date of performance.
Importance of prompt delivery by seller generally derives from circumstance that goods (unlike land) are subject to rapid $ fluctuations.
NP Excuses - Conditions
- P didn't pay subKs after they finished roofing work b/c owners of condo went bankrupt and didn't pay P.
- Payment to genK is NOT condition precedent to subKs getting paid.
Provision in K was too ambiguous. Conditions to K must be set forth clearly.
Dead Daughter Pic
NP Excuses - Conditions
D refused to accept P's painting of his daughter and his right of refusal was just fine b/c it was stated as a condition in the K.
There was no violation of public policy, fraud or mistake, so parties are strictly bound by terms.
Architecture Certificate/Movie Theater
- D never paid P final $2.5k payment for building a movie theater b/c D had never seen the final certificate which was a condition of K.
- D had never required throughout the project as conditioned in K.
- D WAIVED CONDITION b/c previous payments were made w/o certs.
Downs is not on board w/ decision since final certificate is more important than intermittent ones and final payment was much more than previous payments.
Hicks v. Bush
Merger of Shareholders
NP Excuses - Conditions
- Parties agreed to merging shares of companies but when P transferred his D claimed there was parol condition to not merge until enough $ had been raised.
- Parol evidence was admitted since it did not contradict terms, but supplemented them.
Parol evidence can be used to prove conditions.
- D refused to turn over his business to P after using him as apprentice and promising to turn over business for good price.
- P claimed D did not provide him w/ sufficient evidence that he could pay for business.
- Insufficient security was enough to deny P the business.
K for exchange of promised performances may give rise to implied condition on that exchange, making each party's perf dependent on the other party's perf.
- Constructive/Implied Conditions
- Order of Performances (234)
- P to excavate for D through oral agreement that D would pay installments but D failed to pay first one and P walked off job.
- Work must be substantially performed in order for payment to be demanded.
- Law does not require partial payment w/o written agreement.
- If K is silent, default says performance must proceeds payment in absence of contrary indication.
Jacobs & Young
Pipe Case (again)
- Substantial Performance
- Material Breach (241)
- Must have dependent conditions for courts to enforce them. If so, substantial performance does NOT matter.
- This was not dependent condition b/c D had already been living in house and could not take back or re-do, so nominal damages only.
- Substantial Performance
- Material Breach
- With $1600 worth of work to complete, P walked off job after parties got in tiff and D refused to pay remaining $6 owed P.
- D claimed no substantial performance b/c of a misplaced wall that would cost $4k to correct.
- Substantial performance found b/c misplaced wall did not have an effect on MV of home.
- No material breach.
Divisibility of K (240)
- P to deliver lumber but under different rates for different sizes of logs stipulated by K.
- When some logs got lost in flood, D didn't pay for lost logs.
- K was divided to allow for compensation for logs that were delivered.
If items are distinct and a price can be placed on each item, K is divisible.
Employment K Ends Early
- P hired for one year for $120, but quit after 10 months and sued for $100 he worked for.
- P got damages for work done despite his breach.
Regardless of breach, the other party received benefit in advantage over and above damage resulting from breach.
- D hired to work on P's house and P was to pay in installments, but D didn't work up to specifications so P fired him after 2 months.
- P had paid $800 and he had nearly $3k worth.
- P breached but D was justifiably fired.
- Since P had accepted K by paying him $800, so he got the balance for the first installment.
- When builder has supplied work and labor under agreed upon payment, he is entitled to recover for such although he departed from terms of K.
- UNLESS: work done has not benefited owner; OR work done is entirely different from K work; OR he has abandoned work and left it unfinished.
Walker & Co
- Suspending Performance/Terminating K
- Material Breach (241)
D rented sign from P w/ provision that P would maintain it. Tomato got thrown at it, P didn't fix it, so D said their K was void. P sued to collect $ owed for sign rental.
- Because tomato and cobweb does not constitute material breach, D had no right attempt K termination.
- Partial breach, not total breach by P.
Bulldozed Wall Oopsie
Material Breach (241)
- SubK accidentally bulldozed wall and wouldn't pay for it even though he had liability insurance, so genK took it out of his payment.
- SubK walked off job and counter-sued genK when genK sued for breach of K and neg.
SubK committed material breach by not paying for wall and not working in a "workmanlike manner", but GenK was not entitled to withhold payment while SubK continued work.
Iron Rails Unattainable
Hindrance & Prevention Doctrine
D unable to get rails to provide to P b/c P was purchasing all of them from the suppliers, making it "almost impossible" for D to get.
- P entitled to damages for non-performance b/c P was not INTENTIONALLY preventing D from performing their side of the K.
- Conduct of one party that prevents the other from performing is an excuse for non-performance AS LONG AS preventing party makes it super difficult or impossible for other side to perform, absent good faith.
New England Structures
Hindrance & Prevention Doctrine
- P fired subK D b/c he was not providing enough workmen to finish project on time and then sued D for difference in cost to replace him.
- P gave other reasons for terminating him at trial which was fine.
- P would only be prevented from giving new evidence for why K was terminated if D can prove he relied to his detriment on the original reason.
- P doesn't need to convey all reasons for termination, as long as stated reason in termination communication is sufficient.
Courier's Tour of Europe
Prospective Non-Performance (250)
D hired P as courier but cancelled and P sued prior to date of K.
- P was able to sue and did not have to wait for K to come due b/c it was likely that K would be breached.
- P should not be required to forego other employment while waiting to see if D changed his mind and decided to perform.
Kanavos v. Hancock Bank
Option K and Right of First Refusal
Prospective Non-Performance (254)
P had right of first refusal in option K which was violated when D sold stock to 3rd party b/c they thought P wouldn't have $ to buy it.
P must show they are able to perform their part of K, but since P was never given the opportunity to show he could get the $, the ct gave him 60 days to do so.
McCloskey v. Mindweld Steel
Steel and Steel Structure K for Hospital
- Prospective Non-Performance
- Anticipatory Repudiation (2-610, 250)
- D was supposed to get and build steel structure but was having difficult time.
- P required assurance from D or else K would be terminated. D responded that they were having trouble and P took that as repudiation and sued for breach.
- D's notification of their struggle was NOT an anticipatory repudiation.
- AR can only be demonstrated by ABSOLUTE and UNEQUIVOCAL REFUSAL to perform
- DISTINCT and POSITIVE STATEMENT of an inability to perform.
C.L. Maddox v. Coalfield
Coal Mining Facility
- D orally agreed to demolish and rebuild mining facility for P but once work began P never signed D's proposed written K so D pulled workers after close to half done.
- P agreed to sign after that, but was adding terms that were unacceptable to D.
- P hired new company to finish the job and sued D for difference. D countered for payment of work done.
- D had justifiable reasons to suspend performance b/c P showed an intent to not perform the K as initially agreed upon.
- If D had continued performance, he would not have been able to recover damages.
Polystyrene Partial Shipment
Anticipatory Repudiation (2-713, 2-723)
- P only made partial shipments to D and told D rest would be delayed.
- P ended up canceling rest of orders and D refused to pay for those already received.
- Buyer's damages for anticipatory repudiation are measured by MP$ - K$ at a COMMERCIALLY REASONABLE time after repudiation.
- Market price is determined by time buyer learned of breach (which can mean 3 possible times).
Gas Supply to U.S.
- D to provide U.S. with gas for one year housing project but repudiated after several months, giving U.S. 1 month's notice.
- U.S. took other bids and gave D 3 days to retract their repudiation upon hiring new co.
- D did not respond in time so other guy was hired. D then informed U.S. of their retraction 3 days after new hiring and 2 days before they planned to stop gas service for U.S.
U.S. refused the retraction and was free to do so b/c they had relied on repudiation and given D deadline to retract.
Pitt-Des Moines Steel
Bank Loan Assurance - Payment for Water Tank
Assurance of Due Performance (2-609)
- P was to build D a water tank and be paid in full 30 days after completion. P applied for bank loan but when it fell through, P asked for assurances and stopped work when D did satisfactorily assure them they had $ to pay.
- P sued for breach claiming repudiation; D countered that P was the breaching party.
While P had a right to ask for assurances, they wrongfully breached by stopping work b/c they did not reasonably need assurance at that time because money was not due for months.
Norcon Power Partners
3 Tiered Power K
Assurance of Due Performance
D demanded assurance that P could pay $610M in future payments.
- Corporate parties to long term K may demand adequate assurance if there are reasonable grounds to doubt the other party will fulfill its obligations.
- The amount was so high here that it was reasonable to request assurance.
Building that Fell Twice
Mutual Mistake (rule made before restatement)
D hired to build house on P's land but building fell twice due to weak soil so D refused to re-build a 3rd time, claiming mistake of fact about soil quality. P argued it was b/c of negligence on D's part and sued for breach of K.
- There was no excuse for D to not complete building.
- If soil needed to be drained to make it more sturdy, K required D to do so.
- Mutual Mistake (152)
- Restitution (158)
P bought land thinking it would be perfect to grow jojoba. P tested land after paying down payment and it was not good enough so P rescinded and sued for his deposit on grounds of mutual mistake of fact.
- It was a mutual mistake of a material fact.
- P got his down payment back + amount he had enhanced the land - fair rental value of land while P occupied it.
Mineral Park Land
- Superseding Impracticability (261, comment d)
- Restitution (272)
D was to buy all gravel for a project from P but ended up not taking as much as originally contracted for b/c they could not have practically taken any more than they did since it was not "available" above ground.
- Performance is excused when impracticability is found b/c performance depends on existence of a given thing and such existence is assumed in the K, but the thing ceases to exist or is non-existent.
- Non-occurence of the event must have been a basic assumption on which parties made the K.
- Don't focus on excessive cost.
Music Hall Fire
- P was to rent D's music hall for 4 nights of concerts but hall burnt down just days before concerts were scheduled.
- P sued D for event advertising costs.
- Because neither party was responsible for the fire, both parties were excused from K.
- If an occurrence is more foreseeable, parties can still be excused from it if it occurs.
Suez Canal Shipping
- Risk of Loss (2-509(3))
D was to deliver goods to Iran but the typical route through the Suez was closed due to international problems so D took longer route around it, later seeking additional compensation (using quantum meruit) for extra costs incurred for the detour.
- It was not unexpected that the Canal would have been shut down, so not really impracticability.
- Unforeseeability, however, does not end the argument of impracticability.
Ct also said it won't grant a party additional costs other than that agreed to in K if party relies on QM theory and party can't show its K performance was impractical.
Selland Pontiac GMC
School Bus Bodies
- D was to supply P w/ school bus bodies to be manufactured by another company as set forth in K.
- No completion date or escape clause was in K allowing D to get out of it if supply failed.
- Regardless, bodies were never manufactured and P sued for breach after D cancelled order.
- D not held liable b/c suppliers name was specified in K.
- Seller's duty to perform may be excused when unexpected events render seller unable to obtain supplies from source expressly identified.
Sugar Supply for Molasses
Force Majuere (2-615)
P to buy D's molasses but D failed to deliver agreed upon amount b/c sugar company didn't produce enough sugar to supply to D.
- D's duties were not narrow and since D did not put that term in K it failed to relieve itself of fault.
- If seller fails to take all due precautions to ensure steady supply of raw materials to complete his goods, seller is not excused when such raw materials run out.
In midst of oil embargo, D attempted to get out of requirement K b/c the increased cost of oil made performance impracticable.
- To excuse seller from performing K b/c costs have unforeseeably increased, unforeseen costs must be MORE THAN ONEROUS OR EXPENSIVE.
- It must be positively unjust to hold parties bound.
Apt Rental for King's Coronation
Frustration of Purpose (265)
D leased flat to P for 2 days for P to watch King's coronation but event was canceled and after making a deposit, D refused to pay rest of the rent.
- D did not have to pay b/c coronation was purpose of K.
- Although performance isn't impractical, it may still be excused on basis of frustration of purpose.
- There must be a non-existence of events which both parties considered the existence of such as foundation of K.
- Differs from impracticability b/c value of performance to receiving party (not the cost) that turns out to be significantly different than expected.
K was for importation of lamb pelts when gov prohibited them coming in to Philly.
K not impossible to perform b/c once you get them imported from importer, getting them to end locale is your problem.
When goods are delivered free on board (F.O.B.), title and risk of loss pass at the location specified.
Cement Median Dividers
Frustration of Purpose
Gov hired D to do road project, D then hired P to supply the road dividers. Gov decided not to use them, so D called and canceled order.
D's need for barriers had disappeared and was found to be an excuse b/c there was a basic assumption that K would be performed only if they were needed.
- When event not caused or anticipated by either party destroys K and associated value of performance, parties are excused from further performance.
- But, risk of such event must not have been allocated in K terms.
Northern Indiana Public Service
Electric Utility Provider
Force Majuere (2-615)
Price of electricity going up dramatically and D coal company thought they could pass price increase on to customers but were not able to do so b/c P found cheaper suppliers.
- Specific performance not proper remedy here b/c there is a more appropriate way to go about it...and this is purely a price thing so it is more difficult to excuse P for breaching.
- Price argument is a risk that is allocated in most Ks b/c fixing a price is a risk in itself.
Young v. City of Chicopee
Bridge Burning Down
Bridge burnt down due to no one's fault.
P got paid for work they did, but not for materials or anything else.
Alumina to Aluminum
- Frustration of Purpose
P was to convert D's alumina to aluminum but costs to do conversion went crazy high. P would lose $75M if they continued performance.
- P able to reform K b/c based on circumstances, avoidance of abnormal risks was attempted by basing its charge for conversion on an index.
- Modification of selling price in light of the circumstances that upset the formula preserve purposes and expectations of the parties.
However, if ceiling remedy for Alcoa becomes unfair, the greater of the K price and the price at which Alcoa profits 1 cent per pound shall be paid by D for goods.
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