Contracts Issues

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BlairBarb
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Contracts Issues
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2013-05-11 20:13:30
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Spring 2013 Contracts Studying Flashcards for Issues
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  1. Limits on Bargain and Its Performance
    Unfairness
    • Why courts step in:
    •   Disparity in bargaining power
    •   Monopolies taking advantage of public
    •   Public policy

    • Cases:  McKinnon, Tuckwiller, Black
    • Auth:  208; 1-304, 205
  2. Limits on Bargain and Its Performance
    Adhesion K/Standard Form
    • Cases:  O'Callaghan, Graham, Carnival Cruise
    • Auth: 2-302
  3. Limits on Bargain and Its Performance
    Unconscionability
    Determined from circumstances when K was made.

    • Procedural v. Substantial
    • P: fault or unfairness in bargaining PROCESS
    • S: fault or unfairness in bargaining OUTCOME

    Sliding Scale:  If lots of procedural unfairness, only needs to be minimal substantive...and vice versa.

    • Cases: Williams, Jones, Armendariz, Scott
    • Auth: 2-302, 208
  4. Limits on Bargain and Its Performance
    Good Faith
    • Cases: Dalton, Eastern Air Lines, Market Street, Bloor, Lockewill
    • Auth: 205, 1-201(19), 2-103(1)(b)
  5. Limits on Bargain and Its Performance
    Public Policy
    Illegal K
    • 2 main concerns:
    •   Every K made for or about any matter prohibited by statute is void.
    •   Only those Ks that disserve general public interest as indicated by legislature are void.

    • Factors for enforcement of illegality:
    •   Nature of K
    •   Extent of Public Harm Involved
    •   Moral Quality of Parties' Conduct
    •   Do Parties Know
    •   Who would be unjustly enriched and to who's detriment?

    • Considerations to determine illegality:
    •   Does it render K void?
    •   Would recovery still be had?
    •   Relative culpability
    •   Bargaining power involved
    •   Knowledge of parties of K
    •   Public policy

    If loss of K would severely harm one party, it is likely to be enforced.

    In Pari Delicto:  If both parties are responsible for illegal K, ct won't enforce.  If once side is more culpable, ct will likely help less culpable party.

    • Cases: Bovard, XLO, Hopper
    • Auth: 178, 181, 186, 187, 188
  6. Limits on Bargain and Its Performance
    Public Policy
    Employment K
    • At-Will Employment - Lawful discharge rule is that they can be discharged for any reason.
    • EXCEPTION: if enforcing lawful discharge rule would violate public policy.

    • Cases: Balla, Sheets
    • Auth:  187, 188
  7. Limits on Bargain and Its Performance
    Public Policy
    Family K
    Cases:  Simeone, Baby M
  8. Limits on Bargain and Its Performance
    Public Policy
    Licensing Laws
    • Professional whose license is revoked can not be paid no matter what.
    • This protects public welfare.

    Auth:  181
  9. Limits on Bargain and Its Performance
    Public Policy
    Restraints of Trade
    Promise is unenforceable if it restrains trade.

    Promise to refrain from competition that imposes restraint not connected to otherwise valid transaction is unreasonable restraint.

    • Non-compete agreements are reasonable if:
    •   No undue hardship on employee;
    •   It is necessary;
    •   Distance is not ridiculous;
    •   Time period is not too long (as related to industry)

    • Cases: Hopper
    • Auth: 186-188
  10. Remedies for Breach
    Equitable Remedy
    Specific Performance
    Available ONLY when there is NO adequate remedy at law ($ damages).

    Courts are reluctant to make people finish performance b/c they don't want to babysit.

    • Cases: Campbell, Pepsi, Morris, Laclede, Walgreen
    • Auth:  2-716, 357, 359-362
  11. Remedies for Breach
    Measuring Expectation
    Expectation Damages:  Puts parties in position they would have been in had breach not occurred.

    K$ - Cost Saved/Avoided + Other Losses

    Auth: 347
  12. Remedies for Breach
    Measuring Expectation
    Direct Costs v. Overhead Costs
    • Direct Costs:  Vary from K to K
    • Overhead Costs:  All other costs that don't change from K.

    • Case: Vitex
    • Auth: 2-711
  13. Remedies for Breach
    Measuring Expectation
    Cover
    When K is breached and buyer is forced to buy same product at higher price, buyer can recover for difference in price.

    • Case: Laredo Hides
    • Auth: 2-712, 2-713
  14. Remedies for Breach
    Measuring Expectation
    Lost Volume Seller
    Seller has to show that they would sell to another buyer regardless of the breach and would still sustain a profit.

    Car deal is quintessential LVS.

    LVS has burden of proof to show they are.

    Requirement of profitability is JX sensitive.

    • Case: Diasonics
    • Auth: 2-708
  15. Remedies for Breach
    Measuring Expectation
    Losing K
    When goods and services are provided and unintended consequence is that cost of performing the K would be greater than profit.

    • Would not sue for damages if party suing would incur a loss.
    • Instead bring suit in quantum meruit (reasonable value of services)
    •   Recover is undiminished by any loss which would have been incurred by complete performance.
    •   Restitution awarded of reasonable value for benefit conferred.
    •   Sue to get restitution of amount that is already completed.

    Total amount spent / Finishing cost x K$

    Case: Algernon Blair
  16. Remedies for Breach
    Limitations on Damages
    Cost of Remedying Damages
    Liquidated and Penalty Damages
    • Liquidated Damages Enforcement:
    •   Allow parties to control their own exposure to risk.
    •   Avoids uncertainty, delay and expense of judicial process.
    •   Economically efficient.
    •   Corrects potential inadequate judicial remedies.

    Disfavored b/c it may infer unfairness if in excess of injury and public law, not private law, typically determines remedies.

    • Case:  Wasserman
    • Auth:  356
  17. Performance and Breach
    Excuses for Non-Performance
    Conditions
    Condition Precedent: Factor or event which parties intend must exist or take place before there is a right to performance.

    "If so long as..."

    • Condition is not a duty.
    • Does not create new liability.
    • Only limits existing duty.
    • Language of express duty may be strictly complied with.

    • To establish a condition in K:
    •   Due Diligence 
    •   Express Condition of Notice
    •   Divisibility of K 
    •   Don't be Ambiguous
    •   Express Right of Refusal

    Cases (in relative order from above): Luttinger, Internatio, RS 240, Peacock, Gibson

    Auth:  204, 224-229, 234
  18. Performance and Breach
    Conditions
    Waiver, Estoppel, Election
    Waiver:  Agreement that condition doesn't have to occur.  Despite this, K can still completed.

    Waiver can be retracted if it was waived BEFORE time for occurrence, UNLESS other party has substantially relied on waiver.

    If there is reliance, estoppel will preclude retraction.  Retraction CAN NOT happen AFTER time for occurrence regardless of reliance.

    • Election:  When time for condition to occur has expired, party whose duty it conditional makes choice to --
    •   Take advantage of non-occurence so duty is discharged; OR
    •   Disregard and treat duty as unconditional.
    • Reliance plays no role, election is a binding decision.

    Auth: 84
  19. Performance and Breach
    Constructive/Implied Conditions of Exchange
    Types of Conditions:

    Mutual & Independent - either side may recover if other party breaches a covenant where there is no excuse for D to allege breach of covenants on a party or plaintiff.

    Dependent - Performance of one depends on prior performance of another.

    Same Time Performance - Both must be performed at the same time.
  20. Performance and Breach
    Substantial Performance
    Factors to determine whether performance was substantial and nonetheless breached.

    • Purpose to be served
    • Desire to be gratified
    • Excuse for deviation
    • Cruelty of enforced adherence
  21. Performance and Breach
    Suspending Performance and Terminating K
    • When can a party do this?
    •   Was there uncured breach by other party?
    •   Is it breach of duty of performance that was exchanged under exchange of promises? 232
    •   Did breach go to performance that was to be rendered at earlier time than that of aggrieved party?  237
    •   Is breach serious enough to justify self-help of suspension of termination?
  22. Performance and Breach
    Suspending Performance and Terminating K
    Material Breach
    • Was it material? 241
    •   Injured party deprived of reasonably expected benefit.
    •   Extent adequate party can be reasonably compensated.
    •   Extent party failing to perform will suffer forfeiture.
    •   Likelihood party failing to perform will cure his failure.
    •   Whether party failing to perform comports w/ good faith and fair dealing.

    • Is it partial or total breach?
    •   If not material, partial.  Party can get damages, but no termination of K.
    •   If material, aggrieved party can continue performance and treat breach as only partial, OR stop performance and treat as total breach.
  23. Performance and Breach
    Prospective Non-Performance
    Anticipatory Repudiation
    • Language of repudiation must be sufficiently positive to be reasonably interpreted to mean the party will not or cannot perform.
    • 2-610, 250

    AR can only occur before time has arrived.

    • Renunciation by one party frees other party from future obligations to perform.
    • Hochster

    Cases: Hochster, Kanavos, McCloskey, C.L. Maddox, Cosden, Seacoast
  24. Basic Assumption
    Mutual Mistake
    Where there is material, mutual mistake, that is a reason not to enforce deal.

    If mistake is over something's worth, materiality is questionable.

    • Cases: Stees, Renner
    • Auth: 152, 158
  25. Basic Assumptions
    Impracticability of Performance
    Under Restatement
    Maj: Party is not excused from performance if act is not impossible to perform, even if party becomes unable to perform.

    Min: If something was basis of agreement, and performance depends on it, performance is excused by difficulty of performance or by the fact he becomes unable to perform.

    Performance may be impracticable b/c extreme or unreasonable difficulty, expense, injury, or loss to one of the parties involved.

    May also be impracticable b/c it will involve risk of injury to person or property that is disproportionate to the ends to be attained by performance.

    • Cases:  Mineral Park Land, Taylor
    • Auth: 261, 263

    • RS 265, Comment A: Discharge by Supervening Frustration
    •   Purpose frustrated must have principle purpose of that party in making K.
    •   Frustration must be so severely substantial that its not fairly to be regarded as w/in risk assumed under K.
    •   Non-occurrence of frustrating event must be a basic assumption to K.
    •       Foreseeability is factor in determination, but just b/c event was foreseeable doesn't mean non-occurrence was not such a basic assumption.
    •       Remember the Foreseeability Spectrum!
  26. Basic Assumptions
    Impracticability of Performance
    Under UCC Article 2
    • Standards for impracticability:
    •   Something unexpected must have occurred.
    •   Risk of unexpected occurrence must not have been allocated either by agreement or by custom.
    •   Occurrence of contingency must have rendered performance impracticable.
    • Transatlantic, 2-509(3)

    • Risk Bearing Analysis:  Look at who is in better position to bear the risk.
    •   Partial failure to seller's source of supply is generally a foreseeable contingency, and risk is allocated to seller w/o specific provision to the contrary in K.
    • Selland Pontiac-GMC, 2-615
  27. Basic Assumptions
    Impracticability
    Force Majeure Clauses
    Escape clauses that remove liability if you expressly state it in K.

    Must be carefully drafted b/c general phrases are usually limited to terms already mentioned.

    Don't use language "anything similar or dissimilar."

    Cases:  Canadian Alcohol, Eastern Air Lines
  28. Basic Assumptions
    Frustration of Purposes
    Where there is an unforeseen later occurrence that leaves the possibility to perform, but the underlying premise of K does not exist.

    • Necessary Elements for Frustration:
    •   Some supervening act or event leading to frustration;
    •   At the time of entering into K, parties did not reasonably foresee act or event occurring;
    •   Purpose of K has been completely or almost completely destroyed by act or event; AND
    •   Purpose of K was realized by both parties at time of making the K.
  29. Specific Performance 
    Factors to Justify Adequacy
    • Efficiency
    • Adequacy of Legal Remedy
    • Hardship to Defendant
    • Balance of the Equities
    • Practicality of Enforcement
    • Need for Clarity in K/Order
    • Specific Performance as Partial Remedy
    • Plaintiff's Return Performance

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