Ray v. William G. Eurice& Bros., Inc.
1. Case Heading:
Parties: Individual (lot owner who wanted to build a house) and corporation (building contractor).
Year: 1952
Court: Maryland State Appellate
2. Disposition: Reverse the judgment and enter judgment for appellants.
3. Holding: The appellee wrongfully breached its contract to build the plaintiffs a house for 16300.
4. Issue: Did Eurice breach its contract to build a house from a mistake on its part?
5. Procedural History: The trial court ruled in favor of the defendant (no meeting of the minds, no contract in the first place). The plaintiffs appealed.
6. Facts: Rays own a lot on Dance Mill Road and decided to build a home on it. Ray entered negotiation with builders, submitted stock plans and asked for an estimate. Eurice indicated that the cost of the house would be $16000, went over a final bid, and submitted a proposed contract for $16300. Ray indicated his lawyer would draft a contract, drafted it, and signed it. Eurice helped Ray sign the FHA contract, and Ray obtained a loan from Loyola. Plans and specifications from the Building Association were not signed, and Eurice signed them without looking. Eurice claimed he did not look at the drawings and specifications, and if he had to build accordingly, he did not propose to go ahead. They stopped contacting each other.
7. Rule: Absent fraud, duress, or mutual mistake, the one having the capacity to understand is bound by his signature.
8. Reasoning: Neither fraud nor duress are present, and the mistake was unilateral.
-Ray submitted a counteroffer and placed a power of acceptance on Eurice’s hands.
-Relevant question is whether a reasonable person would find objective manifestation of mutual assent, not subjective understanding of a deal.
Lonergan v. Scolnick
1. Case Heading:
Parties: Individual (wanted to purchase the land) and individual (owner of the land)
Year: 1954
Court: California District Court of Appeal
2. Disposition: Affirm the judgment of the trial court.
3. Holding: The parties did not enter into a contract through the advertisement nor the correspondences. (April 8 letter was not an offer but an invitation to offer and merely answered some questions).
4. Issue: Did the advertisement or the correspondence constitute an offer to sell the land?
5. Procedural History: Judgment was made against the plaintiff at the trial court. (April 8 letter was an offer but it was lapsed because Lonergan waited too long to accept) Plaintiff appealed.
6. Facts: Scolnick placed an ad in a LA paper for the 40 acres tract of land. Lonergan inquires more about the land. Scolnick sent a letter to Lonergan describing the land, says he won’t accept less than $2500, and states that “this is a form letter.” The parties exchanged letters on the information about the land. -> (“preliminary negotiation”) On April 12, Scolnick sold the land to a third party. On April 15, Lonergan sent a letter to Scolnick stating he would open the escrow and deposit money “in conformity with your offer.”
7. Rule: Niles v. Hancock
8. Reasoning: The correspondence here indicates an intention on the part of the defendant to find out whether the plaintiff was interested. The advertisement in the paper was a mere request for an offer. [the judge states the language clearly indicated that Lonergan was not being offered.]
-Advertisements generally do not qualify as offer unless they are so concrete; they are usually invitations to offer. Offer when “17 goods sale, first come first serve.”
Normile v. Miller
1. Case Heading:
Parties: Individual (made offer on the real estate) and individual (owner of the real estate)
Year: 1985
Court: Supreme Court of North Carolina
2. Disposition: Modify and affirm the decision of the Court of Appeals.
3. Holding:
4. Issue: Did Normile have a valid contract with Miller?
5. Procedural History: The trial court granted summary judgment for the plaintiff Segal and ordered defendant to specifically perform. The trial court denied summary judgment to plaintiffs Normile and Kurniawan, who appealed. The Court of Appeals affirmed the trial court’s judgment.
6. Facts: Miller listed real estate for sale with Hawkins. Byer showed the property to Normile and Kurniawan and drafted a written offer. The offer was given to Hawkins and Hawkins returned the form to Byer with changed terms. Byer presented the counteroffer to Normile and Normile neither accepted nor rejected it. Segal signed the document similar to the counteroffer and was accepted by Miller. Byer informed Normile that the counteroffer was revoked but Normile signed it and delivered it to Miller.
7. Rule: Contracts, Farnsworth…
8. Reasoning: Once the defendant’s counteroffer was revoked, the signing of the counteroffer by Normile constituted a new offer.
-Counteroffer put the power of acceptance on normile’s hand.
-Miller’s acceptance of Segal’s purchase did not revoke Normile’s power of acceptance. The revocation happened when Normile learned about Miller’s acceptance in the form of “you snooze, you lose”.
Cook v. Coldwell Banker/Frank Laiben Realty Co.
1. Case Heading:
Parties: Individual (real estate agent) and corporation (broker of agent)
Year: 1998
Court: Missouri Court of Appeals
2. Disposition: Affirm the judgment of the trial court.
3. Holding: There was a breach of a unilateral contract.
4. Issue: Is plaintiff entitled to compensation?
5. Procedural History: The jury returned a verdict in favor of Cook for breach of a bonus agreement.
6. Facts: In Mar 1991, Laiben orally announced a bonus program, with bonus to be paid at the end of the year. In Sept 1991, Cook surpassed 32400 in commission.In Sept 1991, Laiben stated bonuses to be paid in March. At the end of 1991, Cook gained 75638 in commission. Cook joined Remax in Jan 1992 and Laiben did not pay bonus.
7. Rule:
8. Reasoning:
-Cook had substantially performed at the time Laiden attempted to revoke the original offer, and an offeror may not revoke an offer where the offeree has made substantial performance.
(different from section 45 of Restatement – option contract is created when the offeree tenders or begins)
Walker v. Keith
1. Case Heading:
Parties: Individual (lessor of a lot) and individual (leased a lot)
Year: 1964
Court: Kentucky Court of Appeals
2. Disposition: Reverse the judgment of the trial court.
3. Holding: The renewal provision failed to specify the rental or the method and there was no agreement nor an option right.
4. Issue: Did the option provision in the lease fixed the rent with sufficient certainty to constitute an enforceable contract between the parties?
5. Procedural History: Based upon the jury verdict, the Chancellor fixed the rent at $125 per month.
6. Facts: Walker leased a lot to Keith for a 10 year term at $100 per month. Keith was given an option to extend the lease for a 10 year term under the same terms and conditions except as to rental. Keith gave the proper notice to renew but the parties were unable to agree upon the rent.
7. Rule:
8. Reasoning:
The degree of certainty is the controlling consideration.
Rent provision expresses two ideas: parties agree to agree, and future agreement will be based on a comparative adjustment in the light of business conditions.
Comparative business conditions does not afford sufficient certainty -> is it about local conditions, national conditions, or conditions affecting the lessee’s particular business?
Walker case: old school type of contract case that has been replaced by modern one (restatement)
-Agree to agree on the price in the future, because the land value may change.
-Appeals court: material term of the contract was left unspecified. Contract requires substantial certainty as to material terms.
-Tenant might argue: the objective method of specifying the rent was stated.
-UCC applies to sale of goods not lands, so doesn’t apply, but it states: even though terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
-UCC: even where the price term is omitted, the contract remains enforceable and the court is to specify a reasonable price, preserve the contract. UCC 2-204, 2-305
Quake Construction, Inc. v. American Airlines, Inc.
1. Case Heading:
Parties: Corporation (bid on construction project) and corporation (intended to expand its facilities)
Year: 1990
Court: Supreme Court of Illinois
2. Disposition: Affirm the judgment of the appellate court.
3. Holding: The letter was ambiguous
4. Issue: Is the letter of intent from Jones to Quake an enforceable contract?
5. Procedural History: The trial court dismissed the complaint based on the cancellation clause. The appellate court found the letter ambiguous.
6. Facts: In Feb 1985, American hired Jones to prepare bid specifications, accept bids, and award contracts for construction of the expansion of airport facilities. Quake received an invitation and bid on a project, and Jones orally awarded the contract to Quake. Jones asked for license numbers of Quake subcontractors and Quake stated they were prepared after signing contracts. Jones sent a letter of intent to Quake. Jones and Quake orally agreed to changes in the contract but no written contract was formed. Jones introduced Quake as the general contractor but American notified Quake that Quake was terminated, which Jones confirmed.
7. Rule: -if the language of a purported contract is ambiguous wrt the parties’ intent to be bound, then a complaint alleging breach cannot be dismissed.
8. Reasoning: “this notice of award authorizes the work.” The work was to commence 4 to 11 days after the letter was written (intent to be bound by the letter so the work begins on schedule). Cancellation clause (intention to be bound by the letter). <-> cancellation clause (not intent to be bound until formal agreement).
Defense view: absence of all terms of agreement makes it not bound by the letter.
Cancellation clause is ambiguous as to the parties’ intent. -> parties should present other evidences of intent.
-AA was participating in rules regarding minority business enterprises, and Quake presented itself as one but was not minority
-trial court: the letter of intent unambiguously disclaimed an intention to be bound. Appellate: ambiguous.
Hamer v. Sidway
1. Case Heading:
Parties: Individual (nephew who was promised award for good conduct) and individual (executor of uncle)
Year: 1891
Court: New York Court of Appeals (Supreme level)
2. Disposition: Reverse the order and affirm the judgment of Special Term.
3. Holding: Plaintiff abandoned a legal right to drink, use tobacco, and so on and the uncle benefited in a legal sense. There was a consideration in the contract.
4. Issue: Was the contract between the uncle and the nephew without consideration, and therefore, invalid?
5. Procedural History: Supreme Court reversed a judgment that was in favor of plaintiff and the plaintiff appealed.
6. Facts: In 1869, Story Sr, uncle of Story 2d, promised at the wedding to his nephew, Story 2d, that if he would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he became twenty-one, he would pay $5000. The nephew assented and fully performed, becoming twenty-one in 1875. Story Sr sends a letter to his nephew stating that he will give $5000 when the nephew is capable of handling it, and the nephew consented. In 1887, the uncle died.
7. Rule:
8. Reasoning: a waiver of any legal right at the request of another part is a sufficient consideration for a promise.
Consideration means that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first.
-nephew promises not to do something illegal -> not a consideration because not forbearing any legal right.
-
Pennsy Supply, Inc. v. American Ash Recycling Corp. of Pa.
1. Case Heading:
Parties: Corporation (subcontractor that paves driveways and a parking lot) and corporation (supplier of base aggregates)
Year: 2006
Court: Pennsylvania Superior Court
2. Disposition: Reverse and remand for further proceedings.
3. Holding: The complaint alleges facts which would show the promise induced the detriment and the detriment induced the promise. This would be consideration.
4. Issue: Is Pennsy’s relief of legal obligation to dispose… a sufficient consideration to ground contract and warranty claims?
5. Procedural History: The trial court granted demurrers (motion to dismiss).
6. Facts: Northern York County School Distract granted a construction project in Northern York High School to Lobar, Inc. Lobar subcontracted the paving to Pennsy. The project specification required Pennsy to use certain base aggregates or AggRite as an alternative. Pennsy informed American Ash that it needed 11000 tons of AggRite and used it for pave work. Pennsy completed the work in 2001 and extensive cracking appeared in the pavement in 2002. District notified Lobar, Lobar notified Pennsy, and Pennsy performed remedial work in 2003. Pennsy requested American Ash to arrange for the removal and disposal of the AggRite but Ash declined.
7. Rule: Holmes’ definition of consideration is “the promise must induce the detriment and the detriment must induce the promise.”
8. Reasoning:
-when the warranty terms are not stated, there are implied warranty
-there was an implicit promise that aggrite would be of certain quality but wasn’t.
-AA saved thousands of dollars in disposal costs it otherwise would have incurred.
-the promise and the consideration are in the relation of reciprocal conventional inducement, each for the other.
Dougherty v. Salt
1. Case Heading:
Parties: Individual (boy who received a promissory note) and individual (testatrix of the aunt).
Year: 1919
Court: New York Court of Appeals
2. Disposition: Reverse the judgment of the Appellate Division.
3. Holding: The plaintiff has explained the genesis of the promise, and consideration has been disproved.
4. Issue: Was there any consideration for the promised payment?
5. Procedural History: The jury returned a verdict in favor of the plaintiff. The trial court judge dismissed the complaint. The Appellate Division court reversed the judgment of dismissal and reinstated the verdict.
6. Facts: The aunt was visiting her nephew, and upon seeing her nephew’s good conducts, decided to take care of him and gave him a promissory note. The promissory note was for $3000 payable at her death or before to her nephew and contained the words “value received”.
7. Rule:
8. Reasoning: The note was the voluntary and unenforcible promise of an executor gift. The child was not a creditor, nor dealt as one. The aunt was not paying a debt. The promise was neither offered nor accepted with any other purpose than a bounty. Nothing is consideration that is not regarded as such by both parties. A note so given is not made for value received.
-past consideration is no consideration at all.
-aunt is not bargaining for;
Plowman v. Indian Refining Co.
1. Case Heading:
Parties: Individual (employee of Indian promised payment) and corporation (employer)
Year: 1937
Court: US District Court
2. Disposition: Decree in favor of defendant; dismiss the bill for want of equity.
3. Holding:
4. Issue:
5. Procedural History:
6. Facts: In 1930, the vice-president and general manager of Indian called the employees who had rendered long years of service separately into his office and made with each a contract to pay him, for the rest of his life, a sum equal to one-half of the wages he was then being paid. The group insurance premiums would be shared between the employee and the company as formerly. The employees were not to render any further services and their obligation was to call at the office for their remittances. The payments were cut off in 1931 and the termination was notified.
7. Rule:
8. Reasoning: The arrangement was made by no corporate officer having authority to make such a contract. The long and faithful services of the employees are relied upon as consideration, but (past or executed consideration is a self-contradictory term and) something delivered before the promise is executed, and made without reference to it, is not a legal consideration. Reporting to the office is a condition imposed upon them in obtaining gratuitous pensions and not a consideration.
Harris v. Time, Inc.
1. Case Heading:
Parties:
Year: 1987
Court: California Court of Appeal
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The trial court dismissed the complaint for breach of contract and granted summary judgment for unfair advertising. Plaintiffs appealed.
6. Facts: Gnaizda received a mail with a two see-through windows on its front. One showed Gnaizda’s name and address and the other stated that “I’ll give you this versatile new calculator watch fee just for opening this envelope before Feb 15 1985.” Not viewable were the words that followed: “and mailing this certificate today!”
7. Rule:
8. Reasoning:
Complaint sought a declaration that all recipients were entitled to receive the item, injunction against similar mailing, compensatory damages for the item, and punitive damages to be awarded to a consumer fund.
Time demurred for failure to state facts sufficient to constitute a cause of action.
There were offer, consideration, and notice of performance, but the complaint dismissed with the de minimis (tifle) principle.
Marshall Durbin Food Corp. v. Baker
1. Case Heading:
Parties: Individual (employee) and corporation (employer).
Year: 2005
Court: Mississippi Court of Appeals
2. Disposition: Affirm that the contract is enforceable and reverse and render the effective date of the contract.
3. Holding:
4. Issue:
5. Procedural History: The trial court found the contract valid. Durbin appealed.
6. Facts: Baker entered Durbin in 1965 and became board of directors in 1998. The company experienced thirty million dollars loss. Disagreements between Mr. Durbin, who controlled 80% of the stock, and his two daughters, who controlled 18% of the stock, caused tension in the company, and the daughters were not re-elected to the board and co-presidents, and not elected to officers. Baker expressed concern for the company about anything happening to Mr. Durbin and losing jobs. Mr. Durin formed contracts with three high level employees on termination and retirement, which would provide compensation for five years under circumstances. In 2001, Mr. Durbin was diagnosed with lymphoma and Baker assumed the responsibilities of president. Court appointed Mr. Durbin’s daughters as co-guardians and Bainbridge as the conservator. On Aug 30, 2001, Baker wrote Bainbridge that the agreement was triggered due to Mr. Durbin’s incapacity and Baker would perform as a consultant and not an employee. Durbin employees took Baker’s company car explaining that Baker had resigned. A new board of directors terminated Baker in all capacities.
7. Rule:
8.Reasoning:Baker supplied consideration by “an act other than a promise.” Baker’s detriment consisted of refraining from seeking other employment and his commitment at a time when the company was in difficulty. Durbin has never challenged, and completely ignores, the finding that the company enjoyed the benefits of retaining a valued employee.
-Recital of consideration creates a presumption of consideration that MDFC failed to rebut.
-Baker made an illusory promise, but it doesn’t matter; Baker furnished consideration by way of performance, staying at the company notwithstanding his right to seek employment elsewhere.
-Baker makes an illusory promise because he may or may not be in the company.
-Durbin made a conditional promise of: we can fire you at any time, but if Durbin dies (cannot control the qualifying event), we are locked into the contract.
Jannusch v. Naffziger
1. Case Heading:
Parties:
Year: 2008
Court: Illinois Appellate Court
2. Disposition: Reverse and remand the trial court’s judgment.
3. Holding: Returning the goods at the end of the season was not a rejection of offer but a breach of contract.
4. Issue:
5. Procedural History: The trial court held that UCC governed the issue, and a contract was formed but an agreement was not reached; it ruled in favor of defendants. Plaintiffs appealed.
6. Facts: Jannusch operated Festival Foods that served concessions to the general public at festivals and events. The assets of the business included a truck and servicing trailer and various equipment. Naffziger was interested in purchasing the Festival Foods and Jannusch entered into an oral agreement to sell the business for $150,000, which included the assets and the opportunity to work at event locations. Naffziger paid $10,000 immediately and the balance was to be paid with the bank loan. Naffziger operated Festival Foods, but two days after the business season ended, Naffziger returned Festival Foods to the storage facility where it had been stored by Jannusch. Gene could not sell Festival Foods to another.
7. Rule:
8. Reasoning: Defendants took possession of the items to be transferred and used them as their own. Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
The fact that a formal written document is anticipated does not preclude enforcement of a specific preliminary promise.
Defendant: UCC should not apply because the case involves the sale of a business. Contract was lacking many elements.
Court: predominant purpose test -> agreement was predominantly one for the sale of goods. Contract may be enforces even though terms are missing, unless essential terms are so uncertain -> essential terms were agreed.
-the essential terms were price and items to be transferred.
E.C. Styberg Engineering Co. v. Eaton Corp.
1. Case Heading:
Parties: Corporation (manufactures custom components) and corporation (manufactures motor vehicle parts)
Year: 2007
Court: US Court of Appeals-7th circuit
2. Disposition: Affirm the judgment of the district court.
3. Holding:
4. Issue:
5. Procedural History: The district court found that no contract existed and ruled in favor of defendant.
6. Facts: From 1998 to 2000, Styberg manufactured an Inertia Brake Assembly (I-brake) for Eaton’s six-speed transmissions. In Aug 1998, Eaton began purchasing I-brake and in Nov 1998, Eaton purchased I-brake to test it in the marketplace. Eaton decided for a full production of I-brake and began negotiating with Styberg in 1999. Davis from Eaton sent Baker from Styberg an email expressing Eaton’s willingness to make a minimum purchase commitment. On Jul 1999, Baker sent Fletcher from Eaton a proposal for order. Days later, Baker secured order from Fletcher and Jones from Styberg asked Davis from Eaton for a commitment. Fletcher wrote a letter to Baker of a commitment and Baker told Fletcher “thank you.” On Sept 1999, Baker sent Fletcher a production schedule. Eaton did not issue a specific purchase order for the 13000 I-brakes and Styberg did not send Eaton a purchase order. Eaton, at first, expected the delivery but soon cancelled the request and did not order I-brakes.
7. Rule:
8. Reasoning:
A price quotation is considered an invitation for an offer, rather than an offer to form a binding contract.
Eaton did not submit a purchase order for 13000 I-brakes. Eaton’s two requests for 240 I-brakes did not constitute repeated ongoing dealing that could be a contract, and it did not adhere to the partis’ usual course of dealing.
Plaintiff: documentary evidence conclusively established the existence of a contract from Fletcher’s July 29, 1999 letter, Baker’s Sept 9, 1999 schedule, and Eaton’s request in Spring of 2000.
Defendant: Fletcher’s letter is an ongoing negotiation.
-I-brakes is a tangible good, and this is a UCC case.
-fact finder went: Baker is not telling the truth on Sept 1998 correspondence.
-UCC section 2-204(2):
Princess Cruises, Inc. v. General Electric Co.
1. Case Heading:
Parties:
Year: 1998
Court: US Court of Appeals-4th circuit
2. Disposition: Reverse and remand the district court’s judgment.
3. Holding:
4. Issue:
5. Procedural History: The jury held defendant liable for breach of contract and awarded Princess. The district court denied defendant’s renewed motion for judgment as a matter of law.
6. Facts: Princess scheduled the SS Sky Princess for routine inspection services and repairs in the hands of GE in Dec. 1994. Princess issued a Purchase Order and, on the reverse side of the order, listed terms and conditions that made it an offer. When GE received the Purchase Order, GE faxed a Fixed Price Quotation to Princess. On Oct. 1994, GE faxed a Final Price Quotation to Princess that took the errors into account and that included GE’s terms that rejected the Princess’s terms and conditions, rejected liquidated damages, and limited GE’s liabilities. Princess gave GE permission to proceed and GE sent a confirmatory letter. GE noted surface rust on the rotor of SS Sky Princess, and during the cleaning ashore, good metal was removed from the rotor, rendering the rotor unbalanced. Princess had to cancel a ten-day Christmas cruise.
7. Rule:
8. Reasoning:
The nature of the contract is determined by the language of the contract, the nature of the business of the supplier, and the intrinsic worth of the materials. Services rather than goods predominated in the contract.
Although GE and Princess never discussed the Purchase Order and the Final Price Quotation’s conflicting terms and conditions, both Princess’s actions and inaction assured GE that Princess assented to GE’s terms.
Defendant: the district court was required to find that the sale of goods predominated in the contract
Court: nature of the contract is determined by: 1. The language of the contract. -> rendering of services. 2. The nature of the business of the supplier. -> GE’s Installation and Service Engineering Department, involved in the contract, performs services functions. 3. The intrinsic worth of the materials. Terms and conditions of Final Price Quotation control liability and damages.
Brown Machine, Inc. v. Hercules, Inc.
1. Case Heading:
Parties: Corporation (manufacturer of the trim press) and corporation (purchaser of the trim press)
Year:1989
Court: Missouri Court of Appeals
2. Disposition: Reverse the judgment of the trial court.
3. Holding: the indemnification clause cannot be held to be part of the contract.
4. Issue: did the parties agree to an indemnification provision in their contract for the sale of the T-100 trim press?
5. Procedural History: The trial court awarded Brown $157911 after a jury returned a verdict in favor of Brown. Hercules appealed.
6. Facts: In 1976, Brown sold Hercules a T-100 trim press. The sales negotiation began in 1975 and Brown submitted an original proposal for the trim press to Hercules, including a liability provision. Wilson from Hercules called Ryan from Brown and stated Hercules had prepared a purchase order but objected to a twenty percent deposit. Brown did not waive it. Hercules submitted written purchase order with sixteen provisions. Brown did not return the acknowledgement form and requested twenty percent deposit. Brown sent an acknowledgement with a term asking whether terms and specifications are agreed upon. Hercules notified that the specifications are correct. Hercules did not pay the twenty percent but eventually paid the final price for the press. Miller, an employee of Hercules, sued Brown for injuries while operating the press. Brown demanded Hercules defend the suit, but Hercules refused, and Brown settled. Brown sought indemnification from Hercules.
7. Rule:
8. Reasoning:
Plaintiff challenge the submissibility of Brown Machine's case, the verdict director given by Brown Machine, admission of certain allegedly prejudicial testimony and, finally, an instructional error.
A price quotation is not an offer, but rather is an invitation to enter into negotiations or a mere suggestion to induce offers by others. Because the quotation reasonably appeared to be an offer to enter into negotiations for the sale of a trim press with a mechanical ejector for $24,410 with acceptance conditioned upon Brown's order acknowledgment form, no firm offer existed. There was no timely acceptance by Hercules. Hercules' purchase order constitutes the offer. Where the offeree's acceptance is made "expressly conditional" on the offeror's assent, the response operates not as an acceptance but as a counter offer which must be accepted by the original offeror. Brown Machine's acknowledgment was not "expressly made conditional" on Hercules' assent to the additional or different terms. Brown Machine's acknowledgment did not operate as a counter offer. Hercules' purchase order here expressly limited acceptance to the terms of its offer. Express assent under § 2-207(2) cannot be presumed by silence or mere failure to object.
-offeror successfully blocked the additional terms from becoming the contract.
-indemnification clause: pledge to absorb the damages. “Hercules absorbs the damages if one occurs”
-Price Quotation (w/ indemn) -> Purchase Order -> Order Acknowledgement (w/ indemn) -> Confirmation
-Because we are in the UCC world, order acknowledgement was a definite and seasonable acceptance, even though terms differed from purchase order. Under the UCC, blue box in purchase order expressly limited the power of acceptance to the purchase order terms -> knocked out the indemnification clause.
-Brown argues that no contract because order acknowledge had language that rendered the acceptance conditional.
-Advice: make it very clear when it is offer, acceptance, conditions
Paul Gottlieb & Co., Inc. v. Alps South Corp.
1. Case Heading:
Parties: Corporation (fabric converter that ships mills) and corporation (manufacturer of medical devices)
Year: 2007
Court: District Court of Appeal of Florida
2. Disposition: Reverse that the limitation of liability clause materially altered the contract and remand, but UCC provides benefit of the bargain damages to Alps.
3. Holding:
4. Issue: Did the limitation of damages clause, as an additional term, materially altered the contract?
5. Procedural History: The trial court awarded Gottlieb on its claim, awarded Alps on its counterclaim, and determined that the limitation of liability clause was a material alteration and not a part of the contract under the UCC.
6. Facts: In 2000, Alps tested new fabrics to develop a new product and settled on Gottlieb’s TL2646 Coolmax fabric. Six months later, Alps rejected some fabric samples from Gottlieb and sent a letter noting product deficiencies and demanding consistent product, but did not disclose the additional costs of using a different fabric or the specialized use of the fabric. Gottlieb exhausted its supply of the yarn and substituted a similar yarn that caused a defect, without notifying Alps. Alps received complaints and recalled and destroyed the liners on the market. Gottlieb failed to receive payment and sued, and Alps counterclaimed for damages by Gottlieb’s breach of warranty.
7. Rule:
8. Reasoning: Because Alps neglected to inform Gottlieb of the larger consequences of the breach, we conclude that Alps cannot maintain that incorporating the limitation of liability clause would result in a severe economic hardship. Thus, Alps failed to carry the burden of proof on hardship.
-What is material? Courts presume it’s immaterial unless shown to be material.
-A material term strikes the other as a big deal, not a minor term. The bigger the term is, the more likely that it does not become a part of the contract.
Kirksey v. Kirksey
1. Case Heading:
Parties: Individual (wife of the deceased) and individual (brother of the deceased)
Year: 1845
Court: Alabama Supreme Court
2. Disposition: Reverse the judgment.
3. Holding:
4. Issue:
5. Procedural History: The jury returned a verdict in favor of the plaintiff.
6. Facts: The brother sent a letter to the wife advising to sell the land and quit the country and stating that his place is available to her. A month or two later, she abandoned her possession and moved to his place. Two years later, he notified her to leave.
7. Rule:
8. Reasoning: The promise was a mere gratuity.
-it’s not a legally enforceable gift because it is not supported by consideration.
-Counterpoint: is the consideration supplied by Antillico’s company? It’s not enough to show that the promisee incurred some cost in collecting.
-Promissory estoppel theory: uses reliance instead of consideration in arguing that the promisee is entitled.
Harvey v. Dow
1. Case Heading:
Parties: Individual (daughter) and individual (parents)
Year: 2008
Court: Maine Supreme Judicial Court
2. Disposition: Vacate the judgment of the Superior Court and remand.
3. Holding: Teresa's reliance on the Dows' general promise to give her land at some time, when coupled with their affirmative actions in allowing her to build a substantial house on a particular piece of their land, would seem to be eminently foreseeable and reasonable. From those actions, a promise by the Dows to convey that specific site could be fairly implied.
4. Issue:
5. Procedural History: The trial court ruled in favor of Dow in the real property claims and on their request for a declaratory judgment. The court rejected Teresa’s argument of promissory estoppels, motions for further findings, amendment of the judgment, and a new trial. (no express promise) Teresa appealed.
6. Facts: Dows own 125 acres of land and Dows, daughter Teresa, and son Jeffrey own houses on the property. Dows had intention to transfer the land to the children when they were older. Teresa and Jarrod built a mobile home and a garage with Dows’ permission and without paying rent or having a deed. Teresa and Jarrod used home equity line of credit to finance building a house on the lot, but after Jarrod died, Teresa used life insurance proceeds to finance it. Teresa and the father went to obtain building permit for the house and a permit was issued not to Teresa but was issued to the father. Teresa testified that the father told her he would execute a deed to her for the property after it was built, while the father denies having said so. The house was built with a cost of $200000 to Teresa and substantial work by the father. Teresa lent $25000 to her brother and sued him to be repaid, while Dows sued Teresa to see her children. Teresa asked the father for a deed but the father refused. Teresa was paying taxes on the house but not the property or rent. Teresa sued Dows to convey the real property to her.
7. Rule:
8.Reasoning:Although they made general promises to Teresa that she would at some time receive some of their land as a gift or inheritance, the Dows did not make an express promise to convey a parcel of land of any specified size, or with any defined boundaries, at any time certain. However, consider the Dows' acquiescence, support, and encouragement of Teresa's construction of a house upon the property and the application of section 90 of the Restatement of Contracts to those facts. In a promissory estoppel analysis, "[t]he promise relied on by the promisee need not be express but may be implied from a party's conduct." When the donee has made substantial improvements to the land in reliance upon the promise to convey the land, courts will enforce the promise to convey." Under these circumstances, a promise is enforceable notwithstanding a lack of consideration.
-Actual reliance: building the house, using the life insurance proceeds
-Reliance foreseeable: based on a promise that the land will be daughter’s, build a house on it
Reasonable reliance? Enforcement necessary to avoid injustice?
King v. Trustees of Boston University
1. Case Heading:
Parties: Individual (wife and administratrix of Martin King) and institution (was donated with documents)
Year: 1995
Court: Supreme Judicial Court of Mass.
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue: Is the evidence at trial sufficient to submit the question of charitable pledge to the jury?
5. Procedural History: A jury determined that Martin King made a charitable pledge to BU. The jury determined that a promise was made and it was supported by consideration and that the letter was not a contract. The trial judge denied King’s motion for JNOV and a new trial. Coretta King appeals.
6. Facts: In 1963, Boston University was expanding its library’s special collections and sought Martin King’s papers. The volatile circumstances in the South led King to deposit papers in BU and he sent a letter that stated the terms of the transfer. Coretta King sued BU for conversion (someone has unlawfully claimed ownership of the property and seeks the property back), claiming title to Martin King’s papers.
7. Rule:
8. Reasoning: The letter contains two sentences which might reasonably be construed as a promise to give personal property to a charity or for a charitable purpose. The bailor-bailee relationship established in the letter could be viewed by a rational factfinder as a security for the promise to give a gift in the future of the bailed property, and thus as evidence in addition to the statement in the letter of an intent of the donor to be bound.
-the judge is asking: was the evidence sufficient to support the jury’s claim?
-promise? Consideration or reliance? Reliance: BU sank time, energy into the organization of the papers because it relied on the promise that the papers will be here for a long haul.
-bailment tasked BU to have a scrupulous care over the papers.
-Under Mass. Law, it was a charitable subscription and BU
Katz v. Danny Dare, Inc.
1. Case Heading:
Parties: Individual (employee/retiree) and corporation (employer)
Year: 1980
Court: Missouri Court of Appeals
2. Disposition: Reverse the judgment and remand in favor of Katz.
3. Holding: The elements of Promissory Estoppel are present with a promise of a pension to Katz, his detrimental reliance, and injustice can only be avoided by enforcing that promise.
4. Issue:
5. Procedural History: The trial court found that Katz was not in the same situation as Feinberg because Katz had the choice of accepting retirement and a pension or being fired and did not suffer any detriment or significant change of position when he retired.
6. Facts: Katz began working for Dare in 1950 and took on various positions. In 1973, Katz placed a bag of money on the counter in a Dare store. A man picked up the bag and left, and when Katz followed him, he was struck in the head. Katz was hospitalized and became impaired in functions. Shopmaker decided to induce Katz to retire. After 13 months of negotiations, Shopmaker proposed an annual pension of $13000, Social Security benefit, and part-time work payment of $2520 that would yield $1000 more to Katz by retiring than by continuing to work. Katz retired in 1975 at age 67 and received $500 every other week. Katz testified that he retired reliant on the promise and Shopmaker testified that he would have fired Katz if he did not retire. In 1978, Dare sent $250 instead of $500 and Katz sent the check back. Dare stopped sending a check, stating that Katz’s health had improved and could work. Katz stated the cut was because he refused to work one-half day for five days for Dare.
7. Rule:
8. Reasoning:
Kats argues he falls within Feinberg and Dare argues Katz falls outside Feinberg.
Elements of Promissory Estoppel: (1) a promise; (2) a detrimental reliance on sch promise; and (3) injustice can be avoided only by enforcement of the promise.
Katz voluntarily retired after the board adopted the resolution promising to pay Katz a pension. Katz cannot engage in a full-time job (3).
Dare urges that the threat of firing effectively removed any legitimate choice on the part of Katz. Shoemaker did not discharge Katz but made effort to induce Katz to retire voluntarily.
The test to be applied is not whether Katz gave up something he was legally entitled, but rather whether Dare made a promise to him on which he acted to his detriment.
-not fire but leave -> Consideration that benefits Dare may be reputation
-even if Dare fired Katz, there is a detrimental reliance because Katz is giving up the dignity; giving up the right to be fired (an unpleasant decision to fire Katz).
-appellate: disagree with the trial court’s assumption that Katz would have been fired;
-injustice avoidance: if Katz benefited from retiring in his spare time, does it affect the analysis?
-you can’t conclude that the promise is not entitled to a claim of promissory estoppel simply because the promise gave up something they didn’t have a legal right to.
Aceves v. U.S. Bank N.A.
1. Case Heading:
Parties: Individual (mortgagor) and corporation (mortgagee)
Year: 2011
Court: California Court of Appeals
2. Disposition: Reverse the order and the judgment to the extent they dismiss the claims for promissory estoppels and fraud.
3. Holding:
4. Issue:
5. Procedural History: The trial court entered an order sustaining the demurrer without leave to amend, ruling in favor of U.S. Bank.
6. Facts: Aceves obtained a loan from Option One in 2006. The loan was evidenced by a note secured by a deed of trust on Aceves’s residence. In 2008, Option One transferred its interest under the deed to U.S. Bank. Aceves could no longer afford the monthly payments on the loan and Quality Loan Services recorded a Notice of Default and Election to Sell Under Deed of Trust. Aceves filed for bankruptcy protection under chapter 7, imposing an automatic stay on the foreclosure proceedings. U.S. Bank told Aceves that, once her loan was out of bankruptcy, the bank would work with her on a mortgage reinstatement and loan modification.Aceves intended convert her chapter 7 bankruptcy case to chapter 13 that could retain the home. U.S. Bank filed a motion to lift the stay to proceed with a nonjudicial foreclosure. American Home, a counsel for the company servicing the loan, contacted Aceves but said they will explore loss mitigation possibilities after the court lifted the stay. In reliance of what U.S. Bank told her, Aceves did not oppose the motion to lift the bankruptcy stay and did not seek bankruptcy under chapter 13. The bankruptcy court lifted the stay and U.S. Bank scheduled the home for public auction. The negotiator Samantha from American Home failed to help Aceves with loss mitigation. Aceves’s home was sold to U.S. Bank and the Bank served Aceves with a notice to vacate and then an unlawful detainer action.
7. Rule:
8.Reasoning:The questions is whether US Bank made and kept a promise to negotiate with Aceves. Aceves does not assert she relied on the terms of a modified loan agreement in foregoing bankruptcy relief.
Aceves’s promissory estoppel claim is not based on a promise to make a unilateral offer but on a promise to negotiate in an attempt to reach a mutually agreeable loan modification.
US Bank promised to work with Aceves to reinstate and modify the loan -> reasonable reliance
-Promise: there was never a clear promise of a modified loan, but there was a clear and ambiguous promise to negotiate the terms of such a loan.
-Reliance? Yes.
-Chapter 13 cannot do diminution of the amount that a renegotiation might do.
-Foreseeable: yes; the point of the promise was to get Aceves to drop the chapter 13 proceeding. Reasonable: yes. Aceves had something to gain from a loan modification, unlike ch 13.
-Detriment: yes; chapter 13 entitles Aceves to many rights and protections.
Berryman v. Kmoch
1. Case Heading:
Parties: Individual (owner of the land) and individual (Colorado real estate broker)
Year: 1977
Court: Supreme Court of Kansas
2. Disposition: Affirm the judgment of the trial court that the summary judgment was proper.
3. Holding:
4. Issue:
5. Procedural History: The trial court entered a summary judgment for Berryman and held the option was granted without consideration, was in effect an offer to sell, and was withdrawn in July 1973.
6. Facts: Berryman was interested in selling the land. Kmoch prepared the option contract on June 1973 and flew to Kansas. An option agreement was signed by Berryman but $10 option was not paid. On July 1973, Berryman called Kmoch and asked to be released from the option agreement and sold the land to another person. In August, Kmoch decided to exercise the option but Federal Land Bank representative told him that the land was sold. Kmoch recorded the option agreement in Stanton County and attempted to exercise his option, but Berryman brought a suit.
7. Rule:
8. Reasoning:
Defendant argues he should have showed that “other valuable consideration” was paid in time spent and expenses incurred in an effort to interest others in joining him in acquiring the land.
Assertion that Berryman expected Kmoch to raise and pay for the land as consideration confuses motive with consideration.
-keeping the offer open for 120 days and promise to pay $10 created option contract.
-non-payment of $10 means the offeree breached option contract.
-a breach means the other party is released from the contract.
-the contract doesn’t specifically bind Kmoch to do anything.
-option contract empowers Kmoch to do necessary actions in the time period but it’s an illusory promise for Kmoch.
-contract obligating Kmoch to a good faith effort, exercise diligence -> not illusory promise anymore.
-court sees no pledge on the part of Kmoch, -> no consideration
-Kmoch’s reliance was unreasonable because he knew no consideration was paid. He should have known that the promise was unenforceable.
-how the contract is created through: furnishing the consideration, reliance.
James Baird Co. v. Gimbel Bros, Inc.
1. Case Heading:
Parties: Corporation (linoleum contractor) and corporation (New York merchant)
Year: 1933
Court: US Court of Appeals
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The trial court ruled in favor of Gimbel.
6. Facts: Gimbel knew about a construction of a public building and sent an employee to the office of a contractor in Philadelphia. The employee underestimated the yardage by one-half and Gimbel sent to 20~30 contractors an offer to supply the linoleum at two lump sums. Gimbel telegraphed all the contracts that it withdrew and would substitute with double the original amount but James had already put in a bid at a lump sum. The public authorities accepted James’s bid. Gimbel declined to recognize a contract and James sued.
7. Rule:
8. Reasoning: Since the offer was withdrawn before it was accepted, the acceptance was too late. The contractors did not suppose that they accepted the offer merely by putting in their bids. There was no contract.
An offer for an exchange is not meant to become a promise until a consideration has been received, eiher a counter-promise or whatever else is stipulated. Gimbel offered to deliver the linoleum in exchange for James’s acceptance, not for its bid, which was a matter of indifference to it.
-promissory estoppel doesn’t apply here because there was no promise. There was merely an offer.
-the offer can’t be construed as creating an option contract
Drennan v. Star Paving Co.
1. Case Heading:
Parties:
Year: 1958
Court: CA Supreme Court
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The trial court awarded Drennan $3,817.00, or the difference between Star’s bid and the final cost of paving to Drennan, plus costs. Star appealed.
6. Facts: Drennan was preparing a bid for a school construction project. As was customary, Drennan solicited bids from subcontractors to perform the paving work necessary for the project. Star contacted Drennan and submitted a bid of $7,131.60 for the paving work. This was the lowest bid, and Drennan relied on Star’s bid when computing his own bid for the project. Drennan’s bid was lowest and he was ultimately awarded the general contract. Drennan promptly informed Star it was awarded the subcontract. However, Star informed Drennan that it had made a mistake in computing its bid and could only complete the work for $15,000. Drennan stated this was unacceptable and proceeded to look for another subcontractor to perform the paving work. After months of searching, Drennan awarded a new subcontract to a company bidding $10,948.60 for the project; the lowest bid found by Drennan. Drennan brought suit against Star to recover damages caused by Star’s failure to perform work as specified in its bid.
7. Rule:
8. Reasoning:
Star’s bid was silent on revocation, and the court determines the right of revocation imposed by law or reasonably inferable.
Drennan should have at least an opportunity to accept Star’s bid after the contract was awarded.
Drennan had no reason to know that Star made a mistake. It misled plaintiff as to the cost, and the mistake should fall on the party who caused it.
-Star paving had every desire and intention for Drennan to rely on its promise. Offer carried with it an implied subsidiary promise to keep the offer open.
-Restatement codifies Drennan; 87: making offer irrevocable in light of reliance of the offeree.
-limits to the Drennan rule: (the subcontractor has to make) explicitly revocable offers; the contractor had reason to know the bid was mistaken; the contractor engages in inequitable conduct; the subcontractor submits an estimate.
Credit Bureau Enterprises v. Pelo
1. Case Heading:
Parties:
Year: 2000
Court: Supreme Court of Iowa
2. Disposition: Affirm the judgment of the district court.
3. Holding:
4. Issue:
5. Procedural History: The district associate judge entered judgment in favor of Credit and against Pelo and dismissed the suit against the Gordo county. Pelo appealed to a district court, which affirmed the judgment. The district judge ruled that Pelo was liable under a contract implied in law or quasicontract theory.
6. Facts: Pelo argued with his wife, left his residence, and checked into a motel in Iowa Falls. Pelo phoned his wife, made threats of self harm, and purchased a shotgun. Police took Pelo to Ellsworth Municipal Hospital. Magistrate found probable cause that Pelo was seriously mentally impaired and required that Pelo be detained in the psychiatric unit for exam and care. Pelo was given a hospital release form that obligated him or his insurance to pay the bill. Pelo says a nurse demanded he sign the form or his personal items may not be safe or returned, and Pelo signed the form. Pelo’s wife filed an application for involuntary hospitalization of Pelo. Referee from evidentiary hearing found that Pelo suffers from bipolar disorder, but declined involuntary hospitalization. The hospital sought payment from Pelo, but Pelo refused, and the hospital assigned the claim to Credit for collection. Credit filed small claims against Pelo.
7. Rule:
8. Reasoning: A contract implied in law arises without regard to a party’s assent by words or acts; it arises from considerations of justice and unjust enrichment. It is also called constructive contracts. Where a person performs services for another which are known to and accepted by the latter, the law implies a promise to pay for those services.
In certain circumstances, restitution for services performed will be required even though the recipient did not request or voluntarily consent to receive such services.
Pelo argues that he was hospitalized but did not agree to pay; that he did not complete the release form because he did not need evaluation or treatment; that he signed the form under duress. He argues he has no duty to pay because he did not ask to be hospitalized and derived no benefit from the hospitalization.
(1) The hospitalization referee’s decision addressed the propriety of any future hospitalization and not whether there was an adequate basis for hospitalization of Pelo or whether he medically benefitted from his hospitalization.
(2) Emergency hospitalization order overrules Pelo’s refusal to consent.
-Pelo was not mentally competent to give consent; the choice principle is overridden.
-subsequent panel found Pelo competent; hospital was officious intermeddler when Pelo refused treatment. -> Supreme Court states that was in the future and, in the first 48 hours, Pelo was incompetent.
-Benefit is that hospital prevented Pelo from harming himself or another; alerting Pelo to his condition and the treatments.
-Restatement (Third) of Restitution section 20: professional is entitled to restitution.
Commerce Partnership 8098 Limited Partnership v. Equity Contracting Co.
1. Case Heading:
Parties: Corporation (owner of office building) and corporation (stucco and surfacing subcontractor for the job)
Year: 1997
Court: Florida District Court of Appeal
2. Disposition: Reverse the trial court judgment and remand to take additional evidence on whether Commerce made payment to or on behalf of its general contractor covering the benefits Equity conferred on the subject property. If Commerce did not pay for the benefits conferred by Equity, the judgment would be for Equity.
3. Holding:
4. Issue:
5. Procedural History: Commerce moved for involuntary dismissal, arguing that contract implied in fact was not established, but the trial court denied the motion. In its closing argument, Equity equated quantum meruit to unjust enrichment. Commerce reopened the case, arguing that Equity’s closing was an indication that it was defending a quasi-contract claim. Commerce introduced evidence that, out of $256,894 price to the World, it paid $223,065 to World and $64,097 to subcontractors. The trial court sustained Equity’s objection to this testimony on the ground of relevance and ruled in favor of Equity.
6. Facts: Commerce contracted with a general contractor, World Properties, to perform improvements on the office building. World contracted with Equity for stucco and surfacing. Commerce and World inspected Equity’s work as it progressed. After the work was completed, Commerce gave Equity a punch list of remedial work. Equity asked Commerce for at least partial payment but Commerce refused, and Equity refused the work. Equity sued World but World declared bankruptcy. Equity sued Commerce under quantum meruit.
7. Rule:
8. Reasoning: Equity argues that Commerce was unjustly enriched. Commerce argues that it paid World in full.
A contract implied in fact is based on a tacit promise, inferred in whole or in part from the parties conduct, not solely from their words. Examples are where a person performs services at another’s request, or where services are rendered b one person for another without his expressed request, but with his knowledge, and under circumstances, raising the presumption that the parties understood and intended that compensation was to be paid.
-Commerce and equity are not in a contract.
-
Mills v. Wyman
1. Case Heading:
Parties:
Year: 1825
Court: Massachusetts Supreme Judicial Court
2. Disposition: Affirm the judgment of the Court of Common Pleas.
3. Holding:
4. Issue:
5. Procedural History: The Common Pleas judge found the action unsupported and directed a nonsuit. Mills filed exceptions and appealed.
6. Facts: Levi Wyman was on his return from a voyage at sea, was taken sick at Hartford, and was cared by Mills for fifteen days. Wyman wrote a letter to Mills, promising to pay him the expenses.
7. Rule:
8. Reasoning:
Webb v. McGowin
1. Case Heading:
Parties:
Year: 1936
Court: Alabama Court of Appeals
2. Disposition: Revers the trial court judgment and remand.
3. Holding:
4. Issue:
5. Procedural History: McGowin demurred and it was sustained. Webb took a nonsuit and appealed.
6. Facts: In 1925, Webb was clearing the upper floor of mill No. 2 of W.T. Smith Lumber Company. Webb was dropping a pine block to the ground below, when he saw McGowin directly under where the block would have fallen. Webb could have remained safely on the upper floor of the mill by turning the block loose but it would have caused McGowin serious injury or death. In order to divert the block from McGowin’s way, Webb fell with the block to the ground and received serious injuries. McGowin agreed to care for and maintain Webb for the remainder of Webb’s life at the rate of $15 every two weeks. The payment continued until McGowin died in 1934, and the payment ceased. Webb sued to recover the unpaid installment.
7. Rule:
8. Reasoning: -not consideration because the actions of jumping with the block were in the past.
-material benefit: promise made to compensate for another party for a material benefit to the promisor can be enforceable.
Crabtree v. Elizabeth Arden Sales Corp.
1. Case Heading:
Parties: Individual (sales manager at Arden) and corporation (manufacturers and sellers of cosmetics)
Year: 1953
Court: New York Court of Appeals
2. Disposition: Affirm the judgment of the appellate court.
3. Holding:
4. Issue:
5. Procedural History: The trial court held for Crabtree and awarded $14,000 in damages, and the appellate court affirmed. Arden appealed, arguing that the employment contract for two years did not exist, and that even if it did, it was barred by the statute of frauds.
6. Facts: In September 1947, Crabtree entered into negotiations with Arden for employment as a sales manager. Arden agreed to offer Crabtree a two year contract with a salary of $20,000 for the first six months, $25,000 for the next six months, and $30,000 for the second year. Crabtree replied that the offer was “interesting.” Ms. Arden directed her personal secretary to draft a memorandum of the agreement as discussed with Crabtree. The agreement stated the salary, party names, and position to be offered to Crabtree. It did not expressly state the duration of the contract, but included the notation “2 years to make good.” The memorandum was not signed. Crabtree accepted the position via telephone. When Crabtree reported to work, Mr. Johns, executive vice president of Arden, drafted and initialed a “payroll change card” outlining Crabtree’s agreed-upon salary agreement. After six months of employment, Crabtree’s salary was increased to $25,000. After the next six months, however, Crabtree did not receive an additional increase. He contacted Mr. Carstens, Arden’s comptroller, who drafted and signed an additional payroll change card detailing Crabtree’s salary arrangement. Ms. Arden refused to approve the increase, and Crabtree left the job and brought suit against Arden in New York state court for breach of contract.
7. Rule:
8. Reasoning: Arden denies an agreement and argues that an agreement is barred by statute of frauds.
The two payroll cards (three papers) constitute a memorandum of their agreement.
“Turning to the writings in the case before us-the unsigned office memo, the payroll change form, and the paper signed- it is apparent that all three refer on their face to the same transaction.“
“The evidence as to the conduct of the parties at the time it was prepared persuasively demonstrates defendant’s assent to its terms.”
-Statute of frauds apply becauseit’smore than one year contract.
-Crabtree tries to put three documents into one. Court: “signed and unsigned writings may be read together, provided that they clearly refer to the same subject matter or transaction” -> relative looseness of statute of frauds requirements.
-Parol evidence may be used to: demonstrate connections between the writings and elucidate the meaning of ambiguous terms.
Beaver v. Brumlow
1. Case Heading:
Parties: Individual (owner of race horse transportation business) and individual (employee of the business)
Year: 2010
Court: Court of Appeals of New Mexico
2. Disposition: Affirm the judgment of the trial court.
3. Holding:
4. Issue:
5. Procedural History: Beavers argued that enforcement of the oral agreement was barred by the statute of frauds. The trial court disagreed and ordered specific performance of the contract to sell the property. The Beavers appealed.
6. Facts: Beaver purchased 240-acres of property. Beaver orally told Brumlow that some of the land would be sold to him to put a home on. Brumlow cashed in their IRA and 401(k), purchased a home and moved it onto the property, and spent $85000 on improvements. Beaver did not make formal documents because he discovered that his property was encumbered with a mortgage containing a due on sale clause. Brumlow requested that the contract be formalized but Beaver said “we will work it out.” Brumlow assumed he would pay whatever the market would bear. Beaver did not interrupt Brumlows’ quiet possession or notify them of their intentions. Brumlow gave Beaver a notice of termination of employment to work for a competitor of Beaver’s. Beaver decided not to sell the land and changed the agreement as a lease; and then to terminate the lease and evict Brumlows. Brumlows sent checks of $400 with “land payment” on the checks, but Beaver did not cash the checks, alleging the payment was for rental. Brumlow offered to buy the property but Beaver refused. Beaver sued for ejectment against Brumlows, who counterclaimed breach and tort.
7. Rule: O’Keefe- Buyers proved that the Sellers entered into a contract.
8.Reasoning:Beavor argues that the character of Brumlows’ performance was not sufficiently indicative of an oral agreement to sell land to qualify as partial performance.
The performance must lead an outsider to naturally and reasonably conclude that the contract alleged actually exists. The factors are: taking possession of the property, and making valuable, permanent, and substantial improvements to the property. ->buyer’s actions were sufficient part performance in reliance on the oral agreement to take the agreement outside of the statute of frauds.
There was significant specific part performance by both buyers and sellers.
It is not buyer’s fault that formal contract was not written with a set price and terms.
The case is under equitable jurisdiction. Land is assumed to have special value not replaceable in money.
-Statute of frauds apply because it’s sale of land. Statute of frauds not satisfied because not in writing. Brumlows’ conduct was indicative of a contract for the sale of land. -> exception to statute of frauds should apply. Was verbal agreement sufficient? Yes.
Alaska Democratic Party v. Rice
1. Case Heading:
Parties: Organization (employer) and individual (employee)
Year: 1997
Court: Supreme Court of Alaska
2. Disposition: Affirm the judgment of the superior court.
3. Holding:
4. Issue: Can promissory estoppel be invoked to enforce an oral contract otherwise unenforceable under the Statute of Frauds?
5. Procedural History: The jury awarded Rice on promissory estoppel claim and misrepresentation claim. The superior court denied Party’s motions for directed verdicts and JNOV. Party appealed.
6. Facts: Rice worked for the Party from 1987 to 1991. She was fired as executive director and worked for Maryland Democratic Party. Wakfield contacted Rice about working as his executive director. In 1992, Wakefield was elected to chair the Party. Rice claims Wakefield confirmed his decision to hire her for at least two years, as well as an additional two years if he was re-elected. Rice accepted Wakefield’s offer, moved to Alaska, and began working for the Party, resigning her position with Landau. The executive committee of the Party advised Wakefield that he could not hire Rice. Wakefield assured Rice that she had the job but then told her she did not have the job. Rice sued.
7. Rule:
8.Reasoning:-Alaska Democratic: “Every time I have an oral agreement I will resort to promissory estoppel” and we can’t open this door. Promissory estoppel fails when it is within the scope of the statute of frauds.
-The court adopts the Restatement 139. An oral promise is enforceable notwithstanding the Statute of Frauds if injustice can be avoided.
Party: Wakefield did not have the authority. The jury found Wakefield as an acting agent.
Party: Wakefield was a volunteer and misrepresentation does not apply. Court: Wakefield had a stake in Rice.
Buffaloe v. Hart
1. Case Heading:
Parties: Individual (tobacco farmer) and individual (owner of tobacco barns)
Year: 1994
Court: North Carolina Court of Appeals
2. Disposition: Affirm the judgment of the trial court.
3. Holding: There was a contract and payment.
4. Issue: Is a personal check signed by plaintiff, describing the property involved and containing an amount representing partial payment, is sufficient to constitute a writing under the statute of frauds? Is there substantial relevant evidence that plaintiff accepted the barns and defendants accepted plaintiff’s check, taking the contract out of the statute of frauds?
5. Procedural History: The jury awarded Buffaloe. The trial court denied Hart’s motion for JNOV and directed verdict.
6. Facts: Buffaloe rented five Roanoke box barns located on Hart’s farm. The agreement was based on handshake, not in writing. Hart provided insurance coverage for the barns and Buffaloe paid the rent. Buffaloe sought to purchase the barns and orally offered to pay $5000 for four years. Hart accepted. Buffaloe applied for a loan with Production Credit and told Hart that he would pay when the loan comes through, but the loan was denied. Buffaloe reimbursed Hart for the insurance cost. Buffaloe placed a for sale ad for the barns in the News and Observer. Mohorn, Stainback, and Elliot made down payment for the barns. Hart called Buffaloe and Buffaloe told her that he would sell the barn. Buffaloe delivered a check of $5000 to Hart for payment for the barns but did not want a receipt and stated that the check would be the receipt. Hart told Buffaloe that Hart had sold the barns and sent the torn check. Hart had sold the barns to the same people who made deposits.
7. Rule:
8.Reasoning:Hart argues that the check was not negotiated or endorsed and is without signature; it does not meet the statute of frauds. Hart further argues that there was no over action on either part and no part performance.
Buffaloe’s actions indicate to a reasonable mind that there was a contract and both sides accepted the terms.
-statute of frauds applies because barns are goods and the price was above $500.
-statute of frauds is not satisfied because the agreement was not in writing.
-2-201(2) does not apply because the transaction is not between merchants.
-2-201(3): “goods for which payment has been made and accepted…” applies.
Prochazka v. Bee-Three Development, LLC.
1. Case Heading:
Parties: Individual (owner of a commercial lot) and corporation (buyer of a commercial lot)
Year: 2015
Court: Arkansas Court of Appeals
2. Disposition: Reverse the summary judgment, reinstate the Prochazkas’ counterclaim, and remand.
3. Holding: How the parties intended the ambiguous purchase agreement to operate should be resolved by a trier of fact.
4. Issue:
5. Procedural History: The trial court granted BTD summary judgment. The Prochazkas appealed, arguing that summary judgment was inappropriate because Article 4.3 was ambiguous, and that ambiguity created a material issue of fact regarding BTD’s right to terminate the contract.
6. Facts: BTD entered into a written contract to purchase a commercial lot from Prochazka.Article 4.3 stated that BTD could terminate the contract during the inspection period if “in [BTD’s] sole and absolute discretion” the commercial lot was unsuitable for BTD’s intended use. During the inspection period, the tenant BTD had secured for the property backed out and BTD terminated the agreement and demanded that the Prochazkas return the earnest money. Prochazka refused. BTD sued the Prochazkas to recover its earnest money. The Prochazkas counterclaimed for breach of contract, arguing that BTD’s right to terminate under Article 4.3 was limited by Article 4.1, meaning that BTD could terminate the contract only if the property failed one of the suitability inspections outlined in Article 4.1. BTD countered, arguing that Article 4.3 gave BTD an unlimited right to terminate the contract for any reason during the inspection period.
7. Rule:
8.Reasoning:Prochazkas argue that the termination language in 4.3 is ambiguous, because it can mean that DTB can terminate within the inspection period because a tenant had backed out for unrelated reasons, or it can mean that the termination must be related to an intended purpose of the inspection period in 4.1. -> “court erred when it substituted its opinion… instead of leaving it to the trier-of-fact…”
Court: the termination clauses are anchored to the subject matter of the sections in which they appear (Article 4)
Contract does not define the term “intended use.” Affidavits do not link the “end use” to a 4.1 inspection term.
Dissent: courts should consider the sense and meanings of the words in plain, ordinary meaning, in unambiguous language, without enlarging or extending its terms.
Frigaliment Importing Co. v. B.N.S. International Sales Corp.
1. Case Heading:
Parties: Coporation (Swiss buyer of chickens) and corporation (New York seller of chickens)
Year: 1960
Court: US District Court SDNY
2. Disposition: Dismiss the complaint.
3. Holding: BNS’s subjective intent coincide with the Dept of Agr regulations. Frigaliment’s subjective intent contradicts the market prices. Plaintiff has the burden of showing that chicken was used in the narrower sense.
4. Issue:
6. Facts: Frigaliment, a Swiss company, offered to buy chicken for $0.33/lb. from BNS, an American corporation. The negotiations were primarily in German, but Frigaliment used the English word "chicken" to mean young chickens, instead of the German word "huhn," which includes stewing chickens (fowl). Frigaliment intended to purchase only young chickens suitable for broiling and frying (broilers). BNS, which was new to the trade, interpreted Frigaliment’s order for “chickens” as encompassing all types of chicken. The market rate for fowl at the time was $0.30/lb., while broilers were between $0.35 and $0.37/lb. Both the cablegrams exchanged by the parties and the contracts stated that the chicken was to be “Grade A, Government Inspected,” and the Department of Agriculture’s regulations were incorporated by reference. BNS shipped primarily fowl to Switzerland. After the first shipment, Frigaliment complained but allowed BNS to make the second shipment. After Frigaliment found fowl in the second shipment, Frigaliment sued BNS for breach of warranty, claiming that BNS delivered goods that did not meet the description in the contract.
7. Rule:
8.Reasoning:Frigaliment argues that 1.5-2lbs should be young chicken because older birds do not fit the size. It deliberately used the English word chicken instead of German word Huhn to mean young chicken. There is a trade usage that chicken meant young chicken, and introduced three witnesses to define the trade term.
Court: different kinds can fill different sizes. Bauer testified that P wanted any kind of chicken and affirmed Huhn.
BNS introduced witnesses that broadly defined the chicken, including Dept of Agr regulation, GSA, and Stat of the Inst Of Am Poultry Indust. Broilers and fryers are more expensive than 33 cents and the transaction would not make economic sense under the narrow definition. Frigaliment knowingly went through the second shipment and protested only when its customers protested.
Thompson v. Libby
1. Case Heading:
Parties: Individual (owner of logs) and individual (buyer of logs)
Year: 1885
Court: Minnesota Supreme Court
2. Disposition: Reverse the judgment of the trial court.
3. Holding: The Court erred in admitting parol evidence of a warranty.
4. Issue:
5. Procedural History: The trial court denied a motion for a new trial.
6. Facts: Thompson agreed to sell his logs to Libby through a written agreement. Libby alleges Thompson made a verbal warranty of the quality of the logs while a warranty is absent on the written contract.
7. Rule:
8. Reasoning: -alleges breach of contract not because the written agreement was violated, but because of the other promise about the quality of logs.
-if completely integrated, supplement or contradiction do not count -> warranty does not count.
-buyer would argue that it was not completely integrated. (partially integrated)
-can we consider parol evidence for the purpose of whether parol evidence applies? -> argues that the fact that there’s parol evidence suggests that the agreement was partially integrated.
-Thompson case - older, less popular way: I only look at the writing itself.
-Restatement would be sad with this case; Restatement says parol evidence should be allowed.
-Thompson case starts with four corners of the contract, make judgment on the writing itself to determine whether it has specificity and completeness to be integrated.
Taylor v. State Farm Mutual Automobile Insurance Co.
1. Case Heading:
Parties:
Year: 1993
Court: Supreme Court of Arizona
2. Disposition: Reverse the court of appeals’ judgment and remand.
3. Holding:
4. Issue:
5. Procedural History: The judge denied both motions, finding the release ambiguous and, therefore, parol evidence admissible. The jury returned in favor of Taylor for $2.1 million. The court of appeals reversed, holding that the release agreement was not ambiguous and parol evidence could not be admitted.
6. Facts: An accident occurred 16 years ago involving three vehicles occupied by Ring, Wistrom, and Taylor. Ring and Rivers sued Taylor and Wistrom. Ring settled with Wistrom but Ring and Rivers obtained combined verdicts against Taylor for $2.5 million in excess of his insurance policy limits from State Farm. Rings settled with State Farm but Taylor sued State Farm for bad faith seeking damages for the excess Rivers judgment, claiming that State Farm improperly failed to settle the Rivers matter within policy limits. State Farm moved for summay judgment, asserting that Taylow relinquished his bad faith claim when he signed a release in exchange for State Farm’s payment of $15000 in uninsured motorist benefits. Taylor moved for partial summary judgment, arguing that the release did not preclude his bad faith claim.
7. Rule:
8.Reasoning:parol evidence rule prohibits extrinsic evidence to vary or contradict, but not to interpret, the agreement.Views question: is the term ambiguous?
Restrictive view: plain meaning; if judge finds one meaning, parol evidence is not admitted. Judge’s decision may not reflect the intent of the parties.
Corbin view: the court considers all the evidence to determine the parties’ intent and applies the parol evidence rule to exclude from the jury only the evidence that contradicts.
Arizona view: court considers the evidence to determine the extent of integration, illuminate the meaning, or demonstrate intent. Judge may not consider evidence if it varies or contradicts. Finalize the court’s understanding by precluding admission of the evidence that vary or contradict.
Judge should not interpret but give effect to the intention of the parties at the time the contract was made.
Refuse that ambiguity should exist before parol evidence is admissible. Rather, judge considers evidence and finds language reasonably susceptible to the interpretation, the evidence is admissible to determine the meaning.
Taylor released all contractual rights. Was the language reasonably susceptible to Taylor’s offered interpretation?
The legal character of bad faith was not universally established and the release could be interpreted as Taylor asserts. The text of the release did not necessarily cover claims for bad faith.
The release could not as a matter of law be interpreted to include or exclude Taylor’s bad faith claim.
Sherrodd, Inc. v. Morrison-Knudson Co.
1. Case Heading:
Parties: Corporation (subcontractor doing earth-moving work) and corporation (subcontractor)
Year: 1991
Court: Supreme Court of Montana
2. Disposition: Affirm the judgment of the trial court.
3. Holding: The compensation is governed exclusively by the written contract and Sherrodd’s claims are barred under the parol evidence rule.
4. Issue:
5. Procedural History: The trial court granted the defendant’s motion, finding that the parol evidence rule prohibited Sherrodd from introducing evidence that conflicted with the express terms of the agreement. Sherrodd appealed.
6. Facts: Sherrodd subcontracted with COP to do earth-moving work in the construction of fifty family housing units in Monana for Army Corps of Engineers. At the site, Morrison-Knudsen, the general contractor, representative told Sherrodd that there were 25000 cubic yards of excavation to be performed. Sherrodd bid $97500 in reliance of that yard figure. Sherrodd’s and COP’s bid were accepted. While performing the earthwork, Sherrodd discovered that the quantity of work far exceeded 25000 cubic yards. The written contract provided that the work would be done in the quantity “LS,” or lump sum. Sherrodd argues that it signed the contract because a COP officer threatened to withhold payment for work already done unless the contract was signed. Sherrodd also argues that the COP officer verbally told it that a deal woud be worked out wherein Sherrodd would be paid more than the sum. COP paid Sherrodd $97500 less $9750 for work left uncompleted. Sheroddsued to recover quantum meruit plus tort damages, and Morrison-Knudsen filed a motion for summary judgment.
7. Rule: MCA provides that when an agreement is reduced to writing, no evidence is admitted except when a mistake or imperfection of the writing is claimed, the validity of the agreement is in dispute, or fraud is alleged.
8. Reasoning: alleged fraudulent statement is contradicted by the terms of the agreement that Sherrodd “by examination, satisfied himself...” a written contract may be altered only by a subsequent contract in writing or by an executed oral agreement.
Dissent: parol evidence could be offered to establish inducement of fraud. Majority creates terrible injustice.
-merger clause: “it’s a completely integrated agreement”
-“no oral modification” clause
-(wrong counsel) lawyers argue that the contract should be rescinded based on fraud and inducement in misrepresentation (and did not argue duress or promissory estoppel)
-problematic is-lie to the counterparty and completely integrate the contract -> fully insulated from fraud claim
Nanakuli Paving & Rock Co. v. Shell Oil Co.
1. Case Heading:
Parties:
Year: 1981
Court: US Court of Appeals 9th circuit
2. Disposition: Reverse the trial court’s granting of the motion and remand.
3. Holding:
4. Issue:
5. Procedural History: The jury awarded $220800 for Nanakuli on the claim that Shell failed to price protect Nanakuli. The district court set aside the verdict and granted Shell’s JNOV.
6. Facts: Until 1963, Nanakuli was unable to compete with the larger contractor for government contracts. In 1963, Nanakuli negotiated a five-year contract with Shell with a guaranteed supply of asphalt at reduced prices.Nanakuli bought all its asphalt requirements from 1963 to 1974 from Shell under two long-term supply contracts. In 1968, Nanakuli entered into further negotiations with Shell on expansion. Nanakuli argues that Shell breached the 1969 contract. Nanakuli argues that price protection required Shell to hold the price on the tonnage because Nanakuli had incorporated the price into bids.
7. Rule:
8. Reasoning: Nanakuli’s argument: (1) all material suppliers to the asphaltic paving trade in Hawaii follow the trade usage of price protection and that, under the UCC, the parties intended to incorporate it into the agreement. (2) price protection was the commercially reasonable standard for fair dealing in the asphaltic paving trade in Hawaii in 1974.
Shell argues: (1) District Court should not have denied Shell’s motion in limine to define trade, for purposes of trade usage evidence, as the sale and purchase of asphalt in Hawaii, rather than expanding the definition of trade to include other suppliers of materials to the asphaltic paving trade. (2) the two prior occasions on which it price protected Nanakuli was waivers of the contract’s price term, not a course of performance of the contract. (UCC). (3) price protection could not be construed as reasonably consistent with the express price term in the contract.
Did the trade usage extend to asphaltic paving trade or limited to the purchase and sale of asphalt? Were two instances of price protection waivers of the contract or a course of performance? Is express contract term of posted price consistent with a trade usage and course of performance? Did good faith oblige Shell to give advance notice of price increase?
Language in Code indicates that Shell would be bound by general usages on Oahu rather than of sellers of asphalt. Shell argues that even such usage is not outlined precise enough. The court states that it is left to the jury. Blee indicated that some price protection was a legal right of Nanakuli’s, and Shell price protected post-1974 -> course of performance. A commercial agreement is broader than the written paper and its meaning is to be determined… by their action… -> price protection was incorporated and consistent with the term of posted price.Code requires advance notice of an increase, in the asphaltic paving trade, as an obligation of good faith.
-special parol evidence that price protection exists;
-trade usage as a type of parol evidence that can supplement the agreement.
-Nanakuli argues: even though shell had the discretion to set the price, it did not act in good-faith (separate requirement that doesn’t look at parol evidence at all). Court: Shell is not commercially reasonable and not allowed.
Wood v. Lucy, Lady Duff-Gordon
1. Case Heading:
Parties: Individual (employee) and individual (designer of goods)
Year: 1917
Court: New York Court of Appeals
2. Disposition: Reverse the judgment of the appellate court and affirm the order of the Special Term.
3. Holding:
4. Issue:
5. Procedural History: The trial court gave an order of Special Term denying a motion by defendant for judgment in her favor. The Appellate Court reversed the trial court’s order.
6. Facts: Manufacturers of dresses, millinery, and like articles pay Lady for her approval. Lady’s designs have a new value in the public mind when issued in her name. Lady employed Wood to turn this vogue into money. Wood was to have the exclusive right to place Lady’s endorsements on the designs and place Lady’s designs on sale or license others to market them. Lady was to have one-half of all profits and revenue from contracts Wood made. The right was to last one year from 1915 and year to year after then unless terminated by notice of ninety days. Wood alleges Lady endorsed without Wood’s knowledge and withheld the profits.
7. Rule:
8. Reasoning: -LDG argues that there was no consideration. Afterwards, she argues it was an illusory promise, because she may or may not license the product. She can license (the contract specifies) zero or more; there is no set amount to license.
-The agent has to use reasonable effort to go out and sell; the law implies it. What LDG gets is the commitment of Wood. The law wants this term to be in this contract because it’s reasonable.
-Cardozo is saying giving LDG the claim is ridiculous result; rather than abandoning consideration, apply reasonable efforts test and conclude that there was no illusory promise made.
-Exclusive dealings case (UCC 2-306)
Seidenberg v. Summit Bank
1. Case Heading:
Parties: Individual (shareholders and executives of insurance business) and corporation (acquirer of the businesses)
Year: 2002
Court: Superior Court of New Jersey
2. Disposition: Reverse the order of dismissal and remand.
3. Holding: No
4. Issue: Can a claim of breach of implied covenant based on good faith and fair dealing be dismissed because of the allegations of the case where it is stated that defendant made a contract with another with the intention of exercising his right to terminate such in bad faith?
5. Procedural History: Plaintiffs sued in the Chancery Division. The parties reached a partial settlement and only the claim of a breach of the implied covenant of good faith and fair dealing was left. The case was transferred to the Law Division. Plaintiffs filed a second amended complaint and Summit filed a motion to dismiss, which was granted.
6. Facts: Seidenberg and Raymond formed Corporate Dynamics and Philadelphia Benefits Corporation that dealt with health insurance benefit plans to employers. Seidenberg and Raymond sold their stock in those brokerage firms to Summit Bank for 445000 shares of the common stock of Bancorp Corp. Plaintiffs also placed 49500 shares of Bancorp into escrow as security for existing but unknown or undisclosed liabilities. Plaintiffs retained their positions as executives and were in charge of any other employee benefits insurance business acquired by Summit. Plaintiffs’ employment agreements with Summit acknowledged the joint obligation on the future performance of the brokerage firms. Plaintiffs argue that Summit’s lack of performance impacted plaintiffs’ expectations of compensation and future involvement. Moreover, plaintiffs expected continued employment but were terminated in 1999.
7. Rule: In New Jersey case law, the implied covenant of good faith and fair dealing is applied in three general ways, each largely unaffected by the parol evidence rule. First, the covenant permits the inclusion of terms and conditions that have not been expressly set forth in the written contract. The covenant acts in such instances to include terms the parties must have intended because they are necessary to give business efficacy to the contract. Second, the covenant is utilized to allow redress for the bad faith performance of an agreement even when the defendant has not breached any express term. And third, the covenant permits inquiry into a party's exercise of discretion expressly granted by a contract's terms.
8. Reasoning: In NJ, the covenant of good faith and fair dealing is contained in all contracts.
-issue 1: is the good-faith claim barred by the fact that the plaintiffs had bargaining strength equal… trial court: yes. Appellate court: no. Plaintiffs were in insurance industry for years and had sufficient bargaining power. Bargaining power is not the sole criterion by which the claim must be resolved.
-issue 2: does the parol evidence rule prohibit the parities from pursuing the good-faith claim? Trial court: yes. Appellate court: no.The obligation to act with good faith and fair dealing is implied, and parol evidence rule does not have present application.
Plaintiff allege there was an expectation that the relationship would last until retirement age. -> implied covenant claim prohibits terminating a contractual relationship in bad faith notwithstanding the expressed right.
-issue 3: did the plaintiffs’ complaint allege a breach of the implied covenant of good faith? Trial court: - appellate court: yes. Plaintiffs suffered as a result of defendant’s bad faith.
-Even if a contract gives a discretionary power, if you exercise the term in a way that is against the spirit of the contract (e.g. manipulative, underhanded), there is a breach of implied good faith and fair dealing.
Morin Building Products Co. v. Baystone Construction, Inc.
1. Case Heading:
Parties: Corporation (subcontractor who supplies aluminum walls) and corporation (contractor building a plant addition)
Year: 1983
Court: US Court of Appeals 7th circuit
2. Disposition: Affirm the judgment of the trial court.
3. Holding: The contract is ambiguous because of the qualifications with which the terms artistic effect and decision as to acceptability are hedged about, and the parties probably did not intend to subject Morin’s rights to aesthetic whim.
4. Issue: Was the contractor dissatisfied with the materials and workmanship in question, and was the rejection therefore in bad faith?
5. Procedural History: Morin prevailed in the trial court. Baystone appealed based on the jury instruction, alleging that the district court erred when it gave a jury instruction that defined the standard for acceptance of the work by defendant under the reasonable person standard..
6. Facts: General Motors hired Baystone Construction, Inc. to build an addition to a Chevrolet plant in Indiana. Baystone hired Morin to supply and erect the aluminum walls for the addition. The contract required the exterior siding of the walls with specifications and terms. Morin put up the walls, but viewed in sunlight from an acute angle, the exterior siding did not give the impression of having a uniform finish and GM rejected it. Baystone removed Morin’s siding and hired another subcontractor to replace it. Baystone refused to pay Morin the contract price.
7. Rule: The reasonable person standard is employed when the contract involves commercial quality, operative fitness, or mechanical utility which other knowledgeable persons can judge. The standard of good faith is employed when the contract involves personal aesthetics or fancy.
8. Reasoning: If the jury instruction is correct, so is the judgment. If it is incorrect, and the proper standard is not a reasonable man but a GM representative, there must be a new trial to determine whether he was dissatisfied or rejected in bad faith.
The building for which the aluminum siding was intended was a factory, not a thing of beauty.
The touchstone of decision is the intent of the parties and consider the actual language used.
If the artistic and quality clauses were not intended for the wall, Morin might prevail where good faith is the only standard.
-we are running up against dangers of an illusory promise.
-default rule: there is an implied obligation on the person making to do reasonable.
Bayliner Marine Corp. v. Crow
1. Case Heading:
Parties: Corporation (manufacturer of the boat) and individual (purchaser of the boat)
Year: 1999
Court: Supreme Court of Virginia
2. Disposition: Reverse the judgment of the trial court.
3. Holding:
4. Issue:
5. Procedural History: The trial court ruled in favor of Crow on all counts and awarded him $135000.
6. Facts: Crow was invited by Atherton from Tidewater to ride on a new model sport fishing boat manufactured by Bayliner. Crow piloted the boat for about 20 minutes but was not able to determine its speed because there was no equipment on board. Crow asked Atherton about the speed but Atherton explained he had no personal experience with the boat and consulted two documents, “prop matrixes,” included by Bayliner in its dealer’s manual. The manual stated that the boat had a maximum speed of 30 mph when equipped with 20x20 or 20x19 propeller, but the boat had a smaller propeller. In 1989, Crow entered into a written contract for the purchase of the boat. After delivery of the boat, Crow piloted the boat and noted that the maximum speed of the boat was 13 mph. During the next 12 to 14 months, Tidewater made numerous repairs and adjustments to the boat to increase its speed capability. The boat only reached a maximum speed of 17 mph. A representative from Bayliner wrote Crow that the actual maximum speed of the boat was 23 to 25 mph. Crow sued for breach of express warranties, implied warranties of merchantability, and fitness for a particular purpose. Crow alleges the boat is too slow to reach the offshore fishing ground 90 miles from the coast.
7. Rule:
8. Reasoning: Crow alleges that the prop matrixes created an express warranty by Bayliner of the speed. Court says prop matrixes described a boat with different propeller sizes.
Crow alleges that Bayliner’s sales brochure made an express warranty. Court says it was a commendation of the boat’s performance and not about a specific characteristic of feature of the boat.
Crow alleges that the slow boat breached an implied warranty of merchantability because was not fit for ordinary purpose as an offshore fishing boat. Bayliner states that the boat did not meet the requirement of this particular fisherman but it was generally merchantable as an offshore fishing boat. Court says the boat was fit for ordinary purpose.
Court says crow had to inform Atherton about the particular purpose of the boat, specifically, the 30 mph requirement.
-no breach of express warranty; no breach of implied warranty of merchantability; no breach of the implied warranty of fitness for its ordinary purpose (essentially the same as (2)); no breach… particular purpose.
Speight v. Walters Development Co.
1. Case Heading:
Parties: Individual (owners of the home) and corporation (custom-built the home)
Year: 2008
Court: Supreme Court of Iowa
2. Disposition: Reverse the judgment and remand.
3. Holding:
4. Issue:
5. Procedural History: The trial court ruled that Speight could not assert implied-warranty claim and it would have been barred by statute of limitations. It also ruled that Speight could not assert a general negligence claim because there was no personal injury claim.
6. Facts: Walters custom-built a house for Roche, who sold it to Rogers, who sold it to Speights in 2000. Speights noticed water damage and mold. A building inspector determined that the damage was the result of a defectively constructed roof and defective rain gutters. No one had knowledge of the defect previously. Speights sued Walters, alleging a breach of implied warranty of workmanlike construction and general negligence in construction of the home.
7. Rule:
8. Reasoning: Implied warranty of workmanlike construction protects home buyer by holding the experienced builder accountable for the quality of construction.
Subsequent purchaser and the builder-vendor lack privity but it does not impede the claim because there is no contractual justification for limiting recovery. Walter argues it opens the door to unlimited liability, but court cites a statute of repose.
Dodson v. Shrader
1. Case Heading:
Parties: Individual (purchaser of the truck) and individual (operator of auto sales store).
Year: 1992
Court: Supreme Court of Tennessee
2. Disposition: Remand to the trial court.
3. Holding: A minor ought not to be permitted to recover the amount actually paid, without… depreciation, and willful or negligent damage to the article purchased, while in his hands.
4. Issue: Is the minor entitled to a full refund of the money he paid or is the seller entitled to a setoff for the decrease in value of the pick-up truck while it was in the possession of the minor?
5. Procedural History: The trial court judge granted the rescission and Shrader appealed. The court of appeals affirmed.
6. Facts: In 1987, Dodson, 16 years old, purchased a used 1984 pick-up truck from Shrader. Dodson paid $4900 in cash. There was no inquiry or misrepresentation about Dodson’s minority, and Shrader assumed Dodson to be 18 or 19 years old. Nine months after the purchase, the truck developed mechanical problems. A mechanic diagnosed a burnt valve and needed to inspect valves inside the engine, but Dodson did not want or have money for a diagnosis. One month later, the truck’s engine blew up and the truck became inoperable. Dodson contacted Shrader to rescind the purchase of the truck and requested a full refund, but Shrader refused. Dodson sued in general sessions court, but the court dismissed the warrant. Dodson appealed to the circuit court and Shrader sought compensation for its depreciation. The truck, parked in the front yard of Dodson’s parents, was struck on the left front by a hit-and-run driver. Shrader valued the truck at $500.
7. Rule:
8.Reasoning:Old rule – contracts with minors are void when they aren’t in the minor’s interest but valid when they are to the minor’s benefit.
Minority rules – Benefit Rule: recovery of the full purchase price is subject to a deduction for the minor’s use of the merchandise.
Minority rules – the minor’s recovery of the full purchase price is subject to a deduction for the minor’s use of the consideration he or she received under the contract, or for the depreciation or deterioration of the consideration.
Sparrow v. Demonico
1. Case Heading:
Parties: Individual (sister who gained no interest in a property) and individual (sister who gained all interest)
Year: 2012
Court: Supreme Court of Masachusetts
2. Disposition: Vacate the motion and remand the case to the Superior Court.
3. Holding: The evidence does not support a conclusion that Susan lacked the mental capacity to authorize settlement on the day of the mediation.
4. Issue:
5. Procedural History: Sparrow sought an order enforcing the motion but the motion judge denied. The case proceeded to trial by jury before a different judge, who granted Demonicos’ motion for a directed verdict. Sparrow appealed.
6. Facts: In 2003, Sparrow argues she is entitled to a one-half interest in the Woburn property, consistent with the wishes of her deceased mother, under theories of constructive and resulting trusts. Demonicos argues that they are the sole owners of the property, as reflected in a deed. Before a final pretrial conference, the parties sought mediation. After the mediation in 2006, Sparrow argues Demonicos settled to sell the property and pay Sparrow $100000 but reneged this obligation. Demonicos argue that the agreement was unenforceable because Susan had experienced a mental breakdown during the mediation.
7. Rule:
8. Reasoning: cognitive test: was the party whose contract it is sought to avoid in such a state of insanity at the time as to render him incapable of transacting the business? (older rule)
Affective or volitional test: the contract is voidable where, by reason of mental illness or defect, the person is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of it. (new)
The inquiry into the capacity to contract focuses on the time of the disputed transaction.
Demonicos argue that Susan’s impairment arose and was limited to the period.
Even in the context of an action sounding in tort, we have often considered medical corroboration to be a highly probative component of a plaintiff’s case. Susan had at least some understanding of the nature of the transaction…
Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co.
1. Case Heading:
Parties: Corporation (Alaska corporation that began operation in 1975)
Year: 1978
Court: Supreme Court of Alaska
2. Disposition: Reverse and remand.
3. Holding: Totem has made a sufficient factual showing as to each of the elements of economic duress to withstand the motion.
4. Issue:
5. Procedural History: The trial judge granted Alyeska’s motion for summary judgment. Totem appealed.
6. Facts: Totem entered into a contract with Alyeska, whereby it agreed to transport pipeline construction materials from Houston to Alaska. Totem chartered a barge and an ocean-going tug in order to perform under the contract. Loans from Stair and Pacific made charters and operations possible. Performance was due August 15. Totem expected to load 2000 tons of regular uncoated pipe in Houston, but ~7000 tons of coated pipe, beams, and valves were improperly piled in the yard, leading to remodeling of the barge and taking 30 days instead of 3. Alyeska’s delay in assuring Totem, bad weather, and administrative problems further delayed. The vessels were traveling slowly due to the extra load. Totem chartered a second tug, Guidry, but Aleyska had not yet made amendment to the contract and Guidry delayed in crossing the Panama Canal. Aleyska complained about delays and lying about the first tug’s horsepower but executed the amendment. The vessels met hurricane that delayed them 8-9 days. Alyeska ordered the vessels off at Long Beach and commenced off-loading the barge. On Sept 14, Alyeska terminated the contract. Totem submitted termination invoices to Alyeska. Totem was in urgent need of cash and might go bankrupt. Totem’s attorney, Bell, advised Alyeska of Totem’s financial straits. A settlement offer paid $97500 and released all claims by Totem. In 1976, Totem sued Alyeska and amended it, seeking to rescind the settlement and release on the ground of economic duress and to recover the balance.
7. Rule:
8. Reasoning: Duress exists where: (1) one party involuntarily accepted the terms of another; (2) circumstances permitted no other alternative; and (3) such circumstances were the result of coercive acts of the other party.
A threat to breach a contract or to withhold payment of an admitted debt has constituted a wrongful act.
Economic duress exists no merely because a person has been the victim of a wrongful act, but because the victim must have no choice but to agree to the other party’s terms or face serious financial hardship.
An available alternative or remedy may not be adequate where the delay involved in pursuing that remedy would cause immediate and irreparable loss to one’s economic or business interest.
If Totem’s allegations are proved, Totem executed a release of its contract claims against Alyeska under economic duress.
Genuine issues of material fact exist such that trial is necessary.
Odorizzi v. Bloomfield School District
1. Case Heading:
Parties:
Year: 1966
Court: California District Court of Appeals
2. Disposition: Reverse the judgment.
3. Holding:
4. Issue:
5. Procedural History: The trial court dismissed Odorizzi’s amended complaint and he appealed that decision.
6. Facts: In 1964, Odorizzi was hired by Bloomfield to teach elementary school. While he was still under contract to teach, he was criminally charged with engaging in homosexual activities. Following his release on bail, Bloomfield’s district superintendent and the school principal visited Odorizzi at his home. They told Odorizzi that if he did not resign immediately, they would suspend him and publicize his dismissal proceeding, as they were required to do by statute. They told him this would cause “extreme embarrassment and humiliation.” He was also told that he had no time to talk to a lawyer and that if he resigned immediately, the arrest and suspension would not be publicized. At the time of this meeting with the superintendent and principal, Odorizzi had gone without sleep for 40 hours from the time of his arrest through his release on bail. Odorizzi agreed to tender his resignation. However, after being cleared of the criminal charges against him, he asked to be reinstated in his employment. When Bloomfield refused, Odorizzi filed an action against Bloomfield, alleging duress, menace, fraud, mistake and undue influence.
7. Rule:
8. Reasoning: (1) No duress or menace has been pleaded – initiating suspension and dismissal proceedings… was not only their legal right but their positive duty as school officials.
(2) No cause of action for actual or constructive fraud.
Actual fraud involves conscious misrepresentation or concealment or non-disclosure of a material fact which induces the innocent party to enter the contract; no knowledge of falsity, intent to induce reliance, and justifiable reliance.
Constructive fraud arises on a breach of duty by one in a confidential or fiduciary relationship…; Each party is expected to look after his own interests, and a lack of confidentiality is implicit in the subject matter of their dealings.
(3) No consent obtained through a mistake of fact or of law. Their speculations did not forecast the exact pattern -> not under some sort of mistake.
(4) Consent to the transaction obtained through the use of undue influence (persuasion which tends to be coercive in nature, persuasion which overcomes the will without convincing the judgment) – O was not a free agent making contract due to such weakness, preventing him from freely and competently applying his judgment.
Second element of (4) is application of excessive strength by a dominant subject against a servient object.
Plaintiff has pleaded such… [questioning] whether his free will had been overborne by defendant’s agents at a time when he was unable to function in a normal manner.
-Claim for undue influence: (1) vulnerable relationship and (2) overpersuasion.
Hill v. Jones
1. Case Heading:
Parties: Individual (buyer of a house) and individual (seller of a house)
Year: 1986
Court: Arizona Court of Appeals
2. Disposition: Reverse and remand.
3. Holding:
4. Issue:
5. Procedural History: The trial court dismissed the misrepresentation claim based on an integration clause and granted Jones’ motion for summary judgment on the concealment claim. Both parties appealed.
6. Facts: In 1982, Hill agreed to purchase Jones’ residence under the term that Jones would pay for and place in escrow a termite inspection report stating that the property was free from evidence of termite infestation. Parquet teak floor covered many rooms of the house. Hill asked about whether a ripple in the wood floor on the step could be termite damage and Jones answered that it was water damage. Few years before, a broken water heater had damaged the area. Hill had seen ripples in wood as termite damage and was not satisfied, but he decided to see the inspection report. The report stated no visible evidence of infestation or the existence of physical damage or evidence of previous treatment. Hill moved in and found a pamphlet about termites. A neighbor told Hill that the house had termite infestation in the past. Hill noticed that the wood on the steps was crumbling. An exterminator confirmed the existence of termite damage. The cost of repair was $5000. When Jones purchased the home, they received two termite guarantees that provided for semi-annual inspections and annual termite treatments. The diagram stated that the damage was not repaired. A neighbor had noticed evidence of termites in the wood floor and fence and Nolen treated them. Jones did not disclose information about termites to Hill, realtor, or inspector.
7. Rule:
8. Reasoning:(integration clause) trial- the agreement did not give buyers the right to rely on the statement made by Jones. Appellate- the misrepresentation occurred after the contract; the clause does not shield from fraud.
Duty to disclose exists regarding information known to seller but not buyer that materially affects the value. (4 factors).
Nondisclosure of a fact known to one party may be equivalent to the assertion that the fact does not exist. Thus, nondisclosure may be equated with and given the same legal effect as fraud and misrepresentation. (material facts).
The existence of termite damage and past termite infestation has been considered… material.
Distinction between live termites and past infestation is not limited by the termites’ health.
Park 100 Investors, Inc. v. Kartes
1. Case Heading:
Parties:
Year: 1995
Court: Indiana Court of Appeals
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The trial court found that Kartes are not liable for unpaid rent. Park appealed.
6. Facts: Kartes were part-owners of KVC and KVC required larger operating facilities. Scannell marketed Park facilities that KVC could lease. Park provided a lease agreement form that did not include personal guaranty to KVC. KVC approved the lease and Kaplan signed and delivered the lease. KVC made preparations to move into Building 107. Scannell went to KVC’s office and said that Kartes had lease papers to sign. Scannell said KVC could not move in until the papers were signed. Scannell produced a document entitled Lease Agreement and Kartes signed the document. Scannell never told the Karteses that what they were signing was actually a personal guaranty of lease. Years later, Park 100 sent Kartes a Tenant Agreement that include an estoppels certificate. Kartes learned about the personal guaranty of lease, disavowed it, and refused to affirm that portion of the agreement. Kartes sold their interest in KVC to Saffron that failed to pay rent, and Park 100 sued to collect from Kartes.
7. Rule:
8.Reasoning:Standard of review for special findings: (1) whether the findings support the judgment; and (2) whether the conclusions and judgments are clearly erroneous based on the facts as found by the trial court.
Elements of actual fraud: (1) a material misrepresentation of past or existing fact by the party to be charged, which (2) was false, (3) was made with knowledge or in reckless ignorance of the falsity, (4) was relied upon by the complaining party, and (5) proximately caused the complaining party injury.
Park 100 argues Kartes failed to prove the third element, reliance.
Court: Scannell misrepresented the personal guaranty as lease papers, and the personal guaranty was disguised under the title of lease agreement.
While a person relying… must use ordinary care and diligence to guard against fraud, the requirement of reasonable prudence in business transactions is not carried to the extent… an intentional fraud practiced on the unwary.
Williams v. Walker-Thomas Furniture Co.
1. Case Heading:
Parties: Individual (purchaser) andcorporation (operator of a retail furniture store in DC)
Year: 1965
Court: US Court of Appeals DC circuit
2. Disposition: Remand.
3. Holding: No findings were made on the possible unconscionability of the contracts in these cases.
4. Issue: Should courts have the power to refuse enforcement of contracts deemed unconscionable? Yes. What makes a contract unconscionable? Was this contract unconscionable? Maybe.
5. Procedural History: The court of General Sessions ruled for Walker. The Court of Appeals affirmed. Williams appealed.
6. Facts: Williams purchased a number of household items from Walker from 1957 to 1962 and the payment was made in installments. The terms of purchase was in a printed form contract that purported to lease the item for monthly rent payment, indicating that the title remains with Walker until the payment was made, and Walker could repossess the item with default… Thorne purchased Daveno and more but defaulted. Willams bought a stereo set but defaulted. Walkers sought replevy on the items since the first transaction.
7. Rule:
8. Reasoning: Williams argues that the contracts are unconscionable and not enforceable.
Unconscionability includes an absence of meaningful choice on the part of one of the parties together with contract terms unreasonably favorable to the other party.
-cross-collateralization clause: payment spreads out to the items and single item is never paid off until all is paid.
-WT has a monopolistic position in a credit market in a segregated town.
-DC just adopted the UCC 2-302, unconscionability, after the case. The law cannot be applied retroactively. But the doctrine can be used as a persuasive authority within the framework of a common law.
-Maybe unconscionability in this case depends on the background norms of the market.
De La Torre v. CashCall, Inc.
1. Case Heading:
Parties: Individual (lendee) and corporation (lender of consumer loans to high-risk borrowers).
Year: 2018
Court: Supreme Court of California
2. Disposition: Reverse the judgment of the trial court.
3. Holding: Interest rate on consumer loans of $2500 or more may render the loans unconscionable under section 22302 of the Financial Code.
4. Issue: Can the interest rate on consumer loans of $2500 or more render the loans unconscionable?
5. Procedural History: The federal district court certified the lawsuit as a class action. It initially denied Cash’s motion for summary judgment but agreed with Cash afterwards, granting the motion. The Ninth Circuit certified the question to the CA Supreme Court, because it involves a complicated state law question.
6. Facts: Cash lends $2600, payable over 42 months, with an APR of 96% or 135%. Torre alleges Cash violated California’s unfair competition law.
7. Rule:
8.Reasoning:Whether an interest rate is unconscionable is fundamentally a different inquiry than whether the rate exceeds a numerical cap. Unconscionability is a flexible standard, not only about the complained of term but also at the process of arriving at the agreement. -> Torre has a cause of action.
Cash argues that since section 22303 does not apply to loans above $2500, it does not apply to interest rates; it also draws assumed and false equivalence between interest rate caps and unconscionability.
Unconscionability requires more than looking at one particular term in a contract and comparing it to a fixed benchmark. It requires oppression or surprise along with the overly harsh or one-sided results that epitomize substantive unconscionability. The court examines (1) undue oppression arising from “an inequality of bargaining power,” such as the parties’ sophistication, their cognitive limitations, and the availability of alternatives; and (2) surprise owing to the “terms of the bargain being hidden in a prolix printed form” or pressure to hurry and sign. -> unconscionability is highly dependent on context.
Substantive unconscionability -> the court looks whether the price exceeds cost or fair value, the basis and justification for the price, and market imperfections that make it less likely that the price was set by a freely competitive market and more susceptible to unconscionability.
There is a difference between not making an activity unlawful and making it lawful. The absence of a rate cap does not make all rates lawful.
Reject the arguments of judicial abstention in the area of interest rate regulation or interference with the DBO. CA courts have the authority to decide whether contract provisions, including interest rates, are unconscionable.
-Code 22303 section caps unlawful rate loans at $2500 but another section prohibits unconscionable loans.
Lenawee County Board of Health v. Messerly
1. Case Heading:
Parties: Individual (seeks rescission of contract based on mistake) and individual (argues there was no mistake).
Year: 1982
Court: Michigan Supreme Court
2. Disposition: Reverse the judgment of the Court of Appeals.
3. Holding: The Pickles are not entitled to the equitable remedy of rescission.
4. Issue:
5. Procedural History: The trial court held that the Pickles had no cause of action because the Messerlys or the Barneses did not know about Bloom’s transgression or the problem and was not implicated in fraud or misrepresentation. Further, the property was “as-is.” The court ordered foreclosure and amount against the Pickles. The Court of Appeals affirmed but reversed on the claim against the Messerlys, because there was a mutual mistake and the Pickles paid an asset without value.
6. Facts: In 1971, the Messerlys purchased a tract of land on which a three-unit apartment building stood. Prior to the transfer, the predecessor Bloom installed a septic tank on the property without a permit and in violation of the health code. The Messerlys used the property as an investment property and sold it to Barnes in 1973, who also used it as an investment property. Barnes sold one acre in 1976 and offered for sale the remaining 600 sqft and the building but defaulted on their land contract. Pickles showed interest but were dissatisfied with the terms, and Barnes executed a quit-claim deed so that the interest lies on the Messerlys and the Messerlys directly contract with Pickles. Pickles executed a new land contract with the Messerlys in 1977 with an “as-is” clause. Pickles went to introduce themselves to tenants and discovered raw sewage seeping out of the ground. Tests indicated the sewage system inadequate. Lenawee condemned the property and sued and obtained permanent injunction against human habitation until the sanitation code was met. Pickles did not pay for the land contract, the Messerlys sought foreclosure, sale, and deficiency judgment, and Pickles sought rescission. Pickles argued failure of consideration and willful concealment and misrepresentation.
7. Rule:
8. Reasoning: The Messerlys argue that there was no mistake in the contract because the defect did not arise until after the contract was executed. The Pickles argue that the Messerlys are confusing the date of the inception of the defect with the date upon which the defect was discovered. -> the facts give rise to inference contrary to the Messerlys.
The Messerlys argue that the mistake relates to the quality or value of the estate that are collateral to the agreement. The Pickles argue that the mistakes were to the very nature of the character of the consideration. -> mistake directly affects value and simultaneously and materially affects the essence of the consideration -> not collateral.
The mistake is significant, but equity does not justify the rescission. Rescission is an equitable remedy granted only in the sound discretion of the court. In cases of mistake by two innocent parties, Court determines who assume the loss. “as is” clause assigned the risk of loss to the Pickles.
BMW Financial Services NA, LLC. v. Deloach
1. Case Heading:
Parties: Corporation (seeks collection from default judgment) and individual (seeks grant of settlement).
Year: 2017
Court: California Court of Appeal
2. Disposition: Affirm the judgment and the motion to compel satisfaction of judgment.
3. Holding:
4. Issue:
5. Procedural History: The court granted Deloach’s motion to compel satisfaction of judgment. The court found the deal for the settlement amount was reasonable and that rescinding the agreement would be unconscionable because Deloach did not deal in sharp dealing or no overly harsh outcome existed.
6. Facts: Deloach leased a 2013 BMW from BMW FS. Deloach did not make his lease payments, and BMW repossessed the car. At that point, BMW determined that the odometer had been tampered with. BMW sued Deloach for breach of the lease and for tampering with the odometer. Deloach did not respond and BMW took his default and sold the car at auction for $25,000 in Apr 2015. The account was sent to a collection agency, Firstsource, which contacted Deloach to collect $24000 in Aug 2015. Deloach’s father negotiated a settlement with Firstsource for a complete release for $14000. In Aug 2015, the trial court entered a default judgment against Deloach for $114677, mostly for odometer tampering. BMW contacted Deloach and stated that the settlement was a mistake and it was rescinding by returning $14000. Deloach moved for a motion to compel acknowledgement of satisfaction of judgment. BMW argues that an account in litigation is not given to a collection agency and Deloach’s account was mistakenly not flagged as being involved in litigation. BMW also did not learn about the default judgment after the settlement had concluded.
7. Rule:
8.Reasoning:A rescission must meet: (1) the defendant made a mistake regarding a basic assumption; (2) the mistake has a material effect upon the agreed exchange that is adverse to the defendant; (3) the defendant does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement is unconscionable.
(1) and (2) is met because BMW made a material mistake that gave it less money.
The error was attributable solely to BMW’s failure to tag the account. There was no evidence that Firstsource or Deloach knew about the default judgment when the settlement was made.
Good faith and reasonable standards of fair dealing include not just an absence of cheating or of fraud but also not disappointing the justifiable expectations of the other party. Deloach expected Firstsource would settle the debt with BMW. Deloach could infer from the letter that BMW was consulted and that BMW could discover the error.
Enforcing the settlement would not be unconscionable. The punitive damage was not an actual loss to BMW.
Hemlock Semiconductor Operations, LLC. v. Solarworld Industries Sachsen GmbH
1. Case Heading:
Parties: Corporation (Michigan supplier of polycrystalline silicon) and corporation (German buyer of polysilicon)
Year: 2017
Court: US Court of Appeals 6th circuit
2. Disposition: Affirm the judgment of the district court.
3. Holding:
4. Issue:
5. Procedural History: Sachsen asserted 17 affirmative defenses and Hemlock stroke the anti-trust argument. The district court granted Hemlock’s motion for summary judgment on its breach-of-contract claim, specifically baed on the liquidated damages provision, and held the remaining affirmative defenses unavailing. Full amount was given to Hemlock. Sachsen appeals the decision to strike the illegality defense.
6. Facts: Hemlock and Sachsen negotiated an LTA in 2005 and three more after 2015, until 2019. A “take-or-pay” provision of the LTA required Sachsen to purchase a specified quantity of polysilicon each year at a fixed price or pay the yearly amount. A “liquidated-damages provision” stated that, if Sachsen failed to pay the specified amount for a given year, Hemlock had the right to terminate the LTAs and Sachsen would owe Hemlock he full remaining balance of the LTA price, including for the future years. Sachsen made advance payments on the LTAs as Hemlock massively expanded its manufacturing facilities. Sachsen obtained polysilicon below the market price until 2009, when the Chinese government subsidized its national production, and the market price of polysilicon dropped below the LTA price. Hemlock and Sachsen negotiated a temporary adjustment of LTA price in 2011 but failed to reach a deal after an expiration of the adjustment. In 2013, Hemlock sent a “Shortfall Notice” to Sachsen from “take-or-pay” provision and Sachsen rejected.
7. Rule:
8. Reasoning: Sachsen argues: take-or-pay and prohibition on resale are inextricably linked and the combination of the two is illegal under the EU and German antitrust law. LTA also violated the antitrust law by tying Sachsen’s demand for polysilicon to a single seller Hemlock.
Hemlock argues: it sought to enforce only the take-or-pay provision and it does not violate the US or the EU/German law.
Sachsen argues: the district court erred in barring commercial impracticability and frustration of purpose arguments. Chinese government illegally subsidized and committed industrial espionage against Sachsen, rendering the defenses.
Hemlock argues: the drop in the price was simply a change in market condition that does not excuse contract perform.
Commercial impracticability: there must be a showing of impracticability because of extreme and unreasonable difficulty, expense, injury, or loss involved. The defense is viable only if an unforeseen event occurs and the non-occurrence was the basic assumption on which both parties made the contract.
Actions of the Chinese government was unforeseeable but the possibility that the market price could skyrocket or plummet would have been well within their contemplation.
Frustration of purpose: unforeseen event altered a basic assumption and requires that the unforeseen event thwart the parties’ purpose in making the contract to such a degree that one party’s performance becomes virtually worthless to the other. -> inapplicable because the purpose of the LTAs was stably supply polysilicon at a predictable price, not of mutual profitability.
Sachsen argues that the full amount award is an unenforceable penalty. The court states it is liquidated damages.
-The parties are making bets on the price of poly by entering into a contract to stabilize the price. The agreement is a mutual allocation of risk. The drop in the price was not a basic assumption of the contract.
Mel Frank Tool & Supply, Inc. v. Di-Chem Co.
1. Case Heading:
Parties: Corporation (storage and distribution facility owner) and corporation (chemical distributor).
Year: 1998
Court: Supreme Court of Iowa
2. Disposition: Affirm the judgment of the trial court.
3. Holding:
4. Issue:
5. Procedural History: The trial court asked: Can the defendant voluntarily terminate the lease agreement because the warehouse could not be used for storing hazardous materials due to the inspection? The court says it depends, but found that Mel had no reason to believe that hazardous would be stored.
6. Facts: In 1994, Di-Chem negotiated with Mel to lease a storage and distribution facility. A day before the lease signing, Frank from Mel asked Di-Chem representatives what they were selling and was replied chemicals. Some of the distributes were considered “hazardous materials.” Provisions require Di-Chem to “make no unlawful use of the premises and to comply with all City Ordinances,” and destruction-of-premises that allow either party to terminate under circumstances. The city’s fire marshall wrote Di-Chem that the building violated the Code and materials should be removed. Mel and Di-Chem thought Di-Chem could occupy after the deficiencies were rectified. The Code was changed after Di-Chem took occupancy. On Aug, Di-Chem informed Mel its intention to re-locate as soon as possible to avoid the proceedings. On Oct, Di-Chem vacated the premises. Mel sued for breach of the lease and damages to the property.
7. Rule:
8. Reasoning: Impossibility of performance: a court may grant relief when an extraordinary circumstance may make performance so vitally different from what was reasonably to be expected as to alter the essential nature of that performance. The court must determine whether justice requires a departure from the general rule that the obligor bear the risk that the contract may become more burdensome or less desirable.
The obligor may claim: (1) the circumstance has made his own performance impracticable; (2) the circumstance has so destroyed the value to him of the other party’s performance as to frustrate his own purpose in making the contract; or (3) he will not receive the agreed exchange for the obligee’s duty to render that agreed exchange.
Frustration must meet: (1) the purpose frustrated is a principal purpose of that party in making the contract; (2) the frustration must be substantial; and (3) the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made.
A regulation may prohibit a tenant, and the tenant is relieved from obligation to pay rent but not if there is a serviceable use still available consistent with the use provision in the lease. The use is less valuable or profitable does not mean the use is substantially frustrated.
Di-Chem produced no evidence that all of its inventory consisted of hazardous. Its principal purpose was not substantially frustrated.
The real estate agent did not represent Di-Chem but the error is harmless.
Alaska Packers’ Association v. Domenico
1. Case Heading:
Parties: Corporation (employer who modified the contract) and individual (worker who stroke for pay increase)
Year: 1902
Court: US Court of Appeals 9th circuit
2. Disposition: Reverse the judgment of the trial court and remand.
3. Holding: judgment for Alaska.
4. Issue: was the contract modification of May was supported by a sufficient consideration?
5. Procedural History:
6. Facts: In Mar 1900, Domenico entered into a contract with Alaska to go from SF to AL and back on board a vessel to work during the fishing season. Alaska was to pay each worker $50 for the season and two cents for each red salmon. In Apr 1900, the workers signed shipping articles for the job that stipulated $60 for the season. Alaska had invested $150000 for salmon cannery. The workers arrived at AL and began work. Few days later, the workers stopped work and demanded the company’s superintendent that they be paid $100 instead of $60, or they will stop working and return to SF. Alaska could not get other men, and after attempting to enforce the contract, substituted the prices to $100 on the contracts. The superintendent stated he was without authority to alter the contracts. The workers demanded the pay upon returning but the company denied the validity of the contract. The workers argue that the fishing nets were defective and then they demanded wage increase.
7. Rule:
8. Reasoning: Consent to a demand to pay more money under the circumstances was without consideration because the workers were already under contract to do that work.
There was no voluntary waiver on the part of the company of the breach of the original contract. The superintendent claimed he had no authority to change the contract and he would have none to waive either.
-“catch salmon w standard nets w $50” -> “catch salmon w substandard nets w $100” has consideration.
-appellate accepts trial court’s finding on quality of nets and does not consider the quality of nets.
Kelsey-Hayes Co. v. GaltacoRedlaw Castings Corp.
1. Case Heading:
Parties: Corporation (maker of brake assemblies) and corporation (supplier of castings).
Year: 1990
Court: US District Court
2. Disposition: Deny Galtaco’s motion for summary judgment and grant Kelsey’s motion to amend.
3. Holding:
4. Issue:
6. Facts: In 1987, the parties signed a three years contract for Galtaco to be the sole source of certain types of castings to Kelsey, and charge fixed and then reduced prices in return. In 1989, Galtaco experienced continued monetary losses for years. Galtaco decided to discontinue its foundry operations but agreed to keep operating its foundries for several months, in exchange for price increase of 30 percent, to let its customers find another source of castings. Kelsey concluded that it would not have been able to find an alternative source for 18-24 weeks and accepted Galtaco’s price increase. Galtaco demanded another 30 percent price increase because other customers found alternative sources but Kelsey was the sole beneficiary of the operation with a higher fixed cost. Kelsey accepted. Galtaco made 282 shipments to Kelsey and Kelsey paid for 197, but not for 84 shipments, similar to the price from the increases.
7. Rule:
8. Reasoning: Kelsey argues the 1989 agreements were executed under duress.
Galtaco argues Kelsey went into the superseding 1989 agreements and cannot sue for breach of the 1987 k.
Court: a subsequent contract or modification is invalid and does not supersede when entered under duress. Economic duress exists even in the absence of an illegal threat and when the threat is merely wrongful.
Kelsey offered proofs of wrongful acts of Galtaco, presented a triable issue that it had no reasonable alternatives, and displayed some protest against the higher price to put the seller on notice that modification is not freely entered into.
-Was Galtaco trying to Kelsey a favor by maintaining the operation? Was it trying to extort Kelsey?
Oppenheimer& Co. v. Oppenheim, Appel, Dixon & Co.
1. Case Heading:
Parties:
Year: 1995
Court: NY Court of Appeals
2. Disposition: Reverse the judgment of the Appellate and dismiss the complaint.
3. Holding:
4. Issue: Does the doctrine of substantial performance apply to the facts of this case?
5. Procedural History: The court ordered in limine barring any reference to substantial performance. The jury rejected that Oppenheim failed to perform and was stopped, but affirmed the substantial performance and awarded O. Oppenheim moved for JNOV and Supreme Court granted the motion. The Appellate reversed and reinstated the jury verdict.
6. Facts: In 1986, Oppenheimer moved to the World Financial Center. Oppenheimer had three years remaining on its lease for the 33rd floor of One New York Plaza. As an incentive to move, O was to make the rental payments due under the rental agreement in the event it was unable to sublease the 33rd floor. O and Oppenheim entered into a conditional letter agreement, with proposed sublease attached, because Oppenheim leased space on the 29th floor but sought to expand. Under the agreement, O was to obtain a written permission that Oppenheim is reasonably acceptable until Dec 30 and the agreement would be void if the condition was not met. The agreement further stipulated tenant work, written consent for tenant work, and that it is void unless timely satisfied. O extended the deadlines in writing and timely satisfied the first condition but never delivered the consent for tenant work. O’s attorney telephoned Oppenheim’s attorney and said the consent was secured. Oppenheim informed O’s attorney that the agreement was invalid for timely failure. The document of written consent was received by O 23 days after the deadline. O sued, claiming breach of contract because Oppenheim was waived or stopped by virtue of its conduct from insisting on physical delivery, and that O had substantially performed.
7. Rule:
8. Reasoning: Oppenheim argues no sublease arose because the condition was not met, and substantial performance is not applicable to excuse the failure.
Condition precedent: an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.
Express conditions: agreed to and imposed by the parties themselves; must be literally performed. Implied or constructive conditions: imposed by law to do justice; subject to the precept that substantial compliance is sufficient.
Court will interpret doubtful language as embodying a promise or constructive condition rather than express c.
Non-occurrence of the condition may be excused by waiver, breach, or forfeiture.
Paragraph 4© of the letter agreement establishes an express condition precedent with (“if,” “unless and until”).
O does not argue that the nonoccurrence should be excused on the ground of forfeiture but Oppenheim’s waiver, equitable estoppel, and O’s substantial compliance.
Flexible doctrine of substantial compliance stands in sharp contrast to the requirement of strict compliance.
Critical concern of forfeiture or unjust enrichment is not present and does not consider substantial performance.
Substantial performance is ordin. not applicable to excuse the nonoccurrence of an express condition precedent.
Parties did not intend to form a contract unless and until defendant received written notice of the consent.
-Express conditions must be literally performed.
-O took on the risk and bear the cost; should not have promised with express condition.
J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc.
1. Case Heading:
Parties: Corporation (owner of a building in Howard Beach) and corporation (tenant)
Year: 1977
Court: NY Court of Appeals
2. Disposition: Reverse the judgment of the Appellate Court and grant a new trial.
3. Holding:
4. Issue: (1) will the tenant suffer a forfeiture if the landlord is permitted to enforce the letter of the agreement? (2) if there is a forfeiture, may a court of equity grant the tenant relief when the forfeiture would result from the tenant’s own neglect or inadvertence?
5. Procedural History: The Civil Court held that the tenant was entitled to equitable relief. The Appellate Term affirmed, and the Appellate Division, after granting leave, reversed and granted the petition.
6. Facts: JNA leased the building to Palermo and Vascellero for 10 years from 1964. The agreement stipulated an option to renew for tenants. The tenants opened a restaurant and Foro corporation. The restaurant operated at a loss and the tenants went into a contract with Chelsea to sell the restaurant and assign the lease. The tenants were required to obtain a modification of the option to renew to allsow a term of 24 years. JNA modified the option and consented to the assignment. Foro assigned the lease and sold its interest. Chelsea reopened the restaurant. JNA sent a letter to Chelsea to inform that taxes were due but did not mention the option to renew. JNA told that the option had lapsed, the date has passed, and to vacate the premises. Chelsea’s attorney sent a written notice of intention to renew the option but was not honored.
7. Rule:
8. Reasoning: JNA seeks to enforce the letter and Chelsea asks for equity to relieve it from forfeiture.
Chelsea claims it did not receive a copy of para 58 and were not aware of time limitation. It thought it had an absolute right to tenancy for 24 years after the expiration. Court: Chelsea had knowledge and failed to renew.
A notice exercising an option is ineffective it not given within the time specified.
Default on an option usually does not result in a forfeiture. Thus, equity will not intervene. Even when paid, nothing is forfeited when the option expires.
When a tenant neglected to exercise an option to renew, he might suffer a forfeiture if valuable improvements were made.
A tenant or mortgagor should not be denied equitable relief from the consequences of his own neglect or inadvertence if a forfeiture would result. The rule applies even though it has neglected to perform an affirmative duty.
Chelsea made a considerable improvements, and if the location is lost, the restaurant would lose good will. There would be a forfeiture and big gravity of the loss. It is entitled to equitable relief if there is no prejudice to P.
-Disproportionate forfeiture doctrine relaxes the express condition requirement (non-occurrence of a condition fully discharges any and all duty of the condition; applying to this case creates injustice).
-Condition of the lessor’s duty to renew that is express.
-JNA had no obligation to notice that the option to renew is expiring, but JNA had habits of notifying about other.
-JNA was at fault, but not in a culpable sense. JNA was not notified about renewal like other issues.
-There would be prejudice to landlord if there was a new tenant was lined up for with paying more, …
Jacob & Youngs, Inc. v. Kent
1. Case Heading:
Parties: Corporation (worked on the plumbing system) and corporation (owner of dwelling).
Year: 1921
Court: New York Court of Appeals
2. Disposition: Affirm and direct absolute judgment for Jacob.
3. Holding:
4. Issue:
5. Procedural History: The trial court directed a verdict for Kent. The Appellate Division reversed and granted a new trial.
6. Facts: Jacob built a country residence for Kent. The construction ceased in 1914 and Kent occupied the dwelling. Kent learned in 1915 that some of the pipes for the plumbing work were the product of factories other than Reading as specified in the specifications. 3/5ths were Cohoes and other pipes. Jacob was directed by the architect to do the work anew and the plumbing was encased within the walls. Work anew meant demolition of substantial parts of the completed structure, and Jacob did not touch the work and asked for a certificate that the final payment was due. Omission of the Reading brand was not fraudulent or willful, but from oversight and inattention from the subcontractor. Jacob argued the brands installed were the same in quality, in appearance, in market value, and in cost. Jacob sues to recover the balance unpaid.
7. Rule:
8. Reasoning: One does not fill the measure of his duty by less than full performance. An omission, however, will sometimes be atoned for by allowance of the resulting damage and will not always be the breach of a condition to be followed by a forfeiture. Some promises are independent and not conditions of one another, others are dependent and conditions of one another, and others are dependent, viewed as independent and collateral with insignificant departure.
The question is one of degree to be answered by the jury. Weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, and the cruelty of enforced adherence.
The measure of the allowance is not the cost of replacement but the difference in value.
The remedy in cases of substantial performance with compensation for defects of trivial or inappreciable importance has been developed as an instrument of justice.
-Implied, constructive condition: close is good enough. Kent’s promise to pay and J’s to build are conditions of each other. A’s substantial performance of x is a condition of B’s duty to do y. B’s… y… A’s…x.
-constructive condition? each promise is conditioned on substantial performance
-immaterial breach has no effect on the performance of the other party.
Sackett v. Spindler
1. Case Heading:
Parties: Individual (agreed to purchase shares)and individual (owner of a majority of the shares of S&S Newspapers)
Year: 1967
Court: California Court of Appeal
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue: Was Sackett’s duty to consummate the contract or to respond to Spindler in damages for Sackett’s filure to perform was in any way discharged by Spindler’s conduct?
5. Procedural History: The trial court found Sackett breached the agreement as an unjustified or unexcused failure to perform all or any part of what is promised in a contract.
6. Facts: Sackett agreed to purchase 6316 shares of stock in S&S Newspapers by paying $6000 on or before July 10, $20000 on or before July 14, and $59000 on or before Aug 15, with 6% interest on unpaid balance, free of encumbrances. Sackett paid $6000 on time, $19800 on July 21, and $59200 check on Aug 10 that declined due to insufficient funds on the account. Spindler acquired the stock owned by the minority shareholders, endorsed the stock certificates, and gave shares to Sackett’s attorneys to hold in escrow until the remainder is paid. On Sept 1, the check did not clear and Spindler reclaimed the stock certificates. On Sept 12, Sackett sent a telegram, stating that he secured payments and is ready, willing and eager to transfer them by Sept 22. Spindler’s attorney served a notice to Sackett to pay the balance with interest or the damages for the breach of the agreement would be assessed, and the urgent need for the newspaper’s working capital was discussed. Sackett paid $3944 in advance but did not pay until Sept 22 or the extended Sept 29 deadline. On Oct 4, Sackett stated his assets were free because his wife’s petition to impress a receivership on his assets was dismissed by the trial court in the divorce proceedings. Spindler’s attorney replied there will be no sale and purchase of the stock. Sackett’s attorney offered to pay in a liquidating trust but Spindler’s demanded payment in cash or its equivalent. No payment was made. Spindler had to mortgage personal items for a loan, sell half of his stock in the newspaper, and convert the paper to weekly because of the newspaper’s difficulties.
7. Rule:
8.Reasoning:Sackett argues “there will be no sale and purchase of the stock constituted notification that Spindler considered his duty discharged as a result of Sackett’s breach and was terminating the contract and substituting his legal remedies for his contractual rights. -> court: justifiable only if Sackett’s breach is total and not partial. If the breach was partial so that Spindler was not entitled to consider himself discharged, then Spindler’s action would constitute an unlawful repudiation of the contract, which would in turn be a total breach of the contract sufficient to discharge Sackett from duty.
Total/partial depends upon the materiality of the breach.
Court: Spindler was justified in terminating the contract on Oct 5 because it was uncertain whether Sackett intended to complete the contract despite offers and assurances. Sackett’s failure to perform despite the numerous requests could be ascribed to gross negligence or willful conduct.
It was unlikely that Sackett would tender the balance due or that he would do so at his own convenience. Spndler was not required to endure the uncertainty or to await Sackett’s convenience and was justified in treating the nonperformance as a total breach.
Spindler was not obligated to perform due to Sackett’s failure to tender the balance, and the repudiation was anticipatory in nature. Also, Spindler’s repudiation was retracted by his attorney who told Sackett’s that Spindler was still willing to consummate. Such a retraction constitutes a nullification of the original effectiveness of the repudiation.
-Sackett: “my material breach was partial and Spindler’s duty was not discharged. Spindler totally breached through repudiation that discharged my duty. Spindler has to pay the different between what I should have gotten and what I got.” Spindler: “Sackett’s repeated failure was a total breachanddischarged my duty to transfer the stocks.”
Truman L. Flatt & Sons Co. v. Schupf
Something happens before the date of performance that makes second party have serious doubts about either the willingness or the ability of the first party to perform. Anticipatory repudiation: advance refusal to perform. Circumstances give reasonable grounds for insecurity about the ability to perform on time.
1. Case Heading:
Parties:
Year: 1995
Court: Appellate Court of Illinois
2. Disposition: Reverse the judgment and remand.
3. Holding:
4. Issue:
5. Procedural History: The trial court granted Schupf’s motion for summary judgment. Truman filed a motion to vacate the judgment, which was denied. Truman appeals, arguing it did not repudiate the contract, and even if it did, it timely retracted the repudiation.
6. Facts: In March 1993, Schupf agreed to sell a parcel of land to Truman for $160000 with a provision that the contract is void if the City denies the request to use the land as an asphalt plant. On May, Truman’s attorney sent a letter to Schupf’s, informing of substantial public opposition at a public meeting about the rezoning. He stated that the chances were none and withdrew the request for rezoning, and the parcel zoned I-1, not I-2, was offered $142,500. On June 9, Schupf’s attorney rejected the offer. On June 14, Truman’s attorney stated Truman elected to proceed with the purchase per the contract. Schupf’s attorney replied on July 8 that Truman’s failure to waive the rezoning requirement and elect to proceed when rezoning was denied, coupled with the offer to buy at less price, voided the contract. Truman sued for specific performance and other relief.
7. Rule:
8. Reasoning: Language that amounts to a statement of intention not to perform except on conditions which go beyond the contract constitutes a repudiation. Whether an anticipatory repudiation occurred is a question of fact. The cases cited did not involve a request to change a term in the contract as here.
Schupf argues that the request to decrease the price implied a threat of nonperformance if not modified. Court: the language did not constitute a clearly implied threat of nonperformance. Such inference is weak and the repudiation has to be manifested clearly and unequivocally. The letter created, at most, an ambiguous implication.
Schupf argues… Truman argues repudiating party has the right to retract the repudiation before the aggrieved pary has chosen one of its options allowed under the common law. June 9 letter failed to treat the contract as rescinded, and absent notice or other manifestation that Schupf was pursuing one of their options, Truman was free to retract.right
Defendant’s theory gives interpretations: Illinois should not follow the common-law rule allowing retraction of an anticipatory repudiation before the aggrieved party elects a response, and aggrieved party may treat the contract as terminated or rescinded without notice or other indication being given to the repudiating party, and once a decision is made, the repudiating party no longer has the right of retraction. ->Schupf did not change position, and it must have indicated to the other party it is electing to treat the contract as rescinded.
June 14 letter indicated Truman intended to perform. July 8 lette indicated intent to treat the contract as rescinded. If May 21 letter were an anticipatory repudiation, Truman retracted it on June 14, where Schupf did not materially change their position or indicated to Truman an intent to tat the contract as rescinded.
Hornwell Brewing Co. v. Spry
1. Case Heading:
Parties: Corporation (supplier and marketer of alcoholic and non-alc beverages) and individual (distributor)
Year: 1997
Court: Supreme Court of New York County
2. Disposition:
3. Holding: Grant declaratory judgment to Hornell that Spry and his company were duly terminated and have no continuing rights.
4. Issue:
5. Procedural History:
6. Facts: In 1992, Spry approached Vultaggio, the chairman, about distributing Hornell’s Arizona beverages. In 1993, Spry presented an ambitious plan for distributing the beverages in Canada. Hornell granted the exclusive right to purchase Arizona products for distribution in Canada, and Spry formed Arizona Iced Tea Ltd. The arrangements were oral. Spry requested a letter needed to secure financing, and Hornell provided one. Spry set himself up as Hornell’s distributor in Canada with Hornell’s approval. During 1993 and until May 1994, Hornell sold beverages to Spry on 10-day credit terms. After problems, Hornell stopped relationship with Spry and selling to them. Spry failed to remit timely payment for shipments, where the unpaid invoices grew to over $100000 and the checks bounced. Also, 1993 sales were far below Spry’s initial projections. A series of communications showed Spry’s constant arrearages and the need to obtain a line and/or letter of credit to put the business on a more secure footing. Hornwell had goals of collecting money owed by Spry and stabilizing future business relationship based on proven and reliable credit assurances. Hornell sent Spry a letter which provided that Spry was indebted to Hornell for almost $80,000. The letter also provided that, if Spry would pay that amount, Hornell would continue the distributorship agreement and allow up to $300,000 in outstanding balances if all invoices were paid. Spry eventually wire transferred the full amount, and ordered $390,000 to $450,000 of product. Vultaggio learned that Spry’s warehouse in Canada was empty; there was no managerial, sales, or office staff or distribution trucks, and Spry’s operation was a sham. Hornell acknowledged receipt of the payment and that it would extend up to $300,000 of credit if Spry would confirm that he had secured the $1.5 million line of credit. Spry did not respond. Vultaggio met with Spry to discuss termination of the business relationship. Vultaggio presented Spry with a letter of agreement regarding the termination, but Spry did not sign it. Hornell sought a declaratory judgment action that any rights of Spry to distribute have been duly terminated.
7. Rule:
8. Reasoning: …
Whether Hornell has reasonable grounds for insecurity depends on factors such as buyer’s exact words or actions, the course of dealing or performance between the parties, and the nature of the sales contract and the industry.
Once the seller correctly determines it has reasonable grounds for insecurity, it must properly request assurances from the buyer. Then, it must determine the proper adequate assurance, based on the test of commercial reasonableness and factual conditions.
Reasonable grounds for insecurity can arise from buyer has fallen behind in his account with the seller.
Spry argues it satisfied assurances by April 15 conversation, Apr 18 letter to Metro, and Metro’s payment.
Court: Hornell had further reasonable grounds for insecurity and a new basis for seeking adequate assurances. Hornell would release up to $300000 on the condition that Spry meet the 14 day payment terms, and Spry out-ordered and gave no opportunity to learn whether Spry would meet the 14 day term. Spry further did not give assurance of pay.
Spry’s failure to respond constituted a repudiation of the distributorship agreement, which entitled Hornell to suspend performance and terminate the agreement.
Crabby’s, Inc. v. Hamilton
1. Case Heading:
Parties:
Year: 2008
Court: Missouri Court of Appeals
2. Disposition: Affirm the judgment
3. Holding:
4. Issue:
5. Procedural History:
6. Facts: Billingsly listed Crabby’s restaurant for sale with Kassab for $325000. Hamilton offered to purchase the property for $290000 and the offer was accepted on May 2003. The contract contained a financing contingency provision (express condition). Hamilton did not furnish Billingsly with a copy of an effective written loan commitment within 30 days as stipulated in the contingency. Hamilton applied for and was approved for a loan. On June 2003, title insurance was furnished, repairs were made, appraisal was performed, and a closing date was specified but was extended due to appraisal requirements. The parties discussed additional repairs and credit $1373 to Hamilton. The closing date was again extended to August 2003 and agreed Hamilton to take possession to clean. Hamilton applied for licenses and set up the utilities. Tax liens were satisfied, Billingsly obtained certificates, and Billingsly’s lender agreed to accept amunt and release its lien. On July 2003, Hamilton sent a letter with the intent not to close, claiming that items were taken from the premises and tax liens existed. Hamilton did not show up for closing and bought another property for $170000. Billingsly sold the property to another for $235000. Billingsly sued for $290000-$235000.
7. Rule:
8. Reasoning: Hamilton argues that the contract terminated when it did not furnish a copy of an effective written loan commitment per contingency. It also argues that if the contract did not automatically terminate, the trial court erred in finding that Hamilton did not use reasonable diligence in finding a loan (wrongful prevention).
Billingsly argues Hamilton’s conduct after entering into the contract waived the contingency.
On contingency, upon the nonoccurrence of the condition, the buyer is ipso facto excused from performance. The buyer can waive the contingency and proceed.
Court: buyer failed to use reasonable diligence to obtain loan and also waived the entire contingency.
Buyer argues that fair market value is not determined because $235000 is 11.5 months after the date and it was a distress sale. Court disagrees.
Handicapped Children’s Education Board v. Lukaszewski
1. Case Heading:
Parties: (employer) and (quitted employee)
Year: 1983
Court: Supreme Court of Wisconsin
2. Disposition: Affirm the breach part and reverse the damage part of the appellate court.
3. Holding:
4. Issue: 1) did L breach her employment contract with the Board? and 2) if L did, did the Board suffer recoverable damages?
5. Procedural History: The trial court awarded the Board $1026 and $222 costs. The court of appeals affirmed the breach of contract claim but reversed the damage award, because more salary got more valuable teacher.
6. Facts: Board hired Lukaszewski as a speech and language therapist for the spring term and assigned her to Lightfoot School, 45 miles from her home. Lukaszewski commuted each day. The board offered a contract to work for the 1978-79 year with an annual salary of $10760 and was accepted. In Aug 1978, Lukaszewski was offered a position by the Wee Care Day Care Center near her home for $13000. L notified the Board’s director that she intended to resign. Board refused to release L, directed her to return to work, and sent a letter to Wee to not interfere or face a legal action. L resented Board’s actions and made an appointment with the doctor. Dr. Chaterjee wrote a letter stating that L had a hypertension problem from 1976, her blood pressure was high, the root situation had to improve for her to improve, and driving long distance was dangerous for her agitated state. L did not return to work and resigned, citing letter. L worked at Wee and Board found a replacement, who had less educational background but more experience and $1026 higher than L’s salary. Board sued L for breach of contract and sought $1026.
7. Rule:
8. Reasoning: L argues that her employment endangered her health and her failure was excused. Court: the trial court did not make a factual finding that L resigned for health reasons. Dissenting: impracticable bchealth reasons.
Damages in breach of contract cases are ordinarily measured by the expectations of the parties. The nonbreaching party is entitled to full compensation for the loss of bargain; loss flowing from the breach which are proven to a reasonable certainty and were within contemplation when the contract was made.
Damages include the cost of obtaining other services equivalent to that promised but not performed, plus any foreseeable consequential damages.
L argues that Board paid more but received proportionately more valuable teacher and an award would place it in a better position than had the contract been performed. Court: it improperly focuses on the objective value of the services rather than that for which it had bargained. Damages are measured by the expectation of the parties. Board expected to receive L’s equivalent, not the more experienced. Board and lost the benefit of its bargain with imposed.
-“the more experienced and expensive therapist was not what the Board wanted, budgeted, or bargained for.”
-not the world’s most experienced and expensive because it does not mitigate the damages.
American Standard, Inc. v. Schectman
1. Case Heading:
Parties: (owner and seller of the plant and the land) and (a demolition and excavating contractor)
Year: 1981
Court: New York Supreme Court
2. Disposition: Affirm the judgment.
3. Holding: The cost of completion, not the difference in value, was the proper measure.
4. Issue: Should the court have charged the jury the difference in value of the property with and without the promised performance?
5. Procedural History: The jury awarded $90000 to American.
6. Facts: Until 1972, American operated a pig iron manufacturing plant on the 26-acre parcel. American decided to close the plant in 1973 and made a contract to convey the buildings and others to Schectman in return for $275000 and promise to remove the equipment, demolish the structures, and grade the property. The contract required Schectman to remove all foundations, piers, headwalls, and other structures, including those under the surface to a depth of one foot below the specified grade lines. Schectman deviated from the required grade lines and foundations and other structures existed above grade of walls.
7. Rule:
8. Reasoning: Schectman argues that the court erred in rejecting his proof that American suffered no loss by breach because it makes no difference in the value of the property whether the old foundations are at grade or below and in denying his offer to show that the property sold for $183000, only $3000 less than its full fair market value. -> diminution in value of the property, not the cost of completion estimated at $110500, should be the damage.
The economic waste of the type which calls for application of the diminution in value rule generally entails defects in construction which are irremediable or which may not be repaired without a substantial tearing down of the structures.
It cannot be said that the grading and the removal of the structures were incidental to plaintiffs’ purpose of achieving a reasonably attractive vacant plot for resale. Nor can defendant maintain that the damages which would naturally flow from his failure and which could have been in the contemplation when the contract was made would not be the reasonable cost of completion.
The performance would not have involved undoing what in good faith was done improperly but only doing what was promised and left undone. The burdens of performance and the cost of completion do not alter that the measure is the cost of completion. …
Hadley v. Baxendale
1. Case Heading:
Parties: (millers) and (well-known carriers)
Year: 1854
Court: Court of Exchequer
2. Disposition: Order a new trial.
3. Holding: the judge should have told the jury that they ought not to take the loss of profits into consideration.
4. Issue:
5. Procedural History: The jury returned a verdict for Hadley.
6. Facts: Hadley’s mill was stopped by a breakage of the crank shaft. Hadley sent a person to the office of Baxendale to have the shaft carried to Greenwich, where the manufacturer Joyce & Co was located. The person stated that the shaft must be sent immediately and Baxendale replied, when sent by twelve o’clock, that it would be delivered the following day. Baxendale took the shaft with the payment but the delivery was delayed by some neglect. Hadley did not receive the shaft for several days and lost profits. Bexendale argued that the damages were too remote.
7. Rule:
8. Reasoning: Under a breach, the damage should be such as may fairly and reasonably be considered either arising naturally, or such as may reasonably be supposed to have been in the contemplation of both parties at the time of contract formation. If special circumstances were communicated, the damage would be the amount of injury which would ordinarily follow from a breach under the special circumstances. If special circumstances were unknown, it would not be affected by the special circumstances.
Hadley communicated that the broken shaft of a mill was to be delivered but not that the mill would be stopped.
Loss of profits cannot reasonably be considered such a consequence of the breach as could have been fairly and reasonably contemplated by both parties when they made the contract.
-argument for breach: put them in a position where they can accurate calculate what the damage is.
Florafax International, Inc. v. GTE Market Resources, Inc.
1. Case Heading:
Parties: (flowers-by-wire company allowing orders between florists and customers) and (a call center provider)
Year: 1997
Court: Supreme Court of Oklahoma
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The jury awarded 0.75 mil for Bellerose loss and 0.82 mil for the cost of setting up a call center.
6. Facts: Bellerose Floral, a leading marketer of floral products, signed up for Florafax’s services. They signed a contract in 1989 where Florafax would accept consumer orders and handle placements and be paid certain fees. The contract would be for one year and extendable. Florafax subcontracted out much of the telecommunication and telemarketing services. Florafax signed a contract with GTE where GTE would provide a call answering center that handles the activities and be paid fees. The contract would be for three years. GTE knew prior to signing the contract that it was providing services to other business such as Bellerose, considered it positive, and determined GTE would make little or no money from the contract. From 1989 to 1990, problems surfaced regarding adequacy of GTE’s performance and became serious. GTE failed during the week leading up to Mother’s Day to provide sufficient TSRs to answer calls without adequate staffs. Florafax also told its manager at the GTE to look out for Florafax’s interests. GTE’s failure caused Bellerose to teminate its agreement with Florafax because of poor performance of GTE. Florafax incurred costs from setting up its own call answering center that GTE was supposed to handle. Florafax seeks damages from the costs of performing the services GTE was to perform and lost profits from the Bellerose contract. Florafax’s economist note increased the Bellerose sales volume from 1990 to 1991 one hundred percent and GTE’s accountant used a flat growth rate. The Florafax expert estimated Bellerose loss at 1.9 mil extended out to three years and GET at 0.5 mil.
7. Rule:
8.Reasoning:GTE argues that lost profit damages cannot include profits from third-party collateral contracts or, if recoverable, Florafax failed to prove entitlement; the lost profits must be limited to a sixty day period. Court: no.
The loss of future or anticipated profit is recoverable 1) if the loss is within the contemplation of the parties at the time the contract was made, 2) if the loss flows directly or proximately from the breach, and 3) if the loss is capable of reasonably accurate measurement or estimate.
GTE had within its contemplation at the time of contracting the potential of profits from Bellerose.
Application of the Osborn rule would improperly allow GTE to benefit from a cancellation right it had no ability to exercise.
This record does not require a conclusion Bellerose would have exercised termination for some other reason.
-Florafax made GTE aware that if the contract is breached, it would cause problems and GTE pays on lost profits.
Rockingham v. Luten Bridge Co.
1. Case Heading:
Parties: (orders a bridge construction) and (constructor)
Year: 1929
Court: US Court of Appeals
2. Disposition: Reverse the judgment.
3. Holding:
4. Issue:
5. Procedural History: The district court directed a verdict for Luten for the full amount of its claim.
6. Facts: Luten entered into a contract to build a bridge for Rockingham. Rockingham voted 3 to 2 for the contract, but one person switched side to against, and Rockingham instructed Luten to stop working on the bridge. Luten continued the construction sued to recover. The court considered Rockingham’s repudiation a total breach.
7. Rule:
8. Reasoning: the county had no right to rescind, but after Luten received notice of the breach, it had duty to o nothing to increase the damages flowing therefrom. Luten should have desisted from further work.
-If cost of building is 150K and the price of bridge is 200K and repudiation occurs at: day 1, expectation damage is 50K. day at completion, expectation damage is 200K. It is more efficient to resolve then and there than proceeding with breach.
Erlich v. Menezes
1. Case Heading:
Parties: (owner of the leaking house) and (licensed general contractor)
Year: 1999
Court: Supreme Court of California
2. Disposition: Reverse the judgment of the Court of Appeals.
3. Holding: Negligence caused economic injury and property damages and breached no duty independent of the contract. Erlich may not recover damages for emotional distress based upon breach of a contract.
4. Issue: Is emotional distress damage recoverable for the negligent breach of a contract to construct a house?
5. Procedural History: Menezes prevailed on the fraud and negligent misrepresentation claims. The jury awarded Erlich the full cost of repair and emotional distress. The Court of Appeal affirmed two-to-one.
6. Facts: Erlich contracted with Menezes to build a house on its lot. Erlich moved into the house in 1990 and discovered in 1991 that, when the rain came, the house leaked from every conceivable location. Despite repair efforts, the house continued to leak. Erlich inspected the home with another general contractor and a structural engineer, who found serious errors in the construction of the home’s structural components. Erlich suffered emotional distress from the defective condition and Menezes’s invasive and unsuccessful repair attempts. Erlich felt sick and was carried away in an ambulance. He has superventricular tachyarrhythmia from stress that made him resign from his positions. Sandra feared the house would collapse and placed stickers, alarms, and lights for rescue crews.
7. Rule:
8.Reasoning:In an action for breach of contract, the measure of damages is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom, provided the damages are clearly ascertainable in both their nature and origin.
In an action not arising from contract, the measure of damages is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.
Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectation of the parties are not recoverable.
The same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts. Conduct amounting to a breach of contract becomes tortuous only when it also violates a duty independent of the contract arising from principles of tort law. The duty that gives rise to tort is completely independent of the contract or arises from conduct which is both intentional and intended to harm.
P: mental distress is foreseeable from negligent breaches of contracts. Court: foreseeability alone not sufficient.
The special relationship test is not relevant because Menezes is one of thousands of available contractors.
Reasons for denying tort recovery in contract breach cases: the different objectives underlying tort and contract breach, the importance of predictability in assuring commercial stability in contractual dealings, the potential for converting every contract breach into a tort with punitive damage recovery, and the preference for legislative action.
Tortuous breach of contract may be found when the breach is accompanied by a traditional common law tort, such as fraud or conversion, the means used to breach the contract are tortuous, involving deceit or undue coercion, or one party intentionally breaches the contract intending or knowing that such a breach will cause severe.. harm.
-recovery for emotional distress is not available for damages that are consequential or special.
A seller may breach contract by: deliver goods that fail to conform to the contract in some way (e.g. breach of warranty) or fail to make a proper tender of the goods (failure to deliver on time or too few or many). Buyer’s remedies turn on whether the buyer accepted the goods.
a. Cover UCC§2-712: If the buyer purchases in good faith and without unreasonable delay, the buyer may recover the difference between the cover price and the contract price, plus incidental and consequential damages.
Market damages UCC§2-713: If the buyer has elected not to purchase substitute goods as cover, the buyer may recover based on the difference between the market price at the time when the buyer learned of the breach and the contract price. Market measure of damages is determined at:
1. The date when the buyer learns of the repudiation;
2. The date when the buyer learns of the repudiation plus a commercially reasonable time thereafter; or
3. The date when actual performance by the seller is due under the contract.
Damages for Accepted Goods UCC §2-714: damages are recovered for accepting nonconforming goods. From a breach of warranty, the measure of damages is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount. Incidental and consequential damages are also authorized.
Specific performance UCC §2-716: compels the breaching party to render the performance required by the contract. May be decreed where the goods are unique or in other proper circumstances.
Incidental and consequential damages UCC §2-715: incidental consist of out-of-pocket expenses incurred by the buyer to deal with the consequences of the seller’s breach. Consequential include economic or commercial loss and damage to person or property.
Seller’s remedy includes the right of resale and recovering based on the lost profit.
Resale Damages UCC §2-706: resell goods and recover the difference between the resale price and the contract price. The seller must identify the goods being resold as the same ones under the contract that was breached, give the buyer proper notice of resale, and do resale in good faith and in a commercially reasonable manner.
Market Damages UCC §2-708(1): traditional contract price minus market value damage.
Lost Profits UCC §2-708(2): lost profits is awarded if the market measure of damages is inadequate to put the seller in a s good a position as performance would have done. Applied under: the case of the lost volume seller, in the process of assembling a product for sale when the buyer breaches, and when the buyer from a jobber (middle person who purchases goods for resale) breaches before the jobber has acquired the goods.
Seller’s Action for the Price UCC §2-709: recover the price of the goods if the buyer has accepted the goods, if the goods are damaged after the risk of loss has passed to the buyer, and if the seller is unable to resell the goods with reasonable effort.
Seller’s Incidental and Consequential Damages UCC §2-710: incidental include a variety of out-of-pocket expenses incurred to deal with the breach, such as cost of storage or transportation of the goods. Consequential is rare but may be appropriate.
Wartzmanv. Hightower Productions, Ltd.
1. Case Heading:
Parties: (law firm that wrongly incorporated the defendant’s firm) and (venture was nullified after wrong incorporation)
Year: 1983
Court: Court of Special Appeals of Maryland
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue: Did the trial court err in awarding reliance damages or development costs to Hightower? Did the trial court properly instruct the jury on reliance damages recovery? Did the trial court err in refusing to instruct on the duty to mitigate damages? Did the trial court err in permitting a member of Wartzman’s firm to testify as a witness?
5. Procedural History: The jury awarded Hightower $170k.
6. Facts: Adler, et al. intended to employ a singer-entertainer to live in a mobile flagpole perch and publicize the venture by radio and television. Adler, et al. approached the law firm of Wartzman for incorporating its venture. Adler, et al. indicated that they needed to sell stock to the public to finance the project and the law firm helped them file the articles of incorporation. Hightower opened a corporate account and an office, selected the flagpole tenant, built a house, and employed public relations specialists. The show received proclamations, a live appearance, and a commitment. A stockholders’ meeting was scheduled because the corporation was low on funds, and Wartzman stated that no further stock could be sold because the corporation was structured wrong and a securities attorney would be needed. The law firm had failed to prepare an offering memorandum and failed to assure that the disclosures were made. A specialist would cost $10k to $15k and Wartzman rejected to pay. Hightower hired a substitute counsel and was advised that Hightower was not in compliance with the securities laws, $43k had to be in escrow, and a specialist would take six to eight weeks to work. Shareholders discontinued the entire project. Hightower sued Wartzman for negligence and breach of contract.
7. Rule:
8.Reasoning:Wartzman: a person performing a collateral service for a new venture is not liable as full guarantor for all costs incurred by the enterprise. Court: recovery based upon reliance interest, but plaintiff cannot escape a bad bargain by falling back on his reliance interest.
-hypothetical: if Hightower would have lost $200k with the full performance -> offsets reliance damage, $0.
-They didn’t have a good evidence that they would have gained with uncertainty about gains from full performance; Hightower pursued reliance instead of expectation damage as a result.
Walser v. Toyota Motor Sales, U.S.A., Inc.
1. Case Heading:
Parties: (purchaser of dealership property in reliance) and (awards dealership agreements)
Year: 1994
Court: US Court of Appeals
2. Disposition: Affirm the judgment.
3. Holding: Yes, the language is permissive.
4. Issue: Does the language of section 90 authorize the district court to limit damages to out-of-pocket.
5. Procedural History: The district court granted Toyota’s motion for partial summary judgment and dismissed some claims. Walser sought $7.6 mil but jury returned a verdict in favor of Toyota on the contract and fraud claims and Walser on the promissory estoppels claim, awarding $232k.
6. Facts: In 1987, Toyota conducted market surveys throughout the US to identify the best markets for new Lexus planned in 1989. The studies identified Minneapolis metropolitan area as a two-dealership market. In 1988, Toyota issued letters of intent for the prospective dealerships in the two locations. The Bloomington/Richfield dealership was unwilling or unable to comply. Toyota began to search for a new dealer and Walser and McLaughlin, co-owners of a BMW dealership, showed interest. Toyota issued a three-step process: the prospective dealer would apply with a plan, Toyota would issue a letter of intent with the final conditions, and a dealership agreement signed. Haag told Walser that the letter of intent would soon be approved and that “you’re our dealer” but a mistake was made and the letter was not approved. Walser had agreed to purchase property of the proposed dealership. Walser sued Toyota and Toyota removed to USDC for DofMinn.
7. Rule:
8.Reasoning:Walser argues that the district court erred in instructing that damages on estoppels claim were limited to the out-of-pocket expenditures made in reliance on the promise but should include lost profits. Court:[holding]
US ex rel. Coastal Steel Erectors, Inc. v. Algernon Blair, Inc.
1. Case Heading:
Parties: (subcontractor whose partial labor and equipment were not paid for) and (general contractor)
Year: 1973
Court: US Court of Appeals 4th circuit
2. Disposition: Reverse and remand.
3. Holding:
4. Issue: May a subcontractor, who justifiably ceases work under a contract because of the prime contractor's breach, recover in quantum meruit the value of labor and equipment already furnished pursuant to the contract irrespective of whether he would have been entitled to recover in a suit on the contract?
5. Procedural History: The district court found that the subcontract required Blair to pay for crane use and that Blair's refusal to do so was such a material breach as to justify Coastal's terminating performance. The court found that the amount due was $37000 but Coastal would have lost more than $37000 if it completed the performance and denied Costal’s recovery.
6. Facts: The subcontractor Coastal brought action under the Miller Act in the name of the US against Blair. Blair contracted with the US to construct a naval hospital in SC. Blair contracted with Coastal to erect steel and supply certain equipment. Coastal commenced performance by supplying its own cranes for handling and placing steel. Blair refused to pay for crane rental, and Coastal terminated its performance after completing approximately 28 percent of the subcontract. Blair hired a new subcontractor and Coastal sued to recover for labor and equipment furnished.
7. Rule:
8.Reasoning:The impact of quantum meruit is to allow a promisee to recover the value of services he gave to the defendant irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract. The measure of recovery for quantum meruit is the reasonable value of the performance, and recovery is undiminished by any loss which would have been incurred by complete performance. The standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the plaintiff's position at the time and place the services were rendered.
-expectation damage is 0. reliance damage cannot exceed expectation damage and is also 0.
-some cost, such as steel, is of value but other costs are sunk costs. Restitution may be different from: what is the value of the benefit the breaching party received?
Lancellotti v. Thomas
1. Case Heading:
Parties: (agreed to buy and operate but denied following through K) and (did not return money)
Year: 1985
Court: Superior Court of Pennsylvania
2. Disposition: Reverse and remand.
3. Holding:
4. Issue:
5. Procedural History: The trial court allowed T to retain $25000 and awarded $6665 to T for rent. (common law)
6. Facts: L agreed to purchase T’s luncheonette business and rent the premises on which the business was located. L agreed to buy the business, the goodwill and equipment, and would pay $25000 on signing, promise that only he would own and operate the business, build an addition that would be 75% complete by May 1, 1973, and lease the premise for five years. In exchange for building the addition, no rent would be charged until August 31, 1973. If addition were not built, L would owe rental and equipment would revert to T. L claims the building permit for the addition was denied at the end of the 1973 season. T claim they obtained the permit but L denied to construct. T build the addition for $11000. In 1974, L no longer wanted to operate the business. L did not pay rent and T found equipment missing. L demand that T return the $25000 plus interest. T counterclaim for damage of $52000, for rent and grievance and suffering.
7. Rule:
8.Reasoning:The common law rule prohibiting a defaulting party on a contract from recovering was the majority rule. -> but it failed to recognize that the nonbreaching party should not obtain a windfall from the breach. The party may almost completely perform at breach or not act at all. Many jurisdictions permit recovery from defaulting party.
Rstm allows recovery by a breaching party to the extent that the benefits exceed the losses sustained by the other party.
-L totally breached.
City Stores Co. v. Ammerman
1. Case Heading:
Parties: (renter) and (center owner)
Year: 1968
Court: USDC
3. Holding: Store exercised its option and is entitled to specific performance.
4. Issue:
6. Facts: Ammerman desired to construct a large shopping center near Tyson’s Corner. Ammerman needed to persuade the Board of County Supervisors to rezone the property, but the Commission voted against the requested zoning. Ammerman had to persuade the Board against the advisory groups and had a strong competitor for another shopping center in the area. City had been negotiating the terms of a lease with defendants. Lerner, a defendant, asked for a letter from Lansburgh, City’s store, about the desire to participate in the Tyson project to use in the Board hearing. Jagels from City wrote a letter stating that Tyson site was preferable to any other and that Lansburgh had interest in becoming a major tenant if the zoning was successful. Defendants wrote a letter to City, stating that when they are successful with the rezoning, they will give City an opportunity to become a major tenant with terms equal to others. City obtained preliminary injunction and seeks specific performance to rent the last available department store site.
7. Rule:
8. Reasoning: City argues that the unilateral contract is an option to accept or reject. Ammerman argues that the contract is not an option and not sufficiently definite to be enforced. -> court: terms would have been meaningless when construction or tenants not secured. Here is a contract with those conditions precedent to its operation. Once secured, Ammerman was in an immediate contractual obligation to tender City a lease with terms as favorable as others.
-> letter was a binding unilateral contract.
Will a court of equity grant specific performance of a contact which has left substantial terms open for future negotiation? -> court: the open terms do not bar. The criterion is not the nature or subject of the contract but inadequacy (not a just and reasonable substitute) or impracticability (no real compensation can be obtained by means of an action at law) of legal remedies.
Money damages would not compensate for loss of the right and for incalculable future advantages.
Ammerman contends that performance will result in hardship and City failed to press its claim. Court denies.
-Coenen: not a unilateral contract but an option.
Reier Broadcasting Company, Inc. v. Kramer
1. Case Heading:
Parties: (owner of radio stations) and (head football coach at MSU)
Year: 2003
Court: Supreme Court of Montana
2. Disposition: Affirm the judgment.
3. Holding: MCA prohibits the use of injunction to enforce negative covenants contained in personal services contract.
4. Issue: Did the district court correctly conclude that Reier was not entitled to injunctive relief to prevent a breach of its employment agreement with Kramer.
5. Procedural History: The district court granted temporary restraining order and amended the order to allow Kramer to engage in media obligations in connection with his coaching job. The court denied injunction and dissolved the TRO. Reier moved to alter or amend the judgment and the court denied.
6. Facts: Reier had exclusive rights to broadcast MSU athletic events. Reier agreed to pay Kramer $10020 per year for exclusive broadcast rights with Kramer and employ Kramer as an announcer and talent at Cat Chat program. Kramer agreed to record commercials. The agreement was to be in effect until Nov 2004. MSU proposal stated it would seek competitive bids from other broadcasting companies for its athletic events, and Reier notified that the Proposal would conflict with the contract with Kramer by letting Kramer announce or provide talent for a competitor. MSU disqualified Reier and awarded Clear. Reier filed a complaint and application for temporary restraining order to prevent Kramer from serving Clear.
7. Rule:
8. Reasoning: Reier questions the MCA language prohibits injunction to prevent a contracting party from performing services elsewhere during the life of the contract. District court: Kramer employment was a personal services contract. Reier: it did not intend Kramer to require personal services but prevent Kramer from providing one to Clear. Kramer’s services are special or unique and may be enforced by restraining.
Anderson: the court can enjoin a party from breaching a negative covenant and performing elsewhere; where a court cannot enforce the positive part of a personal services contract, it cannot restrain by injunction the negative. Court: injunction would make Kramer perform for Reier and is the indirect enforcement of the affirmative part of the contract.
Dissent: Reier is not seeking to compel Kramer to perform but prevent him from violating the provisions. MSU pushed for the contract and then cried foul. Reier performed, MSU and Kramer benefitted, and MSU breaches.
-duties are delegable in lawnmowing and not unique or personal services. Personal services are unique.
-injunction is unenforceable to the extent of inducing compliance with the personal services.
Vogan v. Hayes Appraisal Associates, Inc.
1. Case Heading:
Parties: (ordered building house) and (improperly appraised the completion progress)
Year: 1999
Court: Supreme Court of Iowa
2. Disposition: Vacate the judgment of the court of appeals and affirm that of the district court.
3. Holding:
4. Issue:
5. Procedural History: Hayes moved for summary judgment, claiming that it could not have proximately harmed Vogan. The district court denied the motion and Hayes’s motion for direct verdict. The jury returned a verdict in favor of Vogan. The district court denied Hayes’s motion for JNOV. The court of appeals reversed.
6. Facts: Vogan moved to Des Moines and wanted to build a home. Builder Markley agreed to build the home for $170K and Vogan obtained $170K mortgage from MidAmerica. MidAmerica orally contracted with Hayes to do initial and periodic appraisals of the construction and appraised the home and the lot at $250K. Vogan purchased the lot for $66K. In Dec 1989, Hayes determined 25% was completed. In Feb 1990, MidAmerica determined that less than $2000 remained of the loan proceeds but Markley said $70K more was needed to complete. Vogan took a second mortgage on the home for $42K and paid the bank to make payments to Markley based on Hayes’s reports. Vogan decided to sell the house before completion. On March 20, 1990, Hayes stated 60% was complete. Eight days later, Hayes stated 90% was complete. In Oct 1990, substantial additional work was required but Markley defaulted after having been paid all $170K and additional monies. Another contractor estimated the completion would cost $60K. Vogan stopped paying mortgage, MidAmerica acted to foreclose, and Vogan counterclaimed that MidAmerica improperly authorized payment to Markley. Vogan sued Hayes that it negligently certified the extent of the construction.
7. Rule:
8. Reasoning: Vogan argues that it presented ample evidence to generate a jury question on whether they were third-party beneficiaries of the contract between MidAmerica and Hayes; that the court should consider the intent and the surrounding circumstances and that the bank’s intent was to protect Vogan’s money and Hayes knew Vogan was the owner. Hayes argues that the verbal contract with MidAmerica had no provision or intent to make Vogan third-party beneficiaries; that Vogan presented no evidence of intent of the bank.
Court: reports gave Hayes information about Vogan and Vogan qualify as beneficiaries. Initial loan was disbursed prior to the faulty estimate, but the bank disbursed other funds due to the erroneous reporting afterwards and harmed Vogan. Vogan’s recovery included sums advanced by the bank based on an inaccurate report and the recovery was not beyond Hayes’s contemplation.
-Hayes is the promisor, MidAmerica is promisee, and Vogan is the intended third party beneficiary.
-Hayes had reason to know that MidAmerica contemplated the benefit as a motivating factor; there is intent of MidAmerica and actual/constructive knowledge of Hayes.
Chen v. Chen
1. Case Heading:
Parties: (daughter who intervened in divorce payment case) and (father who paid child support)
Year: 2006
Court: Supreme Court of Pennsylvania
2. Disposition: Reverse the judgment of the Superior Court.
3. Holding: Daughter is not an intended beneficiary because recognition of Daughter’s right to performance is not appropriate to effectuate the intention of the parties.
4. Issue:
5. Procedural History: The trial court found Daughter as an intended beneficiary and granted the petition to intervene. Mother withdrew. In a non-jury trial, the court ruled for Daughter to enforce the agreement. The Superior Court did Guy test of whether Daughter was an intended beneficiary in (1) the recognition of the beneficiary’s right must be appropriate to effectuate the intention of the parties and (2) the performance must satisfy an obligation of the promise to pay money to the beneficiary or the circumstances indicate that the promise intends to give the beneficiary the benefit of the promised performance. The Superior Court affirmed the trial court’s award of $59292.
6. Facts: Mother and Father were married in 1977, Daughter was born in 1982, and the parents divorced in 1983. The property settlement agreement provided that Mother would have physical and legal custody of Daughter and included a child support provision. Father paid $25 weekly to Mother until Daughter’s 18th birthday. Father obtained employment and had salary increase since 1985 but did not increase the child support amount in compliance of the provision or did Mother ask for it. In 2000, Domestic Relations Section notified Mother that support would be terminated and Mother filed a petition for special relief to enforce the agreement about salary increase provision and finding a contempt of court. Daughter filed a petition to intervene.
7. Rule:
8. Reasoning: Father argues that Daughter should have been denied intervention because she was incidental and not an intended beneficiary of the payments. Daughter argues that she is an intended beneficiary.
Intervention is appropriate where the determination of the action may affect any legally enforceable interest of such person whether or not such person may be bound by a judgment in the action.
Courts are reluctant to allow children to enforce their parents’ agreements where the custodial parent was a signatory to the agreement and the designated recipient of the payments. We refuse to enable a child to enforce her parents’ settlement agreement where the agreement provides for support payments to the custodial parent.
-incidental, not intended, because child support payments are owed to the mother.
-the mother’s intent was for the benefit (well-being) of the beneficiary, but there is a mutual recognition of the not intending Daughter to be the direct beneficiary; the court then makes public policy arguments.
Herzog v. Irace
1. Case Heading:
Parties: (surgeon) and (lawyer who received assignment of benefit)
Year: 1991
Court: Maine Supreme Court
2. Disposition: Affirm the judgment.
3. Holding:
4. Issue:
5. Procedural History: The district court ruled in favor of Herzog.
6. Facts: Gary Jones was injured in a motorcycle accident and retained Irace to represent him in a personal injury action. Soon, Jones dislocated his shoulder twice in unrelated incidents and Herzog examined Jones’s shoulder and concluded he needed surgery. Jones was unable to pay for the surgery and signed a letter to pay from the settlement. Herzog notified Irace of the assignment of benefits and was informed that the assignment was sufficient. Herzog performed surgery and treated Jones for about one year. Jones received $20000 settlement and instructed Irace not to disburse to Herzog but he would pay himself. Irace informed Herzog that Jones revoked his permission and that he would follow Jones’s directions. Irace issued a check to Jones for $10K and disbursed the remaining to Jones’s other creditors. Jones sent a check to Herzog but the check was returned for insufficient funds. Herzog sued to enforce the assignment of benefits.
7. Rule:
8. Reasoning: Assignment is an act or manifestation by the owner of a right indicating his intent to transfer that right to another person. To be valid and enforceable, the assignor must make clear his intent to relinquish the right to the assignee and must not retain any control over the right assigned or any power of revocation. The assignment takes effect through the actions of the assignor and assignee. The obligor cannot lawfully pay to the assignor or to his other creditors because the assignee may enforce his rights against the obligor directly.
Irace: Jones’s letter is invalid and unenforceable as an assignment because it fails to manifest Jones’s intent to permanently relinquish all control and does nothing more than request payment. Court: the letter gives no indication that Jones attempted to retain any control over the funds he assigned to Herzog.
Irace: the assignment would interfere with their ethical obligation to honor the client’s instruction. Court: the rule says nothing. A valid assignment must be honored. Irace was under no ethical or contractual obligation.
Sally Beauty Co. v. Nexxus Products Co.
1. Case Heading:
Parties: (distributor of hair care and beauty products to retail stores and hair styling salons) and (CA corporation that formulates and markets hair care products)
Year: 1986
Court: US Court of Appeal
2. Disposition: Affirm the summary judgment on a different ground, for the UCC bars the delegation.
3. Holding:
4. Issue:
5. Procedural History: Nexxus moved for summary judgment, arguing that the agreement with Best was for personal services based on a relationship of personal trust and confidence and could not be assigned. Sally argues assignable because it was between two corporations and the character of the performance would not be altered by the substitution of Sally. The district court granted Nexxus’s motion for summary judgment based on a “finding of fact.”
6. Facts: Nexxus executed a distributorship agreement with Best. Sally acquired Best in a stock purchase transaction and succeded to Best’s rights and interests in all of Best’s contracts. Redding from Nexxus met with Renzulli from Sally and informed in a letter that Nexxus would not allow Sally, a wholly-owned subsidiary of a direct competitor Alberto-Culver, to distribute Nexxus products. Sally sued for breach of contract.
7. Rule:
8. Reasoning: a contract for the sale of goods is not freely assignable in all circumstances. The UCC sanctions delegation except where the delegated performance would be unsatisfactory to the obligee.
Nexxus had contracted for Best’s best efforts in promoting the sale of Nexxus products. Court: has serious questions on Sally’s ability to perform in the same manner as Best. Sally’s position is sufficient to bar the delegation of Best’s duties under the agreement.