Contract Defenses, Discharge, and Remedies Ethical Considerations Question, p. 220 – Reading of Contract – same issue as next slide The contract “shall continue in force for a period of five years from the date it is made and thereafter for successive five year terms, unless and until terminated by one year prior notice in writing by either party.
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Contract Defenses, Discharge, and Remedies
Ethical Considerations Question, p. 220 – Reading of Contract – same issue as next slide
The contract “shall continue in force for a period of five years from the date it is made and thereafter for successive five year terms, unless and until terminated by one year prior notice in writing by either party.
Mistake
End of Chapter Question 8 , p. 250 Group 7
V.
$92,885,000.00 or
$92,855.00
Raffles v. Wichelhaus
Two Ships Peerless. Wichelhaus purchased a shipment of cotton from
Raffles to arrive on a ship called the Peerless from Bombay, India. Wichelhaus meant a ship called Peerless sailing from Bombay in October; Raffles meant another ship called the Peerless sailing from Bombay in December. When the goods were finally delivered in December, Wichelhaus refused them.
Should Wichelhaus be forced to accept the goods?
One of the ships “Peerless”Ethical Considerations, P. 260$50 desk at garage sale worth $15kMap sold for $3 but worth $19 million?
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5
Genuineness of Assent
Mistake of Fact by both parties makes the contract voidable.– Substantiality of the Mistake.– Allocation of the Risks.
CASE 7.5 Honda v. Board of Trustees of the Employees’ Retirement System of the State of Hawaii (2005).
– Timing.
Discharge by Agreement
Parties may agree to dischargetheir contractual obligations inseveral ways:
By RescissionAnd Restitution
The parties mutually agree
to rescind (cancel) the
contract.
ByNovation
A new party is substituted for
one of the primary parties to a contract.
By Accord and SatisfactionThe parties
agree to render performance different from that originally
agreed on.
End of Chapter Question 4 , p. 249 Agreed to settle with insurance company for
$15,000, the amount he thought was his policy limit. His policy in fact had a $250,000 limit When he learned of the higher limit can he rescind
his contract to settle?
Agreement to Settle Based on Bad Information
Lanci v. Metropolitan Insurance
Types of Damages
Compensatory Damages
Punitive Damages
Nominal Damages
Liquidated Damages
Consequential Damages
Case re: termination of catering job 5 days before picnic • $7,000 contract for catering• Cancelled 5 days before• Contract required full payment if cancelled• Plaintiff asserts it's an unlawful penalty clause
Hadley v. Baxendale (1854)
The question before the court was whether Hadley (the mill owner) could recover for consequential damages—the lost profits—caused by Baxendale’s delay in delivering a broken crankshaft.
The court held that the Hadleys could recover only if Baxendale knew or should have known that the mill would have to be shut down while the crankshaft was being repaired. Was Baxendale aware of this?
If it had not been the custom in the mid-1800s for mills to have extra crankshafts on hand, how would this circumstance have affected the court’s ruling?
Mitigation of Damages
When breach of contract occurs, the innocent injured party is held to a duty to reduce the damages that he or she suffered.
Duty owed depends on the nature of the contract.
Classic CaseYou install a window as part of your business and the window breaks after you leave due to your negligence. The homeowner fails to cover the window and additional damages in the home results.
Punitive Damages
Punitive damages are awarded to punish the breaching party and deter similar conduct in the future.
These are usually not awarded in an action for breach of contract unless a tort is involved.
Nominal Damages
Nominal damages are those small in amount (such as one dollar) that are awarded when a breach had occurred but no actual damages have been suffered.
They are often awarded only to establish that the defendant acted wrongfully.
End-of-Chapter Q. 2, p. 249
Sound Finacial, LLC v. Unisearch (2002). • Liability limited to $25.
Liquidated Damages
Damages Stated in Contract. Damages that may be specified in a contract as the amount to be paid to the nonbreaching party in the event the contract is later breached.
Damages Difficult to Estimate and Reasonable Amount. Clauses providing for liquidated damages are enforced if the damages were difficult to estimate at the time the contract was formed and if the amount stipulated is reasonable.
If Penalty – Not Enforced.
• Green Park Inn, Inc. v. Moore (2002). Sale of hotel - $500,000 liquidated damages
Reimbursement
Collision with semi left Deborah Shank permanently brain damaged. Her husband sued and won $700,000 compensatory damages. Wall-Mart insurance company sued for the money.
Specific Performance
Performance Not Damages. An equitable remedy calling for the performance of the act promised in the contract.
Limited Application. Specific performance is only available in special situations, such as– those involving contracts for the sale of unique goods or land, or– when monetary damages would be an inadequate remedy.
Not for Personal Services.
1 432
Oral Agreement
End of Chapter Question 5 , p. 249 Cindy Sawyer approached Melbourne Mills, an attorney, regarding an
idea to sue on behalf of fen-phen users. Mills agreed to pay her $1 million, plus $65,000 over 10 years, if
successful Oral agreement He won $23 million but only paid her $160,000
Parol Evidence
No Oral Evidence. Terms of a written agreement intended to be the final expression of parties’ intentions, cannot be contradicted by prior or contemporaneous agreements.
Exceptions to the rule: – Contracts subsequently modified.– Voidable or Void contracts.– Contracts containing ambiguous terms.– Prior dealing, course of performance, or usage of trade.– Contracts subject to orally agreed-on conditions.– Contracts with an obvious or gross clerical error that clearly would
not represent the agreement of the parties.
20
Impossibility: an event causes obligations to be discharged.
Impracticality: performance is possible but commercially impractical.
Frustration of Purpose: performance is possible, but changed circumstances have made the contract useless to one or both of the parties.
Sovereign Acts Doctrine: the government cannot be held liable for breach of contract due to legislative or executive acts.
Changed Circumstances
Provisions Limiting Remedies
Exculpatory Clause. A contract may provide that no damages (or only a limited amount of damages) can be recovered in the event the contract is breached.
Enforceability of Clauses. Whether such provisions are enforced depends on the type of breach that is excused by the provision. For example:– Fraud. Clauses excluding liability for fraudulent or intentional injury
or for illegal acts cannot be enforced.– Negligence. Clauses excluding liability for negligence may be
enforced if both parties hold roughly equal bargaining power.
Houseboat example
Contrary to Public Policy and Quasi Contract
Contrary to Public Policy– Restraint of trade
Covenant not to compete– Unconscionable
Adhesion Contract Exculpatory Clauses (exclude liability for fraud,
intentional injury, or illegal acts) Quasi Contract - Implied In Law
– Quasi Contract– Unjust enrichment
Current Events Report – ATT/Tmobile Antitrust – week 4AnkurNick
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