43 terms

Contracts Cases

Parker v. 20th Century Fox
20th Century breached contract with Parker.
Parker refused another movie offer.
Court held that Parker did not fail to mitigate damages because the movie offer was different and inferior.
*Rule: the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer can prove the employee has earned OR might have earned from other employment, which cannot be different or inferior.
Neri v. Retail Marine Corp.
Neri ordered boat and put down a deposit.
Neri was hospitalized and could not pay for the boat and sued to get his deposit back.
Court held that Retail Marine was a lost volume seller because RM had an unlimited supply of goods and would have made 2 sales instead of 1.
Court awarded restitution to Neri minus RM's lost profits and incidental damages.
*Rule: Section 2-708(2): the seller is entitled to its "profit (including reasonable overhead)...together with any incidental damages..."
Jordan v. Worldcom
Worldcom breached contract with Jordan. Jordan wanted to be considered a lost volume seller so that he could get around mitigation. Court held he had capacity, but not intent to take on more contracts.
*Rule: A lost volume seller is one who has the capacity to perform the contract that was breached in addition to other potential contracts due to unlimited resources or production capacity. The original and second sale are independent events.
Copylease v. Memorex
Copylease contracted with Memorex to buy specified qty. of toner. Memorex breached and Copylease sought specific performance. California usually does not award specific performance. UCC 2.716 is the exception.
*Rule: Specific performance granted on unique goods or other proper circumstances (i.e. inability to cover)
Lake River v. Carborundum
Parties had a contract which included a liquidated damages clause. Court found it to be a penalty because formula used did not adjust for costs saved by the breach.
*Rule: Liquidation of damages must be a reasonable estimate at the time of contracting of the likely damages from breach and there must be some difficulty of determining damages. If damages are easy to determine or if estimate greatly exceeds a reasonable upper limit of what the damages are likely to be, it is a penalty.
Hadley v. Baxendale
Mill handle broke. Shipped to get it fixed. Shipment was delayed. Hadley sued carrier. Carrier not liable for consequential damages because they did not know the circumstances.
*Rule: The damages to be received by the non-breaching party should be either damages that arise naturally from the breach, or those that the parties are able to foresee at the time the contract is made.
Evergreen Amusement v. Milstead
M breached contract with EA. EA sought lost profits. It was a new business. Used expert testimony to show lost profits.
*Rule: Damages are recoverable for profits only to the extent that the evidence affords a sufficient basis for estimating their amount with reasonable certainty. Where there is no certainty, damages may be measured by the rental value of the property.
Chung v. Kaonohi Center Co.
C tried to lease mall space. K leased to other people, breaching the contract. Court awarded lost profits even though it was a new business because C showed with reasonable certainty what they would have earned.
*Rule: Where a plaintiff can show future profits in a new or unestablished business with reasonable certainty, damages for such losses may be awarded.
Security Stove v. American Railways
AR failed to deliver a stove in time for the expo. AR knew of the circumstances and was not negligent. SS awarded reliance damages even though they would have incurred the expenses regardless of the breach.
*Rule: If damages from lost profits are impossible to calculate, the aggrieved party may be entitled to recover reliance expenditures.
L. Albert v. Armstrong Rubber
LA breached by delaying delivery of 4 refiners. AR made preparations for the refiners. Court awarded reliance damages for those preparations.
*Rule: A promisee can recover his preparation expenses minus the amount the promisee would have lost if the contract had been fulfilled.
Colonial Dodge v. Miller
M bought car; found out later it did not have a spare tire he specifically ordered. M revoked his acceptance because the tender was non-conforming and substantially impaired the value to M.
*Rule: The mere taking of possession of goods by a delivery of goods to a buyer does not equal automatic acceptance. A buyer has a "reasonable opportunity" to inspect goods according to the UCC. A buyer may properly revoke acceptance of a commercial unit where the nonconformity substantially impairs its value. The determination of substantial impairment is made from an objective view or the buyer's subjective view, considering the particular needs and circumstances.
Oliver v. Campbell
O was C's attorney. O performed contract before breach. O was entitled to the contract rate.
*Rule: If he had not fully performed, he could have rescinded the contract and received quantum meruit.
De Leon v. Andrete
DL sold land to A. A made series of payments, but breached by not paying all. DL resold to other party. A awarded restitution for down payment.
*Rule: Whether the vendor who rescinds an executory contract for the sale of land shall return the purchase money paid depends upon the equities of each case. If it would be inequitable for such rescission to occur without restoration of money paid, then it must be restored. (Old Rule: forfeiture of the deposit)
Peevyhouse v. Garland Coal
Contract included clause to restore land. GC did not restore land. Court said it was OK because diminution in value was so small compared to cost to restore.
*Rule: Where the contract provision breached was merely incidental to the main purpose, and where the economic benefit by full performance is grossly disproportionate to the cost of performance, the damages are limited to the diminution in value.
Hawkins v. McGee
Hairy Hand. 100% guarantee - not an opinion.
Awarded difference between perfect hand and H's hand.
*Rule: Uses warranty analysis under 2-714(2). The measure of the vendee's damages is the differences between the value of the goods as they would have been if the warranty as to quality had been true, and the actual value at the time of the sale, including gains prevented and losses sustained, and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor's failure to keep his agreement, and could not by reasonable care on the part of the vendee have been avoided.
Sullivan v. Connor
Botched nose-job. Not restitution, not expectation...reliance is just right. Could not recover for pain and suffering she would have endured regardless.
*Rule: Actions can be based on alleged contract by statements of opinion by doctors, but there needs to be clear proof. Tried to fit patient-physician actions into expectation, restitution, and reliance damages, and reliance wins out.
Balfour v. Balfour
Wife and Husband were on a trip to England.
She stayed behind because of health reasons.
He promised to send 30 pounds each month to cover living expenses.
Then he dumped her and never sent anything (besides alimony apparently).
Rule: No meddling by courts because promises not made with expected legal ramifications.
Mehren v. Dargan
Husband was a cocaine addict.
Created contract that she would resume marital relationship if he promised to refrain from using cocaine.
He broke the promise, and she filed for divorce and for enforcement of the contract.
Public policy = don't look at faults in divorce cases.
Rule = Contracts are invalid if the sole consideration of a bargain is to refrain from committing a crime or a tort, or from deceiving or wrongfully injuring the promisee or a third person.
Marvin v. Marvin
Plaintiff and defendant lived together for 7 years and held themselves out as man and wife.
She claims that they created an oral contract by which she would cook, clean, be a companion, and they would share expenses.
He claims that any such agreement should be void by public policy because cohabitation is frowned upon.
Rule : The only bar to such a contract is if it is solely based on meretricious sexual acts: prostitution.
Also, contracts can be implied from actions of non-married cohabitants.
Hamer v. Sidway
Uncle promised to Nephew 5000 if he would refrain from drinking, smoking, and gambling.
Nephew fulfilled his part, and uncle sent a letter telling him that the money was his, but he wanted to hold it for him until he felt that the nephew was responsible enough to take it.
Rule: Consideration is something that the promissee promises back to the promissor, and the fact that the nephew promised to not drink, smoke, or gamble is enough. If a person limits their legal rights for the promissor, it is a consideration.
Kirksey v. Kirksey
Plaintiff was married to defendant's brother, and the brother died.
He offered to give her a place to raise her 7 kids if she traveled 60-70 miles to where he lived.
She did, and then he later kicked her out,
Court found that there was no valid consideration; although, not all of them agreed.
Ricketts v. Scothorn
Ricketts' grandfather promised to pay her 2,000, so that she wouldn't have to work.
She quit her job, but he never made good on his promise.
She went back to work while he was still alive.
Then he died, and the estate didn't want to fulfil the promise with the liquidated property.
There was no contract, but there was a promise.
Rule: Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration.
Davis v. Jacoby
Rupert sent for Caro to come and take care of his wife and for Frank to come and take care of the business.
He specifically said that he wanted to hear back from them.
He promised to give the estate to them.
They agreed, but he committed suicide before they could actually get there.
He never mentioned them in the estate, and it was going to go to some nephews.
Nephews claim that there was a unilateral contract, but courts lean towards bilateral.
Rule: In bilateral contracts, the other party merely has to promise to do what the contract says in order to be held to the contract.
Hoffman v. Red Owl
Hoffman owned a bakery, but he wanted a piece of the red owl action.
Red owl said that if he came up with 18K to invest, he was in.
Red owl made promises that induced him to sell the bakery, sell a grocery store, and move.
When they upped the price of investing and said that his father-in-law couldn't be an actual partner, he bailed.
Here, there was no contract, but there were promises and there was reasonable detrimental reliance on those promises.
Rule: Promissory estoppel should be recognized in cases even where all of the details of a proposed transaction between promisor and promisee are not worked out
Collins Drugs v. Wallgreen
Plaintiffs (pharmacies) were doing business with Wallgreen as franchisees.
Under WFDL, a franchisor can only terminate the agreement for good cause.
Walgreen wanted to get rid of franchisees and put in corporation-owned stores.
The court had to decide whether business decisions constituted good cause.
Rule: The WFDL does not have a section that allows for business decisions, so no good cause.
McIntosh v. Murphy
Murphy recruited McIntosh to come to Hawaii to work at a dealership.
Mc accepted and came over.
Mu claims that Mc can't close, so he fired him.
However, Mu claims that there was a contract for a year, but there was no written document.
TC found that the S of F did not apply because it claimed that the contract did not begin until Mc came and started working.
Rule: If there is part performance, a person can be granted estoppel: part performance means seriously changing a person's position in reliance on the contract.
R. 139
Wagenseller v. Scottsdale Memorial
Wagenseller was recruited by Kay to work at the hospital.
She did her work well, but she refused to participate in "Moon" river.
So, Kay decided to give her a bad report, and the hospital fired her without consulting the handbook.
Rule: In the absence of contractual provision an employee may be fired for good cause or for no cause, but not for bad cause.
Bad cause = violating public policy and not following own procedures (Implied in fact). Also, violating duty of good faith (implied in law) = bad cause.
Carroll v. Beardon
Madam sold property to Madam in Lee's hometown.
Down payment 8,000.
Contract price = 50,000.
Payments for Mortgage in line with "Peak" season.
Carroll foreclosed because Beardon unable to pay.
Rule: The bare knowledge of the purpose for which the property is sold is not enough to raise the valid defense of illegality.The defendant must also actively participate in the illegal action.
Coma Corp. v. KDOL
Restaurant didn't want to give past wages to illegal.
Rule: Where an illegal contract is outweighed by public policy, then it should be enforced.
Public policy of giving wages for earnings outweighs policy of keeping illegals from contracting.
Kansas Wage Payment Act.
Not paying migrant workers could incentivize employers to hire them and not pay.
Fullerton Lumber v. Torborg
Lumber guy, non-compete for 10 years and 15 miles.
Consideration = pension plan.
Opened up his own shop.
After he left, sales dropped substantially.
Court blue penciled in 3 years because it could.
Rule: if a non-compete agreement is unequal and unfair to the employer, then the court can change the terms if the terms are divisible, or it can strike the whole agreement if the terms are not divisible.
Policy = wants to protect employer, so it gave the company 3 years to build/keep customer base.
Mitchell v. C.C. Sanitation
Guy forced to sign waivers or be fired.
He only got $60 from insurance for past medical.
Duress because of unequal bargaining power.
Rule: To force an employee to sign a release of an action which he has instituted against him or another employer is unlawful, and, under circumstances showing that such means in fact overcame the employee's resistance and will, may constitute duress.
Dissent: Can't have duress if threatening something which you have a legal right to do.
Selmer v. Blakeslee
Sub-contractor messed over on extra job.
Selmer could have walked away here, but continued.
Blakeslee refused to pay Selmer's price for modification of contract.
No duress because of time circumstances (3 years later) and hesitance of courts to mess with settling process.
Settlement was reasonable because it was more than 50%.
Selmer wanted 120K, and it got 67K.
Rule: The amount that the threatened party receives in a settlement case must be reasonable in comparison to the right that he gives up.
Obde v. Schlemeyer
Termites were treated but not sufficiently.
No visible signs when S sold to O. (Latent)
O found out later from exterminator that he had already treated.
Misrepresentation because they should have told.
Misrepresentation by omission, as opposed to fradulent.
Damages = diminution in value of home because of termites; 3.9K.
Rule: When there are concealed defects dangerous to property, health, or life of the tenant, it is the landlord's duty to disclose them to the tenant before leasing. IF he doesn't it is misrepresentation.
Market Street v. Frey
MS wanted funding from GE.
Paragraph 38: MS could get funding for anything over 250K, and if negotiations broke down, then it could opt to buy for much less than the market value.
MS never told GE about the paragraph.
MS "tried" to negotiate with general partner, but never really did.
Then it tried to invoke paragraph 38.
Rule: Good Faith is not fiduciary duty or duty of Candor,
It is a duty to the contract, and deliberate advantage taking of the other party during performance is breach of GF.
Breach of good faith because of sharp dealing.
McCutcheon v. MacBrayne
M asked brother-in-law to ship his car.
Car was shipped, but no form was signed.
Terms were on the wall of the store.
Brother-in-law had signed waivers before, but not every time.
Signing form contracts is important, both for buyer and for seller.
Devlin: artificial line, but fairly drawn.
Yauger v. Skiing
Girl skier died.
Waiver on paper that said Application.
Middle paragraph.
No extra signature.
Waiver inconspicuous and ambiguous.
Rule: Signer should be aware of the nature and significance of the waiver.
ProCD v. Zeidenberg
ProCD compiled 3,000 telephone directories.
Zeidenberg found out that directories are not copyrighted.
So, he decided to put the cd online.
ProCD sued because there were terms and conditions, and Zeidenberg bought the non-commercial version of the cd.
Bubble-wrap waiver.
Easterbrook: terms are part of product. BUT 2-207 says that additional terms are proposals and only treated as terms if accepted.
Rule:A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
Hill v. Gateway
Hills bought a computer over the phone.
It came with terms and conditions inside the box, but it wasn't bubble wrap license because there was no indication of terms and conditions on the box.
Terms allowed for refund if sought within 30 days, and said that if there was a complaint then the complainant would have to use arbitration.
Easterbrook: Not feasible to read the terms over the phone, and the Hills had access to such things online.
Rule: An agreement to arbitrate must be enforced "save upon such grounds as exist at law or in equity for the revocation of any contract."
Hunt v. Perkins Machinery
Fisherman, engine that failed.
H signed a waiver, which waived the warranty of fitness and merchantability, but the waiver was on the second page of a stack of papers.
Under 2-316 (2), to exclude an implied warranty, the language must be conspicuous.
Form contract signed, but not conspicuous, so disclaimers invalid.
Rule:A term is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it.
Boud v. Sdnco
Boud bought a yacht that later had mechanical problems.
Claims that he relied on representations from a brochure that said that it offered superb handling, and it was best in class.
Court held that express waivers are not opinions.
Rule:Affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion does not create an express warrant. To qualify as a statement of fact, a statement must be able to be proved true.
The statements on the brochure were not.
Williams v. Walker Thomas
Williams bought a stereo and couldn't pay the monthly payments.
There was a clause in the contract that allowed Walker (Rent-to-Own) to take all of the past goods if customer couldn't pay.
Tried to replevy shower curtain.
Unconscionable because of no real choice and because terms shocked conscience: Who would want to retake a shower curtain?
Rule: Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.
Jones v. Star Credit
Jones payed 4 times the price of the fridge because salesperson came and pitched it to him.
Monthly installment that Jones couldn't meet.
Price of freezer was unconscionable. (Interest was higher than the actual price of freezer)
Rule: If Under UCC 2-302, Unc. term intimately touches on the contract, then the contract is void
Also unconscionable because of socio-economic situation of Jones.
Johnson v. Cash Store
Woman came to cash store to get 250 for cat.
Came out with 500, and paid 75 in fees.
When she couldn't pay in 30 days, they gave her a new loan for 500 and kept 75.
This happened 14 times.
Total interest = 1100.
Interest rate on pay day loan of more than 600%.
Cash store tried to sidestep federal law on loans, but were caught by unconscionability.
Rule: There are two kinds of unconscionability: substantive and procedural. Substantive involves those cases where a clause or term in the contract is alleged to be one-sided or overly harsh, while procedural relates to impropriety in forming the contract.