check sound check mike time today’s lecture: finishing contracts; starting torts 1. contract...

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Today’s Lecture:

Finishing Contracts; Starting Torts

1. Contract Remedies and Their Significance

2. Tort Remedies and Their Significance

Lecture Organization:

• Class Announcements

• Review

• Contract Damages & Remedies

Time

• An Example

• The Prom Date

Class Announcements

1. Midterm grading

-- going well; hope to finish this weekend in New York City

2. No class on Tuesday (I’ll be in New York)

3. Your paper

-- find the phone number to the magistrate court here in state college and the trial court in Bellefonte.

-- watch them before Thanksgiving break; write the paper during Thanksgiving break

Questions?

Time

Review

1. Basic, skeletal framework of contractual formation

-- take a look

• Prerequisites

• “Assent”

• No defense

• No excuse

Capacity

Subject Matter

Statute of Frauds

Offer

Acceptance

Consideration

Mutual mistake

Unilateral mistake

Misrepresentation

Fraud (I) & (II)

Duress (I) & (II)

Modification

Impossibility

Impracticability

Frustration

Equitable/Fictitious K (imposed for

fairness)

Review

1. Basic, skeletal framework of contractual formation

-- take a look

2. Lawyers can defeat or control many of the disputes surrounding formation by clever draftsmanship, and that K law itself supported this kind of thing …

T-1

Expectation

formed

T-2

Expectation

formed

“Batman”

T-3

Expectation

formed

“Robin”

Date of the signing

Parole Evidence Clause

No Oral-Modification Clause

The writing controls; the attorney drafts the writing

Mention:

1. professional contract negotiations – lawyers on both sides

2. unions for “regular people” (e.g., faculty)

(compare to normal contracts – e.g., leases, regular employment, etc.)

Review

1. Basic, skeletal framework of contractual formation

-- take a look

2. Lawyers can defeat or control many of the disputes surrounding formation by clever draftsmanship, and that K law itself supported this kind of thing …

3. This suggests something about contracts as an area of law:

(a) It is fundamentally about the facilitating of market trades more than it is about the morality of keeping promises

(b) lawyer services in this area are central to the orderly working of commercial arrangements

Time

Contract Damages and Remedies

1. What we want to know now is this: what happens if you breach a contract?

-- so far, we’ve learned how to form one

-- we’ve also learned that writings are very important

-- now we want to know, given that we have one, what happens if we breach it?

2. There are two basic kinds of relief you can seek when a contract is breached:“Expectation” Damages “Alternatives”

-- calculated (exact)

-- don’t have to be calculated

Expectation Damages

Market Value

The market value of the thing denied in the breach

“Consequentials”

Things that are reasonably foreseeable at the time of contracting

- OR -

“incidentals”

Cost of a substitute performance+ -

MitigationThe reasonable avoidance of

the lost performance (substitute performance), sometimes called “covering”

You cannot sit there and “bleed.” You must actively work to lessen your loss. You have this duty.

The Certainty PrincipleDamages cannot be speculative. They must be reasonably certain.

Contract Damages and Remedies

-- there are three types of alternatives to expectation damages.

-– these damages do not have to be “calculated”

-- damages specified in the contract!

(e.g., upon breach, party A shall pay party B the sum of $$)

-- force the person, by court order, to perform

-- rare, used for special subject matter

(e.g., Picasso)

“Alternatives”

“Liquidated Damages”

“Specific Performance”

Contract Damages and Remedies

-- we already went over this when we talked about fictitious contracts

-- you get your money back, property returned, or reasonable value of your services.

You will notice that in each of these three “alternatives,” you never have to quantify damages. Damages are not a calculation.

You just get your money back, force the performance, or obtain a judgment for a sum certain specified in the contract.

“Quasi-K Damages”

Market Value

“Consequentials” - OR -

“incidentals”

MitigationCertainty

Legal Computation:

Alternatives:

Liquidated Amount?

Specific Performance?

Money returned?

+

- Time

Summarizing Damages:

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

• wants the spinach bug immensely

• last one on the lot

• negotiates a $7,000 price, pays $1,000 down

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

• wants the spinach bug immensely

• pays $9,000 for it, up front, in cash

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

Hey Dude,

where is my car?

Question:

What are the damages for breach of contract?

Market Value

Consequentialsincidentals

Mitigation

Certainty

Liquidated?Specific P.

Quasi- K.

Here’s your $1,000 back, kid –- you’re out of luck.

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

Hey Dude,

where is my car?

Question:

What are the damages for breach of contract?

Market Value

Consequentialsincidentals

Mitigation

Certainty

Liquidated?Specific P.

Quasi- K.

Question:

Why are Quasi-K damages out?

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

Hey Dude,

where is my car?

Question:

What are the damages for breach of contract?

Market Value

Consequentialsincidentals

Mitigation

Certainty

Question:

What is the market value of the loss?

• assume the bug is worth 8,000.

• he was supposed to pay $7,000 to get an $8,000 car.

•Let’s assume he buys the Jetta for 8,000

Question:

What can he do to mitigate this loss?

Question:

What are his damages now?

An Example

1. We need an example that will help us understand how contract damages are calculated

Car Lot 1 Car Lot 2

Green Beetle:

$8,000.00

Blue Jetta: $8,000.00

Hey Dude,

where is my car?

Question:

What are the damages for breach of contract?

Market Value

Consequentialsincidentals

Mitigation

Certainty

• He spent 8,000 to get an 8,000 car.

• He had originally bargained to spend $7,000 for an $8,000 car.

• Therefore, he’s out $1,000.

• Plus whatever it took to go to Lot 2 to get the Jetta ($ 25)?

Question:

Was it profitable for the car seller to breach?

$7,000 sale

$9,000 sale

• Just pay the damage and keep the profit!

• Breaching is actually GOOD business sense.

• It promotes optimality, efficiency

Pay $1,025

$2,000 more

Time

The Prom Date

1. Let’s consider a hypothetical that will really illustrate a point that I want to make about this subject

2. This hypothetical will really let us see why I wanted to show you contracts – not as “law,” but rather as a set of objectives and behavior.

-- Let’s imagine two 18 year old students who are coming up upon their senior year prom

-- one is the quarterback of the football team; the other is the most popular cheerleader in the class

Let’s take a look …

The scenario

“Darla”

“Buzz”

Gosh, I hope Buzz asks me to the prom

“Darla”

“Buzz”

He’s the most popular boy

around!

“Darla”

“Buzz”

He’s just so dreamy! Everyone

would be so jealous!

“Darla”

“Buzz”

Damn, I need to find me a date to the

prom!

“Darla”

“Buzz”

Woo wee, that Darla sure would be a good pick.

“Darla”

“Buzz”

Then one day, it happens …

Darla, will you go to the prom with me?

“Darla”

“Buzz”

Why sure Buzz, I will!Question:

Is there a contract here?

Answer:

You have an offer, acceptance & consideration

“Darla”

“Buzz”

In reliance upon the date, Darla has to get prepared …

• Dress ………………………

Question:

What kind of stuff is she going to have to buy?

Question:

How much is the dress?

$400.00• Accessories …………

… Trendy footwear, garters, tiaras, shawls and — for those wearing a two-piece gown — diamond-stud belly rings.

[source: USA Today]

$300.00• “Goop” ……………………

$ 80.00

Question:

How much for accessories?

• Hair …………………………

Question:

Have I left anything out?

$ 50.00• Grooming ……………

Nails, fake tans, teeth whitening and brow waxing are increasingly essential

[source: USA Today]$ 60.00

• “Survival Kit” ………

$ 110.00

(stuffed in her handbag) Compact with powder Lipstick Cologne Stain-removal wipes Pain reliever Breath mints or gum

Flip-flops (for dancing) Band-Aids (for blisters) Nail file Disposable camera Clear nail polish (for stocking runs) Bobby pins Safety pins Cash

[source: USA Today]

Total …………………………

$ 1,000

“Darla”

“Buzz”

Then, something terrible happens …

On the night of the prom, Buzz gets another offer

Hey dude, screw this

stupid Prom – let’s go drinkin!

And so it was, the two went off drinking and listening to Led Zeppelin music, never going to the prom …

Yeah baby!

“Darla”

• At 6:00 p.m., the agreed time of pick up, Darla waits and waits.

• Finally, she realizes she has been “stood up”

• The tears begin to rush in

• The hatred sets in

• The parents are immensely angry

• They immediately call you, their lawyer.

Important Question:

What are Darla’s damages?I tell you what: let’s

complicate this …

“Darla”

There is a boy on the block who also goes to this school … Skippy

“Darla”

• Skippy has always admired Darla.

• At this moment of crisis, with tears in Darla’s eyes, Skippy offers his assistance

Skippy

“Darla”

SkippyWhy Darla, I would be

honored to escort you to

the prom

“Darla”

SkippyIt just so happens that I have my tux in

a closet and can proceed

forthwith toward our endeavors

Important Question:

What are Darla’s contract damages now?

Important Question:

What does Darla REALLY want to sue for? What is her

REAL complaint

Answer:

Emotional damages. (Feeling bad). She can still go to the prom; but she is

now jilted.

Answer:

Note that contracts damages do not allow for

this

Market Value

Consequentialsincidentals

Mitigation

Certainty

Liquidated?Specific P.

Quasi- K.

Question:

How might a clever lawyer get Darla what

she really wants (some revenge) out of suing in

contract?

“Darla”

SkippyIt just so happens that I have my tux in

a closet and can proceed

forthwith toward our endeavors

Get lost, Skippy

“Darla”

Hello Fabio

• Purchase the contractual performance in the marketplace?

• Use an escort service?

• This is the kind of contractual performance she had originally bargained for (“eye candy, attention”)

“Darla”

• This may cost a few thousand dollars (rending the limo, etc.)

• But you can try to sue Buzz for the cost of the escort service!

(caution: I don’t know if it would work, but it really is the only thing that seems intelligible to contract damages)

“Darla”

• Note two things:

-- Whether this works is a Jury issue

-- note that you have to SPEND EXTRA MONEY in order to be damaged.

(under the theory that the contract is about more than just using the dress and so forth)

“Darla”

Question:

Why on earth would I show this to you? What could possibly be the

point of all of this?

Answer:

Contracts are about BUSINESS. They are about

MARKET TRADES.

Answer:

They are not about the morality of promises apart from that. If you play the

game of offer, acceptance and consideration out of

context, “the law” doesn’t understand it.

Answer:

Stated another way, contract law has the

objective of business trades in mind, not following

promises apart from that. Taken out of context, the

principles become foreign.

Answer:

Is it immoral to breach a contract? If it is, it is not

because of anything stated in contract LAW.

Time