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