Parol Evidence Rule Policy
Policy for Parol Evidence Rule as a whole
Pros: fraud prevention rule + incentive to make parties clarify & include all terms.
Con = underenforcement, what if there was a genuine agreement?
Expectation Damages/Specific Performance GOAL
goal is to put promisee in position they would have enjoyed if all parties performed - the benefit of the bargain
Statute of frauds policy rationale
Pros: promotes deliberation and prevents overenforcement.
Cons: underenforcement (not enforcing contracts that do exist)
A landscaper and a homeowner entered into a contract in which the landscaper would maintain the homeowner’s property for $40 per week, payable at the end of the month. The landscaper maintained the homeowner’s property as agreed, but, at the end of the month, the homeowner refused to pay the landscaper, alleging that the landscaper was overpriced.
Which party, or parties, if any, may recover restitution damages?
Neither the landscaper nor the homeowner.
A gun dealer agreed to sell a gun to a purchaser for $500. The dealer had acquired the gun for $425, and thus stood to make a profit of $75 on the transaction. The purchaser made a down payment of $100. Before the purchaser took possession of the gun, the state government passed a new law forbidding sales of that model of gun. The purchaser sued the dealer for the return of his $100 down payment.
How will a court likely rule?
The dealer must return the $100 down payment to prevent unjust enrichment of the dealer.
Integration - Four Corners Approach Policy
Policy: promotes clarity, but creates an underenforcement problem
Reliance Damages GOAL
goal is to return promisee to position they enjoyed before the agreement (restoring status quo ante).
What is the policy con for adequacy of consideration
Policy tradeoffs: incentivizes people to lie about having good faith, encourages ignorance.
A man and a woman entered a contract in which the man agreed to give the woman stock shares valued at $5,000 and a painting valued at $10,000, in exchange for land valued at $12,000 and a car valued at $2,000. The man performed by giving the woman the stock shares and the painting. The woman partially performed by giving the man the car, but then refused to transfer the land to the man.
If the man sues the woman for breach of contract, what remedy is a court most likely to award him?
Specific performance, requiring the woman to transfer the land to the man.
A landowner hired a construction company to build a bridge over a river on his property for $50,000. After the company had finished half of the job, it breached the contract and stopped constructing the bridge. The landowner sued the company for breach of contract. The landowner proved that hiring another company to finish construction of the bridge would cost $30,000. The landowner had already paid the construction company $35,000. The bridge, when finished, would increase the value of the landowner’s property by $90,000.
What is the court likely to award the landowner?
$15,000 (the cost of hiring another company to finish construction minus the amount not paid to the original contractor).
Integration - All Relevant Circumstances Approach
Policy: undermines the parol evidence rule because evidence that contradicts may be admitted, less efficient
Restitution GOAL
goal is that breaching party (promisor) must pay for the unjust enrichment received.
What are the policy pros and cons behind PED
Policy Cons: prevents beneficial renegotiations/modifcations (ex. I found termites in your house, do you want me to remove them in addition to the rodents)
Policy Pros: protects against duress = alaska packers, prevents opportunitism and taking advantage of the buyer, promotes stability of the deal
A painter owned a painting business that operated in a single crew of three painters. The painter entered into a contract with a parking garage to paint the garage for $7,000. The job would take the crew three days. Before the painting began, the garage repudiated the contract. The painter sought alternative employment for his crew of painters. The painter was able to get the crew hired to paint an office building’s interior for two of the three days, earning $3,000. The painter sued the garage for breach of contract and sought damages.
What expectation damages, if any, is a court likely to award?
$4,000, the difference between the contract price for the garage and the contract price for the office building.
A theater owner agreed to pay an actor $5,000 to appear in a play that the theater owner was producing. Before the play opened, the actor told the theater owner that he was going to breach the contract and not perform in the play. The theater owner had not yet paid the actor anything. The theater owner had to hire another, lesser-known actor at a cost of $3,000. The play earned $10,000. The theater owner proved that if the original actor had starred in the play, it would have earned $17,500.
If the theater owner sues the actor for breach of contract, how much is he likely to recover in damages?
$5,500, the difference between what the play earned and what it would have earned with the original actor, minus the difference between what the theater owner would have had to pay the original actor and what he paid the replacement actor.
Interpretation - Broad Approach
Policy: too much uncertainty that words have no inherent meaning - “yellow can mean blue because words have no inherent meaning.”
What is the policy rationale as to why you cannot recover specific performance for services
Bc the court would incur monitoring costs
What is the policy rationale for the UCC as a whole
Policy Goals: (1) Lowers transaction costs; (2) archaic, prefer security of deal; (3) greater flexibility in formation; (4) greater use of implied default terms
An entrepreneur agreed to purchase a store from the store’s owner for $100,000. After signing the contract, the entrepreneur spent $50,000 on inventory to supply the new store. However, the store owner then refused to perform the contract. As a result, the entrepreneur resold the inventory at the best market price available, which was $30,000. The entrepreneur brought a breach of contract claim for reliance damages against the store owner. The court found that the owner had breached the contract and moved on to determine the amount of damages.
If the owner is able to prove that the entrepreneur would have lost $5,000 selling the inventory at the store (had the contract been performed), how much is the entrepreneur likely to recover in reliance damages?
$15,000 (the amount spent in preparation to perform, minus the amount recovered by reselling the inventory, minus the expected loss had the contract been performed).
A plastic surgeon and a patient entered into a contract. In this contract, the surgeon agreed to perform five independent surgeries on the patient over the next few months for a cost of $10,000 per surgery ($50,000 total). The patient paid $40,000 in advance. However, after performing two surgeries, the surgeon informed the patient that the surgeon was moving out of state and could not perform the remaining three surgeries.
If the patient sues the surgeon for restitution, how much is the patient likely to recover?
$20,000 (the difference between the advance payment and the value of the surgeries already performed).
What is the meaning for the ranking of methods to determine term interpretation, once the extrinsic evidence is admitted, under the UCC
Express terms is the closest to the OG deal, then course of performance, course of dealing, and then usage of trade is the furthest
POLICY for restitution
Pro: promotes performance
Con: worry about punishment rather than compensation as a contract remedy, prevents efficient breaches
What is the policy pros/cons behind EACH non traditional contract formation (hint: some only have cons)
Promissory Estoppel: Policy Tradeoff: allows for overenforcement and enforcement of gratuitous promises.
Post Benefit Promise: Policy rationale: if you went back in time and were asked to pay for something, you would probably say yes (see hypo below and refer to ex. Webb v. McGowin: P falls with lumber block to avoid it hitting & killing D, P is severely injured)
Unjust Enrichment: Policy: something that would normally be paid for, often arises in emergencies; ex. doctor saves wrecked biker.
A family contracted with a moving company to move their belongings from an apartment they were renting to a new home. The total price of the move was $1,200. The contract stated that the date of the move needed to be the last day of the month or earlier, so that the family could avoid paying extra rent for holding over at their apartment. Staying extra days at the apartment were charged at $100 per day. On the morning of the move, the last day of the month, the moving company’s owner contacted the family and informed them that his company would be unable to move the family and suggested that the family contact other movers. The family contacted three reputable movers, and the cheapest alternative was a $2,000 move on the third day of the month, which also happened to be the earliest any company would do the move. With no other options, the family agreed. At the end of the move, the family discovered that the new movers had placed an identifying sticker on an antique table. The sticker’s adhesive caused $400 in damage to the table’s finish.
In a breach of contract claim brought by the family against the original moving company, what damages, if any, would the family be likely to recover?
$1,100 (the difference between the original contract price and the new movers’ price, plus the three-day holdover charge).
A hotel chain contracted with a construction company to build a new hotel for $10 million. After completing half of the work, the construction company breached the contract. The hotel chain had paid the construction company $5 million for the work it already had completed. The hotel chain had to pay $6 million to a second construction company to finish the job. Additionally, the hotel’s opening was delayed by one month. The hotel chain sued the first construction company for breach of contract. At trial, the hotel chain proved that, had the first construction company not breached the contract, the new hotel would have opened one month earlier than it had opened and earned profits of $500,000. The hotel based its proof on earnings its comparable properties had made in their first month of opening. The hotel chain sued the construction company for breach of contract, seeking expectation damages.
How much is a court likely to award the hotel chain in expectation damages?
$1.5 million (the amount the hotel chain had to pay the second construction company, minus the amount the hotel saved by not paying the first construction company, plus the lost profits from the month delay in opening).