Valparaiso University



Implied termsWood v. Lucy, Lade Duff-GordonIssue is whether wood’s promise to Levy is an illusory promiseCardozo:Implied that he was to use reasonable efforts to market her clothing in return for exclusive right to do so.Why? Contract wouldn’t make sense if he did nothingCanons of Construction (Fave 5)Expressio Unisexpressing one thing and intent to exclude othersContra proferentum contracts are interpreted against drafterSpecific provisions trump general provisions on the same subjectGive affect to each provision (Everything in a contract is there for a reason)Do not adopt a meaning that would render the contract commercially unreasonableB. Lewis Productions, Inc. v. Maya Angelou & Hallmark Cards, Inc.Letter of agreement showed intent to be boundPart performance helps specify missing termsTAKE AWAY FROM CASES:Courts should imply terms when they are confident that the parties would have agreed to those terms had they considered themBut courts should not imply terms when doing so forces the parties into a contract to which they did not agree to. Good FaithIS AN IMPLIED TERMBOTH under the UCC and RestatementMarket Street Association Limited Partnership (MSA) v. FreyG.E. leases to J.C. and J.C. assigns to MSAJudge PosnerG.E.’s position is “untenableMSA is wrong because K doesn’t expressly not establish a duty of good faith, one may be implied under R.2d § 205Policy: Differing levels of duties in pre-contract and post-contract relationsPurpose of good faith is to prevent “opportunistic behavior.”Breach of good faith:By opportunistic behavior during contract performanceDeliberately taking advantage of a contracting partner’s mistake during performance Duties are limited in the at-will context of employment to conduct that violates public policies. At-will employmentPublic policy prohibits only:Requiring employee to commit crimePreventing employee from complying with a statutory dutyDismissal of employee in violation of statuteNo public policy for whistle blowingAffirmative Defenses/Enforceable Defenses (Brief introduction, see below for details) IllegalityCourts leave parties as they found them No restitution, no reliance, no expectation damagesPublic PolicyIncapacityDuressMust be extreme economic duress or “gun to head” duressUnconscionabilityUnfair and took advantage of ignoranceMistakeImpossibility/Impracticability/Frustration of purposeContract made sense when we entered into it, but now something happened and the contract cannot be performed. IllegalityTotten v. United StatesEmployment and service were to be sealed as was evident by the nature of the contractGeneral rule public policy forbids the maintenance of any suit in court, which the law would consider confidential and respecting which it will not allow the confidence to be violatedCan’t file suit against the government if it is of a secret matter because there cannot be any evidence of the contract to begin with because the situation is confidential in itself.Carroll v. BeardonSale of a brothel from one madam to another. Court findingsDefense of illegality is not used regularly and granted to party who has breached a contract, where fault and illegality is on her side. Lessor must be shown that he participated in the wrongful purpose and property to be used. Knowing that the property will be used for illegal purposes is not enough to prove illegalityThis case was for the sale of property not for profit from the brothel. Baby M CaseSurrogacy agreement made invalid by NJ courts. Against public policy What matters is the best interest of the childTake away from cases:Courts will not enforce illegal contracts In Pari Dilecto Try to find contract in light of non-breacher to hold breacher of the contract responsible. Remedy= leave the parties where they found them. Public PolicyMarvin v. MarvinIssues:Was there an expressed agreement?Was there an implied agreement?Would such agreement violate law or policy?Can you recover in quatum meruit?RulingThis agreement was not about money for sexual relationsTheirs was a real relationshipReasonable expectations of the parties should be enforced so long as consideration is not meretriciousEven without a promise or a contract implied through conduct, non-marital spouse can recover in quantum meruit. Public policy in this case is to encourage people to get into living with someone because you’re paying to have sexual relations with them Usually some sort of legislative action is necessary to establish the public policy (Baby M) ORThe public policy must seem clear to the courtNo court will dispute a K which has secret affairBut where public policy is unclear, courts are left to their own devices. InfancyR.2d § 14All contracts with infants, under 18, voidable at the election of the infantRecovery is limited to avoid unjust enrichment or Take depreciation into accountMay entail a right to restitutionBut usually means return of goods, not moneyAnd may only apply where depreciation is product of willfullnessOld CL exceptionContracts for “necessaries” not voidable (Sometimes retained)Helps induce adults to make contracts with minors when the minor really needs it Halbman v. LemkeRuling from case:Absent misrepresentation of age or tortious damagesIn contract not for a necessity Infant may recover purchase priceWithout diminution for use, depreciation, or damage. Completed Contracts with infantsIf the infant paid the full price of the contract, the K is not voidableMental Incapacitation Haur v. Union State BankHaurs original claimsMental incapacityFraud/misrepresentationBreach of fiduciary duty Claims that survive summary judgmentMental incapacitationBreach of good faith and dealingBreach of fiduciary dutyReasoning:Mental incapacitation IS basis for avoiding a contractPlaintiff has burden of showing her incapacityAlmost any evidence is relevantRule:If party knew of incompetence and took unfair advantage, consideration dissipated without benefit to the incompetent need not be restored. TAKE AWAY FROM CASEMental incapacity R.2d: A K is voidable if the party is:Unable to understand nature and consequences of transaction, ORUnable to act reasonably in relation to transaction and other party has reason to knowDamages may be limited to prevent unjust enrichmentMistake DoctrineWood v. Boynton No fraud since they both were ignorant of the fact that the stone was a diamondmistakeDoctrine of mistake applies when: The parties are mistaken as to the very nature of considerationSuch mistakes are deemed materialDoctrine does not apply where mistake only affects the value or quality of the considerationSherwood v. WalkerWas there a mistake? YESWas the mistake mutual at the time of the contract? YESIt was a substantially material mistake and therefore contract was rescindedBarren cow is substantially different than a fertile one.Lenawasee County Board of Health v. Messerly Was there a mistake? YESWas the mistake mutual at the time of the contract? YESDoctrine does not apply where the mistake only affects the value or quality of the considerationSuch mistakes are deemed “collateral”Restatement (Modern)Was the mistake as to a basic assumption?Does it have a material effect on the agreed exchange?Who should bear the risk of mistake?Restatement § 154 (a)Allocated risk to a party at the time the contract is made§ 154 (b) has limited knowledge but treats the knowledge as sufficient§154 (c) court allocates risk of mistake at its own discretion Remedy for a mistakeAvoidanceMust be mistake of factRemedy for scrivners errorReformationWil-fred’s Inc. v. Metropolitan Sanitary DistrictWil’s argumentMistake was materialIt was caused by misleading specificationNotice was promptEnforcement would be unconscionable in these circumstances.Illinois Court mistake analysis:Contract performance is excused if:Mistake is materialIt occurs despite reasonable careEvidence suggests reasonable careEnforcement would have grace consequences and is thus unconscionable No significant harm to other party R.2d § 153 on MistakeBasic AssumptionMaterial effectGrave consequences make the contract unconscionable OR Other party knew or had reason to know or caused the mistake. FraudSyester v. BantaMisrepresentation of abilitiesCoerced into buying several dance hoursPlaintiff wanted damages and punitive damagesWas awarded $40,000 in punitive damagesThere was a separate tort action for punitive damagesDamages should be everything that she paid She only got $14,000 because she received a benefitRESTITUTIONTAKE AWAY FROM CASE:Remedy for misrepresentation is rescission Elements of fraud:Misrepresentations must be materialScienter (knowledge of falsity)Intent to deceive and defraudBelief and reliance on the misrepresentation Damages Hill v. JonesFirst issue: PERDoes integration clause bar PE of fraud relating to seller’s knowledge of termite damage in house?Appellate Ct: integration clause says relevant information never bars evidence of fraud. Materiality testWhen is there a duty to disclosure under modern contract law (R.2d § 161)?Must be disclosed when:Necessary to correct a mistaken basic assumption of buyer where failure to disclose would be bad faith.Necessary to correct a mistaken assumption of buyer as to a writingBased on relationship of trust and confidenceDuressSelmer Co. v. Blakeslee-MidwestSelmer wanted $150,000, then settled for $120,000 Blake wanted to pay and gave $67,000 and Selmer took it because they were threatened by bankruptcy A SETTLEMENT IS A CONTRACTWhen $67,000 was taken, they agree to settle all further disputeJudge:Selmer could have gotten out of the contract when they wanted but decided not toCant rip open all contract settlements on that basisMust be a limit to duress claimRule:Settlement should be enforced if allegedly threatening party is not the cause of the victim’s economic duress. Odorizzi v. Bloomfield School DistrictSettlement agreement to quit job and district agreed to not spread his secretsDuress:Threat was not unlawful as required for duress under California LawThreat to pursue legal action not unlawful unless knowlingly false. Undue InfluencePersuasion which tends to be coercive in nature, persuasion which overcomes the will without convincing judgmentOnly requires overpersuasion using pressure to take advantage of weaknessMust overcome will but not judgmentDue to weakness that doesn’t amount to mental incapacity Most jurisdictions do just fine without Undue influence because they use duressBut UI arises in familial contexts.TAKE AWAYUnder restatement, a contract induced through threat of physical force is VOIDContract induced through economic duress is VOIDABLE. Duress consists of an improper threat, which could be duty of good faith and fair dealing;More generally, it can be anything that results in an exchange or unfair termsUnconscionability Williams v. Walker-Thomas FurnitureContract for sale had clause that prorated payments for all items plus the newly purchased item. If you miss a payment on one, all items can be repossessed.Past items were used as securityTrail court approachCant condemn Walker-Thomas too harshly because no statutory authority no basis to avoid contract for Unconscionability Skelly WrightUnconscionability is a COMMON LAW doctrine, so no statutory basis required UCC § 2-302 recognizes Unconscionability in formationViewed it as only persuasive authority because it was not enacted at the time of the contract.TAKE AWAY FROM CASEMust show contract was procedurally AND substantially unconscionable. Very hard to show procedural because informed contracting is okay.If court finds one part is unconscionable they can void whole contract, or remove the unconscionable termTestNo meaningful choiceProcedural Meaningful choice is negated by gross inequality in bargaining power. Unreasonable termsSubstantiveProcedural UnconscionabilityConsider education of the partiesMaze of fine printDeceptive sales practicesSubstantive Unconscionability Terms that are grossly unfairSo grossly unfair even compared to similar contractsExcessiveness of the priced terms ................
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