Contracts Case Chart

P injured by LL’s negligence under a lease which exculpated the LL from liability for negligence. A lease clause exculpating a LL from liability for his own negligence should be upheld & is not void against public policy. BUT most states now hold exculpating clauses for residential leases unenforceable.

Graham v. Scissor-Tail. (1990)

Arbitration clause apptd AFM as arbitrator. P was concert promoter. K of adhesion containing arbitration clause fell w/in reasonable expectations of P since he was subject to thous of same. BUT it was uncon b/c it would be biased in favor of union member artist.

Henningsen v. Bloomfield Motors, Inc. (NJ SC 1960)

P injured by steering failure in new car purchased form D under a K in which dealer disclaims all implied warranties of merchantability. At attempt by an auto dealer to disclaim an otherwise implied warranty of merchantability is void against public policy. Disclaimer was insufficient to indicate to RP that he was giving up personal inury claims if car had defect, unequal bargaining positions. Carnival Cruise Lines, Inc. v. Shute (US SC 1991)

P injured on Ds ship. Forum selection clause on back of tix. A forum selection clause in a commercial passage K is permissible if it’s fundamentally fair. Williams v. Walker-Thomas Furniture Co. (US Ct of App DC 1965)

P sold to D furniture w/a cross-collateral clause & subsequent to Ds default, sought to replevy all goods previously purchased by D The defense of Unconscionability to action on a K is judicially recognized. CL rule of caveat emptor modified by 2-302, unequal bargaining position here where P exploited D in uncon K provision.

Jones v. Star Credit Corp. (NY SC 1969)

P bought freezer (worth $300) for $900. Ps pd $619.98 already. 2-302 permits a ct to reform a K on the basis of excessive price. Factors incl: price to value ratio, financial resources of buyer, knowledge of seller concerning buyer’s situation, relative bargaining position of the parties. Armendariz v. Foundation Health Psychcare Services (CA SC 2000)

P signed employment app which incl arbitration clause compelling arbitration for wrongful termination. An adhesive K that incl an arbitration clause requiring adhering party, but not the other, to arbitrate all claims arising out of the same transaction is uncon. K limiting damages of amt of backpay compounds the uncon of agmt. Klein v. PepsiCo, Inc. (US Ct of App 4th Cir 1988)

P wanted to buy D’s jet. 2-716 allows nonbreaching buyer to seek SP if goods are unique. BUT No Specific Performance when money damages are adequate. Substitute goods can be purchased to satisfy the original K. Laclede Gas v. Amoco Oil (US Ct of App 8th Cir 1975)

After D breached a long-term propane supply K, P sought specific performance of K. Specific Performance is available as a remedy for breach of a K involving personal property (ie. long-term supply K where supply is unique). Northern DE Industrial Development v. E.W. Bliss (Del 1968)

P wanted SP of a contract that would have req’d hiring 300 wkrs to complete a second shift. Cts unlikely to order SP where supervision of performance would be impractical. Money damages for losses caused by delay could be determined. Rare to award SP for personal services K.

Walgreen Co. v. Sara Creek Property Co.

Walgreen had lease that prevented LL from leasing space in mall to another pharmacy. LL gonna lease to Phar-Mor. Ct issued injunction instead of awarding damages to (1) shift burden of determining true cost of Ds conduct from ct to parties. Avoid costly supervision by ct. (2) prices/costs more accurately determined by mkt than by gov’t. Vitex Manufacturing v. Caribtex

P was to process wool for D. P reopened factory but D never sent wool to be processed. In a claim for lost profits, overhead should be treated as part of the gross profits & recoverable as damages, & should not be considered as part of the seller’s (processor’s) costs. Overhead should not be treated as a cost saved in computing an award for breach of K b/c it remains constant. Laredo Hides v. H&H Meat Products

D refused to continue delivering hides under its K with P, P purchased them from other sources & sued to recover the price difference When a seller wrongfully repudiates a K or fails to make delivery of the goods, the buyer may “cover” by obtaining such goods elsewhere & sue the seller for the difference b/w the costs of cover & the K price plus + incidental or consequential damages.

R.E. Davis Chemical v. Diasonics. (US Ct of App 7th Cir 1987)

D claimed it lost a “volume sale” when P breached a K of sale. An aggrieved seller may recover, after resale, lost profits from the original sale if he can show that the subsequent sale would have occurred absent the breach and would have been profitable. US v. Algernon Blair (US Ct of App 4th Cir 1973)

P sues to recover in quantum meruit the value of the labor/materials it furnished up to the pt at which it justifiably ceased work. A promise is allowed to recover in quantum meruit the value of services he gave to a D who breached their K irrespective of whether he would have lost money had the K been fully performed and would thus be precluded from recovering in a suit on the K. Rockingham County v. Luten Bridge (US Cir Ct of App 1929)

P was to build a bridge. D unjustifiably told P to stop wk under K, but P refused and spent more $ to complete bridge. After an absolute repudiation or refusal to perform by one party to a K, the other party can’t continue to perform and recover damages based on full performance. The nonbreaching party is not permitted to recover damages which he could have avoided by reasonable efforts. Tongish v. Thomas (KS SC 1992)

After P lost money on resale K due to Ds breach, it contended that the mkt price measure of damages should be used instead of its actual loss. When a seller breaches, mkt damages should be awarded even though in excess of the buyer’s actual loss. Proper remedy for breach of K to deliver goods is diff b/w K price & mkt price. Parker v. 20th Century Fox Film (CA SC 1970)

P, an actress, was to have the lead role in a movie but D decided not to make that movie and offered her another leading role in a different film. The general measure of recovery by a wrongfully discharged employee is the amt of salary agreed upon for the period of service, less the amt which the employer affirmatively proves the employee has earned or w/reasonable effort might have earned from other employment. Jacob & Youngs v. Kent (NY Ct of App 1921)

P built house for D with wrong type of pipe. A trivial & innocent omission will be excused & damages for the minor breach of condition will be allowed rather than holding that there’s a breach of condition forfeiting entire K. Damages should be measured by diminution of value rather than cost of repair, replacement or completion. Groves v. John Wunder (MN SC 1939)

When D surrendered land it leased from P, D had deliberately breached K by removing best/richest gravel w/o restoring land to existing grade. Value of land was $12k if restored, cost of restoring was $60k. When willful breach, breaching party may not sue on the K nor invoke benefit of substantial performance to limit damages to the diminution in value. Cost to complete (not diminution in value) is proper remedy.

- anomolous Peevyhouse v. Garland Coal & Mining Co. (OK 1962)

Where the K provision breached was merely incidental to the main purpose, & where the economic benefit of full performance of work is grossly disproportionate to the cost of performance, the damages are limited to the diminution in value b/c of the non-performance.

Hadley v. Baxendale (Ct of Exchequer 1854)

P stopped mill b/c of broken crankshaft. D was late in delivering. Normally, damages are those which arise naturally from breach. Damages b/c of special circumstances awarded when P informs D of special circumstances or where these damages are reasonably foreseeable by D at time K is formed.

Delchi Carrier SpA v. Rotorex Corp. (1995)

D sold P nonconforming components. P unable to obtain substitute components from other vendors & lost sales as result. Buyer who accepts order from customers based on quantity of components purchased may recover lost profits on those orders when components are defective and buyer can’t purchase replacement components. Kenford Co. v. Cty of Erie (NY Ct of App 1989)

P gave land to D to build sports stadium. D didn’t. P sued for loss of appreciation in surrounding land. Developer not entitled to recover loss of anticipated appreciation in value of real estate surrounding sports stadium when gov’t decides not to build. No indication that D reasonably contemplated that it would assume liability for Ps unrealized appreciation in land values. No tacit agmt that breacher would be liable. Fera v. Village Plaza (MI SC 1976)

Lessor leased to another tenant b/c he misplaced lease. Although prospective profits for a new biz are usually too speculative, when proof of prospective profits is available, they may be recovered even by a new biz. Wasserman’s v. Township of Middletown (NYSC 1994)

Lease b/w P and D contained a stipulated damages provision based on Ps gross receipts If liquidated damages are far in excess of actual losses, the clause may be an unenforceable penalty. Dave Gustafson v. State (SD 1968)

P performed highway construction wk for state. K had liquidated damages clause, P delayed. Liquidated damages clauses should be enforced when they’re fair & reasonable attempts to fix just compensation for anticipated loss caused by breach of K. Useful when damages are uncertain in nature/amt or are unmeasurable. Gianni v. R. Russell (PA SC 1924)

P rented space to sell fruit, candy, soda. D allowed another to sell soda. P claimed D agreed to give P sole right sell soda in building at time of lease negotiations though not in written lease. All preliminary negotiations, conversations, & verbal agmts are merged in & superseded by the subsequent written K, and unless fraud, accident, or mistake is alleged, the writing constitutes the agmt and its terms can’t be added to or subtracted from by parol evidence.

Masterson v. Sine (CA SC 1968)

P transferred prop to relatives reserving option to repurchase for 10 yrs. Relatives went bankrupt, P sought to exercise the option. Evidence of oral collateral agmts should be excluded only when the fact finder (ct) is likely to be mislead. The parol testimony as to the limitation of assignment should have been admitted since that term would not necessarily have been included. Parol evidence can be shown to prove elements of part of agmt that’s not reduced to writing.

MCC- Marble Ceramic Cntr v. Ceramica Nuova D’Agostino (11th Cir 1998) D sells tiles to P. Terms on Ds form Ks were in Italian. CISG permits an inquiry into a party’s subjective intent so long as the other party was aware of that intent. Appears to be a rejection of the PER by CISG.

Bollinger v. Cent. PA Quarry Strip & Const (PA SC 1967)

P contracted to permit D to deposit its construction waste on Ps prop if it removed topsoil & covered the waste w/it. This oral condition was not incl in the written agmt and was omitted by mistake. D didn’t remove topsoil. A ct of equity has the pwr to reform a writing and make it correspond to the understanding of the parties on the ground of mistake as long as that mistake is mutual. Frigaliment Importing v. B.N.S. International Sales (US Dist Ct 1960) D K’d to sell “chicken” to P. D shipped stewing chicken instead of broiling & frying chicken. The party who seeks to interpret the terms of the K in a sense narrower than their everyday use bears burden of persuasion to so show. Raffles v. Wichelhaus (Ct of Exchequer 1864)

D agreed to buy cotton to be shipped by P aboard “Peerless.” 2 ships w/that name. When a term used to express an agmt is ambivalent & the parties understand it differently, & neither of them is aware of the other’s understanding, there can be no K.

Oswald v. Allen (2d Cir 1969)

Swiss Coin Collection & Rarity coins. Rarity collection incl some Swiss coins Agmt not enforceable under Raffles b/c no sensible basis for choosing b/w conflicting understandings of the parties.

WWW Associates v. Giancontieri (NY Ct of App 1990)

K contained a reciprocal cancellation provision. Extrinsic evidence can’t be considered in order to create an ambiguity in written agmt. Before such evidence be considered, ct must find an ambiguity in the written K. PG&E v. G.W. Thomas Drayage & Rigging (CA SC 1968)

D obtained insurance policy covering only 3rd party liability. P argues that intention was to cover property as well. D offers prior Ks indicating only 3rd party property covered. Evidence as to the meaning of a K term must be admitted if K language is reasonably susceptible to the meaning argued for by the evidence. Extrinsic evidence may only be excluded when it’s feasible to determine meaning of wds from the instrument itself. Delta Dynamics v. Arioto (CA 1968)

A separate K provision allowed recovery of attys’ fees in any action for damages. Ct allowed extrinsic evidence to show whether a termination provision was an exclusive remedy.

Hurst v. WJ Lake & Co (OR 1932)

Horse scrap meat. Different prices for meat that were above or below 50%. 140 tons were 49.53-49.5%. In dealings b/w tradesmen, meanings of the terms of the trade should take precedence. PE admissible in order to explain the trade meanings. Dalton v. Educations Testing Service (NY Ct of App 1995)

ETS allowed to cancel test score if it found reason to question validity of the score after offering test-taker 5 options to respond to Ds concerns. P is entitled to SP of Ds promise to consider Ps evidence in good faith. Implied good faith requirement.

Burger King Corp v. Weaver (1999)

D purchased 2 franchises from BK. BK authorized another franchise & D stopped paying. P sues, D counterclaims breach of Ps duty of good faith and fair dealing. Implied covenant of good faith & fair dealing does not support an independent CoA where alleged breaching party has performed the express K’l provision & the implied covenant would vary the express terms of the K. Eastern Airlines v. Gulf Oil

D claims Ps practice of fuel freighting is a breach of K. Evidence indicates practice is established in the industry. An established course of performance & dealing b/w parties, which is also an established usage of trade, becomes part of the terms of the K when not objected to.

Market Street Assoc v. Frey

P allegedly deliberately failed to notify D of an obscure clause that could result in forfeiture of Ds property. Diff b/w superior mkt info & taking advantage of K partner. Duty of good faith doesn’t require complete candor; party may take advantage of another based on superior knowledge of mkt. BUT a party may not intentionally exploit the other party’s oversight of an important fact. Dickey v. Philadelphia Minit-Man Corp

Lease based on percentage of D’s gross sales, w/a minimum rent. D discontinued certain biz, P sued for ejectment. General rule: lease provision specifying certain use of premises is a covenant against a noncomplying use, not a covenant to use. No implied obligation for a lesee to cont to conduct a biz specified in lease if its failure to do so result in less rent to lessor. In other cases where rent based on gross receipts but no minim, cts have imposed an implied covenant to cont biz. Bloor v. Falstaff Brewing Corp.

P alleged D breached its K’l obligation to use its “best efforts to promote & maintain a high vol of sales.” A K’l provision obligating one to use its “best efforts” to promote & maintain a high vol of sales of a certain product is breached by a policy which emphasizes profit w/o fair consideration of the effect on sales vol. Zilg v. Prentice-Hall (US Ct of App 1983)

Prentice-Hall cut original printing & reduced ad budget. A K’l agmt to publish a bk, reserving right to publisher to exercise its discretion, does not incl an implied obligation to aggressively promote the bk. Bak-A-Lum v. Alcoa Building Products (NJ SC 1976)

D canceled an exclusive distributorship agmt w/P after it knew that a new warehouse lease had been entered into by P. Exclusivity agmts that don’t specify duration are terminable at will of either party. Limition: when agent has in good faith incurred expense/time/effort in developing biz, allowed to recoup investment. D could terminate K or just the exclusivity feature w/o paying compensation to P since P had 8/9 yrs of exclusivity but needed notice. Sheets v. Teddy’s Frosted Foods (CT SC 1980)

P fired for complaining about noncompliance w/state regulations. Generally Ks of permanent employment are terminable at will but one may maintain action for wrongful discharge if he can prove that the discharge violates public policy. Balla v. Gamgro (IL 1991)

P was in house counsel for D. P reported illegal activity to FDA, was fired. In-house counsel normally can’t claim tort of retaliatory discharge. P had duty as atty to report, thus no fork b/w losing job or reporting. Client may discharge atty any time. Nanakuli Paving & Rock v. Shell Oil (US Ct of App 1981)

D contended it was not obligated to price protect P, and its conduct in the past didn’t constitute a course of conduct governing the K. Trade usage & course of performance will be read into Ks where such are so prevalent the parties would have to have meant to incorporate them in the terms of the K.

Columbia Nitrogen v. Royster Co (4th Cir 1971)

P D wanted to introduce evidence on usage of trade & course of dealing to show that specific K prix was not to be binding on parties. 2-202 authorizes evidence of usage of trade & course of dealing b/w parties to explain or supplement a K.

Luttinger v. Rosen (CT SC 1972) Obtaining mortgage w/interest rate was condition precedent to K. D unable to obtain mortgage. P offered to compensate for failure of the condition precedent. A condition precedent is a fact or event which the parties intend must exist or take place b/4 there is a right to performance, & if the condition precedent is not fulfilled, K is not enforceable. P not req’d to accept Ds compensation for failure of condition.

Internatio-Rotterdam v. River Brand Rice Mills (2d Cir 1958)

P was to provide shipping instructions at least 2 wks prior to delivery of rice. P didn’t, D canceled K. A condition, which is an act or event, other than a lapse of time, must be literally complied with. Notification was a condition precedent to D’s duty to ship. Peacock Constr. v. Modern Air Conditioning (FL SC 1977)

D failed to pay sub (P) claiming Owner paying was a condition precedent. Ambiguous provisions in subKs which don’t expressly shift the risk of pmt failure by owner to subcontractor will be interpreted as constituting absolute promises to pay and not as setting pmt by the owner as a condition precedent to pmt.

Gibson v. Cranage (MI SC 1878)

P contracted to make a portrait for D. If portrait failed to satisfy D, D need not accept/pay. D not satisfied w/ portrait, & P sued for the K price. Where parties deliberately entire into an agmt which violates no rule of public policy & is free of fraud or mistake, no hardship in holding them bound by it. Contractual liability may be conditioned on subjective personal satisfaction.

Doubleday v. Curtis (2d Cir 1985) Curtis (D) wrote manuscript P deemed worthless. P offered editorial assistance that D refused. Law requires party who terminates K to act in good faith. Where K contains satisfaction clause, it may be terminated only as a result of honest dissatisfaction. Ps duty of good faith incl providing editorial assistance.

McKenna v. Vernon (PA 1917)

D asserted P needed certificate only at last progress pmt. Constant/repeated disregard on owner to exact compliance w/provision. Now too late for him to insist that failure on the part of the P to secure certification before suit defeats his right of action. Owner waived it repeatedly. Hicks v. Bush (NY 1962)

Written K made no mention of the condition (orally agreed to) that sum of money had to be raised in order for written doc to take effect. PER says oral agmt can’t be used as evidence to contradict written agmt. However, if oral agmt is for a condition precedent to the effectiveness of K, then such evidence may be introduced.

Kingston v. Preston (King’s Bench 1773)

P to take over D’s biz. P had to make pmts & show security, which he didn’t do. P sued saying D still had to deliver biz, arguing that covenants were mutual & independent. D argues dependent covenant. Covenant was cond’l & dependent. Performance of one party depends on prior performance of other. Until prior condition performed, other party not held to performance of his covenant. Performance of 1st covenant is implied condition precedent to the duty to perform the 2nd covenant. Stewart v. Newbury (NY App 1917)

P alleged he was to be pd in “usual manner” even though not written into K. When D failed to pay, P stopped wk. Where a K is made to perform wk and no agmt is made as to pmt, the work must be substantially performed b/4 pmt can be demanded.

Plante v. Jacobs

P built D house w/misplaced wall. D refused to finish paying. P refused to complete job and sued for breach of entire K. P rendered substantial performance and is due K price. D should receive damages for Ps failure in finishing home. Unjust to let owner retain value of building w/o pmt b/c of small mistakes. Gill v. Johnstown Lumber

P K’d to drive & deliver 4 mill ft of logs but had delivered only a part of that amt when flood swept away rest of logs. When consideration for work done is apportioned/apportionable in K, that K will be interpreted as divisible/severable in case of part performance.

Britton v. Turner

P wkd for D for 9 ½ mo when K specified 1 yr. Restitution – Employee may recover reasonable value of services (benefit to employer) less damages employer suffers by reason of early termination, w/K providing limit on amt of recovery.

Kirkland v. Archbold

P to repair/improve Ds prop but defaulted after partial performance. Restitution – negligent breach shouldn’t be treatede same as willful breach where forfeiture of value of wk completed is punishment. Award reasonable value of wk done less damages suffered by D thru incomplete wk.

Walker v. Harrison

D rented electric sign which was hit w/tomato. D refused to make further pmts until P cleaned sign. A party attempting to repudiate a K must convince the ct that the other party has materially breached the K. K&G Construction v. Harris

D breached his covenant to perform in a wkmanlike manner, P declined to pay b/c of bulldozer damage. D refused to perform further, causing damage to P. Whenever possible, according to the intentions of the parties and the good sense of the case, mutual promises in a K will be regarded as dependent covenants. Modern rule – mutual promises in K are presumed dependent.

Iron Trade v. Wilkoff

D to deliver rails to P but refused to do so after P reduced available suppy and made Ds performance more difficult. A party who prevents the other party from performing may excuse other party’s performance. BUT mere difficulty of performance will not excuse a breach of K even though that difficulty was created by other party.

New England Structure v. Loranger

D was to construct gypsum roof on school, terminated deal contending that D failed to provide enough skilled wkmen as req’d by K. When notification of a ground for termination is sent to a party deemed to be in breach, the notifier is NOT limited to that ground in defending his action. Hochester v. De La Tour (Queen’s Bench 1853)

P contracted to be a courier for D for 3 months. D changed mind b/4 P was to start. P sues and is in ct b/4 the K was to arise. When promisor repudiates K b/4 date set for performance, P may either wait until date set for performance or sue immediately. Kanavos v. Hancock Bank & Trust Co (MA SC 1985)

D sold stock to which P had earlier been given a K’s right of first refusal. To recover for breach of K, owner of a right of first refusal must prove that, had he been notified of the impending sale, he would have been ready, willing, and able to exercise his right. Ability to perform is a constructive condition.

McCloskey & Co. v. Minweld Steel Co. (US App 1955)

P requested assurance that the work would be completed w/in 30 days. D asked for help in obtaining steel. P sued D for anticipatory breach. To show an anticipatory breach, the party breaching must express an absolute & unequivocal refusal to perform.

C.L. Maddox, Inc. v. Coalfield Services, Inc (7th Cir 1995)

P to do wk for D. D began wking, P failed to sign D’s proposal. P tried to insert a liquidated damages clause unlikely to be accepted. One party may cease performance under an oral K where other party refused to sign a written K. Cosden v. Helm

When a seller anticipatorily repudiates a K, buyer’s damages should be based on the mkt price at a commercially reasonable point after the seller notifies the buyer of the repudiation. Pittsburgh-Des Moins Steel v. Brookhaven Manor Water (US App 1976)

P contended that D repudiated K by failing to meet a demand for a personal guarantee of pmt prior to performance of the K. 2-609 allows a party to cease performance due to the repudiation of the other only where the repudiating party fails, upon demand, to give assurance of pmt. Here no cause for assurance was shown. Norcon Pwr v. Niagara Hohawk Pwr

Party has right to demand adequate assurance of future performance when reasonable grounds arise to lead that party to believe that the other party will commit a breach of nonperformance where K not governed by UCC.

Stees v. Leonard

D tried to build on quicksand 2x. If one binds himself by a positive, express K to do an act in itself possible, he must perform unless prevented by act of God, the law or the other party to K & will not be excused by hardship, unforeseen hindrance or difficulty short of absolute impossibility. Taylor v. Caldwell

P to use D’s music hall for concert. Hall destroyed by fire, neither party at fault. Both parties to K are excused. In a K where the performance depends on cont’d existence of a person/thing, a condition is implied that the impossibility of performance arising from the perishing of the person/thing shall excuse the performance of the K. Transatlantic Financing Corp

D chartered P’s vessel to carry cargo from US to Iran. B/c of closing of Suez, P made extended voyage and sued D for increased expenses. When impossibility alleged, ct must construct a condition of performance based on changed circumstances involving: (1) a contingency, something unexpected, must have occurred, (2) risk of unexpected occurrence must not have been allocated by agmt or custom and (3) occurrence of contingency must have rendered performance commercially impracticable. Krell v. Henry Man rents room to watch coronation which was cancelled. Where purpose of K is frustrated by an unforeseeable supervening event, and the purpose was w/in the contemplation of both parties when K was made, then performance is excused.