DEFENSES to ENFORCEMENTFRAUD: Nondisclosure, Misrepresentation, Concealment*Integration clause is no bar to fraud claim*Remedies: voidable, elect: rescind+rest(X) or damages (Diff. in Value) *Rsnbl Rel: arg for/agnst π, bal. equity for ct. concl; ask π sophistic/innocent?*Nondisclosure (Hill termites): (in)action that asserts a fact does not exist(1) Omission + DutyIndirect: (1) Actual knw ∆ (2) No actual/constructive knw π (*diligence) (3) Material Issue: elastic: choice to enter K, affect on π circs, remedy, good faith, basic assumDirect: π asks automatic duty (materiality irrel.)(2) Reasonable Reliance: causal link, rsnbly motivated to enter K on (lack) infoMisrepresentation: assertion not in accord with the facts(1) Statement: concrete > puffery (2) False/Misleading: half-truth/incomplete thought suffice (3) Intent to deceive (4) Material (5) Rsnbl Rel: causal to enter KConcealment: deliberate conduct hide fact is affirmative, even if not verbal lie(1) Active concealment > silence (2) Material (3) Rsnbl Rel: causal to enter KUNCONSCIONABILITY (Walker Thomas furniture; Higgins tv show)* Unfair bargaining process leading to unreasonable terms* Sliding Scale: balance procedural & substantive; more one, less otherProcedural: unfairness in the bargaining process(1) Adhesion : not determ, but suggestive; 3: std form, no neg, uneql brgn(2) *Key: not mere unequal bargaining; abuse of power to impose(3) Others: target, understand/educ, fncl vuln, need/no time to read(4) Factors of unfair surprise or oppressionSubstantive: unfairness in oppressive terms *context rule(1) Unfairly One-sided: high costs of litig, only one party(2) Shocking as to: (a) industry or (b) πs specific circsRemedies: depends – severability or rescind+Rest(X)(1) Sever: sever unconscionable, if can preserve intent (Adler)(2) Rescind+Rest(X): void entirety; employer has “insidious pattern”Other: lux vs. need: legis. det.; slippery slope; no bearing on unconsc.PUBLIC POLICY *Need Statute: society as victim; must void K*Illegal K: in pari delicto; both know illegal, ct. refuse to provide any reliefNon-illegal, Offend Public Policy: bal equity; likely Rest(X) or adjustmentConsider: nature/gravity viol, goals of law/pub policy, extent permeates KEmployer-Employee Agreements (Valley Med v. Farber non-compete)(1) Strict scrut.: (a) against employer, (b) compare to outside policy guide(2) Rsnblty: (a) interest: employer vs. other parties (b) unrsnbl if greater than nec:

(i) geography, (ii) duration, (iii) activity restrictions or (iv) pub. Policy(3) Severability ‘blue pencil’: sever unreasonable, but cannot rewrite

*Tag: FRD/DUR>back-up UNCON; UNI.M>FRD; CHCIRC>othr REPUD; UNI.M>CHCIRC; FRUST+IMPRAC; *PUB POL

Family Relations Agreements (RR v. MH)(1) ID source of pub.policy: (a) id interest, (b) actual/comp. statute as guide(2) Analyze wrt statute: (a) no pmts beyond hosp. care, (b) services, not baby: (i)

staggered pmt, (ii) final pmt, (iii) refund triggered by condns(3) Adequate Decisional Moment: time to relinquish connection(4) Other: (i) surrog husband consent, (ii) adult surrog prev. preg., (iii) adopt parents

evaluated, (iv) adopt wife barren, (v) all have advice of counselJUSTIFICATIONS for NONPERFORMANCEMISTAKE (M: Lenawee income house sewage; U: Wil-Fred low-ball SC bid)*not mistake: judgment, future prediction, law(1) Mutual (2) Fact (exists, not jdgmt) (3) Basic Assumption: essence motivationnot collateral (value, qlty), “barren cow” (4) Materially Affects Bargain (bal of exch/deprivation) (5) AOR: K or construct (*art/paint = jdgmt risk w/ mistaken prty) Remedies: (a) rescind+Rest(X) at ct. discretion or (b) two innocts *AOR: (i) “ as is” clause, (ii) best position to know, (iii) context rule(1) Unilateral (2) Fact (exists, not jdgmt) (3) Basic Assumption (4) Materially Affects Barg (5) Occurred Even w/ Rsnbl Care: (i) good faith and (ii) notice: immed act to rmdy or other shd have notcd (6) Bal Eq=Rescind (chk*AOR; back status quo)Remedies: rescind if (i) enforce = grave conseq. (ii) non-rescind= no status quoCHANGED CIRCUMSTANCES (3 Types) *basic assumption: not foreseen by parties – okay to be foreseeable by othersUnforeseen: war, act of god, strike, change in law; foreseen: market shift (*dep size)1. Impossibility: literally impossible (classic = death; not look to fault)(1) After K (2) Event (3) Basic assumption is non-occ. (4) Literally impossible2. Impracticability (Karl Wendt farm eqp; mkt shift insuff.) supervening event(1) After K (2) Event (3) Basic assumption non-occurrence (4) Imprac (undue…) (4) No fault: nthr π nor flowing from (5) *AOR: foreseen/explic/implic/indus/equity3. Frustration of Purpose: not incapable, but main purpose disappeared(1) After K (2) Event (3) Frustrates Purpose: (i) prncpl/shared purpose (ii) substntl: not w/i foreseen risks (iii) basic assumption is non-occ (4) No fault: nthr π nor flowing from; extra precaution avoid? (5) *AOR: foreseen/explic/implic/indus/equityRemedies: Rescind: relieve perf. due or if part perform Rest(X)MODIFICATIONS*Remedies: voidable, elect: rescind+Rest(X) or (2) damg (Diff. in Value) Economic Duress (Galtaco overcharging for bearings factory)(1) Improper Threat: not nec. illegal, threat breach, reputatn, embarrass (2) No Rsnbl Alt: amt, reputatn, undue burden/risk, not cure threat conseq (3) Some Protest (*low)Oral Modification (Mama Rizzo breach oral mods of basil orders)SOF: UCC 2-201: sale of goods, > $500, writing, signed by ∆, quantityExceptions: (1) Classic Estoppel: ∆ provides assurance no need/would provide/already made writing; π relies on promise to reduce oral to writing(2) 2-201(3): Statutory Exception: (i) special manuf. (ii) admission – not enforceable beyond qty admit (iii) part perf: pmt made/acc, goods rcvd/acc

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Breach: Expr/Impl; AnticipRepud; Matrl/Total/Partl: what IS it, how π treat it; π: Mat+Total/Partial; ∆: Partial+Cure, π AnticipRepud; Damages? (see Damages)CONSEQUENCES of NONPERFORMANCEEXPRESS CONDITIONS1. Breach of Condition (Oppenheimer office bldg lease)(1) Condn Precedent?: (a) magic lang: “if and only if/unless and until” or(b) rsnblty test: would parties condn perf on completn; *spec = condn?(2) Express or Implied?: (a) express: literal compliance (b) implied: subst. performance/compliance suff; *ambiguous = implied(3) Express Std. of Adherence: (a) obj: industry (b) subj: art, good faith* subst. perf. insuff. to excuse non-occurrence of express condn.(4) Excuse?: (a) Forfeiture: unfair depriv to recip of perf, unfair benefit to party subject to condn, not matrl part of K (b) Waiver: express or implied (pattern)Practical Result: excuse = condn has been ‘performed’; return perf is due2. Option Renewal (JNA v. Cross Bay failed lease renewal)(1) Given within time: yes – valid; no – invalid(2) Exception: Forfeiture balancing π loss vs. ∆ minimal harm: (i) subst improvmts (ii) good faith mistake (iii) no harm ∆ (iv) subst. harm πDETERMINING BREACHStep 1: Material or ImmaterialMaterial: (1) Express Condn: magic lang or rsnblty test; gray area: spec = condn (house vs. pipes); (2) loss of bargain/basic assumption; (3) some: willfulnessImmaterial: subst perf/compliance - *insuff. to fulfill express condnLimit: (i) excuse (ii) condn not arisen: preced, subseq (unless hinder = condn arise)Step 2: Material: Incurable or Curable:*Key: extent of –ve impact on reasonable expectations; context ruleIncurable: material-immediate, irreparable harm that nothing can be doneCurable: material but partial-breacher can cure deficiency = subst. perf.Step 3: Damages *if total: π has option to treat as partial; offer chance cureMaterial and Total: w/hold perf, terminate, claim full damages (past/future)Material and Partial: suspend perf, await cure, claim past damages*cure not arrive: partial = total, claim full damages (past/future)Immaterial (subst. perf.): past damages (cost completion); cannot w/hold perf*Remember: breacher can still claim Rest(X); return of benefit conferred on πANTICIPATORY REPUDIATIONActual Anticipatory Repud (Schupf cont. ltrs to buy land; not repud.)Step 1 Repud?: (1) After K (2) clear manifestation of intent: (a) not to perform or (b) only perform on condn beyond agreed K; Limit: ambig/equivocal/mere conductStep 2 Retract?: Anytime before perf is due; Limit: aggrieved party (a) reliance: mat. changes posn due to repud. (b) notice: indicates believe finalResults: (1) clear, not retracted, π term. or treat final = ∆ breach; (2) ambiguous, π terminate: (a) ∆ not retract, fails to perf = ∆ breach or (b) ∆ arg retract/not repud = π breach; (3) ambiguous, π not terminate: (a) ∆ fails to perf = ct. claim π failed mitig

Insecurity Anticipatory Repudiation (Hornell failed iced tea in canada)Step 1 Insecurity: (1) After K (2) comm’lly rsnbl insecurity: words or actions, course of dealing/perf., nature of sales K, industry; Internal: non-pmt, failure to fix defects, shortage of supplies, cont. late deliveries; External: only major act of god or financial collapse; Rumors: not flimsy; (3) Impair π expectation of due perf: (a) material decline or (b) threatened with subst. lossStep 2 Adeq. Assur.: context: comm’lly rsnbl request, time to fulfillStep 3 Results: Assurances provided w/i time? Yes: No Antic Repud; No: (Step 4)*Exception: further changed circs/insecurity require addn’l assurancesStep 4 π or ∆ further Liable?: π: unrsnbl insecurity or demands, or adds new demands after ∆ provides assurances, or demands unrel to K; ∆ gray area: provides modest but not exact assurances b/c belief π demands unrsnbl

WARRANTIES (Bayliner)Express Warranties: 3 Bases: wrt specific good (1) representation (picture = gray area); (2) description – must match exactly; (3) display sample/model; (F) must be the basis for entering bargainLimit: puffery/talk – ask: verifiable/factual?; gray area: “I’m no expert…”Disclaimer: must be consistent w/ express wty or inoperativeImplied Wty Merchantability: (1) a merchant (2) regularly sells goods of kind (3) 2 Tests *require evid. of industry stds.*: (a) pass w/o objection in the trade (b) fit for the ordinary purposes for which such goods are used; Fail 1 = liableSuff.: actual use relative to objective average suggests fitness (Bayliner)Insuff: signif. segment of buying public wd object – need wide discrep. in perf.Disclaimer: must mention “merchantability”, clear, unambiguous, oral/writtenImplied Wty of Fitness for Partic. Purp.: (1) buyer reasonably relies on seller skill – gray area: “I’m no expert…”; (2) indicates ‘special purpose’ – but if ‘special purpose’ is industry standard then no claim (3) seller has reason to know of reliance – req. communication of needNote: goods need not be defective; not limited to merchantsDisclaimer: *easier to waive, less specific than merch., only writingOther Disclaimer: “as is”, best if conspicuous/obvious

Implied Wty of Habitability (Caceci latent defect 4 years later)General: that home has no major defects; not higher, same reasonable expectation; Merger clause will not bar an implied warranty of habitability; Builder knowledge is irrelevant – implied regardlessReason: unequal brgng, imposs. to inspect new-build home, least cost avoiderDisclaimer: viewed suspiciously; must be narrowly tailored; not effective wrt to latent defects; oral waiver without specificity may not countLiability: never owners; yes against builder-developer (even after-mkt can sue)

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RIGHTS AND DUTIES OF THIRD PARTIES3P CONTRACT BENEFICIARIES: At the time of K(Vogan 3P homeowner beneficiary of SC completion reports)Parties: intended beneficiary: receives benefit; promisor: agrees to provide benefit; promisee: confers their right to receive perf. on beneficiary4 Factors for Valid Standing or ‘Right to Performance’:(1) Intent: (a) intent of promisee to confer ben; (b) rsnbl knw of promisor agree to assume obligation; express or implied (lang/terms of K, bkgrnd, practicality)(2) Rel Prom-Ben: (a) creditor beneficiary or (b) donee beneficiary(3) Causal Link: promisor breached/caused damage enabling 3PB right to sue(4) Foreseeability: within contemplation that suit is liability for breachPractical Result:3PB can sue: as (a) creditor: promisor and promisee; (b) donee: only promisor3PB subject to any limits inherent in K: promisor can raise valid defensesLimit: 3PB not assume personal liab. for promisee; only for liab. on the K

ASSIGNMENT/DELEGATION of RIGHTS/DUTIES to 3P: After KAssignment(Herzog attnys liable for paying proceeds to assignee-doctor)Parties: assignor: voluntarily assign their K right; assignee: recipient of K right; obligor: party with duty to perform to assigneeFactors for Parties:Assignor: (1) voluntarily manifest intent to assign (2) right in existence (3) transfers immediately (4) complete relinquishmentObligor: (1) receives notice of assgmt: (a) rsnbl awareness (delivery, attn), (b) not nec party to assignment transxn, (c) if insecure, can ask assurances; (2) holds performance for assignee: (a) right of assignor extinguished, (b) failure to perform liable to assignee, (c) assignor cant unilateral modify/retract assgmtLimit: (1) matrly impair obligor rights: matrl change in duty, inc burden/risk, impair prospects return perf, subst. reduce value of perf; (2) prohib by K; (3) prohibited by statute; (4) against public policy *invalid assgmt = anticip repud if assignr no retract

“No Assignment” Clause: *must be extremely explicitNot Explicit: only “no assignment”Prohibits delegation; assignments are effective; assignor held in breach; obligor entitled to damages from breach but must fulfill for assigneeExplicit : “…any transfer of rights shall be void”Forbids assignment without consent: K cannot absolutely forbid assgmt; req “good faith” refusal that might be judged by objective rsnblty: others in situatn wud consent- Judge objectively: “which consent shall not be unreasonably withheld”- No objective jdgmt: “where consent shall be given for reason or no reason at all”- Absence of clause assumes allowing of assignmentAssignee: subj. to any condns/defenses obligor has against assignor – on the K

Delegation (assgmt of K usually entails assgmt of rights and delegation of duties)(Sally Beauty invalid deleg. of distributor duties to direct competitor)Parties: delegator: assigns a K duty; obligee: party who is to receive perf; delegate: party with duty to performPractical ResultDelegate: perf discharges delegator’s K duties - obligee refusal of proper delegation = refusal of delegator’s performance = breachIncomplete Sub: delegator remains obligated; obligee can still sue delegator for defective perf; delegator cannot unilaterally release himself from liabDelegate Liab: not liable to obligee unless intend obligee as 3PB: (a) promise to delegator (b) promise directly to obligee – then both delegator/gate liable to obligeeInsecurity: obligee entitled to adequate assurances – *analyze: anticip repudLimit: prohibit by K/statute/public policy or impair obligee rsnbl expectations:Substantial Interest in Original Obligor Performing: (1) K dependent on personal attributes or skills; (2) K requires “best efforts” in excl distributorship (Sally Beauty)Personal Services: need specific language allowing review if change personnel

“No Assignment” ClauseNot Explicit: only “no assignment”Prohibits delegation; assignments are effective; assignor held in breach; obligee entitled to damages from breachImpermissible delegation = repudiation of K = retract or anticip repud

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DAMAGES E(X): posn π would have been in had K been fully performedo Economic loss provable; not provable or unique goods - see Alternativeso 3 Factors

Causation: flows from the breach Foreseeability: w/i contemplation of parties at time K Certainty: rsnbly certain fact and amount; not math precision (ESPN)

o New Venture/Entertainment: issue is certainty; likely Rel(X), out-of-pocket

Increasing Damages : *applies to both partial and total breach o + DIRECT: π loss in value

Real Estate: K – FMV; at time K (slr: K>FMV; byr K<FMV); (Roesch) Services:

Employer : K-equiv replace srvcs (see Mitig); *seasonability/certainty Employee : K-suitable alt employ; back+front pay; *spec: vaca/bonus/raise

Construc: K-Total Dir Costs; Profit + Expenses upto Breach (Luten Bridge) General: K expectation – received (Cost in Completion Am.Std v. Schectman)

Exception : Diminution in Value (Jacob & Youngs)o 3 Factors : incidental, unintentional, economic waste – strict*

o + INCIDENTAL: reliance exps rsnbly incurred to deal w/ breach/avoid loss out-of-pocket: on the K, ship, store, admin. costs obtain sub, cancel fees

o + CONSEQUENTIAL: conseq of breach; depend on K; collateral K (Florafax) Decreasing Damages : *applies to only total breacho – COST AVOIDED: costs saved by not cont. K; dir/variable on the K Lim: OHo – MITIGATION (Loss Avoided): π rsnbl axn to avoid/not aggravate losses

Obj Std : reasonable effort, equivalent substitute, economic price *π inaction may not harm, unless ∆ satisfies burden Equiv Replace Svcs: least cost, equally qualified (Lukaszewski)o less/eql $+same svc=no dmg; higher cost+better svc = yes dmg, if rsnblo never have to accept less/inferior skill

Suitable Alt Emplmt: different is suff.; inferior is insuff.o Equiv given bkgrd/experience; only b/c of unique char/skills (famous)o Alt K only acceptable because of breacho Alt income stream: rsnbly increase hours; age: older maybe not rsnbl

Limit : Self-injurious: undue brdn/cost, personal risk, loss rep, inferior svc/goods Some : ∆ eql opp to mitigate and does not accept (Wartzman)

Exception : non-mitigating Accept better/more expensive sub, if only rsnbly avail (Lukaszewski) Decline commlly unrsnbl alt (i.e., goods, job offer, venue that impair π) Lost Volume (goods/svcs): 3 Factors: capacity, profitability, probability

∆ burden to prove failure to mitigate

Counter rsnblty claims of π: efforts, alternatives, price π inc. losses: irrational (Luten Bridge), bad faith, unfair, fault (dishonest)

o Nonrecoverable: Exception agreed in K terms, provided by statute/court order Attny Fees: not litigation; but see Westhaven (relet), Wartzman (replacement) Emotional: not comm’l K; no foresee (contempl) or causatn (econ), (Erlich)

Legal Duty: insurer-insured, special rel, fiduciary, public interest Tortious: Ask: negligent, fraud, deceit, coercion, intent+know anguish Personal K: express object of K is emotional, sentimental, psychic benefit

Punitive Damages: standard no; ask: willful+tortious

Alternatives o Still 3 Factors: causation, foreseeability, certainty

o Rel(X): restore π status quo; refund out-of-pocket; component of E(X) Timing : after K, before breach; Rsnbl: case-by-case wrt this K, nature/amt Mitigation : as before rsnbl subs, Limit: no self-injurious *Less: any loss that would have been suffered if K completed - ∆ burden

Catch 22: Rel(X) b/c unable to prove economic profit, how prove loss

o Rest(X): return value of benefit conferred both π/∆ *cannot be complete perf Nonbreaching: rsnbl value svc; not capped on K – undim by loss on K Breaching: return benefit/expense in excess of loss caused – capped by K Dist : intentional not preclude rcvry; intentional+defective will preclude rcvry

o Specific Performance: bal dmge insuff vs hardship (∆/3P) + ct suprvsn burdn special/peculiar value; damages inadequate; no undue hardship ∆/3P/court Result : after spec. perf, return performance is due Personal Svcs K : No = invol svtude; No neg injunction = spec perf (Reier) Limit : diff. ct supervsn, hardship to ∆ or 3P reliance on ∆ (more profit insuff)

o Agreed Remedies: stipulated = specified; liquidated = stipulated that rsnbl 3 Factors :

Not penalty: actually est to avoid difficulty/confusion in future Anticipation: rsnbl est. at time of K ; diff to est, cts defer more to partieso New vent: loss uncertain, lenient; Est vent: more certain, firmly

Actuality: accurate est at time of breach ; less accurate ct may deem unrsnblo New vent: loss uncertaint, less impt; Est vent: more certain, highly relo Ct discretion: Agreed > Actual maybe unrsnbl, not award or maybe both

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UCC RemediesBUYER REMEDIES:

Seller Breach: Failure to conform : defective, breach of implied/express wty of quality Failed perfect tender : late, not deliver, too few/manyo Fail deliver or Buyer rejects: recover price, cover dmg, market dmg, spec perfo Accept w/ nonconformityo plus Incidental + Consequential

Repudiates K

Buyer Response: Rejection: rsnbl time/notice; Lim: seller rsnbl time cure, good faith, not trivial Acceptance: (1) inspect+not care about non-conformity; (2) fail to notify: silence

= acceptance; (3) act in manner of ownership Revoking Acceptance: (i) substantially impaired goods (ii) seller induced

acceptance (iii) notice w/i rsnbl time (iv) before subst change to goods

Remedies for Failed Perfect Tender Cover Damages: (K – Replacement) + (incid+conseq) Good faith, not unrsnbl delay, not nec. identical – commlly rsnbl sub, self cover ok Lim : suprior/signif diff goods; fail cover and rsnblty=no conseq; one of mkt/cover

Market Damages: (K – Mkt Price at time of Breach) + (incid+conseq) Mkt Price dep on place of tender: place of shipment or destination Good faith, not unrsnbl delay, not nec. identical – commlly rsnbl sub, self cover ok Wrt Anticip Repud: “time of breach” – learn of repudiation + commlly rsnbl timeLimit: one of mkt/cover

Damages for Accepted Goods: (Value Wrntd less Accepted) + (incid+ conseq) Must give seller notice in rsnbl time

Specific Performance Money damage inadequate, unique goods, substitute K not available

Incidental: out-of-pocket expenses incurred to deal with consequences of breachConsequential : as a consequence of breach

SELLER REMEDIES

Buyer Breach: Wrongfully rejects goods : bad faith, no notice, no payment, repudiation If no acceptance :o Resale dmg, Market dmg, Lost Profit, K priceo plus Incidental + Consequential

Remedies for No Acceptance Resale Damages: K – resale price 3 Factors : identify goods as same, provide notice to buyer of intent to sell, good

faith and commlly rsnbl manner of sale

Market Damages: K – Mkt Price Limit : choose one of either Resale or Market damages

Lost Profits: when market damages inadeq to put seller in position as if K complete Lost Volume Seller : capacity, profitability, probability Profits for Process of Production : Action for profits; K less Cost of Production

Contract Price: 3 types in 2 situations Buyer has effectively accepted and should payo Goods acceptedo Goods damaged ; risk of loss passed to buyer

Goods not rsnbly subject to resaleo Force goods onto buyer bc unable to sell with rsnbl effort

Incidental: out-of-pocket expenses incurred to deal with breach; ship, storageConsequential: as a consequence of breach not much for seller

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