Contracts II

Case Rules


Adbar, L.C. v. New Beginnings C-Star

Page 993–994

Under the doctrine of commercial frustration, if the occurrence of an event, not foreseen by the parties and not caused by or under the control of either party, destroys or nearly destroys the value of the performance or the object or purpose of the contract, then the parties are excused from further performance. If, on the other hand, the event was reasonably foreseeable, then the parties should have provided for its occurrence in the contract.

American Broadcasting Companies v. Wolf

  • Specific performance is not available for contracts for personal services.

  • Courts sometimes will grant a prohibitory injunction to prevent an employee from working for another during the contract's duration, but only when the employee was furnishing a unique service, it is expressly stipulated or implied in the contract, and the employer is exposed to irreparable injury.

  • After the employment contract has terminated, equitable relief is only available to prevent tortious behavior or to enforce an express anticompetitive covenant.

  • Page 1201

    [A]n otherwise valid covenant will not be enforced if it is unreasonable in time, space or scope or would operate in a harsh or oppressive manner

Ammerman v. City Stores Co.

Bak-A-Lum Corp. of America v. Alcoa Building Products, Inc.

Page 835Good faith and fair dealing requires that "neither party do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract."

Blanton v. Friedberg

  • Page 1161, Top

    "The measure of recovery for quantum meruit is the reasonable value of the performance . . . and recovery is undiminished by any loss which would have been incurred by complete performance . . . While the contract price may be evidence of reasonable value of the services, it does not measure the value of the performance or limit recovery. Rather, the standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the plaintiff's position at the time and place the services were rendered." . . . "profits per se have no place in a quantum meruit recovery"

British Waggon Co. v. Lea & Co.

Contracts where personal performance is the essence thereof—where a person selects another with reference to his skill, competency, or other personal qualification—cannot be delegated.

C. & A. Construction Co. v. Benning Construction Co.

A contract must initially be construed according to its plain language. If court determines it to be ambiguous, then a latent ambiguity arises and parol evidence is admissible.

C.R. Klewin v. Flagship Properties, Inc.

Page 583–584

[A]n oral contract that does not say, in express terms, that performance is to have a specific duration beyond one year is, as a matter of law, the functional equivalent of a contract of indefinite duration for the purposes of the statute of frauds. Like a contract of indefinite duration, such a contract is enforceable because it is outside the proscriptive force of the statute regardless of how long completion of performance will actually take.

City of Vernon v. City of Los Angeles

Page 1024

'A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.'

Explanation:

Not just more expensive

Continental Forest Products, Inc. v White Lumber Sales, Inc.

  • UCC § 2-612(2)–(3)
    1. The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
    2. Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
  • Nonconformity can usually be cured by a reduction in price.

Cosden Oil & Chemical Co. v. Karl O. Helm Aktiengesellschaft

Where a seller anticipatorily repudiates a contract for the sale of goods, and the buyer does not cover, fair market value for damages is calculated at the time the buyer learns of the breach plus a commercially reasonable period of time.

Crabtree v. Elizabeth Arden Sales Corp.

Yes, documents can be combined to satisfy the statute of frauds without referring to each other when there is no double in the matter.

Crane Ice Cream Co. v. Terminal Freezing & Heating Co.

One can generally assign his beneficial rights and delegate his obligations, but he cannot if the liability be of such a nature that is performance by another will be substantially the same things as performance by the promisor himself. If an obligation is delegated, the delegator is remains liable if the performance is not in strict fulfillment of the contract.

Cretex Companies v. Construction Leaders, Inc.

For a third-party beneficiary to be able to enforce a contract, there must be an intent to benefit the third party through the contract's performance or the promisor's performance must perform a duty owed to the third party by the promisee.

First National Bank of Lawrence v. Methodist Home for the Aged

Page 798
  1. That doubtful language in a contract is construed most strongly against the party preparing the instrument or employing the words concerning which doubt arises.
  2. That where a contract is susceptible of more than one construction its terms and provisions must, if possible, be construed in such manner as to give effect to the intention of the parties at the time of its execution.
  3. That in determining intention of the parties where ambiguity exists in a contract the test is not what the party preparing the instrument intended its doubtful or ambiguous words to mean but what a reasonable person, in the position of the other party to the agreement, would have understood them to mean under the existing conditions and circumstances.
  4. That the intent and purpose of a contract is not to be determined by considering one isolated sentence or provision thereof but by considering and construing the instrument in its entirety.

Fisher v. Congregation B'nai Yitzhok

Page 794, Bottom

"When a custom or usage is once established, in absence of express provision to the contrary it is considered a part of a contract and binding on the parties though not mentioned therein, the presumption being that they knew of and contracted with reference to it"

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

In common usage, as defendant understood the word, "chicken" can mean a chicken of any age or purpose.

Goodman v. Dicker

  • Page 1136

    Justice and fair dealing require that one who acts to his detriment on the faith of conduct of the kind revealed here should be protected by estopping the party who has brought about the situation from alleging anything in opposition to the natural consequences of his own course of conduct.

  • Page 1146

    [H]e who by his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden.

  • See Also:

    R2C § 349

Hadley v. Baxendale

Page 1088, Paragraph 2

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally ... from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.

Hochster v. De la Tour

A renunciation of a contract before the date of performance is a breach and can be sued over.

Hornell Brewing Co. v. Spivy

When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

Explanation:

"Reasonableness," "adequacy," and "adequate assurance" are defined by commercial standards.

Howard Construction Co. v. Jeff-Cole Quarries, Inc.

A writing must be "sufficient to indicate that a contract for sale has been made."

Hutton v. Monograms Plus, Inc.

Page 861, Paragraph 2–3

Where the satisfaction clause requires satisfaction as to such matters as commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed unreasonably. In these contracts, an objective standard is applied to the satisfaction clause and the test is whether the performance would satisfy a reasonable person.

If, on the other hand, the satisfaction clause relates to matters involving fancy, personal taste, or judgment, then a subjective standard is applied, and the test is whether the party is actually satisfied. Although application of a subjective standard to a satisfaction clause would seem to give the obligor virtually unlimited latitude to avoid his duty of performance, such is not the case. In these situations, courts impose the limitation that the obligor act in good faith.

Jacob & Youngs v. Kent

Ordinarily damages are measured by the cost of replacement, but this is not the case if the cost is grossly and unfairly out of proportion to the good to be attained. Then the measure is the difference in value.

Jacob & Youngs v. Kent

LexisNexis IconWestLaw LogoPage 897

We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence. Then only can we tell whether literal fulfilment is to be implied by law as a condition. . . . This is merely to say that the law will be slow to impute the purpose, in the silence of the parties, where the significance of the default is grievously out of proportion to the oppression of the forfeiture.

K & G Construction Co. v. Harris

  • Page 931–932

    There is a presumption that mutual promises in a contract are dependent and are to be so regarded, whenever possible. . . . [T]he intention of the parties, as shown by the entire contract as construed in the light of the circumstances of the case, the nature of the contract, the relation of the parties thereto, and the other evidence which is admissible to assist the court in determining the intention of the parties, is the controlling factor in deciding whether the promises and counter-promises are dependent or independent.

  • When a total breach occurs, the injured party can treat the breach as only partial and still require performance.

Kenford Co. v. County of Erie (1)

  • LexisNexis IconPage 1110, Top

    [L]ost profits in a new venture are not ordinarily recoverable, but . . . lost profits may be awarded if plaintiff establishes three elements:

    • that the lost profits are the direct and proximate result of the breach;
    • that profits were contemplated by the parties; and
    • that there is a rational basis on which to calculate the lost profits

Kenford Co. v. County of Erie (2)

Page 1120

Loss of future profits as damages for breach of contract have been permitted in New York under long-established and precise rules of law.

  1. First, it must be demonstrated with certainty that such damages have been caused by the breach and,
  2. second, the alleged loss must be capable of proof with reasonable certainty.
    • In other words, the damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes.
  3. In addition, there must be a showing that the particular damages were fairly within the contemplation of the parties to the contract at the time it was made.
If it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty

Khiterer v. Bell

  • LexisNexis IconWestLaw LogoPage 1060–1061

    Where substantial performance has been rendered, the remedy is the cost of completion or correction, unless that cost "is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value." The "difference in value rule" is applied to avoid "economic waste". But where the defect in performance is substantial, the cost of completion or correction will be awarded "notwithstanding the relatively small fee…charged for services rendered."

  • LexisNexis IconWestLaw LogoPage 1061

    Whether the form of action is contract or tort, "the inquiry must always be, what is an adequate remedy to the party injured"; "the law awards to the party injured a just indemnity for the wrong which has been done him, and no more."

Khiterer v. Bell

LexisNexis IconWestLaw LogoPage 914, Paragraph 1

“The courts never say that one who makes a contract fills the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition to be followed by a forfeiture” (id., at 241). The doctrine is required by justice, so as not “to visit venial faults with oppressive retribution” (see id., at 242), and “[t]he transgressor whose default is unintentional and trivial may hope for mercy if he will offer atonement for his wrong” (id., at 244). But “[t]he willful transgressor must accept the penalty of his transgression.” (Id.) “The interrupted work may have been better than called for in the plans. Even so, there can be no recovery if the contractor willfully and without excuse has substituted something else.”

Kingston v. Preston

There are three types of promises:

  1. Mutual and independent promises
    • Neither party's performance triggers the other's duty to perform.
    • If either party fails to perform, it is a breach.
    • The other party still must perform in the event of a breach.
  2. Dependent condition
    • One's performance triggers the other's duty to perform.
    • If the first party, the condition, fails to perform, it is not a breach. If the condition occurs, it is a breach if the other party fails to perform.
    • If the first party, the condition, fails to perform, it is not a breach if the other party also does not perform.
  3. Mutual and simultaneous conditions
    • Either party's performance triggers the other's duty to perform.
    • If neither party performs, it may not be a breach, but if one performs it is a breach if the other does not.
    • If one party fails to perform, the other is not obligated to perform.

Klapp v. United Insurance Group Agency

  • Page 717, Bottom

    Where a written contract is ambiguous, a factual question is presented as to the meaning of its provisions, requiring a factual determination as to the intent of the parties in entering the contract. Thus, the fact finder must interpret the contract's terms, in light of the apparent purpose of the contract as a whole, the rules of contract construction, and extrinsic evidence of intent and meaning.

  • Page 718, Top

    In interpreting a contract whose language is ambiguous, the jury should also consider that ambiguities are to be construed against the drafter of the contract. . . . This is known as the rule of contra proferentem.

  • Page 718, Paragraph 2

    [T]he rule of contra proferentem should be viewed essentially as a "tie-breaker," to be utilized only after all conventional means of contract interpretation, including the consideration of relevant extrinsic evidence, have been applied and found wanting.

Koken v. Black & Veatch Const., Inc.

Page 28

"[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind."

Krell v. Henry

Page 990, Paragraph 2

[F]irst, what, having regard to all the circumstances, was the foundation of the contract? Secondly, was the performance of the contract prevented? Thirdly, was the event which prevented the performance of the contract of such a character that it cannot reasonably be said to have been in the contemplation of the parties at the date of the contract? If all these questions are answered in the affirmative . . . both parties are discharged from further performance of the contract.

Lee v. Joseph E. Seagram & Sons, Inc.

An oral agreement may not be barred by the parol evidence rule if such a term would not be expected be included in the written contract anyway.

Lewis v. Mobil Oil Corp.

Page 504

[T]here are two requirements for an implied warranty of fitness:

  1. that the seller have "reason to know" of the use for which the goods are purchased, and
  2. that the buyer relies on the seller's expertise in supplying the proper product.

Lyon v. Belosky Construction, Inc.

Page 1063, Paragraph 1

As a general rule, the proper measure of damages in cases involving the breach of a construction contract is "the difference between the amount due on the contract and the amount necessary to properly complete the job or to replace the defective construction, whichever is appropriate". Where, however, "the contractor's breach was unintentional and constituted substantial performance in good faith", and remedying the defective performance would result in unreasonable economic waste, damages should be based upon "the difference between the value of the property as constructed and the value if performance had been properly completed"

Market Street Associates Limited Partnership v. Frey

  • Page 813, Bottom

    [A] contracting party cannot be allowed to use his own breach to gain an advantage by impairing the rights that the contract confers on the other party.

  • Page 817

    "'Good faith' is a compact reference to an implied undertaking not to take opportunistic advantage in a way that could not have been contemplated at the time of drafting, and which therefore was not resolved explicitly by the parties."

Martinez v. Socoma Companies, Inc.

Page 1267, Paragraph 3

A person cannot be a creditor beneficiary unless the promisor's performance of the contract will discharge some form of legal duty owed to the beneficiary by the promisee.

Page 1267, Paragraph 4

A person is a donee beneficiary only if the promisee's contractual intent is either to make a gift to him or to confer on him a right against the promisor.

Page 1268

Even though a person is not the intended recipient of a gift, he may nevertheless be "a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise . . . is . . . to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary."

Note:

The first Restatement is cited, which states that the promisee must intend to make a gift to a third party to make him a donee beneficiary. The Restatement Second does not use this language. The practical effect is the same here, but under the Restatement Second, a party must intend to "confer a right" rather than "make a gift."

See Also:

R2C § 302

See Also:

R2C § 313

McCloskey & Co. v. Minweld Steel Co.

Page 943

"In order to give rise to a renunciation amounting to a breach of contract, there must be an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so."

Middletown Concrete Products, Inc. v. Black Clawson Co.

A contract is integrated if the parties intended it to be, as determined from all the circumstances, including their language and other conduct.

Morin Building Products Co. v. Baystone Construction, Inc.

Page 869

"[T]he reasonable person standard is employed when the contract involves commercial quality, operative fitness, or mechanical utility which other knowledgeable persons can judge. . . . The standard of good faith is employed when the contract involves personal aesthetics or fancy."

Morrison v. Bare

Page 842

One who makes a promise thereby expresses an intention that some future performance will be rendered and gives assurance of its rendition to the promisee. . . . a condition is a fact or an event and is not an expression of intention or an assurance. A promise in a contract creates a legal duty in the promisor and a right in the promisee; . . . a condition creates no right or duty and is merely a limiting or modifying factor.

Namakuli Paving & Rock Co. v. Shell Oil Co.

  • The UCC says to look beyond the words of the contract to reach the "true understanding" of the parties.

  • Justia LogoCaseMine LogoPage 742

    [D]ecisions of other courts in similar situations have managed to reconcile such trade usages with seemingly contradictory express terms where the prior course of dealings between the parties, trade usages, and the actual performance of the contract by the parties showed a clear intent by the parties to incorporate those usages into the agreement or to give to the express term the particular meaning provided by those usages, even at times varying the apparent meaning of the express terms.

  • Justia LogoCaseMine LogoPage 742

    [A] usage should be allowed to modify the apparent agreement, as seen in the written terms, as long as it does not totally negate it.

  • A trade usage is operative if it is a "regularly observed" practice of which the other party "should have been aware."

Northern Indiana Public Service Co. v. Carbon County Coal Co.

Owen v. Hendricks

Two writings may be taken together, but only if both are signed by the defendant.

Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co.

Extrinsic evidence must be used to show what the parties meant by their words. The words' meanings anywhere else do not matter.

Parker v. Twentieth Century-Fox Film Corp.

An employee cannot recover for what they could have reasonably earned from other employment. However, the employer must show that the other employment was comparable, or substantially similar, to the deprived employment. The rejection of employment of a different or inferior kind is not a defense for the employer.

See Also:

R2C § 350

Peevyhouse v. Garland Coal & Mining Co.

LexisNexis IconPage 1069, Paragraph 4

[T]he measure of damages . . . is ordinarily the reasonable cost of performance of the work; however, where the contract provision breached was merely incidental to the main purpose in view, and where the economic benefit . . . is grossly disproportionate to the cost of performance, the damages . . . are limited to the diminution in value resulting to the premises because of the non-performance.

Questar Builders, Inc. v. CB Flooring, LLC

Pages 829–830While acting in good faith, one cannot prevent the other party from enjoying their fruits of the contract, terminate the contract to get a better price or other missed opportunity, or exercise discretion in discordance with the "reasonable expectations" of the other party.

Ramirez v. Autosport

  • A buyer may reject goods before acceptance for any nonconformity, but the seller has a right to cure. The seller also has an unconditional right to cure before the time set for performance. After the time set for performance, the seller has a further reasonable time to cure if he reasonably believed that the good would be acceptable. This time period is based on the circumstances, including the change of position by and inconvenience to the buyer, length of time needed to correct the nonconformity, and ability to sell the goods to others instead.

    After acceptance, a buyer can only revoke acceptance if the nonconformity substantially impairs the value of the goods to him.

  • Failure to cure a minor defect allows the buyer to cancel the contract.

Read Central Ceilings, Inc. v. National Amusements, Inc.

Page 183, Paragraph 3, Middle

[Defendant] had a direct economic interest in the timely performance of the work.

Redgrave v. Boston Symphony Orchestra, Inc.

  • Page 1094, Paragraph 3Virtually all jurisdiction hold that damages for reputation are not available in contract actions.

  • Page 1097, Top, C.

    [T]o receive consequential damages, the plaintiff must establish a "basis for an inference of fact" that the plaintiff has actually been damaged

Roberts Contracting Co. v. Valentine-Wooten Road Public Facility Bd.

Page 907

In determining whether performance is substantial, the following considerations are significant:

  1. the extent to which the injured party will be deprived of the benefit that he reasonably expected;
  2. the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
  3. the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
  4. the likelihood that the party failing to perform or offer to perform will cure his failure, taking account of all the circumstances, including any reasonable assurances; and
  5. the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Romero v. Mervyn's

  • Page 1178, Paragraph 4

    [P]unitive damages may be recovered for breach of contract when the defendant's conduct was malicious, fraudulent, oppressive, or committed recklessly with a wanton disregard for the plaintiff's rights.

    Explanation:

    Page 1179

    [M]alice . . . means

    the intentional doing of a wrongful act without just cause or excuse. This means that the defendant not only intended to do the act which is ascertained to be wrongful, but that he knew it was wrong when he did it.

Sackett v. Spindler

Page 924

Whether a breach of contract is total or partial depends upon its materiality. In determining the materiality of a failure to fully perform a promise the following factors are to be considered:

  1. The extent to which the injured party will obtain the substantial benefit which he could have reasonably anticipated;
  2. the extent to which the injured party may be adequately compensated in damages for lack of complete performance;
  3. the extent to which the party failing to perform has already partly performed or made preparations for performance;
  4. the greater or less hardship on the party failing to perform in terminating the contract;
  5. the wilful, negligent, or innocent behavior of the party failing to perform; and
  6. the greater or less uncertainty that the party failing to perform will perform the remainder of the contract.

Sackett v. Spindler

Page 1054–1055

It is the general rule, both under the Uniform Sales Act and apart from it, that where the title to goods has not passed to the buyer and the seller has the property in his possession or under his control, the measure of damages upon the buyer's refusal to accept and pay for goods for which there is an available market is, in the absence of special circumstances, the difference between the contract price and the market or current price or value at the time and the place where the goods ought to have been delivered and accepted, or, if no time is fixed for acceptance, then at the time of the refusal to accept.

Exceptions:

  • Page 1055, Paragraph 2

    [I]n the absence of an available market, it has been held that the measure of damages may be the difference between the contract price and the value of the goods as best as can be ascertained, or the difference between the contract price and the best offer that can be obtained for the goods, or the difference between the contract price and the price obtained on a resale, or the actual damages naturally and directly resulting from the buyer's breach.

  • Page 1055, Paragraph 2, Bottom

    "The general rule that the measure of damages is the difference between the contract price and the market value is not a hard-and-fast rule, but may be varied if circumstances require it; and it will not be followed where a better method of measuring loss or damages is available under the circumstances."

Sackett v. Spindler

Page 1127, Paragraph 2

[A] party injured by a breach of contract is required to do everything reasonably possible to minimize his own loss and thus reduce the damages for which the other party has become liable. . . . a person who has been injured by a breach of contract cannot recover damages for detriment which he could have avoided by reasonable effort and without undue expense.

Sally Beauty Co. v. Nexxus Products Co.

Security Stove & Mfg. Co. v. American Ry. Express Co.

LexisNexis IconWestLaw LogoPage 1141, Bottom

Ordinarily the measure of damages where the carrier fails to deliver a shipment at destination within a reasonable time is the difference between the market value of the goods at the time of the delivery and the time when they should have been delivered. But where the carrier has notice of peculiar circumstances under which the shipment is made, which will result in an unusual loss by the shipper in case of delay in delivery, the carrier is responsible for the real damage sustained from such delay if the notice given is of such character . . . that the carrier will be presumed to have contracted with reference [to the shipper's situation].

See Also:

R2C § 349

Sierra Diesel Injection Service, Inc. v. Burroughs Corp.

Page 785, Paragraph 2

Integration requires a mutual intent by both of the contracting parties that the written agreement contain all of the agreements of the parties and the further mutual intent that the written agreement is intended to be the sole agreement

Sterling v. Taylor

CaseMine LogoPage 665, Bottom

A memorandum satisfies the statute of frauds if it identifies the subject of the parties' agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty.

Taylor v. Caldwell

Page 979, Paragraph 3

[I]n contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

Transatlantic Financing Corp. v. United States

Page 1004, Middle

When the issue [of impossibility] of performance is raised, the court is asked to construct a condition of performance based on the changed circumstances, a process that involves at least three reasonably definable steps.

  • First, a contingency (something unexpected) must have occurred.
  • Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom.
  • Finally, occurrence of the contingency must have rendered performance commercially impracticable. Unless the court finds these three requirements satisfied, the plea of impossibility must fail.

UAW-GM Human Resource Center v. KSL Recreation Corp.

  • Page 775

    [P]arol evidence is not admissible to show that a written agreement is not integrated

  • Page 776, Fraud

    [W]hen a contract contains a valid merger clause, the only fraud that could vitiate the contract is fraud that would invalidate the merger clause itself

Unke v. Thorpe

Restatement First of Contracts § 460

Wassenaar v. Panos

  • Page 1168, Paragraph 3

    [S]everal factors . . . help determine whether a particular clause is reasonable:

    1. Did the parties intend to provide for damages or for a penalty?
    2. Is the injury caused by the breach one that is difficult or incapable of accurate estimation at the time of contract? and
    3. Are the stipulated damages a reasonable forecast of the harm caused by the breach?

    Explanations:

    • Page 1168–1169

      The "difficulty of ascertainment" test has several facets . . . . includ[ing]

      • the difficulty of producing proof of damages at trial;
      • the difficulty of determining what damages the breach caused;
      • the difficulty of ascertaining what damages the parties contemplated when they contracted;
      • the absence of a standardized measure of damages for the breach;
      • and the difficulty of forecasting, when the contract is made, all the possible damages which may be caused or occasioned by the various possible breaches.
    • The factors are tested at both the time of contracting and the time of breach. (i.e., It will be tested in light of both actual and anticipated harm and will not a penalty if reasonable in light of either.)