Cases on Contracts Associate Professor Tadas Klimas
Herbert v. Durand Fr Cc § 1134 ‑ Agreements legally made take the place of legislation for those who make them. They may be revoked only be mutual consent or for causes which the law authorizes.
Herbert v. Durand Durand, a journeyman tailor, got an order from Herbert, a bespoke (custom) tailor, to make two coats at a price of 6.50 Fr. per coat. When the work was done Durand claimed that the price was too low and brought an action in the office of the Conseil des prudhommes (Labour Court) on the grounds that he could not live on a wage so disproportionate to the real value of his labour.
Hawkins v. McGee Fr Cc § 1149 Damages due to a creditor are, as a rule, for the loss which he has suffered and the profit which he has been deprived …
Hawkins v. McGee Principles of European Contract Law Article 9:502: General Measure of Damages The general measure of damages is such sum as will put the aggrieved party as nearly as possible into the position in which it would have been if the contract had been duly performed. Such damages cover the loss which the aggrieved party has suffered and the gain of which it has been deprived.
Δ = McGee, a doctor (surgeon); Π = Hawkins, his patient. Π paid Δ to perform an operation on his hand in order to remove scar tissue. Π testified that Δ guaranteed the hand would turn out “100% perfect” or “100% good”. Additionally, it appears that the Δ had solicited the operation.
The hand was not perfect after the surgery—indeed, it was even worse. Π sued for negligence (which claim was rejected by the lower court) and also for breach of contract. The jury awarded damages to Π, but the trial judge reduced the damages. The plaintiff appealed this reduction in damages.
Issue: As a matter of law, is the standard to be applied in judging whether a contract was formed in which Δ guaranteed a perfect hand an objective one, or a subjective one? That is, are hidden mental reservations on Δs part regarding a guarantee of a perfect hand relevant?
Société des Eaux de Vittel v. DehenFacts: When a person in a self-service store placed a bottle of sodainto her basket, proceeded to thecheckout counter, where when shemoved it, it exploded, injuring hereye. The lower court found nonegligence. Therefore the onlyrecovery possible is in contract.
Société des Eaux de Vittel v. DehenIssue: Can a public offer be madeby means of pricing items in a self-service store?
Barker v. Allied SupermarketSupreme Court of Oklahoma
Barker v. Allied SupermarketShopper puts back?
Barker v. Allied SupermarketShopper puts back?Shop has created a power ofwithdrawal in the shopper
Barker v. Allied SupermarketCt remarks that a shopper has nochoice but to comply with thesituation given.
Barker v. Allied SupermarketThree ways to accept:Place in basketTake to counterPay
Fielders Industries v. SolwestTradingSolomon Islands: High Court (1996)
FieldersFacts: Π = Fielders Inds.Π and Δ had been dealing withone another prior to the eventsleading to this lawsuit. Π =manufactures flour, rice, biscuits,etc. and sells wholesale. Δ = awholesaler and retailer in Noro,Western province.
FieldersΠ in Oct. 91 sent 4 containerloads to Δ who received and soldthese goods. Π in Dec 91 sent 10container loads to Δ who receivedand sold these goods, altho somewere condemned.
FieldersIssue: Can one accept an offer byexercising dominion over goodssent by the offeror?
FieldersIssue: Can one accept an offer byexercising dominion over goodssent by the offeror?YES
FieldersWhat should defendant havedone?Δ should not have exerciseddominion. He should haveinformed the Π of thisimmediately.
FieldersWhat should defendant havedone?Δ SHOULD HAVE CALLED HISLAWYER!!
RULE: PAY YOUR LAWYERS!!GET THEMPAY THEMLISTEN TO THEM!!!
Cooke v. OxleyKings Bench [United Kingdom] (1790)
Cooke v. OxleyKings Bench [United Kingdom] (1790) Oxley/Offeror made an offer good for a term, good until four o’clock. Cooke/Offeree accepted and delivered notice of acceptance prior to four o’clock. Offeror did not perform
Cooke v. Oxley Another way of looking at it: Oxley agreed to give and did give Cooke an option to buy which had to be used by four o’clock or it would lapse. Did Cooke give anything for this? (No.)
Cooke v. Oxley Issue: Can there be an offer for a term? Alternative: Must an offer be accepted at once, or can there be a two-stage situation?
Cooke v. Oxley “Historically contract making was a person process between the two parties and perhaps their lawyers. As commerce expanded contracts were still a matter of personal negotiation, though the carrying out of that task might be entrusted to an agent by one or both sides. The advent of a postal service in the late 18th century in Britain created an entirely new problem for the courts. The offer and acceptance were no longer virtually contemporaneous acts between the parties or their agents face to face. Could there be a contract when that occurred? Cooke v Oxley suggested not.” Dr. Robert N. Moles, Contract L. Lecture, http://netk.net.au/Contract/03Acceptance.asp
Cooke v. Oxley COOKE V. OXLEY HAS BEEN OVERRULED IN THE USA AND DISTINGUISHED IN THE UK. IT IS NOT GOOD LAW.
Maltzkorn v. BraquetFrance: Cour de cassation (1968)
Maltzkorn v. Braquet Facts: In 1961, Braquet made a public offer by means of an advertisement; specifically, to sell certain land for 25,000 Fr. Maltzkorn communicated his acceptance to Braquet. Braquet however repudiated the contract. Braquet admitted that the farm had not been sold at the time of the receipt of Maltzkorns acceptance.
Maltzkorn v. Braquet Issue: is a public offer to sell a thing which can only be sold to one person an offer, or merely an invitation to treat?
Maltzkorn v. Braquet Issue: is a public offer to sell a thing which can only be sold to one person an offer, or merely an invitation to treat? It is an offer. To hold otherwise would be to create a rule of law. Note under French law a sale to the first party would be an effective revocation to the rest of the world.
Maltzkorn v. Braquet Q: What is necessary under French law for an offer (including a public offer) to be revoked? A: An objective manifestation of the internal, subjective, revocation suffices. It is not only that a revocation is effective upon emission, but a wider, more encompassing, rule: any external manifestation works to prove the revocation (such as a sale of a unique item to a third party).
Maltzkorn v. Braquet Q: Why doesn’t the law allow Braquet to simply change his mind? Or does it? A change of mind which is completely subjective with no objective manifestation would not be in accord with the objective theory of contracts. Yet the law does in any event allow Braquet to change his mind; it merely requires an outward manifestation. Secondly, a person is always (although it is not really a function of law but of the legal system) allowed to change his mind, subject to the other partys right to sue.
Maltzkorn v. Braquet Q: How is a public offer revoked in your jurisdiction? There are three considerations. One, a public offer can generally be revoked by a public revocation. Two, a public offer can be revoked by a private communication, effective as to the persons who receive it. Three, there is a presumption in the case of limited numbers that the offer is good only so far as supplies last; this is problematic (see discussion in the casebook at p. 41) .
Maltzkorn v. Braquet Q: Would the rule of law stated in the first paragraph be correct in your jurisdiction? A: Probably not. Under Quebec (§ 1391), Louisiana, and even Lithuanian law the revocation, if sent to a private party, would only go into effect upon receipt. Generally a public offer is revoked by a publicized revocation, which goes into effect upon publication.
Mrs. Deschamps: Offeror= ΔMr. De Marans: Offeree = Π 12/4 12/5 12/6 Offer Posted Offer Received Revocation Revocation Posted Received Acceptance Acceptance Posted Received
De Marans vDeschamps Issue: When is a revocation effective?
De Marans vDeschamps Issue: When is a revocation effective? In this case, plaintiff/offeree seeks to show there was a contract formed.
De Marans vDeschamps Fr: revocation effective upon emission (information principle) Manifestation defendant wins: no contract formed.
De Marans vDeschamps LT: revocation effective upon receipt (information principle), and acceptance effective upon despatch (emission principle) (Lt Cc § 6.169.1 ) Plaintiff offeree wins.
De Marans vDeschamps Quebec: revocation effective upon receipt (information principle), and acceptance effective upon delivery (information principle) Plaintiff offeree loses: can prove only that revocation was received at same time as acceptance received. What can’t he prove?
Cave cooperative de Noviv. Ricome France: Cour de cassation (1923)
Cave cooperative Ricome (Π) is seeking to prove a contract was formed; Cave coop. de Novi (Δ) that it was not.
Cave emits Ricome Cave emits Ricomesoffer via emits revocation Acceptanctelegr on acceptan on 9/7 after e reaches9/5 11:30 am Δ=Cave ce on 9/7 subsequen at 11:30 t to the am via manifestati telegr on of the revocation
Cave cooperative deNovi Issue: Is an acceptance effective upon emission?
Cave cooperative deNovi Issue: Is an acceptance effective upon emission? Holding: Yes.
Cave cooperative deNovi What of the fact that Ricome-Π stated he would arrive at 9:00 am in order to sign the contract?
Cave cooperative deNovi What of the fact that Ricome-Π stated he would arrive at 9:00 am in order to sign the contract? A: No. There are no facts to support the contention that the parties had agreed in advance that no contract would be formed until a formal signing occurs.
Jahn v. Charry Facts: Jahn sent telegrams to Charry, offering her to perform in an opera he was staging. He sent them to the wrong address, and under the particular facts he was responsible for this. Charry as a result received the telegrams after a delay. During the time of this delay Jahn sent another telegram revoking the offer. Upon receipt of the first two telegrams, Charry accepted via telegram and incurred expenses.
Jahn v. Charry Jahn Jahn sends Charry Charry sends telegram receives telegrams telegram revoking Jahns acceptance; to wrong offer; offer incurs address immediately expenses received by agent of Charry
Jahn v. Charry Q: Can in every case an offeror revoke an offer with no attendant liability?
Jahn v. Charry Q: Can in every case an offeror revoke an offer with no attendant liability? A: No. While the offeror can revoke the offer in terms of contractual liability, the acts which the offeror has committed (making and then revoking an offer) may, in the particular case, lead to extracontractual responsibility.
Delai raisonable Lt Cc § 126.96.36.199, which would seem upon its face require that the offeree receive expectation damages (meaning that the court would hold a contract had been formed).
Delai raisonable Restatement 2d § 87(2) USA: An offer which the offeror should reasonably expect to induce action or forbearance of substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice
Gardner Zemke The parties exchanged standard forms which differed materially in regard to a warranty provision. Under the UCC, LT cc, PECL, UNIDROIT no contract would have been formed at this stage.
Gardner Zemke Nevertheless the parties formed a contract by conduct: the goods (refridgerating units called chillers) were accepted and paid for.
Gardner Zemke The question is under which terms: The seller’s? (Last Shot Rule) The buyer’s? (First Shot Rule) The default terms of the code/law?
Gardner Zemke Knock Out Rule: Conflicting terms (material and immaterial (= additional and/or different) ARE KNOCKED OUT.
Gardner Zemke Knock Out Rule: After knockout, what remains?
Gardner Zemke Knock Out Rule: After knockout, what remains? THE DEFAULT RULES Supplied by the law/code/statute
Hill v Gateway U.S. Ct of Appeals 7th Circuit 1997
Hill v Gateway Facts: П consumer/Hill ordered computer via telephone. Apparently paid by credit card. Gateway sent computer and programs via mail. Inside box were terms, including a term binding the parties to arbitrate disputes. The terms stated that they were applicable if the purchaser did not return the computer and software within thirty days. П did not return them, but now sues for damages and wants the dispute tried in court.
Hill v Gateway Issue: Can a contract be formed in stages? (Rolling contract).
Hill v Gateway Issue: Can an offeror condition an acceptance upon silent agreement to terms if rejection of offer is contemplated by return of merchandise?
Hill v Gateway LT Cc § 6.186 1. Negalioja netikėtos (siurprizinės) sutarčių standartinės sąlygos, t. y. tokios, kurių kita šalis negalėjo protingai tikėtis būsiant sutartyje. Netikėtomis (siurprizinėmis) nelaikomos sutarties sąlygos, su kuriomis šalis aiškiai sutiko, kai jos tai šaliai buvo tinkamai atskleistos.
Wood v Lucy, LadyDuff-Gordon NY State Court of Appeals, 222 N.Y. 88 (1917) (NYS Ct of Appeals is highest ct in state)
Wood v Lucy, LadyDuff-Gordon Lucy gave an exclusive right to Wood to market her clothing designs, for a term of one year, for one-half of the profit.
Wood v Lucy, Lady Duff-Gordon Lucy then contracted with Sears, Roebuch & Co. to sell her designs thru their catalog- Which was a major marketing innovation and a super-move
Wood v Lucy, Lady Duff-Gordon Wood sued for breach. Lucy argued that there was no contract-
Wood v Lucy, Lady Duff-Gordon Because of lack of obligations on both sides
Wood v Lucy, Lady Duff-Gordon The intermediate ct agreed: the contract did not expressly obligate Wood to enter into even one single contract.
Wood v Lucy, Lady Duff-Gordon The highest ct in NYS held, however, that there is an implied promise of good faith on the part of Wood.
Wood v Lucy, Lady Duff-Gordon Because of the requirement of good faith, Wood had an obligation to try, in good faith, to maximize the amount of contracts it/he entered into on behalf of Lucy.
Wood v Lucy, Lady Duff-Gordon Therefore there was an obligation on Wood’s part. In Civil-Law terms, the object of his obligation was definable by good faith.
Wood v Lucy, Lady Duff-Gordon This is a nearly-revolutionary case. It allowed open-ended agreements and by implication justified output and requirements contracts, as well as contracts defining price in terms of the market or in good faith-which took the French another 70 years to reach.
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): What is the issue here?
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): What is the issue here? Answer: (TK): Can a requirement of good faith be read into a an exclusive agency contract which does not delineate with specificity the performance required? (Yes.)
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): 2. Who do you suppose drafted this agreement? Why was it drafted the way it was?
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): 2. Who do you suppose drafted this agreement? Why was it drafted the way it was? Probably Wood. It did not specify a minimum level of performance. It was probably written in the way it was because of uncertainty.
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): 4. If the contract is taken as is, without any implied terms, what is Lucys remedy if Wood does nothing to promote her designs?
Wood v Lucy, Lady Duff-Gordon Questions (taken from Val. D. Ricks, the Story of Contract Law): 4. If the contract is taken as is, without any implied terms, what is Lucys remedy if Wood does nothing to promote her designs? No remedy.
Pilarek v. School of TradeRepresentatives France: Civ. 19 December 1973
Pilarek v. School of TradeRepresentatives (France1973) Π Pilarek worked (during the exam sessions only?) for the Δ school for pay in each of the four previous years. In 1970 she worked again.
Pilarek v. School of TradeRepresentatives (France1973) Δ school did not pay her. The contract (apparently oral) between the school and her did not specify the rate of pay for her.
Pilarek v. School of TradeRepresentatives (France1973) Δ claims she worked gratuitously and also that because of the fact that there was a personal relationship between her and the director of the school a gratuitous labor contract should be presumed.
Pilarek v. School of TradeRepresentatives (France1973) The trial court appointed an expert who arrived at a figure of 750 Fr. Δ argues also that the judgement does not state how this was arrived at.
Pilarek v. School of TradeRepresentatives (France1973) Issue: Can a tariff and hours be found through testimony or implication? Does this satisfy the requirements of a certain object?
Pilarek v. School of TradeRepresentatives (France1973) Issue: Can a tariff and hours be found through testimony or implication? Does this satisfy the requirements of a certain object? YES
Pilarek v. School of TradeRepresentatives (France1973) Restatement 2d § 33 Certainty (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
Pilarek v. School of TradeRepresentatives (France1973) LR CK 6.613.2. Tais atvejais, kai pirkimo–pardavimo sutartyje nei tiesiogiai, nei netiesiogiai nenustatyta kaina ar nenurodyta tvarka jai nustatyti ir šalys nėra susitarusios kitaip,
Pilarek v. School of TradeRepresentatives (France1973) LR CK 6,306.4. Pirkimo– pardavimo sutarties sąlyga dėl sutarties dalyko laikoma suderinta, jeigu sutarties turinys leidžia nustatyti daikto (prekės) pavadinimą ir kiekį.
Pilarek v. School of TradeRepresentatives (France1973) LR CK 6.329.2. Jeigu iš pirkimo–pardavimo sutarties turinio ir ją aiškinant neįmanoma nustatyti perduotinų daiktų kiekio, laikoma, kad sutartis nesudaryta.
France: Madame D. v.Madame B. France Civ., 1987 liepos 22
France: Madame D. v.Madame B. Ponia D isipareigojo moketi tam tikra pinigu suma poniai B uz tarpininkavima ivaikinant vaika. Ponia B iskele ieskini del 5000 USD. Zemutines grandies teismas priteise 3000 USD.
France: Madame D. v.Madame B. Ponia D apeliavo sprendima: Sutartis negalioja todel, kad nera (teiseto) objekto: yra neteiseta teikti ivaikinimo paslaugas uz pelna.
France: Madame D. v.Madame B. Taip. Sutarties dalis del pelno negalioja.
Collinet v. Boudet France: Com., 1980 m. sausio mėn. 14 d..
Collinet v. Boudet Facts: Π Boudet, a beer distributor, entered into a long term supply contract with Δ Collinet, a bar owner. After four years, in 1972, Π sues for nonpayment.
Collinet v. Boudet Δ affirmatively asserts lack of object for indefiniteness in that the contract specified that the beer was to be supplied for the price which Boudet set in the city of Verdun, selling similar goods to clients of similar size,” but the lower court found that because of competition, the Δ would not be purchasing beer at a price higher than the market price
Collinet v. Boudet Issue: Is the object definite when the price term is the "usual price" as it was in this case? Holding: No. (French law has since changed). LT, U.S., CISG, UNIDROIT: YES. A reference to the market price is ok as it is to a seller’s catalog.
6.313 str2. …Kai pirkimo–pardavimo sutartyje nei tiesiogiai, nei netiesiogiai nenustatyta kaina ar nenurodyta tvarka jai nustatyti ir šalys nėra susitarusios kitaip, laikoma, kad šalys turėjo omenyje kainą, kuri sutarties sudarymo metu buvo įprastai toje prekybos srityje mokama už tokius pat daiktus, parduodamus atitinkamomis aplinkybėmis
Įmonė Clinique du Plateauprieš sutuoktinius Monsus. Prancūzija: Kasacinis teismas, 1984
Įmonė Clinique Klinika už 300,000 Fr pardavė savo pagrindinį kapitalą pirkėjams Monsams, kurie turėjo apmokėti 10 lygiomis įmokomis, kasmet birzelio menesi.
Įmonė Clinique The price however was indexed to the price of a day at the (birthing) clinic.
Įmonė Clinique In France an index can be used if it is connected with the activity of (at least) one of the parties.
Įmonė Clinique Aftterwards the Clinic no longer satisfied the criteria for a birthing clinic (gimdymo namų) and it therefore said that the indexing clause is void.
Įmonė Clinique Issue: Is the appropriateness of an index to be judged at the time of formation?
Įmonė Clinique Issue: Is the appropriateness of an index to be judged at the time of formation? YES.
Įmonė Clinique Note: This is not a case of the index no longer being available or disappearing. 6. Kai kaina turi būti nustatyta remiantis kriterijais, kurių nėra ar kurie išnyko arba negali būti nustatyti, kaina nustatoma remiantis artimiausios reikšmės kriterijais.[NOT]
Lizingo bendrovių klientaivaliutų kurso pinklėse Verslo žinios 2002 11 26 d. Linas Kmieliauskas, Gytis Vincevičius
Lizingo bendrovių klientaivaliutų kurso pinklėse Nacionalinė vartotojų teisių apsaugos taryba (NVTAT) šiemet gavo trijų vilniečių skundus dėl su “Snoro lizingu” (SL) pernai pasirašytų standartinių išperkamosios nuomos sutarčių.
Lizingo bendrovių klientaivaliutų kurso pinklėse Tarybai buvo pareikšta, kad lizingo bendrovė nesilaiko išperkamosios nuomos sutarties punkto dėl mokėjimų perkaičiavimo, pasikeitus valiutų kursui.
Lizingo bendrovių klientai Pernai, dar iki susiejant litą su euru, sudarytose sutartyse buvo įtvirtinta, kad, pasikeitus lito ir USD kursui, šalys susitaria perskaičiuoti mokėjimus pagal nustatytą mokėjimo dieną galiojantį lito ir dolerio kursą taip, kad mokėjimo atitikmuo doleriais nepakistų.
Lizingo bendrovių klientai SL klientai tikina, kad įmonė neatsižvelgė į nuo vasario pasikeitusį USD ir lito santykį bei neperskaičiavo mokėjimų
Lizingo bendrovių klientai What should an attorney advise his client? (The customers were angry because the leasing companies were delaying recalculating the amounts payable.)
Lizingo bendrovių klientai Well, if one is right, don’t pay.
Lizingo bendrovių klientai But in this situation, probably the banks are right. A ‘lizingas’ is like a loan, and it is not natural to assume that less should be returned than was given.
Société Cofratel v. SociétéBechtel France, Cour de Cassation 1995
Société Cofratel v. SociétéBechtel France, Cour de Cassation 1995 when a contract envisages the formation of further contracts the fact that the price contained in those further contracts is not fixed in the initial contract does not affect the validity of the latter... though any abuse in the fixing of the price may give rise to rescission or damages
Société Cofratel v. SociétéBechtel Case stands for the principle that a framework contract can be valid even if it does not state the price at which services will be rendered in subsequent contracts.
Exercises: Object Distributor distributes beer to retailers. Distributor and Retailer enter into a contract wherein Distributor engages to provide a specified amount of a certain beer to Retailer each month, the price to be that of the Distributor’s latest pricelist minus ten percent
Exercises: Object . At the time of the formation of the contract, the price approximates that prevailing in the market. Several months go by.
Exercises: Object Then the Distributor notifies Retailer of a 200 percent price increase, twice that of the existing market price. Retailer notifies Distributor that it will accept no deliveries at the new price. Retailer then enters into contract with another distributor for a similar product. Distributor sues Retailer for damages.
Exercises: Object Under the PECL (as well as the Lithuanian code), Retailer is not liable for breach of contract. Distributor breached the contract by setting a grossly unreasonable price. This is a material breach. Hence the Distributor cannot recover damages for refusal to purchase the product at the unreasonable price.
Exercises: Object If the jurisdiction (such as Spain or France) has a rule that a contract in which one party has the right to set a price unilaterally does not satisfy the requirement of certainty, then the contract is absolutely invalid.
Exercises: Object 2. Buyer communicates to Seller that it wishes to purchase ten gallons of a certain type of paint. Seller tenders performance together with an invoice at a reasonable price. Is there a contract? At what price?
Exercises: Object LR CK 6.313.2. Tais atvejais, kai pirkimo–pardavimo sutartyje nei tiesiogiai, nei netiesiogiai nenustatyta kaina ...laikoma, kad šalys turėjo omenyje ... protingumo kriterijus atitinkanti kaina.
Exercises: Object 3. Buyer communicates to Seller that it wishes to purchase ten gallons of a certain type of paint.
Exercises: Object 3. Seller tenders performance together with an invoice at a grossly unreasonable price. Is there a contract? At what price?
Exercises: Object France: There would be no contract as there has been no meeting of the minds. This means there has been a failure of the object.
Exercises: Object PECL, LT, CISG, UCC The contract is for the market price or a reasonable price. The seller has breached the contract.
Exercises: Object PECL, LT, CISG, UCC The contract is for the market price or a reasonable price. The seller has breached the contract.
Exercises: Object [New] (Not in readings): A contract states the price shall be that of the seller’s latest catalog. Valid?
Exercises: Object [New] (Not in readings): A contract states the price shall be that of the seller’s latest catalog. Valid? Yes.
Exercises: Object [New] (Not in readings): A contract in Lithuania states the price payable in Litai shall be indexed to the Mexican peso. Neither the contract nor the parties have anything to do with Mexico. Valid?
Exercises: Object [New] (Not in readings): A sale contract in Lithuania states the price payable in Litai shall be indexed to the Mexican peso. Neither the contract nor the parties have anything to do with Mexico. Valid? Yes, in Lithuania (no in France).
Exercises: Object [New] (Not in readings): A person contracts to sell his eye to a buyer to be used to replace the buyer’s damaged eye. The person repudiates. The buyer sues for damages.
Exercises: Object [New] (Not in readings): The buyer sues for damages. The repudiating seller claims the contract is void? Is it?
Exercises: Object [New] (Not in readings): Yes. The thing in question is not something legitimately in commerce. Similar things: ancient artifacts, profesional’s clients, illegal drugs, explosives, surrogate pregnancy.
Exercises: Object LR CK 6.306 1. Pirkimo–pardavimo sutarties dalyku* gali būti neišimti iš apyvartos daiktai ... . *(objektu)
Croize v. Veaux 1929 Veaux, a medical doctor, obtained a licence to exploit a pharmaceutical product and medical treatment from Croize, who was not a medical doctor.
Croize v. Veaux Veaux undertook to advertise this drug or treatment for no less than 6000 Fr. a month. Veaux had to earn 26,000 Fr. a month prior to seeing any profit. The goal was to have Veaux prescribe this cure, it apparently having no scientific value.
Croize v. Veaux Issue: Must the cause or purpose of a contract be prohibited by statute in order to render the contract invalid?
Croize v. Veaux Issue: Must the cause or purpose of a contract be prohibited by statute in order to render the contract invalid? No.
Croize v. Veaux Lithuania Lt Cc § 181.1 provides that a ‘convention which is against public order or good morals is null and invalid.’
Villaceque v. Levray (France 1879)Facts: Π Levray sued Δ Villacequefor non-payment of 4,750 Fr. 80 cfor three barrels of caramel colorantwhich Levray had sold Villaceque. Δraises as a defense the nullity of thecontract.
Villaceque v. Levray (France 1879)The colorant was to be used to colorwine, and it contained arsenic, andto use the colorant thus gives rise toa harmful product.
Villaceque v. Levray (France 1879)Issue: Can the cause of a contractbe illicit when, although its object islicit, the contemplated use of theobject is against the public interest?
Villaceque v. Levray (France 1879)Issue: Can the cause of a contractbe illicit when, although its object islicit, the contemplated use of theobject is against the public interest?YES
Villaceque v. Levray (France 1879)Lt Cc §1.81.3: Unilateral or bilateralrestitution is possible if its applicationdoes not violate imperative legal norms orgood morals, that is, when the purpose ofthe contract, violative of public order orgood morals, was not reached and therules of public law do not provide forproperty sanctions against the parties ofsuch an agreement.
Villaceque v. Levray (France 1879)Here the purpose was probablyreached, therefore no restitution.
Conte v. Fould France, Cour de Cassation 1899
Conte v. Fould Facts: Π Conte is a bar-owner who dispensed drinks as agreed by an agent of Δ Fould to potential voters for Δ Fould who was running for parliament. Π is suing Δ in order to obtain payment for the drinks.
Conte v. Fould "[I]t appears from all the circumstances and evidence in the case that the drinks in question were intended, in the minds of the parties, to obtain votes for Fould from those who took part; that, therefore, the cause of the obligation which Conte wishes to enforce is illicit as contrary to statutes, public policy, good morals
Conte v. Fould Issue: If the object of a contract is licit, can the cause be illicit? Was the cause of the contract licit, entertain guests, with only the motive being illicit?
Conte v. Fould Issue: If the object of a contract is licit, can the cause be illicit? YES
Conte v. Fould Q: Was the cause stated in the contract? That is, was it agreed to entertain the people in order for them to vote for Fould? Is an agreement necessary or mere knowledge?
Conte v. Fould Q: Was the cause stated in the contract? That is, was it agreed to entertain the people in order for them to vote for Fould? Is an agreement necessary or mere knowledge? MERE KNOWLEDGE
Demoiselle Monge v.Veuve Minart Monge worked in Minarts brothel as a chamber-maid. Monge claims she did not know of the fact that it was a brothel at the time of the formation of contract. Monge is owed the balance of her salary —apparently she was paid only part of what she was supposed to have been paid.
Demoiselle Monge v.Veuve Minart Issue: In order for a contract to be illicit, do both parties have to know of the immoral purpose at the time of formation?
Demoiselle Monge v.Veuve Minart Issue: In order for a contract to be illicit, do both parties have to know of the immoral purpose at the time of formation? Holding: Yes.
Demoiselle Monge v.Veuve Minart 3. Vienašalė ar dvišalė restitucija galima, jeigu jos taikymas neprieštarauja imperatyvioms įstatymų normoms ar gerai moralei, t. y. kai nebuvo pasiektas viešajai tvarkai ar geros moralės normoms prieštaraujančio sandorio tikslas…
Cohen-Scali v. Roubieu France: Cour de cassation (1863)
Cohen-Scali v. Roubieu Facts: Cohen-Scali = Π = landlord/lessor sued lessee Δ Roubieu for nonpayment of rent, and, apparently, for renouncing the lease ahead of the stated term. Δ raises as an affirmative defense the nullity of the contract.
Cohen-Scali v. Roubieu By the terms of the written lease Δ renounced the right to sue the Π for any reason whatsoever.
Cohen-Scali v. Roubieu Issue: Does sufficient cause exist in a bilateral contract in which one party has no rights whatsoever?
Cohen-Scali v. Roubieu Issue: Does sufficient cause exist in a bilateral contract in which one party has no rights whatsoever? Holding: No. As the court said, "such a stipulation being in manifest contradiction with the essential rules of the contract of lease and even with the principle of contract altogether."
Cohen-Scali v. Roubieu Best argument for Π: The Δ agreed not to sue; the parties can limit liability. Δ has rights, he merely waived enforcing them.
Cohen-Scali v. Roubieu Best argument for Δ: The Δ has no rights under this purported agreement; it never really was formed, since there must be in a rental agreement an effective right to enforce the agreement on the part of the tenant.
Régie communale des SourcesNessel v. SARL Eurogadget France: Cour de cassation (1973)
Régie communale des SourcesNessel v. SARL Eurogadget Π Eurogadget sued Δ Régie communale des Sources Nessel for non-payment for (we surmise--promotional) bottle openers. Π claimed that the total price is 33,000 Fr (60,000 units at 550 per thousand, or 550 x 60 = 33,000 Fr.).
Régie communale des SourcesNessel v. SARL Eurogadget Δ claimed that the total price was understood by it to be 55 per thousand, or 55 x 60 = 3300 Fr. Δ argued the contract is invalid for mistake. The lower appellate court did not reply to the argument that as a matter of law one cannot make a mistake as to price.
Régie communale des SourcesNessel v. SARL Eurogadget Issue: Can price be a substantial quality regarding which a mistake resulting in invalidity can be made?
Régie communale des SourcesNessel v. SARL Eurogadget Issue: Can price be a substantial quality regarding which a mistake resulting in invalidity can be made? YES
Régie communale des SourcesNessel v. SARL Eurogadget Note: The rule is, however, that a mistake as to value will not be recognized.
Berthon v. Vanden Borre France: Cour de cassation (1968)
Berthon v. Vanden Borre Π Berthon = Lessor sues Lessee Δ Vanden-Borre regarding a repudiated rental agreement. Δ sought to rent a villa on the Côte dAzur for the month of July for 6000 Fr excluding charges (the 2007 equivalent of $1215 USD).
Berthon v. Vanden Borre The "agency acting for Berthon had specified that it was a comfortably appointed villa, but its outside and inside gave the unmistakable impression of a lack of maintenance; the bedding, the doors and walls were in an obviously dirty state; the furniture was clearly insufficient and a large building site ... was in the immediate vicinity of the villa, such as to disturb the peace and isolation of the occupant."
Berthon v. Vanden Borre The Court of Appeal found that the high rent ‘albeit implicitly’ ‘gave rise to a presumption that it would be of a related calibre.’
Berthon v. Vanden Borre Issue: Can a mistake be made as to quality such as would invalidate a contract?
Berthon v. Vanden Borre Issue: Can a mistake be made as to quality such as would invalidate a contract? Holding: Yes.
Berthon v. Vanden Borre Quality was a substantial quality of the thing for the plaintiff. This was known to the lessor/plaintiff.
Berthon v. Vanden Borre Note that it is not necessary that the other party know there is a mistake being made; it must know that X is a substantial/essential quality.
Choquel v. Camirel Δ Choquel put ad in paper. Π Camirel bought a chest for 7000 Fr (about 275 U.S. 1931 dollars). П had it examined by expert who found it was "only a poor copy" and that the signature of the artist was a forgery.
Choquel v. Camirel Δ admitted knowing it was not an antique; at first, however, he had maintained that he had thought it was an antique.
Choquel v. Camirel Π purchaser was a collector, but a dilletante; the seller was an expert. Δ admitted the chest was worth perhaps 700 Fr but contended he had the right to sell it at any price.
Choquel v. Camirel Issue: Can evidence of the conduct of the other (non-mistaken) party be taken to show knowledge that the mistake was as to a substantial, determining, element?
Choquel v. Camirel Issue: Can evidence of the conduct of the other (non-mistaken) party be taken to show knowledge that the mistake was as to a substantial, determining, element? YES
Choquel v. Camirel Assumption of risk? Inexcusable error?
Choquel v. Camirel Assumption of risk? Inexcusable error? No. Purchaser a diletantte/m ėgėjas, seller an expert.
Madam D v. Madam M France: Cour de cassation (1970)
Madam D v. Madam M Π Madam D = a reseller, purchased from Madam M 31 paintings for 55,000 Fr. (about 11,200 in 1966 U.S. dollars). Δ did not pay for them.
Madam D v. Madam M Expert testimony established that some of them were forgeries. Π (the buyer) initiated an action for mistake (and fraud).
Madam D v. Madam M Issue: Can a mistake as to a non- essential quality (aspect) be such as to vitiate consent? Holding: No.
Madam D v. Madam M What is really going on here is that the buyer bought paintings not on the basis of their originality (which was never stated by the seller)
Madam D v. Madam M But merely as industrial art, decoration.
Madam D v. Madam M But merely as industrial art, decoration.
Nugent v Stanley 336 So.2d 1058 (1976) Court of Appeal of Louisiana, Third Circuit.
Nugent v Stanley Пs sue Δ for rescission of the sale of a business on the basis of fraud.
Nugent v Stanley Plaintiffs testified that during these negotiations it was made entirely clear to Stanley that they wished to purchase a going established business with a good reputation, good will in the community, and an established line of credit with carpet mills and other suppliers.
Nugent v Stanley П further testified that during these negotiations they were assured by Δ that upon consummation of the sales transaction they would acquire in addition to the physical property
Nugent v Stanley some $12,000.00 to $15,000.00 of firm contracts for installation of carpet which had been secured by him
Nugent v Stanley Plaintiff also leased premises from Δ with an option to purchase after six months. Δ reserved right upon non-payment of rent to re-enter and take possession of the premises.
Nugent v Stanley Plaintiff also leased premises from Δ with an option to purchase after six months. Δ reserved right upon non-payment of rent to re-enter and take possession of the premises.
Nugent v Stanley Instead of the 12,000 USD in extant contracts there were only two contracts, neither for profit.
Nugent v Stanley Also the business’s credit was very bad. From some suppliers could not even get Cash on Delivery sales.
Nugent v Stanley Π departed the premises, claiming the contract was invalid for fraud/misrepresentation.
Nugent v Stanley Δ re-entered the premises and took over the business.
Nugent v Stanley The trial court held that a voluntary and mutual rescission had taken place when the purchasers left the premises and the seller took them back.
Nugent v Stanley It also held that the court action initiated by plaintiff was in the nature of one for redhibition.
Nugent v Stanley Redhibition has to do with a defective product or thing. The price can be lowered by the court.
Nugent v Stanley The appellate court said, however, that an action for a reduction of price due to defect and a rescission are mutually exclusive.
Nugent v Stanley Note Δ admitted that Δ assured Π that Δ had a well established business, with good with and an established line of credit, plus approximately $12,000.00 worth of contracts for the installation of carpet
Nugent v Stanley but denied any inference that such casual statements and/or representation(s) may have formed part of the contract of sale and assignment, the terms of which are best evidence of itself.
Nugent v Stanley Ct finds: Stanley incorrectly represented and in fact grossly exaggerated the value and income of his going business.
Nugent v Stanley It is settled that parol evidence is admissable [sic] for the purpose of establishing that an agreement is subject to annulment because of lack of consent due to misrepresentation and error.
Nugent v Stanley No mutual rescission: parties had rented premises, and rental period had expired. A separate contract.
Nugent v Stanley Π are entitled to rescission of the sale of December 4th are entitled to a return of the purchase price paid by them subject to their return of the property to Δ together with whatever adjustments are necessary to compensate the Δ for Π’s use of the property during the period from December 4, 1972 to June 4, 1973.
Dombrovskis v.Baranauskas Lietuvos Aukščiausiasis teismas 2005 m. spalio 26 d., Vilnius
Dombrovskis v.Baranauskas Π Baranauskas sued Δ for non-return of a 42,000 Lt loan, plus .5% daily interest = nearly 90,000 Lt, plus damages of 12,000 Lt.
Dombrovskis v.Baranauskas Second paragraph of written loan agreement recites that the loan was made on 2001 10.
Dombrovskis v.Baranauskas Δ claims rescission for fraud or mistake.
Dombrovskis v.Baranauskas Δ claims it never received the loan. That the agreement was blank and given him in a car.
Dombrovskis v.Baranauskas That he understood the agreement to be one for the purchase of a shed/garage in relation to the creation of a new corporation and business.
Dombrovskis v.Baranauskas That he at the time was ill as a paranoid schizophrenic, that this was known to the Π and that he was taken advantage of.
Dombrovskis v.Baranauskas Another man who participated in the negotiations testified that there never was talk of a loan, only a purchase.
Dombrovskis v.Baranauskas The date of the loan agreement and the date of the purported turning over of the money do not coincide.
Dombrovskis v.Baranauskas The loan agreement calls for interest for late payment at the rate of 185% a year!
Dombrovskis v.Baranauskas There was no security given for the purported loan altho the two parties had only known each other for a month.
Dombrovskis v.Baranauskas The trial ct in essence rejected the consideration of any of the above claims and simply affirmed the agreement as written.
Dombrovskis v.Baranauskas Issue: Is extrinsic testimony admissible to prove deceit when a party claims he was deceived as to the consequences of a convention (when the party is clearly unable to fend for themselves)?
Dombrovskis v.Baranauskas Holding: Yes. The LT Supr. Ct. appears to say that the lower cts erred because they did not consider the facts offered by the defendant in regard to the deceit or error.
Dombrovskis v.Baranauskas LAT: ‘vertinant, ar buvo suklysta, reikia atsižvelgti į sandorio šalies, teigiančios, kad ji suklydo … sveikatos būklę, sandorio sudarymo aplinkybes … .
Duty to Disclose “Another exception is made in view of the particular nature of a party or of a contract. Thus, the manifest frailty of a person of advanced age should put the other party on notice that such a person may not be able to exercise the diligence necessary to inform himself concerning all the circumstances of the contract,
Duty to Disclose so, in such a case, the other party is under a duty to inform the elderly person on the nature and consequences of the instruments to be signed.” Saul Litvinoff
Duty to Disclose one who fails to give another information that the other should have found by himself commits no fraud since it can be said that any error made in such a situation results not so much from one partys reticence as from the others lack of diligence in protecting his own interest. Saul Litvinoff
Duty to Disclose It is different, however, when the circumstances are such as to impose on one party a duty to inform the other concerning certain facts, a duty that seems to appear whenever a partys silence, or failure to inform or to disclose, is a flagrant abuse of the other partys ignorance. Saul Litvinoff
First Acadiana Bank v.Bollich Louisiana: Court of Appeal, 3rd Circuit (1988) La Cc § 1949-52; Fr Cc §§ 1109, 1110; PECL § 4.103; Lt Cc § 190; Restatement 2d § 161(c)
First Acadiana Bank v.Bollich Facts: ∆ Bollich agreed to guarantee one loan to son for $ 20,000. No facts were presented that ∆ knew he was signing a continuing guarantee agreement—he did not read it..
First Acadiana Bank v.Bollich Bank officer (Laverne) according to ∆‘s testimony knew he (∆) only was to sign as guarantor for one loan. ∆‘s son repaid the $ 20,000 but owed more and therefore the bank sued ∆ under the continuing guarantee agreement.
First Acadiana Bank v.Bollich There was evidence that the bank‘s actions were not credible: the agreement was notarized long after the actual signature was executed ...
First Acadiana Bank v.Bollich Issue: Can a party avoid a contract by claiming mistake (erreur obstacle) in contradiction of its written terms?
First Acadiana Bank v.Bollich Issue: Can a party avoid a contract by claiming mistake (erreur obstacle) in contradiction of its written terms? Holding: YES
“[I]if in the course of negotiations one party states his impression of the contractual object and asks from the other, ‘Tell me if I am wrong,’
the others silence amounts to an assertion that the asking party is right, and will constitute fraudulent reticence if the one who remains silent knows that the others impression is false …” Saul Litvinoff
Lebret v. Fleischer France: Cour de cassation (1887) Cass. req. 27 April 1887.”
Lebret = Π; Fleischer = ∆. Lebret sued ∆ Fleischer for non-performance of a payment obligation. The parties had contracted that Lebret‘s ship would free Fleischer‘s, which was stuck on sand. Fleischer was about to lose his ship and argued in vain for less rigorous terms.
He escaped total loss only by agreeing to pay 18,000 Fr (4.3 times more than the lower court ordered ∆ to pay)..
Issue: Is consent vitiated for duress only when the threat emanates from the other party?
Holding: No. It is sufficient that the fear be “caused by a considerable and present evil to which the promisor’s person or wealth is exposed.”
Vigneron v. Glaugetas France: Cour de cassation (1919) Casebook 168
Vigneron v. Glaugetas Facts: Bed-ridden farmer Duvoisin (‘paralysed, weakened by illness, bedridden, abandoned by members of his family’) yielded to the fear that his share-cropping tenants would not continue to look after him and made a gift or gifts inter vivos to them.
Vigneron v. Glaugetas Lower court found duress and invalidated the contract of gift.
Vigneron v. Glaugetas Issue: Can it be duress simply when a party is at the mercy of the other? Holding: Yes.
Šlėvė v. Rimkus LAT (Civ. byla Nr. 3K-3-16/2001 m.) (2001)
Šlėvė v. Rimkus Ieškovas F.Šlėvė 1999 m. spalio 7 d. kreipėsi su ieškininiu pareiškimu į Radviliškio rajono apylinkės teismą, prašydamas pripažinti negaliojančiu 1999 m. kovo 3 d. pirkimo-pardavimo sutartį, kuria jis pardavė atsakovui R.Rimkui pastatus, esančius Kėdainių 103A, Šeduvoje.
Šlėvė v. Rimkus Pastatai atsakovui parduoti už 71000 Lt, nors jų inventorizacinė vertė yra apie 712826 Lt. Ieškovas teigia, kad pastatus jis buvo priverstas parduoti dėl susidėjusių sunkių aplinkybių, nes buvo skolingas bankui apie 80000 Lt. Be to, pats atsakovas ruošiasi šiuos pastatus parduoti.
Šlėvė v. Rimkus Radviliškio rajono apylinkės teismas nustatė, kad ieškovas ginčo sandorį iš tiesų sudarė labai nenaudingomis sau sąlygomis dėl sunkių susidėjusių aplinkybių, todėl 2000 m. balandžio 5 d. sprendimu ieškinį patenkino, pripažindamas tarp šalių sudarytą sutartį negaliojančia ir pritaikydamas visišką restituciją.
Šlėvė v. Rimkus Teismas taip pat pripažino negaliojančiu Radviliškio rajono notarų biuro registro įrašą Nr. 1350.
Šlėvė v. Rimkus LAT: Tai, kad sandoris būtų pripažintas negaliojančiu būtina nustatyti šiuos požymius: 1) sandorio šalis (šiuo atveju pardavėjas) neturi būtinų gyvenimui sąlygų (neturi būsto, pragyvenimo šaltinio, sunkiai serga jis ar šeimos nariai ir panašiai);
Šlėvė v. Rimkus LAT: 2) kita sandorio šalis (pirkėjas) turi žinoti šias sunkias aplinkybes;
Šlėvė v. Rimkus LAT: 3) kita sandorio šalis (pirkėjas) pasinaudojo šiomis sunkiomis aplinkybėmis; 4) sandoris buvo sudarytas labai aiškiai nenaudingomis kitai šaliai (pardavėjui) sąlygomis (pvz., ypač maža kaina).
Šlėvė v. Rimkus LAT: Šioje teisės normoje įtvirtinta galimybė nuginčyti sandorį dėl to, kad jo sudarymą nulėmė sunkios susiklosčiusios aplinkybės, verslo santykiuose gali būti taikoma tik išimtinais atvejais, nes verslininkas prisiima su jo verslu susijusią riziką ir privalo a priori suvokti,
Šlėvė v. Rimkus LAT: kad verslui nepasisekus jis patirs neigiamų turtinių pasekmių, t.y. praras investuotas lėšas, turės parduoti jam priklausantį turtą ir panašiai.
Standard Coffee Service Co.v Raymond Babin Court of Appeal of Louisiana, Fifth Circuit 472 So. 2d 124; 1985 La. App. LEXIS 8963 (1985)
Standard Coffee Service Co.v Raymond Babin The employee, a sales representative, was asked to go to the employers office, without knowing what the meeting was about. When he arrived, he was asked to sign a new employment agreement that contained an arbitration clause and a non-compete agreement.
Standard Coffee Service Co.v Raymond Babin The employee signed the contract under alleged threats of termination. Two years later, the employee was terminated and the employee started a similar business on his own. The employer attempted to institute arbitration proceedings regarding the alleged breach of the agreement, and the employee refused on the basis that the agreement was illegally obtained.
Standard Coffee Service Co.v Raymond Babin The employer filed a petition to compel arbitration with the trial court, which denied the rule to compel arbitration. The employer appealed, and the court affirmed.
Standard Coffee Service Co.v Raymond Babin The court held that the trial court properly found the employee was coerced into signing the contract with threats of his termination, and therefore the contract was not valid. The court held that a reasonable person with the subjective characteristics of the employee would have felt forced into signing the employment contract.
Richard v. Buer France: Cour de cassation (1970)
Richard v. Buer Π-appellee is Buer, who hired horses to make a short trek to a lake for himself, his son and a female friend. Buer’s horse was frightened and spooked.
Richard v. Buer The guide, Richard’s son, advised Buer to kick off the stirrups and to jump off. He did so and broke his leg. Buer sued and won in the lower court, the court stating it was a contract of transport [and hence of result-de resultat].
Richard v. Buer Issue: Was the nature of the contract that of transport?
Richard v. Buer Issue: Was the nature of the contract that of transport? Answer: It was not. It was a sport, and thus the responsibility must be only of best efforts. (No negligence was proven, apparently.) Therefore the court reversed the judgement.
DEJEAN v. LOUISIANAWESTERN R. CO. 167 La. 111 (1928) Supreme Court of Louisiana.
DEJEAN v. LOUISIANAWESTERN R. CO. Facts: Π sued ∆ to recover value of 25 bales of cotton. ∆ claimed fire started not due to negligence on its part. Statute states: ‘Carriers ... liable ... unless prove loss … occasioned by’ force majeure.
DEJEAN v. LOUISIANAWESTERN R. CO. Q: Is the obligation of the carrier one of best efforts, of guarantee, or of result?
DEJEAN v. LOUISIANAWESTERN R. CO. Q: Is the obligation of the carrier one of best efforts, of guarantee, or of result? A: Of result. Consult Lt Cc § 6.718.5: party under such an obligation must prove force majeure (a mere proof of diligence is not enough).
DEJEAN v. LOUISIANAWESTERN R. CO. Q: If the obligation had been merely one of diligence, who would have won and why?
DEJEAN v. LOUISIANAWESTERN R. CO. Q: If the obligation had been merely one of diligence, who would have won and why? The carrier.
DEJEAN v. LOUISIANAWESTERN R. CO. Q: If the obligation had been merely one of diligence, who would have won and why? The carrier. The ∆ did not adduce any proof that the fire did indeed start via a spark from a cotton gin which then smouldered, undetected, for a long time, only to burst into flames during transport. If it had, ∆ would have won.
Louis Dreyfus Corp. v.Continental Grain Co. Louisiana: Court of Appeal, 4th Circuit (1981)
Louis Dreyfus Facts: The contract called for Π to sell grain to ∆ upriver at a set price and for ∆ to sell grain (not the same grain, but the same amount and quality) downriver. The effect of the contract was such that a given amount of grain upriver would be sold and the same amount would be repurchased downriver, at a premium indicative of the transport cost. The Mississippi river froze between St Louis and Cairo for 34 days; it was officially closed by the U.S. Coast Guard.
Louis Dreyfus Corp Therefore the ∆ was actually unable to transport the grain—but there was grain available for the ∆ to buy and to resell to Π at the downriver location: except that in order to do this the ∆ would have sustained a significant loss, because the market price downriver was up.
Louis Dreyfus (Note that, ostensibly, the contract calls for the ∆ to sell grain, not transport it.) Therefore ∆ invoked force majeure, arguing that the contract was a through- put contract, essentially one of transport, and not of individual sale and purchase. The Π argued it was a contract of purchase-sale.
Louis Dreyfus Corp. (Note that, ostensibly, the contract calls for the ∆ to sell grain, not transport it.) Therefore ∆ invoked force majeure, arguing that the contract was a through- put contract, essentially one of transport, and not of individual sale and purchase. The Π argued it was a contract of purchase-sale.
Demoiselle Monge v. Veuve MinartMonge worked in Minarts brothel asa chamber-maid. Monge claims shedid not know of the fact that it was abrothel at the time of the formationof contract. Monge is owed thebalance of her salary—apparentlyshe was paid only part of what shewas supposed to have been paid.
Dubosc v. Soc des Eaux deChâtel-GuyonFrance: Cour de cassation (1934)Cass. civ., 5 December 1934
DuboscFacts: Π Dubosc sued ∆ fordamages. Π had several timesrefused without good cause toidentify himself by showing his“bathing” membership card.
DuboscFacts: The ∆ had returned hismoney, the return of which Πaccepted, but ∆ had suspendedperformance and had retained Π’scard. The trial court found that ∆had the right to suspendperformance. Π appeals on thefollowing ground:
DuboscDoes a party have the right tosuspend performance if this isequivalent to a complete and totalbreach—when resolution(termination) of the contract canbe ordered only by a court?
DuboscIn this case the ∆ does not havelesser means of putting pressureon the ∆. It is difficult to conceiveof how it could withhold a lesserpart of its performance.
DuboscAnother justification is that theexceptio is founded on the idea ofcause, and non-performance of oneobligation justifies the non-performance of the correspondingone, each obligation being thecause of the other.
DuboscThe third argument is one ofnecessity:Official Comment to PECL § 9.201:‘In some cases the aggrieved partycannot practicably withhold part ofits performance - for instance, manyobligations to perform a servicemust realistically be performed in fullor suspended in full.’
DuboscThis link is to an account of astudent being forcibly ejected from auniversity library in California in2006 for not identifying himself andfor refusing to leave: http://abclocal.go.com/kabc/story?section= kabclocal&id=4763689&ft=exLg
SA Coronet France v. SARL Marseille Marine France: Cour de cassation (1973)
Coronet-France signed an agreement granting Marseille Marine (MM) an exclusive right to sell its boats in a specified area for three years in exchange for a promise to sell at least nine boats a year and to pay a debt in instalments by way of bills of exchange. MM did not sell any boats the first year and stopped paying the instalments.
CF sent a letter to MM purporting to terminate the contract and to give the exclusive distributorship to another company. The contract apparently did not allow for unilateral termination, even in the case of essential non-performance.
Issue: If a distributor has stopped its performance because of the non- performance of its exclusive agent, can it grant another party an exclusive agency in the same area?
No. Under French law, that is. Yes under other systems. But that is qualified by the right to cure.
Holding: No. This would be the same as a unilateral termination (resolution/rescission), which the contract did not allow for. The contract is still in force, and the creditor (the party making use of the right to stop performance) must remain ready to perform.
Olsona Co. v. Spauda,Inc. Lithuania: Supreme Court (1999)
Olsona Co. v. Spauda,Inc. Facts: On March 6, 1998 Olsona co. and Lithuanian National Radio and Television entered into an agreement by which LNRT undertook to publish an advertising supplement for Olsona. Olsona listed eight telephone numbers to take orders for advertisements.
Olsona Co. v. Spauda,Inc. The numbers actually belonged to Spauda, Inc., but under a lease agreement between Spauda (∆) and Olsona (Π), Olsona had the right to use them. Olsona did not perform its monetary obligation vis à vis the telephone lines, and therefore ∆ disconnected four of them. Π claims it lost 90,000 Litas profit because of this.
Olsona Co. v. Spauda,Inc. Did the Δ have a right to suspend its performance?
Olsona Co. v. Spauda,Inc. Did the Δ have a right to suspend its performance? The opinion relates that the trial court did find that the Δ had a right to disconnect the phones.
Olsona Co. v. Spauda,Inc. Perfect example of proportionality.
Olsona Co. v. Spauda,Inc. Q: Assuming the damages had been proven, what is the best argument that the ∆ had a right to suspend its performance?
Olsona Co. v. Spauda,Inc. Q: Assuming the damages had been proven, what is the best argument that the ∆ had a right to suspend its performance? A: In a bilateral contract, one party‘s obligation has as its objective cause the performance of the other party. Therefore non-performance excuses non-performance. This right to suspend was exercised proportionally.
Jalagier v. SociétéImmobilière LeRabelais France: Cour de cassation (1963)
Jalagier This relatively recent and very short case illustrates the attitude of the Cour de cassation (the "supreme court") of France towards specific performance, or, as it is known in the Continental law, performance in kind.
Jalagier As pointed out by Barry Nicholas, the result is that the creditor has a right to have what was done destroyed;
Jalagier there is no requirement that the creditor prove damages, which indeed in this instance he could not (having arguably received more than he had had a right to receive).
Jalagier Contractor built floors exceeding height limit Was ordered to tear down
Jalagier LT Louisiana PECL? Nope. Unproportional. LR CK § 188.8.131.52.
Jalagier PECL Applying § 9:102 (2)(b), the court would deny the prayed-for relief because "performance would cause the debtor unreasonable effort or expense."
Chem de fer d’Orléans v.Vidal France: Cour de cassation (1924)
Chem de fer d’Orléans v.Vidal Facts: Furniture being transported by rail was damaged. Lower court ordered their repair by the railroad company.
Chem de fer d’Orléans v.Vidal Issue: Can a court compel a party to do an act which it is not obliged to do under law or contract?
Chem de fer d’Orléans v.Vidal The case stands for the proposition that if specific performance is available that a party may be ordered to repair a faulty performance. But the lower court in this case had ordered repair of damages, not of the performance.
Weingarten v. Northgate Mall Supreme Court of Louisiana Louisiana: 404 So.2d 896 (1981)
Weingarten v. Northgate Mall Π=Tenant-Weingarten sued developer of shopping mall seeking permanent injunction to tear down an addition to a mall.
Weingarten v. Northgate Mall The lease provided that specific performance could be had without the necessity of showing irreparable harm or inadequacy of money damages.
Weingarten v. Northgate Mall The place where the addition was built had been a parking lot and Π’s customers now had fewer spaces; also some of the lot had been restricted for future expansion by Π. The trial court denied the relief.
Weingarten v. Northgate Mall The Supreme Court held that: courts are empowered to withhold specific performance in some exceptional cases even when specific performance is possible,
Weingarten v. Northgate Mall under circumstances of case, court would not specifically enforce lease by ordering destruction of major part of $4,000,000 building which shopping center developer erected in an area reserved to its tenant for customer parking.
Weingarten v. Northgate Mall we conclude that the legislative aim of the redactors of the code was to institute the right to specific performance as an obligee’s remedy for breach of contract except when it is impossible,
Weingarten v. Northgate Mall greatly disproportionate in cost to the actual damage caused,
Weingarten v. Northgate Mall no longer in the creditor’s interest, or of substantial negative effect upon the interests of third parties.
Weingarten v. Northgate Mall Rule 1): Regarding certain types of obligations, such as the obligation to deliver a thing, the court must grant specific performance, unless the specific performance is impracticable.
Weingarten v. Northgate Mall Rule 2): In regard to other obligations, there seems no longer to be a right to specific performance, but it is at the discretion of the court.
Suchan v. Rutherford Supreme Court of Idaho 410 P.2d 434 (1996)
Suchan v. Rutherford Δ vendor counterclaims for specific performance of what is essentially a contract for the sale of a farm in which the purchase price is payable over eighteen years.
Suchan v. Rutherford Is specific performance available to the vendor in a real estate contract when the price is payable over 18 years?
Suchan v. Rutherford Is specific performance available to the vendor in a real estate contract when the price is payable over 18 years? Under PECL answer would be no.
Suchan v. Rutherford PECL § 9:102: Non-monetary Obligations 1) The aggrieved party is entitled to specific performance of an obligation other than one to pay money, including the remedying of a defective performance.
Suchan v. Rutherford Is specific performance available to the vendor in a real estate contract when the price is payable over 18 years? Usually in the USA cts have granted sp perf to the vendor as well as the purchaser.
Suchan v. Rutherford Is specific performance available to the vendor in a real estate contract when the price is payable over 18 years? LT: Much less clear.
Suchan v. Rutherford Lt Cc § 6.213. Demand for Execution of the Agreement If a party does not perform a monetary [payment] obligation, the other party has the right to obtain specific performance.
Suchan v. Rutherford LT: Not really disproportunate. Price is more or less market price.
Suchan v. Rutherford LT: The best argument under Lithuanian law on the obligors part would be that the ordering of specific performance would greatly complicate the obligors situation (Lt Cc § 6.213.3).
Suchan v. Rutherford LT: There is no codal provision in LT (there is in Louisiana) regarding practicality of supervision by the court.
Northern Indiana Pub. Ser.Co. v Carbon County Coal Co. United States Court of Appeals, Seventh Circuit 799 F.2d 265 Decided Aug. 13, 1986
NIPSCO In 1978 NIPSCO and Carbon County signed a contract whereby Carbon County agreed to sell and NIPSCO to buy approximately 1.5 million tons of coal every year for 20 years, at a price of $24 a ton subject to various provisions for escalation which by 1985 had driven the price up to $44 a ton.
NIPSCO The contract was a fixed price contract, did not provide for change in price to favor seller, and stated exact amount of coal to be provided.
NIPSCO Nipsco used the coal to generate electricity.
NIPSCO NIPSCO, as things turned out it was indeed able to buy electricity at prices below the costs of generating electricity from coal bought under the contract with Carbon County;
NIPSCO Carbon County (supplier-seller) moves for specific performance.
NIPSCO Carbon County (supplier-seller) moves for specific performance.
NIPSCO Carbon County’s mine shut down, as NIPSCO was the only customer.
NIPSCO although a $$ judgement (121 million) will make the owners of Carbon County whole it will do nothing for the miners who have lost their jobs because the mine is closed and the satellite businesses that have closed for the same reason. Only specific performance will help them
NIPSCO specific performance is available only if damages are not an adequate remedy (Anglo-American rule!)
NIPSCO As to miners “But since they are not parties to the contract their losses are irrelevant. “
NIPSCO Indeed, specific performance would be improper as well as unnecessary here, because it would force the continuation of production that has become uneconomical. No one wants coal from Carbon Countys mine.
NIPSCO With the collapse of oil prices, which has depressed the price of substitute fuels as well, this coal costs far more to get out of the ground than it is worth in the market.
NIPSCO With continued production uneconomical, it is unlikely that an order of specific performance, if made, would ever actually be implemented.
NIPSCO Carbon County is seeking specific performance in order to have bargaining leverage with NIPSCO,
NIPSCO Under PECL Or LT? Disproportional. (Same result.)
NIPSCO Why does Posner claim that forcing CCCC to take coal from the ground would impose “costs on society greater than the benefits”?
NIPSCO Why does Posner claim that forcing CCCC to take coal from the ground would impose “costs on society greater than the benefits”? Wasteful and uneconomic. Far cheaper to buy substitute.
NIPSCO Why in such a contract should specific performance not be ordered?
NIPSCO Why in such a contract should specific performance not be ordered? 1. Adequacy of money damages (USA)
NIPSCO Why in such a contract should specific performance not be ordered? 1. Adequacy of money damages (USA) 2. Disproportunate cost to recalcitrant buyer (who could buy much much cheaper on the market)
NIPSCO Why in such a contract should specific performance not be ordered? Impracticality of supervision (coal mine closed) (but not a criteria in LT and PECL, is in Louisiana and elsewhere)
NIPSCO 5. How does Posner know that the parties will settle out and not perform the injunction?
NIPSCO 5. How does Posner know that the parties will settle out and not perform the injunction? The costs are prohibitive but most importantly they can settle so that everyone wins.
NIPSCO Then Carbon County would be making a profit of only $20 on each ton it sold to NIPSCO ($40- $20), while NIPSCO would be losing $30 on each ton it bought from Carbon County ($40- $10). Hence by offering Carbon County more than contract damages (i.e., more than Carbon Countys lost profits), NIPSCO could induce Carbon County to discharge the contract and release NIPSCO to buy cheaper coal. For example, at $25, both parties would be better off than under specific performance
NIPSCO 6. Why does Posner say that NIPSCO must pay damages? Why is there normally a damages right?
NIPSCO 6. Why does Posner say that NIPSCO must pay damages? Why is there normally a damages right? The risk of the change in market prices was assumed by NIPSCO. There is normally a damages right as a basic principle of contract law. No defenses are here available.
NIPSCO There is normally a damages right as a basic principle of contract law. No defenses are here available.
Madison Square GardenBoxing Inc. v. Earnie Shavers UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK 434 F. Supp. 449 1977
Madison Square GardenBoxing Inc. v. Earnie Shavers
Mad.Sq.Gdn v. Earnie Shavers Known as the "The Acorn" and "Black Destroyer", Shavers compiled one of the most amazing records in boxing history.
Mad.Sq.Gdn v. Earnie Shavers At one point he won almost thirty fights in a row by knockout. He scored over 20 victories in the first round alone, including that over Ken Norton.
Mad.Sq.Gdn v. Earnie Shavers Shavers fought Muhammad Ali at the Madison Square Garden on September 29, 1977 and, while almost flooring Ali with a right in the second round, he lost a close decision. Ali later said Shavers was the hardest puncher he ever faced.
Mad.Sq.Gdn v. Earnie Shavers Π Madison Sq Gdn seeks specific enforcement to enjoin Δ Shavers, a heavyweight contender, from participating in any boxing match until he fulfills his contractual obligations to plaintiff.
Mad.Sq.Gdn v. Earnie Shavers Shavers wants to fight for someone else and has received a 30,000 USD advance for it.
Mad.Sq.Gdn v. Earnie Shavers This is a personal services contract.
Mad.Sq.Gdn v. Earnie Shavers LT Cc 6.213 (vykdymas natūroje galimas nebent) 5) neįvykdyta prievolė yra išimtinai asmeninio pobūdžio.
Mad.Sq.Gdn v. Earnie Shavers PECL Article 9:102 (2) Specific performance cannot, however, be obtained where: (c) the performance consists in the provision of services or work of a personal character or depends upon a personal relationship
Mad.Sq.Gdn v. Earnie Shavers But This is of an obligation not to do.
Mad.Sq.Gdn v. Earnie Shavers Louisiana Civil Code Specific Performance §1986. Right of the obligee Upon an obligors failure … not to do an act …the court shall grant specific performance.
Mad.Sq.Gdn v. Earnie Shavers Ct found Shavers to be without question Earnie Shavers talents are "unusual, unique [and] extraordinary"
Mad.Sq.Gdn v. Earnie Shavers Ct found And that the contract is not unconscionable
Mad.Sq.Gdn v. Earnie Shavers Ct found the Garden would be to a measurable extent, irreparably injured as a viable promoter of major boxing matches were Shavers with impunity able to simply disavow a prior agreement with the Garden to take advantage of a later- made more attractive offer.
Mad.Sq.Gdn v. Earnie Shavers French Law of Contract Where ... the Comedie Francais sought to enforce against one of its actors his contractual undertaking not to appear with another company, an astreinte was imposed.
Mad.Sq.Gdn v. Earnie Shavers 1. Why not order an injunction?
Mad.Sq.Gdn v. Earnie Shavers 1. Why not order an injunction? Best arg: personal services.
Mad.Sq.Gdn v. Earnie Shavers 2. What kinds of damages will Top Rank seek from Shavers? Will Top Rank succeed? Why is a negative injunction necessary?
Mad.Sq.Gdn v. Earnie Shavers 2. What kinds of damages will Top Rank seek from Shavers? Expectation damages (lost profits) Will Top Rank succeed? Probably.
Mad.Sq.Gdn v. Earnie Shavers Why is a negative injunction necessary? Damages … would Shavers have the money?
Mad.Sq.Gdn v. Earnie Shavers Why is a negative injunction necessary? Also-damage to Madison Sq Garden’s reputation and ability to arrange such events.
Mad.Sq.Gdn v. Earnie Shavers 3. What other jobs are enough like Shavers’ that an employer could get a negative injunction to prevent harm from a breach?
Mad.Sq.Gdn v. Earnie Shavers LR CK § 6.213 (galima nebent) 3) turinti teisę gauti įvykdymą sutarties šalis gali protingai gauti įvykdymą iš kito šaltinio;
Hadley v. Baxendale England: Court of Exchequer (1854)
Hadley v. Baxendale Δ undertook to transport a crankshaft to another town to be repaired, and then to return the crankshaft.  Hunter, Modern Law of Contracts § 14:10 [supra n. 88].
Hadley v. Baxendale There was evidence to indicate that the Π millers (Hadley) had informed ∆ that the matter was urgent, and that the ∆ stated “they could quickly deliver the broken crankshaft to and from the town in which the repair shop was located.
Hadley v. Baxendale The defendants did not deliver as rapidly as they promised; consequently, there was a substantial delay in getting the shaft repaired and back to the mill.
Hadley v. Baxendale The plaintiffs did not have a spare shaft, and the mill was shut down the entire time that the shaft was in transit and in the shop.
Hadley v. Baxendale Because the defendants did not live up to their promises of speedy delivery, the plaintiffs sought to recover from them the profits they lost for the time that the mill was closed.”
Hadley v. Baxendale Π did not inform Δ that the crankshaft was the only one they had and that therefore the mill was inoperable until it was repaired and returned.
Hadley v. Baxendale Π did not inform Δ that the crankshaft was the only one they had and that therefore the mill was inoperable until it was repaired and returned.
Hadley v. Baxendale Is a party liable for damage it caused but did not foresee?
Hadley v. Baxendale General damages. A party is entitled to recover damages which flow naturally from a breach.
Hadley v. Baxendale Special damages. A party is entitled to recover damages which otherwise were in the contemplation of the parties at the time of the formation of the contract.
Hadley v. Baxendale Best arg. for Π: ∆’s non-performance (delay in performance) did indeed cause the damages complained-of and therefore ∆ should be liable for them.
Hadley v. Baxendale Best arg. for Π: ∆’s non- performance (delay in performance) did indeed cause the damages complained-of and therefore ∆ should be liable for them.
Hadley v. Baxendale Q: Must a party expressly agree to special damages in order to be liable for them? What if a party at formation merely has knowledge that the other party would suffer lost profits in the event of a breach?
Hadley v. Baxendale Larroumet: Droit Civil “If an obligor knows at formation that if it fails to perform that the other party will be liable under a second contract with a third party to that third party,
Hadley v. Baxendale Larroumet: Droit Civil then the obligor, if it fails to perform, will be liable for the second party’s losses for failure to perform under the second contract.”
Rockingham County v.Luten Bridge Co.(The Bridge To Nowhere Case)35 F.2d 301.United States Court of Appeals, FourthCircuit, 1929.
Rockingham County v.Luten Bridge Co.Π Luten Bridge undertook toconstruct a bridge for appellant-defendant Rockingham County.
Rockingham Cty v. Luten Brdge Co. Π Luten Bridge undertook to construct a bridge for appellant- defendant Rockingham County.
Rockingham Cty v. Luten Brdge Co. Rockingham County repudiated the contract.
Rockingham Cty v. Luten Brdge Co. At the time of the repudiation, Π had spent ~ 1900 USD. (The county cancelled the road construction as well.)
Rockingham Cty v. Luten Brdge Co. Π Luten Bridge did not cease work. It constructed the bridge (now leading to nowhere) and sued for nearly 19,000 USD.
Rockingham Cty v. Luten Brdge Co. Ct: “His remedy is to treat the contract as broken when he receives the notice, and sue for the recovery of such damages, as he may have sustained from the breach, including any profit which he would have realized upon performance, as well as any other losses which may have resulted to him “
Rockingham Cty v. Luten Brdge Co. No right to pile up damages.
Rockingham Cty v. Luten Brdge Co. This is sometimes called the ‘duty’ to mitigate.
Rockingham Cty v. Luten Brdge Co. Not really a duty since duties are owed to the other party.
Binka v. Bartusevičius Lietuvos Aukšč. Teismas Civilinė byla Nr. 3K-3-344, 1999 m.