Law School Legends Audio on Contracts
Author:
Epstein, David G.
Edition:
6th
Copyright Date:
2024
10 chapters
have results for Law School Legends Audio on Contracts by Epstein, David G
Introduction 1 result
- This is a review of the first year course in contracts. My name is David Epstein. I've been teaching contracts at various law schools since 1971. More important than that, I've given more than 50 contracts exams and figure I've probably graded more than 2,500 contracts exam papers. I think that's what's more important because the primary purpose of this recording is to help you make the best possible grade on your contracts exam. Now, I understand that your contracts exam is going to cover the cases that you were assigned. I understand that every professor assigns different cases. But regardless of the cases that you were assigned this semester, this year, your contracts exam, every single fact pattern on that contracts exam is going to involve some combination of the eight questions I'm fixing to talk with you about. But before I get started talking about those eight questions, I think it'd be very helpful if you have your own copy of my lecture notes that accompany this audio. If...
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Question 8 14 results (showing 5 best matches)
- There are two ways someone who is not a party to a contract has rights under a contract that they did not make. The first such way is third party beneficiary. Now just as home sale contracts, easiest way to understand law of conditions, even though conditions are not limited to home sale contracts, life insurance is the easiest way to understand third party beneficiaries, even though third party beneficiary law not limited to life insurance. I enter into a contract with State Farm, a life insurance contract, and I name Sharon Stone as my beneficiary. That's a contract between two people, Epstein and State Farm. Sharon Stone is not a party to the contract. She didn't make any agreement and she certainly didn't provide any consideration to either of the parties to the contract.
- And so, Second Bank has gained contract rights under a contract it did not make. Under those facts, we would call First Bank the assignor. We would call Second Bank the assignee. And we would call you the obligor. And so, in contract talk, the assignee can recover from the obligor. Second Bank can recover from you. Since First Bank has sold, assigned the mortgage to Second Bank, it no longer has any rights. And so, we say under contract law, the assignor cannot recover from the obligor. First Bank having assigned your rights, transferred contract rights to Second Bank, no longer has any rights.
- Nonetheless, even though she was not a party to the contract, she didn't make an agreement, she didn't provide consideration. When I die, she has a contract law right to be paid the policy benefits. She is a third party beneficiary. But again, that's not limited to insurance law. Your casebook may well have included the classic case of Lawrence against Fox where Holly owed Lawrence and Holly made a loan to Fox who agreed to repay what Holly owed Lawrence. And Fox breached the contract with Holly. Lawrence sued Fox and was able to recover.
- But let me give you an easy example of someone who was not an intended beneficiary. I have a worthless piece of land. The person who owns the land next to mine contracts with Disney World for a Disney World to be built on the track of land adjacent to mine. That contract will benefit me tremendously. But that was not the intent of the contracting parties. They had no intent to benefit me. I have no contract rights. Now the other way a person gains rights under a contract that they did not make is an assignment. An assignment. An assignment of contract rights. And so, for example, you buy a house and you get a home mortgage from First Bank. And First Bank then sells that mortgage to Second Bank. You didn't make a contract with Second Bank, but the contract you made with First Bank has been assigned to Second Bank.
- Okay. That brings us to the last of the eight questions. Up to this point, when talking about contract issues, we've simply been talking about the impact, role of the two parties to the contract. The eighth and final question is the effects of a contract on third parties. Easy exam key. Tip. Count the number of names in the fact pattern. If it is a contract's question with only two names in it, then this eighth question is not part of that question. You need to have at least three names. Now where you have three names, you determine which two were parties to the agreement. And then we need to consider whether that third party has either rights or duties related to this contract that they were not a party to.
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Question 5 13 results (showing 5 best matches)
- Second fact pattern to watch for is death or incapacity of a person who is essential, necessary to the performance. Now, we need to contrast death after an offer to death after a contract. Death after an offer terminates the offer. Death after a contract turns on whether the person is necessary to the performance. Because death post-contract is not always an excuse. If that was the law, nobody would enter into a contract with old people like me. We can't make that contract with Epstein. He's old. He's fixing to die. And so, death does not generally excuse. When I die, my estate's going to be liable for my debts. But it's not just debts. At least in theory, although hopefully it doesn't happen in practice, that if O makes a contract with P to paint O's house for $100 and P dies and O has to pay $125 for another painter, then P's estate's liable for the difference. But if on the other hand, the person who died had unique skills or a unique reputation, who wasn't a house painter, it...
- The first is non-occurrence of a condition. We use the term condition to talk about contract language. It's unusual contract language because most contract language creates a promise and language of condition is not a promise creator, it is a promise modifier. Well, that's awfully abstract. I think the easiest way to learn the law of conditions and to understand the law of conditions is to consider a home sale contract. So let's talk about a home sale contract. Common provision in a home sale contract is something like this. Closing is condition of buyers obtaining a mortgage at not more than 7%. That's language of condition. That language does not create an obligation, it modifies an obligation otherwise created. Now language of condition, not limited to home sale contracts, law firm agrees to hire you as a summer associate if you finish in the top 10% of your first-year class. You're not obligated to finish in the top 10% of your law school class. You're not in breach of contract,...
- But sometimes conditions can be eliminated. Conditions can be eliminated by the person protected by the condition. That's called waiver. That sounds awfully abstract. Let me say it again. I'm not sure it makes sense. Conditions can be eliminated by waiver by the person protected by the condition. Let me give you an easy example of waiver. And so we have this home sale contract that's conditioned on the buyer getting a mortgage at not more than 7%. And they get a mortgage at 7.1%. They say, "Well, I want the house anyway. I want the house anyway. I'm going to get the house." They can waive the condition. The second way conditions can be eliminated is by the court saying that to enforce the condition would be unfair, would be a forfeiture. For example, somebody's had car insurance for 40 years, never had an accident, had a fender bender. The insurance policy conditions coverage on giving notice within 30 days, day late on the notice. Court might say, that's unfair. This person has...
- Now, third possibility, and this is the one most likely to be tested though, is later government regulations that affect the ability to perform without violating that later government regulation. One more time, we need a later government regulation. But here's the key. That later government regulation affects the ability to perform. For example, somebody buys a ticket to a Broadway show and travels across country to see this show. But between the time of the contract and the date of the promised performance, COVID breaks out, COVID regulations break out, Broadway gets closed. Well, it's not possible for the play to come on without violating the law. And so performance of the play is excused. But if on the other hand, what we have here is a contract by the owner of the theater to pay rent and COVID has closed the theater. Paying rent doesn't violate that government restriction. And so payment of rent would not be excused.
- Now, if there's any ambiguity, contract language is treated as something other than condition. The word you use on your exam essay is conditions are disfavored. And so if it's ambiguous as to whether this is a promise modifier, then it's not language of condition. And one of the reasons that conditions are disfavored is that language of condition must be strictly complied with. If the condition is getting a mortgage at not more than 7%, then a 7.1% mortgage doesn't satisfy that condition. The home buyer is excused. The home buyer doesn't have to buy the home. Or if you finish in the top 11% of your class and the deal was you have a job, if you finish in the top 10%, that's not strict compliance. The condition has not been satisfied. The law firm is excused. Now there's no breach by either party. You didn't breach, you didn't promise to finish in the top 10%. That wasn't what was bargained for. This was not language of obligation. This was language that modified a promise otherwise...
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Vocabulary and Conclusion 26 results (showing 5 best matches)
- Now, if we have an agreement, we don't necessarily have a contract because contracts require consideration. Consideration on law school exams, person-specific. We deal with consideration issues by identifying the promise-breaker and asking ourselves, did the promise-breaker ask for something in return for the promise? And did the promisee, the promise enforcer, sustain a legal detriment in the form of performance or forbearance, or promise to perform, or promise to forbear? And we know that things that happened before a promise cannot be consideration for a promise. You can't bargain for something that has already happened.
- Okay, it's a danger point again. I'm starting to rhyme. But let me just real briefly move from these 70 words that you need to be able to use to two other words that are essential for you to use multiple times in any exam essay, not just contract exams, any of your law school exams.
- Then we have the common law mirror image rule. Under early common law, if the response to an offer simply adds a term or changes a term, then it's a rejection. Now, Article 2 rejected the mirror image rule and replaced it with 2207. And we know that a seasonable expression of acceptance that adds terms or even changes terms is an acceptance unless it is expressly conditioned on assent, not just conditioned, but conditioned on assent to the new or different term. Now, if we have such express condition on assent, then we look for a 2207.3 contract based on conduct.
- In writing essay answers in any law school exams, there are two words that you have to use. First is here, H-E-R-E, because when you're using the word here, you are applying law to the facts your professor has given you. Here, here, here. That needs to run throughout your exam.
- Acceptance turns our caterpillar into a butterfly. Now, the offer can require acceptance by performance, in which case we're looking at a unilateral contract, or can require acceptance by promise, in which case we're looking at a bilateral contract. But we probably are simply looking at history because today, unless the offer expressly requires a particular method of acceptance, either promise or performance can be acceptance.
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Question 1 3 results
- One more thing to remember about Article 2. Article 2 is part of the Uniform Commercial Code and that word commercial is misleading Because Article 2 applies to every sale of goods. Now, there are special rules for people who are business people called merchants, but Article 2 applies to every sale of goods. Article 2 does not totally preempt common law. And so if you have a question involving a sale of goods, you may need to use common law as well. But most exam questions that cover Article 2 emphasize the nine UCC Article 2 sections that are listed in my notes and then I'll cover with you in the course of this audio. That's what you need to know about the first question. And again, that first question is going to be a part of every contracts exam question.
- Now, there are special rules for growing crops and for minerals, but you're not going to see that on your contract's exam unless your contracts professor also teaches ag law or teaches oil and gas. Now, what you might see on your contracts exam is a mixed deal, a deal that involves goods and services or a deal that involves goods and land. A sale of a house with the furniture in the house or a sale of an automobile that has a service contract as part of the deal. Now, when you encounter one of those mixed deals, goods and services or goods and real property, it's an all-or-nothing proposition. Either Article 2 applies to all aspects of the deal or Article 2 does not apply to any of the deal. And it's a more important part test. If it comes up on your exam, it's obvious it's going to be either primarily a sale of goods or primarily a sale of something else, an all-or-nothing test.
- The first question in every contracts exam FACT pattern is the question, is this a sale of goods? Because if it's a sale of goods, we're going to have to do Article 2 of the Uniform Commercial Code. Now, sale means change of ownership. In a sale, the person who was the owner is the seller. The person who becomes the owner is the buyer, easy enough. Now, goods means something that was movable at the time of the contract. It must be movable at the time of the contract. And so, for example, a sale of bricks is going to be covered by Article 2. But if those bricks are used to build a house and later that house is sold, that's not a sale of goods. It has to be movable at the time of the transaction.
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Question 3 7 results (showing 5 best matches)
- That paying a bonus for doing a good job painting the house also triggers our third possible consideration issue on your final exam. That is contract modification. Under common law, which would apply to painting a house, modifying a contract requires new consideration. And so in the Alaska Packers case, it's in most contracts case books, the promise to pay the fisherman $100 and not $50 for doing what the court perceived to be exactly the same work was not legally enforceable. It was a contract modification and there was no new consideration.
- Now, let's talk about the third question. The third question is whether there is consideration or a consideration substitute. In order to have a contract, we need consideration. Consideration can be defined as a bargain for legal detriment. Now, consideration is person-specific. What do I mean by that? Well, let me put it this way. There are three steps in doing consideration on an exam.
- Now, Article II has a different rule. Article II says you don't need consideration for contract modification. Just has to be good faith. So we've already encountered three of our special Article II rules. The firm offer rule 2207, contract modification. Now the restatement borrows a lot from the UCC. And under the restatement, you don't need consideration for contract modification if there have been unanticipated changes in circumstances.
- Now, the law with respect to promissory estoppel varies tremendously from state to state. And so is not as heavily tested as consideration. Okay, we have talked about three of the eight questions. Does Article II apply? Is there an agreement? And does the promise-breaker get consideration for their promise? Did the promise-breaker ask for something in return, bargain for something in return?
- Okay, let's move to something more important. Let's move to the third question. I've talked with you about the question, do we have to apply Article II because it's a sale of goods? I've talked with you about the second question. Is there an agreement? The question that's going to be triggered by a fact pattern that has a series of communications.
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Question 4 32 results (showing 5 best matches)
- Now, on the other hand, non-disclosure, failure to say something is generally not a defense. There's generally no duty to disclose. If there were not consumer protection laws, then it would be perfectly okay under contract law for a home seller not to tell the buyer there are termites in the house. There is generally no duty to disclose.
- Another heavily tested defense is misrepresentation. What we're looking for is a false fact statement by a person seeking to enforce the agreement. The seller who is seeking to enforce a home sale contract made a false statement about whether there were termites in the house. What we're looking for is a false statement of existing facts by the plaintiff, and it must be material, and it must be relied on by the person who is asserting the misrepresentation defense.
- The fourth possible defense involves not just problems with the terms of the contract, but problems with the agreement process, and that's unconscionability. Now unconscionability originated in Article 2, 2-302. It's our fourth Article 2 provision to watch for. But unconscionability has now become a part of the common law. Common law has in essence incorporated 2-302 with all of its specifics. And so if you have your UCC handy, it's going to be helpful to look at 2-302. And we see in 2-302 that unconscionability, we see this phrase as a matter of law. And that tells us that even though unconscionability is very fact-specific, it's always decided by the judge.
- Third defense is the agreement is not enforceable because of uncertainty created by ambiguous contract language. Now we have two kinds of ambiguous language to watch for. First is the obvious on its face, patent, P-A-T-E-N-T, ambiguity. Like in the case that appears in many contracts books, Varney against Ditmars, fair share of the profits. But we might also find fatal uncertainty, an uncertainty defense based on a non-obvious, a latent ambiguity like Raffles against Wichelhaus. And only when we knew that there were multiple ships Peerless did we know that ex-ship Peerless was ambiguous.
- Second, we see the phrase at the time of the contract. Unconscionability is determined by the world as it existed as of the time of the contract. And we then see the phrase all are part. A court can conclude that the entire agreement is unenforceable because of unconscionability, or decide that the unconscionability defense only applies to a specific term and the rest of the agreement is enforceable.
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Question 2 10 results (showing 5 best matches)
- Now, look again at that language at the end of 2-207(1), conditional on assent to, and underscore those words on assent to. If it simply says acceptance is conditioned on your agreeing to Saturday delivery, we still have a contract. That's simply conditional. But if on the other hand, it says acceptance is conditional on your agreeing to Saturday delivery, we don't have a 2-207(1) contract. Now, if we have a 2-207(1) contract, you look to 2-207(2) to determine if additional terms in the second communication make it into the contract. The first sentence of 2-207(2) gives you the general rule, that those additional terms that appear for the first time in the responsive communication or mere proposals, they're not a part of the contract. Now, the second sentence of 2-207(2) sets out the exception, if and only if both parties to the contract are business people or merchants, then the additional terms are part of the contract unless A, B, or C, unless objected to or more important,...
- Now, if the offer requires some action as acceptance, we call that an offer to enter into a unilateral contract. If the offer calls for some promise as the form of acceptance, we call that an offer to enter into a bilateral contract. Those terms unilateral and bilateral were once important. But today, the presumption is that unless the offer otherwise expressly indicates that it can be accepted either by performance, either by performance or by promising to perform. Now, if acceptance is by performance, the general rule is notification is not required. Performance is enough, unless the facts indicate that the offeror will not know that the performance has occurred. But if the acceptance is by a promise to perform, then the acceptance is not effective until the offeror has been notified. Now, that triggers something called the mailbox rule. If you have not heard the term mailbox rule before, be thankful you've got a good prof and just fast forward on this tape. But some profs still...by
- Sometimes we have facts that trigger that conditioned on assent to exception. If so, look at the conduct of the parties. And if, notwithstanding that language in the responsive communication, the goods have been sent, kept, paid for, we have a 2-207(3) contract and the terms are limited to the terms that appear in both of the communications. Okay, we're almost there to having an agreement. We have determined which communication is an offer, and we've looked at what if anything happened after the offer and have determined that the offer has not been terminated. Then we're looking for acceptance. And acceptance is important because acceptance turns our caterpillar into a butterfly. Offers can be terminated. Contracts cannot be terminated by the action of one of the parties. And so, we need to figure out what is acceptance. Now, the offer can require a particular form of acceptance. The offer can say, for example, "This offer can be accepted only by your handing me the cash." We have a...
- Now, when we have identified a communication as an offer, we are on the way to having a contract, but we are not there yet. You need to think about offers as caterpillars and contracts as butterflies. Just as every caterpillar doesn't make it to a butterfly, every offer doesn't make it to a contract. Some offers get terminated. Let me use a more vivid imagery of death. Some offers get killed. We need to watch for what happens or doesn't happen after that offer to see whether that offer has been terminated. Death or incapacity of either party terminates the offer. Lapse of time, too long a delay in the offeree responding to the offer terminates the offer. Red flag, if you get a fact pattern that gives you the date of the offer and gives you the date of the response, your mindset's got to be every fact is given to you for a reason. And the only reason they're going to give you those dates is for you to raise the issue of whether the offer has lapsed.
- The second situation in which an offer cannot be revoked is our first of nine special Article 2 rules called the Firm Offer Rule. The Firm Offer Rule is a very specific fact pattern in which it's an offer to buy or sell goods. Second necessary fact, the person making that offer is a merchant, a business person. Third necessary fact is that that person expressly promises not to revoke and finally that promise not to revoke is in a writing signed by that merchant. Now, there is a three-month maximum on firm offers. And so, if a merchant in a writing expressly promises not to revoke the offer for five months, it is irrevocable for three months, a three-month maximum. Now, the third way an offer becomes irrevocable is where we have these two facts, a promise by the offeror not to revoke and reliance on that promise by the offeree.
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Question 7 7 results (showing 5 best matches)
- Now, contract terms can come from places other than the words of the parties. Conduct can supply a contract term. And we have three kinds of conduct. Course of performance. That's what has already been done under this contract. And so, we have a contract for weekly delivery of pizzas, that doesn't say anything about day of the week on which the delivery is to occur. But, for 47 weeks, delivery has been on Monday. That course of performance can serve to add a term, Monday delivery. Or, if this is a new weekly delivery of pizza contract, but, for six years, there have been similar contracts between the parties, and those similar contracts didn't say anything about day of delivery, but it's always been Monday, then that may well be added as a term, that we call that "course of dealing." And, custom and usage can also be a source of contract terms, if the parties are in the trade and aware of the custom and usage.
- Finally, courts sometimes supply terms. You may have covered the case of Wood against Lucy, Lady Duff-Gordon, where Lady Duff-Gordon agreed that Wood would be her exclusive agent. But, after so agreeing, went off and used someone else, and said, "Well, it's okay, because there was nothing in the contract that said what Wood was obligated to do." In the court, in this instance of exclusive agency, implied reasonable efforts. I think the implied contract term you're more likely to be tested on if it was covered in class is the implied duty of good faith and fair dealing. And so, if, for example, the franchise agreement doesn't say anything about location of other franchisees, courts will say that the franchisor must act in good faith, and be fair in its location of other branches. But if, on the other hand, the contract expressly gives the franchisor the power to put franchises anywhere, courts generally say that while there is an implied duty of good faith and fair dealing, in every
- Statutes can supply contract terms. Now, listen up. If your professor covered implied warranty of merchantability and implied warranty of fitness, then you need to listen to what I'm fixing to talk about. If it wasn't covered in your contracts class, unless your professor is really a bad guy, not gonna be on your exam, and you can fast-forward. But, let's talk about these two implied warranties. Implied warranty of merchantability. We need it to be a sale of goods, and, we need the seller of the goods to be in the business of selling goods of that kind. One more time. You look at who the seller is, and what that seller regularly does. If the seller is in the business of selling goods of that kind, then it creates an implied warranty of merchantability, fit for ordinary purposes. And so, if you buy a watch from a jewelry store, and nothing is said about the quality of the watch, the watch has gotta tell time, got to be fit for ordinary purposes. Implied warranty of merchantability. If,
- Now, whether it is a complete integration or a partial integration, or not even an integration, is determined by the court. One important factor, particularly if both parties were represented by a lawyer, is something called a merger clause. M-E-R-G-E-R. And a merger clause simply says, "This is the complete and final agreement." Now, while it is called the parol evidence rule, there are actually two primary parol evidence rules. First, if we have any kind of integrated agreement, complete or partial, parol evidence that contradicts a writing cannot even be considered. Parol evidence that contradicts an integrated agreement, whether it's complete or partial, cannot even be considered. Parol evidence number two. If, however, the parol evidence does not contradict, but simply fills gaps, adds to, then it can be considered, won't necessarily be included, but it can be considered by the court unless the court concludes that there was a complete integration.
- Now, there is a second kind of implied warranty. This is the implied warranty of fitness. Here, we must have a buyer that has a particular purpose. Buyer is buying shoes for mountain climbing. The buyer has a particular purpose. Requirement number two, the seller is aware of that particular purpose. And, requirement number three, the buyer is relying on the seller to provide appropriate goods. Where those three requirements come together, we have an implied warranty of fitness for that particular purpose. Now, if you covered 2-314 and 2-315, merchantability and fitness, you probably also covered 2-316, disclaimer, a contract provision that eliminates implied warranties of merchantability and fitness, and, such a provision that seeks to eliminate implied warranties of merchantability and fitness, must be conspicuous. Different font, different color, different print, stand out, and, must specifically mention merchantability unless it uses the term "as is," or the term "with all faults."
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Question 6 15 results (showing 5 best matches)
- Now, while the most common form of money damages, or expectation damages, that's not the only possibility. Courts sometimes award reliance damages, particularly where it's hard to figure expectation damages. Now, reliance damages has as its goal putting the non-breaching party in the same position as if no contract. I contract to sell you my '72 Cadillac. Because a '72 Cadillac is bigger than a battleship, you have to enlarge your garage. I breach the contract. You may well want to sue for reliance damages, the cost of building the garage, because in order to put you in the same position as if there had been no contract, you would not have built the new garage, but for the contract. The other commonly-accepted approach to money damages is what's called restitution damages. That focuses on what the breaching party received from the non-breaching party.
- Second kind of contract provision is liquidated damages, a contract provision that fixes the amount of damages, or tells you how to determine damages. Now, with respect to liquidated damages provisions, the concern is always, on an exam, whether the liquidated damages provision is too high. Too high. Because remember, courts can only compensate, not punish. And so, the thinking is that if a court cannot punish a contract breacher, then a party to the contract with superior bargaining power can't insert a punishment provision. And so, the concern with liquidated damages is always whether it's too high. And, it's a two-part test for validity of liquidated damages. Test number one is whether damages are difficult to predict at the time of the contract. Whether damages are difficult to predict at the time of the contract. And second, whether this is a reasonable prediction.
- One more aspect of specific performance to remember. Since it is an equitable remedy, look for an opportunity to use what are called equitable concepts, the term equitable maxims, M-A-X-I-M, such as, "He who seeks equity must do equity." Plaintiffs must have clean hands. And so, if a plaintiff seeking specific performance has done tacky things, they're unlikely to get the equitable remedy of specific performance. Now, your contracts professor may well have taken the modern view, that courts are more willing to grant specific performance today, and if that's what your professor thinks the law is, then at least for purposes of your exam, that indeed is what the law is. But, in the rest of the world, the remedy is money damages. And so, we're gonna spend a longer time on money damages.
- The purpose of money damages is to compensate the plaintiff, not punish the defendant. There are no punitive damages in contract law, all about compensation. And the most common form of compensation is what is called protection of the expectation interest. Expectation interest damages. The thinking is that when people make a contract, they believe the contract would be performed. And so, protection of the expectation interest simply means putting the plaintiff, putting the non-breaching party in the same position they would have been in if there had been no breach. More specifically, there are three simple steps in doing expectation damages. First, dollar consequence of no breach. Second, dollar consequence of a breach. Third, comparing the two, subtracting two from one. And, again, awfully abstract. Gets a lot easier with examples.
- Second limitation, plaintiff cannot recover avoidable damages. You might have been assigned the Rockingham County case, in which there was a contract to build a bridge, and the contract was breached, but the building company continued to build the bridge. Those post-breach costs were avoidable, and not recoverable. You also may have been assigned Parker against Twentieth Century-Fox, where Shirley MacLaine had a contract to star in a musical, "Bloomer Girl." Twentieth Century-Fox breached, but offered her a part in a western, and argued that she could have avoided the loss by simply starring in the western. Court said those were not avoidable damages, too big a difference between a western and a musical.
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- Publication Date: August 9th, 2024
- Subject: Contracts
- Series: Law School Legends Audio Series
- Type: Audio
- Description: With Law School Legends, students get a brilliant law school professor explaining an entire subject in one simple, dynamic lecture. In this audio lecture, Professor David Epstein explains the important contract law concepts, the relationship among those concepts, and how a student can use the concepts to answer any question a professor might ask in class or on the exam.
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