合同法ClassNotes7.docx

Class Notes 9/21/2011We wondered, given the prevalence of the entirety presumption at the time (which would mean that the contract was not divisible, so that employee would have to work for the entire year before he could be paid for any of it), WHY the employee in Brittain v. Turner would walk away from a job after 9.5 months, with so much time and labor invested and relatively so little timeremaining. Ria theorized that perhaps the employee left to take a much better paying job, one that paid enough to make up for not collecting anything for the time he worked under the Turner contract. This is a plausible notion. Hamadhad another suggestion: perhaps the employee quit because, although the job hadnt been particularly hard to perform for the past 9.5 months, suddenly it had become much more onerous. Hamads idea is actually close to something Judge Joel Parker was concerned about: The judge said that he worried that, if there were not a restitutionary remedy to compensate the breaching employee, Turner (and other employers in the future) would be tempted to make the employment miserable in order “to drive the laborer from his service near the close of his term” so that the employee would not have to be paid. The willfulness or non-willfulness of the employees leaving, or the fact that he was a contract breacher, was not a factor in the courts decision, however. Contract law is morally indifferent to whether or not a party breaches, and only cares how the parties fare economically, so the court based its decision on economic, not moral, factors. Restitution was due simply because, without a remedy, the employer would be unjustly enriched (ie, he would gain the benefit of the employees work without paying for it). After deciding that the employee should be compensated, the next thing the court had to decide was HOW MUCH was the proper amount to award. That is, what should be the proper measure of restitution? The court affirmed the jury award, which, as Fahhad told us on Monday, was obviously the contract rate, prorated. But if the actual value of the employees work had been worth LESS than the pro-rated $10/month contract rate, under quantum meruit, the employee would recover the lesser amount. Reason: The focus of restitution is the benefit actually realized by the other party. As Ju explained, the actual market valueof the work performed, not the contract price, is the proper way to measure the defendants enrichment. The court was not enforcing a contract here, but was awarding restitution for unjust enrichment. On the other hand, even though the value of the benefit realized by the defendant is the measure of his unjust enrichment, if the employee were to prove that his work was worth MORE than the contract rate, the employee should not be permitted to recover at the higher rate. Reason: because if that were allowed, we would be encouraging him to breach the contract to his own advantage. So the contract rate sets the ceiling on the breaching employees recovery. Hamad pointed out that if, the employees quitting early had resulted in some economic damage to the employer (i.e., if the employer had to hire a more expensive worker on an emergency basis, or if his crop rotted because it couldnt be harvested in time) then the employers damages would be deducted from the employees restitution recovery. In an extreme case, the damages could conceivably exceed the unjust enrichment, so there would be no recovery by the employee, and, in fact, the employer might recover! In such a case, however, the employer would be the one initiating the lawsuit, not the employee.Clara explained that the rule announced in Brittain v. Turner would apply to future contracts only where parties did not expressly provide otherwise. As Ria succinctly put it, Brittain v. Turner is the default rule. We thought about advice to a client who wanted to hire a new employee. Our hypothetical client wanted his lawyer(you guys) to draft a 1-year employment contract. The employees first 6 months would be spent mostly in training, so the client would get little benefit from the first 6 months. Many good suggestions were made, and here are several of them: Eason, wanting to avoid any potential Brittain v. Turner problem that might award the employee a pro-rated salary if he quit early, suggested that the contract should state explicitly that the employee will be trained for the first 6 months, and that compensation wont begin to accrue and be paid until the 7th month. Linqi suggested that the contract could specifically provide a lower salary during the training period, and that the amount could be retrospectively increased if the employee stayed beyond that period. LiKe suggested a contract that essentially reflects the Brittain v. Turner formula: there would be a monthly amount of compensation, but the contract would provide that the employee would have to reimburse the employer for the costs of training (ie, damages) in the event of an early breach during the first six months. At the time Judge Parker wrote this opinion, the common law was unsettled as to whether restitution would be available to an employee breaching a long-term employment contract by departing early. As Udi, semi-jokingly, stated, the judge, rather than weighing established precedents (which were divided), “made up” the law. Instead of “finding” the law, the judgeevaluated, in a practical way, how various rulings would operate in the context of the real world. This Judges approach to decision making, as Clara noticed and explained, is an excellent example of judicial realism (versus formalism). We considered a hypothetical in which I hired an artist to paint a painting for me. The artist said it would take 3 months to paint the painting, and the contract price was $300. After a month of work, the artist quit, leaving an unfinished painting. I asked the class if I had to pay the artist anything, and, if so, how to measure what was owed. As Guangdong noted, if this hypothetical is to be governed by Brittain v. Turner, I would have to pay whatever the painting is worth, because otherwise I would be unjustly enriched. Mohammad Alajemi pointed out, however, that the cases are distinguishable because I had contracted for a “specific thing,” a finished product, so that, unlike the farm owner in Brittain v. Turner, who had had the benefit of the employees work on his land, I had not been contracting for the artists labor. The labor would not have enriched me. Ruming added that the creation of a painting is not divisible in the same way that a year offarmwork would be. I imagine that my case would turn on whether or not I kept the painting. If I kept the painting, I think Guangdong would be right, in that I would have to pay something for it. If I did not want, or did not receive, the painting, I think that Mohammad and Rumings arguments would prevail, because I would not have benefited at all from the labor. Hey! I want to know which students are doing a faithful job reading these notes! If you are reading this, please email me (FJL3) a message saying, “I read the notes!” If I receive your message before noon on Monday the 26th, you will receive a treat in class!Okay, now back to the notesPromissory Estoppel* as an Alternative Basis for Enforcing a Promise*Thomas- Thank you for correcting my spelling of “estoppel”!Remember, we started this course by examining the general rule that contracts require bargained-for consideration to be enforceable. In the past couple of classes, we took a little detour to see some EXTRA-contractual situations (cases outside of contract where contracts have been found invalid, or have been thrust aside) where recovery was warranted for the sake of fairness, to correct unjust enrichment. (We saw these situations in the Brittain case, in some of our hypothetical variations of Mills v. Wyman, and in my hypothetical lawn mowing agreement with Wei.) Now we are returning again to the world of enforceable contracts, to see another basis for CONTRACTUAL liability in the absence of consideration. To find another basis for contractual liability, we looked at another type of situation where non-enforcement of a promise would be unfair: Where a party has relied to his detriment on a promise that was not enforceable because of a lack of consideration. This situation is referred to by at least two different names, “Detrimental Reliance,” and “Promissory Estoppel.” (Note that in this context we are talking about UNBARGAINED-FOR DETRIMENTAL RELIANCE. If the detrimental reliance were something that the promissor bargained for, we would have a contract based on consideration like the one in Sidway v. Hammer.) The two terms actually refer to two aspects of the same scenario. “Promissory Estoppel” refers to the equitable principle that a promissor will be estopped, or precluded, from denying a promise that he made, if the promisee has reasonably relied on it. “Detrimental Reliance” refers to the promissees action or forbearance in reliance on that promise. You can see that these terms are really two sides of a coin one side from the promisors perspective and one from the promisees. We used the example of Feonas reliance on my gratuitous promise to give her my I-pad. She detrimentally relied. so I should be estopped from denying my promise. Detrimental reliance (or Promissory Estoppel) may furnish a separate and distinct basis for the enforcement of promises. This doctrine provides a SUBSTITUTE for consideration. Ricketts v. ScothornAs Feona said, the grandfather made a promise, but Katie made no promise in return. So there was no bargain. But Katie did quit work! Why was that not consideration? Because, as Feona correctly stated, Katies quitting work was not bargained for. In Latin, it was not a quid pro quo (an exchange of something for something.)The court COULD have found a contract with consideration IF the Grandfather had bargained for Katie to quit her job. Easonprovided some words that the Grandfather could have used to make such a contract: “IF you quit work, I will give you money.” (Hamer v. Sidway would have supported the notion that Katies quitting, if bargained for, was consideration. Under Hamer, bargained-for forbearance can constitute consideration. )As Eason said, a little earlier, the Grandfather in the Scothorn case could have used to turn his gratuitous promise into a bargain, essentially, “if you quit your job, Ill pay you.” But it seems that perhaps the Grandfather didnt want to force Katie to quit work, he only wanted to make sure that she didnt HAVE to work. Given this circumstance, we wondered how could he make his gift into an enforceable contract. Hamad made the practical suggestion that the grandfather could have simply asked for something else, something trivial even, to serve as consideration. That would have been an effective solution. (Specifically Hamad suggested that Katie might be asked to hold onto the note for the grandfather, but Im not sure about that.Katies side of the bargain might be regarded as illusory because it would be awfully close to “I promise to take the money if you give it to me.”)Eason suggested that the grandfather could just ask his granddaughter to visit him once a week! Although, in the circumstances of this case, Katie quitting work in reliance on her grandfathers promise could constitute detrimental reliance, if she used the money instead to buy a fur coat,