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1

But not admissible to show condition precedent to duty under admittedly effective K

2

Ex: A and B enter into written K to merge companies, but orally agree that written K won’t take effect unless they raise another $500k.  This oral agr’t admissible b/c it is precondition to legal effectiveness of written K

E

To show a FACT recited in the integration is FALSE

F

Subsequent modifications to K

1

Parol ev rule doesn’t apply, but legal duty rule and S/F may apply

2

N.O.M. (no oral modification) clauses

a

Invalid at common law

b

But valid under UCC: no oral mods allowed.  (UCC § 2-209(2))

i

BUT N.O.M. clause must be in writing, separately signed by customer.  (UCC § 2-209(2))

ii

AND STILL, oral-only agr’t may not alter the K, but can serve as a WAIVER.  (UCC § 2-209(4))

1

Recall waiver = excuse of non-perf.  Ex: K calls for particular brand of insulation.  But you ask to use other brand, and I say “fine”

Remedies — Generally

I

Exp / rel / rest example:

A

A contracts to buy house from B for $150k.  B breaches.  A has already given B $5k deposit, and has paid architect $1k for plans to enlarge living room.  A covers for $155k

B

A’s exp dams = $11k.  That’s [$155k - $150k B/B] + [$5k direct reliance costs] + [$1k consequential reliance costs]

C

A’s rel dams = $5k + $1k

D

A’s rest dams = $5k

II

When do you choose particular types of dams?

A

When would you seek rel dams rather than exp dams?

1

When you UNDERPRICED your goods or services — when you’d have a loss on the completed K — that is, your exp dams would be ZERO

2

If other party breached, you’re lucky — you can cease K, but recover your costs as REL DAMS

a

BUT some cts will take negative expectations into account.  However, D will have burden of showing P would have sustained loss

B

When would you choose restit over exp?

1

Losing K

III

Exp dams provide greater INCENTIVE for perf b/c force promisor to take into account value of promise to promisee.  Rel dams don’t account for value promisee places on promise at all

IV

Upon material breach, party may choose:

A

Action on K to recover exp dams

B

OR disaffirm K and seek restit

V

Theory of efficient breach

A

If a promisor’s gains from breach would exceed promisee’s losses from breach, breach is efficient, and promisor should breach

1

If there’s disgorgement, breach can never be efficient b/c promisor will have to give back profits he gains by breaching

B

Problems w/ Posner (p. 218)

1

Tx costs:

a

Extra negotiation betw seller and third party or buyer and third party (tx costs)

b

Search costs -- seller must expend resources to find the buyer who will pay more

2

Unknown how much buyers value goods:

19

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