contracts question

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uzpakalis
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contracts question

Postby uzpakalis » Mon May 02, 2011 5:12 pm

Say Susan has contracted with a celebrity to wear her designer shoes at an upcoming film festival for 100k. Susan ships the shoes via UPS but the shoes get lost and do not arrive in time for the celebrity to wear them at the festival. Celebrity files suit against Susan for the 100k. Who wins?

Also, should there be a discussion as to whether UPS knew of the contract between Susan and celebrity? Would it make a difference?
Last edited by uzpakalis on Mon May 02, 2011 5:59 pm, edited 2 times in total.

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Rurik
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Re: contracts question

Postby Rurik » Mon May 02, 2011 5:44 pm

uzpakalis wrote:Say Susan has a contracted with a celebrity to wear her designer shoes at an upcoming film festival for 100k. Susan ships the shoes via UPS but the shoes get lost and do not arrive in time for the celebrity to wear them at the festival. Celebrity files suit for the 100k. Who wins?

Also, should there be a discussion as to whether UPS knew of the contract between Susan and celebrity? Would it make a difference?


Celebrity sues Susan or UPS?

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glitter178
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Re: contracts question

Postby glitter178 » Mon May 02, 2011 5:49 pm

Celebrity wins, right? Not celeb's fault the shoe's didn't arrive. Not UPS's fault (less the cost of the shoes) unless Susan insured them for an amount over and above that.

I'm a 0L but that's my quick guess. this looked like a fun hypo.

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Rurik
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Re: contracts question

Postby Rurik » Mon May 02, 2011 5:50 pm

glitter178 wrote:Celebrity wins, right? Not celeb's fault the shoe's didn't arrive. Not UPS's fault (less the cost of the shoes) unless Susan insured them for an amount over and above that.

I'm a 0L but that's my quick guess. this looked like a fun hypo.


dude.....

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Re: contracts question

Postby dakatz » Mon May 02, 2011 5:52 pm

glitter178 wrote:Celebrity wins, right? Not celeb's fault the shoe's didn't arrive. Not UPS's fault (less the cost of the shoes) unless Susan insured them for an amount over and above that.

I'm a 0L but that's my quick guess. this looked like a fun hypo.


Thank you for at least prefacing this with the fact that you are a 0L and merely venturing a guess, but without any knowledge of the principles of contract law on which the analysis would be based, its sort of pointless to even bother.

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uzpakalis
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Re: contracts question

Postby uzpakalis » Mon May 02, 2011 5:57 pm

Rurik wrote:
uzpakalis wrote:Say Susan has a contracted with a celebrity to wear her designer shoes at an upcoming film festival for 100k. Susan ships the shoes via UPS but the shoes get lost and do not arrive in time for the celebrity to wear them at the festival. Celebrity files suit for the 100k. Who wins?

Also, should there be a discussion as to whether UPS knew of the contract between Susan and celebrity? Would it make a difference?


Celebrity sues Susan or UPS?


celeb sues Susan

random5483
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Re: contracts question

Postby random5483 » Mon May 02, 2011 6:00 pm

uzpakalis wrote:Say Susan has a contracted with a celebrity to wear her designer shoes at an upcoming film festival for 100k. Susan ships the shoes via UPS but the shoes get lost and do not arrive in time for the celebrity to wear them at the festival. Celebrity files suit for the 100k. Who wins?

Also, should there be a discussion as to whether UPS knew of the contract between Susan and celebrity? Would it make a difference?


Was the shipment FOB? The UCC places the risk of FOB shipment on the purchaser. Here, the facts are unclear as to who might be the purchaser, but if "Celebrity" asked Susan to ship the shoes FOB, then the Celebrity likely bears the risk.

If the shipment was not FOB, the risk of loss is borne by Susan. The "seller" bears the risk usually when delivering its product.

The UPS might bear the risk if the parcel was insured. Otherwise, it is unlikely that UPS will bear the risk.

Also. this is not a clear cut UCC case. A good is not being "sold" per se. It could very well fall under the common law since the contract is probably not primarily for the sale of a goods. So a common law v. UCC analysis might be appropriate. If the common law controls then the risk of loss is probably on Susan.

Other things to consider?

Was the risk of loss assigned by agreement? (insurance, contract, etc).
Will the risk of loss be assigned on a specific party by the court due to the courts determining that they reasonably should bear the risk of loss?
Did one party assume risk of loss by entering contract with limited knowledge, and the party was aware of limited knowledge (probably does not apply here).

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uzpakalis
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Re: contracts question

Postby uzpakalis » Mon May 02, 2011 6:30 pm

It seems more like a services K, and the goods were only incidental. Lets say that Susan did not purchase insurance, but she told UPS that she had a 100k contract with celebrity, and impressed upon the fact that the shoes needed to be delivered before the start of the festival. Do you think Susan could file suit against UPS for consequential damages (Hadley)?

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reasonable_man
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Re: contracts question

Postby reasonable_man » Mon May 02, 2011 6:46 pm

The UCC has no application here at all. The goods are an incident to the contract and there is no sale transaction (no evidence that celebrity paid for the shoes - quite the contrary, celebrity is being paid to wear the shoes, i.e. perform a service).

Suit against the courier is all but useless in this case - common carrier liability is typically very limited in nature.

At the time of the show, the celebrity was ready, willing and able to perform. The designer failed to deliver the shoes in a timely fashion. I'd rule for the celebrity.

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Re: contracts question

Postby squ1rtle » Mon May 02, 2011 6:48 pm

Sounds like theres an issue of supervening impracticability which would excuse performances of the contract if Susan did not bear the risk of loss. Although foreseeability does not prove allocation of risk, the risk of shoes being lost in the mail is highly foreseeable. It is also more reasonable that P would insure against this contingency. It is quite likely the court will conclude that Susan did bear the risk of loss and thus be liable to the celeb for damages equal to her expected bargain, which would be 100k unless the celeb was able to secure another pair of shoes and was paid to wear them. Susan, to guard against such events, should have added a force majeure clause to her contract to guard against this contingency.
Last edited by squ1rtle on Mon May 02, 2011 7:00 pm, edited 1 time in total.

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reasonable_man
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Re: contracts question

Postby reasonable_man » Mon May 02, 2011 6:52 pm

squ1rtle wrote:Sounds like theres an issue of supervening impracticability which would excuse performances of the contract if Susan did not bear the risk of loss. Although foreseeability does not prove allocation of risk, the risk of shoes being lost in the mail is highly foreseeable. It is also more reasonable that P would insure against this contingency. It is quite likely the court will conclude that Susan did bear the risk of loss and thus be liable to the celeb for damages equal to her detriment, which would be 100k unless the celeb was able to secure another pair of shoes and was paid to wear them. Susan, to guard against such events, should have added a force majeure clause to her contract to guard against this contingency.



No.. Susan should have got those bad boys hand delivered! ;) When you've got a 100k contract on the line, you spend the extra bucks to make sure the shoes get there...

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uzpakalis
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Re: contracts question

Postby uzpakalis » Mon May 02, 2011 7:00 pm

reasonable_man wrote:
squ1rtle wrote:Sounds like theres an issue of supervening impracticability which would excuse performances of the contract if Susan did not bear the risk of loss. Although foreseeability does not prove allocation of risk, the risk of shoes being lost in the mail is highly foreseeable. It is also more reasonable that P would insure against this contingency. It is quite likely the court will conclude that Susan did bear the risk of loss and thus be liable to the celeb for damages equal to her detriment, which would be 100k unless the celeb was able to secure another pair of shoes and was paid to wear them. Susan, to guard against such events, should have added a force majeure clause to her contract to guard against this contingency.



No.. Susan should have got those bad boys hand delivered! ;) When you've got a 100k contract on the line, you spend the extra bucks to make sure the shoes get there...


uzpakalis wrote:Lets say that Susan did not purchase insurance, but she told UPS that she had a 100k contract with celebrity, and impressed upon the fact that the shoes needed to be delivered before the start of the festival. Do you think Susan could file suit against UPS for consequential damages (Hadley)?

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Re: contracts question

Postby Rurik » Mon May 02, 2011 7:13 pm

I would say that the assumption of the risk on UPS's part did not enter into the contract, at least not in a meaningful way. You can't just tell the person at the UPS store that your package being lost would result in a $100k loss, not buy insurance, and then expect them to cover your losses. Susan implicitly assumed all loss by not purchasing insurance. This situation is much different than the one in Hadley.

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Re: contracts question

Postby random5483 » Mon May 02, 2011 7:15 pm

reasonable_man wrote:The UCC has no application here at all. The goods are an incident to the contract and there is no sale transaction (no evidence that celebrity paid for the shoes - quite the contrary, celebrity is being paid to wear the shoes, i.e. perform a service).

Suit against the courier is all but useless in this case - common carrier liability is typically very limited in nature.

At the time of the show, the celebrity was ready, willing and able to perform. The designer failed to deliver the shoes in a timely fashion. I'd rule for the celebrity.



You are right. Just look at the CL part of my post. My brain is fried thanks to all these finals :(

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Re: contracts question

Postby LAWYER2 » Tue May 03, 2011 3:19 am

This is a crazy hybrid of services and UCC. I would argue that under the UCC portion of the contract the R.O.L passed once designer made a reasonable contract for delivery with the carrier. Certainly, I would mention the Hadley v. Baxendale argument that consequential damages were/were not foreseeable at the time of transfer.
As far as the celebrity suit against the designer, it would be a breach of contract claim, however the designer (like a previous poster suggested) would have an impossibility/impracticability/frustration of purpose argument that would possibly discharge her duty.

Gawd, I'd hate to get one like this on my contracts exam, however this is one of those kitchen sink arguments that I usually do well at regurgitating a semesters worth of shit

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Ty Webb
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Re: contracts question

Postby Ty Webb » Tue May 03, 2011 3:24 am

random5483 wrote:
uzpakalis wrote:Say Susan has a contracted with a celebrity to wear her designer shoes at an upcoming film festival for 100k. Susan ships the shoes via UPS but the shoes get lost and do not arrive in time for the celebrity to wear them at the festival. Celebrity files suit for the 100k. Who wins?

Also, should there be a discussion as to whether UPS knew of the contract between Susan and celebrity? Would it make a difference?


Was the shipment FOB? The UCC places the risk of FOB shipment on the purchaser. Here, the facts are unclear as to who might be the purchaser, but if "Celebrity" asked Susan to ship the shoes FOB, then the Celebrity likely bears the risk.

If the shipment was not FOB, the risk of loss is borne by Susan. The "seller" bears the risk usually when delivering its product.

The UPS might bear the risk if the parcel was insured. Otherwise, it is unlikely that UPS will bear the risk.

Also. this is not a clear cut UCC case. A good is not being "sold" per se. It could very well fall under the common law since the contract is probably not primarily for the sale of a goods. So a common law v. UCC analysis might be appropriate. If the common law controls then the risk of loss is probably on Susan.

Other things to consider?

Was the risk of loss assigned by agreement? (insurance, contract, etc).
Will the risk of loss be assigned on a specific party by the court due to the courts determining that they reasonably should bear the risk of loss?
Did one party assume risk of loss by entering contract with limited knowledge, and the party was aware of limited knowledge (probably does not apply here).


I don't think this is a UCC case at all. The contract here is a marketing/advertising one. The shoes are the subject of that contract, but the sale of shoes isn't.

You'd want to consider impossibility here, too.

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Re: contracts question

Postby mths » Tue May 03, 2011 4:03 am

I think that we're getting off track with Hadley. Hadley would apply if Susan or the celeb was suing UPS for the 100k as expectancy damages resulting from the non-timely delivery of the shoes.

Looking at the doctrine of impossibility

Restatement § 262-3: Excuses promisor when necessary person dies or is incapacitated or if a “thing” necessary for performance fails “to come into existence,” so that performance is impracticable

The shoes were necessary for the performance and they failed to come into existence for all intents and purposes of the contract. We could say that susan was the superior risk bearer given that she was the one that would have been able to insure the shoes through UPS. However, when there is an impossibility that is not created by a party the only remedy is restitution which, unfortunately for the celeb would be 0. This is if we're considering non-timely delivery to be the same thing as "destruction of a thing".

However, Canadian Industrial Alcohol holds that when the impossibility arises bc of the unreasonable behavior of a party then the promisor is not excused from performance. Not insuring the shoes could be seen as unreasonable behavior and then Susan might have to pay? I'm still not clear if expectancy damages would be appropriate here or if I'm using the right theory.

I dunno, it's 4am and contracts isn't for a while.

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Re: contracts question

Postby Ty Webb » Tue May 03, 2011 4:10 am

mths wrote:I think that we're getting off track with Hadley. Hadley would apply if Susan or the celeb was suing UPS for the 100k as expectancy damages resulting from the non-timely delivery of the shoes.

Looking at the doctrine of impossibility

Restatement § 262-3: Excuses promisor when necessary person dies or is incapacitated or if a “thing” necessary for performance fails “to come into existence,” so that performance is impracticable

The shoes were necessary for the performance and they failed to come into existence for all intents and purposes of the contract. We could say that susan was the superior risk bearer given that she was the one that would have been able to insure the shoes through UPS. However, when there is an impossibility that is not created by a party the only remedy is restitution which, unfortunately for the celeb would be 0. This is if we're considering non-timely delivery to be the same thing as "destruction of a thing".

However, Canadian Industrial Alcohol holds that when the impossibility arises bc of the unreasonable behavior of a party then the promisor is not excused from performance. Not insuring the shoes could be seen as unreasonable behavior and then Susan might have to pay? I'm still not clear if expectancy damages would be appropriate here or if I'm using the right theory.

I dunno, it's 4am and contracts isn't for a while.


It's also worth considering, at least from a practical application standpoint, that courts are going to be very hesitant to impose potentially ruinous financial liability on a party without a very good reason for doing so. The court will be balancing that policy judgment with their need to enforce contracts (and as a corollary, their need to promote an efficient marketplace). Points can be had for arguments within this scope, but I could see many courts shying away from expectancy damages here.

I'm not sure restitution is the word you're looking for above. Reliance damages are more likely.

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Re: contracts question

Postby mths » Tue May 03, 2011 4:14 am

Ty Webb wrote:
mths wrote:I think that we're getting off track with Hadley. Hadley would apply if Susan or the celeb was suing UPS for the 100k as expectancy damages resulting from the non-timely delivery of the shoes.

Looking at the doctrine of impossibility

Restatement § 262-3: Excuses promisor when necessary person dies or is incapacitated or if a “thing” necessary for performance fails “to come into existence,” so that performance is impracticable

The shoes were necessary for the performance and they failed to come into existence for all intents and purposes of the contract. We could say that susan was the superior risk bearer given that she was the one that would have been able to insure the shoes through UPS. However, when there is an impossibility that is not created by a party the only remedy is restitution which, unfortunately for the celeb would be 0. This is if we're considering non-timely delivery to be the same thing as "destruction of a thing".

However, Canadian Industrial Alcohol holds that when the impossibility arises bc of the unreasonable behavior of a party then the promisor is not excused from performance. Not insuring the shoes could be seen as unreasonable behavior and then Susan might have to pay? I'm still not clear if expectancy damages would be appropriate here or if I'm using the right theory.

I dunno, it's 4am and contracts isn't for a while.


It's also worth considering, at least from a practical application standpoint, that courts are going to be very hesitant to impose potentially ruinous financial liability on a party without a very good reason for doing so. The court will be balancing that policy judgment with their need to enforce contracts (and as a corollary, their need to promote an efficient marketplace). Points can be had for arguments within this scope, but I could see many courts shying away from expectancy damages here.

I'm not sure restitution is the word you're looking for above. Reliance damages are more likely.


lol like I said, it's 4 am

I wonder if frustration of purpose could also be argued. That would bring up foreseeability issues on the part of Susan.

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Re: contracts question

Postby Ty Webb » Tue May 03, 2011 4:28 am

I don't really think frustration of purpose would apply here. It's been a solid 5 months since I thought about Ks, but memory tells me that frustration applies when the contract could be performed, but some circumstance has made it so that performing the contract makes no sense anymore. I think the example we had was the hotel room rented out at a high rate to see a King's parade. When the King got sick, there was no parade, so the contract's purpose was frustrated.

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Re: contracts question

Postby Renzo » Tue May 03, 2011 11:58 am

reasonable_man wrote:
squ1rtle wrote:Sounds like theres an issue of supervening impracticability which would excuse performances of the contract if Susan did not bear the risk of loss. Although foreseeability does not prove allocation of risk, the risk of shoes being lost in the mail is highly foreseeable. It is also more reasonable that P would insure against this contingency. It is quite likely the court will conclude that Susan did bear the risk of loss and thus be liable to the celeb for damages equal to her detriment, which would be 100k unless the celeb was able to secure another pair of shoes and was paid to wear them. Susan, to guard against such events, should have added a force majeure clause to her contract to guard against this contingency.



No.. Susan should have got those bad boys hand delivered! ;) When you've got a 100k contract on the line, you spend the extra bucks to make sure the shoes get there...


I'm with RM. Susan controlled the method of shipment, and since the contract doesn't explicitly allocate the risk of lost shipment, it should fall to the person who can best avoid it.

Although, if you wanted to argue the other way, I'd say that this was an employment contract: celebrity was being hired as a model/performer to display the shoes. No work was performed, so no payment is owed.

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Re: contracts question

Postby evilxs » Tue May 03, 2011 12:39 pm

glitter178 wrote:Celebrity wins, right? Not celeb's fault the shoe's didn't arrive. Not UPS's fault (less the cost of the shoes) unless Susan insured them for an amount over and above that.

I'm a 0L but that's my quick guess. this looked like a fun hypo.


GTFO, we post in here for serious help from other students who have had these classes. Your non-legal based guesses aren't helpful.

People wonder why we are so hostile to 0L's. :evil:

Thanks for the great answers everyone else, I tried working through the hypo and they helped me. K's is my next Monday exam.

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Re: contracts question

Postby reasonable_man » Tue May 03, 2011 4:59 pm

LAWYER2 wrote:This is a crazy hybrid of services and UCC. I would argue that under the UCC portion of the contract the R.O.L passed once designer made a reasonable contract for delivery with the carrier. Certainly, I would mention the Hadley v. Baxendale argument that consequential damages were/were not foreseeable at the time of transfer.
As far as the celebrity suit against the designer, it would be a breach of contract claim, however the designer (like a previous poster suggested) would have an impossibility/impracticability/frustration of purpose argument that would possibly discharge her duty.

Gawd, I'd hate to get one like this on my contracts exam, however this is one of those kitchen sink arguments that I usually do well at regurgitating a semesters worth of shit


This is so far from the right answer its sort of painful.

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Re: contracts question

Postby LAWYER2 » Wed May 04, 2011 12:33 am

reasonable_man wrote:
LAWYER2 wrote:This is a crazy hybrid of services and UCC. I would argue that under the UCC portion of the contract the R.O.L passed once designer made a reasonable contract for delivery with the carrier. Certainly, I would mention the Hadley v. Baxendale argument that consequential damages were/were not foreseeable at the time of transfer.
As far as the celebrity suit against the designer, it would be a breach of contract claim, however the designer (like a previous poster suggested) would have an impossibility/impracticability/frustration of purpose argument that would possibly discharge her duty.

Gawd, I'd hate to get one like this on my contracts exam, however this is one of those kitchen sink arguments that I usually do well at regurgitating a semesters worth of shit


This is so far from the right answer its sort of painful.


Outside of the UCC (which I agree is wrong after reading other posts) please explain?

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reasonable_man
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Re: contracts question

Postby reasonable_man » Wed May 04, 2011 8:08 am

LAWYER2 wrote:
reasonable_man wrote:
LAWYER2 wrote:This is a crazy hybrid of services and UCC. I would argue that under the UCC portion of the contract the R.O.L passed once designer made a reasonable contract for delivery with the carrier. Certainly, I would mention the Hadley v. Baxendale argument that consequential damages were/were not foreseeable at the time of transfer.
As far as the celebrity suit against the designer, it would be a breach of contract claim, however the designer (like a previous poster suggested) would have an impossibility/impracticability/frustration of purpose argument that would possibly discharge her duty.

Gawd, I'd hate to get one like this on my contracts exam, however this is one of those kitchen sink arguments that I usually do well at regurgitating a semesters worth of shit


This is so far from the right answer its sort of painful.


Outside of the UCC (which I agree is wrong after reading other posts) please explain?



The UCC sidetrack is enough to tank your answer. The hypo is designed to dangle that out there and get you to bite (which is not the correct analysis). The only way to properly treat it would be to say, the UCC does not apply here because there is no sale of goods. End of story. The UCC analysis is the bulk of your response.

Frustration of purpose, impossibility is a reasonable analysis to discuss, but I would still argue that the likely result is that Celebrity walks away with this one.

I was being harsh, but you were totally leading with your chin on the whole UCC mess. If you’re going to talk about stuff in an answer that does not apply, be sure you quickly explain how you realize that it is not applicable and move onto analysis that do apply to the fact pattern.




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