Contracts Quiz 2nd Semester 1995

10. Construct an argument that discharge of the parties, meaning the setting aside of the consideration, can be squared with the consideration doctrine itself.

A court can be faithful to the parties’ contract by either releasing them or binding them to their contractual obligations, or even to modify the obligations, as long as the consideration provides for it. The consideration itself can provide the setting aside (in whole or in part) of the expectation interest and provide for the protection of either the reliance or restitutionary interests. The consideration can provide for crossing into protection of the expectation interest, and crossing back out of it upon the happening of a certain event. Thus, the consideration can provide for its own evolution, and not break.

11. Why might a negotiated outcome be preferable to a litigated outcome in a contract dispute? What common problem is a negotiated outcome faced with?

The success of contract law is best measured when the parties can negotiate the outcome themselves in good faith. A negotiated outcome most truly represents the enforcement of the parties’ own consideration. There is less opportunity for error by the court in constructing an imperfect remedy. Thus, a negotiated outcome can be an even stronger regulatory tool than litigated damages because any imperfection in a litigated outcome tends to weaken the bite of the reliance principle. The duty to renegotiate in good faith when there has been a significant change in the market is imported into the parties’ own consideration, whether they provide for it expressly or not. However, the common problems that face all contractual formation are still present upon renegotiation. Bad faith, economic duress, and balance of power problems are all regulated by the good faith requirement inherent in the consideration.

12. Describe the pressure put on the consideration by one party having completely performed before the other party has performed. What regulatory goals must the court balance in order to address this problem sufficiently?

The pressure on the consideration is the imbalance of power that is created once a party has fully performed and the other party’s obligation is still executory in nature – where there has been no corresponding performance yet by the other side. When addressing this problem, the courts are faced with balancing the urge to protect the performing party’s reliance or restitutionary interest which is crying out for protection, and discouraging breach by requiring the parties to renegotiate their own result in good faith.

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