There are question under each case (2 cases).100-150 words or so for each case.Total 200-300 wordsChapter Introduction
When one party breaches a contract, the other party—the nonbreaching party—can choose one
or more of several remedies. (Does changing terms of service on a social networking site
constitute a breach of contract? See this chapter’s Insight into Social Media feature for a look at
this issue.) A remedy is the relief provided for an innocent party when the other party has
breached the contract. It is the means employed to enforce a right or to redress an injury.
Insight into Social Media
Was Instagram’s Revision of Its Terms of Service a Breach of Contract?
In 2012, Facebook acquired the social networking site Instagram for $715 million. Instagram
is a photo-sharing service that also allows users to add filters and effects to the photos.
The Terms of Service Are a Contract
When you use social media or other services on the
Internet or download an app for your mobile devices, you normally have to indicate that you
accept the terms of service associated with that service or app. Of course, users rarely, if
ever, actually read those terms. They simply click on “accept” and start using the service. By
clicking on “accept,” however, those users are entering into a contract.
Instagram Changes Its Terms of Service
In 2013, to the consternation of a number of users, Instagram changed its terms of service to
give it the right and ability to transfer and otherwise use user content on the site, apparently
without compensation. The new terms also limited users’ ability to bring class-action lawsuits
against Instagram, limited the damages they could recover to $100, and required arbitration
of any disputes.
Lucy Funes, an Instagram user in California, filed a class-action lawsuit on behalf of herself
and other users, claiming breach of contract and breach of the covenant of good faith and fair
dealing that a contract implies. Although Instagram subsequently modified the language that
appeared to give it the right to use users’ photos without compensation, it retained other
controversial terms, including the mandatory arbitration clause and a provision allowing it to
place ads in conjunction with user content.
Instagram Seeks Dismissal of the Lawsuit
While Funes is contending that Instagram breached their contract by changing its terms of
service, Instagram argues that Funes cannot claim breach of contract. The reason is that
she—and other users—were given thirty days’ notice before the new terms of service took
effect. Because Funes continued to use her account after that thirty-day period, Instagram
maintains that, in effect, she agreed to the new terms.
Behind the Change in Terms of Service
In revising its terms of service, Instagram, or rather its new owner Facebook, was trying to
monetize, or find a way to make revenue, from the many users of its site. A challenge for
Facebook is how to translate its billions of users into profits. This challenge has become
particularly acute for Facebook since its initial public offering in 2012. Now that it is a public
company, Facebook must answer to its shareholders.
Facebook has faced a number of class-action lawsuits, including an ongoing suit for $15
billion from users who claim that Facebook has been “improperly tracking the Internet use of
its members even after they have logged out of their accounts.” As Facebook tries to increase
its profits to please its shareholders, it is likely to face even more lawsuits from users who
resent the company’s efforts to monetize the content on its site.
Legal Critical ThinkingInsight Into The Ethical Environment
Within Instagram’s current terms of service there is a statement, “We may not always identify
paid services, sponsored content, or commercial communications as such.” Is it ethical for
Instagram to act this way? Discuss.
The most common remedies available to a nonbreaching party include damages, rescission and
restitution, specific performance, and reformation. As discussed in Chapter 1, a distinction is
made between remedies at law and remedies in equity. Today, the remedy at law normally is
monetary damages, which are discussed in the first part of this chapter. Equitable remedies
include rescission and restitution, specific performance, and reformation, all of which will be
examined later in the chapter. Usually, a court will not award an equitable remedy unless the
remedy at law is inadequate.
Impossibility of Performance
After a contract has been made, supervening events (such as a fire) may make performance
impossible in an objective sense. This is known as impossibility of performance (A doctrine
under which a party to a contract is relieved of his or her duty to perform when performance
becomes impossible or totally impracticable (through no fault of either party).) and can
discharge a contract. The doctrine of impossibility of performance applies only when the parties
could not have reasonably foreseen, at the time the contract was formed, the event that
rendered performance impossible. Performance may also become so difficult or costly due to
some unforeseen event that a court will consider it commercially unfeasible, or impracticable, as
will be discussed later in the chapter.
Objective impossibility (“It can’t be done”) must be distinguished from subjective impossibility
(“I’m sorry, I simply can’t do it”). An example of subjective impossibility occurs when a party
cannot deliver goods on time because of freight car shortages or cannot make payment on time
because the bank is closed. In effect, in each of these situations the party is saying, “It is
impossible for me to perform,” not “It is impossible for anyone to perform.” Accordingly, such
excuses do not discharge a contract, and the nonperforming party is normally held in breach of
contract.
When Performance is Impossible
Three basic types of situations may qualify as grounds for the discharge of contractual
obligations based on impossibility of performance:
1. When one of the parties to a personal contract dies or becomes incapacitated prior to
performance.
Example 18.13
Frederic, a famous dancer, contracts with Ethereal Dancing Guild to play a leading role in its
new ballet. Before the ballet can be performed, Frederic becomes ill and dies. His personal
performance was essential to the completion of the contract. Thus, his death discharges the
contract and his estate’s liability for his nonperformance.
2. When the specific subject matter of the contract is destroyed.
Example 18.14
A-1 Farm Equipment agrees to sell Gunther the green tractor on its lot and promises to have
the tractor ready for Gunther to pick up on Saturday. On Friday night, however, a truck veers
off the nearby highway and smashes into the tractor, destroying it beyond repair. Because the
contract was for this specific tractor, A-1’s performance is rendered impossible owing to the
accident.
3. When a change in law renders performance illegal.
Example 18.15
Hopper contracts with Playlist, Inc., to create a Web site through which users can post and
share movies, music, and other forms of digital entertainment. Hopper goes to work. Before
the site is operational, however, Congress passes the No Online Piracy in Entertainment
(NOPE) Act. The NOPE Act makes it illegal to operate a Web site on which copyrighted works
are posted without the copyright owners’ consent. In this situation, the contract is discharged
by operation of law. The purpose of the contract has been rendered illegal, and contract
performance isobjectively impossible.
Temporary Impossibility
An occurrence or event that makes performance temporarily impossible operates to suspend
performance until the impossibility ceases.
Performance Normally Is Only Delayed. Once the temporary event ends, the parties ordinarily
must perform the contract as originally planned.
Case in Point 18.16
Keefe Hurwitz contracted to sell his home in Louisiana to Wesley and Gwendolyn Payne for
$241,500. Four days later, Hurricane Katrina made landfall and caused extensive damage to
the house. Hurwitz refused to pay the cost ($60,000) for the necessary repairs before the deal
closed. The Paynes filed a lawsuit to enforce the contract at the agreed-on price. Hurwitz
argued that Hurricane Katrina had made it impossible for him to perform and had discharged
his duties under the contract. The court, however, ruled that Hurricane Katrina had caused
only a temporary impossibility. Hurwitz was required to pay for the necessary repairs and to
perform the contract as written. He could not obtain a higher purchase price to offset the cost
of the repairs.
Performance Can Be Discharged. Sometimes, the lapse of time and the change in
circumstances surrounding the contract make it substantially more burdensome for the parties
to perform the promised acts. In that situation, the contract is discharged.
Case in Point 18.17
In 1942, actor Gene Autry was drafted into the U.S. Army. Being drafted rendered his contract
with a Hollywood movie company temporarily impossible to perform, and it was suspended
until the end of World War II in 1945. When Autry got out of the army, the purchasing power
of the dollar had declined so much that performance of the contract would have been
substantially burdensome to him. Therefore, the contract was discharged.
It can be difficult to predict how a court will—or should—rule on whether performance is
impossible in a particular situation, as discussed in this chapter’s Insight into Ethics feature.
Insight into Ethics
When Is Impossibility of Performance a Valid Defense?
The doctrine of impossibility of performance is applied only when the parties could not have
reasonably foreseen, at the time the contract was formed, the event or events that rendered
performance impossible. In some cases, the courts may seem to go too far in holding that the
parties should have foreseen certain events or conditions. Thus, the parties cannot avoid their
contractual obligations under the doctrine of impossibility of performance.
Actually, courts today are more likely to allow parties to raise this defense than courts in the
past, which rarely excused parties from performance under the impossibility doctrine. Indeed,
until the latter part of the nineteenth century, courts were reluctant to discharge a contract
even when performance appeared to be impossible.
Generally, the courts must balance the freedom of parties to contract (and thereby assume
the risks involved) against the injustice that may result when certain contractual obligations
are enforced. If the courts allowed parties to raise impossibility of performance as a defense
to contractual obligations more often, freedom of contract would suffer.
Legal Critical Thinking
Insight into the Social Environment
Why might those entering into contracts be worse off in the long run if the courts increasingly
accept impossibility of performance as a defense?
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