Vermont Civil Jury Instruction Committee

Plain English Jury Instructions

Section 2.        Contract

 

Table of Contents

 

Preface to Contract Instructions

2.0       Breach of Contract

2.1       Substantial Performance

2.2       Affirmative Defense—Duress

2.3       Affirmative Defense—Frustration of Purpose

2.4       Affirmative Defense—Impracticability/Impossibility of Performance

2.5       Affirmative Defense—Fraud in the Inducement

2.6       Existence of a Contract Disputed

2.7       Existence of Missing or Absent Contract Term

2.8       Promissory Estoppel

2.9       Existence of Disputed Terms

2.10     Modification of a Contract

2.11     Breach of Covenant of Good Faith and Fair Dealing

2.12     Quantum Meruit

 

 

Preface to Contract Instructions

 

            In any contract dispute, there are always legal issues which must be decided:

  1. Whether a contract exists;
  2. Whether the contract includes a particular term;
  3. Whether the contract was abandoned; and
  4. How the contract should be interpreted.

            This list is certainly not complete.  These legal issues are for the judge to decide, not the jury.  Juries only decide facts.  Ordinarily, in a contract case, the judge will focus the jury on the particular “contractual facts” to be determined and then instruct on which direction the jury will follow.  Again, by way of example only:

    • If you find the homeowner accepted contractor’s proposal, then its fixed price governs;
    • If you find contractor agreed to the oak cabinets, then he must have provided them within the stated price;
    • If there was no discussion regarding spacing of studs, then it was up to contractor to decide within the range of what is reasonable;
    • Because the term “hardwood” is ambiguous, you must decide whether the parties discussed “mahogany” for if they did not, then maple is okay.

            The proposed instructions that follow discuss the different elements of contract issues, but judges are encouraged to determine all the legal questions that do not hinge on disputed evidence.  Only the disputed fact questions go to the jury, and then with explicit instructions on the effect of its determination.

 

2.0     Breach of Contract

[Name of Parties] had a contract in which [other party] agreed to do _________ in exchange for _____________ [paid/done] by [claiming party].  [Claiming party] claims that [other party] did not do _______________ [or did not adequately/substantially do ______________].  If you find that it is more likely true than not true that [other party] failed to do what [he she it] was supposed to do, then you should consider my instructions regarding damages. 

 

Reporter’s Notes

The factors that contribute to a breach of contract claim are factually driven.  The instruction as drafted is targeted at the most general statement of contract breach; the instruction should be modified significantly to capture the actual facts presented to the jury and the actual claim of breach asserted.

 

2.1     Substantial Performance

The parties disagree regarding whether [X] did [describe contract obligation] well enough to be [paid/etc.] by [Y]—in other words, they disagree on whether [X] really did perform sufficiently under the contract so that [Y] had to [pay [X] or describe Y’s duty]. 

 

To determine that [X’s] actions were more likely than not sufficient to fulfill [X’s] obligations under the contract, you can consider the following factors [use these factors or add others as appropriate to fact situation]:

 

  1. The purpose of the contract between the parties;
  2. What [X] was requireded to do to fulfill the purpose of the contract;
  3. Whether anything that [X] failed to do defeated the purpose of the contract; and
  4. Whether any failure by [X] was willful.

 

Reporter’s Notes

See Fletcher Hill, Inc. v. Crosbie, 178 Vt. 77, 86 (2005); VanVelsor v. Dzewaltowski, 136 Vt. 103, 105–06 (1978); Vermont Structural Steel Corp. v. Brickman, 126 Vt. 520, 524 (1967).

 

2.2     Affirmative Defense—Duress

[X] claims that the contract is void because [X] was forced into the contract against [his her its] will.

 

To determine that [X] was more likely than not forced into the contract against [his her its] will, you can consider the following factors:

 

  1. [X] agreed to the contract because [X] believed [he she it] had no reasonable choice but to accept the terms;
  2. [X] in fact had no other reasonable choice; and
  3. [X] had no other reasonable choice because of conduct or statements by [Y] that were criminal, false? or morally wrong.

 

Reporter’s Notes

See Ben & Jerry's Homemade, Inc. v. La Soul, Inc., 983 F.Supp. 504, 506-07 (D.Vt.1997) (reviewing elements of fraud and duress under Vermont law).

 

2.3     Affirmative Defense—Frustration of Purpose

[X] admits that [he she it] did not [describe X’s intended conduct], but claims that [his her its] failure to do so was excused because there was no longer any reason to [describe conduct] after [describe the frustration of purpose – “the building burned down” for example].  If you find that it is more likely true than not that [the event that caused the frustration of purpose] was not reasonably foreseeable by [X and Y] when they entered into the contract, and that [X] could no longer fulfill the purpose of the contract after [the event], then [X’s] failure to perform is excused.  

 

Reporter’s Notes

Reasonable foreseeability of the event that allegedly causes the frustration of purpose is the touchstone for this defense.  If an event was “reasonably foreseeable” to the parties, then it cannot be used to excuse performance for frustration of purpose.  No reported Supreme Court case has relied upon this doctrine and the instruction is taken from the Restatement.

 

2.4     Affirmative Defense—Impracticability/Impossibility of Performance

[X] admits that [he she it] did not [describe X’s intended conduct], but claims that [his her its] failure was excused because [describe event leading to impractability/impossibility] made it not reasonably practical/possible to do so.

If you find that it is more likely true than not that [the event] made [X’s] job/promise impossible, or impractical because it would cause extreme and unreasonable [difficulty, expense, injury, loss] to [X] that was not reasonably foreseeable by [X and Y] when they entered into the contract, then [X’s] failure to perform is excused.  

 

Reporter’s Notes

See Agway, Inc. v. Marotti, 149 Vt. 191, 193, 540 A.2d 1044, 1046 (1988) (recognizing defense of impossibility of performance) (quoting Restatement (Second) of Contracts § 261 cmt. d)).

 

See note regarding frustration of purpose.  An event or circumstance that was “reasonably foreseeable” to the parties cannot serve as the basis of an impracticability/impossibility defense.

 

2.5     Affirmative Defense—Fraud in the Inducement

In this case the [name of party opposing the claim] claims the [name of party making the claim] fraudulently induced [name of party opposing the claim] to enter into the contract. [Name of party opposing the claim] argues that for that reason [name of party opposing the claim] should not have to pay any damages to [name of party making the claim]. Under Vermont law, someone who fraudulently induces another to enter into a contract cannot collect damages from someone who breached that contract.

 

[Name of party opposing the claim] has the burden of proving that [name of party making the claim] fraudulently induced [name of party opposing the claim] into agreeing to the contract.

 

To find that [name of party making the claim] fraudulently induced [name of party opposing the claim] to enter into the contract, you must decide that it is more likely than not true:

 

  1. That before they entered into the contract, [name of party making the claim] told [name of party opposing the claim] some fact that [name of party making the claim] knew at the time was false;
  2. That this claimed fact was so important that [name of party opposing the claim] probably would not have entered into the contract if they had known that such fact was false;
  3. That [name of party opposing the claim] did not know at the time, and could not have known then, that such claimed fact was false; and
  4. That [name of party opposing the claim] relied upon the false claimed fact to its harm.

 

Reporter’s Notes

See Sarvis v. Vermont State Colleges, 172 Vt. 76 (2001); Ben & Jerry’s Homemade, Inc. v. La Soul, Inc., 983 F. Supp 504 (D. Vt. 1997).

 

The measure of damages available for breach of contract depends on the circumstances of each particular case.  It is therefore the Committee’s anticipation that in most cases, the trial judge will make the decision as to the proper measure of damages available, given the claims and evidence in the case, and will instruct the jury accordingly. There is little available Vermont case law to guide the trial judge in so doing. Various measures of damages are set forth in the Restatement (Second) of Contracts.

 

2.6     Existence of a Contract Disputed

In this case, the [name of party making the claim] claims that [he she it] and the [name of party opposing the claim] agreed to the following: [insert terms of the alleged contract]. [Name of party opposing the claim] denies that there was an agreement. You must decide whether there was a contract between [name of party making the claim] and [name of party opposing the claim].

 

To find that there was a contract, you must decide that it is more likely true than not true:

 

  1. That [name of party making the claim or name of party opposing the claim as the case may be]  [promised/offered to][describe the offer or promise];
  2. That [name of party making the claim or name of party opposing the claim as the case may be] [accepted the offer/promised to [described the promised performance] in exchange for something that [name of party making the claim or name of party opposing the claim as the case may be] offered or promised; and
  3. That both [name of party making the claim] and [name of party opposing the claim] agreed to [describe the terms and conditions in dispute] of what each gave or what each promised to give the other.

 

Agreement as to these essential terms may be implied from conduct or words. The law does not require that the conduct or words be in any special form(, or that the words be in writing.)

 

Reporter’s Notes

            Starr Farm Beach Campowners Ass'n, Inc. v. Boylan, 174 Vt. 503, 811 A.2d 155 (2002)(“An enforceable contract must demonstrate a meeting of the minds of the parties: an offer by one of them and an acceptance of such offer by the other. Manley Bros., Inc. v. Bush, 106 Vt. 57, 62, 169 A. 782, 783 (1934). To be valid, an offer must be one which is intended of itself to create a legally binding relationship on acceptance. Broad St. Nat'l Bank of Trenton v. Collier, 112 N.J.L. 41, 169 A. 552, 553 (N.J.Sup.1933)”)

 

            Generally, construction of a contract is a matter of law for the court to decide. Bergeron v. Boyle, 176 Vt. 78, 838 A.2d 918 (2003), citing Housing Vt. v. Goldsmith & Morris, 165 Vt. 428, 430, 685 A.2d 1086, 1088 (1996). This instruction is for cases in which the formation of the contract is a matter of disputed fact. Breach of contract cases are usually fact-specific, so this instruction contemplates a description of the offer, acceptance and promised performance.

 

            Furthermore, most contracts are formed with mutual promises and many disputes involve claims by both plaintiff and defendant that the other side breached the agreement. For that reason these breach of contract instructions can be changed to reflect the dispute at hand. As a matter of style the form instructions presume a lawsuit in which the plaintiff claims the defendant breached a contract.

 

“Essential terms” of a contract vary from case to case. For example, in Benya v. Stevens & Thompson Paper Co., 143 Vt. 521, 526, 468 A.2d 929, 931 (1983), the Vermont Supreme Court held that because the defendant was expected to finance three-quarters of the purchase price of real estate, financing was an essential term of the sales contract.

 

Likewise, in Reynolds v. Sullivan, 136 Vt. 1, 3, 383 A.2d 609, 611 (1978) the Vermont Supreme Court held that a preliminary option agreement that was vague and uncertain in its terms “would be an impossibility to enforce.” Id. The test is whether the option agreement contained “all material and essential terms to be incorporated in the subsequent document.” Id. The agreement in Reynolds was labeled as preliminary and specifically provided that the parties “agree to enter an agreement for an option” and that “more specific terms will be stated in the option to purchase.” Id. at 2. It is not necessary under the Reynolds rule that an agreement contain all the terms of a contract as long as it contains a practicable, objective method of determining the essential terms. See Krupinsky v. Birsky, 129 Vt. 400, 405, 278 A.2d 757, 760 (1971) (option contract valid even though it “did not fix a price certain” where “it did appoint a mode of determining the price”); Restatement (Second) of Contracts § 33 comment a, § 34(1) (1981) (“The terms of a contract may be reasonably certain even though it empowers one or both parties to make a selection of terms in the course of performance.”).

 

It is never enough that the parties think they have made a contract; they must express their subjective intent in a manner that is capable of understanding what they agreed to. Vagueness, indefiniteness and uncertainty of expression as to any of the “essential terms” of an agreement have been held to preclude the creation of an enforceable contract. 1 Corbin on Contracts s 95 (1963). Evarts v. Forte, 135 Vt. 306 (1977)(amount of land to be conveyed and the location of boundary lines are essential terms of an agreement to convey land.)

 

The rule appears to be that the terms of a contract must be reasonably certain enough to provide a basis for determining the existence of a breach and for giving an appropriate remedy. Restatement (Second) of Contracts §33. If the terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contract. Restatement (Second) of Contracts §  33, comment a. But even in such cases partial performance or other action in reliance on the agreement may reinforce it. Id. Furthermore, while “the fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance,” Restatement (Second) of Contracts §33, “[w]hen the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court,” Restatement (Second) of Contracts §204.

 

2.7     Existence of Missing or Absent Contract Term

[Name of party making the claim] claims that [name of party opposing the claim] agreed to [describe the disputed terms.] [Name of party opposing the claim] admits that [name of party opposing the claim and name of party making the claim] had a contract, but [name of party opposing the claim] denies that this promise was part of the contract.

 

The terms of a contract may be expressly stated or the terms of a contract may be implied from conduct or words. The law does not require that the conduct or words be in any special form in order for the conduct or words to prove that a contract contained the disputed terms.

 

OPTIONAL LANGUAGE For example in this case, the written agreement between [name of party] and [name of party] does not [described terms about which parties have a dispute,] but you have heard testimony about business they did with one another before they entered into this contract. You must decide if they intended the prior business practices to be part of their contract. You may conclude that the parties intended to include the prior business practices if a person in [name of party’s] position would believe that [name of party] intended to continue the practice, based on [name of party’s] statements or actions.

 

OPTIONAL LANGUAGE: To find that a promise was made as part of the contract you must decide that it is more likely true than not true that:

 

  1. [Name of party opposing the claim] promised [name of party making the claim] that (insert disputed term); and
  2. [Name of party opposing the claim]'s promise was made in exchange for something of value given or promised by [name of party making the claim].

 

Reporter’s Notes

Construction of a contract is a matter of law and not a factual determination. Universal Underwriters Ins. Co. v. Allstates Air Cargo, Inc., 175 Vt. 475, 820 A.2d 988 (2003), citing Gannon v. Quechee Lakes Corp., 162 Vt. 465, 469, 648 A.2d 1378, 1380 (1994).

 

This instruction is for a case in which the existence of a term is in dispute. The instruction should not be used for the purpose of requiring the jury to construe an unambiguous contract, but to instruct the jury about the need to decide what the parties agreed to in the contract. If the contract is ambiguous, then the jury may be asked to determine its meaning. See John A. Russell Corp. v. Bohlig, 170 Vt. 12, 739 A.2d 1212 (1999)(“Whether the contract is ambiguous is a matter of law to be decided by the court. See Morrisseau v. Fayette, 164 Vt. 358, 366, 670 A.2d 820, 826 (1995). If the court concludes the writing is not ambiguous, it must declare the interpretation as a matter of law. See Kipp v. Chips Estate, 169 Vt. 102, ----, 732 A.2d 127, 131 (1999). If the court concludes that the writing is ambiguous, the interpretation of the contract is a question of fact to be decided by the jury. Id.”)

 

Lapoint v. Dumont Const. Co., 128 Vt. 8, 10 (1969) (“In the obligation assumed by a party to a contract is found his duty, and his failure to comply with the duty constitutes a breach. A contract includes not only what is expressly stated therein but also what is necessarily implied from the language used.”) (internal citations omitted).

 

The first “optional language” is to be used in a case in which there is a claim that a contract included terms from prior dealing between the parties. The second “optional language” is to be used when there is a dispute about whether or not the asserted promise was supported by consideration.


2.8     Promissory Estoppel

In this case [name of party making the claim] claims that [name of party opposing the claim] promised to [describe promised performance.] [Name of plaintiff] also claims that the [name of party opposing the claim] failed to keep defendant's promise to (insert alleged promise) and that (insert alleged action or forbearance in reliance by plaintiff) in reliance on the promise.

For [name of party opposing the claim’s] promise to be a contract between [name of party making the claim and name of party opposing the claim,] you must decide that it is more likely true than not true:

 

  1. That [name of party opposing the claim] made a promise to [name of party making the claim];
  2. That [name of party opposing the claim] expected or reasonably should have expected that the promise would cause [name of party making the claim] to act or to fail to act; and
  3. That in reliance on [name of party opposing the claim]'s promise, [name of party making the claim] acted or failed to act and thereby [name of party making the claim] substantially changed [his/her/its] position.

 

Reporter’s Notes

Woolaver v. State, 175 Vt. 397, 833 A.2d 849 (2003)(“To enforce a claim for promissory estoppel, plaintiff must show ‘[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance’ and that ‘injustice can be avoided only by enforcement of the promise.”), quoting Foote v. Simmonds Precision Prods. Co., 158 Vt. 566, 573, 613 A.2d 1277, 1281 (1992) (quoting Restatement (Second) of Contracts § 90(1) (1981)).

Restatement (Second) of Contracts § 90—Promise Reasonably Inducing Action or Forebearance

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires . . . .

 

2.9     Existence of Disputed Terms

[Omitted]

 

2.10   Modification of a Contract

In this case, the parties agree that they entered into a contract. [Name of party making the claim or name of party opposing the claim, as the case may be] claims that after this contract was made, the parties agreed to change the terms of the original contract.

 

To find that the terms of the original contract were changed, you must decide that it is more likely true that not true:

 

  1. That [name the party] gave or promised to give [name the other party] something of value in exchange for that party agreeing to the change in the terms of the original contract; and
  2. That both parties agreed to the change in terms. An agreement may be implied from conduct or words. The law does not require that the conduct or words be in any special form.

 

Reporter’s Notes

            The question whether and how a contract can be modified is a question of law for the court where the agreement contains a provision about modification. This instruction is for those cases where the modification is recognized, but the terms of the modification are in dispute.

 

New England Partnership, Inc. v. Rutland City School Dist., 173 Vt. 69, 786 A.2d 408 (2001)(“It is a generally understood principle of contract construction that “[t]he modification of a contract results in the establishment of a new agreement between the parties which pro tanto supplants the affected provisions of the original agreement while leaving the balance of it intact.”) citing, Beacon Terminal Corp. v. Chemprene, Inc., 75 A.D.2d 350, 429 N.Y.S.2d 715, 717-18 (1980) (citing in part 6 Corbin, Contracts § 1293 (1962)).

 

Chomicky v. Buttolph, 147 Vt. 128, 513 A.2d 1174 (986)(“any proposed changes or modifications ‘are subjected to the same requirements of form as the original provisions.’) quoting Evarts v. Forte, 135 Vt. 306, 311, 376 A.2d 766, 769 (1977). Thus if the original contract was required to be in writing (a contract for the sale of land, for example) any modification must also be in writing.

 

2.11   Breach of Covenant of Good Faith and Fair Dealing

[Name of Plaintiff] says that [name of defendant] breached [his/her] promise of good faith and fair dealing when [name of defendant] [describe alleged action].

 

Every contract comes with a promise of good faith and fair dealing.  This means that both [name of plaintiff] and [name of defendant] promised not to do anything to destroy or hurt the other’s ability to get the benefits of their agreement.  This promise does not change the party’s agreement.  It does not add terms to it.  And it does not stop the parties from doing what the contract allows them to do.  What it means is that the parties must deal fairly and reasonably with one another and act in good faith toward one another and the purpose of their agreement. 

 

You must first decide if [name of defendant] did [describe the alleged action].  If you find that he/she did, you must next decide whether that action was fair and reasonable and was made in good faith toward [name of plaintiff] and the purpose of their agreement.  If it was not, then you must decide if [name of defendant]’s actions reduced the value of the contract to [name of plaintiff] or stopped [name of plaintiff] from enjoying the [name benefit of contract that plaintiff claims has been lost].  If it has, then you must find that [name of defendant] violated the implied covenant of good faith and fair dealing in the present contract and must compensate [name of plaintiff] for what [he/she] would have enjoyed if [he/she] had received [name benefit of contract that plaintiff claims has been lost]. 

 

            If you [name of defendant] breached the covenant, then you should go on to consider damages.

 

Reporter’s Notes

See Carmichael v. Adirondack Bottled Gas, 161 Vt. 200 (1993) in which the Vermont Supreme Court described the implied covenant as follows:

 

An underlying principle implied in every contract is that each party promises not to do anything to undermine or destroy the other's rights  to receive the benefits of the agreement. Shaw v. E. I. DuPont De Nemours & Co., 126 Vt. 206, 209, 226 A.2d 903, 906 (1966). The implied covenant of good faith and fair dealing exists to ensure that parties to a contract act  with "faithfulness to an agreed common purpose and consistency with the  justified expectations of the other party.” Restatement (Second) of Contracts § 205 comment a (1981).

 

*          *          *

 

As the Restatement points out,

 

[a] complete catalogue of types of bad faith is impossible, but the following types are among those which have been recognized in judicial decisions: evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party's performance.

 

Id. § 205 comment d. Further, bad faith inheres in “harassing demands for assurances of performance, rejection of performance for unstated reasons, willful failure to mitigate damages, and abuse of a power to determine compliance or to terminate the contract.”  Id. § 205 comment e.  Additionally, “[s]ubterfuges and evasions violate the obligation of good faith in performance even though the actor believes his conduct to be justified.” Id. § 205 comment d. Finally, the covenant of good faith "also extends to dealing which is candid but unfair, such as taking advantage of the necessitous circumstances of the other party.” Id. § 205 comment e. In the end, good faith is ordinarily a question of fact, one particularly well-suited for juries to decide. J. Calamari & J. Perillo, Contracts §11-38 (c) (1987).

 

That said, the consequences of a breach of the implied covenant cannot be concisely summarized in a form jury instruction. They must be drafted based on the facts of each case. The Vermont Supreme Court recognized as much in Carmichael, where it stated:

 

Although we have stated that a covenant of good faith is implied in every contract, an  action for its breach is really no different from a tort action, because the duty of good faith is imposed by law and is not a contractual term that  the parties are free to bargain in or out as they see fit. Cf. Ainsworth v. Franklin County Cheese Corp., 156 Vt. 325, 331–32, 592 A.2d 871, 874–75 (1991).

 

See also Monahan v. GMAC Mortg. Corp., 2005 VT 110.  The Vermont Supreme Court has recommended in at least one post-Carmichael decision that this claim follows the same pattern and standard as a traditional tort claim since it involves a non-negotiable duty of reasonableness that if breached leads to liability.  Peerless Ins. Co. v. Frederick, 2004 VT 126, at ¶¶ 14, 15.  This recommends that any instruction for a breach of covenant claim should follow the negligence format as well.  See also M. Gergen, The Jury’s Role in Deciding Normative Issues in the American Common Law, 68 Fordham L. Rev. 407, 451–61 (1999).

 

Damage Note:  Damages for a breach of this covenant may be more than normal contract damages as the Vermont Supreme Court and other jurisdictions have classified this claim as more akin tort than conventional contract law.

 

2.12   Quantum Meruit

In this case both [name of plaintiff] and [name of defendant] agreed to do business with one another but their agreement did not state a means for calculating the price of the work actually done. Because the contract does not answer the question, the jury must decide how much [name of plaintiff] should be paid for the work that [name of plaintiff] did.  The question is always, “What has the Plaintiff earned?”

In considering the value of [name of plaintiffs]’s work, you should consider the evidence about how much time was put in by [name of plaintiff] and those who worked for him. You should also consider the fair market value of the work, that is, the evidence about what is usually charged in the community for work of the kind that [name of plaintiff] did. You should consider the fair market value of the materials that [name of plaintiff] used and the profit [name of plaintiff] should earned on the cost of the materials, according to the evidence. You should consider [name of plaintiff’s] business overhead, beyond the direct payments to those who worked for [name of plaintiff.] You should also consider the cost to [name of plaintiff] of designing, planning and supervising the work.

You should subtract from the value of the work any money that [name of defendant] paid to [name of plaintiff.]