Bar - Contracts Flashcards
Main issues
What is the rule for your first issue on governing law that you have to answer at the start of every contract essay?
Article II of the UCC applies to goods (tangible, moveable objects) while the common law applies to all other contracts including those for land and services.
How is a merchant defined?
A merchant is one who regularly deals in the goods of the kind sold, or who holds themselves out as having special knowledge or skills as to the goods involved.
Remember: Article II applies to all sellers, even friends/non merchants.
What is the overall rule for contract formation?
Contract formation requires offer, acceptance, consideration, and no defenses that would invalidate the otherwise valid contract.
What are the 3 elements to an offer?
(1) Manifestation of an intent to be bound;
(2) To definite and certain terms; AND
(3) Communicated to the offeree.
What are examples of insufficient offers?
Ads, catalogs, price quotes, solicitation of bids, negotiations, offers made in jest or exaggeration
What are examples of sufficient offers?
o Customer says “I found you through your website” and site has prices
o Reward offers if clear who can accept and win (offer for unilateral contract)(“first come first served” or “only one can win”)
o Auctions (auctioneer is inviting offers)
o Bids (count as offers except where “without reserve”)
What are definite and certain terms?
Required terms are
- Parties
- Subject
- Quantity (except in output or requirement contracts)
- Price for real estate contracts
What is a requirement contract?
In a requirement contract, a supplier agrees to supply all of the goods a customer requires.
What is an output contract?
In an output contract, a buyer agrees to purchase all of a supplier’s output.
Note
Sample question: If supplier shuts down output, even if contract provides that either party can terminate at any time, the decision must be made in good faith, so there is a decision for the jury of whether the decision was made in good faith. Thus, MSJ should not be granted.
o Note: ‘Quantity’ term is NOT required in either requirement nor output contracts because court can figure out the number
o Note: Output or requirements must approximate a reasonably foreseeable figure (good faith agreement)
Under the requirement of ‘communicated to the offeree’, what is important?
The offeree must have knowledge of the offer.
What are the 5 ways an offer can be terminated?
(1) Rejection of offer by offeree
(2) Counteroffer
(3) Revocation of the offer
(4) Lapse of Time
(5) Termination of offer by operation of law (death/incapacity, destruction of subject matter, illegality)
Some notes on a counter offer
“Would you take less…” is an inquiry, not a counteroffer
Period = counteroffer
Question mark = counteroffer
Conditional acceptance = counteroffer (e.g., Obama says I agree on the condition that…–> this rejects the offer and is a counteroffer
What is the regular will on revocation of an offer?
An ordinary offer is revocable at the will of the offeror, prior to acceptance, even if has promised not to revoke for a certain period.
How can a revocation be communicated?
Directly through unambiguous words or conduct (e.g., selling goods to another party)
Indirectly by receiving correct information from a reliable source
When is revocation effective and the exception?
Revocation is effective upon receipt.
Exception: if revocation is by publication, in which case it is effective when published, but if it is through publication, it must be through the same magazine.
o Note: Communication does not have to be read to have been received.
o NOTE: Do NOT bring up mailbox rule when talking about revocations.
What are the 4 exceptions where an offer is not revocable?
(1) UCC Firm Offer
(2) Option contract
(3) Detrimental Reliance
(4) Unilateral contract
What are the 3 requirements for a UCC Firm offer?
(1) Signed in writing;
(2) By a merchant; AND
(3) To hold offer open for a specified or reasonable time, but in no case may period exceed 3 months
o Note: For 3 months, offeror cannot revoke offer, after three months, offeror can revoke. If he doesn’t revoke, it will remain open and can still be accepted.
o Note: Seller can attach additional condition that must also be met like, “buyer acceptance must be received on or before X date.”
o NO payment/consideration required
What is the rule for an option contract?
An option contract requires consideration and the offer is revocable for the stated period.
o Recall - Exception to Mailbox Rule
An acceptance of an option contract (when the offeree decides to accept the offer) is not effective until received by the offeror.
What is the rule for detrimental reliance and the scenario it plays out in in revocation of offers?
An offer is irrevocable if the offeree has detrimentally relied.
Example: Subcontractor (offeror) makes the big. Offeree general contractor accepts to his detriment.
What is the rule on revocation for a unilateral contract? When does acceptance occur? When does payment occur?
An offer for a unilateral contract is irrevocable once performance begins. Acceptance occurs through performance. Payment occurs upon completion of the act.
o Exam tip
Painter takes one stroke of paint
Walker takes one step
In both of these, offer not revocable.
However, mere preparation (buying paint) is not sufficient and offer can be revoked, but offeree if spent $10K on supplies can seek restitution claim for $10K
What is the rule on lapse of time and offers?
An offer remains open for a reasonable time or when the offeror states it does.
What is the reasonable amount of time for an oral offer? An email or mail? Accepting a reward offer?
An oral offer expires at the end of the conversation.
An email or mail offer expires by the next day.
A reward offer doesn’t expire for a long time, can be up to years.
What are the 3 ways an offer can terminate by operation of law?
(1) Termination by death or insanity
(2) Termination by destruction of subject matter
(3) Termination by illegality of subject matter
Is it necessary that the death or insanity be communicated to the other party?
No, however if mental illness is not adjudicated, the offer is terminated only if the offeree is aware of the incapacity.
What is the rule for acceptance? include common law and UCC
Acceptance is the manifestation of assent to the offer terms. Under the common law, the mirror image rule applies, where acceptance must exactly match the offer. Under the UCC, acceptance does not need to exactly match the offer.
Under a unilateral contract, acceptance occurs when performance is completed. What are the rules on notice and two exceptions?
The offeree is not required to give the offeror notice that he has begun the performance, but he is required to notify the offeror within a reasonable time after performance has been completed
Exceptions
(1) Offeror waived notice, OR
(2) Offeree’s performance would normally come to the offeror’s attention within a reasonable time.
Who may accept an offer and what is the exception?
Only a person at whom the offer is directed may accept the offer
Exception
the option contract creates a separate right to accept and contract rights are generally assignable
When is acceptance effective and what is the rule called?
Under the mailbox rule, acceptance is effective upon dispatch.
What are the 5 exceptions to the mailbox rule?
(1) Offeree uses wrong address or postage
(2) Offer itself provides otherwise
(3) Option contract
(4) Rejection sent before acceptance (whichever is received first is the effective one)(if acceptance sent then rejection sent, normal rule at play)
(5) Offeror detrimentally relies on termination before he receives acceptance.
- Recall: Other types of communications (e.g., offers) are effective when received (e.g., option contract)
- NOTE: If revocation and acceptance happen at exact same time, like offeree hands it to post man as he is handing her revocation letter, court determines outcome.
What is the common law mirror image rule?
Under the mirror image rule, acceptance must be a precise mirror image of the offer.
What is the UCC rule on acceptance?
Under the UCC, any expression of acceptance is sufficient. The Battle of the Forms provision applies.
Who does the Battle of Forms apply to?
Merchants only. If the party is not a merchant, the Battle of Forms is not applicable and new terms are considered mere proposals that do not become part the contract unless the offeror accepts.
Under the Battle of Forms, what two kinds of terms are there?
Additional terms
Different terms
What are the 3 situations when an additional term does NOT become part of the contract?
(1) Materially alters
(2) Offer limits acceptance to offer terms
(3) Offeror objects within reasonable time
o Note: If for any reason the additional term doesn’t get added, the parties still have formed a contract, just without that term.
How are different terms treated in the Battle of Forms? There is the majority rule and a minority rule
Under the majority rule, different terms are knocked out of the contract and gaps are filled by the gap-filler provisions. Under the minority rule, different terms and additional terms are treated the same or the offeror’s terms control.
Under the UCC, what are the 2 ways to accept an offer?
(1) A promise to ship
(2) Prompt shipment
What happens if the seller ships non-conforming goods and acknowledges the issue?
If the seller acknowledges the nonconformity, this is an “accommodation” to the buyer and is not an acceptance of the buyer’s offer. Rather, seller makes a counteroffer that the buyer is then free to accept or reject.
If seller does NOT acknowledge nonconformity: Offer has been accepted and breached simultaneously.
In an auction, up to when can a bidder retract an offer?
A bidder may retract the bid until auctioneer announces completion of the sale
Listen to special auction rules in the UCC
o Goods Auctioned in Lots
Rule: In an auction, if goods are put up in lots, each lot is the subject of a separate sale.
o When Sale Is Complete
Rule: A sale by auction is complete when the auctioneer announced by the fall of the hammer or up to his discretion.
o With or Without Reserve
With: Auctioneer may withdraw goods at any time until he announces completion of the sale
Without Reserve: Once the auctioneer calls for bids, the article cannot be withdrawn unless no bids made in reasonable time.
In either case, bidder may retract bid until auctioneer announces completion of the sale
o Bid on Sellers Behalf
If the seller makes a bid to drive up price, winning bidder may avoid the sale or take the goods at the price of the last good faith bid
What are the 2 requirements for consideration?
(1) A bargained for exchange; AND
(2) Of legal value
- Act of forbearance by promisee must benefit promisor
o Example: Refraining from suing on a valid claim. - The benefit to the promisor need not have economic value.
o Peace of mind or gratification for influencing another is sufficient
o Example: Father tells kid, “I’ll give you $1K if you stop smoking.” This is OK.
o Note: A promise to make a gift is unenforceable. - Note - Exclusive Distributors
o Rule: Where a party is to be the exclusive distributor, courts will imply a promise to use best efforts to sell the product, and the implied promise is valid consideration.
(2) Of legal value. - Sham or Nominal Consideration: Is insufficient, but it must be obvious, because court reluctant to inquire into the adequacy of consideration.
What are the 2 areas that are NOT sufficient consideration?
(1) Past consideration
(2) Pre existing legal duty
What are the 2 exceptions to the general rule that past consideration is insufficient?
(1) Promise to pay a debt that has already been barred by a technical defense
(2) Promise to pay for a past benefit at the promisor’s request
Rule: A new promise to pay a past debt that is now barred does not require consideration so long as promise in writing or is partially performed.
Examples: Man owed lady money but Statute of Limitations had run so lady couldn’t sue. Man wins lottery and promises to pay woman. Written promise to pay a debt discharged by bankruptcy. Written promise is enforceable.
Rule: A new promise to pay for benefits previously received at the promisor’s request or in an emergency can be binding without consideration
Examples
* Promisee performs act at promisor’s request
* Man performs unrequested act during emergency (saves drowning child)
What is the rule on pre existing duty?
Performance of a pre-existing duty is not consideration unless an exception applies.
What are the 6 exceptions to the pre existing duty rule?
(1) New or different consideration provided
(2) Promise to pay voidable obligation
(3) Third party enters
(4) Good faith dispute and parties agree to lesser amount, accord
(5) Extreme, unforeseen circumstances
(6) UCC modification in good faith
o 7 Exceptions to Pre Existing Duty Rule
(1) New or different consideration promised
* Rule: If the promisee gives new consideration or in some way agrees to vary her existing duty (e.g., by accelerating performance), is consideration.
* Rule: When the amount due is not disputed, payment of a smaller sum will not be sufficient consideration for a promise by creditor to discharge the debt. However, if the consideration is any way new or different, sufficient consideration is found.
* Example: Payment before maturity, payment to another other than the creditor, payment in a different medium (stock instead of cash), or payment of a debt that is subject to a honest dispute
* Note: Usually immaterial how slight the change is, because courts want to avoid the preexisting duty rule.
(2) Promise to perform a voidable obligation
* Examples: A minor’s ratification of a contract upon reaching the age of majority is enforceable without new consideration; A defrauded person’s promise to go through with the contract even after learning of the fraud is enforceable.
(3) The preexisting duty is owed to a person different from the one in the new deal
* Example: Baseball player hitting homerun owes the duty to hit well for his baseball team. Then, father of sick boy, says I’ll pay you because this will make my son feel better. OK to take dad’s money. Contract formed.
* Example: Simon forms contract to pay Pam to sing. Later, when Simon threatens to cancel, Dan comes in and offers to pay Simon to not cancel. Because Simon did not owe Dan a duty under the original contract, the contract is enforceable.
(4) Good faith dispute as to a claim and the parties agree to settle the debt for a lesser amount, amounting to an accord
(5) Extreme, unforeseen circumstances
(6) UCC modification in good faith
What is an illusory promise?
An illusory promise is not supported by consideration and is not enforceable. Performance is up to the discretion of the other party.
Example: Party A promises to buy ‘as many widgets as he wants’
Exam tip: For requirement and output contract, explain why the contract is not illusory.
What is a surety contract and what is the rule?
A surety contract involves a promise to pay someone else’s debt. It is not enforceable unless it is supported by consideration.
NOTE: Surety makes promise before or at same time creditor makes promise: consideration present. If surety makes promise after time creditor makes promise, no consideration.
If there is no consideration, what are the 2 avenues to alternative remedies to pursue?
(1) Promissory estoppel/detrimental reliance, where reliance damages can be sought
(2) Quasi contract (implied in law contract), where restitution can be sought
What are the 3 requirements to promissory estoppel/detrimental reliance in which reliance damages may be sought?
(1) Promise foreseeably induces reliance;
(2) Promisee relies to their detriment; AND
(3) Injustice can be avoided only by enforcement of the promise
- Context: Defendant made a promise.
- Recovery
o Reliance damages (restore plaintiff to position she would have been in had the contract never been formed) - Example: Where grandpa promises granddaughter she can stop working because he will pay her
- Damages
o Reliance
o Example: Man says he will bequeath university $5M and university markets this. Man pulls out. University sues for damages. Court unlikely to give university $5M, but will likely award university reliance damages (money they spend on advertising, a plaque, etc.) - Exam note
o If contract lacks consideration, consider promissory estoppel to make contract enforceable. The recovery is higher with a valid contract, but promissory estopped is a good alternative where consideration is lacking.
What are the 2 requirements to a quasi contract? What is the recovery?
(1) Enrichment without intent to make a gift; AND
(2) Unjust for defendant to keep benefit without compensation.
- Context: Defendant did not make a promise.
- Note: Also called an implied-in-law contract.
- Recovery
o Restitution damages (fair market value of benefit conferred)
What is the general rule for the Statute of Frauds? How many areas apply? Remember you bring this up on any contract essay.
Under the Statute of Frauds, certain agreements must be in writing and signed by the party to be bound. 6 areas apply.
What is the mnemonic?
MY LEGS
- Note: If the Statute of Frauds is not raised as a defense, it is waived.
What are the 6 areas which must be evidenced in a writing signed by party to be bound?
(1) Marriage contract prenup
(2) Year bar from start of contract
(3) Land contract
(4) Executor promise to pay estate debts out of his own funds
(5) Guarantor promise to guarantee debt of another
(6) Sale of goods for $500 or more
- (1) Marriage contract
o A promise the consideration of which is marriage must be evidence in writing (e.g., sign a prenuptial agreements)
o Exception
Does not include mutual promise to marry - (2) Year bar
o Rule: A contract that cannot be performed within one year from the date of contract must be evidenced in writing.
o Note: Performance must be literally impossible to perform in one year.
Example: Lease/easements for more than 1 year
Possible to perform in one year - Lifetime agreements (could die tomorrow)
- Superhuman doing job = can always get done in a year
- (3) Land contract
o Includes not only agreements for sale of property but also other agreements pertaining to land
o Includes:
Leases for more than one year
Easements for more than one year
Mortgages and other security liens
Fixtures
Minerals or structures if they are to be severed by the buyer.
o Items That Do Not Create Interest in Land
Contract to build a building
Contract to buy and sell real estate and then divide the profits - (4) Executor
o Rule: A promise by an executor or administrator to pay the estate’s debts out of own funds must be evidenced in writing.
Note on guarantor promise: they are guaranteeing the debt, NOT assuming it.
Example: Bail bond or dad promises to pay cook for daughter’s meal if she doesn’t pay
Example: Give her the food and I’ll pay the bill is not a guaranty contract and thus does not need a writing.
Note: If an indivisible item is partially paid for (like down payment on a car), Statute of Fraud is satisfied for the whole item (car).
Under the guarantor area, where a writing is required, what is the exception where a writing is not required?
Main purpose rule:
If the guarantor’s main purpose is to benefit himself economically, a writing is not required.
o Example: Guarantor owns 40% of company and co-signs loan for company
Under the sale of goods for $500 or more, what are the 2 exceptions where a writing is not required?
(1) Specially-Manufactured Goods
(2) Written Follow Up Memo from Merchant
Under Specially Manufactured Goods, what are the 3 requirements?
(1) Goods specially manufactured for the buyer;
(2) Not suitable for sale to others; AND
(3) Manufacture made substantial beginning toward manufacture or commitments to procurement.
What is the written confirmation by merchant?
In a deal between merchants, a writing confirming the deal sent from one party to another binds both parties unless the other party objects within 10 days of receipt.
For the writing requirement what are the 3 requirements?
(1) Writing;
(2) Includes essential terms; AND
(3) Signed by party to be bound.
o (1) Writing(s);
Entire set of writings may be combined if:
* (1) Signed writing is attached to other writing by party to be charged;
* (2) Signed writing refers to the unsigned writings;
* (3) Signed and unsigned docs clearly refer to the same subject matter; OR
o Note: An ad in the paper that has a price in it is not good enough, the parties could have negotiated a different price. Only way is if party to be bound had signed the ad.
* (4) Written Confirmation by Merchant
o (2) Including essential terms; AND
Note: If a term is missing and cannot be supplied by the law, evidence will not be permitted to add it.
o (3) Signed by the party against whom enforcement is sought.
Typed, initialed, letterhead, one’s name on an email, or firm name on a fax.
Where a contract is subject to the Statute of Frauds but no writing exists, what are the 3 areas in which the contract will still be enforced?
(1) Judicial admission
(2) Promissory estoppel/detrimental reliance
(3) Full or partial performance
What is full performance in the UCC and what is the special rule?
Goods are accepted or paid for, but contract is enforceable only up to that amount.
- Example: Gemologist delivers gems to jeweler and jeweler accepts but refuses to pay. Gemologist entitled to full contract price, and does not need to employ any quasi contract theory.
What is full performance for a land sale contract? What is partial performance?
For full performance, conveyance must have been made.
For partial performance, 2 of 3 must be met. Possession, improvement, payment.
What are the 4 steps to analyze in a Statute of Frauds?
(1) Does contract fall within Statute of Frauds?
(2) Do any exceptions apply?
(3) Is the writing requirement satisfied?
(4) If the writing requirement is not satisfied, can promissory estoppel/detrimental reliance be applied to enforce the oral contract?
What is the difference between a void, voidable, and unenforceable contract?
A void contract has no legal effect from the beginning and cannot be enforced (e.g., agreement to do something illegal).
A voidable contract is one that can be rescinded or avoided (e.g., raising a defense like infancy or mental illness that makes it voidable)
An unenforceable contract is an agreement that is otherwise valid but might not be enforceable (e.g., due to SoL running or Statute of Frauds requirement not met).
What is the difference between a promise and a condition?
Failure to fulfill a promise gives rise to breach but does not discharge the other’s parties obligation.
Failure to meet a condition discharges the other party’s obligation to perform?
Courts tend to favor finding promises over conditions.
How are satisfaction conditions treated?
Satisfaction conditions are judged by a reasonable person standard unless the deal involves art or personal taste in which a subjective standard is used.
What are the 3 situations when one will have waived a condition benefitting them?
(1) Voluntarily giving up condition’s benefit
(2) Receiving and keeping the benefit
(3) Failing to insist on compliance
- Voluntarily gives up condition’s benefit
o Example: Beyonce contract with builder says builder must do X. Builder doesn’t do X. Beyonce says it’s OK, I’ll pay you anyway. Now, she must pay. - Receiving and keeping the benefit
- Fails to insist on compliance
Retraction - Rule: Waiver of conditions can be retracted so long as the other party has not relied upon the waiver.
What is the main rule for the Parole Evidence Rule (PER)?
The Parole Evidence Rule (PER) excludes evidence of prior or contemporaneous agreements that contradict a final agreement. The outcome depends on whether the agreement is partially or fully integrated.
What is a partially integrated contract and what is the rule?
A partially integrated contract sets some but not all of the terms.
Statements that supplement can come in; statements that contradict cannot come in.
Example: Sale for grey horse, will allow oral agreement for saddle but not oral agreement for brown horse (b/c contradicts)
What is a final integrated contract and what is the rule?
A final integrated contract is one in which the parties expressly agree that the writing embodies the final expression of their bargain.
No additional information can come in.
Note: Judge determines whether writing is final integration.
o Example: Merger Clause
A merger clause recites that the agreement is the complete agreement between the parties and is strong evidence that the writing is a complete integration.
How are non-integrated contracts treated with respect to evidence coming in?
The PER does not apply to non-integrated contracts like tentative drafts, so the evidence can come in.
What are the 4 exceptions to the PER where PER will not apply to bar the evidence?
(1) Defense to contract formation or enforcement
(2) Separate, collateral agreements
(3) Oral condition precedent
(4) Explaining/interpreting (ambiguous term)
- (2) Separate/collateral agreements
o Extrinsic evidence may be offered if it represents a distinct and separate contract. - (3) Oral condition precedent
o This exception applies to a situation where the parties agree that the contract itself will not take force until some stated condition is met.
o Example: Parties negotiate contract but orally agree contract will not be in effect until Board of Trustees votes to approve the contract.
What are the 3 areas where the court can admit evidence to explain the contract?
(1) Course of performance (parties conduct in contract at hand)
(2) Course of dealing (past history)
(3) Trade usage (what is typically accepted in the industry)
If the PER bars admission and a mistake has occurred, what should be pursued?
Reformation
o Rule: If the PER bars admission, the contract could still be reformed for mutual mistake if an omitted term in the document was accidental. The parol evidence rule does not apply if a party to a written agreement alleges facts that entitle him to reformation of the agreement.
Exam Tip
* Argue both ways on whether partially integrated or final integration
* Chronology is very important
o If communication occurs after the writing, explain why PER not relevant
Who is an intended beneficiary?
Under an intended third party beneficiary scenario, 2 parties contract to benefit a third party. The intended beneficiary can sue to enforce the contract.
o Note: The original party can sue as well, because they paid consideration to have the other party help the third party.
o Two types of intended beneficiaries
Creditor beneficiary: This is a third party who is owed money by the promisor.
Donee beneficiary: This is a third party to whom the promisor wants to give a gift.
o Promisor has same defenses against third party beneficiary (your friend never paid me) as against promisee (you never paid me)
o Note: If the third party makes a promise to someone else (come to the concert, Beyonce is going to sing for me), and Beyonce is a no show, the someone else has no cause of action, because she is merely an incidental beneficiary.
When a third party beneficiary is involved, when can a contract be modified or discharged?
Only before the third party’s rights have vested.
Example: Singer can only rescind contract before third party beneficiary knows singer will sing for her.
When does the party’s rights vest?
When they learn of the contract and rely on it.
What are the only 2 ways to rescind or modify a contract after the 3rd party intended beneficiaries rights have vested?
(1) Beneficiary consents
(2) Contract provides otherwise
o NOTE: A third-party beneficiary may sue both the promisor and promisee but may obtain only one satisfaction.
What is the rule on incidental beneficiary?
An incidental beneficiary indirectly benefits from the contract and cannot sue to enforce
- Example: Adjacent property owner to a large planned development
What is the rule on entrustment?
An owner who entrusts her goods to a merchant has no rights against a BFP (one who takes for value without notice)
- Note: Person can still sue the jewelry for conversion but cannot go back and get the watch that was sold to a BFP.
- Exam Tip: BFP always wins so long as the BFP bought it from a merchant dealer. If BFP bought it from back of van, you have reason to know you are not getting good title.
Define an assignment and what are the three parties in an assignment
o Defined: Under an assignment, two parties make a contract. The two parties are about to become the obligor and the assignor. Next, the assignor transfers their rights to a third party (assignee).
Obligor assignor assignee
What are the 3 things that an assignor warrants?
(1) He made no prior assignment of right
(2) Right not subject to statute of limitations or defenses other than what is apparent
(3) He will do nothing to defeat or impair the right
Who can the assignee sue and for what?
- Right to sue obligor for non-performance
- Right to sue assignor for wrongful revocation of assignment, for impairing value of assignment, for breach of implied warranty
What is the rule on privity of contract in assignments?
An assignment establishes privity of contract between the assignee and the obligor, and extinguishes privity between the obligor and the assignor.
The general rule is that all rights are assignable. What are the 3 exceptions?
(1) Personal services
(2) Requirements contracts
(3) Public policy violations
What is the rule on trying to change an obligor’s duties?
Assignments cannot substantially change an obligor’s duties, regardless of what the contract says.
- Transfer of who obligor needs to pay: OK
- Transfer of what type of performance she owes: not OK
What language makes an assignment valid?
Assignments must contain language of present transfer.
- Example: I promise to transfer or I will assign my rights to you”: insufficient
- Example: I assign or Batman assigns: sufficient
If a contract prohibits assignments, what is the rule?
Assignment is still valid by the assignee so long as the assignee had no knowledge of the prohibition.
- Example: “Rights under this contract are not assignable.”
If a contract invalidates assignments, what is the rule?
The assignment is void and assignee cannot collect.
- Example: “All assignments are null and void.”
Under multiple gift assignments, what is the rule on who can collect?
The last gratuitous assignee wins, because gifts are easily revocable.
o Note: Best to be at the end of the line with gifts.
Under multiple assignments with consideration, what is the rule?
The first assignee involving consideration wins over all subsequent assignees and gift assignees
What is the exception?
Later assignee for consideration prevails if (1) He doesn’t know of the earlier assignments; AND
(2) Is first to receive payment or judgment from obligor.
o Exam Tips
Recall: In a third party beneficiary, the third party is named in the contract itself. In an assignment, the additional person doesn’t come around until later.
Even if contract prohibits assignments, often the assignment itself will still be enforceable, BUT the party who assigned the rights will be in breach. Be careful to distinguish the assignment being still valid despite the breach.
What is the rule on delegation?
Under a delegation, a party contracts to delegate his duties to a third party to perform. Both the delegator and the delegatee are liable for performance to the main/first party.
What are the 4 types of duties that cannot be delegated?
(1) Duties of special skill or judgment
(2) Those involving special trust (e.g., doctor, lawyer)
(3) Those restricted by contract
(4) Those that materially change obligee expectancy
What is the rule on whether consent is required?
The original party must accept performance. Consent is not required before making the delegation.
o Example: I contract to have Bob paint my house. Bob delegates his duties to have Maria paint the house. Bob’s obligations are not excused, and I can sue him absent a novation releasing him. Also, I do not need to give my consent for Maria to now paint the house.
If a delegation is prohibited in the contract, how is this treated?
No delegations allowed
(compare to assignments where prohibition language is not an obstacle)
If a contract prohibits assignments, what happens to delegations?
If a contract provides “no assignments” this also means “no delegation.”
When is a delegate liable?
When he receives consideration. A delegate who receives a gift is not liable.
Example: I paid Alex $1000 to paint Mark’s house. Since Alex (the delegate) received consideration, he is liable for not painting the house.
What is an exam cluster related to anticipatory repudiation? Three additional issues
Anticipatory repudiation
demand for adequate assurances
failure to respond to request for assurances
performance - material or minor breach. substantial performance vs. perfect tender rule.
PER
Contract modification
alternative theories of enforcement
What are the 3 requirements for anticipatory repudiation?
(1) An unequivocal expression;
(2) Before the time for performance is due; AND
(3) That the repudiating party will not perform.
Note: After this analysis, analyze whether material or minor breach.
Conclusion: There was anticipatory repudiation.
What 4 options does the non-repudiating party have?
(1) Suspend performance and wait to sue
(2) Sue immediately
(3) Treat contract as discharged
(4) Urge promisor to perform
What are the 3 situations in which the repudiating party may not retract their repudiation?
(1) Other party acts in reliance on the repudiation
(2) Other party cancels contract
(3) Other party bring suit
