Contracts Flashcards
1
Q
What is the general flow of contract formation?
A
Offer, Acceptance, Consideration, No Defenses to Formation = Contract
Contract + Conditions Satisfied/Waived and Performance not Excused =Absolute Duty to Perform
2
Q
What are Defenses to formation of a contract?
A
Misunderstanding/Mutual Mistake Capacity Illegality SoF Duress/Undue Influence Fraudulent Misrep Material Misrep Unconscionability
3
Q
If conditions are not satisfied, failure to perform is _____
If there is a valid contract and conditions are met, there is an _______ but no performance is required if there is an _______
A
justified
absolute duty to perform - excuse to non performance
4
Q
What is the result of a failure of a promise?
What is the result of a failure of a condition?
A
Failure of promise = breach
Failure of condition = no obligation to perform
5
Q
What is the most important implied condition?
A
One performance is conditional on the other.
If simultaneous perf is possible, concurrent conditions.
If one perf takes longer than another, condition precedent
6
Q
When does substantial performance satisfy a condition such that the other party still has to perform?
A
Under common law…
Substantial performance of an implied condition satisfies the condition but substantial performance of an express condition does not satisfy the condition
Under UCC,
Substantial performance is not good enough
7
Q
What are some ways to satisfy the absolute duty to perform?
A
Performance Occurrence of condition subsequent Subsequent illegality Impossibility/Impracticability/Frustration of Purpose Rescission (mutual or unilateral) Cancellation Release Modification Accord + Satisfaction Novation Discharge by account stated Lapse Death or incapacity of a person necessary for performance
8
Q
If a contract fails and the result seems harsh, think _____
A
restitution
9
Q
What are the three types of contract (characterized by the method of formation)?
A
Express Contract (formed by language) Implied Contract (formed by conduct) Quasi Contract (not contract but restitution remedy)
10
Q
What are the two types of contract (characterized by the method of acceptance)?
A
Bilateral Contract (promise for a promise) Unilateral Contract (promise for performance)
Offers are presumed to be for a bilateral contract
11
Q
How can you accept an offer for a bilateral contract?
A
by promise or performance
12
Q
How can you accept an offer for a unilateral contract?
A
By COMPLETING performance
13
Q
What are the two ways to make an offer for a unilateral contract?
A
1) an offer to the public (e.g. reward offer)
2) Clearly indicate that the completion of performance is the only method for acceptance
14
Q
What are the three statuses of validity?
A
1) Void Contract (w/o legal effect - enforceable by no one)
2) Voidable Contract (one or both parties can elect to avoid the contract - when a defense is available)
3) Unenforcable Contract (is valid but for a defense)
15
Q
What is a “good” under Article 2?
A
Goods are all things movable at the time they are identified as the items to be sold under the contract
Not realty, services, intangibles, or construction contracts
16
Q
Who is a “merchant” under Article 2?
A
Merchant is one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved
But for general purposes, anyone in business can be deemed a merchant as long as acting in their mercantile capacity
17
Q
A contract involves goods and non-goods does the UCC apply?
A
Determine if the goods or non-goods aspect is dominant unless the contract divides the payment between goods and services, then both UCC and CL can apply
18
Q
What is the UCC definition of “good faith”?
A
honesty in fact and the observance of reasonable commercial standards
19
Q
What is the common law duty of good faith and fair dealing?
A
cannot exercise discretion in a way that deprives the other party for the fruits of the contract
20
Q
What is the definition of an offer?
A
a (1) communication of (2) promise, undertaking or commitment objectively perceived as indicating intent to form a contract to (3) with definite and certain terms communicate to the offer
21
Q
When is a price quote an offer?
A
Generally not, but probably offer if given in response to an inquiry with a quantity term
22
Q
What is considered in determining if there is an offer
A
Must create a reasonable expectation of intent to contract in the offeree (surrounding circumstances and prior relationship considered)
23
Q
Is an ad an offer?
A
Ads (and other broadly distributed communications) are generally solicitations for offers
24
Q
What is the standard for a communication containing sufficiently “definite” terms to be an offer?
A
must contain enough essential terms such that a contract including them is capable of being enforced
2 Basic requirements:
1) Sufficiently identify the offeree or the class of people that can accept
2) Definiteness of the subject matter
25
What "material" terms are required for a communication to be sufficiently definite to be an offer in the following contexts? Can the parties agree to agree later on a material term?
Real estate
Sale of Goods
Services
Real Estate: identify the land and price
Sale of Goods: Quantity (or requirements/output)
Services: the nature of the work to be performed (but not for a contract for employment)
No -cannot agree to agree later on a material term
26
An employment contract does not specify duration - what is presumed?
Employment at will - terminable by either party
27
What price does Article 2 imply if none is provided?
What timeline does Art 2 imply if none is provided?
Reasonable price at the time of delivery
Within a reasonable time
28
Can the court use gap fillers to supplement vague terms?
No -instead the court can use course of performance, course of dealing, and usage in trade
29
What are the ways to reject a contract?
Lapse of time, Rejection (express or counteroffer)
30
What are the common law rules for conditional acceptance or adding terms in and acceptance?
Rejection and a counteroffer that cannot be accepted by performance.
If the counteroffer is accepted by performance, then a contract is formed without the new terms by the parties conduct. Terms include any agreed terms plus gap fillers
31
What is the effect of a rejection of an offer under an option contract during the period of the option?
Rejection or counteroffer under an option does not terminate the offer UNLESS the offeror has detrimentally relied on the offeree's rejection
32
How can an offer be indirectly revoked?
If the offeree receives (1) correct information (2) from a reliable source (3) of the acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
33
What are the 4 circumstances when an offeror cannot revoke an offer?
1) Option
2) Merchant's firm offer
3) Foreseeable Detrimental Reliance (offer held open as an option contract for a reasonable length of time - esp gen/sub contractor bids)
4) Beginning performance (not just prep) under a unilateral contract offer (right but not obligation to finish within a reasonable time)
34
What is the difference in beginning performance under a unilateral contract offer and a bilateral contract offer?
Beginning performance under a bilateral contract offer serves as a binding acceptance and creates an obligation to finish
Starting performance (not just prep) under a unilateral contract offer creates the option but not obligation to finish within a reasonable time. Acceptance only comes upon completion of performance
35
What are the requirements for Merchant's firm offer?
1) Offeror is a merchant
2) offer is in a signed writing
3) writing gives assurances it will be held open
* Remember the 3 month limit absent consideration/option contract
36
What are the circumstances where an offer is terminated by operation of law?
Death or insanity of either party (regardless if the offeree knew about the death)
Destruction of the proposed contract's subject matter
Supervening illegality
37
Can a power of acceptance be assigned?
No unless there's an option contract
38
How can an offer be accepted if there is no method of acceptance specified?
Any reasonable manner
But if method of acceptance is specified, must use that method
39
When accepting an offer for unilateral contract, does the offeree have to give notice?
No notice required when performance has begun, but notice required within a reasonable time after completion unless offeror waived notice or the performance would normally come to the offeror's attention within a reasonable time
40
When can a seller ship nonconforming goods as an accommodation? What is the effect of an accommodation?
When accepting by performance (cannot use accommodation if accepted by promise)
Effect is a counteroffer and buyer can accept all/part.
41
What is the UCC battle of the forms provision?
Unless an acceptance is expressly made conditional on the acceptance of new/different terms, an acceptance with different terms forms a contract (regardless if parties are merchants)
If BOTH parties are merchants, the contract contains the new terms unless prior objection, objection within 10 days, material alteration, or offer limited acceptance to its terms
If any party is a non-merchant, then contract formed without the new terms unless the offeror expressly agrees
42
What is the knockout rule?
In a batte of the forms situation between two merchants, if the acceptance contains DIFFERENT (not additional) terms, then some courts resolve the contradiction by knocking out the conflicting terms and providing a gap filler (but some courts allow the terms of the acceptance to govern)
43
What is a key limitation on the battle of the forms?
If there is a difference as to price, quantity, or quality, then there might not be sufficient meeting of the minds to be a contract
44
Merchants agree to a contract orally and then one sends a merchant's confirmatory memo with slightly different/additional terms - what is the analysis?
Run through the battle of the forms analysis
45
When does the mailbox rule NOT apply to communicating an acceptance?
1) offer stipulates acceptance is effective when received
2) option contract is involved
3) offeree sends a rejection before the acceptance
4) offeree sends an acceptance and then a rejection but the rejection gets there first and offeror detrimentally relies on it
46
Does acceptance by an unauthorized method still work to create a contract?
Maybe if it is actually received by the offeror while the offer is still in existence
47
When is a sale by auction complete?
What is the default rule for withdrawing an item from auction?
Fall of the hammer or other customary manner
Default is that an auction sale is "with reserve" and can be withdrawn at any time until he announces completion of the sale
48
What are the two elements of consideration?
1) bargained for exchange
| 2) legal value (benefit to the promisor or a detriment to the promisee)
49
When does past consideration count?
Reviving an Unenforceable Promise: If a past obligation is unenforceable because of a technical defense, the obligation will be enforceable if a new promise is made IN WRITING OR IS PARTIALLY PERFORMED.
Route 2: If past act benefitted promisor and was performed by the promisee at the promisor's request or in response to an emergency a subsequent promise to pay for that act is enforcable
50
A preexisting legal duty is not consideration, but what are the exceptions?
What is important to remember about an accord and satisfaction to discharge a debt?
1) any new consideration or slight modification in consideration such as paying early or in a different form
2) ratification of a voidable obligation
3) Preexisting duty is owed to a third person other than the promisor
4) There is an honest dispute as to the preexisting duty
5) the modification is fair an equitable in light of circumstances not anticipated [modern view]
Need to meet one of the above for accord and satisfaction because the accord requires new consideration
51
What is the UCC rule regarding the consideration needed to modify an agreement?
If the modification is in good faith then no consideration is required
52
What is the common law rule regarding the consideration needed to modify an agreement?
Contract can't be modified unless the modification is supported by new consideration BUT modern view allows modification without new consideration IF modification is in light of unanticipated circumstances and fair and equitable
53
When is a right to choose among alternatives not an illusory promise?
IF every alternative involves legal detriment
IF at least one alternative involves legal detriment and power to choose rests with a third party or the promisee
If a valuable alternative is actually selected
54
What is the rule for promissory estoppel
Consideration is not required and a promise can be enforced through promissory estoppel TO THE EXTENT NECESSARY TO PREVENT INJUSTICE if:
1) reliance is foreseeable
2) reliance was actually made
55
What is the remedy under promissory estoppel?
Some jurisdictions will give regular expectation damages but courts following Restatement 2nd will limit "as justice requires" which usually means reliance damages (whatever the promisee spent in reliance on the promise
56
What is the rule for a minor seeking to disaffirm a contract?
Can do so during minority or reasonable time after. Must affirm/disaffirm the entire contract. Must return anything that remains at the time of disaffirmance
Makes no difference if a minor lies about their age - voidable
57
What is the limitation on minors seeking to dodge their contractual obligations?
Still liable for restitution for necessities
58
When does a person lacking mental capacity have no ability to contract?
if a guardian has been appointed- any attempted contracts by an incapacitated person under guardianship are void (not voidable)
59
What is the standard for incapacity of an intoxicated person?
What's the key limitation on the ability to dodge obligations for intoxication?
Must be so intoxicated they don't understand the nature and significance of their promise
Still liable for restitution for necessities
60
What are the elements of economic duress
(1) Party threatens to commit a wrongful act that would seriously threaten the contracting party's property or finances
(2) there are no adequate means available to prevent threatened loss
61
What are the elements of undue influence
(1) Undue susceptibility to pressure by one party
(2) excessive pressure by the other party
Usually in a caregiver or confidential relationship
62
What is the result of an ambiguous contract (misunderstanding)
If neither party is aware of the misunderstanding there's no contract unless both parties intended the same meaning
If both parties are aware there's no contract unless both parties intent of the same meaning
If one party is aware there's a binding contract based on the ignorant parties understanding
subjective Intent matters
63
What elements must be present for a contract to be voidable based on mutual mistake
(1) mistake concerns a basic assumption of the contract
(2) the mistake has a material effect on the agreed-upon exchange and
(3) party seeking avoidance did not assume the risk of the mistake
Mistake as to existence of subject matter then rescind but if mistake as to value then enforce
64
When is a contract voidable to unilateral mistake?
If the non-mistaken party knew or had a reason to know of the mistake
(and the mistake had a material effect on the exchange and the mistaken party did not bear the risk of mistake)
65
What is the effect of a mistake by an intermediary
The prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake
66
What are the elements of fraudulent misrepresentation or fraud in the inducement?
1 a party induces another to enter a contract using a fraudulent misrepresentation
2 the party actually and justifiably relied on the fraudulent misrepresentation
67
What are the elements of material misrepresentation
1 the innocent party JUSTIFIABLY RELIED on the misrepresentation
2 the misrepresentation was MATERIAL [subjectively or objectively] (would induce a reasonable person to agree or the maker knows that for some reason it was likely to induce this particular person to agree)
Does not have to be fraudulent
68
What can be a fraudulent misrepresentation?
When is nondisclosure a misstep?
Spoken or written words, concealing a fact, frustrating investigation of a fact, falsely denying knowledge of a fact
Nondisclosure is a misrepresentation only when it is material or fraudulent
69
What is the remedy for fraudulent misrepresentation or material misrepresentation?
The innocent party may resend and sue for breach and recover damages
70
If the __ of a contract is illegal, the contract is void
If the _____ of a contract is illegal, the contract is voidable
subject matter or consideration
Purpose
71
IF the consideration or subject matter of a contract is illegal, then the contract is void, what are the exceptions to this rule?
1) the plaintiff is unaware of the legality while the defendant knows of the illegality
2) one party is not as culpable as the other
3) illegality is a failure to obtain a license and license is for revenue raising purposes rather than public protection
72
If only the purpose of the contract was illegal, the contract is voidable by a party if that party...
(1) Was unaware of the purpose or
| (2) was aware of the purpose but did not facilitate it and the crime does not involve serious moral turpitude
73
What is the only type of unconscionability recognized on the bar exam?
Procedural unconscionability
Unconscionability is seldom a good defense on the MBE
74
When is an unconscionability defense triggered
There is unfairness in the bargaining process
Unfairness in price alone is not a ground for unconscionability
Need UNFAIR SURPRISE AND OPPRESSIVE TERMS or a huge difference in bargaining power
75
What are the 4 common instances of procedural unconscionability
Inconspicuous risk shifting provisions (especially if inconspicuous and incomprehensible)
Contracts of adhesion (signer is unable to obtain necessary goods of the kind without agreeing)
Exculpatory clauses (for intentional wrongful acts generally unconscionable) (for negligence maybe unconscionable if inconspicuous but likely enforceable esp if activity hazardous)
Limitations on remedies
76
When does a limitation remedies become unconscionable?
Limiting liability for damages to property will not be unconscionable unless it is inconspicuous (but a contract that limits remedies to such an extent that the remedy "fails its essential purpose" is unconscionable)
77
When is unconscionability determined as of?
The time of formation of the contract
78
What are the court's three options if it finds a contract clause unconscionable when made?
(1) Refused to enforce the contract
(2) Enforce the remainder of the contract without the unconscionable clause
(3) Limit the application of any clause to render it conscionable
79
Whom does the writing have to be signed by to be enforceable under the statute of frauds?
The writing must be signed by the parties sought to be bound
80
What agreements are covered by the statute of frauds?
MY LEGS
Marriage
Contracts not performable within one year of the date of the contract
Interests in land
Executor promises to personally pay estate debts
Goods of $500 or more
Suretyship promises
81
What is the equal dignity rule?
Authority to enter into a contract on behalf of someone else only has to be in writing if the underlying deal would be subject to statute of frauds
82
What interests in land are subject to the statute of frauds?
```
Leases for more than one year
Easements for more than one year
Mortgages
Fixtures
Mineral rights
```
83
Are contracts to construct a building subject to the statute of frauds?
No
84
How does performance of a contract affect the statute of frauds?
Service contracts and goods contracts
If it's a service contract, full performance by one party is required
If it's a goods contract, if goods have been paid for or accepted, the contract is outside of SOF. If partially paid for or accepted, then enforceable only to the extent of the payment/acceptance. If partial payment on single good, then entire contract is outside of SOF
85
Is a writing effective to satisfy the statute of frauds for goods if it omits or incorrectly states a term?
Yes but it is not enforceable beyond the quantity of goods shown in the writing.
86
What is an exception to the rule that the statute of frauds requires the signature of the party to be bound
If both parties are merchants such that are merchant's confirmatory memo is valid, the confirmatory memo satisfies the statute of frauds even signature of the party sought to be bound
87
What are the methods to take a contract out of the statute of frauds for goods?
```
SWAP
Specially made goods (if mfg has made a substantial beginning on the mag or commitment for purchase has been made)
Merchants confirmatory memo
Admission in court
Performance
```
88
When does the suretyship promise not fall within the statute of frauds?
"Main Purpose Exception" If the main purpose of the promisor is to serve their own financial interest.
To fall within the statute of frauds a surety must make a collateral (not primary) promise to pay the debt of another
89
What is the effect of noncompliance with the statute of frauds
The party sought to be bound can raise SOF as a formation defense
if SOF not raised, it is waived as a defense
90
What is a contract removed from the statute of frauds?
(1) If the contract is modified such that it falls outside of the scope of the statute of frauds
(2) performance
(3) specifically manufactured goods
(4) admission in court
(5) merchant's confirmatory memo
(6) equitable/promissory estoppel
91
Are clauses prohibiting later oral modifications enforceable?
at common law - no
under the UCC - yes (but if the contract is between a merchant and a non merchant, the non merchant must separately sign by this clause)
92
What is the effect of a failed oral modification to a contract that requires modifications to be in writing?
Can operate as a waiver whenever the other party is changed position and reliance on the oral modification.
But the waiver can be retracted if there is has been no reliance on it
93
How does part performance of a land sale contract take the contract out of the statute of frauds?
If the seller conveys the property to the buyer via full performance the seller can force the buyers were promised to pay
If the buyer does at least two of the following they can enforce via specific performance only against the seller:
1) possess
2) pay (in whole or part)
3) improve
94
What is required to satisfy the writing requirement of the statute of frauds?
1) reasonably identify the subject matter of the contract
2) indicate that the contract has been made between the parties and
3) state with reasonable certainty the essential terms
4) signed by the party to be bound
Can be piecemeal
95
What is sufficient for the signature requirement of the statute of frauds?
Any mark or symbol made with the intention to authenticate the writing - can be printed or typed
Under the UCC a party's initials or letterhead works
96
What is required for a merchant's confirmatory memo to be valid?
1) an oral deal
2) both parties are merchants
3) one party sends (w/i a reasonable time) a signed writing containing a quantity term
4) No objection within 10 days
97
When does equitable or promissory estoppel apply to make a contract enforceable despite the statute of frauds?
Equitable estoppel - defendant falsely intentionally tells plaintiff the contract is not within the statute of frauds
Promissory estoppel- if defendant induces plaintive to change position in reliance on an oral agreement
98
What is an integration?
A riding with the intent to embody the final expression of the bargain
99
What is the parol evidence rule?
Any prior oral or written expressions and contemporaneous oral expressions are inadmissible to very the terms of the integration
100
What is the difference in a complete integration and a partial integration?
If complete integration - terms cannot be contradicted or supplemented
If partial integration - writing cannot be contradicted but can be supplemented with additional consistent terms
UCC presumes all writings are partial integrations
101
What is the effect of a merger clause?
It is strong if not dispositive evidence that the agreement is a complete integration
Dispositive under UCC
102
What kinds of evidence are outside of the scope of the parole evidence rule?
(1) Evidence as to validity (formation defects/defenses, conditions precedent to effectiveness)
(2) Collateral agreements and naturally omitted terms
(3) To inform uncertainty or ambiguity (but cannot be used to introduce ambiguity in to facially clear terms)
(4) Showing the "true consideration" paid (or the absence thereof)
(5) Facts entitling a party to reformation (e.g. mistake)
(6) Subsequent modifications
(7) UCC - course of perf, course of dealing, usage in trade admissible to help interpret regardless of ambiguity
103
When would a term be "naturally omitted" from an integration for purposes of the parole evidence rule exception
When would be naturally omitted if:
(1) it does not conflict with the written integration
(2) it concerns a subject that would not ordinarily be expected to be included in the writing
104
What is the UCC gap filler for place of delivery?
Seller's place of business
105
What is the UCC gap filler for time for payment?
At the time and place at which the buyer is to receive the goods
106
What is the UCC gap filler for assortment?
At the buyer's option
107
When does an express warranty become part of the basis of the bargain?
If the description, sample, model is made at a time that the buyer could've relied on it when they entered into the contract – no need to prove actual reliance.
Seller counter but by proving that buyer as a matter of fact did not rely
108
What is the implied warranty of merchantability? When does it apply?
Implied in every contract for sale by merchant who deals in goods of a kind sold.
The warranty guarantees the goods are fit for the ordinary purpose for which they are used - enforced on absolute liability (no need to prove negligence)
109
When does the implied warranty of fitness for a particular purpose apply?
(1) any seller (not just merchant) has a reason to know the particular purpose/goods are being used and that the buyer is relying on seller skills and judgment to select suitable goods
(2) Buyer in fact relies on the seller's skill or judgment
110
What is the warranty of title and when does it arise?
Warranty is made by any seller (not just merchant)
Warrants that the title transferred is good and (to the buyer's knowledge) there are no liens or encumbrances at the time of the contracting
111
What is the warranty against infringement and when does it apply?
Warranty is made only when the seller is a merchant regularly dealing in goods of the kind sold (Does not apply when buyer furnishes specs)
Guarantees that goods are delivered free of any IP infringement
112
How can the warranty of title be disclaimed?
Specific language or by circumstances that give the buyer notice that the seller does not have title or seller is conveying only the title that they have
113
How can the warranty of merchantability be disclaimed?
Must mention merchantability and the disclaimer must be conspicuous (and if contract in writing must be conspicuous)
Or there is a general disclaimer
114
How can the warranty of fitness for particular purpose be disclaimed?
Only in a conspicuous writing
Or there is a general disclaimer
115
What are the general methods for disclaiming implied warranties provided by the UCC
As is, with all faults, or other expression to call the buyer's attention to the fact that there are no implied warranties
116
Implied warranties can be disclaimed by the course of dealing course of performance or usage of trade
True
117
What effect does the buyers examination or right to examine have on warranties?
If a buyer (before entering into the contract) has examined the goods or sample or has refused to examine there is no warranty as to facts that a reasonable examination would've revealed
118
What are the buyers damages for breach of warranty?
The difference between the value of the goods accepted and the value of the goods as warranted measured at the time and place of acceptance (plus incidental and consequential damages)
119
What are damages for the breach of the warranty of title if the true owner or lienholder dispossesses the buyer?
Buyer may rescind the contract, revoke acceptance of the goods, or sue for damages
If the value has changed substantially between the time of acceptance and the time of dispossession, it's the value at the time of dispossession that matters
120
Whom do warranties extend?
The buyer any natural person who's in the family or household of the buyer, and any guest in the buyers home if it is reasonable to expect the person to use, consume, or be affected by the goods and that person suffers personal injury
121
When does the risk of loss pass if buyer has the right to reject the goods?
Not until defects are cured or the buyer accepts the goods in spite of their defects
If the buyer rightfully revokes acceptance, the risk of loss is treated s having rested on the seller from the start but only to the extent of any lapse in buyer's insurance coverage
122
What is the shortcut rule for when risk of loss passes if the goods are not conforming?
Risk of loss remains on the seller if the goods are non conforming (until defects are cured or buyer accepts despite defects) regardless if it is a carrier case or non carrier case
123
When does the risk of loss pass in a non carrier case?
If seller is merchant -> risk of loss passes to buyer only when they take physical possession of the goods
If seller is not a merchant -> risk of loss passes to the buyer upon tender of delivery
124
When does the risk of loss pass in a carrier case if shipment contract? What is a shipment contract?
Shipment contract is when contract authorizes/requires seller to ship the goods by carrier but does not require them to deliver the goods at a particular destination
Risk passes when goods are delivered to carrier
125
When does the risk of loss pass in a carrier case if destination contract?
when the goods are tendered to the buyer at the destination
126
What kind of contract is presumed in a carrier case
-----------
You order shoes from Nike, does risk pass on shipment or at destination?
Shipment contract
A destination contract must be created by FOB term or similar
------------
Assuming Nike ships conforming goods, default is that risk passed when Nike tenders to the carrier. BUT risk can be shifted by FOB term
127
What are the seller's duties in a shipment contract?
Seller must
(1) make a reasonable contract with the carrier on behalf of the buyer
(2) deliver the goods to the carrier
(3) promptly notify the buyer of the shipment
(4) provide the buyer with any documents needed to take possession
128
When does the risk of loss pass if the buyer takes goods for resale but may return them if they are unable to resell?
Treated as ordinary sale subject to ordinary rules on delivery to the buyer but the risk remains on the buyer during transit when they are returned to the seller
129
When does the risk of loss pass if the buyer takes goods for use but can return them even if they conform to the contract?
Risk of loss does not pass to the buyer until the buyer accepts
130
What happens if goods were IDENTIFIED at the TIME THE CONTRACT WAS MADE and are destroyed without the fault of either party and before risk of loss passes to the buyer?
What if the goods were not identified until after the contract was made?
The contract is avoided (and seller's performance is excused
the seller would have to either made a new performance or would have to prove impracticability
131
What are the two standards for how close to conforming a performance has to be under a contract?
Under common law, substantial performance is called for
| Under Article 2, perfect tender is called for
132
What is the default rule for UCC payment and delivery?
In non carrier cases (unless contract says otherwise), sale is for cash and price is due concurrently with tender of delivery
In carrier cases, the price is due only at the time and place at which the buyer receives the goods (so if shipment contract -> price due when goods delivered to carrier. In destination contract -> price due when goods at destination)
133
What is the rule for the timing of payment and delivery in an installment contract?
if delivery or performance (UCC or CL) authorized in installments, then seller may demand payment for each installment if the price can be apportioned (unless contrary intent appears)
134
Does the buyer have the right to inspect the goods before paying?
Yes unless the contract provides for payment COD or otherwise eliminates the right to inspect
135
What are the two methods by which a condition can operate?
A condition that must occur before there is a duty to perform or a condition that once occurs terminates the duty to perform
136
A failure of a condition (is or is not) a breach of contract. Pick one
Is not
137
What determines if a provision is a condition or a promise?
The intent of the parties governs. (look at prior practices of the parties, custom in the business community, etc) in cases of doubt most courts say the provision is a promise
138
How is "When" interpreted - as condition as promise?
If the event following “when” is not within the obligees control, courts prefer to interpret it as indicating a time for performance not a condition. (e.g. if contract between sub and gen contractor, contract says sub gets paid "when" gen gets paid is interpreted as a timing term and gen must pay sub within a reasonable time)
139
What is an express condition?
A condition that says that either turns a duty on or off based on the occurrence of an event (e.g. satisfaction of some party might be an express condition)
140
When does a condition of satisfaction use a reasonable person standard and when is a subjective standard used?
If the condition of satisfaction relates to mechanical fitness, utility, or marketability, it's a reasonable person standard
If the condition is personal taste/judgment, it's subjective in good faith (if bad faith, condition excused)
Of it's satisfaction of a third person (e.g. engineer), it's subjective satisfaction in good faith
141
What is a condition precedent?
Condition concurrent?
Condition subsequent?
Condition precedent (must occur before an absolute duty of immediate perf)
Condition concurrent (those capable of occurring together)
Condition subsequent (when it occurs it cuts of an existing duty of performance)
142
What are the 3 implied conditions?
1) Constructive Condition of Performance (each party's performance is conditioned on the other's performance)
2) Constructive Condition of Cooperation (the party must cooperate in the rendering of performance to it)
3) Constructive Condition of Notice (the other party must give notice that performance is due - especially if the party would not otherwise know)
143
How can a condition be excused?
1) condition by hinderance of failure to cooperate
2) Excuse of condition by waiver or estoppel (waiver can be revoked unless detrimental reliance)
3) Excuse of condition by material breach
4) Excuse by repudiation
5) Excuse of implied condition by substantial performance (common law only)
6) Excuse of condition by divisibility of contract
7) Impossibility, impracticability, frustration of purpose
144
If a condition doesn't occur or a duty of performance is broken, what are the beneficiary of the condition's options?
(1) terminate their liability
(2) continue under the contract and necessarily waive the condition or duty (decision to continue cannot be withdrawn even if the other party has not relied on it)
145
Is consideration required for a waiver of a condition?
No as long as the condition is not the entire return performance (then consideration would be required)
146
How does waiver operate in installment contracts?
in an installment contract, if a waiver isn't supported by consideration, the beneficiary of the waiver can insistent on strict compliance with the condition in future installments by giving notice
147
How significant does a breach have to be for it to discharge the duty of counter performance?
Under common law, the breach must be material (minor breach might suspend the duty to perform but doesn't discharge it)
148
What are the nonrepudiation party's options if the counterparty repudiates the contract?
(1) treat as total repudiation and sue immediately
(2) suspend performance and wait to sue until performance date
(3) treat the repudiation as an offer to rescind and threat the contract as discharged
(4) ignore the repudiation and urge the counterpart to perform (and maybe sue later)
149
How does a party repudiatie a contact? can the repudiation be withdrawn?
Party must clearly repudiate (expression of doubt gives right to demand adequate assurances but is not repudiation).
Can withdraw the repudiation unless the counterpart has indicated that they treated the repudiation as final or materially changed position in reliance on the repudiation.
150
When can a party demand adequate assurances? What can the party do if they are not given?
If there is prospective nonperformance, the innocent party can suspend their performance and if adequate assurances are not given the innocent party is excused from their own performance and may treat the failure to provide assurances as a repudiation
151
When does substantial performance excuse the condition of complete performance and force the other party to perform?
Substantial performance only satisfies constructive/implied conditions and does not satisfy express conditions.
Substantial performance is when the breach is minor and substantial performance does not satisfy the condition if the breach was willful. Damages offset is available
Substantial performance does not apply to sales of goods under the UCC
152
When is a contract divisible such that a party's performance of one part entitles them to counter performance for that part (discharges the condition of counter performance)?
The 3 below must be CONCURRENTLY satisfied:
1) performance of each party is divided into two or more parts under the contract
2) the number of parts due from each party is the same
3) performance of each part is agreed on as the equivalent of a corresponding part
153
What are the UCC and common law assumptions as to divisibility?
Common law and UCC assume that a contract is not divisible unless performance is authorized in pieces
154
When can an absolute duty to perform discharged by rescission?
Can it be done orally?
What is required for rescission
Rescission can be mutual or unilateral. Duties MUST be executory ON BOTH SIDES to be discharged by rescission.
Oral OK unless UCC and provision requiring writing or SOF
Mutual rescission is itself a binding contract (but beware TPBs) when both parties agree to rescind
Unilateral rescission is when only one party has a duty to perform outstanding and one of the following must be met:
1) new consideration by the nonperforming party
2) elements of promissory estoppel (detrimental reliance)
3) offeree intent to make a gift of the original obligation owed to them
or
4) in the absence of agreement, mistake, misrep, duress, failure of consideration
155
What is required to discharge an absolute duty to perform by release?
Usually a writing is required and usually new consideration/estoppel elements are required
156
What is required of an accord?
new consideration (low bar - could be changing type of consideration or paying to a different party) or if there is a bona fide dispute
157
What are the creditors options if the debtor breaches the accord?
1) sue on the original contract
| 2) sue on the accord
158
What are the debtor's options if the creditor breaches the accord by suing on it?
1) D can ask the suit to be dismissed by raising the accord as an equitable defense
2) D can lose the suit and then sue for breach of the accord
159
What is the result of a novation?
| What are the elements for a valid novation?
Result: New party substituted for the old party and old contract discharged
1) previous valid contract
2) agreement among all parties including the new party to the contract
3) immediate extinguishment of the old duties between the old parties
4) valid and enforceable new contract
160
What are the common requirements of impossibility and impracticability?
An event occurred the nonoccurrence of which was a basic assumption of the parties in making the contract AND neither party expressly/impliedly assumed the risk of the event occurring.
161
Is subjective impossibility valid?
No, only objective impossibility. It must be impossible for anyone to perform
162
What is partial or temporary impossibility?
If the performance to be rendered under the contract becomes only partially impossible, the duty may be discharged only to the extent of the impossibility
Temporary impossibility suspends the contractual duties until the impossibility subsides
163
Under what circumstances does death or incapacity of someone discharge a duty to perform?
the person who died/incapacitated must be NECESSARY to effectuate the contract
164
What is required for impracticability?
Performance has come under extreme and unreasonable difficulty and or expense AND its occurrence was a basic assumption of the parties
e.g. shortage of raw materials, war, strike, embargo, unforeseen shutdown of major supplier - mere increase in costs is not enough
165
If a seller becomes partially unable to perform due to impracticability, what does the seller have to do?
Must allocate deliveries among their customers and may include an allocation to regular customers not under contract
166
When is a duty to perform discharged by frustration of purpose?
(1) supervening act
(2) the parties did not reasonably foresee the act or event occurring
(3) purpose of the contract was been completely or almost completely destroyed by this act or event
(4) purpose of the contract was realized by BOTH parties at the time the contract was made
167
When is a duty discharged by account stated?
A discharge by account stated is a contract between parties whereby they agree to an amount as a final balance due from one to another to merge a bunch of preexisting claims
168
When is a duty discharged by lapse?
If the duty of each party to perform is a condition concurrent to the other's duty, it is possible that on the day set for performance, neither party performs.
If the contract says time is "of the essence" then lapse occurs immediately, otherwise the contract will lapse after a reasonable time
169
What is the effect of SoL running on a contract COA?
Judicial remedies for breach of contract are barred, but the duties to perform remain live.
If the party that has the advantage of SOL subsequently agrees to perform, new consideration will NOT be required
170
What is the difference in a discharge by lapse and the running of the SOL?
Lapse discharges the duties to perform. SOL only makes the duties to perform unenforceable
171
When the non breaching party withholds performance and sues for breach what must they prove (in addition to the counter party's breach)?
That they are willing and able to perform but for the breaching party's failure to perform
172
You will NEVER BE ASKED TO DETERMINE IF A BREACH IS MATERIAL ON THE MBE
so don't do it, but you might need to know the factors considered in an essay question
173
What factors are considered in determining if a breach is material or minor?
1) the act of benefit received by the non breaching party
2) the adequacy of compensation for damages to the injured party
3) Extent of part performance by the breaching party
4) Hardship to the breaching party
5) Negligent or willful behavior of the breaching party
6) Likelihood that the breaching party will perform the remainder of the contract
174
What is a minor breach?
| What is the effect of a minor breach (relevant in common law only)
If the obligee gains the substantial benefit of their bargain despite the obligor's defective performance, it's a minor breach
the aggrieved party still has to perform (but they do have a right to damages/setoff for the minor breach
175
What is the effect of a material breach?
What is the effect of a minor breach?
The obligee does not receive the substantial benefit of their bargain
If the breach is materials the non breaching party
(1) may treat the contract at an end and not perform
(2) exercise an immediate right to all remedies for breach
Cannot withhold counter performance but may sue for damages
176
What is the effect of a minor breach and an anticipatory repudiation?
The nonbreaching party can treat it as a material breach and sue immediately for total damages and withhold any counter performance
177
What happens if the party that is breached on does not withhold counter performance?
They might not be able to recover their expenditures because of the duty to mitigate damages
But the UCC permits a party to complete manufacture of goods to avoid having to sell the goods at a lower salvage value
178
Is failure to perform on time a material breach under common law?
Generally not a material breach if performance is rendered within a reasonable time UNLESS the contract states that time is of the essence (modern courts look at a time of the essence clause as one factor in an evaluation of the circumstances)
Simply including a date for performance does not make time of the essence
179
What are the buyer's rights when nonconforming goods are delivered?
Under the UCC perfect tender rule, Buyer can:
Accept all (and have right to damages)
reject all
Accept/reject any commercial unit
180
What actions constitute acceptance of goods by a UCC buyer?
Buyer accepts when
1) after reasonable opportunity to inspect, they indicate that the goods conform
2) indicates that will keep the goods despite inconformities
3) Fail to reject within a reasonable time after tender or notify seller of the rejection
4) they do any act inconsistent with seller's ownership
181
What must a buyer do after rejecting goods?
Can't treat the goods as if buyer owns them
Has an obligation to hold the goods with reasonable care at the seller's disposition for a time sufficient for the seller to remove them
If seller has no place of business or agent in the area, a MERCHANT buyer must open any reasonable instructions (e.g. to reship)
182
What can the buyer do with rejected goods if the seller gives no instructions on what to do with them after a reasonable time?
1) reship the goods to the seller
2) store the goods
3) resell the goods in a public sale or a private sale after giving the seller reasonable notice of intent to resell (can recover expenses and a reasonable commission)
183
What happens if the buyer wrongfully exercises ownership over rejected goods?
Seller has an action against the buyer for conversion
184
Once a buyer has accepted goods, can the buyer revoke acceptance?
generally no, but can revoke acceptance IF
A) goods have a defect that substantially imparts their value to the buyer
B) within a reasonable time after buyer discovered or should have discovered the defect
C) before any substantial change occurs in the goods that is not caused by a defect present at the time the seller relinquished possession
AND EITHER
1) buyer accepted the goods on reasonable belief the defect would be cured and it has not been OR
2) buyer accepted goods because of the difficulty of discovering the defects or because of the seller's assurance that the goods conformed to the contract
185
What are the exceptions to the perfect tender rule?
- Right to cure on single delivery contracts
| - Installment Contracts
186
How can a seller cure when buyer has rejected defective goods?
Within the original time provided for performance, they can cure by BOTH:
1) giving notice of intent to cure
2) making a new tender of conforming goods (The buyer must then accept)
187
When does seller get additional time to cure beyond the original contract window for performance?
If the buyer rejects nonconforming goods that the seller reasonably believed would be acceptable with or without money allowance. Look to either (1) trade practices and prior dealings or (2) seller could not have known of the defects despite proper business conduct
The seller must NOTIFY buyer and has further reasonable time to cure
188
What is the rule for buyer's right to reject a shipment under an installment contract?
--------
When is the whole installment contract breached?
Similar to the common law substantial performance rule.
An installment can be rejected only if the nonconformity substantially impairs the value of that installment and cannot be cured
----------
The whole contract is breached ONLY if the nonconformity substantially impairs the value of the entire contract
189
When is specific performance available as a remedy?
When the legal remedy is inadequate
- Land (always)
- Items that are rare or unique at the time of performance including items in short supply
Never for services (but can enjoin to enforce a noncompete)
190
When is a covenant not to compete enforced via specific performance?
1) if the services to be performed are unique such that money damages are inadequate
2) necessary to protect a legit interest of the party protected by the covenant and
3) is reasonable as to scope and duration
191
What are the equitable defenses available for specific performance?
1) Laches (P delayed and delay prejudiced D)
2) Unclean Hands (P is guilty of wrongdoing in the transaction being sued upon)
3) Sale to BFP (claim that the subject matter has been sold to a person who purchased for value in good faith
192
What are the buyer's non monetary remedies under Art 2?
1) If buyer rightly rejects goods for nonconformance, he can simply cancel the contract
2) If buyer made at least part payment on identified goods and seller has not delivered, buyer can replevy if EITHER A) seller becomes insolvent within 10 days of buyer's first payment
B) goods were purchased for personal/family/household purposes
(but of course buyer must still pay the remaining purchase price)
3) Buyer can replevy undelivered, identified goods from the seller if buyer is unable to cover
193
T/F Buyer can only have a non monetary remedy if the goods have been identified?
False - buyer can only replevy if the goods have been identified (and other circumstances are met) BUT court can order specific performance even if goods haven’t been identified if goods are unique
194
What are a seller's non monetary remedies under Art 2?
1) Can withhold goods if buyer fails to pay at the appropriate time
2) Can withhold goods If before credit sale seller discovers buyer is insolvent (absent cash payment)
3) Can reclaim goods upon demand with 10 days if buyer has received goods on credit while insolvent (but no 10 days limit if buyer misreped solvency to THIS seller in writing w/i 3 mo of delivery)
195
What is the procedure for requesting adequate assurances from a party who you fear may not perform?
If reasonable grounds for insecurity about a party's performance, the other party may make written demand for adequate assurance and pay suspend performance until AA given. If not given within a reasonable time (30 days), may treat as repudiation
196
To what extent are money damages recoverable?
To the extent they can be proved with reasonable certainty and could not be avoided with reasonable effort
197
What is the goal of expectation damages?
Put the non breaching party in the position they would have been in had the counterparty not breached. Give benefit of the bargain - enough to buy substitute performance
198
When are expectation damages appropriate?
When are reliance damages appropriate?
Expectation damages are the default
Reliance damages are used when expectation damages would be too speculative (e.g. P cannot show with sufficient certainty the profits he would have made).
199
What are reliance damages?
P can recover the damages they suffered in reasonable reliance on the contract (put P in the position they would have been in had the contract never been formed)
200
What are incidental damages?
The expenses that are incurred by the non breaching party that are associated with breach. (usually shipping/storage/inspection expenses for righty rejected goods if seller breached or reselling costs if buyer breached)
201
What are consequential damages?
Losses in excess of standard expectation damages. Usually lost profits.
Can be recovered only if:
(!) a reasonable person would have FORESEEN the damages as a probable result of the breach.
(2) the damages COULD NOT HAVE BEEN AVOIDED BY COVER
202
Who can recover consequential damages in a sale of goods context?
Only the buyer
203
What are the two requirements for a valid liquidated damages clause?
1) Damages for breach are difficult to estimate at the time the contract is formed
2) The amount agreed is a reasonable forecast of compensatory damages in the case of breach (if the amount is unreasonable, the clause is a penalty and not enforceable - beware flat fees for lateness)
^If valid, this act is recoverable even if there are no actual damages
204
What are the buyer's damages if seller breaches in a sale of goods (either by not delivering or delivering defective goods that are rejected)
------------
What are the buyer's damages if seller breaches by delivering defective goods and the buyer accepts the defective goods?
Market Price - Cover Price
+ Incidental and Consequential damages
- Expenses saved as a result of seller's breach
-------------
Warranty damages
Difference in value between the goods accepted and goods contracted for (+ Incidental and consequential)
205
What is the cover price for a UCC buyer?
The cost of buying replacement goods in good faith and without unreasonable delay (after the time the buyer learns of the breach)
Reaching out to a nonlocal supplier might be required by "good faith"
206
At what time are a UCC seller's damages calculated as of?
At what time are a UCC buyer's damages calculated as of?
The time for delivery
The time the buyer learns of the breach (including if the breach is anticipatory
207
What are a UCC buyer's damages for a seller's breach of warranty?
difference in the value of the goods as delivered and the value of perfect tender PLUS incidental and consequential damages
208
What must a UCC buyer do to recover damages for a defect in accepted goods?
Must provide notice to the seller of the defect within a reasonable time after they discovered or should have discovered the defect
209
In what particular circumstances is a seller deemed to have foreseen buyer's consequential damages?
1) If buyer is in the business of reselling goods, seller is deemed to have knowledge of the resale
2) If the seller knows that the goods they provide are to be used in the mfg process, they have notice that breach would disrupt production and lead to lost profits
210
What are the 4 measures of damages that the UCC provides to sellers whose buyer repudiates or refuses to pay?
1) Difference in contract price and resale price (if seller resells)
2) Difference in market price and contract price (at time and place of delivery)
3) If lost volume seller, "lost profits"
4) If buyer has accepted/damaged goods such that they cannot be resold and buyer has not paid, can bring an "action for price"
+ Incidental damages - Expenses Saved
211
What is the measure of damages for a breach by the employer in an employment contract?
Regardless when the breach occurs (before, during, after perf), employee can recover the entire contract price (reduced by duty to mitigate damages
212
What is the employee's duty to mitigate damages in the event of employer's breach of an employment contract?
If the breaching employer can prove that a comparable job in the same locale was available, then contract damages against the breaching employer for lost wages will be reduced by the amt that would have been earned at the comparable job
213
What are the damages if construction contract breached by the owner?
If the contract is breached by the builder?
Builder entitled to lost profits plus any costs expended
Owner is entitled to cost of completion plus the reasonable compensation for the delay (with offset for the value of the work performed to date)
214
What is the rule for construction that does not conform to specifications?
Owner is entitled to the cost of fixing the defect
BUT unless there is special significance attached to a particular item and that significance is communicated to the builder, a court will not order a remedy that results un undue economic waste
215
What is the rule for construction that does not conform to specifications?
Owner is entitled to the cost of fixing the defect
BUT unless there is special significance attached to a particular item and that significance is communicated to the builder, a court will not order a remedy that results un undue economic waste
216
If a contract calls for installment payments and one is missed, what happens?
There is only a partial breach and can only recover for the missed payment UNLESS there is an acceleration clause and then all payments come due and can collect all of them
217
What is the duty to mitigate damages?
cannot recover damages that could have been avoided with reasonable effort, but can recover the expenses of mitigation.
This means not continuing work in the construction and mfg contexts unless completion will decrease damages
218
What is restitution?
What are its other names
It's a non contractual theory of recovery to eliminate unjust enrichment when one has conferred a benefit on another without gratuitous intent
aka implied inlay, quasi contract, quantum meriut
219
How is restitution measured?
Usually, the value of the benefit conferred
But can also be the value of the detriment to the plaintiff if the benefit conferred is difficult to measure
220
When a party with a contract use restitution?
When might a party want to use restitution?
If the non breaching party has not fully performed, they can cancel the contract and sue for restitution.
If P has not fully performed, not limited to contract damages
If P has fully performed, is limited to contract damages
(this makes restitution attractive in "losing contracts")
221
Can a party that breached use restitution?
Generally yes, but if breach was intentional, court might deny or cap restitution to the contract price less damages incurred as a result of the breach
222
If the buyer has paid in advance or made a deposit and the buyer breaches, what can the seller do with the deposit?
UNLESS SELLER CAN PROVE GREATER DAMAGES or LIQUIDATED DAMAGES, seller can keep 20% of the advance or $500 (whichever is less) and then return the remainder to the buyer
223
What are the 4 elements for a quasi contract recovery in the complete absence of a contract?
1) P conferred a benefit on D
2) P had the reasonable expectation of being compensated
3) D knew or had reason to know of P's expectation
4) D would be unjustly enriched if they were allowed to retain benefit without comp
224
What is the result of rescission?
Parties are left as though a contract had never been made
225
What are valid grounds for rescission?
Must have occurred at or before the time the contract was formed. The grounds are:
1) mutual mistake
2) unilateral mistake if the other party knew or should have known of the mistake
3) unilateral mistake if hardship by the mistaken party is extreme and outweighs the other party's expectations under the contract
4) Material misrepresentation of fact or law
5) Duress, Undue Influence, Illegality, Lack of Capacity, Failure of Consideration
and can get restitution on top of rescission
226
When is reformation available as a remedy?
Does negligence bar reformation?
What is the standard of proof
1) Mistake based on variance between final writing and original agreement
2) Misrepresentation relating to the content of legal effect of the written record (not the subject matter of the contract)
Negligence is not a bar to reformation
Clear and convincing evidence
227
What is the statute of limitations under the UCC?
4 years but may be shortened by agreement (but not less than one year
228
When does the SoL start to run
When the party can bring suit (ie when breach occurs) regardless if the aggrieved party knows of the breach. (for breach of warranty, breach occurs upon delivery unless it expressly extends into the future)
229
What is entrusting?
If you leave goods with a merchant who deals in goods of that kind, the merchant has the power (but not the right) to transfer all of the rights of the entrusted to a buyer in ordinary COB.
230
What is the voidable title concept?
If a sale is induced by fraud, the seller can rescind the sale and recover the goods from he fraudulent buyer (but not from a good faith purchaser for value who bought from the fraudster or if a security interest has been granted)
This is related to entrustment
231
Can a thief pass good title?
No - thief's title is void and so even a good faith purchaser for value cannot cut off rights of the true owner
But if a good faith purchaser has made accessions to the goods, the true owner may be estopped from asserting title if the true owner expressly/impliedly represented that the thief had title
232
How do you identify an intended beneficiary?
What's the benefit of being an intended beneficiary
1) is identified in the contract 2) receives performance directly from the promisor 3) has some relationship with the promisee to indicate intent to benefit
Intended beneficiaries are the only kind of beneficiary that has contractual rights
233
What are the two types of intended beneficiaries?
Creditor beneficiary and Donee Beneficiary
Notice how Donee beneficiaries are still intended beneficiaries so they
234
TPB sues promisor on the contract, how can the promisor defend?
Can raise against the TPB any defense that the promisor has against the promisee
Promisor can use the defenses the promisee would have against the TPB only if the promisor made an absolute promise to pay TPB, not just a promise to pay what the Promisee owed TPB
235
Who can a creditor beneficiary TPB sue?
The promisor and the promisee (but can only obtain one satisfaction)
236
What's the significance of a TPB's rights vesting?
When do the rights of a beneficiary vest?
TPB can only enforce a contract if their rights have vested. and before vesting the promisor/promisee can alter/eliminate the TPB's rights
Rights vest when [LASR] TPB LEARNS of contract and :
1) manifests ASSENT to a promise in the manner requested by the parties
2) bring a SUIT to enforce the promise
3) materially change position in justifiable RELIANCE on the promise
237
Generally all rights can be assigned. What are the exceptions where rights cannot be assigned?
1) Assignment would substantially change the obligor's duty or risk
2) assignment of future rights to arise from future contracts
3) assignment prohibited by law (e.g. a wage assignment)
238
What is the effect of assignment on privity of contract?
What's the effect?
Establishes privity between the obligor and assignee and extinguishes the privity of contract between obligor and assignor.
This means that once the obligor has knowledge of the assignment, they must render performance to the assignee and might be screwed if they render performance to assignor
239
Is consideration required for an assignment?
No, just PRESENT intent to assign and a description of the right assigned
240
When is an assignment revocable?
Assignment is revocable if it's gratuitous (absent an exception)
Assignment for value (for prior debt or for consideration) is not revocable
241
When does a gratuitous assignment become irrevocable?
IF:
(1) the obligor has already performed
(2) a token chose (physical claim like stock certificate) is delivered
(3) assignment of a simple chose (intangible claim) is made in writing
(4) detrimental reliance
242
How can a gratuitous (and thus revocable) assignment be revoked?
1) death/bankruptcy of the assignor
2) notice of revocation by the assignor to the assignee OR the obligor
3) assignor accepting performance directly from the obligor
4) subsequent assignment to someone else
243
A clause prohibits assignment of "the contract" what does that mean?
A clause prohibits assignment of "contractual rights" or "rights under the contract" what does that mean?
A clause says that attempts to assign will be void - what effect?
bars only delegation of the assignor's duties
doesn't bar assignment but does give obligor the right to sue for damages
bars assignment
244
What are the assignee's rights against the obligor? What are obligor's defenses?
Assignee can sue obligor and obligor can raise any defense inherent in the contract.
Obligor cannot raise defenses the assignor might have against the assignee
245
What are assignee's rights against assignor?
in every assignment FOR VALUE, the assignor warrants that they (1) have not previously assigned the same right (2) the right exists and is not subject to undisclosed defenses (3) assignor won't interfere with the assigned right
Assignee can sue on any of these warranties, BUT assignor won't be liable to assignee if obligor is incapable fo performing
246
What is the rule for sequential assignments of the same right?
First assignment is revocable, later assignment revokes it.
If first assignment is irrevocable, it prevails over later assignments UNLESS (1) a subsequent assignee has paid value and taken without notice AND EITHER
(A) subsequent assignee gets the first judgment against the obligor
(B) subsequent assignment gets first payment of a claim from the obligor
(C) subsequent assignee gets delivery of a token chose
(D) Subsequent assignee is partly to a novation releasing the assignor
(E) subsequent assignee can proceed against hte first assignee on an estoppel theory
247
What duties may be delegated?
All duties can be delegated EXCEPT:
1) duties involve personal judgment and skill
2) delegation would change the obligee's expectancy (e.g requirement/output contracts)
3) special trust was imposed in the delegator
4) contractual restriction on delegation
248
What is required for an effective delegation of duties?
Manifestation of present intent to delegate. Can be written or oral, no consideration required
249
How are the terms assignment and delegation used on the MBE?
Loosely. Plus a prohibition on assignment is construed as a prohibition on delegation of duties as well
250
Who can the obligee sue if there has been a delegation of duties?
Obligee can sue the delegator
Obligee can sue the delegate only if there has been an assumption (where the delegate expressly/impliedly promises they will perform the duty as delegated and promise supported by consideration). Assumption creates a contract between delegate and obligee with the delegator as TPB
251
Assignment of "the contract" or "all my rights under the contract" include assumption of duties unless a contrary intention appears
True
252
A retailer signs a contract to buy exclusively from mfg and mfg will supply all its output to retailer. Retailer goes out of business - has retailer breached?
Under the UCC, no, as long as retailer shut down in goods faith.
253
What are the ways for an irrevocable assignment to be made?
------------
If an obligor has notice of the assignment and renders performance to the assignor instead of the assignee, what is the result?
An assignment for new value or on account of a preexisting debt
Gratuitous assignment that is bade irrevocable by performance of the obligor, token/simple chose, or detrimental reliance
----------
If the obligor has notice and assignment is IRrevocable, duty of perf can only be discharged by perf to the assignee. Perf to the assignor will not discharge the obligation.
But if assignment is revocable, then assignor's acceptance of perf revokes the assignment and obligors duty of perf is discharged
254
Offeror makes offer. Offeror dies. Offeree accepts. Offeree finds out offeror died. Contract?
No, the death of the offeror automatically terminates the offer regardless of when the offeree finds out
