Contracts Flashcards
When have 3rd party beneficiary rights vested?
o When they learn of the k and agree
o When they learn of the k and rely
o When they learn of the k and sue
Before a 3PB’s rights vest, the contracting parties to the k may modify or cancel the k without 3PB’s consent
After 3PB’s rights vest, contracting parties cannot touch the k unless 3PB consents
FOB
Seller holds risk of loss until reaches FOB destination
When a non-breaching buyer does not receive the contracted goods, it has several options:
-It can cancel the contract and recover any incidental damages,
-Or it can purchase replacement goods and sue for the cost of replacement-“cover.”
Damages under the latter option are measured by the difference between the contract price and the amount the buyer actually has to pay for the replacement goods.
Lost-profits doctrine/Lost-volume seller doctrine
Where seller has unlimited supply of goods at their disposal, they can seek lost profits against breaching buyer
Where an owner breaches a construction contract after construction has been started but before construction is completed, the builder is entitled to recover…
any profit he would have derived from the contract plus any costs he has incurred to the date of the breach.
Recission
A party to a contract may not unilaterally rescind it if the contract is valid (i.e., in the absence of mistake, misrepresentation, etc.). However, both parties to a contract may agree to rescind and discharge their contractual duties as long as the duties are still executory on both sides.
Unilateral K
One promise and one performance = unilateral
o Acceptance can only be by performance
o Once performance begins, the offeror cannot cancel offer. But note that mere preparation is not enough.
o Does not terminate at offeror’s death
Modification (UCC)
Under UCC, a modification sought in good faith is enforceable even without consideration
Modification (CL)
Terms of a contract may be modified by the parties to the contract. However, consideration generally is necessary to modify a contract (in other words, the modification must have a bargained-for exchange with some element of legal value to the parties). Where a modification would operate to the benefit of only one of the parties, it generally will be unenforceable unless some consideration is being given to the other party. Under the preexisting legal duty rule, the promise to perform or the performance of an existing legal duty will not be sufficient consideration.
* Modern trend in CL: modification allowable even in non-goods contracts if the modification is fair, equitable, and due to some unforeseeability
Option Contracts
- Under the UCC, an offer by a merchant to buy or sell goods in a signed writing that, by its terms, gives assurances that it will be held open is not revocable for lack of consideration during the time stated (not to exceed three months). If the term assuring that the offer will be held open is on a form supplied by the offeree, it must be separately signed by the offeror.
- A court will lower an option k down to 3 months if it comes up in litigation
Accord and Satisfaction
Accord = a new agreement between parties who are already in k with each other
* No additional consideration is needed, as long as accord calls for new type of obligation
* It suspends performance of the original k until the accord is either satisfied or unsatisfied
* If fail to satisfy the accord, other party can sue either on accord or original k
* A valid accord, taken alone, does not discharge the prior contract. It merely suspends the right to enforce it in accordance with the terms of the accord contract. The performance of the accord agreement, which is called satisfaction, discharges not only the accord agreement but the original contract as well. Where the accord agreement is breached by the creditor by suing on the original contract, as is the case here, the debtor may seek to have the action enjoined by raising the accord agreement as an equitable defense.
Contracts with minors
Minors generally can disaffirm contracts, but cannot disaffirm contracts involving necessities
But might be unconscionable!
Assignments
All contracts are assignable/delegable except for unique personal service ks and long term requirement ks
Assignments may be gratiutious or for value (don’t need consideration!)
Assignments for value are irrevocable
Gratuitous assignments revocable absent reliance
Orally or in writing okay
Perfect Tender Rule (UCC)
CL: perfect performance not required
If a material breach, non-breaching party can cancel k and sue for damages
If parties specifically negotiate a time is of the essence clause, time is of the essence and failure to complete within the time stated is breach.
For minor breach, non-breaching party can sue for damages but cannot cancel k
Unless the nature of the contract is such as to make performance on the exact day agreed upon of vital importance (e.g., contract for use of a wedding chapel), or the contract by its terms provides that time is of the essence, failure by a promisor to perform at the stated time will not be material. Merely providing a date for performance does not make time of the essence.
