Contracts

Question 1

contract

Answer 1

legally enforceable agreement between 2+ persons as to something that is to be done in the future by one or both of them

Question 2

Types of K

Answer 2

express= formed by words
implied in fact= created by conduct
Bilateral K= promise in exchange for a promise
Unilateral K = promise in exchange for performance (completion of performance is acceptance of the offer, when offeree tenders/begins requested performance offeror becomes bound and can’t revoke)
Option K= offeree gives consideration for offeror to not revoke offer for period of time

Question 3

Merchant

Answer 3

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 s to the practices or goods involved

Question 4

Mixed good/ service K test

Answer 4

Language
Nature of business
Intrinsic value of material (greater cost alone insufficient, separation is key)

Question 5

offer

Answer 5

manifestation of intent to be bound/ enter into a bargain , Create a reasonable expectation in the offeree that offeror is willing to enter into a K on basis of the offered terms

Ads, circulars, form letters, etc. is not an offer
ad = invitation to an offer

Exception to broad audience
- bait &switch
1st come 1st serve while they last, subject to prior sale
Reward offer

Question 6

material / missing terms

Answer 6

should include : Offeree’s name, Offer’s subject matter, and Price

Fact that 1 or more terms are left open doesn’t prevent the formation of a K if it appears that the parties intended to make K and there is a reasonably certain basis for giving a remedy

land sale offers= must include price and description of land
sale of goods= must include quantity or way to determine quantity

Question 7

requirement K

Answer 7

B promises to buy a certain seller all of goods the B requires, and S agrees to sell that amount to B

Question 8

output K

Answer 8

S promises to sell to B all of the goods that S produces and B agrees to buy that amount from the seller

Question 9

employment K

Answer 9

Where no duration is stated courts will not supply reasonable term of employment but will instead find “at will” contract
“At will” contract means employee or employer can terminate contract at any time

Question 10

Termination of an offer

Answer 10

Traditional view= an offer can be revoked at anytime b4 acceptance even if offer says offer will remain open ( except: consideration, option K)

Revocation Process
Can be revoked through words or conduct (act inconsistent with offer)
Must be communicated to the offeree directly by offeror OR indirectly by reliable 3rd party
Must be communicated by a comparable medium 🡪 does not have to be the same but it should be done to reach same audience that the offer was sent to

NOTE: revocation is generally effective when received by the offeree/ when published

Question 11

events that terminate

Answer 11

By operation of law
Death or incapacity of offeror :offeree does not need to be aware
Destruction of the proposed contract’s subject matter OR
Supervening illegality
Lapse
Offer will lapse at the end of the time stated 🡪 if none stated, offer will lapse after a reasonable time (time may vary depending upon the circumstances)
At the end of face-to-face or telephonic conversation (unless contrary indicated)
Specified event 🡪”Subject to prior sale” (if there is a prior sale then the occurrence of that event will terminate the offer)
Rejection & counteroffer
Offeree doesn’t want terms of offer they want new terms they have specified
Counteroffer terminates the original offer and offeree becomes offeror, can’t go back to original offer b/c it no longer exists

Question 12

doesn’t make a counteroffer

Answer 12

Grumbling Acceptance: A person is complaining about the terms of an offer. (“price to high” , “would you take $100”)This does not terminate the offer and is not considered a counteroffer/rejection, can still come back and accept

Inquiry: This is just a question. It does not terminate the offer and is not considered a counteroffer/rejection, can come back and still accept

Question 13

rejection is effective when received by offeror exception

Answer 13

Rejection of a counteroffer to an option doesn’t constitute a termination of the offer
Offeree free to accept original offer w/i the option period unless offeror has detrimentally relied on the offer’s rejection

Question 14

Mailbox Rule

Answer 14

General rule acceptance effective when mailed
Must be reasonable means and properly mailed
Effective even if never received by offeror

exception : offeror must receive by x date= effective when received (option K effect when received)

Question 15

vacilitating offeree

Answer 15

sending both acceptance and rejection = whichever received 1st applies

If offeror relies on rejection, offeree estopped from asserting MBR-no K
If MBR applies-K
. Examples:
Acceptance mailed, rejection mailed, rejection received, acceptance received= no K
Acceptance mailed, rejection mailed, acceptance received,rejection received= K

Question 16

firm offer ( offer is irrevocable if)

Answer 16

offer by a merchant to buy or sell goods in a signed writing and the writing gives assurance that it will be held open =

irrevocable for time stated or if no time stated, reasonable time not to exceed 3 mos. ( revocable offer if beyond 3 months

Under article 2 if the term of an offerassuring that the offer will be held open is on a form supplied by the offeree, that term must be separately signed by the offeror ( by initialing that sentence) to be enforced as a firm offer

Question 17

Detrimental reliance

Answer 17

When offeror could reasonably expect that the offeree would rely to their detriment on the offer, and offeree does so rely
Offer will be held irrevocable as an option contract for a reasonable length of time

Question 18

Acceptance

Answer 18

manifestation of assent to an offer

Power of acceptance created by an offer
must be unequivocal and unqualified in order for a contract to be formed
Objective test= action and conduct/words

Question 19

offers to buy goods for current or prompt shipment

Answer 19

Accepted by either a promise to ship or by a shipment of conforming or nonconforming goods

Shipment of nonconforming goods is an acceptance creating a bilateral contract as well as a breach of the contract unless seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation
Not required to accept can reject

Question 20

Battle of the forms

Answer 20

applies to K for sale of goods

Knockout rule:
different terms cancel each other out and do not become part of K
If applicable, replaced by supplementary terms

additional terms show up in only one form and not the other
- Additional terms become a part of the contract between merchants unless…
The offer expressly limits acceptance to the terms of the offer
They materially alter it
Notification of objection to them has already been given or is given within a reasonable time after notice of them is given

Question 21

Consideration

Answer 21

bargained for exchange b/n parties and there is legal value

no bargained for when one party gives a gift to another

peppercorn theory= virtually anything can serve as consideration if bargained for

past consideration is not consideration

preexisiting legal duty is not considertaion
EXCEPTIONS
new/ different consideration is promised
promise is to ratify a voidable obligation
Preexisting duty is owed to a 3rd person rather than promisor
Honest dispute as to duty or
Unforeseen circumstances insufficient to discharge a party

Question 22

illusory promise

Answer 22

Promissory language but promisor not bound

Question 23

Promise v. expression of intention

Answer 23

has to be present act

Question 24

Forbearance as performance

Answer 24

promisee agrees not to sue promisor in exchange for promisor’s promise to settle claim outside of court is consideration if
Genuine dispute or
Claim was asserted in good faith

Question 25

modification of K ( consideration )

Answer 25

GR: K can’t be modified unless modification supported by new consideration

CL: modification w/o consideration if
- Modification is due to circumstances that were unanticipated by parties when the contract was made
-It is fair and equitable

UCC: no consideration needed if dealing in good faith

Question 26

discharege of debt ( modification of K)

Answer 26

through accord and satisfaction

Question 27

Promissory estoppel

Answer 27

Basis is for enforcing promise where no consideration

Enforceable if necessary to prevent injustice if
The promisor should reasonably expect to induce action or forbearance and
Such action or forbearance is in fact induced

Question 28

Mental incapacity (defense)

Answer 28

Group who can avoid liability or disaffirm
K voidable
Effective unless disaffirmed

Only mentally incapactitated ( or representative) can disaffirm
Any time while incapacited or w/n reasonable time after coming into lucid state
Must return item or make restitution

minor must disaffirm w/n reasonable time of reaching age of majority
- liable for necessaries
- don’t have to make restitution

Question 29

duress( conduct as justification for nonperformance)

Answer 29

wrongful (unlawful) or improper act or threat that leaves party w/ no reasonable alternative but to acquiesce

Threat to initiate a criminal prosecution solely for personal gain = improper

Economic duress ( business compulsion )
Financial circumstances presented no reasonable alternative but to agree
Other side caused financial hardship or contributed to financial hardship

Question 30

misunderstanding (K defense)

Answer 30

ambiguous contract language

Includes term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity
Neither party aware= no K unless both parties intended same meaning
Both parties aware= no K unless both parties intended same meaning
One party aware= binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words

Question 31

clerical error vs erros in judgment

Answer 31

clerical= computational, typose
judgment= time, resources, conditions

Question 32

reformation

Answer 32

ct has writing changed to conform to parties intentions
must be
- agreement and reduced to writing

Question 33

misrepresentation

Answer 33

2 choices for redress: tort action or K recisission

Assertion not in accord w/ facts
Past or present but not future
Facts vs. opinion or future prediction

Exceptions
The person stating opinions an expert = treated as if the statement is a fact
Party misrepresents state of mind
Relationship of trust or confidence
Susceptibility due to age, health, etc.

Question 34

public policy ( K defense)

Answer 34

Consideration or subject matter of a contract is illegal the contract is void
If only the purpose behind the K is illegal, the K is voidable by a party who was
Unaware of the purpose or
Aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude

Question 35

Unconscionability

Answer 35

If K or clause of K is unconscionable, court can refuse to enforce all or part of K

two prong test
procedural= absence of meaningful choice
substantive= terms unreasonably favorable to other party

Question 36

Statute of FRauds

Answer 36

certain agreements, by statute, must be evidence by a writing signed by the party sought to be bound
Ks w/n SOF (MY LEGS)

K made in consideration of marriage ( prenups, give something, etc)
K not to be preformed w/n a year of its making
K for sale or transfer of an interest in land
K of executor to answer for decendent’s debts out of executors own funds
K for sale of goods for $500+
Suretyship ( K to answer for duty of another)

Question 37

Marriage ( SoF)

Answer 37

Applies to promises that induce marriage by offering something of value ( ex: you marry my son I give you two a house)

Question 38

Year ( SoF)

Answer 38

performance not within one year from date of contract
Promise that by its terms cannot be performed w/i one year is subject to the SoF
Date runs from date of the agreement and not from date of performance
Lifetime K not subject to SoF 3 year contract is

Question 39

land (SoF)

Answer 39

Ks for sale or transfer or interest in land
Real property ( structures permanently attached to the land)
Option to buy an interest in land
Easements, mortgages, fixtures, leases ( short term leases (1-3 yrs) generally exempt)
Minerals or structures if they are to be severed by the buyer
K to build a building or to find a buyer for a selef do not create aninterest in land

EXCEPTIONS
Leases of less than or equal to a year
Part performance of real estate contracts
Payment, possession, improvement ( need ⅔)

Question 40

Executor or Administrator Promises personally to Pay Estate Debts

Answer 40

Out of their own funds must be evidence by a writing

Question 41

Good ( SoF)

Answer 41

priced at $500 or more
Writing is sufficient even though it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity of goods shown in the writing

EXCEPTIONS
Goods accepted
Goods paid for
Substantial beginning on custom goods

Question 42

Suretyship (SoF)

Answer 42

t least 3 parties
Creditor
Debtor ( principal) underlying legal obligation
Promisor (Surety) promise must be made to the creditor ( if Debtor does not pay then I will pay)

NO Suretyship
No underlying legal obligation running from the debtor to the creditor

P orally promises to pay C if C delivers goods to D; D not obligated to C
Result: P’s oral promise to C enforceable

Novation ( underlying legal obligation extinguished)
C accepts P’s oral promise to pay C in satisfaction of D’s obligation and D is discharged
result:P’s oral promise to C enforceable

Joint promise ( no underlying legal obligation)
P&D jointly orally promise to pay C
Only one obligation
Result: P’s oral promise to C enforceable

Suretyship EXCEPTION
Main purpose (leading object) rule
The main purpose of the promisor’s promise is to benefit the promisor then promise enforceable even if not in writing (helping himself)
Result: P’s oral promise is enforceable

Question 43

K removed from (SoF)

Answer 43

Contract modictions: modifications must be in writing if the contract as modified falls within the SoF
For sale of goods K, if K as modified is for $500 or more, must be evidence by a writing
If K as modified is less than $500 no writing is necessary
CL- Provisions prohibiting oral modification is not enforceable
Article 2 if party’s agree all modification’s must be in writing it is enforceable

Exception for service contracts: FULLl performance K satisfies SoF
An oral K that cannot be completed w/i one year but has been fully performed by one party is enforceble
No part performance exception for service contracts

Judicial Admissions Exception
Agreement admitted to under oath enforceable K

Merchant’s confirmatory Memo
Merchants
Agree to K
One party sends signed writing containing quantity terms
No objection by recipient within 10 days

Question 44

Adequate writing satisfy (SoF)

Answer 44

Sales of good of $500 or more
Quantity term
D‘s signature ( signed by party to be charged)

K for services must have
All material terms ( who, what)
D’s signature

Signature Requirement
Signature is any mark or symbol made with the intention to authenticate the writing as that of the signer
Can be printed or typed
Initials or letterhead
Electronic signature okay

Question 45

Parol evidence

Answer 45

When the parties to a contract have mutually agreed to incorporate a final version of their entire agreement in a writing, the writing is an integration neither party will be permitted to contradict or supplement that writing agreements w/ extrinsic evidence of prior agreements or negotiations between them

Any other expressions written or oral made prior to the writing as well as any oral expressions contemporneous with the writing are inadmissible to vary the terms of writing

Question 46

Integration

Answer 46

Writing intended as final expression of the agreement
Whether the integration was intended to be complete or partial

Partially integrated writing can be supplemented but not contradicted by
Prior oral or written or
Contemporaneous oral or written
Agreements and negotiations

Totally completely integrated writing cannot be supplemented or contradicted by
Prior oral or written or
Contemporaneous oral or written
Agreements and negotiations

Question 47

merger clause

Answer 47

Recites that the agreement is the complete agreement b/n the parties
Presence of merger clause is usually determinative in large commercial contracts

Question 48

PER Exceptions

Answer 48

Agreements, negotiations, etc AFTER writing modification of K

Collateral agreements: independent of K? Separate consideration?

Evidence offered to invalidate K: no consideration; fraud; K subject to condition precedent

Evidence offered to explain meaning of term in K: chicken means broiler/fryer

Evidence offered to reform K: parties mistakenly wrote incorrect price, typographical, computational errors

Question 49

PER sale of goods

Answer 49

Final expression of parties agreement
Cannot be contradicted by
Prior oral or written agreements or
Contemporaneous oral agreements

But may be explained or supplemented by :
Course of dealing; trade usage; course of performance & consistent additional terms

Trade Usage: practices or methods having such regularity of observance in place vocation or trade that it justifies expectation parties will observe

Course of Dealing: conduct b/n parties Before agreement in question

Course of Performance: conduct by parties After agreement in question accepted w/o objection

when express terms & course of performance, course of dealing & trade usage cannot reasonably be construed as consistent w/ each other, EXPRESS TERMS CONTROL
Heirarchy
Express terms
Course of performance
Course of dealings
Trade usage

Question 50

Warranty for sale of goods ( 3types)

Answer 50

Express warranty (2-313)
Created by Seller’s representations, examples & models
Negation or limitation is inoperative to the extent that such construction is unreasonable

Implied warranty of merchantability (2-314)
Merchant warrants goods will pass w/o objection in trade & are fit for ordinary purposes for which such goods are used
Goods fit for ordinary, foreseeable purpose for which they are to be used
Disclaimer must be conspicuous

Implied warranty of fitness for particular purpose (2-315)
Seller aware of buyer’s particular purpose & Buyer relies on Seller’s knowledge/skill re: goods in making the purchase
Buyer comes in with special purpose
Seller knows of special purpose
Seller picks out goods fit for buyer’s special purpose
Disclaim by a conspicuous writing

Question 51

Disclaimers

Answer 51

Conspicuous defined
Is is in larger type thn surrounding text
It is in a contrasting type, font, or color
Set off from the text by marks that call attention to it

Implied warrant can be disclaimed by depression such as “as is” “with all faults”, etc

No warranty as to defect sthat a reasonable examination would have revealed

Parties may include in K clause limiting damages available in case of breach of warranty as long as it’s not unconscionable

Must be agreed to during bargaining process

Question 52

risk of loss

Answer 52

Seller bear risk= replace goods
Buyer bear risk= pay contract price

Hierarchy of risk

Allocation of risk ( ex: buyer beas risk)

Breaching party is liable

Noncarrier case( buyer picks up directly or seller delivers directly to buyer)
Merchant seller’s bear risk until seller takes physical possession
Nonmerchant sells buyer bears risk when seller tender delivery
tender= where product is and how to get it

Delivery by common carry ( 3rd party in shipping business)
Risk of loss shifts from seller to buyer when seller completes its shipping obligations

Question 53

Delivery obligation

Answer 53

assume looking at shipping contract

Shipping contract (buyer bears loss even before get the goods)
Seller delivers goods to common carrier
Arranges for delivery an d
Notifies buyers
Risk of loss passes to buyer on delivery to carrier

Destination contract
Seller must deliver goods to buyer’s location

FOB= free on board
FOB followed by city name = seller bears risk until reach city name
FOB followed by seller city = shipment contract

Question 54

how to show performance for diff types of K

Answer 54

CL K
Substantial performance is enough
Meets K’s essential purpose

UCC Article 2
Perfect tender rule: seller’s delivery must be perfect
Not 100% perfect buyer has right to reject

INstallment K
Requires delivery of goods in separate installments over specified period

Terms of performance
Tender payment by cash
Check is okay = performance obligation satisfied
Don’t have to take , if refuse have to give additional reasonable time to come in with cash

Question 55

conditions

Answer 55

ons
conditions= limit obligations created by contract language ( if, as long as, until, when, unless, provided that, on the condition that)
An event or state of world that must occur or fail to occur before a party has a duty to perform
An event or state of th eworld, the occurrence or nonoccurence of which releases a party from their duty to perform

Question 56

express conditions

Answer 56

must be perfectly satisfied
No substantial performance rule
Conditions Do not create obligations

Question 57

satisfaction condition

Answer 57

easured by a reasonable person standard unless
K deals w/ art r personal taste

Question 58

condition (precedent, subsequent, waiver, excusal)

Answer 58

Express condition precedent
Performance not due until event occurs

Conditions subsequent
Events after performance that could terminate duty to pay

Conditions may be excused by action or inaction of person protected by condition
Waiver of condition: voluntary giving up of condition’s protection

Question 59

anticipatory repudiation

Answer 59

Before performance is due

Statement of intent not to perform or (Must be definite & unequivocal)

Conduct
Act makes it impossible to perform
Refusal to perform except on terms outside K
Repudiation even if party honestly believes s/he not obligated to perform
NN: financial difficulty is not repudiation

Upon repudiation injured party can
Suspend performance or
Wait until the time set for performance
Or withhold performance & sue immediately

Exception: if injured party has completely performed at time of repudiation must wait until time set for performance

Repudiation can be retracted unless:
Injured party has changed her position in reliance on or
notified repudiating party she is treating repudiation as final

Question 60

demand for Adequate Assurances

Answer 60

Party w/ reasonable rounds for insecurity can demand adequate assurances in writing

Failure to provide adequate assurances w/n reasonable time < 30 days is repudiation

Cannot use adequate assurance provision to rewrite K or demand certain assurance

Question 61

recission

Answer 61

party mutual agreement to cancel contract
Each party must have some performance remaining for effective rescission

Question 62

Later agreement excusing performance ( recission, modification,accord and satifaction, novation,delegation, impossibility/impracticability, death, supervening illegality,destruction of subject matter, frustration of purpose

Answer 62

rescission= party mutual agreement to cancel contract
Each party must have some performance remaining for effective rescission

Modification agreement= replaces existing K with new K immediately

Accord and satisfaction = agreement to accept different performance to satisfy existing duty ( if….then)

Novation: agreement to substitute new party for existing party

Delegation : one party finds replacement party to perform
Original party’s obligations not excused

Impossiblity/ impracticability : later unforeseen event makes party’s performance impossible

Death or incapacity of essential person

Supervening illegality : form of impossibiltiy
If performance made illegal by subsequent gov’t regulation, performance excused

Destruction of K’s subject matter
Increase in cost is not an excuse

Frustration of purpose = become valueless by virtue of some supervening event not the fault og the party seeking discharge
Both parties understood the central purpose
Performance excused if K’s essential purpose frustration
Party seeking to be excused must show:
Supervening act/ Event substantially frustrated principal purpose of K
Nonoccurrence of event basic assumption on which K made
Party did not create the impracticability &
Party did not assume obligation greater than that imposed by law ( developing brand new technology and guarantee that it is going to work is an obligation assumed greater than law

Question 63

breach

Answer 63

failure to perform absolute duty
nonbreaching party must show willing able to perform but for breach

Question 64

minor breach

Answer 64

Obligee gains substantial benefit of their bargain despite the obligor’s defective performance

Minor breach doesn’t relieve the aggrieved party of their duty of performance under the K

Question 65

material breach

Answer 65

Obligee does not receive substantial benefit of their bargain
Noperformance or substantial performance
No benefit of bargain to nonbreaching party
Contract ended
Counter-performance discharged

Determining
Amount of benefit received
Adequacy of compensation
Extent of part performance
Hardship
Negligent or willful behavior
Likelihood that breaching party will perform remainder of K

Time for performance
Failure to perform w/i stated time is not material breach unless
Time of essence
Ct looks at all the circumstances

Question 66

to determine substantial performance ct looks to

Answer 66

Benefit received by nonbreaching party
Part performance by breaching party
Hardship to breaching party

Question 67

perfect tender rule

Answer 67

if goods don’t conform buyer may
Reject entire shipment
Accept entire shipment or
Reject in part, accept in part

Acceptance goods if they
Indicate good conform to K
Indicate theyll keep nonconforming goods
Fail to reject w/i reasonable time
Fail to notify seller of rejection
Act inconsistent with seller’s ownership
Acceptance may be revoke acceptance if goods have a defect that substantially iimpairs their value to the buyer and
Accepted goods on reasonable belief that defect would be cured and has not been OR
Accepted the goods bc of the difficulty of discovering the defects or bc of the seller’s assurance that the goods conformed to the K
Revocation of acceptance must occur
w/i reasonable time after discovery
Before any substantial change in the goods occurs

Seller has right to cure nonconforming goods w/i time for performance
Notify buyer with intent to cure

Installment K
Buyer can reject installment if nonconfrormity substantially impairs value of installment
K breach if nonconformity substantially impairs entire K’s value

Anticipatory repudiation
Early statement of nonperformance
Can be retracted if not relied on

Question 68

Nonmonetary remedy

Answer 68

Specific performance
Money damages inadequate
Feasible to enforce decree
Land K
All land unique
Specific performance available
Sales of good
Specific performance available only if goods unique or buyer unable to cover ( only supplier)
No specific performance for personal service K
Can get injunction against working for competitor

Reclamation- article 2
Seller can get reclamation if
Buyer insolvent and
Seller demands reclamation w/i 10 days of receipt

Requirements
Buyer Insolvent at time received goods
10 day rule
The date the goods delivered to the buyer
For reclamation to work, buyer must have goods at time of demand

EXCEPTION
Seller can reclaim goods beyond 10 day limit if
Buyer misreps solvency
In writing
w/i 3 mo before delivery

Question 69

Money damages

Answer 69

Expectation damages= put injured party in position they’d be in had K been performed
Measuring expectation Damages
Loss in value
Due under K (general $$)
+ Other loss
incidental/ consequential $$ ( special $$)
- costs avoided
Savings resulted from breach
- loss avoided
Salvage, other employment, etc
= $$

Reliance damages
Available if expectation damages uncertain
Return nonbreaching party to status quo

Restitution damages
Measure by value of benefit conferred

Incidental damages
Costs incident to breach
Cost incurred in dealing with a breach

Consequential damages
Recoverable if foressable at time of formation

No punitive damages in K

Liquidated damages clauses
Upheld if
Damages difficult to est at K formation
Amount reasonable forecast of damages
Invariable lump sum liquidated damages clause = invalid

Question 70

Sale of Goods damages - buyer

Answer 70

Cover damages
Cover price ( buying replacement goods)- original contract price
Buyer must make reasonable K for substitute goods in good faith and w/o unreasonable delay

Market damages
Market price - original K price
Market price at time buyer learns of the breach and at the place of tender

Loss in value
Value as promised- value as delivered
Buyer kept nonconforoming goods

Question 71

sale of goods damages- seller damages

Answer 71

Resale damages
K price- resale price

Market damages
K price - market damages
Didn’t resale in good faith or couldn’t resale
K price available if seller can’t resell goods (unique goods)

Lost-volume seller rule
Unlimited supply
Lost profit measure used

Avoidable damages
Damages that could’ve been avoided are not recoverable
Duty to mitigate
Duty to mitigate limited to similar/comparable subject matter

Question 72

entrustment - rights and duties of third parties

Answer 72

Merchant who ordinarily deals in goods of kind sells entrusted goods to BFP
BFP always wins

Question 73

third party beneficiary

Answer 73

2 parties K to benefit 3rd party
Intended beneficiary
Name in K
Can enforce K
promisor= party who promises to perform for 3rd party
promisee= party who secures promise
Promisor liability
Intended 3rd party beneficiaries can enforce rights under K
Promisor has same defenses against 3rd party beneficiary as against promisee

Question 74

3rd party beneficiary rights

Answer 74

Intended beneficiaries have rights to enforce contract

Incidental beneficiaries do not

Either promisee or beneficiary can enforce rights against promisor

Vest when
Manifest assent to a promise in the manner requested by the parties
Bring a suit to enforce the promise
Materially change position in justifiable reliance on the promise

Question 75

recission/ modification- 3rd party

Answer 75

K can be recided/modified until beneficiary rights have vested

Promisor and promisee can’t cancel k after vesting unless
Beneficiary consents or
K provides otherwise

Question 76

assignment

Answer 76

2 parties to K
1 party (assignor) assigns rights to 3rd party (assignee)
Assignee can enforce rights against party who owes duty (obligor)

Valid assignment
Language of present transfer “I assign”
No consideration needed (gift assignment OK)

Restrictions on assignments
Prohibition : assignments not permitted
Assignee w/o knowledge can stil collect
Invalidation: assignments null and void

Assignments can’t substantially change duties of obligor
Aignee can recover from obligor directly
Obligor has same defense against assignee as against assignor

Gift assignements
Easily revocable
Last gratuitous assignee wins

Consideration assignments
1st assignee for consideration wins over all subsequent assignees and previous gift assignees

Exception
Later assignment for consideration if he doesn’t know of the earlier assignments and is first to get a payment from or a judgment against the obligor

Question 77

Delegation

Answer 77

Party to K delegates duty to 3rd party

Obligor can delegate duties w/o obligee’s consent

Prohibition against delegations= no delegations allowed

No assignements= no delegations

Party w/ special skills can’t delegate

Parties to K agree to substitute new party under K = novation not delegation

Delgetaing party always liable to obligee

Delegate for consideration= liable
Create third party beneficiary obligations