Contracts Flashcards
What is a quasi-contract?
Not really a contract
Name given when an unenforceable contract results in unjust enrichment
Enriched party will have to pay rsble, fair market value of service in restitution
What is a bilateral contract?
One consisting of the exchange of mutual promises - a promise for a promise
Can be accepted in any rsble way - by promising or beginning performance
Usual type of contract
What is a unilateral contract?
One in which offeror requests performance rather than a promise
Offeror-promisor promises to pay upon the completion of the requested act by the promisee
Once act is completed, contract is formed
Occurs in only two situations:
(1) when the offeror clearly (unambiguously) indicates that completion of performance is the only manner of aceptance; and
(2) where there is an offer to the public, such as a reward offer
What is a void contract?
One that is totally without any legal effect from the beginning
Cannot be enforced by either party
What is a voidable contract?
One that one or both parties may elect to avoid, such as by raising a defense that makes it voidable
What is an unenforceable contract?
Otherwise valid but isn’t enforceable due to a defense, such as SOL or SOF
What does common law govern?
Contracts for non-goods, like land or service contracts
What does the UCC govern?
Sale of goods
Goods are all things movable at the time they are identified as the items to be sold under the contract
What is a merchant?
A merchant is one who regularly deals in the goods of the kinds sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved
For UCC provisions dealing with genearl business practices, almost anyone in business can be deemed a merchant
But other provisions are narrower and require a person to be a merchant with respect to goods of the kind involved in the subject transaction
What type of law do you apply if the contract deals with both goods and nongoods?
Determine which aspect is dominant and apply the law governing that aspect to the whole contract
If the contract divides payment bt goods and services, then Art 2 will apply to the sale portion and CL will apply to services portion
What is good faith per the UCC?
UCC imposes an obligation of good faith in its performance and enforcement
Good faith is honesty in fact and the observance of rsble commercial standards
CL imposes a duty of…
good faith and fair dealing
What three questions should I ask to determine if there was in fact a contract?
(1) was there mutual assent? (offer and acceptance; intent to enter into contract)
(2) was there consideration or some substitute for consideration?
(3) are there any defenses to creation of the contract?
For a communication to be an offer, it must…?
Create a rsble expectation in the oferee that the offeror is willing to enter into a contract on the basis of the offered terms
What three questions should I consider in deciding whether a communication creates this rsble expectation?
(1) was there an expression of a promise, undertaking, or commitment to enter into a contract? (rather than invititation to begin preliminary negotiations; must be intent)
(2) were there certainty and definiteness in the essential terms?
(3) was there communication of the above to the offeree?
Objective standard
Are the circumstances surrounding the lagnuage considered by courts in determinig whether an offer exists?
Yes, for ex, if a statement is made in jest, anger, or bragging, and it is rsbly understood in this context, it will have no legal effect
Do courts consider prior relationship and practice of the parties in determining if an offer exists?
Yes, look at that to determine if certain remarks constitute an offer rather than just preliminary negotiations
What effect does the method of communication have on determining if something is an offer or not?
The broader the communicating media, the more likely it is that the courts will view the communication as merely the solicitation of an offer
Ads, catalogs, and things containing price quotes are usually contrued as mere invitations for offers
On exam, what general things should I consider in seeing if something is an offer or not?
the language used
Surrounding circumstances
Prior practice and relationship of the parties
Whether it was like an ad
What is the basic inquiry in determining if an offer is definite and certain in its terms?
Whether enough of the essential terms have been provided so that a contract including them is capable of being enforced
Identification of offeree = statement must sufficiently identify the offeree or a class to which they belong to justify the inference that the offeror intended to create a power of acceptance
Definiteness of subject matter = subject matter of the deal must be certain bc a court can enforce a promise only if it can tell w rsble accuracy what the promise is
What must an offer involving realty identify?
Must identify the land and the price terms
Land must be identified w some particularity but a deed description isn’t required
Most courts will not supply a missing price term for realty
Offers usually must include?
Offeree’s name
Offer’s subject matter
Price
In a sale of goods contract, what must be included as to quantity?
the quantity being offered must be certain or capable of being made certain
What is a requirements contract?
In a requirement contract, a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer
What is an output contract?
In an output contract, a seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller
What is the effect of a requirements or output contract on what the quantity is supposed to be?
It is assumed that the parties will act in good faith
So there can’t be a tender of or a demand for a quantity unrsbly disproportionate to:
(1) any stated estimate, or
(2) (in the absence of a stated estimate) any normal or otherwise comparable prior output or requirements
what are some words that indicate we have a requirements or output contract?
require, need, produce
All, only, exclusively, solely
What happens if the duration of the employment is not specified in a contract for employment?
If duration is not specified, the offer, if accepted, is construed as creating a contract terminable at will of either party
Does some missing terms prevent the formation of a contract?
Fact that one or more terms are left open does not prevent the formation of a contract if it appears that the parties intended to make a contract and there is a rsbly certain basis for giving a remedy
Majority of jurisdictions and Art 2 hold that court can supply rsble terms for those that are missing
Does failure to state the price prevent the formation of a contract?
Yes in real property contracts
In other contracts, failure to state price doesn’t prevent formation of a contract if the parties intended to form a contract without the price being settled
If a contract for the sale of goods is missing a price term, Art 2 provides that the price will be a rsble price at the time of delivery
What happens if the contract doesn’t specify time?
If agreement doesn’t specify time in which an act is to be performed, the law implies that it is to be performed within a rsble time
What if a contract includes vague terms?
Presumption that parties’ intent was to include a rsble term goes to supply missing terms
With vague terms, presumption can’t be made if teh parties have included a term that makes the contract too vague to be enforced
However, uncertainty can be cured in part performance that clarifies the vague term or by acceptance of full performance
What happens if a material term is vague or ambiguous?
Then it is not an offer at CL or under UCC
Terms like appropriate, fair, rsble - signal a possible vagueness problem
What happens if contract includes terms to be agreed on later?
If the term is a material term, the offer is too uncertain to be enforceable
If I see dates in a fact pattern separated by more than a month or so in time, what issue should I raise?
Should raise issue of if offer is even still open
Only open for “rsble” period of time
So examine whether the offer has terminated due to lapse of time
What is termination for lapse of time?
Offer may be terminated by offeree’s failure to accept within the time specified by the offer or, if no deadline was specified, within a rsble time period
What is an express rejection?
Statement by the offeree that they do not intend to accept the offer
Will terminate offer
What is a counteroffer as rejection?
A counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in terms
So if you see a counteroffer, that’s a termination and a new offer, so original offeror would have to accept for there to be a contract
But be careful: mere bargaining/mere inquiry is not the same as a counteroffer and doesn’t kill the offer
Period often means counteroffer; question mark often means bargaining
Will a mere inquiry terminate an offer like a counteroffer will?
An inquiry won’t terminate the offer when it is consistent with the idea that the offeree is still keeping hte original proposal under consideration
Ex: Would you consider lowering your price by $5,000?
Test is whether a rsble person would believe that the original offer had been rejected
Is conditional acceptance an acceptance or a rejection?
When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer
Conditional acceptance is essentially a new offer, and the original offeror may form a contract by expressly assenting to the new terms
However, offer that results from a conditional acceptance cannot be accepted by performance
If parties ship or accept goods after a conditional acceptance, a contract is formed by their conduct, and the new terms are not included
When is a rejection effective?
It is effective when received by the offeror
Does a rejection of an option terminate the offer?
An option is a contract to keep an offer open
A rejection of or a counteroffer to an option does not constitute a termination of the offer
Offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection
So you promise to keep it open for two weeks - so I can reject it, but then come back within that two week time period and accept it because the time period is still open
What is a revocation?
A revocation is a retraction of an offer by the offeror
Can an offeror revoke by directly communicating to the offeree?
Yes, can revoke by directly communicating revocation to the offeree
Ex: I revoke my offer of May 25
An offer made by publication can be directly revoked only by publication through comparable means
How can an offer be revoked indirectly?
Can be revoked indirectly if the offeree receives:
(1) correct information,
(2) from a reliable source,
(3) of acts of the offeror that would indicate to a rsble person that the offeror no longer wishes to make the offer
Can’t accept after you know it was revoked
When is a revocation effective?
A revocation is generally effective when received by the offeree
When revocation is by publication, it’s effective when published
Things like revocation become effective when “received.” Does this mean the person has to read it for it to be revoked?
No, doesn’t matter whether recipient actually reads the communication or listens to a phone message - you “received” it and it has been revoked
What is an option contract?
An option is a contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer
Ex: an offeror offers to sell her farm to an offeree for $1 million and promises to keep the offer open for 90 days if the offeree pays the offeror $1000 to keep the offer open
So generally, offeror’s can revoke their offers, but not when it’s an option contract
What is the merchant firm offer rule under Art 2?
(1) if a merchant, (2) offers to buy or sell goods in a signed writing, and (3) the writing gives assurances that it will be held open, the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a rsble time (but in no event may such period exceed 3 months)
Ex: This offer will be held open for 10 days; this offer is firm for 10 days
Letterhead is often fine as a signature
If you want to keep open for over 3 months, have them pay consideration, and then it becomes an option contract that is irrevocable
If the offeror can rsbly foresee that the offeree would rely to their detriment on the offer, can they revoke?
No, when the offeror can rsbly expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a rsble length of time
Subcontractor S submits a bid to do the plumbing work on a school project for $10,000. General Contractor G relies on S’s bid in computing its own bid, and wins the overall school building project. Can S still revoke its offer?
bids are offers; no, here is where you do have foreseeable detrimental reliance; when S submits her bid, she knows the GC is going to rely on her bid; she wants the GC to rely on that bid; the GC did rely on that bid
So subcontractor can’t revoke her offer
When does an offer for a true unilateral contract become irrevocable?
An offer for a true unilateral contract becomes irrevocable once performance has begun
Offeror must give the offeree a rsble time to complete performance
Offeree is not bound to complete performance - they may withdraw at any time prior to completion of performance, and there is no acceptance until performance is complete
Do substantial preparations to perform (as opposed to the beginning of performance) make the unilateral offer irrevocable?
No, substantial preparations to perform don’t make the offer irrevocable, but may constitute detrimental reliance sufficient to make the offeror’s promise binding to the extent of the detrimental reliance
Meg Ryan offers me $10,000 to paint her house. Her offer states that it can be accepted only by painting the house. I start painting the house. Can Meg still revoke?
“offer only by” means unilateral contract offer situation; Meg cannot still revoke; once you start performance of unilateral contract offer = irrevocable offer
Meg Ryan offers me $10,000 to paint her house. Her offer states that it can be accepted only by painting the house. I start painting the house. What if I had ordered paint but not yet started painting the house? Could Meg still revoke?
mere preparation to perform does not equal start of performance; but if there was foreseeable rsble detrimental reliance then maybe the offer could be irrevocable
Can a bilateral contract be formed upon start of performance?
A bilateral contract may be formed upon the start of performance by the offeree
Therefore, once the offeree begins performance, the contract is complete and revocation becomes impossible
But notification of the start of performance may be necessary
contrast with unilateral contracts where start of performance makes offer irrevocable, but contract isn’t complete and accepted until the end of performance - can stop at any time
What events will terminate an offer by operation of law?
(1) death or insanity of either party (unless offer is of a kind the offeror could not terminate, such as an option supported by consideration) - death only terminates revocable offers - death or insanity need not be communicated to other party
(2) destruction of the proposed contract’s subject matter
(3) supervening illegality (a law comes into place that makes what was going to be the contract illegal)
What is “acceptance”?
An acceptance is a manifestation of assent to the terms of an offer
(contract = mutual assent [offer + acceptance] + consideration - absence of defenses)
Who can accept an offer?
Generally, only the person to whom an offer is addressed has the power of acceptance
Member of a class to which an offer has been directed also has power to accept
Generally, an offeree’s power of acceptance cannot be assigned
But if offeree paid consideration to keep offer open (option contract), the right to accept is transferable
Is an offeree’s power of acceptance assignable?
Generally, no, an offeree’s power of acceptance cannot be assigned
But if offeree paid consideration to keep offer open (option contract), the right to accept is transferable
If parties send each other offers with the same terms, but they send them without knowing of the other party’s offer, is that acceptance of a contract?
No - if A sends B an offer and B sends A an offer unaware of A’s offer, no contract is formed, even if the offers contain the same terms
Need to about an offer in order to accept it
How can a bilateral contract be accepted?
Unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract
May be accepted either by a promise to perform or by the beginning of performance
Beyoncé offers me $10,000 to paint her house, but does not specify how to accept her offer. I start painting the house. Have I accepted Beyoncé’s offer so that I am bound to finish the job?
yes, a bilateral contract offer can be accepted in any rsble manner; she can either give a promise or can start performance; she has to finish the job now or she’s in breach
Unlike unilateral contract where beginning of performance makes it irrevocable, but the offeree can stop performing whenever because a unilateral contract isn’t accepted until performance is complete
Is silence an effective acceptance for a bilateral contract?
Offer to enter into a bilateral contract must be communicated to offeror
Silence isn’t effective means of acceptance
Rsble person has to look at both words and actions of both parties and think that a contract was made
If rsble person is looking at an offeree who stays silent, rsble person is not going to think that person excepted
Exception: court may find silence works as an acceptance if, because of prior dealings or trade practices, it would be commercially rsble for the offeror to consider silence an acceptance;
Also, if recipient of services knows or should have known that the serviecs were being rendered w the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak
If you want to accept a unilateral contract, what must you do?
You have to complete performance
Unless otherwise provided, an offer is construed as inviting acceptance in…
Any rsble manner and by any medium rsble under the circumstances
Under Art 2, an offer to buy goods for current or prompt shipment may be accepted how?
(1) a promise to ship or (2) by current or prompt shipment of conforming or nonconforming goods
what is are the traditional and common law approaches to what identical or not identical terms in acceptances means?
Traditional contract law insists on an absolute and unequivocal acceptance of each and every term of the offer (mirror image rule)
At CL, any different or additional terms in the accceptance make the response a rejection and counteroffer
For unilateral contracts, does the offeree have to give the offeror notice that he’s started performance?
Generally, offeree is not required to give the offeror notice that he has begun the requested performance but is required to notify the offeror within a rsble time after that performance has been completed
However, no notice is required if:
(1) the offeror waived notice; or
(2) the offeree’s performance would normally come to the offeror’s attention within a rsble time
Is shipment of nonconforming goods a breach of contract?
Shipment of nonconforming goods is an acceptance creating a bilateral contract as well as a breach of contract unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation
Sending an accommodation is then NOT an acceptance and is a counter offer, and not a breach
Buyer is not required to accept accommodation goods and may reject them
If buyer rejects, shipper isn’t in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer’s original offer
ONLY IN shipment acceptances, not promise to ship acceptances
Can you use accommodation in a contract where acceptance is by promising to ship (as opposed to shipment)?
No, can’t use accommodation in promises to ship, only in prompt shipment acceptances
If seller accepts an order by promising to hsip, and then discovers they lack the specified goods and ships nonconforming goods as an “accommodation,” that’s a breach
the contract was a promise to ship - the shipment wasn’t the acceptance - therefore, accommodation isn’t possible
Is shipping an accommodation (nonconforming goods) an acceptance?
No, it’s a counteroffer
So buyer can reject the goods and the seller won’t be in breach of contract because this was a counter offer, not an acceptance
Does Article 2 use the mirror image rule?
No, CL uses the mirror image rule and says that any different terms creates a rejection and counter offer
But UCC provides that the inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the addtl or different terms
Whether the addtl or different terms become part of the contract depends on whether or not both parties are merchants
Landlord sends Tenant a signed lease that says nothing about pets. Tenant adds, “Tenant may keep a pet,” signs the lease, and returns it to Landlord. Has Tenant accepted Landlord’s offer?
no, tenant has violated the mirror image rule; acceptance must mirror the terms of the offer exactly; lease of an apt is governed by CL; this is a rejection and counter offer
If both parties are not merchants, how do we deal with different or additional terms added to contracts?
If any party to the contract is not a merchant, the addtl or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees
If both parties are merchants, how do we deal with different or additional terms added to contracts?
If both parties to contract are merchants, additional terms in the acceptance will be included in the contract unless:
(1) they materially alter the terms of the offer;
(2) the offer expressly limits acceptance to the terms of the offer; or
(3) the offeror has already objected to the particular terms, or objects within a rsble time after notice of them is rec’d
What about different terms?
Some courts treat different terms like addtl terms and follow the above test
Other courts follow the “knockout rule,” which states that conflicting terms in the offer and acceptance are knocked out of the contract, because each party is assumed to object to the inclusion of such terms in the contract; gaps left by knocked out terms are filled by the UCC
Note: although terms might be different, there still must be a meeting of the minds for the contract to be accepted; so if there are differences in price, quantity, or quality terms, they likely indicate that there isn’t sufficient meeting of the minds to constitute a contract
B makes a written offer to buy 100 widgets from S. The offer does not mention any warranties. S’s written acceptance disclaims all warranties.
(1) Is there a contract?
(2) Does the contract include S’s disclaimer?
(3) What if S had merely added “Monday delivery”?
(4) What if B had responded that Monday delivery was not convenient?
(1) yes, Art 2 acceptance rule; sale of widgets/goods; no mirror image rule; there was a seasonable expression of acceptance
(2) no, disclaimers are considered a material change, so it’s not part of the deal; material change = likely to cause hardship or surprise to the offeror
(3) you have a contract formed, and that addtl term is automatically part of the deal as long as the dealings are between merchants
(4) the buyer can keep out any term, no matter how minor it is; if other side objects to this within a rsble time, you can keep out that addtl term; industry custom term - this is a non-material change - not a material change to throw in a term that is customary in the industry
What is a merchant’s confirmatory memo?
A merchant’s memo confirming an oral agreement that contains different or addtl terms is also subject to the battle of the forms provisions
What do we do when we have an oral agreement and then a confirmatory memo is sent with addtl or different terms?
Despite the fact that there’s already a contract at the time the memo is sent, the memo is put through the battle of the forms provisions as if it were an acceptance
Addtl terms are put through the material alteration test
Depending on juris, different terms are treated either the same as addtl terms or knocked out
What does the UCC do with situations where it can’t be determined with certainty which specific communication was the offer and which was the acceptance but the parties act as though there is a contract?
UCC considers this a binding contract even though the moment of its making is uncertain
When is acceptance by mail, etc. effective?
At the moment of dispatch
Provided mail is properly addressed and stamped
Unless one of these exceptions applies:
(1) offer stipulates that acceptance is not effective until received
(2) option contract is involved (an acceptance under an option contract is effective only upon receipt - and if there is a deadline, you have to get it in before that deadline)
(3) offeree sends a rejection and then sends an acceptance - whichever arrives first is effective
(4) offeree sends an acceptance and then a rejection - in which case acceptance is effective (mailbox rule applies) unless the rejection arrives first AND the offeror detrimentally relies on it
Donald Duck offers to sell his Tesla Roadster to Mickey Mouse for $1 million. Mickey pays Donald $3,000 to hold the offer open until July 9. On July 9, Mickey mails an acceptance. On July 11, Donald receives the acceptance. Is Mickey’s acceptance effective?
“hold offer open until” plus consideration; option contract; the offeror can’t revoke it before July 9, but there’s no mailbox rule for acceptance under options; you’ve got to get your acceptance actually received by the deadline; here, acceptance wasn’t rec’d until July 11, so that’s not going to be effective; option contracts remove the reason for the mailbox rule protection - protect against offeror revocation; once you have an option contract, you can’t revoke, but offeree, you have to make sure that youre acceptance is rec’d by the end of that option, no mailbox protection
How can an acceptance transmitted by unauthorized means still be effeective?
An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually rec’d by the offeror while the offer is still in existence
What is consideration?
Two elements are needed to constitute consideration:
(1) a bargained-for exchange between the parties; and
(2) legal value, meaning that which is bargained for must be considered of legal value or, as it is traditionally stated, must constitute a benefit to the promisor or a detriment to the promisee
Is an act or forbearance by the promisee sufficient consideration for a contract?
Yes, as long as it benefits the promisor in some way (loose definition)
Even if you wouldn’t have done it anyway, you’re still giving up your legal right to do something and that counts as consideration
Is a promise given for something already done consideration?
No, not consideration because you already did it - you’re not doing it for this bargain
Watch out for questions that say “in consideration of you taking care of me all those years, I promise you $1000” - that’s not a real contract because there’s no consideration - so she doesn’t have to pay you that $1000
This is an unenforceable gift
Do courts generally look into the actual adequacy of consideration?
No, don’t look into the adequacy or fairness of consideration - so it can be grossly low or high, but as long as you agreed to it, that’s fine and the court won’t interfere
However, if something is entirely devoid of value, then it is insufficient
What is the gist of the pre-existing legal duty rule?
Performing or promising to perform an existing legal duty is insufficient consideration
Ex: You agree to sing at a concert for $20,000 and then get there and demand $30,000 and the hall agrees; then you’re done singing and they only pay you $20,000; that is correct - you can’t get more out of doing the same thing you already had a duty to do
But many exceptions
What are the five main exceptions of the pre-existing legal duty rule?
There is consideration if:
(1) new or different consideration is promised (for ex, asking for $30K when you’d agreed upon $20K but adding that you’ll sign autographs for an hour)
(2) the promise is to ratify a voidable obligation (for ex, a promise to ratify a minor’s contract after reaching majority or a promise to go through w a contract despite the other party’s fraud)
(3) preexisting duty is owed to a third person rather than to the promisor (Kanye comes in and says he’ll promise to pay the extra $10K she’s requesting)
(4) there is an honest dispute as to the duty
(5) there are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made
Does a good faith agreement modifying a contract need consideration per the UCC?
No, a good faith agreement modifying a contract subject to the UCC needs no consideration to be binding
What is the modern view for modifying a contract without consideration?
Under general contract law, a contract can’t be modified unless the modification is supported by new consideration
Modern view permits modification without consideration if:
(1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and
(2) it is fair and equitable
For UCC, consideration isn’t necessary to modify - all the parties need are good faith promises of new and different terms
Can forbearance to sue constitute consideration?
Yes if the claim is valid or the claimant in good faith believed the claim was valid
What makes a promise illusory?
If only one party is bound to perform, the promise is illusory and will not be enforced
Courts often supply implied promises to infer mutuality (that consideration was given on both sides)
Ex: language like “all the widgets I require” or “all that you produce” is a valid requirements/output contract; but language like “all the widgets I want” or “all you want to sell me” is illusory
You owe MasterCard $3,000. You and MasterCard orally agree that if you pay $2,000, MasterCard will forgive the rest of the debt. If you pay $2,000, can MasterCard recover the $1,000 balance?
debt is already due and undisputed; yes, MC can still recover remaining balance; can make and break that promise; there was no consid for it; you already owed the $3000; there’s no consid given if you’re merely promising to pay back a portion when you already owe $3000
What are the three steps to evaluate for promissory estoppel?
First, look to see if there was consideration (bargained-for exchange of legal value or lack thereof). If no consideration, then look for promissory estoppel. Promise made, rsbly foreseeable detrimental reliance, justice requires enforcement. Then you can enforce promise.
What is promissory estoppel or the reasoning behind it?
Promissory estoppel = promise + performance
Foreseeable detrimental reliance in the form of some sort of performance can make the promisor’s promise enforceable even if it lacks consideration at the outset
So you start out with a gift promise (unenforceable, no consideration), transform it into enforceable if the PE elements are met
(1) There was a promise
(2) The promisor should rsly expect to induce action or forbearance, and
(3) such action or forbearance is in fact induced
Grandpa promises to give his granddaughter $2,000 as a
gift. In reliance on the gift, Granddaughter quits her job as a bookkeeper. Then Grandpa dies and his estate reneges. Was there consideration for Grandpa’s promise to give Granddaughter the $2,000?
Can Granddaughter enforce Grandpa’s promise on any other ground?
step one, is there consid? No. There was no bargained-for exchange here. This was just a gift promised by GP to GD; he never required that she quit her job in exchange. If you don’t see any bargained-for exchange, you do not have consid.
Step two, can GD enforce GP’s promise on some other ground? Yes, PE. GP made her a promise. It was rsbly foreseeable that she woudl rely to her detriment on that promise. She did actually rely by quitting her job. Therefore, justice requires enforcement.
What damages can you get from promissory estoppel?
Some jursi will award expectation damages (what was promised)
Restatement provides that remedy “may be limited as justice requires” - so might award reliance damages (whatever the promisee spent in reliance on the promise), which is usually less than expectation damages
Are contracts made by minors binding on the minors or adults?
Contractual promises of an adult made to a minor are binding on the adult, but not on the minor
What is disaffirmance?
A minor may choose to disaffirm a contract any time before (or shortly after) reaching the age of majority
Contract must be disaffirmed as a whole
If minor chooses to disaffirm, they must return anything that they received under the contract that still remains at the time of disaffirmance
What is disaffirmance?
A minor may choose to disaffirm a contract any time before (or shortly after) reaching the age of majority
Contract must be disaffirmed as a whole
If minor chooses to disaffirm, they must return anything that they received under the contract that still remains at the time of disaffirmance
What is implied affirmation?
When a minor retains the benefits of a contract he made when he was a minor, after gaining capacity
so if he agreed to buy a car when he was 17, and then continues to use that car after he turns 18, he is impliedly affirming the contract and is liable for payment
What are necessaries and what are a minor’s liability for them?
Necessaries are items necessary for subsistence, health, or education
Minor may disaffirm a contract for necessaries but will be liable in restitution for the value of benefits rec’d
Ex: rented an apartment to a minor; he has to pay but only for the rsble value of the apartment; so there’s no contract claim bc he has a lack of capacity defense bc he’s a minor; so he has to pay in restitution whatever the fair market value of the apt was worth
With mental incapacity, when can one affirm or disaffirm?
May disaffirm when lucid or by a later appointed legal rep
May affirm during a lucid peirod or upon complete recovery
The contract is voidable
Same thing with necessaries as with minors
But note that once a legal guardian is appointed, the mentally incompetent person has no ability to contract and any contracts made by them are void, not just voidable
What happens with contracts with intoxicated persons?
One who is so intoxicated that they don’t understand the nature and significance of their promise may be held to have made only a voidable promise if the other party has reason to know of the intoxication
Intoxicated person may affirm contract upon recovery
Same deal with necessaries
Are contracts indued by duress or undue influence voidable?
Yes, are voidable and may be rescinded as long as they are not affirmed
when does duress occur?
Common type of duress occurs when a party’s assent is procured by an improper threat, either physical or economic
Generally, taking advantage of another’s economic needs is not duress, but withholding something someone wants or needs will constitute economic duress if:
(1) the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and
(2) there are no adequate means available to prevent the threatened loss
Ex: someone will say “I’m not going to go through with my side of the bargain unless you do XYZ” - other guy is vulnerable and has no other rsble alternative but to agree - they call up 10 other suppliers to try to find someone to help them but no one can, so they give in to the improper wrongful threat
What are the elements of undue influence?
(1) undue susceptibility to pressure by one party, and
(2) excessive pressure by the other party
Concerns often arise when the dominant party is in a confidential or caregiver relationship w the influenced party
When there is a misunderstanding about ambiguous contract language, what are the three possible results?
Neither party aware (of ambiguous term) = no contract unless both parties intended the same meaning
Both parties aware = no contract unless both parties intended the same meaning; or
One party aware = binding contract based on what the ignorant party rsbly believed to be the meaning of ambiguous words
–> If a party was aware or should have been aware, liability will be on them
Subjective intent taken into account
If both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if:
(1) the mistake concerns a basic assumption on which the contract is made (for ex: the parties think they’re contracting for the sale of a diamond but in reality the stone is a CZ);
(2) the mistake has a material effect on the agreed-upon exchange (for ex: the CZ is worth only a 1/100th of what a diamond is worth); AND
(3) the party seeking avoidance did not assume the risk of the mistake
When is mutual mistake not a defense?
If the party asserting mistake as a defense bore the risk that the assumption was mistaken
Commonly occurs when one party is in a position to better know the risks than the other party (for ex, contractor v homeowner) or where the parties knew that their assumption was doubtful (when the parties were consciously aware of their ignorance)
If the parties make assumptions as to the value of the subject matter, will mistakes in those assumptions be remedied?
Generally no - even though the vaule of the subject matter is generally a basic assumption and the mistake creates a material imbalance - because both parties usually assume the risk that their assumption as to value is wrong
When will a unilateral mistake cause the contract to be voidable
If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract
BUT if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party
As w mutual mistake, mistake must have had a material effect on the agreed-upon exchange, and the mistaken party must not have borne the risk of the mistake
What is fraudulent misrepresentation and what will happen to the contract?
If party induces another to enter into a contract by using fradulent misrepresentation (by asserting info they know is untrue), the contract is voidable by the innocent party if they justifiably relied on the misrepresentation
Fraud in the inducement
What is a material misrepresentation and what will happen to a contract?
Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material
A misrepresentation is material if:
(1) it would induce a rsble person to agree, or
(2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a rsble person would not
Is unfair price alone a ground for unconscionability?
No
Are inconspicuous risk-shifting provisions unconscionable?
Standardized printed form contracts often contain a material provision that seeks to shift a risk normally borne by one party to the other
typically, these clauses are in the fine print
Courts have invalidated these provisions because they are inconspicuous or incomprehensible to the average person, even if brought to their actual attention
What will courts do with take it or leave it clauses?
Courts will deem a clause unconscionable and unenforceable if the signer is unable to procure necessary goods, such as a car, from any seller without agreeing to a similar provision
What will courts do with exculpatory clauses for intentional and negligent acts?
An exculpatory clause releasing a contracting party from liability for their own intentional wrongful acts is usually found to be unconscionable because such a clause is against public policy
Exculpatory clauses for neg acts may be found to be unconscionable if the clauses are inconspicuous
But they commonly are upheld if they are in contracts for hazardous activities
What will courts do with a clause limiting remedies?
A contractual clause limiting laibility for damages to property generally will NOT be found unconscionable unless it is inconspicuous
But if a contract limits a party to a certain remedy and that remedy fails of its essential purpose (for ex: contract limits remedies to repair and the item can’t be repaired), the limitation may be found unconscionable and courts will ignore it
What timing is looked at for unconscionability?
Determined by the circumstances as they existed at the time the contract was formed
What may a court do if they find a clause or contract unconscionable?
If courts finds that a contract or clause was unconscionable when made, the court may:
(1) refuse to enforce the contract;
(2) enforce the remainder of the contract without the unconscionable clause; or
(3) limit the application of any clause so as to avoid an unconscionable result
Very generally, what is the statute of frauds?
Governs what agreements must be evidenced by a writing signed by the party sought to be bound
So even though you formed a contract, it might not be legally enforceable if you didn’t comply with SOF and get it in writing
What are the SOF categories?
MYLEGS
Marriage
Years (terms of)
Land sales
Executors
Goods over $500+
Sureties
What is the marriage SOF category?
If marriage is the consideration for a promise, that must be evidenced by a writing
Applies to promises that induce marriage by offering something of value (If you marry my son, I will give the two of you a house)
Doesn’t include just a promise to marry
Ex: P claims A promised to relinquish claims to her assets if she agreed to marry him. This promise is within SOF because it’s a prenup; I will not go after your assets held prior to marriage, in return for marriage
What is the years category of the SOF?
A promise that by its terms cannot be performed within one year is subject to SOF
Part performance doesn’t satisfy SOF
Date runs from the date of the agreement, not the date of performance
Watch for a contract measured by a lifetime (ex: a promise to employ until I die; or work until I die) - not within SOF because it is capable of performance within a year because a person can die within a year - so this contract doesn’t need to be in writing
What is the land sales category of SOF?
A promise creating an interest in land must be evidenced by a writing
Includes not only agreements for sale of real property but also:
Leases for more than one year; easements of more than one year; mortgages; fixtures; minerals if they are to be severed by the buyer
DOESN’T include; contracts to build a building or to find a buyer for a seller
Billy Ray Cyrus alleges that Lil Nas X orally agreed to sell him the Old Town Road Ranch for $4,000,000.
Lil Nas X authorizes an agent to sell the ranch. Must the agent’s authorization be in writing?
authorization to enter into a contract on behalf of somebody else; issue is when do you need to have that auth in writing? Governed by equal dignity rule = says that the auth to enter into a contract on behalf of someone else, like an agent to sell ranch, it must be in writing only if the underlying deal would have been subject to SOF; here, the agent has to get the auth in writing bc the underlying deal is to sell a ranch, sell real estate, which is subject to SOF
What is the equal dignity rule?
equal dignity rule = says that the auth to enter into a contract on behalf of someone else, like an agent to sell ranch, must be in writing only if the underlying deal would have been subject to SOF
For ex: if an agent is going to have to sell a ranch, that’s subject to SOF, so contract with agent to do must be in writing
What is the executor SOF category?
A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing
What is the goods category of SOF?
Contract for the sale of goods for a price of $500 or more is within SOF and usually has to be in writing to be legally enforceable
A 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
What do you need to look for with the signatures of something within the SOF?
In the writing, it needs to be signed by the party to be charged (the party getting sued) - otherwise you can’t sue them on it
So for goods, look for SOF signature, then merchants confirmatory memo
When is a writing signed by the party to be charged not required for the sale of goods, even if $500 or more?
SWAP:
Specially made goods
Written confirmation by a merchant (merchant’s confirmatory memo)
Admission in court
Performance
these things take it out of the SOF
What is the surety category of SOF?
A promise ot answer for the debt or default of another must be evidenced by a writing
If main purpose or leading objective of the promisor is to serve a pecuniary interest of his own, the contract is not within SOF even though the effect is still to pay the debt of another
Ex: homeowner promises to pay contractor’s debt to building supplier if contractor does not pay, so contractor can obtain supplies to work on homeowner’s house - main object is to benefit themselves so this is not bound by SOF and doesn’t need to be in writing
what happens if a contract is not compliant with the SOF?
Noncompliance with the SOF renders the contract unenforceable at the option of the party to be charged
Party being sued may raise the lack of a sufficient writing as an affirmative defense
If SOF isn’t raised as a defense, it’s waived
Does a modification to a contract need to be written or be within SOF?
A written contract can be modified orally, but the modification must be in writing if the contract as modified falls within the SOF
So if contract for sale of goods is modified to be for $500 or more, it must be in writing
If contract is modified and reduced to only being for $400, then that can just be orally modified
What are the CL and UCC approaches to contract clauses prohibiting oral modifications?
CL: rule is that even if a written contract expressly provides that it may be modified only by a writing, the parties can orally modify the contract
UCC: if a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect
If contract is bt a merchant and nonmerchant, however, this provision requires the nonmerchant’s separate signature
What effect does full performance or part performance by the seller or buyer in land sale contracts have on the SOF?
Full performance by the seller will take contract out of SOF - so if seller conveys property to the buyer (they fully perform), seller can enforce the buyer’s oral promise to pay
Part performance by buyer may also remove it from SOF - part performance that unequivocally indicates that the parties have contracted for the sale of land takes contract out of SOF
Most juris require at least TWO of the following: payment (in whole or part), possession, and/or valuable improvements
So if buyer has done two of those things, even if there was only an oral contract, the contract can be enforced
What should I watch for when parties orally agree to an installment land contract?
In absence of other facts, such as a large down payment, in this case, possession plus payment does not unequivocally indicate a contract for the sale of land
these facts are consistent with a lease and then the purchaser can’t enforce the contract for the whole sale
Can an oral contract that cannot be completed within one year but has been fully performed by one party be enforceable?
Yes
Ex: B orally agrees to employ C for 2 years for $50K. C works for 2 years, but B refuses to pay. Normally, this would have to be under SOF because it’s a contract that can’t be completed within one year, but because he completed out the contract and did full performance, C can enforce this contract; no one would work for 2 years if there wasn’t actually a contract
But what if: same oral agreement but C gets fired after 3 months; then no, C can’t enforce the contract and B doesn’t have to pay him full amount; part performance isn’t enough - but remedy? Restitution for services; measured by fair market value of the benefit conferred.
When can part performance take a sale of goods contract out of the SOF?
When (1) the goods have been specially manufactured or (2) the goods have been either paid for or accepted
If a contract is only partially paid for or accepted, contract is enforceable only to the extent of the partial payment or acceptance
If an indivisible item is partially paid for, most courts hold that SOF is satisfied for whole item (ex: you put a downpayment on a boat, then seller doesn’t deliver boat; seller doesn’t have an SOF defense bc you can’t apportion a boat like you can 20 out of 50 footballs or something, so the down payment pulls the whole thing out of the SOF)
What are the three situations in which contracts are enforceable without the writing per the SOF?
(1) specially manufactured goods - If goods are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of their business, contract is enforceable if the seller has, under circumstances that rsbly indicate that the goods are for the buyer, made a substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received
Substantial beginning = enough has been done to show that those goods are made to order, that these are custom made goods, that the seller cannot resell them to anyone else
(2) admissions in pleadings or court - if the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is enforceable without a writing (but contract is not enforced beyond the quantity of goods admitted)
(3) merchants confirmatory memo - in contracts bt merchants, if one party, within a rsble time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the SOF to bind the sender, it will also bind the recipient if: (1) they have reason to know of the confirmation’s contents; and (2) they do not object to it in writing within 10 days of receipt
Needs to include quantity terms - the above can satisfy the SOF even without receiving the merchant’s signature and only receiving your own
Vera Wang Design Studios sends Victoria’s Bridal Shop a signed letter “confirming our earlier oral agreement over the phone for the sale
of 9 gowns for $2,700.” Victoria’s Bridal Shop does not respond. Will Vera Wang’s letter satisfy the Statute of Frauds against Victoria’s?
normally, you’d need a writing bc it was oral, over the phone, for over $500; yes will satisfy SOF exception; even though you don’t have D’s signature on dotted line, this is the special merchant confirmatory memorandum rule; Victoria will lose her SOF defense; theory is that a rsble merchant would have responded right away if other merchant was committing a fraud
Does the SOF require a formal written contract?
No, it can be a receipt, a letter, a check with details in the memo line, email, several papers adding up to one agreement, etc
Requires that the writing: (1) rsbly identify the subject matter of the contract, (2) indicate that a contract has been made bt the parties, and (3) state w rsble certainty the esssential terms
What are the essential terms required to be a valid SOF writing?
Must be enough in the writing to enable a court to enforce the contract
If an essential term is contained in the writing, evidence is admissible to explain the particulars, but evidence will not be admitted to add a missing term
Ex: identity of the parties, description of the subject matter, and the terms necessary to make the contract definite
Writings for land sale contracts must contain a description of the land and the price
Empoyment contracts must state length of employment
For sale of goods, UCC requires only some signed writing indicating that a contract has been made and specifying the quantity term - and DEFENDANT’s signature (unless merchants confirmatory memo)
If a contract violates the SOF, what can the party sue for?
In almost all cases, a party can sue for the rsble value of the services or part performance rendered, or the restitution of any other benefit that has been conferred
If the part performance rendered takes the contract out of the SOF, the performing party has the option of suing on the contract for expectation damages rather than merely in restitution for the value of the benefit conferred
What is the parol evidence rule?
When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an integration
Any other expressions - written or oral - made prior to the writing, as well as any oral expressions contemporaneous w the writing, are inadmissible to vary the terms of the writing
What are the two components of an integration?
(1) whether the writing was intended as the final expression of the agreement; and
(2) whether the integration was intended to be complete or partial
Evidence is admissible to show the parties’ intent
What evidence can you have if the integration is partial?
The writing may not be contradicted but may be supplemented by proving consistent addtl terms
The UCC presumes all writings are partial integrations
Partial integration = a final statement of the terms included but not a complete statement as to the entire deal
What is the effect of a merger clause on integration?
A merger clause recites that the agreement is the complete agreement bt the parties
Usually determinative in large commercial contracts
But for most contracts, modern trend is to consider it as one factor in determining integration
(in example, merger clause made it so that J.Lo couldn’t include parol evidence that they said throw in the bridal suite for free when the contract said nothing about sleeping arrangements - the merger made it complete integration so you couldn’t include anything else)
Can a memo prepared by one party and not shown to the other be an integration?
No, because the parties could not have intended it to be the final complete expression of their agreement when one party has not even seen it
but a confirmatory memo may be a partial integration under the UCC bc it was sent to the other party and that party was aware of its contents
Parties can’t bring in extrinsic evidence that seeks to vary, contradic or add to an integration. But what other forms of extrinsic evidence may be admissible?
Parties can bring in evidence to establish a defense against formation
That there was an oral agreement that the written contract would not become effective until a condition occurred
To interpret a vague or ambiguous term
To show the true consideration paid (or not paid)
To show subsequent modifications of a written contract (parol evidence applies to things before the final integration, not after; but with this, think about CL modification and pre-existing legal duty rule; or UCC modification, where you think about good faith; and think about whether modification needs to be in writing per SOF)
Under Art 2, a party can’t contradict a written contract but may add consistent addtl terms unless: (1) there is a merger clause, or (2) the courts find from all the circum that the writing was intended as a complete and exclusive statement of the terms of the agreement; also provides that a written contract’s terms may be explained or supplemented by evidence of course of performance, course of dealing, and usage of trade - regardless of whether or not the writing appears to be ambiguous
To fix a typo
Will courts construe contracts as a whole?
Yes, specific clauses will be subordinated to the contract’s general intent
Will courts construe words to their ordinary or techncial meanings?
Courts will construe words according to their ordinary meaning unless it’s clearly shown they were meant to be used in a technical sense
Who are ambiguities in a contract construed against?
Ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention of the parties
What is course of performance, which the court will consider?
how the parties have conducted themselves under prior installments of the current contract
Ex: you might have S and B who contracted for the sale of 100 chickens per month for the next 12 months; the first 3 installment shipments under this contract are broilers, not stewing fowl, so in month 4, when you’re thinking about what the word chicken means, the previous course of performance, the first 3 months, they were all Bs, not SFs, and that can provide evid for what the word chicken means in month 4; and that’s pretty good evid to figure out what “chicken” means
When rules in contract construction conflict, what do courts consider?
(1) express terms are given greater weight than course of performance, course of dealing, and usage of trade
(2) course of performance is given greater weight than course of dealing or usage of trade; and
(3) course of dealing is given greater weight than usage of trade
Recall that key to forming a contract for UCC is the quantity term. If other terms are missing, Art 2 has gap-filler provisions to fill in the missing terms. What are they for price, place of delivery, time for shipment or delivery, time for payment, and assortment?
Price = if: (1) nothing has been said as to price; (2) the price is left open to be agreed upon by the parties and they fail to agree; or (3) the price is to be fixed in terms of some standard that is set by a thirdp erson or agency and it is not set, then the price is a rsble price at the time for delivery
Place of delivery = the place usually is the seller’s place of business, if they have one; otherwise, it’s the seller’s home
Time for shipment or delivery = shipment/delivery is due within a rsble time
Time for payment = payment is due at the time and place at which the buyer is to receive the goods
Assortment = the assortment is at the buyer’s option; if the party who has the right to specify the assortment doesn’t do so seasonably, the other party is excused from any resulting delay and may either proceed in any rsble manner or treat the failure as a breach
Contracts for goods usually include what warranties?
Automaticaly include a warranty of title
May include implied warranties and express warranties
What are express warranties?
Any affirmation of fact or promise made by the S to the B, any description of the goods, any sample or model creates an extress warranty if the statement etc. is part of the basis of the bargain
To be part of the basis of the bargain, needs to come at such a time that the buyer could have relied on it when they entered into the contract
Need not actually rely on it - but then S can negate warranty by proving that B did not rely
No intention requirement
Where you have a seller who desecribes the goods or she promises facts about the goods; she shows a buyer a sample or a model of goods; but NOT simply a seller expressing her opoinion, puffing up her product
What is an implied warranty of merchantibility?
That the goods are fit for their ordinary, foreseeable purpose
If you want to show this, you’re showing a merchant seller who is regularly selling that type of goods, just not any businessman
To consumer, automatically implied by law under Art 2 is that they come under the implied W or M
Not because of anything the seller said expressly - doesn’t matter if S didn’t know of defect - it’s an absolute liability
Implied by law
What is an implied warranty of fitness for a particular purpose?
Whenever (1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the B is relying on the seller’s skill and judgment to select suitable goods; and (2) the B in fact relies on the S’s skill or judgment
You’re going to show that the goods are going to be fit for the B’s particular purpose beyond the ordinary purpose
Key fact they’ll give me is a B who comes in w a special purpose, S is going to know that B has that special purpose, and S is going to pick out suitable goods for that purpose, and knows that the B is relying on the S to pick out suitable goods for B’s special purpose
All those facts together = addtl implied W of FPP
Seller doesn’t have to be a merchant
If they know that the B says my special purpose is X, and then that S picks out goods that fit X, that’s the implied W of FPP
What warranties can seller disclaim?
Can disclaim implied warranties but not express
So if they make an express promise about their goods, they can’t later disclaim that
Merchantability: can be specifically disclaimed by mentioning merchantability - if sales contract is in writing, disclaimer must be conspicuous
FPP: can be specifically disclaimed only by a conspicuous writing
Conspicuous = so written that a rsble person would notice it; rsbly obvious to a rsble person; if you do so, you can make implied warranties go away
What are the general methods for disclaiming implied warranties per the UCC?
By using “as is” language - “buyer takes as is”
If buyer has examined the goods as fully as they want or has refused to examine before entering into the contract - no warranty as to what a rsble inspection would have shown
May be disclaimed by course of dealing or performance, or usage of trade
What are the rules about limitations on damages clauses?
General rule: seller can limit buyer’s remedies for breach of warranty; even an EW, you can limit the remedies as long as the limitation is unot unconscionable
Exception: where personal injury occurs, limiting a buyer’s remedies for PI in the case of consumer goods, we just presume those types of limits are unconscionable
You buy an oven for your home from Al’s Kitchen Appliances. The contract provides: “All parts are guaranteed for two years” and “Al’s liability is limited to replacement parts.” A year later, a defect in the oven causes a fire that injures you. Can you get damages from Al’s?
merchant seller reg selling that type of good; going to come w an implied warranty of merchantability; for PI, limiting remedies for damages would be prima facie unconscionable so yes you can get damages; if it was just property damage, the court would have to decide whether it was unconscionable or not to just limit you to replacement parts
What are buyer’s damages for breach of warranty?
Generally, difference bt the value of the goods accepted and the value of the goods as warranted, measured at the time and place of acceptance
and B can recover appropriate incidental and consequential damages
If an agreement allocates risk, who bears the loss?
Whatever the agreement says
If a party is in breach, who bears the loss of damaged goods?
If a party is in breach, rule there is that the breaching party will be liable, will bear the risk of those losses or destroyed goods, even if their breach was not related to the reason the goods got damaged or destroyed
If a buyer has a right to reject the goods, who bears the risk of loss?
If buyer has a right to reject the goods, the risk of loss doesn’t pass to the buyer until the defects are cured or the buyer accepts the goods in spite of their defects
If buyer rightfully revokes acceptance, risk of loss is treated as having rested on the seller from the beginning to the extent of any deficiency in the buyer’s insurance coverage
If the goods are nonconforming, risk of loss remains on the seller
What is a noncarrier case and who bears the risk of loss?
Noncarrier case is a sale in which it appears the parties did not intend that the goods would be moved by a common carrier
If seller is a merchant, risk of loss passes to the 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 (tender can be seller telling the buyer where the goods are and how to get them)
What is a carrier case and who bears risk of loss?
Carrier case is a sale in which it appears the parties intended the goods to be moved by a carrier - shipment contracts and destination contracts
Shipment contract: seller completes her delivery obligations when she gets the goods to a CC, makes rsble arrangements for delivery, and notifies the buyer; that’s what the seller’s delivery obligations are, at that point, the risk of loss passes to the buyer (on exam, assume it’s this contract)
Destination contract: seller must get the goods all the way to a specific destination, usually where the buyer is located, so seller will keep risk of loss longer under this contract
FOB: free on board; risk of loss passes to the buyer at the named location after FOB; whether shipment or destination contract depends on name of city
What kind of contract is it if Starbucks said it would ship the coffee FOB Seattle?
What if the contract provided for any other city (for example, FOB New York)?
FOB seller city; shipment contract; get the goods to a CC, make arrangements for shipment, notify B, at that point, S has completed delivery obligations and risk of loss passes to buyer; so when rats get in halfway through the country, B has to pay for the coffee
Destination contract; seller would bear the risk of loss until coffee arrived in NY correctly; so if rats get in in transit, S bears risk, S would have to deliver new coffee
