Contracts Flashcards
Three principal questions
has an enforceable contract been formed
has the contract been performed
what are the remedies for breach
what is a contract
legally enforceable agreement
Two universes of contract law
Common Law: real estate or services
UCC: deals with goods
what is the deal with mixed contracts
All or nothing rule: must fall under either UCC or CL
exception: divisible contracts
Predominant Purpose rule: does a good or service play a bigger role
Topics regarding the formation of a Contract
Agreement (offer and acceptance)
consideration
defenses to formation
statute of frauds
what must there be for a contract to be formed
offer and acceptance
definition of an offer
a manifestation of a willingness to enter into an agreement that creates a power of acceptance
what standard governs offer and acceptance
the objective test: the outward appearance of words and actions matter
not secret intentions
serious intent to be bound
Who must the offer be directed at
the specific offeree, cant accept an offer unless it is directed at you
exception: contest/reward offers
How specific do the terms have to be
CL: all essential terms, parties, subject, price, and quantity
UCC: only essential term: quantity
price doesnt need to be stated
UCC fills the gaps based on reasonableness
Requirements and Output contracts
exceptions to the quantity requirement
Requirement K: buyer agrees to buy all that buyer will require of a product from the other party
if it is substantially more- that is nonconforming tender
Output K: seller agrees to sell all that the seller manufactures of a product to the buyer
invitations to deal
not an offer
preliminary communication that reserves a final right of approval with the speaker
not an acceptance
EX.: advertisement
exceptions: reward advertisements and very specific advertisements that leve nothin open to negotiation
Ways to terminate an offer
1)revocation: express communication to the offeree
sent by mail: has to be received
2)constructive revocation: offeree learns that offeror has taken action that is absolutely inconsistent with a continuing ability to contract
3)rejection
4)counteroffer
5)death: death has to happen before K is accepted
exception: option Ks do not terminate
6)reasonable amount of time passes
Irrevocable offer situations
1)Option: independent promise for additional consideration to keep the offer open for a period of time
Firm Offer: 1) a merchant 2)in writing and signed by offeror 3) explicit promise not to revoke
time period: 1) stated in offer, or 2) reasonable time not to exceed 90 days
signed required: official letterhead and initialed is fine
Unilateral contract: offeree has started performance
Detrimental reliance: offeree reasonably and detrimentally relies on the offeror’s promise prior to acceptance, liable to the extent necessary to avoid injustice
Unilateral v. Bilateral contracts
Unilateral: arises from a promise that requests acceptance by an action of the promissee
Bilateral: request for a return promise
if ambiguity: acceptance can be by either performance or a return promise
Notice of Acceptance for Unilateral Ks
offeree not required to give notice after completing performance unless:
1)offeror wouldnt learn of performance with reasonable certainty/promptness
2)offer requires notice
If notice is required but not provided, offeror’s duty is discharged, unless:
1)offeree exercises reasonable diligence to give notice
2)offeror learns of performance within a reasonable time, or
3) offer indicates notice of acceptance is not required
Notice of acceptance for Bilateral contracts
offeree must give notice of acceptance
mailbox rule
UCC: if acceptance is made by beginning performance, notice is required within a reasonable time, failure to give notice results in lapse of offer
Revival
a terminated offer may be revived by the offeror and accepted by offeree
Promises binding without consideration
1)pay a debt barred by SOL
2)perform voidable duty: new promise to perform prior voidable contract
3)material benefit rule
4)promissory estoppel
Material benefit rule
when a party performs an unrequested service for another party, modern trend permits the performing party to enforce the promise of payment for material benefits received to extent necessary to prevent injustice
acceptance
a manifestations of a willingness to enter into the agreement by the offeree
Other acceptance rules
must be specifically directed to the person trying to accept it
must know about the offer in order to accept it
must communicated acceptance to other party
mailbox rule: acceptance sent by mail is effective when letter is sent
when does mailbox rule not apply
if the offeree sends something else back first
other types of communications
option contracts
other media unclear
means of acceptance
offeror is master of the offer and can dictate the manner and means by which an offer may be accepted
if nothing state: any reasonable manner
Acceptance by silence
unilateral reward offers or contests
unilateral offer in which the parties are geographically close
a past history of silence serving as acceptance
offer says acceptance must come by silence and the offeree intends to accept by silence
Implied in Fact Contracts
can communicate an acceptance without writing or speaking
Ex.: getting your haircut
Common Law rule for additional or different terms
Mirror image rule: acts as a counteroffer
UCC acceptance with additional terms and whether it controls
acceptance is valid even if there are additional or different terms unless acceptance is expressly made conditional upon assent to the additional or different terms
new terms controls only if:
1)both parties are merchants
2) new term does not materially alter the deal
3)the initial offer did not expressly limit acceptance to its terms, and
4) the offeror does not object within a reasonable time to the new term
UCC for different terms
Majority: Knock out rule- different terms nullify each other and court uses gap filling provisions
Minority: apply rule for additional terms
UCC acceptance based on conduct
parties might fail to make a contract but still act as though there is an agreement
only the terms that both writings agree on become part of the contract, with all other terms supplied by the UCC default rules
UCC confirming memo
arises when the parties have a contract and one party sends a confirming memo with additional terms
do same analysis as additional term but new terms will very rarely come in
consideration
a deal in which the parties exchange promises involving a legal detriment or benefit
Questions to ask regarding consideration
1) who is making the promise that needs to be supported by law
2) is there a benefit to the promisor or a detriment to the promisee
3) was this bargained for
distinguishing a gift from valid consideration
whether the offeree could have reasonably believed that the intent of the offeror was to induce the action
legal detriment
not doing something that you are legally entitled to do
Adequacy of consideration
a pretense of consideration is insufficient
example: 1 dollar
a difference in economic value for items exchange is not ground
can consider subjective value
Illusory Promise
a promisor must clearly commit to the deal or there is no consideration
satisfaction contracts are not illusory
promising not to sue as consideration
settling a legal claim can be sufficient consideration but only if:
1)the plaintiff has a good faith belief in the validity of the claim, or
2) there is reason to doubt the validity of the claim due to uncertain law
Pre-existing duty rule
a promise to do something that your are already legally obligated to do is not consideration
exceptions:
1)a change in performance
2) a third party promising to pay, or
3) unforeseen difficulties that would excuse performance
Past consideration
not adequate consideration- not bargained for
Modification by promising partial payment for release of debt
ask whether the debt is currently due and undisputed- if it is, modification not binding
Modification at CL
must be supported by new consideration
look to pre-existing duty rule
Modification under UCC
need good faith, not additional consideration
Promissory estoppel and its elements
one party makes a promise and the other party relies on that promise to take some action
elements:
1) a promise is made that would be reasonably expected to induce reliance
2) the promisee does indeed take detrimental action in reliance on the promise, and
3) injustice can only be avoided by enforcement of the promise
charity exception to promissory estoppel
need not prove deterimental reliance
Quasi contract
when you would have made a contract if you could have but you could not, and it would be fair to pay for that benefit
elements:
1) plaintiff confers a measurable benefit on D
2) plaintiff reasonably expected to get paid, and
3) it would be unfair to let the D keep the benefit without paying
damages limited to the fair value of the benefit conferred
types of enforceability
Void contracts: as if no K existed between the parties
Voidable Ks: operates as a valid contract until one of the parties takes steps to avoid it
unenforceable Ks: a valid K that cannot be enforced if one of the parties refuses to carry out its terms
Defenses to Contract Formation
mistake
misunderstanding
misrepresentation, nondisclosure, fraud
undue influence
duress
lack of capacity to contract
illegality
unconscionability
misunderstanding defense + elements
what happens if one/both party knows or should know of the misunderstanding
arises when each party attaches a different meaning to the same words
must show that:
1) the parties use a material term that is open to two or more reasonable interpretations- subjective, not objective
2) each side attaches a different meaning to the term, and
3) neither party knows, or should know of the confusion
if one party knows: contract formed based on the meaning of the term as understood by the unknowing party
both parties know: no contract, unless they intended the same meaning
Who lacks the capacity to make a contract
minors under the age of 18 (broad protection)
people who are mentally ill
if adjudicated- K is void
not adjudicated:
1) the person cannot understand the nature and consequences of his actions, or
2) the person cannot act in a reasonable manner in relation to the transaction if the other side knows or has reason to know
Very intoxicated persons if the other side knows or has reason to know
capacity exception
contract for necessities
the party without capacity must still pay fair value (not contract price)
examples: food, clothing, shelter
what happens if you make a contract with a person who lacks capacity
contract is voidable- only incapacitated party can disaffirm
but they can ratify the deal by keeping the benefits of K after capacity is obtained
mistake defense to contract formation
a belief that is not in accord with a present fact
mutual mistake
allows adversely affected party to rescind if:
1) there is a mistake of fact ecisting at the time that the deal is made
2) the mistake relates to a basic assumption of the contract and has a material impact on the deal, and
3) the impacted party did not bear the risk of the mistake
unilateral mistake
allows the adversely affected party to rescind if:
1) prove all elements of mutual mistake, and
2) either
a) the mistake would make the contract unconscionable, or
b) the other side knew of, had reason to know of, or caused the mistake
conscious ignorance exception to mistake
a party may bear the risk of mistake when:
1) the party is aware at the time of the contract of having only limited knowledge of the facts to which the mistake relates, and
2) the party accepts such limited knowledge as sufficient
misrepresentation defense
a statement at the time of contracting that is not true
party must show:
1) a misrepresentation of a present fact (not opinion)
2)that is material OR fraudulent, and
3) that is made under circumstances in which it is justifiable to rely on the misrepresentation
fraud in the execution
you trick someone into signing something that they do not even know is a contract
Nondisclosure
the other party does not learn the truth about something, but now you just remain quiet
normally dont need to tell the other person
exception: special fiduciary relationship or active concealment
Duress
an improper threat that deprives a party from making a meaningful choice to contract
economic duress: when one party makes threats to induce another party to contract (or modify a K)
Undue influence
arises when a party puts very intense sales pressure on another party who often seems weak minded or susceptible to high pressure sales tactics
illegality
illegal contracts are unenforceable
but a contract entered in furtherance of an illegal act will still be enforced
remedy: law will just leave the parties where they stand, but modern trend toward allowing less guilty parties to recover restitution
Contracts against public policy
not enforced
contracting situations that are not formally illegal but present some other public policy concern
balancing test
example: broad exculpatory agreement
Unconscionability
two types
Procedural: a defect in the bargaining process itself
1) a hidden term, or
2) an absence of a meaningful choice- no other contracting option
Substantive: a rip off in some term of the contract
Statute of Frauds
a barrier that some contracts must meet in order to become legally binding
goal: prevent false assertions about a contract that was never really created
questions to ask in a SOF analysis
does the SOF apply to this transaction
has the SOF been satisfied
what contracts fall under SOF
Marriage: contract made in consideration of marriage (prenup)
Suretyship: contract promising to guarantee the debt of another
One Year: contract that by its terms cannot be performed within one year of its making
UCC: goods contracts for a price of 500+
Real Property: contract for the sale of an interest in real property
Suretyship exception to SOF
main purpose exception: if main purpose in agreeing to pay the debt of another is for the surety’s own economic advantage, not in SOF world
One Year Rule SOF
very narrow: whether there is no possible way for the contract to be performed within one year of its making
two main ways to satisfy SOF
performance
signed writing
Satisfying SOF for longer than one year Ks
full performance by either side satisfies the SOF
part performance does not
writing requirement for SOF
must be signed by the party against whom the contract is asserted
must cover fundamental facts:
1)show that a contract has been made,
2) identify the parties, and
3) contain the essential elements of the deal
does not have to be a formal contract
satisfying SOF for real estate
signed writing satisfies
part performance satisfies if any of the two following are met:
1)possession
2)payment
3) improvements to the land
Satisfying SOF under UCC
Signed Writing
1) no need to mention the price
2) must mention the quantity- if incorrect, only enforceable for quantity mentioned
Part Performance: only for the quantity delivered and accepted
Custom made goods: exempted from SOF
as soon as maker makes a substantial beginning toward the manufacturing of the goods
Judicial admission: includes a statement in a pleading or during testimony
Confirming Memo: failure to object to a confirming memo within 10 days will satisfy the SOF but only if both parties are merchants
SOF and Agency Law
equal dignity rule: need a signed writing to authorize an agent to form a contract that is under SOF
modification under SOF
ask whether the deal, with the alleged modification, would be in SOF world:
if so: SOF requirements must be met
if not: no SOF requirement
Four big topics regarding contract performance
Parole-evidence rule
warranties
conditions
excuse of performance obligations
Steps for a Parole evidence question
1)determine what the agreement entails
2)is it an integrated writing
PER determine what the agreement entials
if parties have reduced their contract to a comprehensive writing, then earlier statements/writings related to this agreement are not part of the deal
PER doesnt bar later written/verbal statement, just earlier stuff
PER types of integration
Complete integration: contract expresses all of the terms of the agreement
partial integration: there is a final writing but some terms are not included
PER distinguishing whether there is integration
Merger clause: evidence of complete integration
whether an extrinsic term of the agreement would naturally be omitted from the writing: if so may not violate PER and can be introduced so long as it does not contradict
Situations where PER doesnt apply
1)evidence relevant to a defense against contract formation/enforcement
2) even if a writing is completely integrated, party can introduce evidence of a second, separate deal
3)might be able to introduce evidence of a prior communication that is designed to interpret an ambiguous term in the final agreement
4) may be admitted to prove a condition precedent to the existence of the contract
5) trade usage and course of dealing
warranty
a promise about a term of the contract that explicitly shifts risk to the party making the prmise
can you disclaim warranties
yes: as is language
types of warranties
express warranty
implied warranty of merchantability
implied warranty of fitness for a particular purpose
express warranty
a promise that affirms or describes the goods and is part of the basis of the bargain
cant be the seller’s opinion
use of a sample/model creates express warranty that goods sold will be like the model
implied warranty of merchantability
warrants that the goods are fit for ordinary commercial purposes
when is the implied warranty of merchantability triggered
when the seller is a merchant dealing in the goods at issue
how to waive the warranty of merchantibility
has to be very clearly done
look for very conspicuous language and look for the term merchantability
types of phrases used to constitute a waive
as is
with all faults
implied warranty of fitness for a particular purpose
warrants that the goods will satisfy this special purpose
when is warranty of fitness for a particular purpose triggered
when a buyer relies on a seller’s expertise to select a special type of good that will be used for a special purpose
does not have to be a merchant as long as the buyer relies on the experties
how to disclaim warranty of fitness for a particular purpose
must be conspicuous and the disclaimer must be in writing
conditions
a way to shift risk by stating that one party’s contractual obligation will only kick in if some future event takes place
you cant intentionally make the condition fail- has to naturally fail
how are express conditions created
by the language in the contract
must be strictly satisfied
words to look for for express conditions
only if
provided that
on the condition that
only in the event that
How are satisfaction conditions met
depends on the nature of performance
1)preferred approach: use an objective standard of satisfaction
if most reasonable people would be satisfied, the condition is met
2) aesthetic taste: use subjective standard
party can still breach if they claim dissatisfaction in bad faith
how is a condition waived
1) the party receiving the protection of the condition may waive the condition by word or conduct
2) if the other party wrongfully interferes with or hinders the occurrence of the condition- good faith standard
constructive condition of exchange
one party’s performance is conditioned on the other side’s performance
Performance under the CL
Doctrine of substantial performance
a party will satisfy the CCE if there is not a material breach and the failure to fully perform is not willful
Measuring damages under doctrine of substantial performance
1)nonbreaching party can recover damages for the deficiency
typically measured as the cost to complete the performance- sometimes limited to the diminution in market value
2) breaching party cannot get paid on the contract
maybe quasi-contract
3)express conditions- not gonna get paid
substantial performance and divisibility
if a contract is clearly divisible, then it will be broken into mini contracts for the purposes of determining if there has been substantial performance
Performance under the UCC
requires perfect tender
exceptions: contract explicitly changes the default rule, installment contracts
obligations of perfect tender
perfect goods
perfect delivery
Nonconforming tender: what the buyer can do
can accept or reject in part or in full and still recover damages
UCC remedy for rejection of goods
if tender does not conform exactly to the terms of the contract, the buyer has the right to reject the goods
buyer will no longer be obligated to pay the purchase price
What happens if buyer accepts nonconforming goods UCC
buyer becomes obligated to pay the purchase price, and the buyer may deduct its damages from the purchase price
UCC requirements to reject goods
to be effective, must reject within a reasonable time (depends on circumstances)
buyer is entitled to inspect the goods
buyer must notify the seller of the rejection
UCC when does acceptance of the goods occur
when the buyer indicates that he is accepting the goods, or
through any act inconsistent with the seller’s ownership of the goods
revocation of acceptance under UCC
a buyer can revoke an earlier acceptance of the goods if a nonconformity substantially impairs the value of the goods
requirements:
1)buyer must notify seller that she is revoking acceptance
2) revocation must be within a reasonable time from when the buyer discovers or should have discovered the problem with the goods, and
3)the buyer must satisfy one of the statutory grounds:
i) seller promised to cure the problem but never did
ii) seller made assurances regarding the goods, or
iii) the non-conformity is a latent non-conformity (not readily visible)
who can assert the remedy of revocation for goods under UCC
only available against a buyer’s immediate seller
it is not a remedy against the manufacturer
seller’s right to cure under UCC for performance
if the seller fails to tender perfect goods and time is left on the contract or the seller had reasonable grounds to believe that the buyer would accept a replacement, then the buyer must give the seller a chance to cure
Default delivery rule under UCC and its exception
one delivery of goods
exception: installment contracts
buyer can reject a specific delivery that is not perfect only when there is substantial impairment that cannot be cured
methods of tender/delivery
Tender at seller’s place of business
Shipment contract
destination contract
tender at seller’s place of business
if the goods are to be tendered at the seller’s place of business, then the seller just needs to give the goods to the buyer
shipment contract
F.O.B. Seller’s place of business
three actions to be taken by the seller to satisfy perfect delivery:
1)get the goods to a common carrier
2) make arrangements for delivery, and
3) notify the buyer
Destination contract
F.O.B. Buyer’s place of business
seller must get the goods to the buyer’s business and notify the buyer
Risk of Loss under UCC
arises when there is a goods contract followed by damage or destruction before buyer receives them
Steps to determine liability:
1)whether parties have dealt with risk problem in the contract
2)whether either party has breach- if so breaching party bears risk, even if breach unrelated to damage
3) what type of delivery
Shipment: risk rests with buyer
Destination: risk rests with seller
4) whether the seller is a merchant
if so: risk stays with seller until buyer receives the goods
if not: risk moves to buyer when seller tenders the goods
Excuses to performance
Impossibility and Impracticability
death after a contract
frustration of purpose
performance is excused because initial contract has been modified/cancelled
impossibility and impracticability
impracticability: some unanticipated event take place: excused from performing until you can
look for these fact patterns:
1)performance becomes illegal
2)subject matter of contract is destroyed
3) in a services contract with a special person, the performing party dies or is incapacitated
something that just makes performance more expensive will not normally excuse
look for an unforeseen event, in which the non-occurrence was a basic assumption and the party seeking discharge was not at fault
Death after contract
does not normally excuse liability on a K that has been made
ask where there is something special about the person performing on the K, such that it makes no sense to continue if they die
frustration of purpose
performance can still occur, but something has happened to undermine the entire reason for the creation of the contract
***very rare- event must be extreme and not previously allocated to one of the parties
rescission by mutual agreement
performance is excused because initial contract has been modified/cancelled
there must be some performance remaining from each side
Accord and Satisfaction
parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance
accord: the new performance
satisfaction: excusal of the initial performance obligation
if the accord is not performed, the other side can sue on either the original obligation or the new promise
An unliquidated or disputed claim may be discharged by negotiable instrument (e.g.,
a check with the note “Payment in full”) and the other party cashes it
Novation
arises when both parties agree that a substitute person will take over the contractual obligation
original promisor will be excused from performance
breach of a constructive condition of exchange
CL: failure to substantially perform means the other side may withhold their own performance
cant withhold if other side has substantially performed, but may be entitled to recover for breach
UCC: seller must strictly perform or be in breach
except installment contracts
Anticipatory Repudiation
when the other side says that they are not going to perform on the contract before performance is due, clearly and unequivocally
Nonbreaching party options under anticipatory repudiation
1)treat the repudiation as breach and sue immediately for damages
but if you have completed the entire performance and are only waiting for payment you cannot sue early
2)ignore, demand performance, and see what happens
retraction of repudiation
can do it as long as the other side has not:
1)commenced a lawsuit, or
2) acted in reliance on the repudiation by materially changing its position
Repudiation under UCC
reasonable grounds for insecurity about the other side’s performance allows you to demand an adequate assurance of performance
if party fails to respond with reasonable time, treat it as a repudiation
what is the typical remedy in contract law
money damages
Remedies in general
expectation damages
reliance damages
restitution damages
liquidated damages
specific performance
punitive damages
Expectation damages and how it is measured
normal way to calculate damages in contracts
goal: put a party in the same economic position it would be in if the contract had been performed as promised
measured by comparing the value of the performance without the breach to the value of the performance with the breach
major limitations on expectation damages
1)these damages must be proven with reasonable certainty
2) unforeseeable consequential damages
3)mitigation
general vs. consequential damages
general: the types of loss that almost anyone would incur from a breach
includes incidental
consequential damages: losses that are unique and special to P: breaching party must have some reason to know that they are a possibility
mitigation
a breached against party must take reasonable steps to reduce damages from breach
if party refuses to mitigate, the law will calculate damages as if the party did mitigate
D bears the burden of proving a mitigation failure
mitigation efforts must be reasonably similar to the original contract
Special problems with expectation damages
Lost volume profits
incomplete performance
economic waste and diminution in market value damages
Lost Volume Profits
if the paying party breaches, then normally the selling party needs to mitigate by reselling the goods/services to another person
but if the seller is a retailer who sells this type of product all the time, argue this
you get the profit you would have been owed by initial contract
Incomplete Performance and the formula
if the paying party breaches in a partially completed building contract, the builder must stop work
formula: expectation damages= contract price- amount already paid- amount that would be needed to finish the job
economic waste and diminution in market value damages
the cost to complete the job is the normal measure of damages but sometimes this will dramatically overcompensate the P
Ask: how much lower is the market value of what you got versus what you wanted
breaching party normally must have acted in an innocent and unintentional manner
reliance damages
goal: put a party in the same economic position that it would be in if the contract had never been created in the first place
recovery of both reliance and expectation damages
cannot recover both: must choose one or the other
restitution damages
goal: give the P an amount equal to the economic benefit that the plaintiff conferred on the D
*does not always equal reliance damages
liquidated damages
stated in a contract as an explicitly negotiated amount due upon breach
will be awarded only if:
1) the amount of liquidated damages was reasonable at the time of contracting, and
2) actual damages from breach would be uncertain in amount and difficult to prove
if it is too high-penalty, not damages
Punitive damages
almost never allow in contract law
look for situations where the breach also seems like a tort
Attorney’s fees
generally not recoverable unless the parties agree otherwise
UCC does not allow them
Specific Performance
look for uniqueness
equitable remedies
specific performance and injunctions
the exception, not the norm in contract law
only when monetary damages are considered inadequate for some reason
presumption of specific performance
presumed for real estate transaction, unless it has already been transferred to a different bona fide purchaser
presumptively not available for contract of person service
courts might grant an injunction prohibition a breaching party from performing similar services for a competitor for a reasonable period of time
Specific performance and the UCC
only available for unique goods like art or custom made items
right of reclamation
arises when an unpaid seller tries to reclaim goods that were sold on credit when the buyer is insolvent
following facts must be present:
1)buyer is insolvent at the time of receipt of goods
2) the seller must demand the return of goods within 10 days of receipt or within a reasonable time if the buyer misrepresented his solvency to the seller in writing within 3 months of delivery, and
3) the buyer still has the goods
third party beneficiary contracts
whether a third party can sue to enforce a contract made by two other people
the parties in a third party situation
promisor: the person making the promise that the outsider is trying to enforce
promisee: a contractual counterparty to that promise, could presumably enforce the contract but is not doing so
third party beneficiary: outsider suing the promisor for the breach
when does a third party beneficiary have the right to sue
intended beneficiaries have the right to sue
incidental beneficiaries do not
determining the classification of a third party
whether the initial counterparties intended to convey enforcement rights to the third party in the event of breach
two special types of third party beneficiaries
creditor beneficiary
donee beneficiary
creditor beneficiary
arises when the promisee strikes a deal with the promisor in order to repay some earlier debt to the third party
donee beneficiary
arises when there is no preexisting obligation, but the promisee clearly intends to confer a gift of enforcement on a third party
how a third party can prevent the revocation of its rights
if any of the following facts are true, they cause the right to vest:
1) the beneficiary detrimentally relies on the rights
2) the beneficiary manifests assent to the contract, or
3) the beneficiary has filed a lawsuit to enforce the contract
ability to assert defenses against 3rd party
the promisor can assert any contract defense against the third party that he would be entitled to assert against the promisee
assignment v. delegation
assignment: transfer of rights under a contract
delegation: transfer of duties under a contract
steps to distinguish assignment from third party beneficiary
1) the formation of a contract, and
2) the transfer of the benefits of the contract from an original counterparty to some third party
when is assignment permitted
almost all contract benefits can be assigned in whole or in part unless the contract explicitly prohibits or invalidates assignments
assignment people
guarantor
assignor
assignee
what to do if the contract states that rights are not assignable
must determine whether the contract prohibits assignments or invalidates assignments
contract prohibits assignment
the assigning party has breached when he makes the assignment, but the third party can still recover from the guarantor
contract invalidates assignment
the third party cannot recover because there is no power or right to assign
what happens if someone assigns the same rights twice
depends on whether consideration was given:
assignment without consideration
if assigned without consideration- assignment is generally revocable and the last assignment controls
cannot be revoke if :
1) the obligor has already performed
2) promissory estoppel applies, or
3) a document evidencing the assigned right or a written assignment signed by the assignor was delivered to the assignee
assignment with consideration
if assigned for consideration: first assignment is typically irrevocable and will hold
limited exception: a later assignment will take priority if the second assignee does not know of the initial assignment and is first to obtain payment or a judgment
when is delegation acceptable
generally acceptable as long as the contract does not prohibit delegation and as long as the other party does not have some special interest in having a specific individual perform
delegation people
delegating party
delegatee
obligee
does liability transfer to the delegatee
a delegatee is generally not liable for breach unless she receives consideration from the delegating party
can delegatee recover damages
no- benefits have not been transferred, just the duties
delegation vs. novation
novation is agreed to by both parties
need this in order to release a delegator from their liability
ways to discharge contractual obligations
full performance of obligations
impossibility, impracticability, or frustration of purpose
release (in writing only)
mutual recision
substituted contract
covenant not to sue
accord and satisfaction
novation
Virginia source of law
CL: for services or real estate
UCC: sale of goods which are tangible, movable items of personal property
predominant purpose test: all or nothing approach to hybrid Ks
Virginia future contracts
a contract to agree in the future is unenforceable: present intent to enter a contract is necessary
Virginia rule for employment contracts
employment contract without a duration term is considered to be an employment at will
even if contract states a duration term, still construed as at will if parties have not indicated the grounds upon which the employer can terminate the employee
Virginia rule for Firm Offer
has adopted the uniform electronic transactions act: writing requirement may be satisfied by an electronic record with an electronic signature
Virginia rule on requirements contracts
when a dispute arises regarding whether a requirements K actually exists, look to all the documents involved, as well as parol evidence
if no unambiguous language specifically referring, parties intent will control- determined by jury
Virginia rule on consideration
promisor must bargain either for a benefit to himself or a detriment to the promisee
*just need one
What is not considered sufficient consideration in Virginia
past consideration or moral consideration- it is not bargained for
Virginia rule on promissory estoppel
it is not recognized as a substitute for consideration
*but on exam still show what I know
Virginia rule on Quasi contract
basis of recovery: quantum merit
elements:
1) P confers a benefit on D
2) D knows that the benefit has been received, and
3) it would be inequitable to retain the benefit without paying
if there is an express contract between the parties, there can be no quantum merit recover
but a third party can recover for unjust enrichment relating to the contract
Virginia rule on infancy
the age of majority is 18
a contract entered into by an infant is voidable, which means the infant can disaffirm the contract if they wish and not have to perform
exception: if it is for necessity, required to pay fair value of the benefit
Virginia rule on Necessity
three steps in determining whether it is a necessity:
1)is the thing acquired generally considered a necessity
2) is there sufficient evidence to determine whether the things supplied were necessary here
3)were the things supplied actually necessary
Virginia rule on mistake
does not recognize unilateral mistake
but if unilateral mistake+fraud/inequitable conduct, may be treated as a mutual mistake
Virginia rule on unconscionability
a contract that no man in his senses and not under a delusion would make, and as not fair man would accept
must be gross unfairness
focus on facts at time contract is entered into
is unenforceable
generally need both procedural and substantive unconsconability
Virginia rule on public policy
a preinjury release of liability is void as against public policy
indemnity clause that determines how losses will be distributed is not void
Virginia rule on noncompetes
three factor test:
1)necessity: is it greater than necessary to protect legitimate business interest- function, duration, geographical scope
2)impact: does it unduly restrict the employee’s ability to earn a living
3) PP: does it conflict, consider, disfavor of restrictions, any shortage of skills provided by employee, concerns about monopoly
have to be narrowly drafted: VA doesnt like them
When does SOF apply in Virginia
marriage
suretyship
one year
UCC 500
real property
Brokerage: a real estate brokerage contract
Infancy: a promise to pay a debt incurred during infancy, or ratification of a contract made during infancy
Big Loans: a promise to lend money or extend credit in the amount of 25,000+
Generous executor: a promise by the executor of an estate to pay a debt of the estate with the executor’s own money
Virginia rule on part performance under SOF
established by showing:
1)the parol agreement relied on is certain and definite in its terms
2) the acts proved in part performance are connected to that agreement, and
3) the agreement was so fat executed that a refusal of full execution would operate a fraud upon the party
Virginia rule on Parol evidence
extrinsic evidence is always admissible to give meaning to or explain ambiguous, vague, or indefinite terms
if the contract is facially incomplete, then extrinsic evidence may be introduced in order to add or supplement with consistent additional terms
Virginia rule on express warranties
a statement that this item is of good quality does not constitute a warranty- considered to be puffery
Virginia rule on what implied warranties are applied to
both new and used goods
the standard will differ depending on whether it is new or used
Virginia rule on disclaimers of warranties
a disclaimer that is printed in the same size, style, and color as most of the other contract language is probably not conspicuous
Virginia rule on privity of contract and warranties
plaintiff doesnt have to purchase from D
look instead to whether the P was reasonably expected to use, consume or be affected by the goods
VA rule on partial impracticability
when seller can only deliver some goods, seller may allocate his goods in any manner that is fair and reasonable
the buyer has the right to refuse acceptance and legally cancel the contract
Virginia rule on specific performance
requires party seeking specific performance to show:
1)no adequate remedy at law, and
2)that the terms of the contract sought to be enforced are sufficiently definite
legal remedies are inadequate when:
1)they are impossible or difficult to measure, or
2)the aggrieved party cannot purchase substitute performance
doubts about the adequacy of damages should be resolved in favor of the aggrieved party
Virginia rule on punitive damages
will not award punitive damages unless compensatory damages are also awarded and the breaching party is liable for a willful, independent tort
Virginia rule for rejecting goods under UCC
if the notice of rejection is unreasonably late, the rejection is not effective
treat the goods as having been impliedly accepted
Virginia rules on revocation of acceptance under UCC
whether the buyer revokes an acceptance within a reasonable time is a question of fact
if the buyer is too patient with the seller’s multiple attempts to cure, that might not be reasonable
contract for the sale of assorted goods
When a contract for the sale of assorted goods does not specify who will choose the assortment, the UCC imposes a duty on the buyer to make that selection. If the buyer fails to specify the assortment of goods, then the seller can treat that failure as a breach—but only if the buyer’s failure to specify the assortment materially impacts the seller’s performance.
Statute of limitations for breach of sales contract
must be commenced within 4 years after the cause of action accrues
generally accrues when the breach occurs
breach of warranty accrues when delivery is made
