Contracts Flashcards
What is the Statute of Frauds?
barrier that some contracts must meet to become legally binding
prevent false assertions about a contract that was never really created
what is an output contract?
seller is offering to sell 100% of whatever amount is produced to teh buyer
what is a requirements contract?
buyer is offering to buy 100% of whatever amount is needed from seller
how do you accept a bilateral contract?
promise OR starting performance
remedies for breach
under the UCC, what is the recourse for anticipatory repudiation?
you can demand an adequate assurance
if party fails to respond within a reasonable time, treat this as repudiation
what is the difference between novation and delegation?
novation - BOTH parties agree someone else will take over the contractual obligation
delegation - one party decides to outsource their duties under the contract
what are the four main elements of contract formation?
ACDS - all contracts don’t sink
A - agreement (offer + acceptance)
C - consideration
D - defenses to formation
S - statute of frauds (enforceability)
what is a bilateral contract?
contract in which parties exchange promises
what is a unilateral contract?
contract in which offer makes a promise and offerree must perform
ex. rewards and contests
For frustration of purpose to serve as an excuse for performance, an event must occur that ____________________ the reason for the contract. The event ____________________ performance of the contract impossible.
PQs Set 1
Undermines, does not make
What two questions should you ask about Statute of Frauds?
- Does the SOF apply to this transaction?
- If so, has the SOF been satisifed?
remedies for breach
with anticipatory repudiation, can a party retract its repudiation?
yes as long as the other side has not commenced a lawsuit OR acted in reliance on the repudiation
how do you accept a unilateral contract?
only complete performance
how do you form a unilateral contract?
offerree must (1) know about the offer and (2) intend to accept the offer by completing performance
What happens if there is valid novation?
the original promisor will be excused from performance
what is required for an offer under the UCC?
quantity is the only essential term
price does NOT need to be mentioned
what is novation?
BOTH parties agree that a substitute person will take over hte contractual obligations
When must a contract that is modified satisfy the Statute of Frauds?
Whenever the contract as modified is subject to the Statute of Frauds
when does the common law apply?
services or real estate
Ways to discharge contractual obligations (8)
FIRM SCAN
- Full performance of contractual obligations
- Impossibility, impracticability, or frustration of purpose
- Release (in writing only)
- Mutual rescission
- Substituted contract
- Contract or covenant not to sue
- Accord & satisfaction
- Novation
tip
Three main questions to ask for a Contracts question
- Has an enforceable contract been formed?
- Has the contract been performed (or, has the performance been excused)?
- What are the remedies for breach?
what are the ways to terminate an offer?
- revocation of offer - express communication to the offeree
- constructive revocation - offeror takes action that is absolutely inconsistent with their continuing ability to contract
- rejection by offeree
- counteroffer by offeree (rejection + new offer)
- death of offeror
- reasonable amount of time passes
remedies for breach
with anticipatory repudiation, what are your two options as the nonbreaching party?
- treat repudiation as a breach + sue for damages now
BUT if you completed entire performance and are just waiting to be paid, can’t sue early - ignore repudiation, demand performance, and see what happens
What is the parol evidence rule for a sale of goods?
Evidence of an additional promise made before the written contract was entered into that does not contradict the contract may be considered unless the parties would certainly have included the term in the contract.
An acceptance is a(n) ________________ manifestation of a willingness to enter into the agreement by the offeree. The offeree _______________ accept a unilateral offer with a promise to perform.
PQs Set 1
objective, may not
remedies for breach
What is anticipatory repudiation?
when the other side says they aren’t going to perform on the contract before performance is due
how do you determine if a mixed contract (goods and services) is under the UCC or common law?
- predominate purpose test
- all or nothing rule
exception: divisible contracts
what is required for an offer under the common law?
all essential terms must be provided (parties, subj, price, quantity)
what do you need to have a valid contract?
offer, acceptance, consideration
when is impractability a defense?
if
- an unforeseeable event has occurred
- the contract was formed under the basic assumption that the event would not occur AND
- the party seeking discharge of performance is not at fault.
But if a party assumed the risk of an event happening that made performance impracticable, then the party’s performance will not be discharged by impracticability.
when does the UCC (Article II) apply?
goods
when does the Statute of Frauds apply?
M. SOUR
- Marriage
- Suretyship
- One year (no possible way it can be performed in one year)
- UCC (goods $500+)
- Real property (interest in it)
what is a substitute for consideration?
promissory estoppel
what are the defenses to contract formation?
- misunderstanding
- incapacity
- mistake
- fraud / misrepresentation / nondisclosure
- duress
- illegality
- unconscionability
what are the major topics under whether a contract has been performed?
Pizza with crawling escargot
P - Parol evidence rule
W - warranties
C - conditions
E - excuse of performance obligations
what is the parol evidence rule?
prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written
whether any of the earlier oral or written terms are part of the parties’ contract, even though they are absent from the parties’ written agreement
if there is not a signed writing, what rule should I think about?
Statute of Frauds
if there is a signed writing + earlier discussion of the deal, what rule should I think about?
Parol Evidence Rule
what are the parts of an agreement in contract formation?
offer + acceptance
what is the test for offer and acceptance?
objective test - whether the offeror displays an objectively serious intent to be bound
outward appearance of words and actions
who does an offer have to be directed at?
the specific offeree
EXCEPTION: contest offers or reward offers
what is needed to have a valid offer?
must convey the power of acceptance to the side
NOTE:
invitations to deal (doesn’t convey power of acceptance)
advertisement (understood as invitation to deal EXCEPT reward ads, ads that are very specific and leave nothing open to negotiation)
what is a counteroffer?
rejection + new offer
normally, when can an offeror revoke an offer?
offeror is normally free to revoke at any time prior to acceptance
what are the four ways an irrevocable offer can arise?
- option
- firm offer
- unilateral contract
- detrimental reliance
irrevocable offers
what is a firm offer?
merchant (UCC) can make a firm offer to buy/sell goods –> binding, free option
irrevocable offers
what are the requirements for a firm offer?
firm offer must be (1) written (2) signed by the offeror and (3) contain an explicit promise not to revoke
offeror has to be a merchant (Essay 4281)
firm offer can include a condition
irrevocable offers
what is the time perod for a firm offer?
either (1) as long as stated in the offer OR (2) reasonable time period not to exceed 90 days (UCC 2-205)
what is a merchant (UCC)?
someone who regularly deals in the type of goods at issue
businessperson or someone holding themselves out as having knowlege or skills particular to the goods
what is a unilateral contract?
arises from a promise that requests acceptance by an action of the promise
only accepted by performance
what is a bilateral contract?
request for a return promise
irrevocable offers
when can an unilateral offer be revoked?
can’t be revoked if offeror has started to perform
is the offeree required to complete performance if a unilteral contract is revoked?
they have the right to finish, but not required to
irrevocable offers
when does detrimental reliance arise?
offeree reasonably and determinetally relies on te offer in some forseeable manner
look for contractor/subcontractor
part of reliance theory (promisorry estoppel)
what is acceptance?
manifestation of a willingness to enter into the agreement by the offeree
what is the test for acceptance?
objective test
offeror is master of the offer
who decides if an offer is unilateral or bilateral?
offeror
modern approach
what happens if there is ambiguity about whether an offer is unilateral or bilateral?
acceptance can be by performance or return promise
what if the seller tries to acept by shipping the wrong goods?
UCC treats as acceptance + breach
how do you accept an offer that is open-to-all?
you must know about that offer to accept it
do you have to communicate your acceptance to the other party for it to be effective?
yes
acceptance
what is the mailbox rule?
acceptance sent by mail is effective when the letter is sent
determines when acceptance has been legally communicated when there is a delay between sending and receiving
acceptance
what are the exceptions to the mailbox rule?
- offeree sends something else first (like counteroffer or rejection)
- other types of communications (revocations, rejections)
- options contracts
- unclear whether it applies to other media like email, fax, text
aceptance of offer is effective only if received before offer expires
acceptance
can you accept an offer without comunicaton?
yes, by silence
acceptance
when can acceptance happen without communication (by silence)?
- unilateral reward offers or contests
- unilateral offers in which the parties are geographically close
- past history of silence serving as acceptance
- offer says taht accpetance must come by silence and offeree intends to accept by silence
how do you accept an implied in fact contract?
without writing or speaking
communcation by gestures or actions
what is the rule for counteroffers under the common law?
mirror image rule
terms in the acceptance must match the offer exactly or it is a counteroffer (not acceptance)
common law
what is a conditonal acceptance?
form of counteroffer
UCC / Counteroffers
what is the rule for counteroffers under the UCC?
(1) definite and seasonable expression of acceptance (2) sent within reasonable time is an acceptance (3) even though additional or different terms (4) unless acceptance is expressly made conditional on the additional/different terms
more forgiving of accpetnaces that don’t match exactly
doens’t matter whether parties are merchants
UCC 2-207
UCC / Counteroffers
when does an additional term in a counteroffer control?
only if
1. both parties are merchants
2. new term doesn’t materially alter the deal
3. initial offer didn’t expressly limit acceptance to its terms AND
4. offeror doesn’t reject/object the new term within a reasonable time
UCC / Counteroffers
when does a different term in a counteroffer control?
(accpetance has a different term from the initial offer)
knock-out rule (majority) - neither term governs, UCC gap-filling rules apply
minority states - intial offer controls
UCC / Counteroffers
when can you accept based on conduct?
parties fail to make a contract but act as though there is an agreement
only terms in both writing agree are part of the contract, other terms are supplied through UCC default rules
UCC 2-207(3)
when does a confirming memo arise under UCC?
parties have a contract (normally verbally) and one party sends a confirming memo with additional terms
UCC 2-207
what are the requirements for confirming memos under UCC?
(1) written confirmation (2) sent within reasonable time (3) operates as an acceptance
UCC 2-207(1)
when should I look out for confirming memos under UCC?
early agreement + written confirmation with new terms
what is bargained-for consideration?
consideration is a deal in which the parties exchange promises involving a legal detriment or benefit
what is the test for consideration?
- who is making the promise that needs to be supported by law?
- is there a benefit to the promisor OR a detriment to the promisee?
- was this bargained for / quid pro quo?
what is a legal detriment?
not doing something you are legally entitled to do
do gift promises and conditional gifts count as bargained-for consideration?
nope
think about whether I would sue you if I didn’t do this
consideration
what is nominal consideration?
pretense of consideration
insufficient
as long as there is enough value, even subjective value ot the person receiving it, consdieration will be adequate
consideration
what is an illusory promise?
promisor must clearly commit to the deal or there is no consideration
there has to be a way for the promisor to breach
consideration
are satisfication contracts illusory?
performance has to be done to my satisifcation
Nope, real contracts
consideration
are output and reqirements contracts illusory?
nope, they’re real
there’s a way for a party to breach –> requiring the product and purchasing from others or making the product and selling to others
consideration
is past consideration valid consideration?
nope
consideration
is settling a legal claim sufficient consideration?
promising not to sue
yes only if (1) plaintiff has a good faith beleif in the validity of the claim
OR
(2) reason to doubt the validity of the claim due to uncertain law
does contract modification require new consideration under common law?
preexisting duty rule - promise to do something that you are already legally obligated to do is NOT consideration
but exceptions
common law / contract modification
what are the exceptions to the preexisting duty rule?
- change in performance
- 3p promising to pay
- unforseen difficuties that would excuse performance
common law / contract modification
is a modification binding that promises partial payment for release from a debt obligation?
ask whether the debt is currenlty due and undisputed
if so, modification is NOT binding
what is the rule for contract modification under the UCC?
ask whether the modification is made in good faith
if so, is it IS binding even without new consideartion
what is a subtitute to consideration?
promissory liability
what are the categories of promissory liability?
- promissory estoppel / reliance
- quasi-contract
- moral obligation + subsequent promise
- seal
consideration substitute
when does promissory estoppel arise?
one party makes a promise and the other party relies on that promise to take some action
consideration substitute
what are the elements of promissory estoppel / reliance?
PDI - promise made, deterimental reliance, injustice
- promise is made that would be reasonably expected to induce reliance
- promsie does indeed take detrminental action in reliance on the promise AND
- injustice can only be avoided by enforcement of the promise
don’t need to prove #2 for charitable gift promise
consideration substitute
what is a quasi-contract / contract implied in law?
when you would have made a contract if you could have, but you could not, OR when one party conferred a benefit on another party, and it would be fair to pay for that benefit
consideration substitute
what are the elements of a quasi-contract?
- plaintiff confers a measurable benefit on the defendant
- plaintiff reasonably expected to get paid AND
- it woud be unfair to let the defendant keep the benefit without paying
look for oppy to decline or a good reason why there wasn’t an oppy to decline
when should a flag go up for a quasi-contract?
situation doesn’t satisfy normal requirements for a contract but still seems unfair
consideration substitute
is a moral obligation and subsequent promise binding?
yes in some jurisidictions
normally past consideration (not binding)
consideration substitute
does a seal on a doc act as a consideration substitute in most jurisidctions?
nope
defenses to contract formation
what are the elements of misunderstanding?
each party attaches a different meaning to the same words
1. parties use a material term that is open to 2+ reasonable interpretations (objective test doesn’t apply)
2. each side attaches a diff meaning to the term
3. neither party knows or should know of the confusion
defenses to contract formation
who lacks capacity to make a contract?
- minors (< 18 years old)
- people who are mentally ill –> can’t understand the nature and conseuqneces of their actions OR can’t act in a reasonable manner in relation to the transaction and the other side knows/has reason to know this
- very intoxicated person (if other side knows or has reason to know this)
defenses to contract formation
what happens if you make a contract with a person who lacks capacity?
contract is voidable - incapacitated party can disaffirm
party without capacity can ratify the deal by keeping the benefits of the contract after capacity is obtained
contract for necessities - party without capcity must still pay fair value
defenses to contract formation
what is a mistake? what are the types?
belief that is not in accord with a present fact
mutual mistake (affecting both parties) + unilateral mistake (one party)
defenses to contract formation
what are the elements of a mutual mistake?
allows the adversly affected party to rescind if
1. there is a mistake of fact at the time the deal was made
2. mistake relates to a basic assumption of the contract + has material impact on the deal
3. impacted party didn’t bear the risk of mistake
defenses to contract formation
what are the elements of a unilateral mistake?
allows the adversly affected party to rescind if
1. can prove all the elements of mutual mistake AND
2. either (a) mistake would make the contract unconsciousable OR (b) other side knew of/has reason to know of or caused the mistake
defenses to contract formation
with mutual and unilateral mistakes, who can claim these defenses?
only the adversly affected party
defenses to contract formation
what are the elements of misrepresentation?
statement at time of contracting that is not true
can be intentional (fraudulent) or accidental
party must show
1. misrepesentation of a present fact (not opinion)
2. that is material OR fraudlent (intentional)
3. made under the circumstances in which it is justificable to rely on the misrepresentation
defenses to contract formation
what is fraud in the execution?
you trick someone into signing something that they don’t even know is a contract
defenses to contract formation
what is nondisclosure?
other party doesn’t learn the truth about something, but now you just remain quiet
EXCEPTION: special (fiduicary) relationship or active concealment
normally you don’t need to tell the other side about all material facts
defenses to contract formation
what is duress?
improper threat that deprives a party from making a meaningful choice to contract
economic duress - one party makes threats to induce another party to contract/modify a contract
defenses to contract formation
what is undue influence?
undue influence - party puts v intense sales pressure on another party, who often seems weak-minded or susceptible to high pressure sales tactics
I think this is kinda a subcategory of duress, but it seems like the questions treat it as a separate defense
defenses to contract formation
what is illegality? when is an illegal contract enforceable?
unenforceable
contract entered in furtherance of an illegal act (that is not itself illegal) can be enforced
are the defenses of illegality, contracts against PBPL, and unconsciousability enforcement or formation defenses?
enforcement b/c don’t impact the requirement that contracting parties have a meeting of the minds
don’t prevent formation, but impact enforcement
defenses to contract formation
are contracts against PBPL enforceable?
not enforced
contracting situations that are not formally illegal but present some other policy concern
defenses to contract formation
what is unconscionability?
everything seems fine but ct says it’s unconsciosable
ultimate contract defense
defenses to contract formation
what are the two types of unconscionability?
- procedural unconscionability - defect in bargaining process like hidden term or absense of meaningful choice
- sustantive unconscionability - rip-off in some term of the contract
some juris require both before a deal is struck down, others allow just one
statute of frauds
what is the goal of the statute of frauds?
barrier that some contracts must meet in order to become legall binding
prevent false assertions about a contract that was never really created
statute of frauds
what is the main purpose exception?
if the main purpose in agreeing to pay the debt of another is the surety’s own econ advantage, then we are NOT in SOF world
statute of frauds
are contracts invovling real property in SOF world?
only those transfering an interest in the property
statute of frauds
what are the two main ways to satisify the SOF?
performance or writing
statute of frauds
what are the four categories for how to satisify the SOF?
- service contracts that can’t be performed within one year
- writing signed by the party against whom the contract is asserted
- real estate
- goods (UCC)
statute of frauds
how do you satisify the SOF for service contracts that can’t be performed within one year?
full performance by either side satisifies SOF
part performance doesn’t
statute of frauds
how do you satisify the SOF for a writing signed by the party against whom the contract is asserted?
both signatures are NOT required
the writing does NOT have to be a formal contract
must cover the fundamental facts
1. contract has been made
2. ID the parties
3. contain the essential elements of the deal
statute of frauds
how do you satisify the SOF for real estate?
signed writing will satisify
part performance can satisify if 2/3 apply
1. possession
2. payment
3. improvements to the land
statute of frauds
how do you satisify the SOF for goods?
UCC world!
- signed writing satisifes - need quantity, price not required
- part performance satisifies but only for the quantity delivered and accepted
- custom-made goods are EXEMPTED from SOF, can satisify SOF as soon as maker makes a substnatial beginning towards manufacturing
- judicial admission (incl. statement during testimony or a pleading) satisifies
- confirming memo - failure to object to a confirming memo within 10 days will satisify SOF if both parties are merchants
statute of frauds
do you need a signed writing to authorize an agent to form a contract that is in teh SOF world?
yes, equal dignity rule
statute of frauds
if you have a deal in SOF world and requirements are met. the parties want to modify the deal.
does the modification have to satisify the SOF?
not automatically
if the deal with the alleged modification would be in the SOF world
if so, SOF must be met for the modification
if not, no SOF requirement
parol evidence rule
does the PER apply to later written or verbal statements about the deal?
nope
parol evidence rule
does the PER apply to earlier written docs?
yes
parol evidence rule
what are the two types of integrated writings?
complete integration - contract expresses all terms of the agreement
partial integration - final writing, but some terms aren’t included
parol evidence rule
how do you tell if an agreement is integrated partially or completely?
merger clause is evidnce of complete integration
cts might also ask whether an extrinsic term of the agreement would “naturally be omitted from the writing”
parol evidence rule
what steps should I follow for PER?
- look at what the agreement entails - have the parties reduced their contract to a comprehensive writing? if so, earlier statemetns are not part of the deal
- have the parties created an integrated writing?
parol evidence rule
what are exceptions to the PER? situations where the PER doesn’t bar earlier evidence
- will not bar evidence relevant to a defense against contract formation
- even if a writing is completely integrated, a party can intro evidence of a second separate deal
- even if a writing is completly integrated, party might be able to intro evidence of a prior comm that is designed to interpret an ambiguous term in the final agreement
what is a warranty?
promise about a term of the contract that explicitly shifts risks to the party making the promise
you can disclaim all warranties
what is the UCC rule for integrated agreements?
presumes that a writing is a partial integration at most unless the parties would have certainly included a disputed term in the writing
warranties
what are the three types of warranties?
- express warranty
- implied warranty of merchantability
- implied warranty of fitness for a particular purpose
warranties
what is an express warranty (incl the test)?
promise that affirms or describes goods + is part of the basis of the bargain unless it is merely the seller’s opinion
use of a sample or model creates an express warranty
warranties
what is an implied warranty of merchantability?
triggered only when the seller is a merchant dealing in the goods at issue
warrants that the goods are fit for ordinary commercial purposes
can be disclaimed by using “as if” if (1) disclaimer uses the term “merchantability” and (2) must be conspicuous if in writing
can be disclaimed orally
warranties
what is an implied warranty of fitness for a particular purpose?
triggered when buyer relies on a seller’s expertise to select a special type of good that will be used for a special purpose
warrants that the goods will satisfy this special purpose
can be disclaimed if (1) conspicuous and (2) disclaimer is in writing
non merchant can extend this warranty if the buyer relies on any seller’s expertise
warranty
what type of warranty does a sample or model create?
express warranty
conditions
what are the two types of conditions?
express or implied
conditions
what is the most important implied condition?
constructive condition of exchange - one party’s performance is condition on the other side’s performance
conditions
how must express conditions be satisfied?
must be strictly satisfied unless the condition is somehow excused
conditions
what are the two main buckets of express conditions?
satisfaction conditions and waivers
conditions
how are satisfaction conditions met?
depends on nature of performance
preferred - use an objective standard of satisfaction
subjective standard sometimes
conditions
can a party breach for a satisfaction condition?
yes if they claim dissatisfaction in bad faith
conditions
what is the rule for waivers?
party receiving the protection of the condition may waive the condition by words or conduct
condition will be waived if the other party wrongfully interferes with or hinders the occurrence of the condition
good faith standard
conditions
what is the standard for implied conditions in the common law?
substantial performance if there is not a material breach
only satisfied constructive condition of exchange if failure is not willful
divisible contracts
conditions
what is the standard for implied conditions in the UCC?
perfect tender: (1) perfect goods and (2) perfect delivery
exceptions: contract explicitly changes default rule, installment contracts
implied conditions / common law
if payment must be made (b/c only minor problem), can non breaching party recover damages for the deficiency?
yes
typically measured as cost to complete the performance
implied conditions / common law
can a breaching party who fails to satisfy the Constructive Condition of Exchange due to a material breach get paid anything?
not under teh contract but maybe under a quasi-contract
implied conditions / UCC
can a buyer revoke acceptance?
yes if the goods seem okay when delivered but a defect is discovered within a reasonable time
implied conditions / UCC
does the seller have a right to cure?
if the seller fails to tender perfect goods and time is left on the contract OR seller had reasonable grounds to believe that the buyer would accept a replacement,
THEN the buyer must give the seller a chance to cure
implied conditions / UCC
does the UCC allow installment contracts? what happens?
yes
buyer can reject a specific delivery that is not perfect only when there is substantial impairment
implied conditions / UCC
what is the default method of delivery?
one delivery of the goods
assumed that goods are to be delivered in one delivery unless K says otherwise
implied conditions / UCC / method of tender/delivery
what are the three methods of tender / delivery?
- tender at seller’s place of biz
- shipment contract (FOB seller’s place of biz)
- destination contract (FOB buyer’s place of biz)
FOB = free on board
implied conditions / UCC / method of tender/delivery
what happens if the tender is at the seller’s place of business?
seller just needs to give the goods to the buyer
implied conditions / UCC / method of tender/delivery
what happens for shipment contracts?
seller must take three actions to satisfy perfect delivery
1. get goods to a common carrier
2. make arrangements for delivery
3. notify the buyer
implied conditions / UCC / method of tender/delivery
what happens for destination contracts?
seller must (1) get the goods to the buyer’s business and (2) notify the buyer
implied conditions / UCC
when do risk of loss problem arise?
goods contract followed by damage or destruction of the goods before buyer receives them
implied conditions / UCC
who bears the risk of loss? (give the full test)
- does the contract already deal wtih this problem? if so, that controls.
- has either party breached? (typically part of contract)
if so, breaching party bears risk (even if breach is totally unrelated to delivery damage) - if no breach and goods are being shipped, what type of delivery contract is it?
shipment - buyer bears risk
destination - seller - all other cases: is the seller a merchant?
yes, risk of loss is with seller until buyer receives the goods
no, risk of loss moves to the buyer when seller tenders the goods
what are the major types of excuses?
- impossibility and impracticability
- death after a contract
- frustration of purpose
- performance is excused b/c initial contract has been modified or canceled
excuses
what is the test for impossibility and impracticability?
performance becomes illegal after contract is formed
subj matter of contract is destroyed
services contract with key person, performing party dies or becomes incapacitated
hinders the ability to perform, not just the cost to perform
unforeseen event in which non-occurrence of the event was a basic assumption of the contract and party seeking discharge was not at fault
excuses
what happens if there is death after a contract?
normally does NOT excuse liability on a contract that has been made, estate is on teh hook
ask whether there is something special about teh person performing such that it makes no sense to continue if they die
excuses
what is frustration of purpose?
performance can still occur, but something has happened to undermine the entire reason for the creation of the contract
excuses
what happens if performance is excused b/c the initial contract has been modified or canceled?
both parties can agree to just walk away as long as there is some performance remaining on both sides
if not, no consideration for this modification –> recession / cancelation by mutual agreement
what are accord and satisfaction?
parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance
the new performance is the accord
excusal of the initial performance obligation is the satsification
if the accord is not performed, what happens?
other side can sue on either the original obligation or new promise
what is the difference b/t a modification and accord + satisfaction?
if party to perform has an option to perform by doing something else, it’s accord and satisfaction
if parties have changed the performance obligation, it’s modification
what is the constructive condition of exchange under common law?
basically what is the standard for completion
failure to substantially perform means the other side may withhold their perofrmance
can’t withold paymetn if other side has subtantially peformed, but may be entitled to recover for the breach
what is the constructive condition of exchange under UCC?
basically what is the standard for completion
perfect tender - seller must strictly perform all obligations or be in breach
material breach applies to installment sales
remedies for breach
what are the main categories of remedies for a breach?
- anticipatory repudiation
- money damages - expectation, reliance, restitution, liquidate, punitive damages
- specific performance / injunction
remedies for breach
what is the typical remedy in contract law?
money damages
remedies for breach / money damages
what are the types of money damages?
- expectation damages
- reliance damages
- restitution damages
- liquidated damages
- punitive damages
remedies for breach / money damages
what are expectation damages? how are they measured?
put a party in teh same economic position it would be in if the contract had been performed as promised
measured by comparing value of the performance w/o breach vs. value of performance w/ breach
remedies for breach / money damages
how are expectation damages measured under Restatement?
Expectation Damages = loss in value + other loss – cost avoided – loss avoided
remedies for breach / money damages
what are the 3 major limits on the calc of expectation damages?
- expectation damages must be proven with reasonable certainty
- unforeseeable consequential damages
- mitigation
remedies for breach / money damages
under expectation damages, what are thef two categories of unforeseeable consequential damages?
not recoverable unless breaching party had some reason to know about the possibility of these special damages at time of contracting
- general damages - type of loss almost anyone would incur from a breach, incl. incidental damages
- consequential damages - losses that are unique or special to this plaintiff
remedies for breach / money damages
under expectation damages, what are the requirements for mitigation?
breached-against party must take reasonable steps to reduce damages from breach
if party refuses to mitigate, law will calc damages as if they did mitigate
defendant bears burden of proving a mitigation failure
mitigation efforts must be reasonably similar to the original contract
remedies for breach / money damages
what is loss volume profits?
if the paying party breaches, then normally the selling party needs to mitigate by reselling the goods or services to another person
BUT if the seller is a retailer who sells this type of product all the time, seller might try to argue for loss volume profits
remedies for breach / money damages
what happens if there is incomplete performance?
if paying party breaches in a partially completed building, builder can’t continue working
expectation damages = contract price - amount already paid - amount that would be needed to finish the job
remedies for breach / money damages / expectation damages
what is the normal measure of expectation damages?
cost to complete the job
remedies for breach / money damages
what is diminution of market value? when does it apply?
how much lower is the mkt value of what you got vs. what you wanted
breaching party normally must have acted in an innocent and unintentional manner for these damages
remedies for breach / money damages
what are reliance damages?
put the party in the same econ position if the contract had never been created in the first place
remedies for breach / money damages
can a party recover both expectation and reliance damages?
generally no, need to pick one
remedies for breach / money damages
what are restitution damages?
give the plaintiff an amount equal to the econ benefit that the plaintiff conferred on the defendant
sometimes equal to reliance damages, but not always
remedies for breach / money damages
what are liquidated damages?
stated in contract as explicitly neogtatied amount due upon breach
remedies for breach / money damages
when will a ct award punitive liquidated damages?
only if
1. amount of liquidated damages was reasonable at time of contracting
2. actual damages from breach would be uncertain in amount and difficult to prove
remedies for breach / money damages
when are punitive damages allowed?
rarely in contract law
more of a tort thing
remedies for breach / equitable
what type of transactions is specific performance presumptively available?
real estate
NOT personal service
remedies for breach / equitable
when is specific performance available under the UCC?
only unique goods like art or custom made items
remedies for breach / equitable
what is the right of reclamation?
arises when an unpaid seller tries to reclaim goods that were sold on credit when buyer is insolvent
remedies for breach / equitable
when does the right of reclamation apply?
- buyer is insolvent at time of receipt of the goods
- seller must demand return of goods w/in 10 days of receipt (or reasonable time if buyer misrepresented his solvency within 3 mo before delivery)
- buyer still has the goods
3p beneficiary contracts
what is a 3p beneficiary contracts?
whether a 3p can sue to enforce a contract made by two other people
3p beneficiary contracts
what are the two buckets of 3p?
intended and incidental beneficiaries
3p beneficiary contracts
do intended beneficiaries have the right to sue?
yep
3p beneficiary contracts
do incidental beneficiaries have the right to sue?
nope
3p beneficiary contracts
what type of beneficiaries are creditors?
intended beneficiary
3p beneficiary contracts
when does a donee beneficiary arise?
when there is no preexisting obligation but the promisee clearly intends to confer a gift of enforcement on a 3p
3p beneficiary contracts
when can 3p rights be revoked?
ask whether the 3p knows abut the promise and has changed position in reasonable reliance on the promise
if so, 3p may be able to make a claim under promissory estoppel
3p beneficiary contracts
when will a 3p NOT lose enforcement rights?
when the rights of beneficiary vests
if any one of the following is true
1. beneficiary determinately relies on the rights
2. beneficiary manifests assent to the contract
3. beneficiary field a lawsuit to enforce the contract
3p beneficiary contracts
what rights can a promisor assert as a defense against a 3p, if any?
any contract defense that they would be able to assert against the promisee
what is assignment?
transfer of rights under a contract
what is delegation?
transfer of duties under a contract
what is the difference between assignment and delegation?
delegation - transfer of duties (outsourcing)
assignment - transfer of rights
how do you distinguish 3p beneficiary contract from assignment?
assignment has two steps
1. formation of contract
2. transfer of benefits from OG counterparty to 3p
when can contracts be assigned?
almost always in whole or part unless contract explicitly prohibits
what happens if a contract states that rights are not assignable?
determine whether contract prohibits assignments or invalidates assignments
assignment
what happens if a contract prohibits assignments? can 3p recover?
assigning party has breached when they make the assignment, but 3p can still recover from guarantor
power to assign persists even if right to assign doesn’t
assignment
what happens if a contract invalidates assignments? can 3p recover?
3p can’t recover b/c there is no power or right to assign
assignment
what happens if someone assigns the same rights twice?
if rights are assigned w/o consideration (no payment) –> assignment is removable and last assignment controls
if assigned w/ consideration –> first assignment for consideration is irrevocable and holds
when is delegation allowed?
generally allowed as long as contract doesn’t prohibit delegation and as long as other party doesn’t have some special interest in having a specific idv perform
is a delegatee liable for breach (in general)?
not liable unless they receive consideration from the delegating party
types of compensatory damages?
PQs Set 2
expectation damages
incidental damages
consequential damages
is the other party’s consent required for delegation?
PQs Set 2
no (unless otherwise stated)
a lack of objection from other party does not excuse a breach by the other party
when does acceptance need to happen for a firm or irrevocable offer?
PQs Set 2
effecitve only when the offeror receives the acceptance before the offer expires
UCC
What is required for the quantity term under the UCC?
MBE PQs Set 3
contract must therefore specify a quantity that is certain or determinable by reference to objective facts, such as the buyer’s actual requirements or the seller’s actual output in a requirements or output contract.
for a contract specifying an assortment of goods, what happens if the assortment is not timely selected?
MBE PQs Set 3
- did the delay materially impact the seller’s performance?
- if so, seller can (1) proceed in a reasonable manner or (2) treat the nonselection as breach
- if not, seller must follow selection
when is a delegator released from liability?
MBE PQs Set 3
only if the other party to the contract expressly or impliedly agrees to a novation
UCC / default rule
when is payment due for an installment contract?
MBE PQs Set 3
Payment is due upon each delivery unless the price cannot be apportioned
each shipment is to be separately accepted by the buyer
UCC / auction
can a good sold at auction be withdrawn once the auctioneer calls for bids?
MBE PQs Set 3
depends on type of auction
reserve auction - may withdraw goods prior to completion of sale
no-reserve auction - goods cannot be withdrawn after auctioneer calls for bids
UCC / auction
what is the default type of auction?
MBE PQs Set 3
reserve auction
no-reserve auction has to be specifically announced
common law
what is a minor breach?
Practice Essays
breaching party substantially performed
common law
what happens if there is a minor breach?
Practice Essays
non-breaching party must still perform under the contract
breaching party still recovers (contract price - cost to other party to obtain full performance)
common law
what is a material breach?
Practice Essay
non-breaching party doesn’t receive the substantial benefit of the bargain
breaching party can’t recover contract damages (maybe restitution)
UCC
when does a shipment of nonconforming goods serve as a rejection + counteroffer?
UWorld
if seller (1) made no prior promise to ship conforming goods AND
(2) notifies buyer that nonconforming shipment is merely an accommodation
UCC
if buyer wrongfully disposes of rejected goods, what can the seller do?
UWorld
seller can sue for conversion to recover FMV the converted property at time of the conversion
up until what point can the contracting parties modify or rescind the contract when there is an intended beneficiary?
Themis PQs #4
until the intended beneficiary’s rights are vested
when does vesting occur for an intended beneficiary?
Themis PQs #4
when the beneficiary:
(1) materially changes position in justifiable reliance on the rights created
(2) manifests assets to the contract at a party’s request
OR
(3) files a lawsuit to enforce the contract
when is the implied warranty of merchantability disclaimed for defects?
Themis PQs #4
this warranty is disclaimed (waived) for defects that an examination would have revealed if the buyer
(1) examined the goods as fully s desired before entering the contract OR
(2) refused to examine the goods before entering the contract
what is the hierarchy of evidence under the UCC?
Themis PQs #4
express terms > course of performance (current transaction) > course of dealing (prev transactions) > trade usage
can a party to an illegal contract recover damages?
Themis PQs #4
yes, restitution damages if that party conferred a benefit on the other party and (1) was justifiably ignorant of the facts that made the contract illegal, (2) was less culpable than the other party, or (3) withdrew before the contract’s illegal purpose was achieved and did not engage in serious misconduct
statute of frauds
when is a suretyship enforceable without a writing?
Themis PQs #4
if it was made mainly for the surety’s economic advantage (not the principal’s benefit) or to indemnify the creditor
note this is outside the SOF
does consent to a delegation create a novation?
Themis PQs #4
NO, mere consent to a delegation does NOT create a novation
in a real estate contract that requires delivery of possession, what is the recourse for late delivery?
Themis PQs #4
it’s a breach that entitles the nonbreaching party to compensatory damages for actual economic losses
is consideration required for assignment? what happens if there is consideration vs. no consideration?
Themis PQs #4
not required to have consideration
without consideration –> revocable by signer unless (1) obligor already performed (2) doc symbolizing the assigned right has been delivered to the assignee, (3) written assigns signed by the assignor has been delivered to the assignee OR (4) the assignee has determinately relied on the assignment
in an auction, when can a bidder withdraw their bid?
Themis PQs #4
bidder has right to withdraw a bid until the auctioneer announces completion of the sale
under reserve OR no-reserve auction
damages
what is the goal of compensatory damages? what comprises compensatory damages?
Essay 5318 / Outline
put the nonbreaching party in as good a position as performance would have done (expectation damages) + consequential and incidental damages, if any, - possible mitigation of damages
damages
how do you calculate expectation damages in construction if owner fails to pay?
Essay 5318 / Outline
profits builder would have earned + any costs incurred by building - any payments made to owner - any materials purchased by contractor that can be used on another job
damages
how do you calculate expectation damages in construction if contractor failed to begin or complete the project?
Essay 5318 / Outline
contract price - cost of construction by another builder + any progress payments to breaching building + compensation for delay in completion
damages / common law
what are the types of actual damages?
Essay 5318 / Outline
direct or consequential
direct - necessary and usual result of D’s wrongful act
consequential - result naturally from the breach, but don’t have to be the result of breaching party’s conduct; need to be reasonably foreseeable result of the breach
damages / common law
what type of damages have to be reasonably foreseeable?
Essay 5318 / Outline
consequential damages
reasonably foreseeable by the breaching party
damages
what type of damages are allowed when the nonbreaching party has partially performed a below-market-price contract?
PQs Set 5
restitution damages
how much the breaching party would have to pay someone else to do the job
prevents breaching party from profiting from its breach
what is the definition / rule for unconscionability?
PQs Set 5
when it is so unfair to one party that no reasonable person in the position of the parties would have agreed to it
must have been offensive at the time the contract was made
Fact pattern:
- contract prohibits assignments without permission
- contract assigns benefit to child of original party
- child assigns rights to charity without permission
- no payment given for the service
- charity filed suit
will charity win against original party in suit?
PQs Set 5
charity will win b/c assignee of child’s contractual rights
other party fully performed their obligation so the right to receive payment can be assigned and enforced by charity through breach of contract
not a donee beneficiary b/c contract was not for the purpose of benefitting the charity
when is a revocation effective?
PQs Set 5
upon receipt
what is the implied duty in all contracts (UCC + common law)?
PQs Set 5
duty of good faith and fair dealing
remedies
what is the remedy when a buyer breaches or repudiates a contract for the sale of goods?
Essay 3566
seller may resell the goods and sue for the contract price – the resale price
for a private sale –> seller must first give the buyer reasonable notice of his intent to resell
If the resale is made in good faith + commercially reasonable manner –> the seller can recover the difference between the contract price and the resale price plus incidental and consequential damages
Parol Evidence Rule
what type of evidence is allowed under this Rule?
Evidence Lecture Handout
allows evidence that might add to the terms
but EXCLUDES evidence that would contradict the terms of the agreement
Parol Evidence Rule
what type of extrinsic evidence can be admitted (these are exceptions to Rule)?
Evidence Lecture Handout
- clarify an ambiguity
- prove a custom of trade or course of dealing
- show fraud, duress, mistake, illegal purpose
- show whether consideration has/hasn’t been paid
is a promise to make a gift enforceable?
UWorld
generally no (lacks bargained-for exchange) but may be enforceable under promissory estoppel
what is an intended beneficiary?
UWorld
they receive a direct benefit from the contract b/c contracting parties intended that the payment will go to the 3p
what type of damages are available for a material breach vs. minor breach?
Practice Exam #1, Q33
- material breach –> restitution damages; can’t recover under contract
- minor breach –> expectation or reliance damages
when does a party have to respond to a demand for adequate assurance?
NCBE Simulated MBE 1
only if the demand is reasonable and justified –>
which means that the party has reasonable grounds for the insecurity
under parol evidence rule, what can evidence of a prior or contemporaneous communication be used for if there’s a fully integrated written contract?
UWorld
can be admissible to determine remedies for breach –> prove foreseeability of consequential damages
damages available for failing to perform a real estate sales contract
MBE Mixed Set #1
difference between contract price and FMV on date of breach
UCC
how can a seller accept a purchase order (an offer)?
UWorld
- shipping the goods
terms of the offer are the contract terms
effective when shipment is made
OR - promising to ship the goods
if merchants: contract terms are terms of the offer + battle of the forms
if not merchants: terms of offer, new terms are proposals
is an offer presumed to be a bilateral or unilateral contract?
UWorld
bilateral
when is an acceptance effective vs. when is a revocation effective?
PQs
- acceptance is effective when sent
- revocation is effective upon receipt
exclusive dealing contract - what is implied in this agreement?
UWorld
implied obligation by seller to use best efforts to supply the goods + buyer to promote their sale
if a condition precedent has not been met, is there a breach?
MBE Practice Exam #3
no, failure to meet a condition relieves the duty to perform (no breach b/c not a contract)
major difference between implied in fact vs. implied in law contract
MBE Practice Exam #3
implied-in-fact contract is created ONLY when conduct indicates assent or agreement
if someone responds to an offer with only a question (merely requesting info), what is that treated as?
like is that an acceptance
NCBE Simulated #2
inquiry not counteroffer
factors that allow a party to cancel when there is temporary impracticability by the other side
NCBE Simulated #2
degree of uncertainty relating to the
nature and duration of situation
extent to which a delay in making substitute arrangements would have prevented the entire contract
when are goods in a contract identified?
UWorld Assessment #2
- if goods already exist + identified - when contract is made
OR - (future goods) - earliest of when goods are shipped, marked, or otherwise designated by the seller
Statute of Frauds
how do you measure the one year provision?
UWorld Assessment #2
starts the day after the contract is made / offer accepted
must be in writing if it is impossible for any party to fully perform within one year of its making
when is a contract NOT assignable?
NCBE Essay July 2016
if assignment would
1. materially change duty of obligor
2. materially inc burden or risk on obligor
3. materially impair obligor’s chance of obtaining return performance OR materially reduce value of that return promise
4. forbidden by statute or precluded by PBPL
5. validly precluded by contract
does delegation remove the contractual liability of the original party?
NCBE Essay July 2016
nope, other contracting party can go after delegatee OR original party
rule statement queen!
whether there is an enforceable contract
Essay 5546
Under Article 2 of the UCC, a contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
rule statement queen!
whether the contract is subject to the Statute of Frauds
Essay 5546
Contracts that fall within the Statute of Frauds are unenforceable unless evidenced in writing and signed by the party to be charged.
A contract for the sale of goods for a price of $500 or more is subject to the SOF.
rule statement queen!
whether the writing is sufficient under SOF
Essay 5546
The UCC requires a contract for the sale of goods for $500 or more be evidenced by a writing that
(1) identifies the subject matter of the agreement,
(2) identifies the parties,
(3) contains a quantity term, and
(4) is signed by the party against whom enforcement is sought—i.e., the “party to be charged.”
A signature includes any authentication that identifies the party to be charged (not just a handwritten signature), such as a letterhead on the memorandum.
The writing need not be an actual contract. Even a series of correspondence between the parties may suffice as a writing.
rule statement queen!
whether UCC confirming memo exception applies
Essay 5546
Under the UCC, an exception to the SOF applies when
(1) both parties are merchants
(2) a memorandum sufficient against one party is sent to the other party who has reason to know of its contents, and
(3) the receiving party does not object in writing within 10 days of receipt of the memorandum.
In that case, the contract is enforceable against the receiving party even though he has not signed it.
A merchant includes not only a person who regularly deals in the type of goods involved in the transaction, but also any businessperson when the transaction is of a commercial nature.
rule statement queen!
whether party can recover under theory of substantial performance
Essay 2616
The doctrine of substantial performance provides that a party who substantially performs can recover on the contract even though full performance has not been tendered.
However, there is no substantial performance if the incomplete performance was a material breach of contract.
Under the common law, a material breach of contract (i.e., when the nonbreaching party fails to receive the substantial benefit of its bargain) allows the nonbreaching party to withhold any promised performance and to pursue remedies for the breach, including damages.
Substantial performance is less likely to be found when a party intentionally furnishes services that are materially different from what he promised.
Such a breach is more likely to be treated as a material breach for which contract damages are recoverable.
rule statement queen!
whether party can recover under theory that contract is divisible
Essay 2616
A divisible or installment contract is one in which the parties’ obligations are divisible into distinct units of performance.
Recovery is limited to the amount promised for the unit of the contract performed.
But when parties expressly agree to a condition precedent (or a concurrent condition),
they are generally held strictly to that condition, and a party must fully comply with that condition before the other party’s performance is due.
rule statement queen!
whether party is entitled to restitutionary relief
under theory of quasi-contract
Essay 2616
When a plaintiff confers a measurable benefit on a defendant and the plaintiff has a reasonable expectation of compensation, it would be unfair to permit the defendant to receive the benefit without compensating the plaintiff.
In this case, the court can permit the plaintiff to recover the value of the benefit to prevent this unjust enrichment.
Although this type of action is often characterized as based on an implied-in-law contract or a quasi-contract, quantum meruit does not depend on the existence of a contract.
rule statement queen!
whether parol evidence rule would prevent enforcement
NCBE Essay July 2022
Generally, under the common law parol evidence rule, a binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.
An integrated agreement is a writing constituting a final expression of one or more of the agreed terms of a contract.
Evidence of prior or contemporaneous agreements or
negotiations is not admissible in evidence to contradict a term of the writing that is a binding
integrated agreement.
If, however, the integrated agreement is consistent with the prior agreement, evidence of the prior agreement may be admitted unless the integrated agreement is
also completely integrated.
A written agreement is considered to be integrated if it
constitutes a final expression of one or more terms of an agreement and is considered to be completely integrated if the parties adopted the writing as a complete and exclusive statement of their agreement.
rule statement queen!
whether extrinsic evidence of a vague term may be offered
NCBE Essay July 2022
Generally, extrinsic evidence may be proffered for the purpose of clarifying a vague or ambiguous term in a written contract.
Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish the meaning of the writing, whether or not integrated.
rule statement queen!
whether covenant not to compete is enforceable
NCBE Essay July 2022
A promise that unreasonably restrains trade may be unenforceable on grounds of public policy.
Whether a restrictive covenant, including a covenant not to compete, is unreasonable requires a balancing of interests.
If the restraint is greater than what is needed to protect a party’s legitimate business interest, it violates public policy.
In deciding whether to enforce a covenant not to compete, the courts generally consider the reasonableness of the covenant’s duration and geographic scope. Generally, covenants not to compete are disfavored.
