Contracts Flashcards
1
Q
Applicable Law
A
Determines whether the UCC or Common Law governs the transaction
2
Q
UCC (Uniform Commercial Code)
A
The UCC applies when the sale of goods is involved.
3
Q
UCC - Merchants
A
Are both parties merchants (someone who regularly does business with knowledge and experience in particular goods)? If selling/buying high volume, assume merchant. If unknown, assume non-merchant.
Example: If a car dealership sells cars regularly, they would be considered merchants.
4
Q
Common Law (CL)
A
If K does not deal with sale of goods, e.g., real estate (house, land), services (construction).
5
Q
Hybrid Cases
A
Determine the predominant purpose of the transaction.
6
Q
FORMATION (Mutual Assent)
A
A valid contract requires offer, acceptance, and consideration.
7
Q
Exchange Sought
A
Bilateral: Promise for promise. Unilateral: Promise for complete performance.
8
Q
Once Promise Given
A
Bilateral: Both parties bound. Unilateral: Offeror bound only when performance completed. Offeree never bound to finish.
9
Q
Offeror’s Revocation
A
Bilateral: OK before offeree’s acceptance. Unilateral: Once offeree begins performing, offeror may not revoke (option K is created). Mere preparation does not trigger irrevocability.
10
Q
Offer
A
An offer must create a reasonable expectation in the offeree that the offeror is willing to enter a contract with the offered terms. There must be a promise, definite terms, and communication to the offeree.
11
Q
Offer - Promise
A
There must be a present commitment rather than a mere invitation to begin negotiations.
12
Q
Offer - Public Offers
A
Ads, catalogs, price quotes are invitations for offers. EXCEPT promises to specific offerees (“first come, first served”; “only one can win”).
13
Q
Offer - Puffery
A
Jest or exaggeration does not create a reasonable expectation in offeree (Pepsi Points Case).
14
Q
Offer - Reward Offers
A
Offers to enter into a unilateral K, EXCEPT limited to how many can accept.
15
Q
Offer - Auctions
A
Auctioneer is inviting offers; bids are offers, EXCEPT where “without reserve”.
16
Q
Offer - Definite Terms
A
Must sufficiently identify offeree & definite subject matter (LSK: land and price / service K: nature of work / UCC: quantity). Ct may supply reasonable missing terms, except price in LSK.
17
Q
Offer - Communication
A
Offeree must have knowledge of the communication.
18
Q
Termination of Offer
A
By offeror before acceptance, may happen after effective acceptance (e.g., by a letter).
19
Q
Termination - Revocation
A
Retraction of an offer by the offeror, effective when received by offeree, or by publication through comparable means (e.g., can’t revoke offer in business magazine by publishing in home magazine).
20
Q
Revocation - Irrevocable
A
Irrevocable if 1) UCC firm offer: Offer by merchant in signed writing to keep offer open during time stated (or, if not stated, reasonable time up to 3 months). 2) Payment required. 3) Detrimental reliance. 4) Part performance of unilateral K.
21
Q
Termination - Rejection
A
Outright rejection or another method to reject + create new offer.
22
Q
Rejection - Counteroffer
A
Not mere inquiry.
23
Q
Rejection - Nonconforming Acceptance
A
Mirror image rule: Acceptance must mirror the terms of the offer.
24
Q
Termination - Lapse of Time
A
Offeree must accept within specified/reasonable time starting from when offer is received by offeree or when it would have been received (if delayed + offeree knows or should have known); otherwise, offeree allows offer to terminate.
25
Termination - Death or Incapacity
Destruction of subject matter, unconscionability, invalid party (minor, insane, etc.).
26
Acceptance
Offeree must objectively manifest assents to terms and communicate it in any reasonable manner. Expressly or by conduct. Offeree must have knowledge of offer.
27
Acceptance - Unilateral K
Only complete performance constitutes acceptance of offer. Completed act forms the K.
28
Acceptance - Timing
Mailbox rule: Acceptance is effective when dispatched. EXCEPTION: When exercising option K, effective when received. Other types of communication (such as offers) are effective when received.
29
Acceptance - Response Proposes Changes
If the offeree's response to offer proposes adding/deleting/changing terms:
30
Response - CL
Each and every term of offer must be accepted unequivocally (mirror image rule). Any additional/different terms in the acceptance makes the response a rejection and counteroffer.
31
Response - UCC § 2-207 (Battle of the Forms)
A contract can be formed between merchants even though terms of acceptance do not match terms of offer. Additional/different terms are effective as an acceptance, unless acceptance is expressly made conditional on acceptance of proposed terms.
32
Response - Not a Merchant
§ 2-207 is not applicable. Additional/different terms are mere proposals and not part of K unless offeror agrees to the modified terms.
33
Response - Both Merchants + Additional Terms
Additional terms become part of K, UNLESS: 1) Acceptance is made conditional on offeror's assent to additional or different terms. 2) New terms materially alter original terms, e.g., arbitration clause, disclaimer, materially shorten deadline, change usage of trade or past method of dealing. 3) Offeror objects to the change within reasonable time.
34
Response - Both Merchants + Different Terms
Knockout rule (majority): Conflicting
35
Response - Both Merchants + Additional Terms
Additional terms become part of K, UNLESS: 1) Acceptance is made conditional on offeror's assent to additional or different terms. 2) New terms materially alter original terms, e.g., arbitration clause, disclaimer, materially shorten deadline, change usage of trade or past method of dealing. 3) Offeror objects to the change within reasonable time.
## Footnote
Example sentence: If the offeror objects to the additional terms within a reasonable time, those terms may not become part of the contract.
36
Response - Both Merchants + Different Terms
Knockout rule (majority): Conflicting terms are omitted from K; gaps left are filled by UCC default terms (see § V-2-v). Minority rule: Alternatively, analyze as if additional terms (see (b) above). No acceptance but parties perform anyway? Use knockout rule.
## Footnote
Example sentence: The knockout rule applies when there are conflicting terms in the contract.
37
Consideration - Value of Promises
Value of promises or requests is irrelevant for validity: Zero-value token is not sufficient consideration, but “a mere peppercorn will suffice”.
## Footnote
Example sentence: Even a nominal amount of consideration, like a peppercorn, can be sufficient for a contract to be valid.
38
Consideration - Peace of Mind
Peace of mind or personal satisfaction is sufficient to qualify as a benefit.
## Footnote
Example sentence: Personal satisfaction can be considered a benefit in the context of contract consideration.
39
Consideration - Unconscionability Defense
Consider unconscionability defense (see below) for excessively one-sided bargain.
## Footnote
Example sentence: The unconscionability defense can be used when a contract is deemed to be extremely one-sided.
40
Consideration - Surrendering a Claim
If the claim is invalid, surrendering can still constitute consideration if 1) the claim is in fact doubtful, or 2) The surrendering party (regardless of other party) believes the claim is well founded.
## Footnote
Example sentence: Surrendering a doubtful claim can still be considered valid consideration in a contract.
41
Consideration - Where it Does Not Exist
Illusory promise: Only one party is bound to perform, leaves performance to discretion of other party—"all the widgets I want” (not “I require”), “all you want to sell me” (not “you produce”).
## Footnote
Example sentence: An illusory promise occurs when only one party is obligated to perform.
42
Consideration - Gratuitous Promise
A promise to make a gift and no return consideration.
## Footnote
Example sentence: A gratuitous promise involves giving a gift without expecting anything in return.
43
Consideration - Executed Gift
Legally binding intent to give a gift + actual/symbolic delivery.
## Footnote
Example sentence: An executed gift involves the intent to give a gift and the actual delivery of the gift.
44
Consideration - Past/Moral Consideration
Promise in exchange for something already given or performed. EXCEPTIONS: New promise to pay anyway.
## Footnote
Example sentence: Past or moral consideration involves exchanging a promise for something that has already been given or done.
45
Consideration - Statute of Limitations
Written promise to pay a debt barred by limitations.
## Footnote
Example sentence: A promise to pay a debt that is past the statute of limitations may not be enforceable.
46
Consideration - Bankruptcy
Written promise to pay a debt discharged by bankruptcy.
## Footnote
Example sentence: A promise to pay a debt that has been discharged through bankruptcy may not be valid consideration.
47
Consideration - Substitutes/Alternatives
For consideration—use to enforce a promise in the absence of consideration.
## Footnote
Example sentence: Substitutes or alternatives can be used as consideration to enforce a promise when there is no other consideration.
48
Consideration - Promissory Estoppel
1) Specific promise of future gratuitous action. 2) Promisee’s action was reasonably foreseeable to promisor, 3) Reliance induced by the promise and not other factors, 4) Injustice without enforcement (willfulness of breach, relative positions, detriment, alternatives).
## Footnote
Example sentence: Promissory estoppel involves enforcing a promise when one party has relied on the promise to their detriment.
49
Consideration - Quasi-K
AKA restitution, quantum meruit, implied-in-law K: Where A has conferred a benefit upon B under circumstances where no enforceable K results, A may be entitled to recover the value of the benefit conferred.
## Footnote
Example sentence: Quasi-contract, also known as restitution, allows for recovery when a benefit has been conferred without a formal contract.
50
Consideration - Implied Best Efforts
Where a party is to be the exclusive distributor, courts will imply a promise to use best efforts to sell the product. This implied promise is valid consideration (CL and UCC).
## Footnote
Example sentence: Implied best efforts can be considered valid consideration when one party is expected to use their best efforts in selling a product.
51
DEFENSES TO FORMATION
Absence of mutual assent
## Footnote
Example sentence: Lack of mutual assent can be a defense to the formation of a contract.
52
Defenses - Mutual Mistake
As to existing facts: K is voidable by adversely affected party if 1) mistake concerns a basic assumption of K, 2) mistake has a material effect on agreement, and 3) affected party did not assume the risk of the mistake (assumption commonly occurs when one party is in a better position to know the risks).
## Footnote
Example sentence: Mutual mistake can make a contract voidable if it goes to a basic assumption of the contract and has a material effect on the agreement.
53
Defenses - Unilateral Mistake
K voidable only if non-mistaken party knew or had reason to know of mistake by other party.
## Footnote
Example sentence: A unilateral mistake may only make a contract voidable if the other party was aware of the mistake.
54
Defenses - Absence of Consideration
Result: No K exists.
## Footnote
Example sentence: Lack of consideration can result in the absence of a valid contract.
55
Defenses - Incapacity
Infancy (under 18) or mental incompetence at the time of K. Such incapacitated party may enter into a K and enforce it, and the K is voidable only by that party.
## Footnote
Example sentence: Incapacity due to being under 18 or mentally incompetent can make a contract voidable by the incapacitated party.
56
Defenses - Ratification
Once a minor turns 18, may expressly/impliedly ratify and be bound to K. EXCEPTION: Can recover reasonable value for necessaries (food, clothing, shelter).
## Footnote
Example sentence: Ratification can occur when a minor reaches the age of 18 and chooses to be bound by a contract they entered into as a minor.
57
Defenses - Misrepresentation
K becomes voidable by innocent party.
## Footnote
Example sentence: Misrepresentation can make a contract voidable by the party that was misled.
58
Misrepresentation - Fraudulent
Fraud in the inducement: Inducing another party to enter into K by asserting or conduct such that other party infers untrue information. K voidable if justifiably relied on misrepresentation.
## Footnote
Example sentence: Fraudulent misrepresentation occurs when one party induces the other to enter into a contract by providing false information.
59
Misrepresentation - Nonfraudulent
K voidable if innocent party justifiably relied on material misrepresentation.
## Footnote
Example sentence: Nonfraudulent misrepresentation can still make a contract voidable if the innocent party relied on the false information.
60
Misrepresentation - Materiality
Objectively likely to induce a reasonable person to agree with asserted information or subjectively the maker of assertion had reason to know it was likely to cause someone to agree.
## Footnote
Example sentence: Materiality in misrepresentation means that the false information would likely influence a reasonable person's decision.
61
Defenses - Fraudulent Nondisclosure
Nondisclosure of material facts + duty to disclose (e.g., fiduciary relationship, assertion later made untrue, obligation of good faith) + reasonable reliance on nondisclosure. K becomes voidable.
## Footnote
Example sentence: Fraudulent nondisclosure occurs when one party fails to disclose important information that would impact the contract.
62
Defenses - Duress
1)
## Footnote
Example sentence: Duress can be a defense to the formation of a contract.
63
What is the definition of misrepresentation?
Materiality,Objectively likely to induce a reasonable person to agree with asserted information or subjectively the maker of assertion had reason to know it was likely to cause someone to agree.
## Footnote
Example sentence: The innocent party justifiably relied on material misrepresentation.
64
What are the elements of the defense Fraudulent Nondisclosure?
Nondisclosure of material facts + duty to disclose (e.g., fiduciary relationship, assertion later made untrue, obligation of good faith) + reasonable reliance on nondisclosure. K becomes voidable.
## Footnote
No additional information.
65
What are the elements of the defense Duress?
1) Intent to inflict harm, 2) wrongful threat, 3) no reasonable means to prevent threat. K becomes voidable.
## Footnote
No additional information.
66
What are the elements of the defense Undue Influence?
1) Unfair persuasion, 2) against a vulnerable party (aged, ill). K becomes voidable.
## Footnote
No additional information.
67
What is the test for Unconscionability defense?
The test is whether in light of the general commercial background and needs of the particular parties, K is so one-sided as to be unconscionable under the circumstances at the time of formation. Result: Court may refuse to enforce K, enforce remainder of K w/o unconscionable parts, limit clauses to avoid unconscionable result.
## Footnote
No additional information.
68
In what situations is a contract void under the defense of Public Policy?
K void if subject matter is illegal or crime (bribery, prostitution, murder) or performance itself is a tort.
## Footnote
No additional information.
69
What is the requirement for Statute of Frauds to apply as a defense?
Some portion of the K has yet to be performed.
## Footnote
No additional information.
70
When does the Statute of Frauds require a written agreement?
An oral K is valid in many instances. However, for certain agreements to be enforceable, they must be evidenced by a writing signed by the party sought to be bound.
## Footnote
No additional information.
71
What are the exceptions to the Statute of Frauds requirements?
EXCEPTIONS to these categories of K can still make oral promise enforceable.
## Footnote
No additional information.
72
What are the requirements for the Statute of Frauds regarding Marriage K?
No additional information.
## Footnote
No additional information.
73
What is the Year Bar requirement under the Statute of Frauds?
K that cannot be performed within 1 year of agreement must be in writing.
## Footnote
No additional information.
74
What is the exception to the Land Sale K requirement under the Statute of Frauds?
EXCEPTION: Part performance—improvements, payments, evidence of K in existence.
## Footnote
No additional information.
75
What is an Executor Promise under the Statute of Frauds?
A promise by an executor or administrator to pay estate's debts out of own funds.
## Footnote
No additional information.
76
What is a Guaranty K under the Statute of Frauds?
A promise to guarantee (not assume) the obligation or debt of another person. EXCEPTION:
## Footnote
No additional information.
77
What is the Main Purpose Rule under the Statute of Frauds?
If guarantor’s main purpose in promising is for his own economic advantage (e.g., as shareholder), writing not required. Oral promise to guarantee such a loan is enforceable.
## Footnote
No additional information.
78
What is the Merchant Confirmation exception for the Sale of Goods for $500+ under the Statute of Frauds?
If a merchant sends written confirmation after oral agreement within reasonable time, binds recipient if reason to know of contents and no written objection within 10 days of receipt.
## Footnote
No additional information.
79
What is the Enforceable to Extent of Quantity exception for the Sale of Goods for $500+ under the Statute of Frauds?
Enforceable to extent of quantity of goods shown in writing or paid for (including partial payment).
## Footnote
No additional information.
80
What is the requirement for Satisfactory Writing under the Statute of Frauds?
One or more signed writings that reflect material terms signed by party to be charged (sued, i.e., A or its authorized agent). Signature may be typed, initialed, on a letterhead, or electronic.
## Footnote
No additional information.
81
What is included in the definition of Common Law under the Statute of Frauds?
Writing includes nature and subject matter of K, essential terms of agreement.
## Footnote
No additional information.
82
What are the requirements for Several Writings to satisfy the Statute of Frauds?
Entire set of writings may be combined into one sufficient to satisfy SOF if 1) signed writing is attached to other writing by party to be charged, 2) signed writing refers to the unsigned writings, or 3) signed and unsigned docs clearly refer to the same subject matter.
## Footnote
No additional information.
83
What are the requirements for a contract to be enforceable under the UCC?
Requires quantity of goods. Enforceable up to stated quantity. EXCEPTIONS: Writing signed by charged party not required for sale of goods if SWAP.
## Footnote
No additional information.
84
What are the requirements for Specially Manufactured Goods under the UCC?
Goods manufactured to buyer's specs, substantial reliance by seller.
## Footnote
No additional information.
85
What is the Written Confirmation by Merchant requirement under the UCC?
Between merchants, signed written confirmation of an oral agreement sent within reasonable time will also bind recipient, if recipient has reason to know of confirmation’s contents (quantity) + does not object in writing within 10 days + actually received by the party to be charged.
## Footnote
No additional information.
86
What is the limit of Admission in Court under the UCC?
Up to quantity admitted.
## Footnote
No additional information.
87
What are the requirements for Partial Performance under the UCC?
Payment made & accepted, goods received & accepted.
## Footnote
No additional information.
88
What are the Alternative Enforcement Methods under the UCC?
Promissory/equitable estoppel: Reliance on a promise of creating signed writing. Quasi-contract: Recovery of value for benefits conferred where there is unjust enrichment.
## Footnote
No additional information.
89
What is the definition of Parol Evidence Rule (PER) under the UCC?
When parties to a contract have put in writing the final and complete expression of their agreement (“completely integrated”), evidence of any other prior or contemporaneous oral or written agreements (negotiations) are not admissible to vary or contradict (OK to explain) the terms of the writing.
## Footnote
No additional information.
90
What is the requirement for Writing - Partially Integrated under the UCC?
A writing is “partially integrated” when it is a final expression of the agreement but not a complete expression of the agreement (only reflects a part of the agreement, e.g., missing terms). Evidence may only be used to supplement (not contradict) partially integrated writing with consistent additional terms.
## Footnote
No additional information.
91
What is the requirement for Writing - Completely Integrated under the UCC?
Under one view, if within the plain meaning of the four corners of the contract it appears intended to be the final and complete expression of their agreement. A merger clause. Under another view, the existence of extrinsic evidence of an additional term (like an oral statement).
## Footnote
No additional information.
92
Completely Integrated Writing
When it is a final expression of the agreement but not a complete expression of the agreement (only reflects a part of the agreement, e.g., missing terms). Evidence may only be used to supplement (not contradict) partially integrated writing with consistent additional terms.
## Footnote
Example sentence: A merger clause.
93
Exceptions to Completely Integrated Writing
Even though there is a completely integrated writing, PER will not apply to (can admit): 1) Oral condition precedent: Oral agreement that K would not be effective until a condition occurs. 2) Subsequent agreements or modifications (PER only applies to prior/contemporaneous expressions). 3) Collateral agreements (distinct from completely integrated written agreement). 4) Attack validity of written agreement (show it did not become proper K): ambiguous terms, no consideration, mistake, duress, fraud, reformation to correct mistake.
94
Default 'Gap Filler' Provisions
If terms are missing from K: 1) Under CL—Price: reasonable value. Duration: employment at will, given assurance of job security. 2) Under UCC—Price: reasonable price as of delivery. Time of delivery: reasonable time. Time of payment: time and place of receipt by buyer. Place of delivery: seller's place of business. Quantity: Definite, certain term required (§ II-a-ii). But see § V-a-v-3 below.
95
Implied Warranties
Good title, merchantability (for merchants, goods are fit for ordinary purposes, unless displaced by “as is” language), fitness for a particular purpose buyer intends to use them for (seller has good reason to know the purpose + buyer relies on seller’s skill/judgment). Any disclaimer must be in conspicuous writing so that a reasonable person can notice it.
96
Express Warranties
Created by seller’s affirmation/promise, description of good.
97
Open Quantity Term
(Not specifying quantity) typically fatal to a K. EXCEPTIONS under UCC: 1) Output K: Buyer agrees to purchase all of a supplier’s output. 2) Requirements K: Supplier agrees to supply all of the goods required by buyer.
98
Quantity Demanded
Quantity demanded may not be unreasonably disproportionate (higher/lower) to a stated estimate or comparable prior numbers. Actual “requirement” may be zero (e.g., if company out of business).
99
Satisfaction Clause
Where one party pays only if satisfied may be considered illusory, but UCC requires “best efforts” or “good faith effort” by both parties.
100
Delivery by Common Carrier
If delivery by common carrier other than seller (e.g., FedEx), it may be a shipment K (states “FOB [free on board] seller”) where risk of loss (ROL) passes to buyer when goods are delivered to carrier, or it may be a destination K (states “FOB buyer”) where ROL is on buyer upon delivery.
101
Risk of Loss
Which party should bear burden of risk for damage to goods after sale?
102
Delivery by Non-Carrier
If delivery by non-carrier (seller must deliver), it is a destination K by nature.
103
Risk of Loss - Merchant Seller
If seller is a merchant, ROL passes to buyer when in buyer's possession (if buyer never takes possession, seller still has ROL). If non-merchant, ROL is on buyer upon delivery.
104
Duty of Good Faith and Fair Dealing
Every UCC contract imposes an obligation of good faith in its performance and enforcement.
105
Trade Usage
Trade usage is used to fill in gaps or interpret ambiguous language. Such evidence can trump in conflict: 1. Course of performance (regular performances within K) can establish waiver/modification of express terms > express terms in K > course of dealing (pattern of previous transactions between parties) > trade usage (regular industry practice).
106
Time of the Essence
Time is of the essence of the K if it explicitly so states. By default, time is not of the essence.
107
Conditions
A “condition” is the occurrence or nonoccurrence of an event that triggers, limits, or extinguishes an absolute duty to perform (“provided”/“if”). K may provide that a party does not have a duty to perform unless some condition is fulfilled. The party’s failure to perform is justified if that condition was not fulfilled.
108
Absolute Duty
There is an absolute duty to perform if there is no condition, or condition has been excused or satisfied.
109
Constructive Conditions
Conditions may be constructively implied, where the duty of each party to render performance is conditioned on the other party doing so. If so, what’s the sequence of performance?
110
Simultaneous Performance
If simultaneous performance is possible, each party must tender, to put the other under duty to perform. If one performance will take longer, its completion is due first as constructive condition precedent.
111
Promise vs Condition
Agreement or commitment to do or not do something. May be conditional or unconditional. Failure of a promise is a breach and gives rise to liability. Failure of a condition is not a breach and relieves a party of the obligation to perform.
112
Simultaneous Performance
If simultaneous performance is possible, each party must tender, to put the other under duty to perform. If one performance will take longer, its completion is due first as constructive condition precedent.
## Footnote
Example: A and B agree to exchange goods and money. A must tender the goods to B before B is required to pay.
113
Promise vs Condition
Agreement or commitment to do or not do something. May be conditional or unconditional. Failure of a promise is a breach and gives rise to liability. Failure of a condition is not a breach and relieves a party of the obligation to perform.
## Footnote
Example: A promises to deliver goods to B on a certain date. If A fails to deliver, it is a breach. If delivery is conditional on payment, failure to pay relieves A of the obligation to deliver.
114
Excuse/Waiver of Conditions
Where an obligation is subject to a condition, and the condition hasn’t been satisfied, the obligation can still be an absolute duty to perform if the condition is excused (i.e., an absolute duty to perform the obligation arises without the condition occurring).
## Footnote
Example: A agrees to sell goods to B upon B's request. If B does not request the goods, A may still have an absolute duty to perform if there is a valid excuse for the condition not being satisfied.
115
Breach of Contract
Breach occurs on failure of an absolute duty to perform.
116
Actual/Present Breach
When one of the parties fails to perform, a breach of contract occurs. Material breach: Breach is material if the obligee does not receive the substantial benefit of the bargain. Nonbreaching party is discharged from duty and has a right to terminate the K. Failure to perform by stated time is not material if done within reasonable time. If timely performance essential to K, or K expressly provides time is of essence, failure is material. Minor breach: Breach is minor if obligee receives the substantial benefit of the bargain despite obligor’s defective performance. Nonbreaching party still has duty to perform but may seek damages.
## Footnote
Example: A contracts with B to deliver goods by a certain date. If A fails to deliver the goods on time, B may terminate the contract if timely delivery was essential to the agreement.
117
Anticipatory Repudiation
Unequivocal (not merely prospective inability to perform, manifested by doubt) statement/conduct indicating party will commit a breach (before deadline) can be treated as immediate breach. Failure to provide reasonable assurances within reasonable time (30 days) is treated as a repudiation. Retraction: Repudiating party may retract repudiation, unless other party acts in reliance on repudiation, accepts repudiation (signifies it to repudiating party), or brings suit.
## Footnote
Example: A tells B that they will not be able to deliver goods as promised. This statement can be considered an anticipatory repudiation, allowing B to treat it as an immediate breach.
118
Effects
If repudiated, aggrieved party may sue immediately, wait, discharge K, or urge party to perform. If repudiation cannot be established, but there are reasonable grounds for insecurity, the insecure party may demand adequate assurance of performance.
119
Wrongful Prevention/Hindrance of Condition
Gross forfeiture: Fulfilling condition results in a large loss. Waiver or estoppel: Material change of position of one party in reliance of waiver indicated by other party.
120
Modification
Request for modification (after K) must be supported by new consideration (CL) or good faith (UCC).
121
CL - Preexisting Duty Rule
If one already owes a duty to perform, that performance cannot be used as consideration for another promise. EXCEPTIONS: Duty owed to 3P: Modernly, a duty is preexisting only if it is owed directly to a promisee. Promise to perform a duty is valid consideration as long as the duty is not already owed to the promisee. Unforeseen burdens: Promise of increased compensation is given in exchange for a promised performance substantially more burdensome than reasonably anticipated at formation. Mutual modification: Parties agree to a different performance that is not a mere pretense.
122
UCC - Good Faith
Only good faith (usually there) needed to modify. Mod must be in writing if regarding sale > $500.
123
Novation
All parties expressly agree to release and substitute a party. No writing required.
124
UCC Perfect Tender Rule
Terms for sale of goods are enforced exactly. If goods or delivery fail to conform to K in any way, buyer may 1) reject goods within reasonable time of delivery, 2) accept goods, or 3) accept some units. Buyer's right to reject is cut off by acceptance or failure to reject within reasonable time. Seller has right to cure: Seller may cure any defects and make conforming delivery after seasonable notice. Buyer has right to revoke acceptance within reasonable time if acceptance relied on 1) assurance that defect would be cured, 2) difficulty of discovering defect, 3) or seller’s assurance that goods conformed to K.
125
EXCUSES FOR NONPERFORMANCE
Discharge of duties in unforeseen events: Even with an absolute duty, promisor may not be liable for nonperformance only if nonoccurrence of the unforeseen event was a basic assumption of the K.
126
Impossibility
Objective impossibility (i.e., no one would be able to perform) for the promisor to perform excuses performance, e.g., illegality, death of necessary person, destruction of subject matter.
127
Temporary Impossibility
Merely suspends performance.
128
Impracticability
A severe burden, cost, or risk to the promisor excuses performance. Examples: shortages caused by war, local crop failure, unforeseen disasters. NOT if assuming risk of market fluctuations, great increase in expense of performance, event that makes performance impracticable is fault of party seeking relief.
129
Frustration of Purpose
A contingency occurs that dramatically/totally reduces the value of performance to the receiving party, and principal purpose in entering the K is substantially/totally frustrated.
130
Impracticability
A severe burden, cost, or risk to the promisor excuses performance.
131
Frustration of Purpose
A contingency occurs that dramatically/totally reduces the value of performance to the receiving party.
132
Mistake
Requires materiality—mistaken facts must significantly impact transaction, e.g., rarity or nature of item.
133
Unilateral Mistake
One party mistaken about material facts is NOT excused (NOT voidable), UNLESS other party knew or had reason to know of mistake (failure to act in good faith) or serious clerical error by mistaken party.
134
Mutual Mistake
Voidable by disadvantaged party who did not bear the risk of mistake.
135
Excuses by Agreement
Rescission,Consideration is provided mid-performance by each party to discharge the other's duties.
136
Accord & Satisfaction
New agreement (accord suspends duty; cf. modification alters) where obligor promises to accept substituted performance in satisfaction of obligor's original existing duty.
137
THIRD-PARTY BENEFICIARIES
(Whether 3P beneficiary has standing to enforce the K)
138
Contracts
A (promisee) contracts with B (promisor) such that B must perform for C (3P beneficiary).
139
Who Can Sue?
Intended beneficiaries, not incidental beneficiaries. 3P must 1) receive performance directly from promisor, 2) be expressly designated in the K, or 3) have a relationship with the promisee implying intent to benefit.
140
When Does Right to Sue Vest?
When 3P 1) brings suit to enforce, 2) changes position in reliance on K, 3) manifests assent to K at request of promisee or promisor, or 4) expressly vested under K.
141
Assignment
X (obligor) contracts with Y (assignor); Y assigns right to X's performance to Z (assignee).
142
3P Rights/Obligations
Parties may only assign rights that they could enforce themselves. Assignee steps into assignor's shoes.
143
What is NOT Assignable/Delegable?
Personal service, requirements K, public-policy violation, anti-assignment (AA) clauses.
144
Effects
Establishes privity of K by obligor and assignee. Removes original privity between obligor and assignor. Obligee must accept performance from delegatee of all duties that may be delegated.
145
Liabilities
Assignee may sue obligor (under assignor's rights) and assignor (implied warranties: Assignor will do nothing to impair value of assignment; assignor has actual right to assign). Delegator may still be sued by obligee absent novation (expressly releasing delegator). Delegatees who receive consideration from delegator (not gratuitous) may be sued by delegator or obligee.
146
REMEDIES
Establish the contract liability theories first. See also Remedies Magicsheets.
147
Legal Remedies
Types of compensatory damages in the form of money
148
Expectation Damages
Put the non-breaching party where it would have been had the promise been performed. Expectation damages must be reasonably foreseeable at K formation.
149
Reliance Damages
If expectation damages too speculative, cost of performance made in reliance of K.
150
Consequential Damages
Losses resulting from breach that a reasonable person would have foreseen.
151
Incidental Damages
(K for sale of goods): Expenses reasonably incurred incident to breach.
152
Duty to Mitigate
Non-breaching party can't recover avoidable damages, has a duty to mitigate damages.
153
UCC Seller Damages
K price - resale price (exercise good faith) or FMV (if not resold).
154
Lost Volume Seller
Assumed to have as many items as he can sell (effectively unlimited).
155
Damages
Lost volume profits (profit on the lost sale) + any incidental damages.
156
UCC Buyer Damages
K price - cover price (exercise good faith) or FMV (if not covered).
157
Merchant Buyer's Duties
Rightfully rejected goods that are perishable or quickly devaluing: Make reasonable efforts to sell for seller, and be reimbursed up to 10% gross proceeds.
158
Agreed-to Damages
159
Liquidated Damages
Parties may include terms providing for custom damages. Enforceable only to compensate for breach: 1) Parties intended it to be LD clause rather than penalty, 2) LD clause was reasonable estimate of damages in re anticipated harm. Clause unenforceable and stricken from K if designed as penalty to punish a breach.
160
Provisions Limiting Damages
OK unless unconscionable (personal injury from consumer goods).
161
What is the term associated with personal injury from consumer goods?
unconscionable
## Footnote
personal injury from consumer goods
