Contracts Flashcards
Seven general issues in contract law: Armadillos from Texas play rap, eating tacos.
Applicable law Formation of K Terms of K Performance Remedies for unexcused non-performance Excuse of non-performance Third-party problems
What is a contract?
An agreement that is legally enforceable.
What are the do kinds of contract offers?
1) Unilateral K offers: expressly requires performance as the only possible method of acceptance.
2) Bilateral K: all other offers. Usually silent to method of acceptance. This is the default.
Presume there’s a bilateral K unless…
1) reward, prize, contest
2) offer expressly requires performance for acceptance
What is quasi-contract?
Equitable remedy for when there is a K but it’s not fair to be bound by K rules. Resort here when K gives bad result.
What are the two kinds of law applicable in K?
CL: for real estate, services K, everything not subject to Art. 2
Art. 2: sale of goods (all things movable at the time they are sold).
What law applies when there is a mixed sale of goods and non-goods?
Apply the law that applies to the more important part of the contract to the entire K. EXCEPT if K divides payment apply UCC to goods part and CL to remainder.
What are the three possible problem areas in creating an agreement?
1) Initial communication (offer)
2) What happens after the initial communication (termination of offer)
3) Who responds and how they respond (acceptance)
Difference between void, voidable, and unenforceable
Void: w/o any legal effect from beginning. Can’t be enforced.
Voidable: one or both parties may elect to avoid.
Unenforceable: otherwise valid, but not enforceable due to defense extraneous to formation, like SOL or SOF.
What is the general test for whether an initial communication is an offer?
Manifestation of commitment by one person: Look for words or conduct showing commitment that would make a reasonable person in position of the offeree believe that his or her assent creates a K.
What must be contained in a offer for sale of goods and real estate?
Goods: quantity.
Real estate: price and description.
What is the effect of vague or ambiguous terms on whether an offer has been made under both CL and UCC?
If vague or ambiguous language relates to a material term, NO OFFER. Such terms include: appropriate, fair, or reasonable.
In determining whether communication creates a reasonable expectation of willingness to enter into K, consider these 3 factors:
1) Expression of promise, undertaking, or commitment to enter K
2) Certainty and definiteness of essential terms
3) Communication of 1 and 2 to offeree
What is the inquiry for whether terms were definite and certain enough to form basis of K?
Were enough essential terms provided so that K is capable of enforcement.
Are requirements/output Ks sufficiently descriptive in content to form agreements?
Yes if states the quantity of goods to be delivered under K in terms of buyer’s requirements or seller’s output. Look for language like all, only, exclusively, and solely to make K not vague or ambiguous.
If there is a requirements K, may requirements be increased?
Buyer can increase so long as increase is in line w/ prior demands. Limit: no unreasonably disproportionate increases.
What do we do w/ missing terms?
If appears parties intended to K and reasonably certain basis for giving remedy, enforce.
For Art. 2, if no price, price is reasonable price at time of delivery and performance is w/in a reasonable time.
What if a missing term is too vague to be enforced?
No enforcement unless there has been part performance that clarifies the vague term or acceptance by full performance.
Is an ad or quote an offer?
No. It’s an invitation for offers. EXCEPTIONS:
1) If ad is in nature of reward, offer.
2) If ad specifies quantity and indicates who can accept.
3) Price quote sent in response to inquiry = offer.
What are the ways an offer may be terminated?
1) Lapse of time (either stated or reasonable but more than a month = lapse)
2) Death of a party prior to acceptance (unless offer is irrevocable)
3) Words or conduct of offeror i.e. revocation
4) Rejection by offeree
How may an offer be revoked?
Later unambiguous statement or conduct by offeror to offeree, or that offeree is aware of in the case of conduct, of unwillingness or inability to K. Revocation is effective when received by the offeree.
How may a published offer be revoked?
By similar publication.
What are the limits on offeror’s ability to revoke an offer?
1) Option: offeree gives consideration of a promise by offeror not to revoke an outstanding offer.
2) Art. 2 Merchant’s Firm Offer Rule
3) Detrimental reliance
4) Beginning performance in response to true unilateral K offer
5) Beginning performance in response to offer indifferent as to manner of acceptance.
What is the firm offer rule?
If 1) a merchant (person in business) 2) offers to buy or sell goods in a signed writing and 3) the writing assures the offer will be held open for a period not to exceed 3 mos., offer can’t be revoked. ONLY APPLIES TO ART. 2 SALES!!!!
When can an offer not be revoked due to reliance?
Reliance that is 1) reasonably foreseeable and 2) detrimental.
What is the implication of beginning performance in response to unilateral K v. offer that doesn’t specify acceptance?
Unilateral K: beginning performance makes K irrevocable and offeree gets reasonable time to complete. Offeree isn’t bound to complete perf.
Other Ks: once performance is begun, K is complete and revocation becomes impossible.
What are the methods by which offeree may reject offer?
1) Counteroffer
2) Conditional acceptance
3) Adding additional terms* CL only.
4) Express rejection
When is rejection effective?
When received by offeror.
What is the effect of a counteroffer?
Rejects the offer and creates a new offer. BUT bargaining/inquiries don’t terminate the offer and counteroffers don’t terminate options.
What is a conditional acceptance?
Response to an offer w/ the word “accept” followed by “if”, “only if”, “provided”, “so long as”, “but”, or “on the condition that.”
What constitutes “beginning performance”?
Actually starting to do the work NOT mere preparation i.e. buying supplies (can probably recover in quasi K for this though).
What is the effect of conditional acceptance?
At CL: rejection and counteroffer that can be accepted by conduct.
Art. 2: rejection. Any conduct that results is the sole basis for K: no terms apply.
What are the effect of additional terms at CL?
Mirror Image Rule: A response to an offer that adds new terms is treated like a counteroffer.
What are the effect of additional terms under Art. 2?
If 1) offer to buy or sell goods and 2) response w/ additional/different terms, THEN:
A) A response to an offer that adds additional or different terms but doesn’t make the new terms a condition of acceptance is treated as a seasonable expression of acceptance.
B) Additional term doesn’t become part of K unless both parties are merchants. Term is still not part of offer if term is material or term is objected to.
How does an offer terminate as a matter of law?
1) Death or insanity of a party
2) Destruction of proposed K’s subject matter
3) Supervening illegality
Who may accept an offer?
Only the person to who offer is addressed. Cannot assign power of acceptance, but right to accept under an option is transferrable. Offeree must know about the offer to accept.
How may an offer be accepted?
Offeror controls the method of acceptance, but when K is silent, offeree may accept by starting to perform (unless unilateral K where completion is required).
What is the mailbox rule?
1) All communications other than acceptance are effective only when received.
2) Acceptance is generally effective when mailed.
3) If rejection mailed before acceptance, neither is effective until received.
4) MAILBOX RULE MAY NOT BE USED TO MEET OPTION DEADLINE.
What if seller sends the wrong goods?
Generally, acceptance and breach.
BUT if accommodation exception applies, it’s a counteroffer and no breach.
What is the adequacy of consideration?
Not relevant in K law.
What is a past act and is it consideration?
Past acts as consideration for a not yet entered into K UNLESS acts expressly requested by promisor and promisee expects payment.
Is consideration required to modify a sale of goods?
New consideration is not required under Art. 2 to modify a sale of goods K. GF is the test.
Under CL, is consideration required to modify a K?
Doing what you are already legally obligated to do by K or statute isn’t new consideration for new promise to pay. New consideration required for K modification. EXCEPTIONS: addition to or change in performance, unforeseen difficulty so severe performance is excused, 3d party promise to pay.
Is party payment consideration for release (promise to forgive balance of debt)?
Key is whether debt is undisputed. If debt due and undisputed, part payment is not consideration for release.
If debt is not yet due (or disputed), early or part payment is a new detriment.
What is a consideration substitute?
A promise is legally enforceable even though there is no consideration if there is a consideration substitute.
What are the two consideration substitutes?
1) Written promise to satisfy an obligation for which there is a legal defense is enforceable w/o consideration.
2) Promissory estoppel, which requires a promise, reliance that is reasonable, detrimental, and foreseeable, and enforcement necessary to avoid injustice.
What are the consequences of incapacity?
1) Right to disaffirm by person w/o capacity;
2) Implied affirmation by retaining benefits after gaining capacity;
3) Quasi-K liability for necessaries.
What is the Statute of Frauds?
Requires claimant to have objective proof before claimant gets into court. Generally require proof of either 1) performance or 2) a writing signed by D.
What are the 4 kinds of contracts that w/in the Statute of Frauds?
1) Suretyship: promises for the debts of another;
2) Service K not capable of being performed w/in a year from the time of the contract: if specific time period of more than a year SF applies, but if no time capable of being performed w/in a year no SF.
3) Transfers of interest in real estate (w/ exception of lease for less than a year)
4) Sale of goods of $500 or more.
When does a suretyship agreement come w/in SOF?
Promise to “answer for” someone else’s debts only if that person does not herself pay. BUT the main purpose exception says that if the main purpose of the obligation guaranteed was to benefit the guarantor, then not even that guarantee is w/in SOF.
How is SOF satisfied if the agreement is w/in the Statute of Frauds?
D files motion to dismiss or motion for SJ based on SOF defense. P can still get to court by providing objective evidence of the K to satisfy court’s concern about fraud.
How can SOF be satisfied by performance in a real estate contract?
Performance in transfer of real estate requires any TWO of the following: 1) improvements to the land, 2) payment, and 3) possession.
How can SOF be satisfied by performance in a services contract?
1) Full performance satisfies SOF;
2) Part performance of a services K doesn’t satisfy SOF (but may probably recover in quasi-K for part performance).
How can SOF be satisfied by performance in a services contract?
1) Seller’s part performance when there are ordinary goods satisfies SOF but only to the extent of the part performance. W/ respect to part that is delivered, there’s objective proof.
2) Seller’s part performance when there are specially manufactured goods satisfies SOF as soon as there is a substantial beginning.
When can SOF be satisfied by writing in a non-Art. 2 case?
Look at contents of writing: ALL MATERIAL TERMS TEST. Need to know who and what, and it matters who signed the writing. No SOF defense if writing has been signed by D.
When can SOF be satisfied by writing in an Art. 2 case?
Writing must simply indicate that there is a K for the sale of goods and contain the quantity term. Must be signed by D EXCEPT in transaction between 2 merchants and there’s a delay in responding to something that is akin to a receipt or invoice.
Besides performance or a writing, how may the Statute of Frauds be circumvented?
1) D admits in pleading or testimony that he entered into a K.
2) Estoppel: reliance on oral promise can estop D from asserting an SOF defense. Critical fact is D promises it will be put in writing.
When does there need to be written proof of authorization to enter into a K for someone else?
Authorization must be in writing only if the K to be signed is w/in SOF: authorization must be of “equal dignity” w/ the K.
When does there need to be written proof of K modification?
1) Look at the deal w/ alleged change AND 2) determine whether the deal w/ the alleged change would be w/in SOF. If the deal w/ the alleged change would be w/in SOF, then alleged modification must be in writing.
What do we do w/ K provisions that explicitly require modifications to be in writing?
1) Under CL, contract provisions requiring that all modifications be in writing aren’t effective. Ignore K language.
2) Under UCC, K provisions requiring written modifications are effective unless waived.
When are Ks unenforceable due to illegality?
1) If subject matter is illegal, agreement is not enforceable.
2) If subject matter is legal, agreement is enforceable if P didn’t have reason to know of D’s illegal purpose.
When is a K unenforceable due to public policy?
Exculpatory agreement that exempts intentional or reckless conduct from liability or a covenant not to compete w/o a reasonable need or reasonable time and place limits.
When will misrepresentation bar enforcement of an agreement?
1) Statement of “fact” before K
2) By one of contracting parties or her agent
3) that is false
4) AND induces the K.
NO WRONGDOING IS REQUIRED FOR MATERIAL MISREPRESENTATIONS.
When will nondisclosure bar enforcement of an agreement?
Person making K has no duty to disclose what she knows. Wrongdoing requirement for nondisclosure is a defense. Look for: fiduciary like relationship or concealment.
When will duress or undue influence bar the enforcement of K?
1) Physical duress always leads to unenforceability
2) Economic duress requires 1) an improper threat (usually threat to breach existing K) by a bad guy AND 2) a vulnerable party w/o reasonable alternative.
3) Undue influence where there’s a 1) special relationship between parties and 2) improper persuasion of the weaker by the stronger.
When will unconscionability bar the enforcement of an agreement?
1) Unfair surprise (procedural) OR 2) oppressive terms (substantive) that are tested as of time agreement was made by the court.
Applies in all K law and empowers a court to enforce all or part of an agreement.
What is the effect of ambiguity in the words of the agreement?
No K if 1) parties use a material term that is open to at least 2 reasonable interpretations, 2) each party attaches a different meaning to the term, and 3) neither party knows or has reason to know the term is open to at least 2 reasonable interpretations.
What is the effect of a mutual, material mistake of existing fact at the time K is entered?
Relief is available if both parties are mistaken (not just uncertain) about existing facts (mistake is different from uncertainty). BUT no relief for mistake if the person seeking relief bears the risk of mistake.
What is the effect of a unilateral mistake of material fact?
Relief only where the other party had reason to know of the mistake.
What is the most important evidence of the terms of a K?
Words in the written contract.
What triggers the parol evidence rule?
1) final written K
2) earlier words of one or both parties
What is the parol evidence rule?
Final written version of a deal replaces earlier agreements, negotiations, and conversations.
How is the parol evidence rule like a rule of evidence?
Admissibility often depends on the purpose for which the evidence is to be introduced.
What is integration?
Written agreement that court finds is the final agreement: triggers parol evidence rule.
Partial v. complete integration
Partial: written and final, not complete
Complete: written, final, and complete
What is the effect of a merger clause on application of parol evidence rule?
Phrase like “this is the complete and final agreement” is persuasive but not conclusive of parties’ intent to integrate.
What is parol evidence?
Words of a party, before integration, that are oral or written (and arguably shed light on the contract).
What are the 5 parol evidence fact patterns?
1) Evidence of earlier agreements changing or contradicting terms in written deal can’t be considered for purpose of contradicting written K;
2) Court may consider changing terms for the limited purpose of determining whether there was a clerical mistake in integration;
3) May consider earlier words for purpose of determining whether there is a defense to the enforcement of agreement like fraud/duress;
4) Does not prevent consideration of earlier agreement to resolve ambiguities;
5) Prevents a court from considering evidence of earlier agreements as a source of consistent, additional terms unless court finds written agreement was only a partial integration OR additional terms would ordinarily be an a separate agreement.
How may conduct be a source of contract terms (Art. 2)?
1) Course of performance: same parties, same K
2) Course of dealing: same parties, different but similar K
3) Custom and usage: different but similar people, different but similar K
Under the UCC, what does the seller have to do to complete its delivery obligation?
1) If a shipment K, seller completes delivery obligation when it 1) gets the goods to a common carrier, 2) makes reasonable arrangements for delivery, and 3) notifies the buyer.
2) If a destination K, seller doesn’t complete delivery obligation until the goods arrive at the destination.
How do you know if it’s a shipment or destination K?
FOB (free on board) plus seller location or where goods are is a shipment K; FOB followed by another city is a destination K.
When is there a risk of loss problem?
Arises when 1) after K formed but before buyer receives the goods, 2) goods damaged or destroyed, and 3) neither buyer nor seller is to blame.
What are the consequences in a risk of loss problem?
If risk of loss on buyer, he has to pay full K price for lost or damaged goods. If seller has risk of loss, no obligation on buyer and possible liability on seller for nondelivery.
How to determine who bears the risk of loss (apply rules in descending order until we get an answer):
1) Agreement of parties controls
2) Breaching party is liable for any uninsured loss even though breach is unrelated to the problem
3) Common carrier delivery shifts risk from seller to buyer at time seller completes delivery obligations
4) Catch-all: if seller is a merchant (don’t care about buyer’s status), risk of loss shifts from merchant-seller to buyer on buyer’s receipt of goods. Risk of loss shifts from non-merchant seller when he or she tenders the goods.
What are the three warranties of quality?
Express warranty
Implied warranty of merchantability
Implied warranty of fitness for a particular purpose
What is an express warranty?
Words that promise, describe or state facts. Distinguish from sales talk which is general or opinion. Or look for a sample/model.
What is the implied warranty of merchantability?
When any person buys any goods from any merchant, a term is automatically added to the K by operation of law that the goods are fit for the ordinary purpose for which such goods are used.
TRIGGERING FACT: merchant that deals in the goods of the kind sold.
WARRANTY: fit for ordinary purposes.
What is the implied warranty of fitness for a particular purpose?
TRIGGERING FACTS: 1) buyer has a particular purpose, 2) buyer is relying on seller to select suitable goods, 3) seller has reason to know of purpose and reliance.
WARRANTY: goods fit for particular purpose.
What are the limitations on warranty liability?
1) SOL = 4 years. Begins when tender of delivery made.
2) Privity: P contracted w/ D. Unsettled in VA.
3) Buyer’s exam of goods: no implied warranties as to defects which would be obvious on examination.
4) Limitation of remedies (doesn’t eliminate warranties, but may limit remedy even for breach of express warranty)
5) Disclaimers of warranties
How do disclaimers of warranties work?
Eliminate warranties BUT
1) Express warranties generally can’t be disclaimed AND
2) Implied warranties of merchantability and fitness can be disclaimed in EiTHER a) conspicuous language or disclaimer mentioning merchantability OR b) “as is” or “with all faults”
What is the Art. 2 perfect tender rule?
1) Only applies to sales of goods.
2) Means goods and delivery must conform to K terms.
3) Less than perfect tender by seller generally gives buyer the option of rejection of the delivered goods so long as buyer acts in good faith.
What are the four things to know about rejection of goods?
1) Different than rejection of offer.
2) If perfect tender not met, buyer has option to retain and sue for damages or reject all or any commercial unit and sue for damages.
3) Buyer must take reasonable care of rejected goods and can’t continue to use them.
4) Rejection alternative is limited by cure, installment Ks, and acceptance.
What is cure?
May occur when:
1) seller has reasonable ground to believe the goods tendered would be acceptable. Statutory test is “reasonable grounds.” Need info about prior deals.
2) seller cures early improper delivery when time for performance has not yet expired.
How does rejection of goods work in installment contracts?
Buyer has right to reject an installment only where substantial impairment in that installment that can’t be cured.
What is an installment contract?
Requires or authorizes 1) delivery of goods in separate lots 2) to be separately accepted.
What is the effect of acceptance of goods for the rejection of goods doctrine under Art. 2?
If buyer accepts the goods, he can’t later reject them. Failure to reject after reasonable time to reject is acceptance. Effect of buyer’s keeping goods is implied acceptance.
EXCEPT: Payment w/o opportunity for inspection isn’t acceptance.
What is the effect of revocation of acceptance?
Same as rejection of goods. BUT this doctrine applies only in very limited circumstances.
What are the requirements for revocation of acceptance?
1) Nonconformity substantially impairs the value of the goods, AND
2) Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction, AND
3) Revocation w/in a reasonable time after discovery of nonconformity.
What are the non-monetary remedies for an unexcused non-performance?
Specific performance/injunction or equitable remedies.
When do non-monetary remedies usually come up?
1) Sale of real estate Ks
2) Ks for sale of goods when there are unique goods or appropriate circumstances
3) K for services (no specific performance available but maybe injunction)
What is the right of an unpaid seller to get its goods back i.e. right of reclamation?
1) buyer must be insolvent when goods received
2) seller demands return of goods w/in 10 days of receipt
3) buyer still has goods at the time of demand.
What is the typical measure of damages in a K case?
Expectation damages i.e. people who K expect that the other will not breach, so protect expectation. Look for:
1) Dollar value w/o breach
2) Dollar value of performance w/ breach
3) Compare the 2 to determine the amount of damages
What is the typical method of calculating damages under Art. 2?
Put innocent party where it would have been if K was performed. Depends on who breached, who has the goods, and if there was a later “replacement deal.”
Under Art. 2, what damages are available if the seller breaches?
1) If seller breaches and buyer keeps the goods, FMV of perfect tender minus FMV as delivered OR cost of repair is available.
2) If seller breaches and seller has the goods, market price at time of discovery of breach minus K price OR reasonable replacement price minus K price, whichever is greater.
Under Art. 2, what damages are available if the buyer breaches?
1) Buyer breaches and keeps goods, K price.
2) Buyer breaches and seller has goods, K price minus resale unless seller can’t resell in which case seller can recover K price and in some cases provable lost profits.
When can a seller obtain lost profit damages?
When the good is “off the rack” i.e. in regular inventory AND absent buyer’s breach there would have been two sales rather than one, seller may recover provable lost profits.
What additional damages and limitations on damages must also be considered?
1) Incidental damages (costs dealing w/ breach) are always recoverable.
2) Consequential damages that are foreseeable may be recovered.
3) Minus avoidable damages i.e. could have been avoided w/o undue burden on P. Burdens of pleading and proof on D.
4) Minus any damages that can’t be proved w/ reasonable certainty. EX: services K or new business. Reliance may be available.
What are consequential damages?
Loss that is special to the P in this case. Limited to damages arising from P’s special circumstances and recovery of consequential damages is limited to situations in which D had reason to know of these special circumstances at the time of K.
What are liquidated damages?
Damages provided for in K fixing amount of damages. Allow liquidated damages when 1) damages were difficult to forecast at the time K was made and 2) provision is a reasonable forecast. LIMIT: liquidated damages cannot impose a penalty i.e. no single # plugged into damages clause no matter when the breach occurred or what happened–this is invalid.
What is anticipatory repudiation?
Unambiguous statement or conduct 1) that the repudiating party will not perform 2) made prior to the time that the performance was due.
EFFECT: excuses the other party’s duty to perform.
When may damages for anticipatory repudiation be recovered?
Usually immediate claim for damages for breach unless claimant already finished her performance. If performance finished, must wait until K date.
How may anticipatory repudiation be retracted?
May be withdrawn so long as there has not been a material change in position by the other party. If repudiation is timely retracted, the duty to perform is reimposed but performance can be delayed until adequate assurance is provided.
What is excuse because of insecurity about whether the other guy is going to perform?
Where:
1) Words or conduct give reasonable grounds for insecurity
2) Written demand is made for adequate assurance AND
3) It is commercially reasonable to stop performance
THEN performance may be suspended until assurance is received.
When is there excuse because of improper performance?
Art. 2 perfect tender rule.
CL material breach rule: damages can be recovered for any breach but only a material breach excuses the other party form performing a K governed by K law. Whether breach is material is a question of fact, but if there was substantial performance then the breach was not material.
What constitutes material breach?
1) Quality of performance i.e. performance isn’t substantially what was bargained for or roughly comparable.
2) Quantity (amount of performance): some work but less than 1/2. No obligation to pay for this but may be liable in quasi-K.
What is the divisible contract corollary?
In a divisible contract there can be a K law recovery for substantial performance of a divisible part even though there has been a material breach of entire K. There is a divisible K corollary if price is stated on a per performance basis and not as a lump sum.
What is an express condition and how can express conditions be identified?
1) Language in K
2) Limits obligations created by other K language
3) Triggering words: if, only if, provided that, so long as, subject to, in the event that, unless, when, until, and on condition that.
What is the standard for determining whether an express condition has occurred i.e. been satisfied?
Generally, strict compliance is required for satisfaction of a condition.
EXCEPTION: condition of personal satisfaction of one of the parties must be honest and good faith dissatisfaction i.e. need a reasonable person who would have been satisfied/dissatisfied.
How can an express condition be eliminated so that its nonoccurrence doesn’t affect performance obligations?
1) Waiver: if person who benefits from the condition gives up the benefits and protections of the express condition.
2) Prevention: person protected by the express condition hindering or preventing the occurrence of the express condition.
What is the difference between conditions precedent and conditions subsequent?
1) Conditions precedent excuse performance until and unless they occur. Conditions subsequent occur after the start of performance and excuse performance when they occur.
2) Same law applies to both though: the limit performance obligations otherwise created.
What is rescission?
Cancellation of K. Parties can agree to rescind if both still owe performance on a K. Agreeing not to proceed or enforce is consideration sufficient to enforce a rescission.
What is an accord and satisfaction?
An agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.
What is the effect of an accord and satisfaction?
1) If the new agreement (accord) is performed (satisfaction), then performance of the original obligation is excused.
2) If the accord is not performed then the other party can recover on either the original obligation or the accord.
What is K modification?
A substituted agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.
What is a K novation?
An agreement between both parties to an existing K to the substitution of a new party i.e. same performance owed to a different party.
Who is liable after a novation?
Novation excuses the contracted for performance of the party who is substituted for or replaced.
How is delegation different from novation?
Novation requires the agreement of both parties to original K, and excuses the person replaced from any liability for non-performance.. Delegation doesn’t require the agreement of both parties and doesn’t excuse.
What happens if there is damage or destruction of the subject matter of the K?
At CL, party is excused from performing if he can’t physically complete the task because continued existence of the object of performance will excuse the owner’s non-performance.
Under Art. 2 (applies only to identified goods), if the risk of loss is on the buyer, buyer pays. If the risk of loss is on the seller, buyer doesn’t pay and may get damages from seller.
What is the effect of death on contract obligations?
Generally, death doesn’t make obligations disappear. EXCEPTION: death of party to K who is a “special” person excuses non-performance.
What if subsequent law or regulation interferes w/ K?
If later law makes performance of K illegal, excuse by impossibility.
If later law make mutually understood purpose of K illegal, excuse by frustration of purpose.
What is required as a precursor to a third party beneficiary problem?
Two parties contracting w/ common intent of benefit to a 3d party.
What is the vocab for third party beneficiary problems?
Third party beneficiary: not a party to K. Able to enforce K others made for her benefit.
Promisor: look for person who is making the promise that benefits the 3d party.
Promisee: person who obtains the promise that benefits the 3d party.
What is the difference between an intended and incidental 3d party beneficiary?
Only intended beneficiaries have K law rights. Intent of the 2 parties to K determines whether intended or incidental. ON MBE, intended beneficiary will be named in K.
How can a K for a 3d party beneficiary be cancelled or modified?
Test is whether 3d party knows of AND has relied on or assented as requested. If so, her rights have vested and K can’t be canceled or modified w/o her consent unless the K otherwise provides.
Who can sue whom in 3d party beneficiary Ks?
1) Beneficiary or promisee (but not both) can recover from promisor.
2) Beneficiary can’t recover from promisee UNLESS creditor beneficiary recovers from promisee on a pre-existing debt.
3) Promisor may assert any defense that he would have had if sued by the promisee.
What is an assignment?
A transfer of rights under K. Two steps:
1) K between only 2 parties
2) One of the parties later transfers rights under that K to a 3d party.
What is the vocab for assignment?
Assignor: party to K who later transfers rights under K to another.
Assignee: not party to K. Able to enforce the K because of the assignment.
Obligor: other party to K.
What are the two kinds of K clauses regarding assignment and what are their effects?
1) Prohibition: takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of K, but an assignee who doesn’t know of the prohibition can still enforce the assignment. EX: rights are not assignable. This is the default if there are doubts about what language in K is doing.
2) Invalidation: Takes away both the right to assign and the power to assign so that there is a breach by assignor and no rights in assignee. EX: all assignment of rights under this K are void.
What if there is nothing in K language regarding assignability?
Even if K doesn’t limit right to assign, CL bars assignment that substantially changes the duties of obligor:
1) Assignment of right to payment is never a substantial change
2) Assignment of right to K performance other than right of payment is usually a substantial change.
What are the requirements for assignment?
General rule is that consideration is not required but gratuitous assignments (and only gratuitous assignments) can be revoked.
In assignments, who can sue whom?
1) Assignee can recover from obligor
2) Assignor for consideration cannot recover from obligor
3) Obligor has same defenses against assignee as it would have against assignor
4) Payment by obligor to assignor is effective until obligor knows of assignment. Modification agreements between obligor and assignor are effective if obligor didn’t know of assignment.
What are the implied warranties of assignor in an assignment for consideration?
1) Right assigned actually exists
2) Right assigned is not subject to any then existing defenses by obligor
3) Assignor will do nothing after assignment to impair the value of assignment
What happens if there are multiple assignments?
If all are gratuitous assignments, last assignee generally wins.
If there are multiple assignments for consideration, then:
1) first assignee for consideration wins
2) UNLESS subsequent assignee doesn’t know of the earlier assignment and is the first to obtain a) payment, b) judgment, c) novation, or d) indicia of ownership.
What is a delegation?
Party to K transferring work under that K to 3d party. Transfer by a party to a K of his duties or burdens under the K to a 3d party who was not a party to K. (By contrast, assignment is transfer of rights or benefits under K.)
What duties are delegable?
Generally, K duties are delegable. LIMITATIONS: 1) K prohibits delegations or assignments; 2) personal services K that calls for very special skills.
What happens if the delegate doesn’t perform under the K?
1) Delegating party always remains liable.
2) Delegatee liable only if she receives consideration from delegating party (because this makes the other party to the initial K a 3d party beneficiary).
