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Contracts+sales Flashcards

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1
Q

THE BASICS
7 step flowchart

[overview]

A
  1. What law GOVERNS the transaction
  2. Is there a DEAL btwn the parties
  3. If so, is the deal ENFORCEABLE by courts (aka is the deal a contract)
  4. If there is an enforceable deal, what are its TERMS
  5. Did either party FAIL TO PERFORM its part of the deal and, if so, was that non-performance EXCUSED
  6. If there was inexcusable non-performance, what are the non-breaching party’s REMEDIES
  7. Do any THIRD PARTIES have rights and/or obligations under the contract
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2
Q

CONTRACT FOR GOODS
what law governs a contract solely for sale of goods?

[no. 1: what law governs the transaction]

A

= UCC ARTICLE 2 governs the transaction, regardless of whether parties are merchants or non-merchants

NOTE = many important UCC rules apply only to contracts in which at least one party is a merchant

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3
Q

CONTRACT FOR GOODS
definition of goods

[no. 1: what law governs the transaction]

A

= tangible, movable items

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4
Q

CONTRACT FOR GOODS
what covers the sale of ordinary goods?

[no. 1: what law governs the transaction]

A

= ARTICLE 2

example = suit off the rack

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5
Q

CONTRACT FOR GOODS
what covers the sale of custom-made goods?

[no. 1: what law governs the transaction]

A

= ARTICLE 2

example = tailor-made suit

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6
Q

CONTRACT FOR NON-GOODS
what law governs a contract involving only non-goods?

[no. 1: what law governs the transaction]

A

= COMMON LAW governs the transaction

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7
Q

CONTRACT FOR NON-GOODS
3 things included in definition of non-goods

[no. 1: what law governs the transaction]

A
  1. real estate
  2. services
  3. intangibles
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8
Q

MIXED TRANSACTIONS
what law governs a contract involving both goods and non-goods?

[no. 1: what law governs the transaction]

A

= PREDOMINANT PURPOSE of the contract governs

NOTE = this is an all-or-nothing test AKA

  • if the primary/dominant purpose of the contract is GOODS = UCC governs ENTIRE contract
  • if the primary/dominant purpose of the contract is NON-GOODS = COMMON LAW governs ENTIRE contract
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9
Q

MIXED TRANSACTIONS
predominant purpose test

[no. 1: what law governs the transaction]

A

to determine the predominant purpose of a mixed transaction, courts examine

  1. the LANGUAGE of the parties’ contract
  2. the NATURE of the biz of supplier of goods/non—goods
  3. the REASON parties entered into the contract (aka what each bargained to receive)
  4. the respective amounts CHARGED under the contract for goods and for non-goods
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10
Q

THE BASICS
definition of deal

[no. 2: is there a deal btwn the parties]

A

Agreement or mutual assent

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11
Q

THE BASICS
3 parts of a deal

[no. 2: is there a deal btwn the parties]

A
  1. An OFFER
  2. Which is “ALIVE” @ THE TIME of the attempted acceptance
  3. A proper ACCEPTANCE
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12
Q

THE BASICS
how is mutual assent determined?

[no. 2: is there a deal btwn the parties]

A

Judged by the objective theory of contract

Whether an offer or revocation has been made is judged from the perspective of a reasonable OFFEREE

Whether an acceptance, rejection, or counteroffer has been made is judged from the perspective of a reasonable OFFEROR

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13
Q

THE BASICS
3 types of contracts

[no. 2: is there a deal btwn the parties]

A
  1. Express contracts
  2. Contracts implied-in-fact
  3. Contracts implied-in-law
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14
Q

THE BASICS
express contracts

[no. 2: is there a deal btwn the parties]

A

= mutual assent established by the parties’ LANGUAGE (oral or written)

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15
Q 
THE BASICS
option contracts (express contracts)

[no. 2: is there a deal btwn the parties]

A

= an express contract to hold an offer open for a fixed period of time

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16
Q

THE BASICS
contracts implied-in-fact

[no. 2: is there a deal btwn the parties]

A

= mutual assent established (at least in part) by the parties’ CONDUCT

EX = silently accepting benefits where it is reasonable to assume the other party expects compensation

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17
Q

THE BASICS
contracts implied-in-law

[no. 2: is there a deal btwn the parties]

A

TRICK. These are not contracts, so there is no mutual assent

= simply a remedy designed to prevent unjust enrichment

AKA quasi-contracts

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18
Q

OFFER
definition of offer

[no. 2: is there a deal btwn the parties]

A

= expression of present willingness to enter into a bargain, made in such a way that a reasonable offeree would believe that she can conclude a bargain merely by giving assent

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19
Q

OFFER
3 components of a valid offer

[no. 2: is there a deal btwn the parties]

A
  1. INTENT on the part of the offeror to enter into an IMMEDIATE deal
  2. CONTENT of the offer must be sufficiently DEFINITE
  3. COMMUNICATION of the offer to the offeree
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20
Q

OFFER // SUFFICIENTLY DEFINITE
4 basic things identified in offer

[no. 2: is there a deal btwn the parties]

A

Ideally, the offer should identify

  1. the parties
  2. the subject matter
  3. the price
  4. the time of performance

But certain terms are ESSENTIAL for real estate, UCC, employment contracts

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21
Q

OFFER // SUFFICIENTLY DEFINITE
essential terms for real estate contracts

[no. 2: is there a deal btwn the parties]

A

for real estate contracts, there must be a price and an adequate description of the land

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22
Q

OFFER // SUFFICIENTLY DEFINITE
essential terms for UCC contracts

[no. 2: is there a deal btwn the parties]

A

for UCC contracts, there must be a quantity term (ex = numerical or buyer’s requirements or seller’s output)

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23
Q

OFFER // SUFFICIENTLY DEFINITE
essential terms for employment contracts

[no. 2: is there a deal btwn the parties]

A

for employment cntracts, there must be a duration (no duration results in an at-will contract)

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24
Q

OFFER // SUFFICIENTLY DEFINITE
advertisements as offers

[no. 2: is there a deal btwn the parties]

A

TRICK.

Advertisements, price quotes, and catalogs are generally NOT offers

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25
Q

OFFER // COMMUNICATION
2 key takeaways

[no. 2: is there a deal btwn the parties]

A

only persons AWARE of the offer may accept

only persons to whom the offer was DIRECTED may accept (aka OFFER are NOT assignable but OPTION CONTRACTS are assignable)

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26
Q

OFFER // COMMUNICATION
when is an offer effective?

[no. 2: is there a deal btwn the parties]

A

upon RECEIPT by the offeree

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27
Q

ALIVE @ ACCEPTANCE
4 ways an offer may die prior to attempted acceptance

[no. 2: is there a deal btwn the parties]

A
  1. By its own terms
  2. Revocations by operation of law
  3. Revocations by the offeror
  4. Terminations by the offeree
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28
Q

ALIVE @ ACCEPTANCE // REVOKED BY ITS OWN TERMS
offer revocation by its own terms

[no. 2: is there a deal btwn the parties]

A

By its own terms, the offeror is the “master” of the offer

As such, she may place a SPECIFIC LIMIT on the time to accept (ex = one day or five minutes)

If NO such limit is placed on the offer, the offer is open for a REASONABLE TIME

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29
Q

ALIVE @ ACCEPTANCE // REVOKED BY OPERATION OF LAW
3 times offer automatically revoked

[no. 2: is there a deal btwn the parties]

A

offer is AUTOMATICALLY revoked
REGARDLESS of other party’s knowledge by
1. DEATH or ADJUDICATED INCAPACITY of offeror OR offeree
(EXCEPT doesn’t terminate option contracts)
2. Intervening ILLEGALITY or DESTRUCTION of SUBJECT MATTER

offer is AUTOMATICALLY revoked IF
other party has knowledge of
3. NON-ADJUDICATED insanity of offeror OR offeree

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30
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
general rule

[no. 2: is there a deal btwn the parties]

A

Offers are freely revocable even if the offeror promises not to revoke the offer

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31
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
2 ways for an offeror to revoke an offer

[no. 2: is there a deal btwn the parties]

A
  1. Unambiguous verbal revocation communicated by the offeror to the offeree prior to acceptance
  2. Unambiguous conduct by the offeror indicating revocation (ex = item sold to another) communicated by the offeror or a reliable third party to the offeree
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32
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
when is a revocation effective?

[no. 2: is there a deal btwn the parties]

A

A revocation is effective upon “receipt” by the offeree

Revocations by the offeror must pre-date the acceptance

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33
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
mailbox rule

[no. 2: is there a deal btwn the parties]

A

As a general rule, acceptances are effective upon dispatch, but revocations are always effective upon receipt by the offeree

if a revocation will be communicated to the offeree PRIOR to the receipt of the acceptance by the offeror (because it’s still in the mail) but SUBSEQUENT to the mailing of the acceptance = the revocation is ineffective

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34
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
receipt

[no. 2: is there a deal btwn the parties]

A

A written offer, revocation, counteroffer, or rejection is received when the writing comes into the POSSESSION of the person addressed

REGARDLESS of when such document is opened or read

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35
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
nonrevocable offers - 4 times offers are nonrevocable

[no. 2: is there a deal btwn the parties]

A

Offers are inherently revocable EXCEPT

  1. Option contracts
  2. Merchant’s firm offer (UCC-only)
  3. Detrimental reliance
  4. Unilateral contracts
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36
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
nonrevocable offers - option contracts

[no. 2: is there a deal btwn the parties]

A

definition = an agreement, supported by consideration (even nominal consideration), to hold an offer open for a fixed period of time

Rule = under the Restatement, an option contract is enforceable if it merely RECITES nominal consideration

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37
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
nonrevocable offers - merchant’s firm offer
LEZ GET IT

[no. 2: is there a deal btwn the parties]

A

(UCC 2-207 RULE)
MERCHANT’S FIRM OFFER bb =

  • Offer to buy or sell goods
  • Made by MERCHANT
  • In a SIGNED WRITING
  • In which merchant PROMISES TO HOLD
  • Offer open for STATED (or REASONABLE if not stated) TIME
  • NOT LONGER THAN 90 DAYS!!!!!!!!!!

NOTE = never irrevocable for +90 days BUT can be accepted after if not revoked

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38
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
nonrevocable offers - detrimental reliance

[no. 2: is there a deal btwn the parties]

A

the OFFEREE has DETRIMENTALLY RELIED on the offer AND
that reliance was REASONABLY FORESEEABLE by the OFFEROR

EX = If a general contractor relies on the bids of subcontractors in preparing the general contractor’s bid, the subcontractors’ bids are irrevocable until the owner/architect awards the contract to a general contractor

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39
Q

ALIVE @ ACCEPTANCE // REVOKED BY OFFEROR
nonrevocable offers - unilateral contracts

[no. 2: is there a deal btwn the parties]

A

definition = language of contract expressly limits acceptance to complete performance

rule = if the contract is unilateral and the offeree has COMMENCED PERFORMANCE (something more than mere preparation to perform),
THEN offeree must be given a REASONABLE TIME TO COMPLETE performance
(BUT the offeree is not BOUND TO COMPLETE performance unless it was a bilateral contract)

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40
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
rule

[no. 2: is there a deal btwn the parties]

A

The offeree may also terminate an offer

When an offeree terminates an offer, it is called a “rejection.”

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41
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
3 methods of rejection

[no. 2: is there a deal btwn the parties]

A
  1. Counteroffer
  2. Express rejection
  3. Conditional acceptances
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42
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
counteroffer

[no. 2: is there a deal btwn the parties]

A

a counteroffer by the offeree permanently revokes the offer and, in fact, constitutes a new offer

mere inquiries alone (“Will you take $9,000?”) are not rejections

in some cases, the original offer may be revived after a counteroffer

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43
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
express rejection

[no. 2: is there a deal btwn the parties]

A

“No thanks” or “Not interested.”

A rejection permanently revokes the offer, even if the offeror had originally indicated that it would be held open for a longer period.

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44
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
effective date of rejection

[no. 2: is there a deal btwn the parties]

A

rejections (express or otherwise) are effective upon receipt by the offeror

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45
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
option contracts rejection/counteroffer

[no. 2: is there a deal btwn the parties]

A

A rejection or counteroffer made by the “offeree” during the option period does not terminate the option contract, unless the “offeror” detrimentally relies on the offeree’s rejection

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46
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
conditional acceptances

[no. 2: is there a deal btwn the parties]

A

= “I accept IF [or but or provided that or on the condition that or so long as]”

acts as a rejection/counteroffer and permanently revokes the offer

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47
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
mirror image rule @ common law

[no. 2: is there a deal btwn the parties]

A

if the offeree adds terms to the acceptance, this constitutes a counteroffer and a rejection

LAST SHOT RULE = if the parties perform without an express contract, the last document governs

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48
Q

ALIVE @ ACCEPTANCE // TERMINATION BY OFFEREE
mirror image rule under UCC

[no. 2: is there a deal btwn the parties]

A

if an offeree adds a term (“I accept and ….”) to the acceptance, ask 2 Qs.

Q1 = IS THERE A CONTRACT?
A1 = Yes
(as long as acceptance of the additional term was NOT an EXPRESS CONDITION of acceptance)

Q2 = DOES CONTRACT INCLUDE ADDITIONAL TERM?
A2 = It depends
– if BOTH MERCHANTS, additional term IS part of the contract, unless
1. original offer LIMITED acceptance to offer’s EXACT terms
2. offeror objects to additional term W/IN REASONABLE TIME after receiving the acceptance
3. additional term MATERIALLY ALTERS offer
(like changes remedies available to offeror, significantly limits offeree’s liability, or disclaims warranties)
– if either is NON-MERCHANT, additional term is NOT part of the contract UNLESS additional term is EXPRESSLY ACCEPTED by offeror after receiving acceptance

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49
Q

PROPER ACCEPTANCE
definition

[no. 2: is there a deal btwn the parties]

A

= manifestation of assent to the terms of the offer

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50
Q

PROPER ACCEPTANCE
who may accept?

[no. 2: is there a deal btwn the parties]

A

Only those who are aware of the offer

Only those persons to whom the offer was made (= offers may not be assigned or accepted by bystanders to whom the offer was not directed—EXCEPT option contracts)

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51
Q

PROPER ACCEPTANCE
equal publicity rule

[no. 2: is there a deal btwn the parties]

A

Someone who has made an offer via newspaper ad or the like must give equal publicity to the retraction as he did to the offer (ex = same newspaper, same number of days, etc.)

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52
Q

PROPER ACCEPTANCE
how may an offer be accepted?

[no. 2: is there a deal btwn the parties]

A

General rule = the offeror is the master of the offer and may limit the form of acceptance (ex = by fax only) BUT must do so UNAMBIGUOUSLY

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53
Q

PROPER ACCEPTANCE // BY PERFORMANCE
bilateral contracts

[no. 2: is there a deal btwn the parties]

A

may be accepted by EITHER

  1. PROMISE to perform (communicated to offeror) OR
  2. COMMENCEMENT of performance

Contracts are PRESUMED to be bilateral

If offeree accepts by COMMENCING performance AND the offeror has NO ADEQUATE MEANS OF LEARNING of such commencement
= offeree must notify offeror w/in REASONABLE TIME that perf has COMMENCED
(AKA failure to give timely notice will render the contract unenforceable)

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54
Q

PROPER ACCEPTANCE // BY PERFORMANCE
unilateral contracts

[no. 2: is there a deal btwn the parties]

A

may NOT be accepted by commencing performance
may ONLY be accepted by FULL performance

offeree is NOT BOUND by COMMENCING perf
BUT commencement PREVENTS offeror from REVOKING offer for REASONABLE time

Unilateral contracts are limited to

  1. those that UNAMBIGUOUSLY require completion of performance as acceptance
  2. offers to the public, such as rewards or prizes
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55
Q

PROPER ACCEPTANCE // BY MAILING
mailbox rule

[no. 2: is there a deal btwn the parties]

A

As a general rule, an acceptance is effective upon dispatch (ex = mailing), even if it never gets to the offeror

A contract is created at the moment of dispatch, provided the dispatch is properly addressed and, where necessary, stamped

After proper dispatch, the offeror may not revoke the offer

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56
Q

PROPER ACCEPTANCE // BY PERFORMANCE
exceptions to mailbox rule

[no. 2: is there a deal btwn the parties]

A

The Mailbox Rule does NOT apply where

  1. the offeror stipulates that acceptance is not effective until received OR
  2. the offeror unambiguously mandates a method of acceptance (ex = by fax only) different than that used by the offeree OR
  3. the offeree’s method of acceptance is not reasonable under the circumstances (ex = offeree uses U.S. mail to accept an email offer to purchase ripe bananas)
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57
Q

PROPER ACCEPTANCE // BY PERFORMANCE
dual dispatches

[no. 2: is there a deal btwn the parties]

A

If an offeree FIRST REJECTS an offer by mail and THEN ACCEPTS by mail, the FIRST document RECEIVED by the offeror CONTROLS

If the offeree FIRST ACCEPTS by mail but THEN REJECTS by mail = CONTRACT CREATED upon dispatch of acceptance
BUT if offeror received REJECTION FIRST + CHANGED POSITION IN RELIANCE = offeree will be estopped from enforcing the contract

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58
Q

PROPER ACCEPTANCE // BY PERFORMANCE
option contracts

[no. 2: is there a deal btwn the parties]

A

the offeror must RECEIVE the acceptance (exercise the option) to have a contract

AKA the Mailbox Rule does not apply to option contracts

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59
Q

PROPER ACCEPTANCE // BY SHIPMENT
3 methods to accept a UCC offer for prompt shipment

[no. 2: is there a deal btwn the parties]

A
  1. Promise to ship
  2. Shipment of conforming goods
  3. Shipment of non-conforming goods
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60
Q

PROPER ACCEPTANCE // BY SHIPMENT
effect of shipment of non-conforming goods

[no. 2: is there a deal btwn the parties]

A

Shipment of non-conforming goods constitutes an acceptance AND a breach of contract

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61
Q

PROPER ACCEPTANCE // BY SHIPMENT
shipment of non-conforming goods as accommodation

[no. 2: is there a deal btwn the parties]

A

If the seller sends non-conforming goods as an “accommodation,” there is no acceptance and thus no breach of contract

If a seller PROMISES to ship CONFORMING goods AND THEN sends non-conforming goods as an accommodation, the seller has accepted the offer and breached the contract

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62
Q

PROPER ACCEPTANCE // BY SHIPMENT
definition of accommodation (for shipment of non-conforming goods)

[no. 2: is there a deal btwn the parties]

A

An accommodation occurs when the seller notifies the buyer (before or with the shipment) that the goods are non-conforming but are being sent anyway

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63
Q

THE BASICS
2 requirements for a deal to be enforceable

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Sufficient consideration

2. No valid defenses

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64
Q

CONSIDERATION
definition

[no. 3: is the deal enforceable
aka a contract?]

A

= BARGAINED-FOR EXCHANGE
of LEGAL DETRIMENT

AKA 2 parts

  1. promisor bargained for exchange by promisee in which
  2. promisee either
    a. promises to do something or does something
    that, but for the contract,
    she is not obligated to do OR
    b. promises not to do something or does not do something that, but for the contract, she is legally entitled to do
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65
Q

CONSIDERATION
sufficiency of consideration

[no. 3: is the deal enforceable
aka a contract?]

A

consideration must be legally sufficient for there to be a binding contract

sufficient = must be something that has value in the eyes of the law

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66
Q

CONSIDERATION
4 examples of insufficient consideration

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Love and affection
  2. Performing a service the law believes does not exist (ex = voodoo curse)
  3. Nominal or token consideration (EXCEPTION = option contracts)
  4. Promise to forbear filing a suit the plaintiff knows is frivolous
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67
Q

CONSIDERATION
adequacy of consideration

[no. 3: is the deal enforceable
aka a contract?]

A

If the requirement of sufficiency of consideration is met, there is no additional requirement of equivalence in the values exchanged, UNLESS the contract is so one-sided that it is UNCONSCIONABLE

As long as consideration exists, the parties’ motives for performance are irrelevant

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68
Q

CONSIDERATION
4 key issues for consideration

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Past consideration or moral obligation
  2. Preexisting legal duty
  3. Part payment of a debt
  4. Promise not to sue
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69
Q

CONSIDERATION // PAST CONSIDERATION or MORAL OBLIGATION
general rule

[no. 3: is the deal enforceable
aka a contract?]

A

generally, if promisee has already performed act BEFORE promisor makes promise
= there is no bargained-for exchange and thus no consideration

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70
Q

CONSIDERATION // PAST CONSIDERATION or MORAL OBLIGATION
3 exceptions

[no. 3: is the deal enforceable
aka a contract?]

A
  1. RST MATERIAL BENEFIT RULE
    promise made in recognition of benefit previously received by promisor from promisee = BINDING to extent necessary to PREVENT INJUSTICE
    UNLESS either
    - promisee conferred benefit as GIFT OR
    - for other reasons promisor has NOT been UNJUSTLY ENRICHED
  2. PROMISE TO PAY DEBT BARRED BY SOL
    written promise to pay debt barred by SOL = enforceable UP TO amount of NEW PROMISE despite no new consideration
  3. PROMISE TO PERFORM A VOIDABLE OBLIGATION
    if minor or incompetent PROMISES to perform voidable obligation AFTER reaching age of majority/regaining competency = obligation is enforceable despite no new consideration
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71
Q

CONSIDERATION // PREEXISTING LEGAL DUTY
general rule

[no. 3: is the deal enforceable
aka a contract?]

A

= If the promisee is legally bound to do (or not to do) the act either by a prior contract or statutory law, there is no legal detriment suffered by the promisee

AKA that the modification of an existing contract requires new consideration

NOTE = if a modification is induced by IMPROPER THREATS, the innocent party may also raise the defense of ECONOMIC DURESS if it had NO REASONABLE ALTS

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72
Q

CONSIDERATION // PREEXISTING LEGAL DUTY
4 exceptions
(aka when can parties modify contract)

[no. 3: is the deal enforceable
aka a contract?]

A
  1. promisee agrees to add to/modify original deal in any LEGIT fashion
  2. modification is FAIR & EQUITABLE in view of circumstances NOT ANTICIPATED by parties when the contract was made
  3. THIRD PARTY agrees to pay ADDITIONAL consideration to promisee
  4. UCC = SALES contracts may be modified w/o consideration as long as parties act in GOOD FAITH
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73
Q

CONSIDERATION // PART PAYMENT OF DEBT
rule

[no. 3: is the deal enforceable
aka a contract?]

A

key Q = If creditor agrees to take less than full payment in exchange for release, may creditor seek remainder from debtor?

  1. if debt is DUE (or overdue) AND UNDISPUTED in amount
    = part payment does NOT constitute consideration for release
    AKA debtor owes remainder
  2. if debt is NOT YET DUE (and debtor agrees to pay early)
    OR if there is GOOD FAITH DISPUTE as to amount of debt
    = part payment would constitute consideration for release
    (aka examples of accord & satisfaction)
  3. if a DIFFERENT TYPE of performance (transfer of goods/services) is agreed upon
    = would also be consideration
    (aka also accord & satisfaction example)
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74
Q

CONSIDERATION // PROMISE NOT TO SUE
rule

[no. 3: is the deal enforceable
aka a contract?]

A

A promise not to sue constitutes consideration if the promisor has EITHER a GOOD FAITH (subjective) or REASONABLE (objective) belief that the suit is valid

If a party executes a written instrument (i.e., a quitclaim deed) settling a claim that was bargained for by the other party, the instrument is sufficient consideration even if the executing party did not subjectively believe the claim was valid

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75
Q

CONSIDERATION
promissory estoppel

[no. 3: is the deal enforceable
aka a contract?]

A

If there is no consideration, may the promisee enforce the deal?
Generally = no

BUT consider PROMISSORY ESTOPPEL, which applies where
1. promisor made a promise
2. promisee REASONABLY, DETRIMENTALLY, and FORESEEABLY relied on promise
(aka promise induced promisee to act)
3. enforcement of the promise is NECESSARY TO AVOID INJUSTICE

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76
Q

CONSIDERATION
damages for promissory estoppel

[no. 3: is the deal enforceable
aka a contract?]

A

Promissory estoppel damages are generally limited to reliance damages (as opposed to expectation damages)

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77
Q

CONSIDERATION
SOF application to promissory estoppel

[no. 3: is the deal enforceable
aka a contract?]

A

TRICK.

SOF does not apply to promissory estoppel

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78
Q

DEFENSES
7 valid defenses

[no. 3: is the deal enforceable
aka a contract?]

A

A contract is not enforceable if there is a valid defense, such as:

  1. Lack of Capacity
  2. Statute of Frauds
  3. Illegality
  4. Duress/Undue Influence
  5. Misrepresentation
  6. Mistake or Misunderstanding
  7. Unconscionability
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79
Q

DEFENSES
burdens for defenses

[no. 3: is the deal enforceable
aka a contract?]

A

These 7 defenses are typically affirmative defenses for which the defendant would carry the burden of pleading, the burden of production, and the burden of persuasion

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80
Q

DEFENSES // LACK OF CAPACITY
3 parties that lack capacity

[no. 3: is the deal enforceable
aka a contract?]

A
  1. minors (under age 18)
  2. mental incompetents (unable to understand legal significance of acts)
    Note = contracts of a party who has been adjudicated incompetent are VOID
  3. intoxicated persons (unable to understand legal significance of acts AND the other party knew or should have known of the intoxication)
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81
Q

DEFENSES // LACK OF CAPACITY
rule for party lacking capacity

[no. 3: is the deal enforceable
aka a contract?]

A

A party lacking capacity may disaffirm a contract (aka the contract is voidable by the incapacitated party) during disability or within a reasonable time thereafter

In a minority of jurisdictions, the party lacking capacity is liable for any benefit he experiences or damage he causes prior to disaffirming

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82
Q

DEFENSES // LACK OF CAPACITY
2 situations in which incapacitated parties are liable on contracts

[no. 3: is the deal enforceable
aka a contract?]

A
  1. If incapacitated party either
    – RETAINS BENEFIT of the contract after gaining capacity OR
    – FAILS to DISAFFIRM the contract w/in REASONABLE time
    AFTER gaining capacity
    = she’s IMPLIEDLY AFFIRMED contract and it’s enforceable

NOTE = affirmation by minor/incompetent doesn’t require new consideration

  1. if contract is for necessaries (aka NECESSITIES) = the incapacitated party is liable in quasi-contract for the value of the goods or services, but not for the actual contract price
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83
Q

DEFENSES // STATUTE OF FRAUDS
SOF flowchart

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Is the contract subject to the SOF?
  2. If so, has the SOF been satisfied?
  3. If the SOF applies and has not been satisfied, are there any remedies available to the plaintiff?
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84
Q

DEFENSES // STATUTE OF FRAUDS
(step #1, is the contract subject to SOF)
general rule

[no. 3: is the deal enforceable
aka a contract?]

A

= Oral contracts are generally enforceable

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85
Q

DEFENSES // STATUTE OF FRAUDS
(step #1, is the contract subject to SOF)
6 exceptions

[no. 3: is the deal enforceable
aka a contract?]

A

= following are subject to SOF

  1. agrmnt to MARRY supported by some form of $$$$ consideration (ex = prenuptz)
  2. Promise by ESTATE executor/administrator to pay estate’s debts out of OWN POCKET
  3. SURETYSHIP contracts (aka where one person guarantees the payments of another, like a co-signer)
    - – EXCEPTION = if MAIN/PRIMARY PURPOSE of agrmnt is to BENEFIT SURETY, contract doesn’t have to be in writing
  4. SERVICE contracts that by OWN TERMS are NOT CAPABLE of being performed W/IN ONE YEAR from date of contract
  5. contract for sale of GOODS where purchase price is $500+
  6. transfer of an interest in LAND
    - – EXCEPTION = short-term (12 mos. or fewer) leases
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86
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
signed writing - requirement

[no. 3: is the deal enforceable
aka a contract?]

A

SOF requires writing signed by DEFENDANT
BUT does NOT require the parties to sign a written contract
instead, any writing that contains the essential terms and is signed by the defendant will suffice
(ex = a check, a memo to the file, a letter to a friend, notes scribbled on a cocktail napkin)

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87
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
signed writing - 2 requirements for non-goods contracts

[no. 3: is the deal enforceable
aka a contract?]

A 
1. writing must be SIGNED by D 
AND
2. all MATERIAL TERMS must be in writing, which are 
- identity of the parties
- subject matter
- price
- time
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88
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
signed writing - essential terms for goods contracts of $500+

[no. 3: is the deal enforceable
aka a contract?]

A

only essential term is quantity

NOTE = the contract is not enforceable beyond the quantity stated in the writing

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89
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
signed writing - 2 ways to satisfy under UCC

[no. 3: is the deal enforceable
aka a contract?]

A
  1. the writing must be signed by the defendant OR
  2. a written confirmation may be used BTWN 2 MERCHANTS
    ( = a confirmation letter containing a quantity term signed by the PLAINTIFF)
    if the other party does not object to the written confirmation within 10 days of receipt
    NOTE = the contract is not enforceable beyond the quantity stated in the confirmation
90
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
signed writing - electronic signature

[no. 3: is the deal enforceable
aka a contract?]

A

Under both the UCC and common law, the signature requirement may be satisfied by an electronic signature

(such as a person typing her name at the end of an email message)

91
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
performance - general rule

[no. 3: is the deal enforceable
aka a contract?]

A

“Part Performance” may, in some cases, entitle the plaintiff to specific performance or damages despite the lack of a writing

3 key cases

  1. Service contracts
  2. Sale of goods contracts
  3. Land contracts
92
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
performance - service contracts

[no. 3: is the deal enforceable
aka a contract?]

A

full performance by either party satisfies SOF

part performance does not (but quasi-contract damages may be available)

93
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
performance - sale of good contracts

[no. 3: is the deal enforceable
aka a contract?]

A

ordinary goods
= PART delivery/payment/acceptance will satisfy SOF
to EXTENT delivered/paid and accepted

unique/specialized goods not suitable for sale in ordinary course
= contract fully complies with SOF when S
SUBSTANTIALLY begins performance OR
makes COMMITMENTS for PROCUREMENT of goods

94
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
performance - land contracts

[no. 3: is the deal enforceable
aka a contract?]

A

Specific Performance only

Requires payment (substantial or full) PLUS either possession or improvement

95
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
admissions

[no. 3: is the deal enforceable
aka a contract?]

A

Under the UCC, an admission in court or court papers satisfies SOF (up to the amount of the admission)

This rule may also apply to common law contracts

96
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
when must a modification satisfy SOF?

[no. 3: is the deal enforceable
aka a contract?]

A

A modification to a contract must satisfy SOF if the contract, AS MODIFIED, would be subject to SOF

97
Q

DEFENSES // STATUTE OF FRAUDS
(step #2, if so, has the SOF been satisfied?)
waiver (private statutes of fraud?)

[no. 3: is the deal enforceable
aka a contract?]

A

Under the common law (and the UCC to a lesser degree), a “no oral modifications” clause is usually deemed WAIVED by

a. the parties’ oral modification of the contract OR
b. the parties’ performance of the contract in a manner inconsistent with its express terms

NOTE = A waiver generally occurs even if the contract contains a “no waiver” clause.

98
Q

DEFENSES // STATUTE OF FRAUDS
(step #3, if the SOF applies and has not been satisfied, are there any remedies available to the plaintiff?)
2 remedies to consider

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Restitution

2. Promissory estoppel

99
Q

DEFENSES // ILLEGALITY
3 rules for illegality

[no. 3: is the deal enforceable
aka a contract?]

A
  1. If the SUBJECT MATTER of a contract is illegal, NEITHER party may enforce it at any time
    AKA the court will leave the parties as it finds them
    (ex = a contract with a hit man or a gambling contract in a state where gambling is illegal)
  2. If the contract MERELY RELATES to an illegal act, it is enforceable by the party who is NOT INVOLVED in the illegal act
    (ex = the purchase of a gun on credit from Walmart that is to be used in a murder, Walmart isn’t involved in murder…directly…so walmart can enforce it)
3. If one party to an illegal contract is a member of a class for whose protection the statute or regulation was enacted, the PROTECTED PERSON may enforce (or disaffirm) the contract
(ex = child may enforce or disaffirm an employment contract that violates child labor laws, but the employer may not enforce or disaffirm it)
100
Q

DEFENSES // ILLEGALITY
2 rules for failure to be licensed

[no. 3: is the deal enforceable
aka a contract?]

A

If a contract is illegal solely because a party does not have a required license, the enforceability of the contract depends on the PURPOSE of the license

  1. If the purpose of the license is to regulate the SKILL + QUALITY of a particular occupation, the contract is UNENFORCEABLE
    (ex = a license to practice law, medicine, plumbing, nursing)
  2. If the purpose of the license is SOLELY to RAISE REVENUE, the contract is ENFORCEABLE
    (ex = a biz license)
101
Q

DEFENSES // DURESS & UNDUE INFLUENCE
2 types of duress

[no. 3: is the deal enforceable
aka a contract?]

A

TWO types of duress may render a contract VOIDABLE

  1. physical duress = violence or threats of violence (this type of duress renders a contract VOID)
  2. economic duress = by wrongful act (ex = threatening to breach a contract), one party takes advantage of another party who has no reasonable alternatives

BUT such defense is limited to circumstances where D CAUSED P’s financial distress in the first place

102
Q

DEFENSES // DURESS & UNDUE INFLUENCE
undue influence

[no. 3: is the deal enforceable
aka a contract?]

A

= unfair persuasion of party who

  • – is under DOMINATION of person exercising the persuasion AND
  • – by virtue of confidential/fiduciary RELATIONSHIP btwn them
  • – is JUSTIFIED in assuming that person won’t act in manner inconsistent w/ her welfare
103
Q

DEFENSES // MISREPRESENTATION
2 types of misrepresentation defenses

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Fraud in the inducement

2. Fraud in the execution (factum)

104
Q

DEFENSES // MISREPRESENTATION
fraud in the inducement - definition + 2 takeaways

[no. 3: is the deal enforceable
aka a contract?]

A

= if party is induced to enter into contract by FALSE ASSERTIONS OF FACT

  • traditionally = only falsity of past or present fact
  • restatement/majority = includes promissory fraud based on promise of future action w/ intent to perform future action

misrepresentation makes a contract VOIDABLE if it is either FRAUDULENT or MATERIAL

fact that truth of a misrepresentation could’ve been revealed by exercise of DUE CARE doesn’t mean reliance was unjustified

105
Q

DEFENSES // MISREPRESENTATION
fraud in the execution (factum)

[no. 3: is the deal enforceable
aka a contract?]

A

If the defrauding party misrepresents the very nature of the document presented to the innocent party for signature, the agreement is VOID

106
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
2 rules

[no. 3: is the deal enforceable
aka a contract?]

A

NO manifestation of mutual assent (aka no contract) if

  1. parties attach MATERIALLY DIFF MEANINGS to their manifestations AND
  2. NEITHER knows or has reason to know meaning attached by other

BUT there IS mutual assent and a contract if

  1. one party does not know of meaning attached by other AND
  2. another party knows or should know of meaning attached by other
107
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
2 types of mistakes

[no. 3: is the deal enforceable
aka a contract?]

A
  1. Mutual mistake

2. Unilateral mistake

108
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
mutual mistake - definition

[no. 3: is the deal enforceable
aka a contract?]

A

= BOTH parties are mistaken about a BASIC MATERIAL FACT

109
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
(2 rules for mutual mistake)
when does mutual mistake affect enforceability?

[no. 3: is the deal enforceable
aka a contract?]

A
  1. if mistake relates to SUBJECT MATTER of contract = unenforceable UNLESS
    party asserting defense of mistake ASSUMED the risk of mistake because either
    a. the parties knew their assumption was doubtful OR
    b. one party (like contractor) is in a better position to know the risks than the other party (like homeowner)
  2. if mistake relates to VALUE of what is being purchased = fully enforceable (as long as there was no fraud, etc.)
110
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
unilateral mistake - definition

[no. 3: is the deal enforceable
aka a contract?]

A

= Only one party was mistaken

111
Q

DEFENSES // MISUNDERSTANDING & MISTAKE
unilateral mistake - general rule + 2 exceptions

[no. 3: is the deal enforceable
aka a contract?]

A

generally = contract is enforceable
UNLESS 2 EXCEPTIONS APPLY

  1. involves MECHANICAL ERROR OF COMPUTATION, non-mistaken party can’t SNAP UP an offer/bid that it KNEW/SHOULD’VE KNOWN was erroneous
    (aka the offer was too good to be true)
  2. restatement = unilateral mistake also valid defense if enforcement of contract would be UNCONSCIONABLE
112
Q

DEFENSES // UNCONSCIONABILITY
UCC doctrine

[no. 3: is the deal enforceable
aka a contract?]

A

unconscionable contract =

  1. PROCEDURALLY UNFAIR and
  2. OPPRESSIVE TERMS
113
Q

DEFENSES // UNCONSCIONABILITY
common law doctrine

[no. 3: is the deal enforceable
aka a contract?]

A

unconscionable contract =

  1. PROCEDURALLY UNFAIR and
  2. OPPRESSIVE TERMS
114
Q

DEFENSES // UNCONSCIONABILITY
how/when does a court evaluate unconscionability?

[no. 3: is the deal enforceable
aka a contract?]

A

Tested at the time of contracting

Question of law for the court

115
Q

PAROLE EVIDENCE RULE
fully integrated contract (definition)

[no. 4: if there is an enforceable deal, what are its terms?]

A

written contract that is final and complete agreement of the parties

116
Q

PAROLE EVIDENCE RULE
complete integration

[no. 4: if there is an enforceable deal, what are its terms?]

A

If written contract is final AND complete agrmnt of parties, PER prohibits parties from introducing
- PRIOR oral statements or writings OR CONTEMPORANEOUS oral statements
that ADD to OR CONTRADICT the written contract

MERGER CLAUSE = presumption of complete integration
ex = “This is the complete and final agreement.”

TEST TIP = on MBE, parol evidence QS will generally state (or assume) that the contract is completely “integrated”

117
Q

PAROLE EVIDENCE RULE
effect of merger clause

[no. 4: if there is an enforceable deal, what are its terms?]

A

contract contains a merger clause = a presumption of complete integration

ex = “This is the complete and final agreement.”

118
Q

PAROLE EVIDENCE RULE
partial integration

[no. 4: if there is an enforceable deal, what are its terms?]

A

If written contract is FINAL (but NOT COMPLETE) expression of parties’ agreement, PER prohibits parties from introducing

  • PRIOR oral statements or writings OR CONTEMP oral statements
  • that CONTRADICT the written contract
119
Q

PAROLE EVIDENCE RULE
what type of question (for a judge) is integration?

[no. 4: if there is an enforceable deal, what are its terms?]

A

Whether a writing is integrated (completely or partially) = a question of LAW for the judge

120
Q

PAROLE EVIDENCE RULE
6 exceptions + UCC exception

[no. 4: if there is an enforceable deal, what are its terms?]

A

parole evidence is admissible
1. to prove contract NEVER BECAME OPERATIVE due to
fraud / duress / mistake / illegality / failure to satisfy condition precedent
2. to establish meaning of AMBIGUOUS term
3. to show that CONSIDERATION was/wasn’t paid
4. to establish a case for REFORMATION by showing writing contains clerical error
5. to prove UNCONSCIONABILITY
6. to prove SIDE DEAL aka if it’s additional agreement that would NATURALLY/NORMALLY be contained in SEPARATE AGREEMENT (w/ separate consideration)

UCC exception
= 3 things admissible to explain/supplement contract (regardless of integration or ambiguity)
in order of PREFERENCE
1. course of PERFORMANCE (same parties in same contract)
2. course of DEALING (same parties in earlier contracts)
3. usage of TRADE (other parties in same industry)

NOTE = oral/written statements made AFTER EXECUTION
(usually as part of modification) also not barred by PER, but still subject to SOF

121
Q

IMPLIED TERMS
basic principales

[no. 4: if there is an enforceable deal, what are its terms?]

A

Under modern law, if contract has been FORMED fails to address some terms, court will fill-in those terms as follows:

Common Law AND UCC = All contracts contain implied promises of good faith, fair dealing, and reasonable efforts in connection with performance and enforcement.

JUST UCC = In addition, the UCC has gap-fillers for

  1. Time and Place of Payment
  2. Place of Delivery
  3. Risk of Loss
  4. Price
  5. Date of Delivery
  6. Mode of Delivery
122
Q

IMPLIED TERMS // UCC
6 UCC gap-fillers

[no. 4: if there is an enforceable deal, what are its terms?]

A
  1. Time and Place of Payment
  2. Place of Delivery
  3. Risk of Loss
  4. Price
  5. Date of Delivery
  6. Mode of Delivery
123
Q

IMPLIED TERMS // UCC
time and place of payment

[no. 4: if there is an enforceable deal, what are its terms?]

A

Under the UCC, payment is due at the time and place at which the buyer is to RECEIVE the goods.

In an installment contract, payment is due at the time and place at which the buyer is to receive of EACH installment.

The buyer may pay by check, but the seller may demand cash; in such event, the buyer must be given a reasonable time to obtain the cash.

124
Q

IMPLIED TERMS // UCC
place of delivery + risk of loss for non-delivery contracts

[no. 4: if there is an enforceable deal, what are its terms?]

A

Place of Delivery = If contract does not call for (expressly or implicitly) delivery, UCC presumes B will pick up such goods at S’s place of BIZ (or if no biz, S’s RESIDENCE)

Risk of Loss = risk of loss shifts to B upon

  1. physical receipt by B if S is MERCHANT or
  2. tender by S if S is NON-MERCHANT
125
Q

IMPLIED TERMS // UCC
place of delivery + risk of loss for delivery contracts

[no. 4: if there is an enforceable deal, what are its terms?]

A

2 types of UCC delivery contracts when parties EXPRESSLY/IMPLIEDLY provide for delivery by common carrier

  1. SHIPMENT Contracts = created by the phrase “FOB or FAS Seller’s location.”
    - S’s risk of loss ends when S places goods w/ common carrier
    - Risk of loss remains with S if S is in breach
  2. DESTINATION Contracts = created by the phrase “FOB or FAS Buyer’s location.”
    - S’s risk of loss ends when goods arrive at B’s location
    - Risk of loss is borne by B if B is in breach BUT B is entitled to any insurance proceeds S obtains for such loss

NOTE = if contract calls for delivery but is silent as to risk of loss, UCC PRESUMPTION = shipment contract

126
Q

IMPLIED TERMS // UCC
risk of loss

[no. 4: if there is an enforceable deal, what are its terms?]

A

NON-DELIVERY contracts = risk of loss shifts to B upon

  1. physical receipt by B if S is MERCHANT or
  2. tender by S if S is NON-MERCHANT

DELIVERY contracts = depends if shipment contract or destination contract

  1. SHIPMENT contract =
    - S’s risk of loss ends when S places goods w/ common carrier
    - Risk of loss remains with S if S is in breach
  2. DESTINATION contract =
    - S’s risk of loss ends when goods arrive at B’s location
    - Risk of loss is borne by B if B is in breach BUT B is entitled to any insurance proceeds S obtains for such loss
127
Q

IMPLIED TERMS // UCC
price

[no. 4: if there is an enforceable deal, what are its terms?]

A

basically, parties can conclude contract for sale w/o settling price

price = REASONABLE PRICE @ time for DELIVERY if

a. NOTHING is said as to price OR
b. the price is LEFT to be agreed by the parties and they FAIL to agree OR
c. the price is to be fixed in terms of some agreed market or other STANDARD as set or recorded by a third person or agency and it is NOT SO SET or recorded

128
Q

IMPLIED TERMS // UCC
date of delivery

[no. 4: if there is an enforceable deal, what are its terms?]

A

The time for shipment or delivery or any other action under a contract if not agreed upon by the parties shall be a REASONABLE TIME

Reasonableness depends on the circumstances, such as

  1. how COMPLICATED the good is to MAKE
  2. PAST DEALINGS of the parties
  3. the PRACTICE of the INDUSTRY
  4. the NEEDS of the BUYER

A party MUST give notice before treating a sales contract as breached due to the passage of a reasonable time for performance

129
Q

IMPLIED TERMS // UCC
mode of delivery

[no. 4: if there is an enforceable deal, what are its terms?]

A

default rule = that goods will be delivered and received in a single lot

130
Q

WARRANTIES
express warranties

[no. 4: if there is an enforceable deal, what are its terms?]

A

definition =
statements of fact BUT NOT puffing/opinions
that are part of B’s basis of the bargain

B’s basis of the bargain

  • If statement existed @ TIME of sale = presumed to be part of B’s basis of bargain
  • If statement was made AFTER sale = not part of B’s basis of the bargain unless court finds that it was modification

Liability for breach of express warranty = STRICT liability

Disclaimer of express warranties

  • Practically speaking, can’t be disclaimed
  • BUT PER will often bar evidence of express warranties that were made prior to execution of integrated contract
131
Q

WARRANTIES
5 types of implied warranties

[no. 4: if there is an enforceable deal, what are its terms?]

A
  1. Implied warranty of merchantability
  2. Implied warranty of fitness for a particular purpose

Other implied warranties = seller also impliedly warrants that she

  1. Has good title
  2. Has the right to convey
  3. There are no liens or encumbrances on the goods
132
Q

WARRANTIES
implied warranty of merchantability

[no. 4: if there is an enforceable deal, what are its terms?]

A

= applies only to MERCHANTS who sell GOODS OF THIS KIND
= requires goods are fit for their ordinary purposes

EXAMPLES

  • general disclaimer = by selling “as is” or “with all faults”
  • specific disclaimer = by a CONSPICUOUS disclaimer mentioning “merchantability”
133
Q

WARRANTIES
implied warranty of fitness for a particular purpose

[no. 4: if there is an enforceable deal, what are its terms?]

A

= made by ANY seller
who KNOWS B’s SPECIFIC NEEDS and
KNOWS that B is RELYING on S’s EXPERTISE to select suitable goods

may be disclaimed generally or specifically

EXAMPLES

  • general disclaimer = by selling “as is” or “with all faults”
  • specific disclaimer = by a CONSPICUOUS written disclaimer
134
Q

THE BASICS
how to approach questions about non-performance by one of the parties

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If a question states that one of the parties failed to do what he agreed to do (i.e., non-performance), it is probably testing the remedies available for breach

Before moving to that issue, a preliminary Q must be asked =
Was the non-performance excused?
– If so, there is no breach

135
Q

THE BASICS
6 excuses for non-performance

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A
  1. Failure of a Condition Precedent
  2. Other Party’s Breach
  3. Anticipatory Repudiation
  4. Prevention (a/k/a Failure to Cooperate or Bad Faith)
  5. Subsequent Agreement
  6. Subsequent Event
136
Q

FAILURE OF A CONDITION PRECEDENT
4 takeaways

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A
  1. If a condition precedent to a party’s performance has not occurred, that party’s performance is excused
  2. EXPRESS conditions precedent may be satisfied ONLY by STRICT COMPLIANCE
    AKA unless the condition occurs completely, the duties subject to the condition are not enforceable
  3. The party whose performance is subject to a condition precedent must make a GOOD FAITH ATTEMPT to satisfy the condition
  4. BUT compliance with an EXPRESS condition precedent = excused if the party whose performance is subject to the condition VOLUNTARILY WAIVES (by words or conduct) the condition
137
Q

FAILURE OF A CONDITION PRECEDENT
3 rules for express condition of a party’s satisfaction

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If a contracting party’s performance is expressly conditioned on his or her “satisfaction” with the other party’s performance, the following rules apply:

  1. if the contract is for services that do not require personal taste or aesthetics, the party (whose performance is conditioned on his or her satisfaction) must act REASONABLY (OBJECTIVE test) in determining whether the other party’s performance is satisfactory
    - in close cases, courts will apply this objective test
  2. if the contract is for services that require personal taste or aesthetics, the party (whose performance is conditioned on his or her satisfaction) must act in GOOD FAITH (SUBJECTIVE test) in determining whether the other party’s performance is satisfactory
  3. if THIRD PARTY is to make the determination of “satisfactory” performance, the third party must act in GOOD FAITH (SUBJECTIVE test)
138
Q

FAILURE OF A CONDITION PRECEDENT
3 constructive conditions for order of performance

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If the contract fails to provide for the order of performance, the following conditions are implied in law

  1. if performance by one party will take time, that party’s performance must take place prior to the other party’s performance
  2. if performance by both parties may occur at the same time, the parties must tender simultaneously
    (AKA each party’s tender is a condition precedent to the other party’s performance)
  3. if the contract sets a date certain for one party to perform but does not set a date for the other party to perform, the party subject to the date certain must perform first
139
Q

FAILURE OF A CONDITION PRECEDENT
satisfaction of constructive conditions

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

Unlike express conditions, constructive conditions may be satisfied by SUBSTANTIAL compliance

UNLESS the breach is willful
(in which case strict compliance is required)

140
Q

FAILURE OF A CONDITION PRECEDENT
sale of goods – general rule for condition triggering B’s duty to perform
(idk man i tried to rewrite this prompt and i got nothing)

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If S does not make PERFECT tender, B’s duty to perform (aka pay) is excused

2 EXCEPTIONS =

  1. Seller cures
  2. Installment sales contract
141
Q

FAILURE OF A CONDITION PRECEDENT
sale of goods – seller cures

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

(exception for imperfect tender in sales of goods)

  1. S’s right to cure if time for performance has NOT EXPIRED = S has right to cure by
    - giving reasonable NOTICE that it will cure
    - making a new tender of conforming goods
    = B must then accept
  2. S’s right to cure beyond original contract time = ordinarily, no right to cure
    BUT where B rejects tender of nonconforming goods
    that S REASONABLY BELIEVED would be acceptable (w/ or w/o money allowance), based on something like
  3. trade practices or prior dealings w/ B led S to believe goods would be acceptable
  4. S could not have known of the defect despite proper biz conduct
    (prepackaged goods from reputable supplier)
    = S has right to cure within further reasonable time and B must accept
142
Q

FAILURE OF A CONDITION PRECEDENT
sale of goods – installment sales contract

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

= if delivery will occur in two or more installments

an INSTALLMENT may be REJECTED only if

  • the nonconformity SUBSTANTIALLY IMPAIRS the value of that installment AND
  • CAN’T BE CURED

the WHOLE contract is breached only if the nonconformity of ONE OR MORE installments SUBSTANTIALLY IMPAIRS the value of the ENTIRE contract

NOTED = unless the contract expressly calls for installments, UCC PRESUMES a SINGLE delivery

143
Q

FAILURE OF A CONDITION PRECEDENT
non-goods – general rule

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If one party is in MATERIAL breach (aka the party has NOT SUBSTANTIALLY performed), the other party’s duty to perform = EXCUSED

If breach is NOT material = non-breaching party must perform and THEN seek damages (or offset the amount of damages from final payment)

144
Q

FAILURE OF A CONDITION PRECEDENT
non-goods – compliance for willful breach

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

Most courts require STRICT compliance if the breach is WILLFUL

145
Q

FAILURE OF A CONDITION PRECEDENT
delay @ common law

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

delay in performance = generally constitutes MATERIAL BREACH only if it operates to SIGNIFICANTLY DEPRIVE other party of benefit of contract

TIME OF THE ESSENCE and party doesn’t perform on time = that party is in material breach

modern law presumption = time is NOT of the essence
unless contract so states or other circumstances make need for promptness apparent

146
Q

FAILURE OF A CONDITION PRECEDENT
divisible contracts @ common law

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If performances to be exchanged under exchange of promises
can be apportioned into CORRESPONDING PAIRS of part performances properly regarded as agreed equivalents
= party’s performance of his part of the pair has same effect on other party’s performance
as if only that pair had been promised

BUT if contract by its own terms is EXPRESSLY INDIVISIBLE, court may not construe it otherwise

147
Q

ANTICIPATORY REPUDIATION
basic principle

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If a party UNAMBIGUOUSLY declares (in communication to other party) that it won’t perform prior to the date of performance
= other party’s performance is excused
and that party has 2 choices
1. AWAIT performance by repudiating party for COMMERCIALLY REASONABLE time
(while SUSPENDING its own performance)
2. treat declaration as IMMEDIATE BREACH (ex = bring suit, sell item to another buyer)
EVEN IF it has notified repudiating party that it would await performance and has urged a retraction

if repudiating party RETRACTS repudiation BEFORE non-repudiating party party has
1. MATERIALLY CHANGED position in RELIANCE on the repudiation
OR
2. NOTIFIED repudiating party that contract is TERMINATED
= obligations of both parties are revived

148
Q

ANTICIPATORY REPUDIATION
what is required for repudiation?

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

It is NOT necessary for repudiation that performance be made literally and utterly IMPOSSIBLE

Repudiation can result from action which REASONABLY INDICATES a rejection of the continuing obligation, including

  1. a statement of intention not to perform except on conditions that go beyond the terms of the contract or
  2. a sale of the goods to a third party that the seller was contractually obligated to deliver to the buyer
149
Q

ANTICIPATORY REPUDIATION
adequate assurances

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

UCC (and Restatement) = A party may demand IN WRITING adequate assurances of future performance if that party has REASONABLE grounds for insecurity (ex = something short of an anticipatory repudiation, such as credit problems)

the party demanding adequate assurances MAY SUSPEND its future performance until such assurances are received (which must be WITHIN A REASONABLE TIME, NOT TO EXCEED 30 DAYS)

Failure to provide such assurances in a timely fashion constitutes an ANTICIPATORY REPUDIATION

150
Q

PREVENTION
basic principle

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

AKA Failure to Cooperate or Bad Faith

If one party acts in such a way that it makes the other party’s performance impossible, the other party’s performance is excused

151
Q

SUBSEQUENT AGREEMENT
novation

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

All parties to the original contract (and the new third party) agree to SUBSTITUTE the new party for one of the original parties

In such case, the original party’s (the party who was replaced) performance is excused and the new party assumes that duty

A novation is NEVER PRESUMED = it must be clearly established

152
Q

SUBSEQUENT AGREEMENT
accord and satisfaction

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

An agreement by the parties to a contract to accept a different type of performance by one party (the “accord”) AND that party so performs (the “satisfaction”)

The accord suspends the original performance; the satisfaction excuses the original duty

If there is no “satisfaction,” the other party may sue on the original agreement OR the accord

153
Q

SUBSEQUENT AGREEMENT
mutual rescission

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

This excuses performance only if both parties’ performances are still executory

If the original contract is subject to the SOF, a writing may be required to rescind it

154
Q

SUBSEQUENT EVENT
2 tests for event affecting seller (goods) or provider (services)

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

After deal executed but before it’s performed, UNEXPECTED event occurs that renders performance of SELLER of goods/real property OR PROVIDER of services either

  1. OBJECTIVELY IMPOSSIBLE
  2. COMMERCIALLY IMPRACTICABLE
155
Q

SUBSEQUENT EVENT
objectively impossible performance

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

= when no one could perform under such circumstances

3 key examples

  1. destruction of the subject matter
  2. death or incapacity of a party in a personal services contract
  3. a supervening illegality

BUT if @ the TIME OF CONTRACTING, the parties were AWARE that an event was not CERTAIN to occur, that event may not be used to support a claim of impossibility or impracticability

156
Q

SUBSEQUENT EVENT
commercially impracticable performance – general rule

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

An UNFORESEEN event that SO DRASTICALLY changes the duty of one party that it is NO LONGER FAIR to make that party perform

Example = an unexpected strike, war, outbreak of disease, shortage of raw materials, embargo

157
Q

SUBSEQUENT EVENT
commercially impracticable performance – more expensive performance

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

An unforeseen event that simply makes a party’s performance MORE EXPENSIVE is NOT sufficient to excuse performance

UNLESS
1. the increase in expenses is MASSIVE 
(ex = a ten-fold increase) 
OR 
2. the increase places the non-performing party on the BRINK OF BANKRUPTCY
158
Q

SUBSEQUENT EVENT
commercially impracticable performance – temporary event

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If the unforeseen event is TEMPORARY in nature, the seller may ONLY SUSPEND performance

159
Q

SUBSEQUENT EVENT
commercially impracticable performance – partial inability to perform

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

If the seller’s inability to perform as a result of the unforeseen event is only PARTIAL, the seller must provide PRO RATA PERFORMANCE to her customers, including regular customers who do not have any outstanding orders

160
Q

SUBSEQUENT EVENT
test for event affecting buyer (goods) or recipient (services)

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

After deal executed but before it’s performed, an UNEXPECTED event occurs that FRUSTRATES THE SOLE PURPOSE of a BUYER of goods/real property or a RECIPIENT of services

161
Q

SUBSEQUENT EVENT
frustration of purpose

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

= SOLE purpose of the contract, which BOTH PARTIES KNOW of @ time of CONTRACTING, no longer exists

NOTE = frustration of purpose is RARELY successful as an excuse for non-performance

162
Q

OVERVIEW
basic principle

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

NON-breaching party may CHOOSE to pursue various remedies, including

  1. Expectation Damages
  2. Reliance Damages
  3. Equitable Remedies
  4. Restitution
163
Q

EXPECTATION DAMAGES
purpose

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

to place the non-breaching party in the position it would have been in if the breaching party had fully performed

164
Q

EXPECTATION DAMAGES
calculation

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

in most cases, non-breaching party is entitled to
EXPECTATION damages
— PLUS INCIDENTAL damages
— PLUS FORESEEABLE CONSEQUENTIAL damages (foreseeable by BOTH parties @ time of CONTRACTING = usually P told D of special needs @ contracting)
– MINUS reasonably AVOIDABLE costs and damages

165
Q

EXPECTATION DAMAGES
determining amount of expectation damages (3 Qs)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

ASK

  • What would the plaintiff have received if the contract had been fully performed?
  • What did the plaintiff receive?
  • What’s the difference?
166
Q

EXPECTATION DAMAGES
3 special cases for expectation damages

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A
  1. Construction contracts
  2. Employment contracts
  3. Contracts for the sale of land
167
Q

EXPECTATION DAMAGES
for construction contracts

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

defective/unfinished construction, P may recover damages based on EITHER

a. diminution in property’s MARKET PRICE caused by the breach OR
b. reasonable cost of COMPLETING performance or REMEDYING defects AS LONG AS cost is NOT CLEARLY DISPROPORTIONATE in value

168
Q

EXPECTATION DAMAGES
for employment contracts

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

EMPLOYEE BREACH = employer entitled to recover
difference btwn REPLACEMENT employee WAGES and breaching employee’s CONTRACT

EMPLOYER BREACH = employee is entitled to recover
FULL CONTRACT
— MINUS the salary employee would’ve received if employee had made REASONABLE efforts to obtain a COMPARABLE job in same locale AND
— MINUS ACTUAL salary employee received from ANY job

169
Q

EXPECTATION DAMAGES
for contracts for sale of land

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

= difference btwn
CONTRACT price and
FMV of the land

170
Q

EXPECTATION DAMAGES
4 key situations for sale of goods (UCC)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A
  1. S breaches, S has goods
  2. S breaches, B has goods
  3. B breaches, B has goods
  4. B breaches, S has goods
171
Q

EXPECTATION DAMAGES
B’s remedies when S breaches, S has goods (UCC)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

BREACH OCCURS WHEN

a. Seller Repudiates (fails to deliver)
b. Buyer Rightfully Rejects Goods
c. Buyer Rightfully Revokes Acceptance of Goods
d. Goods Destroyed Before Risk of Loss Shifts to Buyer

DAMAGES =
EITHER
- Cover (Reasonable Substitute) = difference 
btwn COVER price 
and CONTRACT price
OR
btwn MARKET VALUE 
(@ time B learns of breach and at place of tender/arrival for rejection/revocation of acceptance) 
and CONTRACT price 
PLUS
- Incidental Damages and
- Consequential Damages (if foreseeable by seller) 
MINUS
- Expenses Saved by Breach

EQUITABLE RELIEF
= Specific Performance
ONLY for very unique goods or for “other proper circumstances”
(ex = B is unable to cover or is unable to secure a comparable long-term contract)

172
Q

EXPECTATION DAMAGES
B’s remedies when S breaches, B has goods (UCC)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

BREACH OCCURS WHEN
- Buyer Accepts Non-Conforming Goods (breach of warranty) or Non-Conforming Tender

DAMAGES for NONCONFORMING GODS
= Difference btwn Value of Goods as Accepted and Value as Promised

DAMAGES for NONCONFORMING TENDER
- Losses resulting from the ordinary course of events (e.g., damages caused by S’s failure to make timely delivery)
PLUS
- Incidental Damages and
- Consequential Damages (if foreseeable by S)

LIMITATION CLAUSE for CONSEQUENTIAL DAMAGES

  • Consequential damages may be limited or excluded in contract, unless limitation or exclusion is unconscionable
  • Limitation of consequential damages for injury to person in case of consumer goods is PRIMA FACIE UNCONSCIONABLE
173
Q

EXPECTATION DAMAGES
S’s remedies when B breaches, B has goods (UCC)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

BREACH OCCURS WHEN

  1. B accepts goods but doesn’t pay
  2. Goods destroyed after risk of loss shifts to B

DAMAGES
Contract price
PLUS incidental damages
MNUS expenses saved by breach

174
Q

EXPECTATION DAMAGES
S’s remedies when B breaches, S has goods (UCC)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

BREACH OCCURS WHEN

  1. B repudiates before delivery
  2. B wrongfully rejects (and returns goods)
  3. B wrongfully revokes acceptance (and returns goods)
GENERAL RULE for DAMAGES
= Difference btwn contract price and 
resale price or market value (as of time/place of tender) 
PLUS incidental damages
MINUS expenses saved by breach

DAMAGES for SPECIAL CASES exceptions)

  1. LOST VOLUME SELLER = profit
  2. SPECIALIZED GOODS = contract price
175
Q

EXPECTATION DAMAGES
liquidated damages

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

Liquidated Damages are appropriate only if

  • at time of contracting, parties knew it would be DIFFICULT TO DETERMINE damages in event of breach AND
  • liquidated damages amount is REASONABLE in light of anticipated or actual damages

If contract permits P to ELECT to recover EITHER liquidated damages or actual damages
= liquidated damages clause is probably UNENFORCEABLE

EXAMPLES of enforceable liquidated damage clauses

  • 10% of purchase price for real estate contracts
  • Per diem (e.g., $100 per day for delays in building contract) damages
176
Q

EXPECTATION DAMAGES
punitive damages

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

no punitive damages are awarded in contracts cases (unless there is also a tort)

177
Q

EXPECTATION DAMAGES
damages for emotional distress

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

Damages for emotional distress are not available in breach of contract actions, unless the breach caused personal injury (e.g., breach of warranty) or such harm is “particularly likely” to result from a breach (e.g., a mortuary mishandling a corpse or an insurance company guilty of bad faith)

178
Q

RELIANCE DAMAGES
definition

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

= Reliance damages are backward-looking damages; their purpose is to put the non-breaching party in the position it would have been in had the contract never been formed

179
Q

RELIANCE DAMAGES
use

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

reliance damages are generally awarded in cases where the non-breaching party cannot establish expectation damages with reasonable certainty

in those cases, the non-breaching party has a right to damages based on its reliance interest, including expenditures made in preparation for performance

180
Q

RELIANCE DAMAGES
new business lost profits

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

traditional (Minority) View = Lost profits (i.e., expectation damages) are not recoverable by a new business or enterprise; a new business or enterprise is limited to reliance damages.

restatement (Majority) View = Lost profits are recoverable by a new business or enterprise if proved with reasonable certainty

181
Q

EQUITABLE REMEDIES
when are equitable remedies available?

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

ONLY if money damages are inadequate

AKA money damages will not put non-breaching in as good a position as performance would have

182
Q

EQUITABLE REMEDIES
availability of specific performance

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

available only for breaches of

  1. real estate contracts
  2. UCC contracts
    — a. sale of unique or rare goods
    — b. for other proper circumstances
    (like buyer is unable to cover or is unable to secure comparable long-term contract)
183
Q

EQUITABLE REMEDIES
specific performance for personal services contracts

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

TRICK
NOT awarded for personal services contracts

BUT an injunction may be entered to prevent the employee from working for a competitor where

  1. employee has very rare skills OR
  2. employee possesses trade secrets OR
  3. employee is subject to an enforceable “non-compete” agreement)
184
Q

EQUITABLE REMEDIES
reformation

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

Where a writing that memorializes an oral agreement fails to accurately express the agreement because of a clerical or transcription error (or fraud), the court may reform the writing to express the agreement, except to the extent that rights of third parties will be unfairly affected

Clear and convincing evidence is usually required for reformation

185
Q

RESTITUTION
purpose

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

= to prevent UNJUST ENRICHMENT

186
Q

RESTITUTION
no enforceable contract

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

If there is no valid contract but the plaintiff provided a valuable service (or property) to the defendant with a reasonable expectation of payment, the plaintiff may be entitled to quasi-contractual relief

187
Q

RESTITUTION
quasi-contract definition

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

A quasi-contract is not a contract, but rather a form of relief designed to remedy unjust enrichment

188
Q

RESTITUTION
measuring quasi-contract damages

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

Quasi-contract damages are measured by either the detriment suffered by the plaintiff or the benefit experienced by the defendant

189
Q

RESTITUTION
non-breaching plaintiff

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

nonbreaching P (which is typical)
= P may choose RESTITUTION over EXPECTATION/RELIANCE damages
(but restitution is usually best remedy only w/ regard to losing contracts)

breaching P
= quasi-contract damages limited to ENRICHMENT actually RECEIVED BY D (not value of efforts undertaken by P)

190
Q

THE BASICS
3 types of third parties that may have rights/duties in the contract

[no. 7: do any third parties have rights and/or obligations under the contract?]

A
  1. Third party BENEFICIARY
  2. ASSIGNEE of rights
  3. DELEGATEE of duties
191
Q

THE BASICS
timing distinctions btwn 3 types of 3Ps

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

3Pb is contemplated by original contracting parties AT TIME OF CONTRACTING

Assee’s of R’s appear AFTER THE EXECUTION of the original contract

Delee’s of D’s appear AFTER THE EXECUTION of the original contract

192
Q

THIRD PARTY BENEFICIARIES
timing

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

3Pb is contemplated by original contracting parties AT TIME OF CONTRACTING

193
Q

THIRD PARTY BENEFICIARIES
how is 3Pb created?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

If AT THE TIME OF CONTRACTING, the OG contracting parties INTEND to confer BENEFIT ON a 3P = 3Pb can enforce agreement (with 2 exceptions)

BUT if OG contracting parties DON’T expressly intend to confer a benefit on 3P, then 3P = merely an INCIDENTAL third party beneficiary and has NO RIGHT to enforce the contract

194
Q

THIRD PARTY BENEFICIARIES
what may 3Pb do?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

3Pb may enforce agreement AGAINST PROMISOR

UNLESS

  1. OG contracting parties MODIFIED/CANCELLED contract PRIOR to the time 3P’s interest in the contract VESTED
  2. PROMISOR has DEFENSE regarding FORMATION/PERFORMANCE of the contract that would’ve been valid against the promisee (b/c 3Pb’s rights to enforce the contract = derivative)
195
Q

THIRD PARTY BENEFICIARIES
vesting (3 methods)

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

occurs when 3P

  1. assents to the contract OR
  2. knows of and relies upon the contract OR
  3. files suit on the contract
196
Q

THIRD PARTY BENEFICIARIES
promisee’s rights in 3Pb contract

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

promisee may sue PROMISOR for order of SPECIFIC PERFORMANCE ordering the promisor to provide the goods, services, etc. TO 3P

197
Q

ASSIGNMENT OF RIGHTS
timing

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Assee’s of R’s appear AFTER THE EXECUTION of the original contract

NOTE =

  • often contract rights AND duties are assigned/delegated to the same 3P
  • when a party to a contract “assigns” the contract, this transfer acts as BOTH assignment of rights and delegation of duties
198
Q

ASSIGNMENT OF RIGHTS
when does assignment of rights occur?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Occurs when AFTER time OG parties entered into contract, one party assigns her rights under the contract to a third party

199
Q

ASSIGNMENT OF RIGHTS
roles of parties in assignment of rights

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Assignor = party who assigns her rights

Assignee = 3P

Obligor = other original party to the contract

200
Q

ASSIGNMENT OF RIGHTS
example of rights typically assigned

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Benefits, often the right to payment

201
Q

ASSIGNMENT OF RIGHTS
common law v. UCC rules for assignment

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

TRICK.

The common law and UCC rules are quite similar regarding assignments

202
Q

ASSIGNMENT OF RIGHTS
in what instances are contract rights assignable?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Contract rights are generally assignable UNLESS

  1. CONTRACT makes assignments VOID or
  2. assignment would MATERIALLY CHANGE OBLIGOR’S DUTY or
  3. assignment would MATERIALLY INCREASE the BURDEN/RISK imposed on obligor
203
Q

ASSIGNMENT OF RIGHTS
effect of language prohibiting assignment of the contract

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Language prohibiting assignment of the CONTRACT = construed as BARRING DELEGATION OF DUTIES and NOT assignment of rights

Language prohibiting assignment of CONTRACTUAL RIGHTS = does NOT BAR assignment but merely GIVES OBLIGOR RIGHT to sue assignor for breach

204
Q

ASSIGNMENT OF RIGHTS
rights of parties

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

If an assignment is effective, assignee (but NOT assignor) may sue obligor to enforce it

BUT assignee is subject to most defenses obligor could assert against assignor
(b/c assignee’s rights to enforce the contract are derivative)

205
Q

ASSIGNMENT OF RIGHTS
duties of parties

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Once obligor has KNOWLEDGE of a valid assignment, obligor MUST render PERFORMANCE to or PAY assignee

if obligor renders performance to or pays ASSIGNOR, obligor does so at her own risk

206
Q

ASSIGNMENT OF RIGHTS
revocability of assignments

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

An ORAL GRATUITOUS assignment =

  • generally REVOCABLE by assignor
  • AUTOMATICALLY REVOKED
    1. by DEATH OR BANKRUPTCY of assignor OR
    2. by assignor’s SUBSEQUENT ASSIGNMENT of same rights to another assignee OR
    3. if the assignor takes performance directly from the obligor

Assignments FOR VALUE = generally IRREVOCABLE by the assignor
(ex = as payment for a preexisting debt)

WRITTEN GRATUITOUS ASSIGNMENTS = generally IRREVOCABLE by the assignor
(ex = a signed writing or delivery of a token chose, such as a savings account passbook or a lottery ticket)

207
Q

ASSIGNMENT OF RIGHTS
assignment of rights to more than one assignee

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

If the assignor assigns SAME CONTRACT RIGHTS TO MORE THAN ONE assignee, 2 rules apply

  1. If FIRST assignment is REVOCABLE = subsequent assignment revokes it
  2. If TWO OR MORE IRREVOCABLE assignments = first irrevocable assignee prevails (BUT losing assignee (for value) has a breach of warranty action against the assignor)
208
Q

DELEGATION OF DUTIES
timing

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Delee’s of D’s appear AFTER THE EXECUTION of the original contract

NOTE =

  • often contract rights AND duties are assigned/delegated to the same 3P
  • when a party to a contract “assigns” the contract, this transfer acts as BOTH assignment of rights and delegation of duties
209
Q

DELEGATION OF DUTIES
when does delegation of duties occur?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

occurs when AFTER time the OG parties entered into contract, one party transfers her under the contract to third party

210
Q

DELEGATION OF DUTIES
roles of parties in delegation of duties

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

“delegator” or “delegor” = the party who delegates her duties

“delegatee” or “delegee” or “delegate” = the third party

“obligee” = the other original party to the contract

211
Q

DELEGATION OF DUTIES
in what instances are contract duties delegable?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

Duties may generally be delegated, but not if

  1. contract PROHIBITS EITHER delegations or assignments
  2. obligee chose delegator to perform PERSONAL SERVICE because of the delegator’s SPECIAL SKILLS, REPUTATION, OR TRUST (e.g., the delegator is a famous portrait painter)

AKA if the delegation impairs obligee’s commercially reasonable expectations = delegation is void

212
Q

DELEGATION OF DUTIES
obligations under delegation

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

If the delegation is proper, the obligee MUST accept the performance of the delegate

if the obligee refuses to accept such performance, the obligee forfeits any rights it has against the delegatee AND the delegator

213
Q

DELEGATION OF DUTIES
what rights does an obligee have?

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

If delegation is valid and delegatee doesn’t perform, OBLIGEE may sue either
a. delegator (unless there’s novation) OR
b. delegatee (as 3Pb of contract btwn delegator and delegate)
(in such cases, delegatee has primary liability and delegator has secondary liability as a surety)

UCC = OBLIGEE may treat delegation as creating REASONABLE GROUNDS FOR INSECURITY = may demand that DELEGATEE PROVIDE ADEQUATE ASSURANCES of performance

214
Q

THE BASICS
day in each month

[overview]

A
  • 30 days hath September, April, June, and November
  • all the rest have 31
  • except February which as 28 or maybe 29
215
Q

SALES
breach of warranty - privity

[no. 4: if there is an enforceable deal, what are its terms?]

A

Article 2 requires horizontal privity

Majority = person other than B bringing suit for breach of warranty must be

  1. Natural persons B’s family or household or guest in B’s home AND
  2. Seeking damages for personal injury
216
Q

SALES
breach of warranty - notice

[no. 4: if there is an enforceable deal, what are its terms?]

A

As prerequisite to filing breach of warranty claim, B must give pre-suit notice to S within reasonable time after breach is discovered or should have been discovered

217
Q

SALES
breach of warranty - defenses

[no. 4: if there is an enforceable deal, what are its terms?]

A

Assumption of the risk = defense

Unforeseeable misuse of product = defense

Contributory negligence = NO defense

218
Q

SALES
assignment in requirements/output contracts

[no. 7: do any third parties have rights and/or obligations under the contract?]

A

rights”in requirements and output contracts are assignable AS LONG AS assignee does NOT DISPROPORTIONATELY alter the quantity

219
Q

SALES
restitution under UCC 2-718(2)

[no. 6: if there was inexcusable non-performance, what are the non-breaching party’s remedies?]

A

Where S justifiably withholds delivery of goods b/c of B’s breach = B is entitled to restitution of any amount by which sum of his payments exceeds either

  1. Amount to which S is entitled by virtue of an ENFORCEABLE liquidated damages clause OR
  2. In absence of such clause, whichever is SMALLER of 20% of total contract price OR $500
220
Q

SALES
items attached to land

[no. 1: what law governs the transaction]

A

Article 2 applies to certain items attached to land like

  1. sale of
    - minerals
    - oil
    - gas
    - structures if to be severed from land by S
  2. sale of
    - crops
    - timber
    - fixtures regardless of which party is to sever asset from land
221
Q

SALES
other party’s breach - reasonable inspection
(how does B’s acceptance happen under UCC)

[no. 5: did either party fail to perform its part of deal and if so, was non-performance excused?]

A

B’s acceptance occurs when B

  1. After REASONABLE OPPORTUNITY to inspect goods, tells S goods are conforming/will accept non-conforming goods
    - If B pays at/before receipt, there’s still right to inspect and reject non-conforming goods
  2. FAILS TO REJECT
    (but such acceptance does not occur until B has had a reasonable opportunity to inspect them)
  3. Does any act inconsistent with S’s ownership
    (ex = B sells the goods to 3P)

Bar Refresher (8 decks)

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