Critical Pass - Contracts Flashcards
1
Q
Equation for Contracts
A
K = MA (O + A) + C - D
2
Q
First question to ask for every contracts Q
A
What law applies?
UCC = contracts for sale of goods
Common law - contracts for services
3
Q
How to accept a unilateral K
A
completion of performance
4
Q
Quasi Contracts - what is it
A
not a contract, a restitution remedy to prevent unjust enrichment (typically P conferred a benefit to D and D will be unjustly enriched if P is not compensated)
5
Q
Unilateral contracts can occur in what 2 situations
A
(1) when the offeror clearly (unambiguously) indicates that completion of performance is the only manner of acceptance; and
(2) where there is an offer to the public, such as a reward offer.
6
Q
For mixed K (for goods and services) what law applies
A
predominant purpose of the K unless the K divides payment between goods and services (then apply UCC to goods portion, and CL to remainder)
7
Q
UCC/Article 2 applies to goods. What is not included tho?
A
- sale of real estate,
- services (such as a health
club membership or employment), or - intangibles (such as a patent), or
- construction contracts.
8
Q
who is a “merchant”
A
one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.
9
Q
Mutual assent is the same as…
A
offer and acceptance
10
Q
for a communication to be an offer, it must create ..
A
a reasonable expectation/objective manifestation of intent that the offeror is willing to enter into a K on the basis of the offered terms.
11
Q
In deciding whether a communication creates an offer, ask: (3)
A
- was there a promise to enter into the K?
- was there certainty or definiteness in the terms?
- was there communication of the above to offeree?
12
Q
Advertisements are or are not offers?
A
typically not offers, they are usually construed as mere invitations for offers.
13
Q
when can ads be an offer?
A
highly specific as to quantity and clearly indicate who may accept
14
Q
For real estate transactions, what terms must be included in the offer
A
- the land (just some specificity is ok)
- price terms
15
Q
What must be included in an offer under the UCC/sales of goods?
A
the quantity being offered must be certain or capable of being certain
16
Q
What is a requirement/”output” contract?
A
a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer. (output K is when the seller promises to sell all there stuff to a certain buyer)
17
Q
For offers in employment contract situations, what must be specified? What happens if THIS THING is not specified?
A
Duration must be specified. If not, the offer is construed as creating a contract terminable at will.
18
Q
Requirement/output K offers under the UCC require that
A
there was no unreasonable disproportionate increase in quantity allowed.
19
Q
under the UCC, if the offer is missing terms..what happens (missing price term)
A
it is ok so long as the parties clearly intended to make a K and there is a reasonably certain basis for giving a remedy
20
Q
Under common law, an offer could have issues of vagueness. For these issues, think of where what could apply?
A
The presumption that the parties intent was to include reasonable terms, which helps supply missing terms.
21
Q
But when can the presumption for vague terms not apply?
A
Presumption cannot apply if the parties have included a term that makes the K too vague to be enforced (“I agree to split profits on a ‘liberal basis’”)
22
Q
What if an offer state states that terms will be agreed upon later?
A
This is typically fine unless the term is a material term, in which case the offer is too uncertain.
23
Q
3 ways that an offer can be terminated by the acts of parties?
A
- lapse of time,
- rejection
- revocation by offeror
24
Q
What does it mean for an offer to terminate through lapse of time?
A
Offeree must accept the offer within the time specified, or if no time is specified, within a reasonable time. If neither, offer is terminated.
25
4 potential ways an offeree can reject an offer and terminate their power of acceptance
1. express rejection (offeree's statement that they do not intend to accept the offer)
2. counteroffer
3. conditional acceptance
4. acceptance with new additional terms (UCC and common law differ here)
26
A counteroffer under the common law is both a
rejection and a new offer (terminates the OG offer and reverses the role of the parties)
27
Under common law, a counteroffer is simply a
rejection of the contract, and terminates the offer
28
When you see a counteroffer, make sure to distinguish between counteroffer and a ...
mere inquiry which does not terminate the offer (
would you consider lowering the price?)
29
a condition offer will constitute a rejection of the offer if
the acceptance is made expressly conditioned on acceptance of new terms.
ex. offer to mow lawn, offeree says "I accept if you also trim the hedges." New offer, and original offerree is now the offeror.
30
conditional acceptance is not a rejection to an offer if
the condition would be included anyway (does not terminate original offer)
31
a rejection is effective, when?
when received by the offeror
32
a rejection of or a counter offer of an option in an option K is not.. (IMPORTANT, confused)
a termination of an offer. The offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree's rejection.
33
in the option K situation, what two things are NOT a termination of the offer
1. counteroffer to an option
2. rejection
34
Methods of offeror revocation (2)
1. directly
2. indirectly by offeree becoming aware through 1. reliable info, 2. from a reliable source, 3, of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make an offer.
35
when is revocation effective?
when received by offeree
36
an offer CANNOT be revoked once..
it has been accepted
37
for unilateral Ks, when can the offer become irrevocable
when the start of the performance has occurred (not just mere preparation)
38
4 situations where offer is Irrevocable
1. Option K
2. UCC Firm offer
3. Detrimental Reliance by offeree
4. Beginning performance for unilateral K
39
What are the requirements for an Option K under Common law, what about UCC?
CL: consideration required in exchange for option
UCC: firm offer rule cant apply and consideration needed
40
3 elements of a UCC firm offer:
1. offeror is a merchant
2. writing gives assurances that offer will be held open
3. writing is signed and in writing.
only
ass
wiggles
41
When does detrimental reliance make an offer irrevocable?
When the offeror could reasonably expect that the offeree would rely to their detriment on the offer.
42
3 situations where an offer can be terminated by operation of law?
1. death or insanity of either party
2. destruction of the proposed contract's subject matter; or
3. Supervening illegality
43
Acceptance is (generally)
manifestation of assent to the terms of the offer
44
for an acceptance with additional terms, how is this treated under common law and the UCC?
common law: mirror image rule - rejection and counteroffer
UCC: depends on whether merchants or not
45
unless provided otherwise in the K, an offer is construed as inviting acceptance in...
any reasonable manner and by an medium reasonable under the circumstances
46
Under UCC Art. 2, offers to buy goods for current or prompt shipment invite acceptance by either:
1. promise to ship; or
2. by current or prompt shipment of conforming or nonconforming goods
47
Under the UCC, for acceptance with additional terms, what happens when both parties are merchants? what about if there is a non-merchant?
Merchants: Additional terms become part of the K unless certain exceptions apply (TAMMY LIVES OBESE)
Nonmerchant: Terms of offer govern, Additional terms excluded and are mere proposals to modify the K
48
The beginning of performance in a unilateral K may create...
an option so that the offer is irrevocable. but the offeree is not obligated to complete performance merely because they have begun performance.
49
In all Ks, offeree must know of the offer to accept it. If A finds O's watch and returns it to O without knowledge of O's reward offer, what happens?
A has no contractual right to the reward. they didnt know.
50
when does an offer die with the offeror
if they died before the offeree accepted
51
when the offeror could reasonably expect that the offeree would deny to their detriment on the offer, what happens
the offer will be held irrevocable as an option contract for a reasonable length of time.
52
bilateral contracts can be accepted by either:
1) promise to perform
2) beginning of performance
53
What is a conditional offer
"If X happens, I will buy it for Y."
54
What needs to happen for a conditional offer to be valid
Condition precedent needs to be satisfied
55
If acceptance letter is sent, then rejection is sent, what controls
acceptance usually
56
if rejection letter is sent, then acceptance sent, what usually controls
whichever arrives first, mailbox rule usually does not apply
57
Under the UCC, if both parties are merchants, acceptance with additional terms is TYPICALLY fine and includes the terms unless.... (what doctrine)
Battle of the forms
K is formed with the additional terms unless:
1. term materially alters the K
2. offer limits acceptance to terms of the offer; OR
3. offeror has already objected to the additional terms
SAYING: Tammy, lives, obese
58
If the battle of forms applies to the additional terms in acceptance, what happens
contract is still formed, without the additional terms tho
59
Mailbox rule does NOT apply to...
1. offers that stipulate acceptance is not effective until received
2. option Ks
3. all irrevocable offers (rejection sent, then acceptance)
60
Remember that for different terms in the acceptance, there is a split of authority. Some courts will... while others will..
1. Some courts will follow the tests for additional terms/battle of forms
2. others will apply the knockout rule
61
What is the knockout rule
conflicting terms in the offers and acceptance are knocked out of the K. Gaps leftover are filled by the UCC.
62
IMPORTANT: a merchant's confirmatory memo is still subject to...
battle of the forms analysis
63
what is a merchant's confirmatory memo
confirms an oral agreement that may contain different or additional terms
64
Typically silence is not acceptance unless
Silence indicates acceptance by:
1. prior dealings or trade practices
2. it would be commercially reasonable for the offeror to consider silence as acceptance
3. if the recipient of the services knew or should have known that the services were being rendered with the expectation of compensation
65
2 ways merchants can accept an offer to buy goods by shipment (IMPORTANT) UCC
a) Providing a promise to ship goods (usually by written confirmation), or
b) Promptly shipping conforming or nonconforming goods
66
A unilateral K cannot be accepted until...
performance is completed.
bilateral is beginning of performance.
67
a sale by auction is complete when the auctioneer...
announces by "fall of the hammer" or in another customary manner.
68
is a shipment of nonconforming goods still an acceptance?
yes , creates bilateral K. but it is also a breach unless the seller seasonably notifies the buyer that a shipment of the nonconforming goods is offered only as an accommodation.
69
If the buyer required to accept accommodation goods?
No, they may reject. If they reject, shipper is NOT in breach and may reclaim the goods.
70
Consideration general rule
bargained-for exchange of legal value between parties; there must be a benefit to promisor or detriment to promisee
71
What two things are invalid consideration
1. gifts
2. illusory promises
3. PAST CONSIDERATION
3. Promise to perform a pre-existing legal duty
72
For consideration the promise must..
induce the detriment and the detriment must induce the promise.
73
a promise given in exchange for something already done does not typically satisfy consideration unless...
the past obligation is unenforceable because of a defense (like SOL) and that obligation is made in writing or partially performed
74
If a past act benefited the promisor and was performed by the promisee at the promisor's request or in response to an emergency....
a subsequent promise to pay for THAT SPECIFIC act will be enforceable
75
A promise to perform a preexisting legal duty is typically not valid consideration, but what are the exceptions
a) New or different consideration is promised;
b) The promise is to ratify a voidable obligation (for example, a promise to ratify a minor’s contract after reaching majority or a promise to go through with a contract despite the other party’s fraud);
c) The preexisting duty is owed to a third person rather than to the promisor;
d) There is an honest dispute as to the duty; OR
e) There are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of circumstances not
anticipated when the contract was made.
76
Generally, a contract cant be modified unless there is NEW consideration. But some courts under common law may permit the modification with this consideration if:
1. the modificative is due to circumstances that were unanticipated by the parties when the contract was made; and
2. it is fair and equitable.
77
Under the UCC, what is required for modification of K?
yes, without any new consideration. all the parties need are good faith promises of new and and different terms.
78
a promise to refrain from suing on a claim can be valid consideration if...
the claim is valid; OR
the claimant in good faith believed the claim was valid.
79
consideration must be mutual. what does this mean?
Consideration must exist on both sides of a K.
80
what is an illusory promise
a promise to perform when there is no obligation to perform (A promises to do B's chores if he has the time)
81
What is the material benefit theory of consideration (minority view)
Some courts have said that consideration is not needed, and a promise will still be enforced if:
1. the promise is based on a material benefit that was previously conferred by the promisee on the promisor
2. the promisee did not intend to confer the benefit as a gift.
82
If you see a lack of consideration in the fact pattern, and detrimental reliance, think of
promissory estoppel
83
promissory estoppel will enforce a promise if: (4)
1) necessary to avoid injustice
2) promisor should have expected the promisee to change his position in reliance on the promise
3) the promisee acts or refrains from acting in detrimental reliance, and
4) the promisee's act/failure to act was to the promisee's detriment.
84
In a unilateral K when is the offeree required to provide notice
within a reasonable time upon completion of performance
85
what are the 8 common defenses to K formation
1) Incapacity
2) SOF
3) illegality
4) misrepresentation/fraud
5) Duress
6) Unconscionability
7) Misunderstanding
8) Mutual mistake as to existing facts
86
3 types of populations who could be found to lack capacity to contract
1. infants/minors
2. mentally incompetent people
3. intoxicated persons
87
If a minor wants out of a K, what can they do
disaffirm anytime before/shortly after they reach the age of majority (18). If they disaffirm, K is basically void.
88
What are necessaries? what is relevant about them for minors in incapacity defenses?
Necessarys are items such as food, shelter, clothes, etc.
A minor can disaffirm a K for necessaries but will be liable in restitution for the value of benefits received.
89
For incapacity defense, what happens to intoxicated people
They may be found to lack capacity to contract if the other party had reason to know of the intoxication, their promise may be voidable
90
For the duress and undue influence defense, generally look for what in the facts?
2 guys, 1 is the bad guy threatening something, does not need to be physical, and 2nd guy who is the victim
91
What is the misunderstanding defense?
There is a term in the K with two possible meanings, and there is ambiguity concerning terms of the K (subjective intent considered)
92
what is the mutual mistake as to existing facts defense?
Both parties are mistaken about existing facts (not future happenings)
93
For the misunderstanding defense, what are the 3 situations that may arise?
ambiguity concerning terms of the K
1. Neither party aware - no K formed unless both parties intended same meaning
2. One party aware of ambiguity - K formed but to the extent of unaware parties knowledge
3. Both parties aware - no K unless both parties intended the same meaning
94
What are the elements for the mutual mistake defense to apply?
K is voidable by an adversely effected party if:
1. Both parties are mistaken concerning a basic assumption of fact;
2. Mistake materially affects the agreed upon exchange; and
3. Adversely effected party did not assume risk of the mistake
95
What is the unilateral mistake defense?
where one party makes a mistake concerning facts of an agreement, but the other does not.
96
When will a contract be voidable for unilateral mistake defense?
if the non mistaken party knew or had reason to know of the mistake made by the other party, K is voidable
97
When is a K voidable under fraudulent misrepresentation/fraud?
if the party detrimentally relies on the misrepresentation
98
Does failure to read a K or use care in reading it preclude a party from avoiding a contract for misrepresentation?
No, just because a misrepresentation could have been revealed by the exercise of reasonable care does NOT mean that reliance was unjustified.
99
What is the illegality defense
If the consideration or subject matter of the K is illegal, the K is void
100
What are the two scenarios under the illegality defense? which situations allow the K to be enforceable?
1. illegal subject matter? K is not enforceable
2. Legal subject matter, illegal purpose - K only enforceable by the one who did not know about its illegal purpose
101
What is the unconsionability defense
court may refuse to enforce all or part of the K that is unfair or oppressive to one party based on bargaining or terms
102
what is the timing of when unconscionability is determined
determined by the circumstances as they existed at the time the K was formed
103
an exculpatory clause releasing a contracting party from liability for their OWN intentional wrongful acts is usually unenforceable because...
it is unconscionable.
104
A contractual clause limiting liability for damages to property generally will or will not be found unconscionable?
Not unconscionable unless inconspicuous
105
A signed writing is required for the SOF. But what is the UCC exception?
signed writing not required if:
1. both parties are merchants; and
2. the party asserting the SOF defense received a signed writing memorializing the agreement and its essential terms
3. did not object within 10 days of receipt of agreement
106
performance can also satisfy the SOF. What are the three scenarios where this arises?
1. Service K
2. Sale of goods K/custom made goods
3. Real estate
107
for a service K, when is the SOF satisfied
full performance needs to occur
108
For a sale of goods, when is the SOF satisfied
delivery and acceptance of goods satisfies SOF to extend of goods delivered and accepted
109
for custom made goods, when is the SOF satisfied
once the seller makes a substantial beginning toward performance
110
For real estate Ks, when is the SOF satisfied?
if the buyer has done 2 of 3:
full or part payment/possession of property/improvements to property
111
SOF applies to what types of Ks
1. marriage as consideration, prenup
2. one year
3. land (not contracts to build or to find a buyer for a seller)
4. executor
5. goods for $500 or more
6. Surety (if Beyonce doesnt pay you, I will)
112
If a K violates the SOF, in almost all cases.. a party can sue for: 2
1. reasonable value of the services or part performance rendered; or
2. the restition of any other benefit that has been conferred
113
A written contract can be modified orally, but the modification must be in writing if...
The K as modified is falls within the SOF.
ex. for a sale of goods contract, if the contract as modified is for $500 or more, it must be evidenced by a writing; if the contract as modified is for less than $500, no writing is necessary.
114
implied contracts are formed by...
express contracts are formed by....
Express: formed by language, oral, or written
Implied: formed by conduct
115
unless indicated otherwise, assume that a ___ K is at issue
bilateral
116
two situations where unilateral K occurs:
1. when offered indicates completion of performance is acceptance; and
2. where there is an offer to the public, such as reward offer
117
If there is a valid defense to K formation or enforcement, a K may become (3)
1. void
2. voidable
3. unenforceable
118
a void K is one that
is totally without legal effect from the beginning. can never be enforced!!
119
a voidable K is one that
one or both parties may elect to avoid
120
an unenforceable K is one that...
is otherwise valid K but it is unenforceable because a defense applies
121
Goods under UCC Art. 2 are defined as...
all things movable at the time they are identified as items to be sold under K
122
First question to ask for a parole evidence rule question
Is the writing a final integration or partial?
123
If the integration is complete, typically the writing..
cannot be contradicted or supplement.
124
If the integration is partial, the writing may not..
may not be contradicted, but may be supplemented by proving consistent additional terms.
125
The existence of a merger clause (the agreement is complete agreement) can be determinative of a final integration, but...
the modern tern is that it is not dispositive. just 1 factor
126
PER typically bars evidence of...
negotiations and agreements before K becomes integrated
127
But the PER may allow extrinsic evidence if:
1. K was partially integrated, or
2. additional terms would ordinarily be in separate agreements
128
PER allows evidence of:
Mistake in the process of reducing an agreement to writing
Misrepresentation, fraud, duress, or illegality
Condition precedent to agreement becoming effective
Modifications (oral or written) made after the writing
Meaning parties intended to give particular terms in the writing
129
Under the UCC, evidence of what can be used to explain or supplement a written K's terms?
evidence of course of dealing, performance, or trade.
Can be used to show that parties customs take precedence over an industry's custom.
130
Under the UCC, what will the court apply if the K for sale of goods has the quantity term, but other terms are missing?
Apply art.2 gap filler provisions (price, place of delivery, timing)
131
If place of delivery is not specified, the place usually is at..
seller's place of business. If there is not one, seller's home
132
If time for payment is not specified, payment is due ...
at the time and place at which the buyer is to receive the goods.
133
what is a warranty
a promise regarding a contract
134
Under the UCC, what happens with warranties
there are default implied warranties, but they can be disclaimed
135
what creates an express warranty
promise or fact made about:
1. description of the goods
2. sample or model
3. any promise or affirmation of fact
136
to be an express warranty, it needs to come at a time where
a buyer could have relied on it when they entered into the K
137
what is the implied warranty of merchantability
merchant seller automatically warrants goods are fit for their ordinary purpose for which such goods are used
138
what warranty is in every K for sale by merchant who deals in goods of the kind
implied warranty of merchantability
139
when will the implied warranty of fitness for a particular purpose be automatically implied in the K?
if:
1. buyer has a particular purpose
2. buyer in fact relies on seller to select suitable goods; and
3. seller has reason to know of buyer's purpose and reliance on seller
140
what are the two other misc. warranties that are automatically included?
1. warranty of title (all sellers)
2. warranty against infringement (merchant)
141
what is a warranty of title
any seller of goods warrants that the title transferred is good, and transfer is rightful, and there are no liens or encumbrances against the title
142
what warranty automatically arises and need not be mentioned in the K
warranty of title
143
how to disclaim the warranty of merchantability
by mentioning merchantability
If sales K in writing, disclaimer must be conspicious
144
how to disclaim warranty of fitness for particular purpose
only by conspicuous writing
145
when is a writing / disclaimer conspicous
if: (1) it is in larger type than surrounding text;
(2) it is in a contrasting type, font, or color; or
(3) it is set off from the text by marks that call attention to it.
146
both the implied warranty of merchantability and fitness for particular purpose can be disclaimed by expressions such as
"as is" or "with all faults" or other expressions that in common understanding call the buyer's attention to the fact that there are no implied warranties
147
Implied warranties may also be disclaimed by...
course of dealing/course of performance, or usage of trade
148
are the limitations and disclaimers that appear on computer software that require the purchaser to click to agree to the terms upheld?
usually yes because the purchaser can return the software if they disagree with the conditions
149
generally, the measure of damages for breach of any warranty is
the difference between the value of the goods accepted and the value of the goods as warranted
150
can you disclaim an express warranty?
not typically, very difficult to disclaim
151
when do risk of loss issues arise
under UCC K's when goods are lost or destroyed
152
If risk of loss has transferred to the buyer, the buyer must..
pay the K price
153
if the agreement allocates risk of loss..
the agreement controls (if buyer bears risk, buyer bears risk
154
For carrier situations (Fedex,UPS, etc), in shipment Ks, risk of loss shifts to buyer when..
seller completes delivery obligations, not when actual delivery occurs
155
Under a Shipment K, what are the sellers duties
Seller delivers goods to common carrier
Arranges for deliver. And
Notifies buyer
After this, risk of loss transfers to buyer
NOTE THIS IS TESTED ON BAR! NOT INTUITIVE. Buyer could bear risk before they even get the goods.
156
For destination Ks, when does risk of loss transfer to buyer
when the goods are tendered to the buyer at the destination (when buyer takes delivery)
157
what is a destination K? If not specified otherwise, what is the default presumption?
The K requires the seller to deliver the goods at a particular destimation
ARt. 2 presumes a contract is a shipment K (assume shipment for the BAR)
158
FOB - seller city - shipment contract -when does risk of loss pass to buyer
when goods are delivered to the carrier
159
FOB - any other city
risk of loss stays with seller longer. whenever they get to the named location
160
If buyer rejects defective goods or revokes acceptance, risk of loss
does not pass to buyer until defects are cured or she accepts
161
For non-carrier deliveries, when does Risk of loss pass to buyer
depends on if merchant seller or not:
Merchant seller—ROL passes to buyer when he takes physical possession
Non-merchant seller—ROL passes to buyer upon tender of delivery
162
What are 3 types of conditions that can impact whether performance is due?
1. condition precedent - must occur before performance is due
2. conditions concurrent - conditions to occur at same time
3. condition subsequent - cuts off existing duty
163
failure of a promise leads to.... failure of condition ...
failure of promise leads to breach
failure of condition relieves a party's performance obligation
164
If a party is insecure that a party will be unwilling or unable to perform under the K, the party can demand
adequate assurances
165
a demand for adequate assurances must be made
in writing based on reasonable and justified grounds for insecurity
166
If adequate assurances are not provided, the insecure party may...
treat K as repudaiated
167
if adequate assurances are provided, the insecure party must
perform. failure to do so will be a breach
168
Insecurity vs. anticipatory repudiation
insecurity involves uncertainty regarding the other party’s performance, whereas anticipatory repudiation involves a clear indication the other party will not perform
169
Anticipatory repudiation (a.k.a. “repudiation”) arises when
one party to a K makes it clear that he will not perform under the K - this will excuse performance by the other party
170
Anticipatory reputation arises if one party to a K:
Unambiguous act—makes an unambiguous statement or conduct
Prior to full performance—prior to the time performance is due
Indicating non-performance—which indicates he will not perform
171
repudiation can be withdrawn unless other party has either: (anticipatory repudiation)
Materially changed position in reliance on the repudiation,
Cancelled the K in response to the repudiation, or
Indicated they consider the repudiation to be final
172
Non-repudating party's options:
Treat the anticipatory repudiation as a total repudiation and sue,
Suspend performance until performance date is due and wait to sue,
Treat repudiation as an offer to rescind and treat K as discharged, or
Ignore repudiation and urge promisor to perform
173
If an unforeseen event occurs after K formation but before performance is complete....
performance may be excused as impossible or impracticable
174
What does it mean to excuse performance bc its impossible or impracticable?
Impossible—performance is objectively impossible, or
Impracticable—performance is only possible with extreme and unreasonable difficulty or expense
175
Common unforeseen events that could be impractiable or impossible
Substantial damage or destruction of K’s subject matter
Damage or destruction must not have been either party’s fault
Death—K obligations generally survive the death of a party, unless deceased party’s K obligations are non-delegable
Usually only unique personal services are non-delegable
Subsequent law or regulation (e.g., supervening illegality)
If performance becomes illegal, excuse by impossibility
176
a party's duty to perform under a K may be discharged if an unforeseen event occurs that undermines or
frustrates one or both party's principal purpose for entering into the K
177
Test for frustration of purpose excuse
a K may be discharged if:
1) An unexpected event destroys one or both party’s purpose for entering into the K;
Whether performance is possible after the event is irrelevant
Issue is whether performance after the unforeseen event nullifies one or both party’s original purpose for the K
2) The unforeseen event is not the fault of the frustrated party; and
3) The non-occurrence of the event was a basic assumption of the K
178
What is the perfect tender rule
if goods or delivery fail to conform to the K in any way, the buyer can reject all, accept all, or accept any commercial units and reject the rest
179
under the perfect tender rule, a buyer will accept (and cut off right to rejection) when: (3)
1. after reasonably opportunity to inspect, the buyer indicates that goods conform or that they will keep the goods
2. they fail to reject within a reasonable time of delivery or fail to notify the seller of rejection; or
3. do any act inconsistent with the seller's ownership
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under the perfect tender rule, payment without an opportunity to inspect is not
acceptance
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if the buyer accepts goods under the perfect tender rule, she cannot..
later reject them unless she discovers a defect
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Buyer can revoke acceptance within a reasonable time after discovering a defect if:
1) Defect substantially impairs the goods’ value and either:
a) Buyer accepted goods on the reasonable belief that defect would be cured and it has not been, or
b) Buyer was excusably ignorant of defect or reasonably relied on seller’s assurance that goods conformed
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what is the perfect tender rule in an analysis
a basis of identifying if there was a breach of contract under the perfect tender rule (unless seller cures in time)
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If buyer has notified seller of imperfect tender, seller may have an opportunity to cure if:
1) seller gives buyer notice of intent to cure and time for performance has not yet expired
2. seller has reasonable grounds to believe nonconforming goods sent would be acceptable
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if the seller has reasonable grounds to believe that nonconforming goods sent would be acceptable, how much time do they have to cure
additional reasonable time to tender conforming goods
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a buyer who rejects goods must: (perfect tender rule)
1) notify seller of rejection in reasonable time
2) hold the rejected goods using reasonable care; and
3) give seller reasonable time to arrange for removal of goods
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what is the buyers only option for perfect tender rule (nonconforming goods) in an installment K
can only reject the delivery/installment
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The buyer can reject the delivery/installment under an installment K if: (2)
1. defect substantially impairs the installment; and
2. defect cannot be cured
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anticipatory reputation can be treated as an
immediate breach of K
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when can a buyer in an installment K cancel an entire K due to defective installment under perfect tender rule
only if the installment substantially impairs the entire K's value
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Under a common law K, if one party has substantially performed, the other party is obligated to
perform and complete performance
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under common law is failure to perform by the time state in a K a material breach?
no if performance is rendered within a reasonable time after the time stated
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when can failure to perform by time stated in a K be a material breach under common law?
“time is of the essence” clauses
If timely performance is essential as stated in the K, failure to perform by that time is a material breach
Arises if one party indicates as a term of the K that performance by a given date is essential
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material breach rules ONLY apply in
common law, not UCC Ks
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when does a material breach occur? common law
when one party’s failure to perform under the K substantially deprives the other party of the benefit they bargained for
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Rescission of a K will serve to
discharge contractual duties
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Rescission of a K can either be:
mutual or unilateral
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what is a mutual rescission?
an express agreement between the parties to rescind (can be oral)
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When is writing req'd for a K to be rescinded? Oral is not ok
When K to be rescinded is subject to SOF
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Parties CANNOT rescind a K if the ..
rights of a 3rd party beneficiary have vested
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to rescind a unilateral K when the offeree has already performed, the rescinded promise must be supported by:
an offer of new consideration, elements of promissory estoppel/detrimental reliance, manfifestation of an intent by OG offeree to make a gift of the obligation owed to them
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What is a unilateral rescission
when only one party wants to rescind the K, usually a court-ordered remedy where there is a valid defense to K enforcement or formation
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When is a unilateral rescission usually granted
Where there is a defense to K enforcement or formation
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for mutual rescission, both parties need
some performance remaining under the K
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what is a modification for changes to K obligations
subsequent change to terms of a K
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what is novation?
parties agree to substitute a new party to perform
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Under the common law, what is required for modification?
What about UCC?
CL: mutual assent, consideration (generally present bc parties have limited their rights)
UCC: no consideration, just good faith modification. modification also must be in writing if falls within SOF
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under novation, the original party who was supposed to perform is..
excused from performance and no longer has any K obligations so long as all parties agreed to sub them out
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what is admissible to show subsequent modifications to a K
parole evidence
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what is an accord and satisfaction?
parties to an existing K agree to accept different performance in satisfaction of the original existing obligation
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what is an accord? what about satisfaction?
accord: new agreement to accept alternative performance in lieu of the original performance obligation (consideration usually required even if lesser than the original)
Satisfaction: performance of the accord agreement (discharges the original K and the accord)
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when is a lesser or new consideration OK for accord?
when it is different than the original, or to be paid to a 3rd party, or to resolve a good faith dispute concerning the OG K
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what is the standard measure of money damages
expectation damages
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what is the goal of expectation/compensatory damages
puts the parties in the economic position they would have been in if the K had been performed (if breach never occurred)
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reliance damages are designed to
compensate P based on the value of her performance and put P in the position they would have been in had the contract never been formed
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what are consequential damages and how are they awarded?
damages that reflect losses over and above standard expectation damages.
foreseeable losses indirectly resulting from a breach (e.g., lost profits); recoverable if:
Damages are a foreseeable result of the breach; and
When K was formed, D had reason to know P would suffer special, unpreventable, or unexpected damages in the event of a breach
UCC Ks—only buyers can recover
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are punitives awarded in contracts cases?
no
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when is a liquidated damages clause upheld?
Upheld if:
1. Damages are difficult to estimate at the time of K formation
2. Amount reasonable
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what types of damages are the default
expectation damages
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when can incidental damages be awarded/what are they
reasonable expenses incurred by the non-breaching party in UCC Ks (e.g., costs of inspecting, returning, storing, reselling goods)
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what are the 3 potential damages for a buyer under the UCC
1. cover price
2. market price
3. loss in value
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what is the cover damages under the UCC for buyer
difference between contract price and cost of buying replacement goods
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what are the market price damages for a buyer under the UCC
difference between K price and market price
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what are the loss in value damages for a buyer under the UCC? when are they used
when seller delivers nonconforming goods that buyer accepts
Value as promised - value as delivered
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if buyer is breacher under the UCC, what are the available remedies for seller
1. resale damages (K price - resale price)
2. market damages (K price - market price)
3. K price available if seller cant resell (custom goods)
4. lost volume seller (if supply is unlimited)
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when does the lost volume seller rule apply?
when the seller has unlimited supply, then lost profits measure can be used for damages.
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what are the big 4 non monetary remedies
1. specific performance
2. rescission
3. reformation
4. reclamation
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when is specific performance remedy usually avaialble
usually only available for Ks involving real estate or unique goods (e.g., antiques, art)
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for reclamation, a seller can get it if: (UCC)
1. Buyer is insolvent; and
2. Seller demands reclamation within 10 days of receipt
These always start on a credit sale
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What is the exception to the reclamation rule
when buyer misrepresents solvency in writing, within 3 mo's before delivery
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what is reformation remedy
remedy whereby a K is changed so that it reflects parties’ original intent
Can arise where there is a mistake in K formation such that the final K varies from a prior written agreement of parties
Can also arise where K is inaccurate due to some misrepresentation
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who is a third party beneficiary
A third party that benefits from a K entered into between other parties is a third-party beneficiary (“TPB”)
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two types of third party beneficiaries
Intended TPBs—parties to the K intend for TPB to benefit from the K
TPB has rights under the K
Incidental TPBs—stands to benefit from K although not intended by parties to the K; has no rights under the K
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Entrusting goods to a merchant who deals in goods of that kind
gives them the power (but not the right) to
transfer all rights of the
entruster to a buyer in the ordinary course of business.
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In determining if a beneficiary is intended, consider
whether the beneficiary
(1) is identified in the contract, (2) receives
performance directly from the promisor, or (3) has some relationship
with the promisee to indicate intent to benefit.
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in order to enforce rights under a K, a TPB must
vest
237
vesting occurs when the TPB either:
1. Accepts benefits—accepts the benefits of the K in a manner requested by the parties to the K,
2. Sues to enforce—brings suit to enforce the K, or
3. Detrimental reliance—detrimentally relies on the K (i.e., materially changes position in justifiable reliance on the K)
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TPB can only sue
promisor
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what is an assignment
a transfer of rights under a K to a third party after the K is formed
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Assignor can only transfer the rights they have in a K
at the time of assignment
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common law bars any assignment that
substantially changes the duties of the obligor
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valid assignments need language of
PRESENT TRANSFER - "I assign" not "I will assign"
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is assignment of payment a substantial change
no
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K limitations on assignment—Ks may contain non-assignment clauses:
Non-assignment of K:
bars delegation of assignor’s duties only (i.e., does not prohibit assignment of rights)
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non-assignment of rights clauses will bar
right to assign but not power to assign
246
assignment as void clauses will cause
assignment to be ineffective
247
gift assignments are...
but assignments for consideration are..
gift: easily revoked
assignments for consideration: irrevocable
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for gift assignments, who will typically win for multiple assignments
last gratuitous assignee generally wins because a later gift assignment revokes an earlier one.
249
But what assignee will typically win over all subsequent assignees and previous gift assignees?
first assignee for consideration
250
If the first assignment is revocable, a subsequent assignment revokes it. If it is irrevocable, the xx will usually prevail over a subsequent assignment.
first assignment
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assignee can sue obligor for...
they can also sue assignor for...
obligor: nonperformance
assignor: for breach of any of the following implied warranties:
-no prior assignment of the same right
-the right to assign was not subject to defenses
-no interference with the assigned right
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a delegation in assignments occurs when
one party to a K (delegator) delegates the duties she owes to another party to the K (the obligee) to a third party (the delegatee)
253
Obligor can delegate duties without (WHOSE) consent
obligee's
254
prohibitions against delegations are/are not upheld
ARE! No delegations means no delegations
255
If no assignments in the K, then no... either
No delegations
256
Only X may be delegated, whereas rights may be transferred to a third-party via X
Only duties may be delegated, whereas rights may be transferred to a third-party via assignment
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Exceptions to delegation—duties are non-delegable if:
1. Duties involve personal judgment and skill,
2. Delegation materially changes the obligee’s expectancy under the K,
3. The K prohibits delegation, or
4. Prohibited by statute or public policy
258
who remains liable to obligee for delegatees performance
the delegator
259
difference between delegation and novation
novation arises when three parties agree that a substitute person will take over duties under the K,
delegation occurs when one party independently decides to delegate duties to a third party
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obligee can can sue the delegator or the delegatee?
BOTH
can sue delegator for non-performance by delegatee
can sue delegateee if the delateee has assumed duties under the entire K
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Can price quotations be considered offers?
Yes but only if given in response to a specific inquiry.
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Generally, a unilateral mistake is not grounds to rescind a K unless..
the non mistake party knew or should have known of the mistake.
ex. knowing a contractor's bid is far too low.
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A builder contracted to build a house for a newly married couple. Terms of the contract provided that the builder would receive the contract price when the building was fully completed. Just when the builder had completed one-half of the structure, a tornado struck the area and demolished the building.
What is the builder entitled to recover from the couple under the contract?
Nothing. The builder's completion of the house was a condition precedent to the couple's duty to pay. The condition precedent was not discharged by the destruction of the work in progress because construction has not been made impossible, but rather merely more costly—the builder can rebuild.
BUT, courts will excuse timely performance because the destruction was not the builder's fault.
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Claim preclusion bars only __ NOT ____
Claim preclusion bars claim arising out of the same transaction or occurrence, not defenses.
265
Is a second installment under a divorce property settlement the same transaction or occurrence as the first installment under the same divorce property settlement? (CLAIM PRECLUSION)
No, it is a separate T/O
266
For issue preclusion, the issues actually litigated in the first case must be
the same as the issues litigated in the second (even a defense).
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what is the doctrine of merger? what does it go with?
claim preclusion. merger occurs when the plaintiff wins the prior case, so her cause of action merges into the judgment so she cannot relitigate the claim.
(all injuries in one accident constitute a single cause of action, so you cannot relitigate for a second injury)
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under the UCC, if the buyer accepts nonconforming goods, what is their damages?
the basic measure of damages is the difference between the value of the goods as delivered and the value they would have had if they had been according to the contract,
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what are crossing offers? what does this mean?
no contract is formed. Even if two offers cross paths from two parties, they do not form a K even with the same terms.
