Various Rules Flashcards
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Rule for Assignment under a Contract
An assignment is valid unless
1. it materially alters what is expected
2. is prohibited by law/public policy
3. its precluded by contract
* 4. if the K prohibits assignment –> assignor liable for damages, BUT assignment still valid/enforceable by assignee
* 5. If the contract terms “voids all assignments” –> the assignment is VOID
With an assignment, assignor delegates any unperformed duties to assignee under the K.
But does assignor remain liable for nonperformance?
YES. Assignor remains liable for nonperformance unless a notvation occurs
Novation = where ALL parties involved agree the assignor si no longer liable
What are the rights of Assignee + Assignor?
- Assignee may sue obligor for non-performance.
- Any defense against assignor may be used against assignee. −
- An assignee may also sue the assignor for wrongful revocation of an assignment or for breach of an implied warranty
Rule for Delegation under a Contract
All contract duties are delegable UNLESS
1.it materially alters what is expected
2. the contract precludes it
* 3. and if party delegates in violation – it will be void
* It’s a personal service contract that calls for exercise of personal skill/discretion
Does delegating party remain liable for nonperformance?
YES
delegating party remains liable for nonperformance unless a novation occurs (novation = where ALL the parties involved agree delegating party no longer liable)
What is impossibility/impracticability?
- Occurs when an unforeseen event, that neither party assumed would occur (cant be either party’s fault either), makes one or both party’s performance under the contract either
- Impossible - objectively impossible; or
- Impracticable - unreasonably difficult or expensive to preform
- Performance will be discharged
What is frustration of purpose?
- Occurs when an unforeseen event, that neither party assumed would occur, undermines one or both party’s reasons for entering into a contract
- Performance will be discharged
Who is a third party beneficiary?
When two people contract with the intent to benefit a third party, a third party beneficiary is created.
Third party rights
What kind of third party beneficiary can sue? When?
The 3P intended beneficiary can sue.
3P intended beneficiary may enforce his rights under a contracto nly if the rights have vested. Vesting occurs when. 3PB
1. sues to enforce the K
2. changes position in reliance on the K
2. manifests assent to the K at the request of promisee or promisor
Once a third party intended beneficiaries rights have vested, can the contract be modified or canceled without his consent?
NO
When is restitution damages available?
Type of remedy avail where one party has been unjustly enriched. Restitution only applies when the breaching or non-breaching party has partially performed and conferred a benefit onto the other party. The minute you fully perform –> limited to damages under the k
Awarded based on value of the benefit wrongfully conferred / or airbnb host returns what you paid
A party cannot recover both expectation damages and restitution damage
involves returning to a person any benefits or sums that have been conferred on another in specific circumstances, typically when a contract has been terminated or found invalid.
When are expectation damages available?
standard measure of money damages
Puts the parties in the economic position they would be in if the K had been performed (i.e., if the breach never occurred)
Note - when in doubt, look for the answer that most closely gives damaged party what she would have received absent the breach
Note – only entitled to expectation damages when the breach is ACTUALLY CAUSED by breaching party (actual cause)
Cant seek expectation AND restitution at same time
Cant seek expectation AND reliance at same time
When are reliance damages available?
when expectation damages are too speculative to calculate, reliance damages are used
Reliance damages are just expenditures made in reliance of a contract
Are meant to put the non-breaching party in the position it would have been if the contract never existed
Cant seek expectation AND reliance at same time
When are Incidental Damages available?
UCC ONLY
In a ucc contract, incidental damages are the commercially reasonable expenses incurred by the non-breaching party
ex. cost to return, store, resell, inspect, transport, or care for non-conforming goods
When are consequential damages available?
Arise indirectly from the breach (e.g. lost profits from gig)
Only available if the damages were:
* 1) reasonably foreseeable at the time of K formation AND
* 2) When K was formed, D had reason to know P would suffer special or unpreventable damages in the event of a breach
In UCC Ks—only buyers can recover consequential damages
What are liquidated damages?
Agreed-upon contract provision that stipulates specific amt of damages when theres a breach
Requirements—liquidated damages provisions are valid only if:
- Damages are DIFFICULT TO PROJECT at time of K formation; and
- The provision is a REASONABLE ESTIMATE of the actual damages suffered
What is the duty to mitigate?
After receiving notice of breach, P has a duty to refrain from incurring additional losses
- NOT A COMPLETE BAR TO RECOVERY. IT JUST REDUCES AMT P CAN RECOVER
- EX. Employment—P’s damages can be reduced if D can show a comparable job in the same locale was available to P
- D bears the burden of showing P’s failure to mitigate
What is recission?
non-monetary remedy
- Allows both parties to treat the contract as canceled.
- Often arises when there is a defense to contract formation/enforcement causing it to be voidable
- IDUSMMMIP:SU mutual mistake, unilateral mistake that other party knew or should have known, misrepresentation, or duress, undue influence, illegality, incapacity, or failure of consideration
- Avail =before or after performance.
What is reformation of a contract?
non-monetary remedy
- Allows a court to modify the written terms of the contract to reflect the parties’ original intent/true agreement
- Often arises when theres a mistake/a contract term is inaccurate due to
- Mutual mistake
- Unilateral mistake if other party had reason to know of it
- Fraud or Misrepresentation
In a UCC contract, what is reclamation of goods?
non-monetary remedy
- in UCC Ks, unpaid sellers may stop delivery or reclaim goods from an insolvent buyer
- Unpaid seller generally cannot reclaim goods from subsequent good faith buyers
Can reclaim only where:
* 1)Buyer was insolvent when he received the goods;
* 2)Seller makes a demand within 10 days of buyer receiving the goods; AND
* If buyer misrepresented his solvency to the seller in a writing in the 3 months leading up to the delivery, 10 day limit doesnt apply / seller can make demand any time
* 3)The goods have not been sold to a good faith purchaser for value
Under a UCC contract
Once a buyer accepts the goods, can he reject them?
NO but he can try to revoke his acceptance of the goods
- If buyer accepts → cannot reject; but can try to revoke acceptance
- If buyer DOES NOT ACCEPT goods → can still reject
UCC Buyer damages
IF Seller failed to deliver, Buyer rightfully rejected, or Buyer justifiably revoked acceptance, BUYER ENTITLED TO
- Incidental & Consequential damages; AND
* Incidental = Are the reasonable costs or expenses incurred as a result of a breach.
* Examples → cost to return, store, inspect, transport, or care for non-conforming goods. - Recover either:
* Cover Damages – difference between contract price and cost of replacement goods (if purchased in good faith).
* Market Damages – difference between contract price and market price (if not in good faith or no cover at all).
* Market price = determined at time buyer learns of breach
UCC Buyer damages
IF seller delivered non–conforming goods AND buyer accepts , BUYER ENTITLED TO
- 1) Incidental & Consequential damages; AND
- 2) Loss-in-Value Damages – difference between the value of the nonconforming goods and the value they would have if they had been according to contract ; ex.
Note—if seller delivers non-conforming but superior goods, buyer is not responsible for increased value of superior goods
What are the damages for conversion?
FMV of goods at the time of the conversion
UCC Seller damages
When buyer repudiates or refuses to accept conforming goods, SELLER ENTITLED TO
- Incidental Damages (cost of storing, shipping, reselling); AND
Recover either:
a) Cover Damages [ aka seller can resell the goods] – difference between the resale price and the contract price (used when seller resold in good faith);
b) Market Damages – difference between market price and contract price; OR
* Market price = measured at time and place of delivery
**Lost Volume Seller **– if lost volume seller, can recover difference between the contract price and the cost to the seller.
Sale 2 - sale 1?
lost volume seller = seller regularly sells the goods at issue and has unlimited inventory
