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94 Cards in this Set

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Acceptance by Silence
If offeree states "If I don't hear from you, I will assume acceptance" cts could interpret as either acceptance or rejection depending on offeree's subjective intent.

If offeree later sues to enforce = evidence of acceptance
Conditions of Satisfaction

1-aesthetic tastes
2-default rule
A K can condition payment upon one party being satisfied with a tendered performance

Personal Tastes: If the satisfaction involves aesthetic or personal tastes, then that party is the sole judge of the quality of performance

Default: If is doubt (ambiguity), K law implies objective dissatisfaction was intended

Conditions of satisfaction involving mechanical fitness, utility, merchant ability, or value (ie. Ks involving the sale of a car, a building, or machinery) require a party’s objective, reasonable dissatisfaction
Third-Party Approval

(Conditions of Satisfaction)
Subjective: Where the K makes conditional satisfaction subject to the approval of a 3d person (eg engineer, architect, or mechanic) (frequently used in the construction industry to make progress payments), then it is deemed in multi-state to be the honest good faith subjective satisfaction or dissatisfaction of the 3d person

*ABSENT fraud, dishonesty, bad faith, or collusion, the 3d pty satisfaction CAN be withheld unreasonably
Waiver
one party’s intent to voluntarily abandon a K right, a party’s surrender of right to enforce the K terms, knowledgeable relaxation of a K term prior to time for performance
-can be express or implied from one party's action or inaction

Ex. A bank giving a struggling borrower more time to pay his mortgage. Thus, if bank commences foreclosure proceedings, the borrower’s defense is waiver by bank. *Subject to oral modification clause
Withdrawal of Waiver
Cannot be withdrawn if the waiver has been detrimentally relied upon

Notice of withdrawal must be given to the other party and, if necessary, that party must be given a reasonable extension to perform

Limit: If the wavier was supported by consideration, then it amounts to a K modification and NOT a waiver and thus, it could NOT be withdrawn
Limits of Waiver Withdrawal

1-modification
2-after the fact waiver
Modification: If the wavier was supported by consideration, then it amounts to a K modification and NOT a waiver and thus, CANNOT be withdrawn

After-the-Fact: If a waiver occurs AFTER the time for performance in which the event should have occurred, then that waiver CANNOT BE REVOKED, even though NOT supported by consideration and even though the waiver was NOT detrimentally relied upon by the other party
Third-Party Beneficiaries
When the circumstances indicate that the contracting parties intended to give a named or even an unnamed party the benefit of a K’s performance, then the TPP doctrine applies

This allows a stranger to the K to enforce it, EVEN WITHOUT privity, consideration

When TPB sues, promisor can assert any defenses against TPB that he could have asserted against other K'ing pty
Enforcement of Third-Pty Beneficiary Contract
Requires INTENT: A TPB can enforce the K PROVIDED she can show that the K, when made, was intended for the TP’s benefit

Absent intent, it's merely an incidental benefit, unenforceable

Exs. Janitor contracts to clean hospital. Patients in hospital are IBs, NOT TPBs with right to enforce; sub-contracters - bc K not meant to benefit any SC in particular

*"No third-party beneficiary clause" can negate TPB's rights
Sub-Contractor's Remedies
Cannot sue Owner for breach of K bc no privity between them

Can file lien on Owner's property (record) and service notice on O

Likewise, if SC breaches, O cannot assert claim against SC bc not a TPB
Vesting of TPB's Rights

MAD
Intended TPB’s rights NOT vested UNLESS K expressly made TPB’s benefits irrevocable

K’ing parties are free to modify K to alter or to cancel TPB’s benefits UNLESS prior to receiving notice of the K’s modification, TPB got MAD:

M – manifested an assent (acceptance) called for the in the TPB K (TPB accepts offer, arising from the TPB K)
A – commenced a breach of K action against promisor of the TPB K
D – detrimentally relied on TPB K by materially changing her position
Assignment of Contracts

ADA
Types of K Assignments
A – assignment of the right to collect the K price
D – delegation of the duty of performance to a TP
A – assumption of the liability for performing the K

K right must be in existence at time of assignment!
right must be solid; not a mere hope
Revocability of Contract Assignment
A K assignment is irrevocable and immediately extinguishes in the assignor

In order to revoke an assignment, it requires a court action for rescission of K

Exception: HOWEVER, a gratuitous assignment (as a gift), much like as a promise to make a gift, can be freely revoked by the assignor
Double Assignment

who holds the right?
MBE - JPNC
If assignor assigns the same right twice, then assignee first in time prevails UNELSS second assignee paid value (past consideration is good value) in good faith, and was the first to:
-NY: filed a UCC Art 9 financing statement in Albany, OR
-MBE, when 2d assignee was first to JPNC:
J – obtains a judgment, i.e. second assignee initiates an action and gets a judgment
P – got paid from the obligor
NC – entered a new contract with the obligor of the original K
Delegation vs. Assumption

(assignment of K)
Both involve transferring duty of performance to third party

Delegation - assignor remains liable; assignee only liable to assignor

Assumption - assignee personally assumes duty; liable to both assignor and obligee of original K under TPB theory
Gratuitous Assignment
Termination of Gratuitous Assignment (gift) is terminated if the assignor:
-Dies,
-Reassigns the same right, OR
-Revokes the gift by giving notice EITHER to the gratuitous assignee OR to the obligor who owes the money under the K that was assigned

A gratuitous assignment becomes irrevocable (the gift is complete) ONLY WHEN the gratuitous assignee JPNC
Notification of Assignment
After a right has been assigned, in order to extinguish an assignor’s right to collect the money from an original obligor, the assignee must immediately notify the obligor who owes the money under the assigned K


If no notification, the obligor pays the assignor, and the assignee can recover from the assignor

*Assignee cannot sue the obligor if not notified
When assignee sues on contract

1-his claims
2-obligor's claims
3-counterclaims
An assignee stands in the shoes of the assignor when the assignee sues on the assigned K right to receive money, then the K’ing party who owes the money can assert the following against the assignee, who is suing:

Any defenses that could have been asserted against the assignor (SOL, fraud, breach of K, or Statute of Frauds)

Related counterclaims, i.e. breaches of the same K by the assignor that arose any time, EVEN AFTER the K right was assigned

Unrelated counterclaims having nothing to do with the assigned K that the obligor has against the assignor, but ONLY if the unrelated counterclaim accrued PRIOR TO the time the obligor was notified of the assignment
Revocation of Assignment
Where assignment for consideration, can only revoke through rescission of K
SIR P rights are NOT freely assignable

(assignment of K)
K rights are freely assignable EXCEPT for SIR P:

S – where a statute prohibits the assignment
--That is, the right to receive WASP income


I – where the assignment is coupled with an improper delegation of the contractual duty to perform the K to an unqualified person
R – where the assignment of the K increases the risk to the other K’ing party
P – where the services to be performed are highly personal in nature, then the party who is to receive those services CANNOT assign away that right = would MATERIALLY ALTER the K (this is rare)
Assignments Prohibited by Statute - WASP

S in SIR P
W – worker’s compensation payments
A – alimony or child support payments
S – beneficiary of spendthrift trust income
P – personal injury or wrongful death
--BUT once it is reduced to a judgment, the judgment CAN be assigned
Express Prohibition of Assignment
A K can expressly prohibit its assignment HOWEVER, once performance has been completely finished by one party, then the anti-assignment clause DOES NOT prohibit the K’s assignment by that party of the right to receive payment
Delegation of Duties
A delegation is the transfer to another of the duty to perform the K
When a K right to receive money is assigned for consideration, then that right to receive payment is extinguished in the assignor
HOWEVER, where the duty to perform under a K is delegated, then the assignor’s liability for full performance is NOT extinguished, and the assignor remains liable for damages in the event there is a breach of K
✪Tested on every MBE!
Limits of Delegation of Duties under K
Most duties are freely delegable UNLESS it is a K requiring trust, competence, or skill in the performing party.

In determining whether the duties of a K can be delegated to another, the ct looks at whether the performance by the assignee would be significantly different from the performance required by the assignor
Can waive! If obligor continues to go to the assignee, despite less skillful performance, he waives his right to object

A K to perform personal services is NOT delegable IF the person seeking those services has a substantial interest in having that party perform those services
Assumption Agreement
express promise by the assignee to assume personal liability for the performance of the K and to become personally liable if that K is breached

the person assuming liability, as well as the assignor of a K, are both personally liable if the K is breached

UCC Art 2 → implies that the assignment of a K for the sale of goods is simultaneously an assignment of the right to receive payment, a delegation of the duty to perform, and an implied assumption of liability - takes it all on!
Novation Contract
an agreement to release a prior obligor (a debtor) and to look ONLY to the newly replaced obligor
simply a contractual substitution for one debtor for another; it’s a delegation AND assumption of liability by a new party, coupled with a release of the originally obligated party

Arises where creditor agrees to release and extinguish her claims against a debtor, and in debtor’s place, the promise of a third person to discharge the debt or obligation
Materiality of Breach

HAIL
Rest 2d Factors; no one factor controlling:

H – hardship on the breaching party if a total material breach is declared

A – amount of benefit bestowed on the non-breaching party
The greater the amount of benefit bestowed, the less likely the ct is to find a material breach, but see NYAA 287s, where completing 75% or 85% of performance was found NOT TO BE substantial performance

I – whether it was an innocent breach
That is, the failure to performance was inadvertent and unintentional

L – likelihood (ease) of full performance being achieved
To prove breach of contract, must show:
π MUST establish by a preponderance of the evidence:
1 - Formation of an enforceable TACO K between competent parties (privity),
--EXCEPT where π is a TPB (privity not required)
2 - D materially breached K terms, AND
3 - Performance by π of any conditions precedent or concurrent conditions (tender) OR proof that π COULD have tendered performance EXCEPT for D’s anticipatory breach
Substantial Performance
If there has been substantial performance, then any breach is IMMATERIAL
Recovery: K price MINUS the cost of completing the price

*Breaching party has burden of showing substantial performance
Where substantial performance does NOT apply
In a sale of goods K where the perfect tender rule applies (see Lec 12)

To conditions in a K, because conditions must be literally satisfied. NYAA 246-47.

To a performing party who willfully breached the K
The breach was not innocent or inadvertent
HOWEVER, many cts now treat a willful breach as ONLY ONE FACTOR in determining whether substantial performance has been achieved
Damages where cost to complete is minor compared to entire K

(substatnial perf)
Where the cost to complete the K according to its terms is out of proportion to the benefit to be achieved, and it would constitute economic waste to complete the K, then the measure of damages for the breach =
difference btwn value of the substantial performance and the value of what SHOULD have been tendered if there had been full performance.

Ex. Contractor uses galvanized piping in stead of copper (according to contract) on house. So damages for home owner is the difference the mistake made in the value of the home.
Timing of Completion of K

i.e. when it constitutes breach
Failure to perform by date state in K NOT USUALLY breach

Generally, a party has a reasonable time to perform and does NOT have to perform by the precise date fixed in the K UNLESS time is made of the essence

An unreasonable delay in performing a K MAY constitute a material breach
Installment Contracts (Divisible Contracts)
Each installment is deemed a separate K and is separately enforceable, REGARDLESS of a pty’s breach of one installment
--UNLESS breach of one impairs entire K

Recovery by non-breaching performer: price for completed installments, LESS any damages caused by not performing other installs
Anticipatory Breach
one pty categorically & unequivocally announces before date for performance an unwillingness or inability to perform the K – “I will not, or cannot, perform.”

Non-Breaches: A pty's request to renegotiate, a pty's statement that he “might not” be able, or he “doubts” he will be able to perform, or where one party requests more time to perform
BUT gives other pty reasonable grounds to demand assurances

Can sue immediately at repudiation, BUT NOT if only suspects will be breached
When anticipatorily breaching party can RETRACT repudiation

(anticipatory breach)
The AB party can retract the repudiation, BUT ONLY if the non-breaching party has NOT:

1 - Commenced a lawsuit for breach of K,
2- -Materially changed her position and entered a new K for goods or services (“cover”), OR
3 - Effectively communicated to the breaching party an intent to treat the repudiation as final and to terminate the K
Breach of Contract Defenses

I3 FU2MED & I S2IP
I3 - infancy, incompetency, intoxication
F - fraud, deceit, or negligent misrep - SI2R M
U2 - unconscionability or undue influence
M - mistake
E - equitable defenses
D - duress
I - impossibility of performance
S2 - SOF or SOL
I - illegality
P - parole evidence rule
Infancy

(Breach of K Defenses)
After reaching majoirty, infant may ratify K by manifesting an intent of assent

A married infant's K that involves her principal place of abode NOT subject to this defense
Mental Incompetency

(BK Defenses)
Requires proving EITHER:

1- incompetent did not understand nature and consequences of entering K, OR
2 - executing K was an uncontrolled reaction to mental illness AND other K’ing party had reason to know of this condition (could be result of depression)

Limit: A K by an incompetent for whom a guardian has been appointed is VOID, and not voidable
Intoxication

(BK Defenses)
Must show K’ing party was so intoxicated that she did not understand the nature and consequences of her act in entering the K, AND the other party had reason to know of this condition
Fraud, deceit, or negligent misrepresentation - SI2R M

(BK Defenses)
π’s must allege fraud in detail (CPLR 3016(b)) - a misrep or concealment of material fact AND π's justifiably relied on statement
-Active concealment of chattel or failing to answer directed ques = fraud

S – scienter = proof D knew her statement was false (lied)
I – intent to induce π to act
I – financial injury suffered (for tort of deceit for $ dmgs)
R – π justifiably relied on misstatement or omission
M - misrep involved a material fact or omission of material fact
MBE & NY differences in proving fraud defense

(BK Defenses)
R in SI2RM

MBE: π only has to show that the misrepresentation was justifiably relied upon - could even be negligent reliance

NY: objective reasonable reliance is required, imposing a duty of due diligence on defrauded party to reasonably investigate the representation if the means to do so were available
MBE Damages for Fraud, Deceit

(BK Defenses)
MBE measures of damages for the tort of deceit is expectation damages (loss of bargain damages), which is the difference between the value of:
--What the π was fraudulently promised AND
--The value of what the π received
*Even if π paid less than value had misrep been true
NY Damages for Fraud, Deceit

(BK Defenses)
EXCEPT in a K for the sale of goods, the NY measure of damages is ONLY the defrauded party’s actual out-of-pocket loss, which is the difference between:
--The value of what she received (what it was actually worth), AND
--The amount she paid to the fraudulent party
Negligent Misrepresentation

(BK Defenses)
Difference btwn tort of deceit and tort of negligent misrep is SCIENTER

In both NY and MBE, π’s recovery is limited only to out-of-pocket losses
--In both juris, must have special relationship btwn ptys, giving rise to DUTY on D to impart correct info

When a business or prof person negligently makes false statements honestly believing they were true (no reas grounds belief) = negligent misrep

Innocent (non-negligent) misrep = rescission of K, NOT out of pocket losses
Unconscionability

(BK Defenses)
An unconscionable K is such a bad bargain that no reasonable person would agree to it and no honest and fair person would offer it
--allows equity to intervene to prevent an injustice

Claim requires π to prove: BOTH the unconscionable terms (harsh, one-sided and unfair terms) AND tactics (pressured into it)

Presumption against unconscionability arises where SOPHISTICATED BUSINESS PEOPLE K in a commercial setting
Undue Influence

(BK Defenses)
Unfair persuasion by the misuse of a position of trust, confidence, and control by misusing a dominant psychological advantage to obtain an unjust enrichment at the expense of a susceptible weaker K’ing party

Requires: 1) special relationship AND 2) unfair persuasion
Mistake

(BK Defenses)
one party’s belief that is not in accord with the facts

Mutual mistake = both parites mistake; Unilateral mistake = incorrect assumption by one pty

Elements of rescission for unilateral mistake - COPS:
C – mistake was communicated to other pty BEFORE other pty changed her position in reliance on mistake
O – mistake involved ordinary negligence
P – prompt notice of mistake was given to other pty
S – mistake would impose a substantial hardship on mistaken pty if ct does not correct

**Risks as to value, future value, future events assumed by parties = B can get a boon
Equitable Defenses

(BK Defenses)
--The relative hardship test (see Prov Rems), and
--The unclean hands of a π

Unclean Hands Defense = based on the premise that “she who seeks equity must enter the court with clean hands” - no unconscionability or immoral conduct
--Court’s Discretion: The unclean hands doctrine is discretionary with the court, and it may decline to assert unclean hands whose fault may be less culpable than the other K’ing party.
Duress

(BK Defenses)
When a party signs a K out of fear, induced by a wrongful threat that overcame a party’s free will

Limit: Where a party has a legal right i.e. to sue and threatens to exercise that right unless other party signs a K = NOT COERCION OR DURESS because a threat to do that which a party has a legal right to do DOES NOT constitute duress.
Impossibility ("Defense of Excuse")

(BK Defenses)
Objectively impossible; unforeseen event
3 Categories: Impossibility, Frustration of Purpose, Commercial Impracticability

Elements:
-unexpected & unforeseen occurred AFTER executing K
-Risk of event not covered in K OR by custom in trade (ROL)
-non-occurrence was a basic assump on which K was made
-Performance made impossible or econ'lly impracticable (UCC)
Frustration of Purpose (Impossibility)

(BK Defenses)
performance is still possible, but purpose has evaporated, and would be meaningless to perform the K (not frequently followed in the US)

Limit: If the intervening event was foreseeable by parties, and a provision for that event could have been placed in the K, then frustration of purpose CANNOT be successfully asserted, i..e returning wedding gowns
Comercial Impossibility (Impossibility)

(BK Defenses)
performance possible, but because of an unforeseen change in circumstances, seller’s cost of performance has become economically unrealistic (a price increase of more than double or triple K price)

*prevent B from asserting Perfect Tender Rule
Construction Ks (Impossibility)

(BK Defenses)
In K for construction of new structure, ROL on builder if structure destroyed BEFORE title turned over to owner

However, in K to repair = ROL on owner
--Ker's Remedy = restitution TO EXTENT THAT his services enhanced value of structure
Statute of Frauds

SMART FLYS

(BK Defenses)
Certain Ks MUST BE in writing & signed by pty to be charged (If K satisfies SOF, ptys free to orally cancel)

S-surety Ks
M-marriage Ks
A-answer for debts discharged in bankruptcy
R-RP Ks
T-testamentary promises
F-finder's fee arrangements
L-leases longer than one year
Y-Ks not capable of performance w/i 1yr
S-UCC Sale of Goods Ks for $500+
Surety Ks (SOF)

(BK Defenses)
Must have signed writing between surety and creditor (not an assignment; suit based on TPB theory)

Main Purpose Rule --> where surety's main intent is to benefit herself, NO SIGNED WRITING req'd to enforce
**NY ONLY STATE DOESN'T FOLLOW
Marriage Ks (SOF)

(BK Defenses)
Where 1 pty's consideration is promise to marry and other's is promise to pay, K must be in writing
Answer for debt discharged in bankruptcy (SOF)

(BK Defenses)
A dischargeable debt will survive a bankruptcy proceeding, BUT ONLY if the debtor’s intent is evidenced by a pre-discharge signed writing
--DOES NOT have to be supported by any new consideration


*Under federal law, the debtor must be advised as to the document’s legal effect and given 60 days to change her mind
Real Property Ks (SOF)

(BK Defenses)
An oral agreement to convey an interest in real property EXCEPT for a lease that does not exceed 1 year, is unenforceable because of the SOF
Testamentary Promises (SOF)
**NY ONLY

(BK Defenses)
Promise of testamentary disposition MUST BE in a valid will, OR in a writing signed by the testator
Finder's Fee Arrangements (SOF)

(BK Defenses)
Signed writing req'd for compensation for services rendered in negotiating the purchase or sale of a business opportunity or interest

Exceptions: NY attys, real estate brokers, or real estate salespersons are excused from this SOL requirement
Leases longer than 1 year (SOF)

(BK Defenses)
Real property leases for longer than one year MUST BE in writing, signed by party to be charged OR signed by her agent whose authority to be signed by also be in a signed writing.

*Measure from date of possession
Ks not capable of performance within 1 year (SOF)

(BK Defenses)
One year from when K entered, NOT when starts

**IN NY (min view), if either pty can terminate within 30 days, no signed writing needed (capable of perf within 1 yr)

Lifetime Ks: (employ or support)
--MBE - no writing req'd
--NY - writing req'd
Remedies for Performance of Oral K req'd to be in writing (SOF)

(BK Defenses)
Part Perf: no remedy UNLESS UCC or real property Ks
--UCC = quasi K claim
--Real Property = specific perf BUT MORE than just possession; must be for sale and unequivocal evidence of oral K

Full Perf:
--MBE = considered reliable evidence of a K, removing SOF defense
--NY = SOF defense remains BUT can recover for quasi K if detrimental reliance
Estoppel Doctrine (defense to SOF)
Even if not supported by consideration, certain Ks may be enforceable if detrimental reliance

Even if a gratuitous promise, detrimental reliance takes the place of consideration of promisee

**Rarely applied by cts absent an unconscionable (egregious) result!
Constructive Trust (defense to SOF)

(BK Defenses)
Equity will impose a remedy where there was oral promise in confidential relationship and person should not in good conscience retain property

T-CUP Elements: clear & convincing; not rigidly applied
T-transfer of property or money
C-confidential relationship where 1 person acts for benefit of another
U-unjust enrichment
P-breached express or implied promise to retain property
Illegality of K


(BK Defenses)
if illegal at time of entry, cts will not enforce where ptys in pari delicto

Can sever illegal elements to enforce legal K

Where statutory violation, but not inherently dangerous, consider THUG to enforce
Where illegal K may be enforced - THUG

(BK Defenses)
Where K violates statute, but not inherently dangerous, cts will consider THUG:

T-type of illegality (murder vs. tax avoidance)
H-harm suffered by one party
U-unjust enrichment by one pty
G-relative guilt of ptys
Parol Evidence Rule (aka Extrinsic Evidence Rule)

OF MICE2

(BK Defenses)
If K terms are clear and unambiguous, and writing was intended as a final and complete expression of agreement = totally integrated (complete) agreement and PER prohibits a pty from supplementing or contradicting with statements prior to or contemporaneous with a K’s execution

Excepts: OF MICE2; Partially-Integrated Ks (may be supp'd with prior consistent terms)

Merger Clause = complete writing "this reps entire agreement"
Supplemental Parol Evidence (exception to PER)

(BK Defenses)
Terms in complete agreement can be explained by to establish the meaning of those words

Usage in the Trade - to explain certain terms with "trade meaning"

Independent Collateral Agreement - intro of prior consistent oral agreement btwn ptys

Ptys prior dealings - even if contradictory to show they intended waiver or modification

Subsequent oral modification - PER applies only to prior or contemporaneous oral modification
Exceptions to Parol Evidence Rule

OF MICE2

(BK Defenses)
O-oral condition precedent (oral statement of cond)
F-evidence of fraud
M-mutual mistake
I-illegality, duress, overreaching, lack of capacity
C-no consideration
E-explain ambiguous terms
E-no enforceable agreement ever intended
Contract Remedies

CAPS
3 Types: expectation, reliance, restitution

Ptys free to alter/limit dmgs in K (exculpatory or liquidated dmgs clause)

Cannot recover dmgs for CAPS:
C-consequential dmgs not foreseeable by either pty
A-dmgs that could have been avoided (mitigate)
P-dmgs for pain, suffering, distress
S-speculative dmgs - must be reasonable certain
Restitution Damages

(K Remedies)
Seeks a recovery to the extent a benefit has been conferred on breaching party by the π’s part performance (focus on benefit conferred)

DOES NOT seek to enforce K, but seeks to prevent unjust enrichment by ordering compensation for value of π’s part performance that D received
Expectation Damages

(K Remedies)
benefit of the bargain if K had not been breached; profit that would have been made if K was fully performed by both parties
-seeks to put non-breaching pty in same position if not for breach

= includes lost profit π would have made if K performed
Reliance Damages

(K Remedies)
out-of-pocket losses by non-breaching pty in reliance on K (focus = loss incurred)
-Must have been foreseeable and ascertainable
-put pty in as good position as before
*do not include lost profits
Liquidated Damages Clause

(K Remedies)
reasonable est fixing anticipated dmgs by K’ing ptys, BUT ONLY under circumstances where dmgs would be difficult to precisely determine
-avoids difficult and exp of proving dmgs at trial

Challenging an LDC: Pty challenging MUST show EITHER:
1. That LD amount is grossly disproportionate to any foreseeable damages, which would render the LD clause an unenforceable penalty, OR
2. Proving the damages would have been easy
--i.e. where there’s a breach of K requiring a payment of $ = easy to determine dmgs
Exculpatory Damages Clause

(K Remedies)
opposite of LDC; allows a party to limit or waive liability for a breach
--NOT favored by the law; cts strictly construe

**NY reqs "negligence" be used in clause in order to waive negligence dmgs
Equitable Contract Remedies
Either injunction or specific performance
Specific Performance

(Equit K Remedies)
ct order compelling a D to perform according to the terms of the breached K

To successfully obtain SP, π MUST show EITHER:
-Subject matter of the suit is unique
--i.e. irreplaceable chattel or K involving transfer of interest in RP (all RP considered unique)
-$ dmgs NOT an adequate remedy
--i.e. if calculation of damages is too uncertain, OR where π could not replace the subject matter of a K by recovering $ damages

Ct will balance relative hardship to ptys if SP not granted and how difficulty of valuation of dmgs
Parties can include any contract terms unless they are PLUS
P-terms that violate PP
L-excessive dmgs in liquidated dmgs cl
U-unconscionable terms
S-enforcement of SP in event of breach
Covenants Restricting Competition in Employee Ks

TISSUE
Factors ct considers in determining whether to enforce non-compete clause:
T-time of restriction must be reasonable
I-inability of employee to work anywhere else bc of restrict
S-scope of geo area of restriction
SUE-whether employee's skills are special, unique, and extraordinary

*if fired without cause, will not enforce
Right to Fire Employee
Where at-will = no right to sue for BK

"definite duration" in K DOES NOT guarantee permanent employment

Where fired before employment period ends, dmgs = expectation damages LESS mitigation exps (req'd to mitigate = look for similar employ in same geo area)
Negotiable Instrument

MUST SOW
M-payable in money (currency) only
U-promise to pay is unconditional
S-signed by the maker (note) or drawer (check)
T-to be payable on demand, or at a fixed determinable time
S-in a sum certain (apparent on face)
O-to the order of an ABC - a named person, bearer, or cash
W-in a signed writing
Blank Endorsement on NI
(just a signature) on the back of a check simply consists of the required necessary signature

If “order paper” is endorsed in blank on the back (simply a signature), becomes bearer paper, which a thief can effective negotiate (thief can cash)
Special Endorsement of NI
specifies the only person who can negotiate the instrument
1. CANNOT thereafter be validly transferred without that person’s signature
2. A thief CANNOT negotiate

An NI “payable to the order of” X or Y requires only one signature to negotiate it
--BUT, if it is payable to “X and Y”, both signatures are required to effectively negotiate
Restrictive Endorsement of NI
specifies a single use for the NI

i.e. “For deposit only” = a subsequent holder can use is ONLY in a manner consistent with the restrictive endorsement
Qualified Endorsement of NI

TSAID
when endorser adds the words “without recourse” when she signs on the back = cancels contractual liability, but modifies only one element:
T-endorser has good title
S-signatures are genuine
A-instrument has not been materially altered
I-endorser has no knowledge of insolvency proceedings against maker or drawer
D-has no knowledge of any defenses to the instrument that could be asserted against him
Forged Endorsement of NI
A thief cannot pass title, and there CANNOT be an HDC following the forged endorsement

HOWEVER, if made to "cash" or "bearer" = any signature will do

Criminal: in NY, forgery is a felony where forger intends to defraud
--separate claim to knowingly possess a forged instrument with intent to defraud another
--when use the forged instrument to obtain money/property = crime of larceny
Fictitious Payee on NI
When an employee furnishes an employer with a fictitious name for a payee intending that the named payee have no interest in the instrument, then the fraudulent employee’s signature is effective - not really considered a forgery
Altered Instrument (NI)
drawer or maker of an any NI unconditionally promises to pay ONLY that amount originally written on NI
--if original amount is altered by a thief, then original maker is ONLY liable for the original amount, and not altered amount
--UNLESS he was NEGLIGENT in allowing alteration to occur (i.e. didn’t put a line writing out amount on check)

Distinguish: Unauthorized Completion (personal defense), Altered Instrument (real defense)
Holder in Due Course (NI)

ODD
one who receives an NI and pays value for it in good faith (consideration) is an HDC
--can enforce instrument and will prevail in action for fraud

An HDC takes for value to the extent the agreed consideration has been performed (not future consideration), but she takes for value if she gives current or past consideration

If signature forged, then by law CANNOT be any subsequent HDC (unless Shelter Doc applies)

If just a gift, not an HDC (unless SD applies)
To be an HDC, holder must take without notice that the instrument is ODD
O-that the instrument is overdue
--checks are stale after 30 days, and no HDCs after
D-notice that the instrument has been dishonored
D-notice that there are no real or personal defenses attached to the instrument
--i.e. if there are any visible signs of alteration or had heard rumors there were defenses to its payment
An HDC takes instrument free and clear of all MUUFFIN personal defenses with whom HDC has not personally dealt
M-mistake
U-unconscionability
U-unauthorized alteration
F-failure of a condition on check's issuance (precedent or subsequent)
F-failure of consideration
I-fraud in the inducement (SIR M)
N-non-delivery of completed instrument
HDC is subject to real defenses of DAFFIDILS

*these are defenses one can assert against the HDC no matter if they knew about it??*
D-duress (threat of violence)
A-material alteration
F-forgery
F-fraud in factum (when someone unknowingly signs the wrong thing; compare with fraud in the inducement, which is a personal defense)
I-illegality
D-discharge in bankruptcy by maker or drawer
I-infancy
L-lack of mental capacity of maker or drawer
S-statute of limitations
Shelter Doctrine
Where holder of NI took from an HDC as a gift (no consideration), OR even if holder knew instrument was ODD when took it, nevertheless has same protections and rights as a HDC UNLESS he:
1. Earlier participated in the activity, giving rise to the defense, OR
2. Was a PRIOR HOLDER holder of the instrument with notice it was ODD
--He cannot enhance his position by giving to an HDC and retaking from the HDC
discharge of liability on a NI
HDC can effect a discharge by crossing out pty's endorsement or sign. on the face of the check
--if done without notice, discharges all subsequent holders