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112 Cards in this Set
- Front
- Back
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Application of Article 2 |
Article 2 applies to all sales of goods. It doesn't matter what the price is or whether the parties are merchants.
The common law applies to all other ks. |
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Express versus Implied Contract |
A contract is a legally enforcable agreement.
An express contract is created by the parties words
An implied contract is created by the parties conduct |
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Restitution |
Protects against unjust enrichment (generally in the employment or services context).
Remedy of last resort.
Breaching party may not recieve the contract price but can recieve the reasonable value of the benefit conferred
Remember that it protects against UNJUST ENRICHMENT if there is no unjust enrichment there is no restitution damages |
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Bilatteral Contract |
Can be accepted in any reasonable way (although the contract language will control) |
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Unilateral Contract |
Offer can only be accepted by performing. The offer must expressly state that that acceptance = performance. Common Examples: Rewards, contests, prizes |
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Was there an offer? |
A manifestation of the intent to be bound
Advertisements are generally not offers unless there is a quanity term indiciated
Indefitness: are any of the terms to vauge to be enforced
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Does a failure to state a price in the offer invalidate the offer? |
No, courts will read in a "reasonable" price EXCEPT in a contract for a sale of real property |
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Requirements Contract |
Article 2: these are fine: it is permissible to identify the qualty of goods you want on the basis of need
Example: I will buy all the widgets I need from you
Limitation: Plaintiff will not have a remedy against a breaching party for an unfair surprise. If the parties course of conduct indicate a certain quantity requirement the Plaintiff cannot suddenly ask for substantially more. Plaintiff cannot take the seller by surprise with a large increase in request. |
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When does an offer lapse? |
If no time limit is stated by the K the offer will lapse after a reasonable time. |
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When can the offeror revoke an offer? |
An offer may be revoked at any time before acceptance.
Revocations:
Direct: the offeror engages in conduct that indicates directly to the oferee that he has changed his mind about the deal
Indirect: the offeror engages in conduct that indicates that he's changed his mind AND the offerree is aware of this conduct |
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When can an offer not be revoked? |
Option Contract: if the offerree pays the offeror for the option to keep the offer open it is irrevocable. NOTE: the offeror cannot simply promise to keep the offer open it must be paid for
NY DISTINCTION: In NY a promise to keep the offer open in writing that is signed makes the promise irrevocable
Firm Offer (Only in cases involving Article Two): An offer by a merchant that is signed that promises to keep the offer open is irrevocable. A firm offer only lasts for three months if no time is stated
Foreceeable reliance before acceptance: very rare: generally only in the case of subcontractors, the subcontrator has to know that you are relying on thier offer before accepting. |
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Signature under Article Two |
Signature is broadly defined under article two and includes letter head, initials, symbols, a regular signature and an electronic signature |
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Unilateral Contract (Performance) |
Starting to perform a unilateral contract does not constitute acceptance BUT an offeror cannot revoke a unilateral contract once work has started. NOTE: mere preperation to begin work does not make the offer irrevocable
NY DISTINCTION: A unilateral contract can always be revoked until completion |
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When is a revocation effective? |
A revocation is effective only when it is recieved. |
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What constitutes rejection of an offer |
Counteroffer operates as a rejection, but mere bargaining does not.
Conditional Acceptance (I will accept if you do x) operates as a rejection. Disguised counteroffer |
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What if an acceptance changes the terms of the offer? |
Common Law: No acceptance, the acceptance must mirror the offer (Mirror Image Rule).
Article 2: There is no mirror image rule. Alterations to the contract do not invalidate acceptance they just will not be included into the K UNLESS 1. both parties are merchants 2. the change is not material (inserting common industry standards is not material) 3. there is no objection within a reasonable time.
NOTE: even under article two if the person responding conditions his acceptance on some fact then his offer is a rejection. "I will accept only if you give me a discount"
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Effect of death on an offer? |
Death of either party before acceptance terminates a revokable offer. |
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Acceptance (bilateral contract) |
Language controls (accept "only by") but most offers can be accepted by the promise of performance.
Starting performance is acceptance, and carries with it the promise that you will finish the job. |
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Acceptance (unilateral contract) |
Begining performance is not acceptance and therefore carries with it no promise to finish the job. Only completing performance is considered acceptance |
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Improper Pefromance |
Can lead to both acceptance and a breach simultaneiously.
Example: I agree to paint your house white. I paint the house burnt orange. I accepted when I began painting but I breached when I chose the wrong color.
Article 2 Exception: Not considered acceptance and breach if the seller is sending the goods to buyer as an accomodation. |
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Offeree Silence |
Silence can never be acceptance and an offeror cannot turn silence into an acceptance. |
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Unsolicited Mailings (NY DISTINCTION) |
Considered to be a gift. |
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Timing of Acceptance |
Mailbox rule: acceptance is effective when it is mailed
It does not matter if the offeror does not get the letter, the burden of loss is on the defendant |
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Exceptions to the Mail Box rule for acceptance |
K language states otherwise (acceptance must be recieved by x)
Irrevocable offer: mail box rule simply doesn't apply, the offer remains open only to the end of the irrevocable period, and acceptance is effective when it is recieved
Rejection sent first: If an offerree responds first with a rejection and then with an acceptance whatever gets there first is effective |
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Lack of Capactiy |
Categories (infancy, intoxicated, mentally incompetent)
An incapacitated defendant may disaffirm the K (the incapacitated defendant will not be bound by the K) UNLESS the incapacitated defendant enjoyed the benefits of the K after regaining competency.
EXCEPTION: An incapacitated defendant is still liable under a K for necessitites (food, shelter, water, clothing, medical care) but only for the reasonable value of these goods and not their K price.
HOWEVER, the incapicitated individual can use the K against the other non-incapicitated party
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Economic Duress |
Rare
Must have a: 1. threat to break an existing contract 2. only reason the buyer agrees to the second contract is to get the first deal done 3. No reasonable alternative |
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Misrepresentation/Disclosure of a material fact |
Even an honest misrepresentation of a "material fact" is a fatal flaw in K formation |
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Ambiguity/Misunderstanding Between Parties |
Both parties misunderstanding will negate the existence of a contract UNLESS one party knew or had reason to know of the other party's meaning in this case the innocent party's interpretation would govern |
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Mistake about a matieral fact: Mutual Mistake |
A mutual mistake as to a material fact will negate the existence of the K so long as:
the mistake concerns a basic assumption on which the K is made
the mistake has a material effect on the agreed upon exchange
the party seeking avoidance did not assume the risk for the mistake
A mistake as to the value/price of something is NOT MATERIAL.
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Mistake about a matieral fact: Unilateral Mistake |
Unilateral mistake will not invalidate the K UNLESS the other party had reason to know or did know about the mistake and did not correct it |
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CONSIDERATION |
Must have consideration on both sides: promise to do something, promise to stop doing something (forebearance), or to actually do something.
Adequacy of consideration is irrelevant |
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Past Consideration |
No consideration at all NY DISTINCTION: Past consideration may count as consideration if it is memorialized in a signed writing that identifies what was done and can be proven. |
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Illusory Promise |
Unenforcable the promise to buy something only if you want to (as opposed to need: requirement contract) doesn't obligate you |
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Preexisting Duty Rule |
Common Law Only: New consideration is needed to modify a contract, the performance of the pre-existing duty is not enough need to be doing something new. NOTE: preexisting duty rule would only apply to the parties to the K, a seperate payment by a third party would not fall under this rule
NY DISTINCTION: if the modification is signed and in wriitng no consideration is needed |
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Preexisting Duty Rule (Article 2) |
Consideration is not required to modify a contract AS LONG AS you show good faith |
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Is partial payment of a debt consideration? |
Generally no. HOWEVER, if you promise to pay them before you are obligated to, more then you are obligated to, or if you payed a disputed debt this would be consideration. |
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Is the payment of a time barred debt consideration? |
You do not need consideration to be bound by a promise to pay a time barred debt. So long as you say you will, you must.
The signed writing works as a subsitute for consideration. |
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Promissory Estoppel as a substitute for consideration |
foreseeable reliance on a deal will make the deal enforcable even if it lacks consideration.
Analysis: No consideration BUT foreseeable reliance so the deal can be enforced |
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Validity of a covenant not to compete |
Court will analyize the covenant with regard to the reasonableness of geographical and temporal limitations imposed on defendant and whether defendant's skill set is specialized or unique (look at its scope and the need) |
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Exculpatory Clause |
May limit liability for negligence but NOT for gross negligence or intentional torts |
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Statute of Frauds: Categories |
Transfer of interest in real property K that cannot be completed in a year Sale of goods for over $500 Surityship Modifications that change the K such that it would implicate the SOF |
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SOF: NY DISNTINCTIONS |
Leases over 1k assignment of insurance policy promise to pay a discharged debt an agreement to pay a finder's fee or broker's commission EXCEPT for attorney auctioneer or licensed real estate agent |
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SOF: Transfer of Interest in Real Property |
Must be in writing. Applies not only to sales of the land but the transfer of any interest (lease, easements). If agent is trying to transfer the interest the agent's authorization must also be in writing.
Exception: Leases for less than one year
Partial Peformance: The SOF cannot be asserted against a defendant who has done two of the following three things: 1. Paid (either partially or completely) for the property 2. Is in possession of the property 3. Made improvements on the property (permanent?) |
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SOF: Peformance of a K that cannot be completed in one year |
Any specific action, no matter how big, can be completed in one year. Actual performance time does not matter.
If you employ someone for the rest of thier life this does not require a writing
NY DISTINCTION: For life Ks do require a writing
NOTE: the timining of the year period begins when the K is executed runs until the performance is finished. Therefore, if contracted to work for one year starting next monday this would require a K or if you hire someone to perform at a show a year out.
EXCEPTION: Full Performance If an individual has already completed performed under the K the SOF cannot be asserted against them. NOTE: If there is partial performance SOF is a valid defense to K formation but the individual is entitled to restitution for the work performed |
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SOF: Sale of Goods for $500 or more |
Explanatory
EXCEPTION: The SOF is only available for goods not yet paid for, if you paid for some of the items then you cannot assert the defense. Additionally, if you paid for part of a nondivisible (no apportionment) item (like a boat) then you cannot assert the SOF. A downpayment takes the whole thing outside of the statute of frauds.
If someone made you custom goods, substantial start and the goods are not suitable for sale to others, the SOF is also not a defense. |
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NY DISTINCTION: SOF: Lease of goods for over 1,000 |
The writing must identify that it is a lease, the duration, payments, and be signed by the defendant |
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SOF: Suretyship |
A promise to "answer for" the debt of another. This requires that you have a K already! You have a K with someone and a THIRD PARTY to the K tells you they will pay the K price.
If you do not have a K with someone then the promise to pay would be a K between the two of you.
EXCEPTION: If the promise to pay is for the primary benefit of the party asserting the breach then no writing is needed.
NY DISTINCTION: Does not recognize this acceptiation |
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SOF: Contract Modification |
Must be in writing only if the contract as modified would be within the statue of frauds. |
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Oral Modifications |
Article 2: Parites are allowed to prohibit oral modification of thier contracts
Common Law: Prohibition on oral modification are not enforcable, can orally modify |
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SOF: Satisfactory Writing |
Article 2: Must contain a quantity term and be signed by the DEFENDANT (the party charged with the breach) to the instant action. NOTE: remember that signature, under Art. 2, is a broad concept Effect: One way street if only one signed writing the party who signed it is liable, but the party who didn't sign it has a valid SOF defense.
Common Law: K must include all material terms (who, what) and be signed (actually signed) by the DEFENDANT (party against who the breach is asserted) |
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Merchant's Confirmatory Memo |
ART 2 ONLY
A plaintiff may use his owned signed writing as a contract binding the defendant for the sale of goods over $500 if: 1. Both parties are merchants 2. the memo acknoweldges the quantity of the items sold or claims an agreement has previously been made 3. the other party does not submit a written rejection within 10 days |
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Seller's Waranties: Express Warranty |
Promises, descripitions of the goods, and the use of sample or model (promise that your item will be like the sample)
OPINION is not an express warranty
A warranty must be the basis for the bargain: if the buyer could have releid on the express warranty it is |
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Seller's Warranties: Implied Warranty: Implied Warranty of Merchantability |
Implied warranty that the goods are fit for thier ordinary purporse
Only applies if: the seller is a merchant who deals in goods of the kind who has specialized knoweldge about this particuar good involved in the transaction
EXAMPLE: Foot locker selling shoes (IWM), foot locker selling you a van (no IWM) |
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Seller's Warranties: Implied Warranty: Implied Warranty of Fitness |
NO RESTRICTIONS as to who seller is (does not need to be a merchant)
Implied warranty that these goods are suited for the buyer's particular purpose. Seller must know that buyer has a special use for these goods and is relying on seller to pick out goods suitable for that use. |
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Disclaimers of Warranty |
Can disclaim implied but not express waranties BUT TO BE EFFECTIVE the disclaimer must be part of the offer and acceptance process or be agreed upon by the buyer CANNOT simply find out about the disclaimer later (like if it was in a box)
MUST use the phrases "as is" or "with all faults" to disclaim implied warranties.
Otherwise must include conspicious language that disclaims the warranties that includes the term merchantability. |
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Limitation on liability in a warranty |
Generally permissible unless it is unconscionable. A seller may limit buyer's remedies for breach of any warranty if the limitation is not unconscionable.
Limiting a buyer's remedies for personal injury in the case of consumer goods is PRESUMED unconscionable
NOTE: If a limited remedy fails its essential purpose other remedy provisions will apply |
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Risk of Loss: Only implicated under Article 2 |
When goods are damaged or destroyed in transit which party is to blame.
1. Contractual language controls 2. the breaching party, even if the breach is unrelated to the damage suffered, bears the ROL (shipping something after k deadline for instance) 3. Delivery by common carrier 4. Delivery by a non-common carrier |
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ROL: Delivery by Common Carrier |
Who bears the ROL depends on type of contract: 1. Shipment: Seller has ROL until he delivers the goods to a common carrier, makes delivery arrangements, and notifies the buyer
2. Destination contract: Seller has ROL until the goods reach a specific location
SHIPMENT CONTRACTS are the default rule, therefore, must expressly state a destination contract
FOB = Free on Board, generally followed by a location. If expressly stated in the K the seller bears the ROL until the goods reach this location |
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ROL: Delivery by Non-Carrier |
Merchant: The seller merchant bears the ROL until the Buyer takes possession of the goods.
Non-merchant: The seller bears the ROL until he tenders the goods in the Buyer (tells him where to pick them up/makes them available to the buyer) |
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NY DISTINCTION: ROL: Lease |
ROL is on the lessor |
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Perfect Tender Rule |
Article 2: If the tender is not perfect (not exactly what the contract requires then the seller has breached)
Common Law: So long as the offeror has substantially performed under the contract everything is goodie. There cannot be a material breach |
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Option to cure if tender is not perfect |
Article 2: if the time for the delivery has not yet expired the seller can cure by perfectly tendering until the deadline
If time has expired then the Seller has no option to cure UNLESS the buyer has customarily accepted non-perfect tender (custamarily accepted non-conforming goods). In this case the seller has a reasonable oppurtunity to cure |
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Installment Contracts |
Requires or authorizes delivery in seperate instalments. Must be indicated in the K language.
If instalment contract Perfect Tender Rule does not apply, buyer may reject only for substantial impairment. |
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Buyer's Acceptance of Goods |
The Buyer accepts the goods whenever she has had the oppurtunity (NOT the actual chance to) inspect the goods. EXCEPTION: The buyer does not accept the goods after an oppurtunity to inspect them if thier is a latent defect in the goods that is difficult to detect that SUBSTANTIALLY impairs the value of the goods
Once the buyer has accepted the goods he CANNOT reject them (still may get damages) |
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Consequences of Rejection or Revocation |
Return: the buyer can force the seller to take back the goods at the seller's expense
Refund: the buyer can get any money back that he has paid for the goods
Damage: the buyer can get damages from seller for breach of the contract |
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Buyer's Obligation to Pay |
May use a check but the seller can refuse a check. If the seller's refusal of a check would make the buyer miss the payment deadline then the buyer is given a reasonable time to go get cash. |
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Failure to perfectly tender |
Article 2: Buyer may:
reject all the goods reject the non-conforming goods accept all the goods
Regardless of his option there is still a breach and therefore still damages
Common Law: The injured party can recover for ANY BREACH, however only a material breach provides an excuse to not engage in your part of the K |
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Timliness of Completing Service |
Common Law: Finishing late is not a material breach UNLESS the K or the circumstances indidicate that "time is of the essence" |
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Anticipatory Repudiation |
Telling a party, before thier obligations are fullfilled, that you will not pay them or fullfill your obligations
Constitutes a material breach, other party is excused from completing the K. If the other party shows that they are ready, willing, and able to perform then they are entitled to damages.
Can revoke an anticipatory repudiation so long as the other party has not relied on it
Language may consitute an expression of doubt to someone's abilities to perform under the contract THIS IS NOT REPUDIATION. In this case the innocent party may suspend performance until he recieved a adequate assurances that performance will be forthcomming. |
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Failure to Give Adequate Assurance |
Article 2 (only): A party, with reasonable grounds for being insecure, may request in writing, ADEQUATE ASSURANCE that the other party will perform thier contractual duties. Failure to provide this writing is considered an anticipatory repudiation and therefore a material breach.
This writing will just state that the other party will perform, it cannot be used to rewrite the contractual agreement and you cannot demand a particular type of assurance. |
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Rescission |
An agreement to cancel the contract. In order for a recession to be effective each party must have some duty left to perform under the K.
There must be an express agreement to rescind and therefore both parties must have a meeting of the minds, they both must know they are rescinding |
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Modification |
Takes place immediately, needs consideration under the common law. |
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Accord and Satisfaction |
An accord is an agreement to accept, in leiu of performance of that the person is supposed to recieve from the other party, some other different type of performance.
Satisfaction would be the performance of the new agreement.
If there is a good faith dispute about performance and somone accepts a reduced price as a result this would be an accord and satisfaction.
NOTE: if the K is breached then the breaching party is liable both for the existing duty and for the current failure to perform
Needs an already existing duty to work (such as a debt) COMPARE modification which is effective immediately |
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Novation |
an agreement between all parties to substitute a new party for an existing one
Cross Reference: Corporations: Liability of a Promoter to a coproration not yet formed |
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Impossibility (Impracticability) |
A later unforseen event that makes performance impossible provides the seller with an excuse.
Common Law: destruction rpovides an excuse for non-performance (concert hall burns down)
Article Two: A seller who bore the ROL when the goods where damaged or destroyed is excused by impracticallity
Article Two: Unidentified Goods: Seller is excused only if the goods that were damaged or destroyed were identified to the contract. In that they were tagged or set off so as to be recognized as being part of this contract (a warehouse fire that destroys all your goods will not be a defense if the goods were not clearly identified to one contract) |
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Death/Incapacity of an Essential Person |
If the contract calls for some special skill that cannot be replaced then this is an excuse.
However, if it is a job that anyone can do it is not a defense, you can delegate your duties to someone else.
If buyer dies estate is always liable because anyone can pay someone money. |
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Increase in the cost of seller's performance |
Increase in cost will never excuse the seller
NY DISTINCTION: An increase in cost may excuse the seller and the courts look to the % increase as well as the $ amount increase. |
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Frustration of Buyer's Primary Purpose |
This is an excuse for Buyer if the Seller knew about the primary purpose was when he was entering into the contract.
Example: Rent an apartment to watch the fireworks but the fireworks get cancled |
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Failure of an Express Condidition |
Express conditions lmit other contractual language and do not create new rights (if this then that, as long as, when, provided that, on the condition that).
Strict compliance is required or else performance is excused, but this cannot be a base for liability since it does not create any new rights
HOWEVER a condition could just be for a promise "I promise to pay for the jacket if you promise to donate your home" -- In that situation I would still be obligated to pay for the jacket even if you do not donate because all I was asking for was your promise to donate and not the actual donation -- In that instance you would be in breach but I would still need to perform |
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Satisfaction Clauses |
Pay only if "you are satisifed with the work" judged only from a reasonable persons standard UNLESS artwork or something equally personal is involved and then it would be subjective |
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Losing the protection of an express condition |
An express condition can be waived through inaction or later action by the person protected by the condition.
For instance, if the condition says you buy the house only if you get a mortgage and you do nothing to get the mortgage then the condition is waived and you are bound by the k
Express waiver: the protected party tells someone the waiver will no longer apply, can revoke the waiver as long as the other party has not relied on it |
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Remedies: Specific Performance |
Available only in cases of real property
Never allowed in service contracts (may get an injunction to stop the person from working for someone else)
Art 2: if the goods are unique or there are "other proper circumstances." The seller must actually still have the goods in this setting. Works of art, antiques, custom made goods. |
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Unpaid Seller's Right to Reclaim Goods |
Not available under Article 2.
EXCEPTION if the buyer is insolvent when it recieved the goods AND the seller makes a demand within 10 days after the buyer recieves them HOWEVER if the goods are sold to a third party they are unavailable UNLESS the buyer misrepresented its solvency to the seller in writing within three months of the contract |
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Punitive Damages |
Never awarded, the goal of K damages is to compensate the parties not to punish |
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Liquidated Damages |
Upheld if the damages at the time of K formation were difficult to predict, and at that time, they were a reasonable forecast of future damages. They cannot act as a penalty.
Generally a per diem, graduated remedy is permissible and a lump sum remedy is not.
Article 2: Liquidated damages may be reasonable either at K formation or reasonable in light of his actual damages
Striking down a liquidated damages clause still means you can recover damages just not these |
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NY DISTINCTION: Liquidated Damages in Real Estate |
Under a real estate contract a seller can keep buyer's down payment even if it would constitute a penalty |
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Expectation Damages |
Put the injured party in as good a position as full performance. |
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Buyer's Expectation Damages Under Article 2 |
Cover Damages: Cover Price - Contract Price. If buyer covers (buys a similar item in good faith)
Market Damages: Market Price - Contract Price. If the buyer doesn't cover in good faith (buys a much more expensive alternative) or does not try to cover at all.
Loss in Value: Value as promised - Value delivered. If the buyer chooses to keep non-conforming goods. |
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Seller's Expecation Damages Undert Article 2 |
Resale Damages: Contract Price - Resale Price. If the seller resells in good faith
Market Damages: Market Price - Contract Price. If the seller does not resell in good faith (really low sale price) or does not try to resell at all
Contract Price: If the seller cannot resell the goods because they are unique or particullarly suited to an individual buyer. |
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Lost Volume Dealer |
Special damages situation. If you are a volume dealer that contracts to sell something out of your regular inventory and someone breaches and you sell the same good to someone later for the same price, then you can recover your lost profits on the first sale. |
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Incidental Damages |
Article 2: The cost to an injured buyer or seller of transporting/caring for goods after a breach and arranging a subsequent transaction |
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Consequential Damages |
COMMON LAW ONLY
Damages special to this plaintiff that were reasonably foreseeable to the breaching party at the time of K formation.
EXAMPLE: If I dont get this widegt my whole shop will shut down so you better get it to me for friday, then probably liable for the shop shutting down if he doesn't get it |
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Mitigation |
COMMON LAW ONLY
An injured party cannot recover damages he could have avoided with reasonable effort.
Generally seen in the employment context. Job must be in the same city same responsibilities (or type of job) |
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Entrustment |
Article 2: An owner who entrusts goods to a merchant who deals in the same type of goods has no rights against a bona fide purchaser
An owner takes jewlery or a care to a dealer who sells that and now can only recover in conversion against the dealer |
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Third Party Beneficiary |
Two people enter into a contract intending to benefit a third party. Legal status is conferred to the person who is to intended to benefit under the K, an incidential benefit to someone else has no legal rights under the K. |
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Donee Beneficiary |
An intended beneficiary who is getting performance as a gift |
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TBP: Who may rescind or modify the underlying contract? |
The promissor and promissee can rescind or modify the contract (the original two parties) UNTIL the rights of the TBP have vested in that the TBP learns about the K and relies on it (then you need the TBP's consent)
Of course, the K language controls if it says something different |
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TBP: Promisor liable to the TBP? |
TBP has the same rights as the promissee, therefore she can sue the Promisor if the promisor materially breaches even though there is no privity.
HOWEVER, this also means that if the promissee materially breaches TBP cannot recover |
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TBP: Is the promisee liable to the intedned beneficary? |
Not if it is a donee beneficiary, however if it is a creditor beneifciary (getting the benefit to repay a debt) then yes. |
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Delegation of Duties |
Contractual duties (obligations) may be delegated without the consent of the person to whom performance is owed.
The person delegating |
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Restricitons on Delegation |
K language can prohibit deleigation (language prohibiting assignment also prohibits delegation)
If the K is for a special skill or because of your reputation you cannot delegate |
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Delegation: Rights of the obligee |
Delegating party still remains liable to the original contractual party, the delegate is not liable to the obligee UNLESS the delegate gets consideration for his services (in this case the original party to the contract is the TBP of the new contract between the delgator and delegee) |
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Assignment of Rights |
Two people make a contract, then after contract is made, the assignor transfer his rights to a third party asignee.
To do this you MUST have specific language stating "I assign" BUT you do not need consideration.
Also the obligor must be notified in order to be liable for failure to comply with the assignment.
The person delegating his rights or obligations to a third party remains liable if that third party screws up |
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Restrictions on Assignment |
Contract language controls: HOWEVER if the language merely prohibits assignment ("rights under this contract are not assignable) then the assignment is STILL VALID even though the delegator breached by assigning.
The assignment is VOID only if the K says assignments under this contract are VOID. |
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May an obligor's duties be changed through assignment? |
No, an assignment cannot substanlly change the duties of an obligor. That is the requirements of the assignment have to be in line with the original K.
Assginement of right to pay is always good. |
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When is the obligor liable to the assignee? |
Assignee can sue obligor, essentially he steps into the shoes of the assignor and has only the rights that he would have.
Once Obligor has notice of the assignment he is bound to render perofrmance to the assignee (if he mistakenly pays the assignor then this is a breach) |
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Multiple Assignments |
Gratuitious or gift assignments are easy revoked: the last made gift assignment is the one that is valid, a new gift assignment revokes the previous one. Also, assignor could just take performance directly by the obligor and this would revoke as well.
CANNNOT revoke if the assignor should have known the assignee would detrementally rely on the promise and the assignee actually did rely on the promise.
HOWEVER if you pay for the right (consideration for the assignment) then the first assignee for consideration prevails over all subsequent assignees.
NOTE: if the assignee gave consideration for the assignment and is unaware of other assignments and is the first to get payment from the obligator then this assignment controls. Notification of the obligor first does nothing must be first to recieve payment or win a judgement against. |
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Consideration and Mutuality |
In order for a contract to be valid there must be consideration on both sides: the promises must be mutually obligatory. If one party is bound and the other is not then there is no mutuality and consideration generally fails because the promise is illusory.
Unqualified right to cancel a K at any time is not supported by consideration if it is in no way restricted (what is the other party getting for its promise to let you cancel). |
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TBP: Vesting |
The rights of a third party beneficiary do not vest until:
TBP manifests assent in a manner invited to or requested by the parties
TBP learns of the contract and detrimentally relies on it
TBP brings a lawsuit to effect its rights
If the TBP's interests have not vested the contracting parties are free to modify the contract without the TBP's consent |
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Insolvent Purchaser |
Under Art. 2 if someone is insolvent then you can change the terms of the agreement to require cash on delivery |
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Effect of Rejection of Non-conforming Goods |
If the buyer rejects non-conforming goods then it is entitled to the money it prepaid and return the goods
HOWEVER if the seller refuses teh offer to return then the sale of the nonconforming goods will be placed in an account to offset the Seller's liability to Buyer |
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Offers to Induce Someone into Marriage |
Must be in writing |
