Contracts

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UCC

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1. UCC governs the sales of goods.
2. In hybrid cases, which involves the sale of goods and a service contract, then look to the predominant purpose. Factors include, 1) the language of the contract, 2) the nature of the supplier's business; and 3) the relative values of the good versus the service.

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Implied-in-law Obligation/Quasi-Contractual Obligation

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1. The bestowal of the benefits unjustly enriched the recipient and accordingly an implied-in-law contract is found to restore the value of the benefits conferred.
2. This is used when emergency services are given, the benefits are conferred by mistake, or the benefits are conferred via an unenforceable contract.

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Offer

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1. an outward manifestation which can be oral, written, or made via conduct.
2. and signals that acceptance will conclude the deal.
3. Advertisements to multiple recipients are treated as invitations for offers, this is because demand may exceed supply. Language in the advertisement identifying the means by which the goods will be allocated in the event of excess demand will constitute an offer, however.
4. An offer creates the power of acceptance in an eligible offeree. This gives the offeree the power to create a contract simply by accepting the offer.

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Termination of the Power of Acceptance

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1. Lapse of Time - the power of acceptance terminates at the time stated in the offer. If no time is stated than the power of acceptance terminates at a reasonable time. If an offer is made face to face, the power of acceptance ends at the end of the conversation.
2. Death or Incapacity - the supervening death or incapacity of the offeror or offeree will terminate the power of acceptance with respect to the offer.
3. Revocation of Offeror - the offeror may terminate the offeree's power of acceptance at any time so long as it occurs before acceptance and is communicated to the oferee.
4. Rejection by the Offeree - the power of acceptance is destroyed with an outright rejection, a counteroffer, and non-conforming acceptance.

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Options Contracts/Firm Offers

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1. The offeror can revoke an offer even if he has expressly promised to keep the offer open.
2. In order to have an enforceable options contract there must be 1) an offer, 2) a subsidiary promise to keep the offer open, and 3) a sell by date in an offer may only be an express lapse provision, and 4) some valid mechanism for securing enforcement of the subsidiary promise to keep the offer open, usually consideration
3. A firm offer to either buy or sell goods without consideration is valid as long as the offer is made by a merchant, in a signed writing by the merchant, and the offer expressly states by its terms that it will be held open. A firm offer can be for no longer than 3 months.

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Revocation of the Offer in a Unilateral Contract

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1. Once the offeree begins performance, an option contract is created and the offeror may not revoke. An offeror may revoke where the offeree is engaged in "mere preparations" to perform rather than the beginning of performance itself.
2. Although the offeror cannot revoke once the offeree has begun performance, accetpance of the offer is still effective only upon the completion of the performance. The offeree of a unilateral contract is free to abandon the performance at any time or not undertake performance at all.

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Acceptance under the Common Law

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1. Acceptance must mirror the terms of the offer, and acceptance must be communicated to the offeror by means stated by the offeror, or if none are stated by a reasonable means. A means is reasonable if it is the means used by the offeror, one customarily used in the transaction, or a method just as reliable and speedy as the one chosen by the offeror.
2. The mailbox rule states that acceptance by mail is effective upon dispatch so long as the acceptance is properly sent, an offer may not be revoked once acceptance is dispatched. If a rejection is sent first, then the mailbox rule will not apply. If the acceptance reaches the offeror first then there is acceptance, if the rejection reaches the offeror first, then the power of acceptance is terminated.

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UCC section 2-207 (Disappearing Contract Issue)

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1. Non-conforming acceptance, or acceptance that contains variant terms, operates as legally effective acceptance. Thus, the exchange of forms will successfully conclude the contract formation, despite the fact that there are boilerplate differences between them.
2. The only situation in which non-conforming acceptance will not operate as legally effective acceptance occurs when acceptance is made expressly conditional on assent to the additional or different terms. Under the majority rule, would-be acceptance that tracks the language of the 2-207 proviso constitutes conditional acceptance if the language in question is clear and conspicuous.

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UCC section 2-207 (Surprise Terms)

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1. In a transaction between consumers or between a merchant and a consumer, additional or different terms are not part of the contract and are proposals for additions to the contract that are freely rejectable.
2. Between merchants these terms are considered part of the contract unless, 1) the offer expressly limits acceptance to the terms of the offer, 2) the additional terms would materially alter the contract, or 3) the offeror objects to the additional terms within a reasonable time.
3. Under UCC 2-207(3) if both parties engage in conduct that recognize a contract despite conditional acceptance that was never approved by the other sides, then there will be a contract with terms on the original forms and UCC gap fillers.

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Knock Out Rule

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1. Where the parties exchange forms or other communications that differ from each other with respect to a particular term, the conflicting terms knock each other out and neither is part of the contract.

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Material Alteration

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1. Material alterations are terms that would cause surprise or hardship if incorporated without the express awareness of the other party. The most reliable guide is whether the term is consistent with the usual trade practices or inconsistent with those practices.

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Consideration

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1. A promise is unenforceable unless it is supported by consideration.
2. Under the legal detriment test the question is whether the promisee is doing something he had a legal right not to do or is forgoing some activity which he had a legal right to engage in.
3. Illusory Promises - a promise to perform that leaves performance to the discretion of the promising party is an illusory promise and won't constitute consideration.

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Executed Gifts

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1. Delivery of a would be gift combined with a present intention to bestow the gift constitutes a legally binding gratuitous transfer.

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Conditions

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1. A condition on a gratuitous promise does not satisfy the requirement of consideration. A condition is something a promisee must do to avail herself of the promisor's benevolence.
2. Words suggesting benevolence rather than self-interest, such as "gift" may indicate a gratuitous promise, whether the gift is made in a commercial context or charitable/family context, and if there is a benefit to the promisor for performance of the condition.

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Promise for a Benefit Received

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1. The common law rule is that a promise for past services is unenforceable, as past consideration is not consideration.
2. The modern rule is that a promise made in recognition of a previously received benefit is enforceable, so long as it was a material benefit. Where the promisor makes a promise in recognition of benefits that the promisor received under the terms of a contract, the promise is not enforceable.

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Promissory Estoppel

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1. Promise
2. Foreseeable Reliance
3. Actual Reliance
4. Injustice without Enforcement - the courts will consider the strength of the case as a whole, and where there is substantial proof of other elements, the case is strengthened, the court will also consider blameworthiness, and balance of the equities (how much harm to each party if there is enforcement).

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Statute of Frauds

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1. The statute of frauds requires that certain contracts be evidenced by a writing, signed by the party against whom enforcement is sought.
2. This includes contracts for marriage, a term of at least one year, land, executor, guarantee, and sale of goods of $500.
3. The memorandum must identify the parties of the transaction, the nature and subject matter of the transaction, and the essential terms of the unperformed promises in the agreement.

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Tacking under Statute of Frauds

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1. The writing does not need to be a single writing, and the requirements of the writing can be satisfied by tacking several documents together. All the documents must be signed, or if not signed incorporated by reference by a signed writing.
2. If unsigned documents are not incorporated by reference in a signed document, tacking together the signed and unsigned documents to satisfy the Statute of Frauds is permissible if: 1) there is at least one signed writing unambiguously establishing a contractual relationship between the parties; 2) the signed and unsigned documents clearly refer to the same subject matter, and 3) there is clear and convincing evidence of acquiescence to the unsigned documents by the party against whom enforcement is sought.

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Performance as Satisfaction

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1. Land Contracts - part performance will make an oral contract for the sale of land enforceable in 1) an action by the buyer against the seller, but not in an action by the seller against the buyer, and 2) in an action for specific performance, but not in an action for money damages. Part performance includes substantial reliance.
2. One Year Contracts - full performance of an oral contract for services by the party performing the services will make the contract enforceable against the paying party.
3. Sale of Goods - FILL THIS IN.

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Enforcement Where Statute of Frauds is not Satisfied

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Recovery for Benefits Conferred - the party has the option of filing a cause of action for restitution, seeking to recover the value of the benefits that he conferred. Alternatively, if services are involved, the party may recover on a theory of quantum meruit, meaning it would sue to recover the reasonable value of the services rendered.
Promissory Estoppel - stiffer requirements than normal promissory estoppel (not all courts recognize this claim). They require a definite and substantial character of reliance, and its relationship to the remedy sought, the extent to which the reliance is corroborated by the evidence of the formation and terms of the contract, and the extent to which the formation and terms of the contract are otherwise established by clear and convincing evidence.

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UCC Statute of Frauds

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1. a writing
2. that is signed by the party against whom enforcement is sought
3. that is sufficient to indicate that a contract for sale has been made between the parties. This requires terms indicating the quantity of goods sold in the transaction. This can be satisfied with language that provides an unambiguous basis for measuring quantity, and in the case of output and requirements contracts, those expression or their equivalent is sufficient. No other term is required.
4. The writing must be contemporaneous with or subsequent to contract formation to satisfy the writing.

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Merchant's Confirmation

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1. The UCC Statute of Frauds may be satisfied when two merchants enter into an oral agreement and one of them sends the other a written confirmation in the agreement. The statute of frauds is satisfied against the recipient merchant if the latter fails to object in a timely fashion.
2. This requires under 2-201(2) that 1) the writing is sufficient against the sender (satisfies 2-201(1)), and 2) that it is in confirmation of the contract, 3) that is sent within a reasonable time of the making of the oral agreement, and 4) the contents of which the receiving merchant has reason to know.

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In Court Admission

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1. The statute of frauds is satisfied when a party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made.
2. The in court admission exception will not secure enforcement of the contract in question beyond the quantity of goods admitted.

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Partial Performance

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1. The partial performance exception does not apply unless there are actions by both parties indicating that a contract for sale exists. Thus, a payment can constitute partial performance only if the buyer makes the payment and the seller accepts it, and delivery of goods can constitute partial performance only if the seller makes the delivery and the buyer accepts the goods.
2. If the contract in question involves divisible goods partial performance secures enforcement for any quantity that has already been paid for by the buyer or delivered by the seller, the contract is not enforceable beyond that quantity.
3. If the contract in question involves an indivisible good the majority rule holds that partial payment secures enforcement of the entire contract.

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Substantial reliance by Seller of Specially Manufactured Goods

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1. Five elements must be satisfied: 1) the goods are to be specially manufactured for the buyer, 2) the goods are not suitable for sale to others in the ordinary course of the seller's business, 3) the seller has substantially begun to manufacture, or made commitments to procure the goods, 4) the actions undertaken to begin to manufacture or procure occurred under circumstances which reasonably indicate that the goods are for buyer, and 5) the actions undertaken to begin to manufacture or procure occurred before seller received notice of buyer's revocation.

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Promissory Estoppel and UCC Statute of Frauds

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1. Among those courts that do recognize promissory estoppel, some impose enhanced proof requirements on the claimant, such as proving unconscionable injury or that the other party would be unjustly enriched without enforcement.
2. Virtually all courts have protected a general contractor via promissory estoppel even if the oral subcontractor in question is for goods at a price greater than 500 dollars.

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Limitations on the Statute of Frauds

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1. The contract may provide evidence in establishing an element of a legal claim apart from breach of contract, the contract may provide evidence establishing a defense to a legal claim apart from breach, and the contract may provide evidence of the value of the services already rendered.

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Implied Warranties

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1. Warranty of Title - an implied warranty of good title to the goods, rightful transfer of the goods, and no liens attached to the goods.
2. Warranty of Merchantability - if the seller is a merchant under the UCC, then there is a guarantee that the goods are fit for the ordinary purposes for which those goods would be used.
3. Warranty of Fitness for a Particular Purpose - this warranty only applies if at the time of contracting, the seller has reason to know that 1) the particular purpose for which the goods required; and that the seller's skill or judgment is being relied upon to select or furnish these goods.

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Missing Terms

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1. The default rule for a missing price term is a reasonable price at the time established by the contract for delivery of the goods.
2. For a missing time term, the contractual action must be taken within a reasonable time.
3. The default rule for a missing place of delivery term is that the place of delivery will be the seller's place of business.
4. Employment-at-will is the default rule for the duration of employment.

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Good Faith and Fair Dealing

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1. Good faith is generally defined as honesty in fact int he conduct or transaction concerned and in the case of a merchant good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
2. The good faith obligation will also operate to ensure good faith where the terms of the contract leave a critical term, such as price, satisfaction, or quantity open to the determination of one party.
3. There must be a good faith determination in output and requirement contracts. Under UCC 2-306 there is a prohibition against unreasonably disproportionate demand or tender if there was either 1) a stated estimate made between the parties, or in absence of a stated estimate, any comparable prior outputs or requirements.

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Objective v. Subjective

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1. The objective reasonable meaning of a term at the time of contracting controls over a subjective understanding of the term by one of the parties.
2. If the other party knows or has reason to know of the first party's subjective understanding then that subjective interpretation controls.
3. Where both parties share the subjective understanding of the term at the time of contracting, the mutual subjective understanding will control.

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Contra Profentem and Reasonable Expectations

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1. If more than one meaning is possible, then the meaning more favorable to the nondrafting party will prevail.
2. Under the doctrine of reasonable expectations, even unambiguous terms may be interpreted against the drafting party if they conflict with the reasonable expectations of the other party. This only applies to boilerplate terms, and unreasonable boilerplate terms are unenforceable.

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Trade Usage, Course of Dealing, and Course of Performance

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1. Usage of trade is any practice or method of dealing having such regularity of observance in a place or trade as to justify an expectation that it will be observed with respect to the transaction.
2. Course of dealing is a pattern of conduct concerning previous transactions between the parties that can be regarded as establishing a common basis of understanding for interpreting their subsequent expressions and other conduct.
3. Course of performance is present when a particular contract involves repeated occasions of performance by a party and the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces to it without objection.
4. Such evidence is not available to contradict an express term, but can supplement or interpret. But can be used to show waiver or modification of a term.
5. Course of performance prevails over course of dealing and usage of trade, and course of dealing prevails over usage of trade.

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Parole Evidence Governs

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1. Oral and documentary evidence of negotiations and other communications between the parties, where the communications took place prior to or contemporaneous with the execution of a written contract.
2. Parole evidence does not apply to agreements entered into subsequent to the execution of the written document. However, no oral modifications agreements may bar their admissibility (common law and UCC under 2-209), but the modification may be enforceable if the disadvantaged party relies on the modification or the parties act in accordance with it.
3. Parole evidence will not affect agreements between the parties that are entirely distinct from the written agreement of the contract at issue.

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Admissibility of Parole Evidence

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1. Parole evidence is always admissible to explain or interpret the terms of a written contract.
2. Parole evidence may be used to contradict the terms of a contract, unless the terms are integrated. However, under the UCC course of dealing and performance may be admissible in sale of goods cases to qualify the meaning of an integrated term.
3. Parole evidence may be used to supplement unless the contract is completely integrated.

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Parole Evidence and Absence of Agreement

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1. The parole evidence rule does not bar efforts to prove the absence of a written agreement. The absence of an agreement may be proved by parole evidence or other extrinsic evidence.
2. This includes failure of an oral condition, absence of consideration, mistake, duress or fraud.

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The Pre-existing duty rule

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1. A promise to increase compensation under an existing contract would be an unenforceable modification to an existing contract because there is no consideration offered for the modification.
2. A promise to increase compensation under an existing contract is enforceable as a mutual modification to a contract if 1) both parties agree to a performance that is different from the one required in the original contract, and 2) the difference in performance is not a mere pretense of a newly formed bargain.
3. Where a promise of increased compensation is given in exchange for a performance, and that performance is rendered substantially more burdensome than reasonably anticipated by the parties when they entered the contract, then the pre-existing duty rule will not apply.

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No Pre-existing duty rule under the UCC

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1. Modifications, however, must meet the UCC's good faith test, and a failure to do so will render them unenforceable.
2. The good-faith test applies even to modifications that are supported by consideration. Modifications supported by "consideration" will be unenforceable if the appearance of the mutual bargain is merely a pretext to hide a bad-faith change in terms.

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Unilateral Mistake

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1. A party operating under a faulty assumption about material facts as they exist at the time of contracting is not excused from his contractual performance, unless the other party knew or had reason to know of the mistake, or the mistake was based on a clerical error (however, this exception does not apply if the error was caused by extreme negligence or the other party relied on the error).

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Mutual Mistake

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1. Where both parties have labored under a common faulty assumption regarding the present facts, the contract is voidable by the disadvantaged party where both parties are mistaken and the disadvantaged party does not bear the risk of mistake under the agreement.

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Impossibility

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1. Excuses both parties from their obligations under a contract if the performance has been rendered impossible by events occurring after the contract was formed. This requires objectively impossibility (literally impossible and was not the result of some fault or failure by one of the parties), and the occurrence of the contingency must not be known to the parties at the time of contracting (possible at time of contracting, then became impossible or was always impossible but this was unknown to the parties).
2. This doctrine does not apply where the parties have allocated the risk, or if performance is only temporarily impossible, then this will only suspend the obligations of the parties until the impossibility ends.

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Impracticability

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1. A promisor may be excused from performance if 1) the impracticability of the performance was caused by some unforeseen contingency, 2) the risk was neither assumed nor allocated by the parties, and 3) the increase in the cost of performance would be far beyond what either party anticipated.
2. Under the UCC, increase in cost alone does not excuse performance unless the rise in cost is due to an unforeseeable contingency and alters the essential nature of performance.
3. Allocation of the risk will depend particularly on, if the contingency was foreseeable at the time of the contract and the contract is silent (suggests a decision to allocate risk to performing party), the payment of a market premium, evidence of course of dealing or trade usage reveals that it is customary for the performing party to assume the risk of contingencies.

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Frustration of Purpose

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1. Where a condition occurs that dramatically reduces the value of performance for the receiving party.
2. 1) The frustration of purpose defense is available where the party's principal purpose in entering the contract is frustrated, 2) substantial frustration is required, and 3) the non-occurrence of the event precipitating frustration must have been a basic assumption of the contract.

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Conditions

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1. A promissory condition is where the contract performance is conditioned on the occurrence of the promised performance by the other party.
2. Pure conditions are typically where contract performance is conditioned on the occurrence of events beyond the control of either party.
3. Implied conditions are those created under the law to address order of performance and rights upon breach when the parties haven't done so expressly.

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Order of Performance

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1. If the contract is silent on the order of performance, where one party's performance requires a period of time to be completed, and the other party's does not, then the performance over time is treated as an implied condition to the latter.
2. Where the parties' can exchange performance more or less simultaneously, then the performances are treated as concurrent conditions of each other.
3. Because sales contract mostly involve delivery and payment, performance is treated as concurrent, and so each performance is conditioned by the performance of the other.

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Failure of an Express Condition

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1. Express Conditions - where a party's performance under the contract is subject to an express condition, the failure of that condition will discharge the party's obligation to perform. However, when a party waives the condition, the waiving party's obligation becomes absolute because it is no longer subject to the condition. Bad faith conduct will excuse the condition where the benefiting party interferes with the fulfillment of a contract, or where the benefiting party fails to take steps necessary for the condition's fulfillment. Where a substantial forfeiture is involved, the condition is excused based on a number of circumstances.

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Implied Conditions

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1. If the breach is serious enough, the court will treat the breach in the same way as an express condition, and relieve the aggrieved party of his performance obligation, this is called a material breach.
2. If the breach is less serious, the court will treat the breach as substantial performance. In this case there is no discharge, although the aggrieved party may still sue for damages.
3. The factors for determining whether a breach is material or substantial performance includes: 1) the extent to which the aggrieved party will be deprived of benefit, 2) the extent to which the aggrieved party can adequately be compensated via damages, 3) the extent to which the aggrieved party will suffer forfeiture if a material breach is found, 4) the extent to which the breach was willful or in bad faith, and the likelihood that the breaching party will cure his failure in a reasonable time.

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Total Breach

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1. Where the possibility of cure by the breaching party remains, the breach is deemed merely material and the victim may temporarily suspend his own obligations pending cure. But where such cure is unlikely or does not take place, there is a total breach, and the victim is free of performance obligation.

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Imperfect Tender under the UCC

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1. If there is imperfect tender the buyer may reject the goods within a reasonable time, the buyer may accept the good and has a reasonable time to inspect the goods, and he may reject part of the goods and accept other parts of the goods.

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Breaching Sellers under the UCC

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1. If the time for performance has yet to expire, the seller may substitute as long as the seller gives the buyer seasonable notice, and the seller makes conforming delivery within the time specified in the contract.
2. If there is reasonable grounds to believe there would be acceptance, seller may give notice of intent to substitute, and make the conforming delivery within a reasonable time.
3. The seller may prove that he has reasonable grounds for believing the buyer would accept non-conforming goods through express assurances, trade usage, course of dealing or course of performance.
4. In installment contracts, if the non-conforming tender substantially impairs the value of the entire contract then buyer is entitled to cancel the contract and sue for damages, if it impairs the value of the installment then may cancel the installment and sue, if it does not impair the value of the installment then the seller must give an opportunity to cure the non-conformity with a reasonable time, if there is inability to cure, then can reject the installment.

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Infancy

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1. A minor may enter into a contract, but the contract is voidable at the option of the minor.
2. If the minor voids the contract he must return the goods if they are in his possession, but he is not liable for any depreciation in the value of the goods.
3. A minor may ratify a contract entered into during infancy by making a manifestation to the other party that he will be bound by the original contract.
4. For necessaries the other party may secure the reasonable value of the goods or services, not the contract price.
5. In a minority of jurisdictions a minor is estopped from proving his real age in court if he misrepresented his age.

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Mental Incompetence

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1. The key in all cases is whether the person was incompetent at the time of contracting.
2. To be incompetent they must be adjudicated incompetent, unable to understand in a reasonable manner the nature and consequences of the transaction, or unable to act in a reasonable manner in relation to the transaction and the other person knows of this condition (not majority rule on this last point).
3. A contract by a mentally incompetent person is voidable. The person must pay the reasonable value of the goods if the person received benefits. A mentally incompetent person is responsible for any damages and depreciation.

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Fraudulent Misrepresentation

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1. In order to establish this defense, 1) the defendant must have made an assertion that was inconsistent with existing facts, 2) there must be scienter which is satisfied if he made the assertion knowing it was false or he made the assertion knowing that he had no idea whether it was true or false, 3) an intent or substantial likelihood of misleading, 4) the misrepresentation must be material to the contract (either subjectively or objectively), and 5) the reliance was reasonable.

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Non-Fraudulent Misrepresentation

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1. The following elements must be established, 1) the defendant must have made an assertion that is inconsistent with existing facts, 2) the misrepresentation must be material to the contract, and 3) there must have been reasonable reliance on the misrepresentation.
2. For negligent misrepresentation the aggrieved party must show that the perpetrator would have known that the assertion was false had he exercised care.
3. For an innocent misrepresentation, the aggrieved party need only show that the perp made an assertion not in accord with existing fact.

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Remedies for Misrepresentations

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1. All three give power of avoidance, rescind contract and collect reliance damages.
2. For fraudulent misrepresentations the victim may seek the benefit of the bargain, in addition punitive damages are available.

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Duress

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1. To establish this action there must be, 1) a threat, 2) that is wrongful in nature, and 3) that leaves the aggrieved party with no reasonable choice but to succumb to the threat.
2. Contracts made under physical duress are void, and contracts entered into under other forms of duress are voidable, and the aggrieved party is entitled to restitution for benefits conferred, and required to return excess value of benefits to the perpetrator.

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Undue Influence

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1. Unfair Persuasion - discussion at an inappropriate time, at an unusual place, demand transaction be finished immediately, multiple persuaders, absence of third party advisors, and statements that there is no time for advisors.
2. Vulnerable Party - mental infirmity due to age or illness short of mental incompetence, vulnerability due to some recent trauma, or reliant on party because of a relationship of trust.
3. Voidable, but must pay restitution for benefits, and must return excess value of those benefits.

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Unconscionability

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1. Procedural Unconscionability - The bargaining process that produced the contract in question creates an absence of meaningful choice for the aggrieved party.
2. Substantive Unconscionability - the contract terms are unreasonably unfavorable to the aggrieved party.
3. Remedies - refuse to enforce the contract, excise the offending clause and enforce the remainder, or limit the application of the offending clause as to avoid any unconscionable result.

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Expectation Damages

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1. The aggrieved party will be entitled to the amount that will restore them to a position had the contract been fully performed.
2. Will not be entitled to this if the cost of performance greatly exceeds the market value of performance.
3. Responsible for consequential damages if at the time of contracting the breaching party knew or had reason to know tha the consequential damages would result from the breach.
4. Must take reasonable efforts to mitigate damages.

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Reliance Damages

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1. Calculated by determining the amount of money necessary to restore the aggrieved party to the position he was in prior to the contract.
2. Most commonly used where expectation damages would be uncertain or speculative.

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Restitutionary Damages

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1. An aggrieved party can choose restitutionary damages over expectation damages. Recover the value of the benefits conferred on the breaching party by the aggrieved party during the course of the contract. It is limited to situations where the aggrieved party has only completed partial performance under the contract.
2. Recovery is the market value of the services rendered, not the contract price.

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Liquidated Damages

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1. Enforceable if the court finds it to be valid damages clause and unenforceable if the court finds that it constitutes a penalty.
2. Validity Test - 1) did the parties intend the clause to operate as a liquidated damages clause or a penalty, 2) Was the clause reasonable at the time of the contracting in relation to the anticipated harm, and 3) was the clause reasonable in relation to the harm and losses that actually occurred due to the breach.
3. The party attempting to show unenforceability has the burden of proof.

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Anticipatory Repudiation

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1. Anticipatory repudiation may be established by 1) a party's definitive statement indicating that he will commit a breach of contract, or 2) a party's voluntary or affirmative act that renders the party unable to perform or apparently unable to perform.
2. If there is no anticipatory repudiation but, there are reasonable grounds to worry, then the party can demand assurances. Under the UCC the demand must be in writing, under the common law it can be made by oral or written communication.
3. The insecure party may suspend performance if there is no response in a reasonable time, or does not respond in a way that gives assurances, which are determined by the circumstances, relationship of the parties, past dealings of the parties, and the nature of the insecurity.

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Seller's Remedies

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1. If some or all of the goods have been delivered, seller is entitled to collect the contract price.
2. If not delivered yet, seller can resell goods it can recover the difference between the contract and resale price.
3. If seller does not resell, seller can recover the contract-market differential.
4. Seller may at all times recover incidental damages.
5. Volume sellers are permitted to recover the profit they would have made on a sale rather than contract-market or contract-resale differentials.

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Buyer's Remedies

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1. If buyer covers, then he is entitled to the contract-cover differential.
2. If the buyer does not cover, then he is entitled to the contract-market price differential.
3. Buyer may at all times recover incidental damages.
4. If the buyer receives non-conforming goods the buyer is entitled to the difference between the value of the conforming goods and the non-conforming goods.

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Third-Party Beneficiaries

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1. Intended beneficiaries may sue a breaching promisor, incidental beneficiaries may not. Intended beneficiaries are beneficiaries where the promised performance is intended to benefit the third party (this includes creditor or donee beneficiaries). Incidental beneficiary are third parties who will benefit but who are not intended beneficiaries.
2. The parties to the contract may mutually rescind third party beneficiaries, but this must be done before their rights vest. The vesting occurs when the beneficiary brings suit on the matter, changes his position in justifiable reliance, manifests an assent to the contract, or the rights of the beneficiary vests under an express term.
3. Valid defenses to a contract will be effective against the beneficiary as well.

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Assignment of Rights

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1. The owner of the right must manifest an intention to make a present transfer of the right without further action by the owner or obligor.
2. A right is not assignable if the assignment would materially alter the risks to or obligations of the party to the contract, if the obligor has a personal interest in rendering the performance in question to the obligee and not a third party, violate laws or public policy, or prohibited by the contract (although such clauses are strictly construed).
3. An assignee gets whatever rights to a contract the assignor had, and takes subject to whatever defenses the obligor could have raised against the assignor. Once notice of the assignment is given, payment to the assignor is no defense, but it is a defense prior to notice.

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Delegation of Duties

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1. A delegation does not relieve the delegator from his obligations under the contract. If there is a novation, the delegator is relieved from the obligations under the contract, but this requires a clear promise to release from liability.
2. Delegatee is liable to the delegator if he does not perform, and also to the obligee because he is an intended beneficiary.
3. All obligations can be delegated, except when the performance in question is personal and the recipient must rely on qualities such as the character, reputation, taste, skill or discretion of the party who is to render the performance, or when the contract prohibits delegation.