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Merchant (definition)
Either one who deals regularly in the sale of goods involved OR holds self out as having some special skill or knowledge as to those goods or business practices involved.

Special treatment for merchants in UCC. If neither party a merchant, then basic level applies to all buyers and sellers. If one party is a merchant, then 2nd level of regulation applies (e.g. firm offers). If both parties are merchants, then 3rd level of regulation (e.g. add'l terms in acceptance).
Contract (definition)
A contract is a promise or set of promises the breach of which has a remedy under law, or the performance of which the law recognizes as a duty. In order for a contract to be created, there must be: 1) mutual assent (offer and acceptance); 2) consideration or a substitute; and 3) no defenses to formation.
Mutual Assent (definition)
An offer is: 1) a promise, undertaking, or commitment; 2) with definite and certain terms (definite enough to shape a remedy); and 3) must be communicated to an identifiable offeree. To be valid, an offer must clearly demonstrate a manifestation of intent to be bound such that a reasonable person would construe it as inviting acceptance.
Where would a court look for the terms of the K? (and in what order)
1) Express terms (generally parties and subject matter/quantity are required for a valid K), except in requirement/output Ks; 2) History - course of previous performance or prior dealings; 3) gap rules/trade usage
What kind of events terminate an offer?
Lapse of time (e.g. perishable goods), death of offeror (modernly though, estate obligated to perform if accepted), destruction of subject matter of K, or illegality.
What kind of acts by the parties would terminate an offer?
Rejection (by offeree)(can be express or implied, or counter-offer to someone else) or Revocation (by offeror)(directly communicated to offeree or indirectly, whereby offeror takes action inconsistent with intent of proposed K and offeree finds out).
What kind of offers are there and are they revocable?
Option (irrevocable for agreed period, if sufficient consideration), Firm (irrevocable if all elements met), Supported by detrimental reliance (jxdn split), or plain (revocable).
Plain Offer (definition)
A plain offer is revocable at any time before acceptance, even if it expressly states it will remain open for a certain time or that it is irrevocable.
Option Contract (definition)
A promise by offeror to hold the offer open (irrevocable) for an agreed period of time, which must be supported by sufficient consideration.
Firm Contract (definition)
UCC 2205 - where a merchant makes a written, signed offer to buy or sell goods and includes a promise to hold the offer open, the offer is irrevocable for the period stated, or if none specified, or a reasonable period, neither period to exceed 3 months. After the 3 months, it is a revocable offer - no automatic revocation after 3 months.
Offer supported by Detrimental Reliance
If offer is detrimentally relied upon by offeree, it creates an option K to extent necessary to avoid injusticeL
(Maj.) - offer is irrevocable for reasonable amount of time
(Min) - offer is revocable

* "detrimentally relied upon" would NOT include applying and getting a loan for purchase property

IF a unilateral K? then irrevocable if party begins performance
What is the UCC?
The Uniform Commercial Code governs all contracts involving the sale of goods - tangible, moveable objects at the time the contract was entered into. (The common law governs all other contracts.)
Acceptance and Mirror Image Rule (C/L, general)
Acceptance is a manifestation of assent by the offeree to the proposal made by the offeror. Acceptance of an offer can only be made by the offeree (exception: option K), must be communicated to the offeror, and must be unequivocal in its terms (Mirror Image Rule).
Acceptance (UCC 2-207)
Acceptance by any reasonable means is valid; a "definite and seasonable expression of acceptance" will be treated as an acceptance even if it contains different terms unless the acceptance is expressly conditioned on assent to the new terms. New terms? if layperson(s) - original; if btw merchants - new unless an ironclad offer, objection (within reasonable time), or if material alteration
Mailbox Rule (definition)
Majority rule is that acceptance is effective upon dispatch (properly addressed, prepaid, and deposited in appropriate medium), except for option Ks (effective on receipt), and unilateral Ks (effective on performance). Offer effective on receipt. Rejection effective on receipt. Revocation effective on receipt (maj), but (min) effective on dispatch.

If rejection followed by acceptance - whichever arrives first. (Mailbox Rule n/a).
Consideration
Legally sufficient, bargained for exchange, which induces current performance, detriment to the promisee, and a binding obligation on both parties.

Both parties give something in exchange, eliminates gifts.
Past Consideration
Past consideration is NO consideration. Exception - Promise to pay past debts enforceable (even though no new consideration and even if S o L has run) if reaffirmance of the debt occurs in writing or implied promise (promisor acknowledges in way that shows intent to pay, makes partial payment, or gives creditor collateral).
Moral Consideration
Moral obligation is generally not sufficient. Modernly, courts will enforce promise to extent necessary to prevent injustice at least insofar as the promisor has received a benefit from the promisee.
4 Areas Court will Examine Adequacy of Purported Consideration
Pre-existing Duty, Forbearance to Sue, Illusory Promises, and Nominal Consideration
Pre-existing Duty
When a party to a bargained-for-exchange offers as consideration a promise (or an act) which she is already under a legal duty to perform, the general rule is that the consideration is inadequate.
Forbearance to Sue
A promise not to pursue a legal claim or to refrain from asserting a defense to a legal action is unquestionably legally sufficient consideration to support a return promise if the claim or defense is valid. Trad - reasonable, good faith belief that claim is valid was required. Modernly - just good faith belief that claim is valid sufficient.
Illusory Promise
When one party's promise does not actually subject him to a legal detriment, thereby not supplying the requisite consideration.

--"At will"
Trad - illusory.
UCC - covenant of good faith and fair dealing provides implied covenant to give notice before termination, so not illusory

--"Definite undertaking"
Trad - illusory
UCC - implied covenant to use best efforts under UCC, so not illusory
Promissory Estoppel
Where one party makes a promise to the other without legally sufficient consideration, and second party changes position in reliance upon the promise, the first party will be estopped from asserting lack of consideration as a defense to enforcement. Party asserting must prove: 1) reasonably foreseeable to promisor that promisee would rely on promise; 2) the promisee did so rely (reasonably); and 3) injustice can be avoided only by enforcement of the promise.
Restitution
Where one party has conferred a benefit upon the other party under circumstances where no enforceable contract results, the aggrieved party may be entitled to recover the value of the benefit conferred.
Defenses to Enforcement of K
MICS oF DUPer

Mistake, Illegality, Capacity, S of F, Duress/Fraud, Unconscionability, Parol Evidence Rule
When may a mistake render a K unenforceable?
Mutual mistake. Generally, not for unilateral mistake, unless other party knew of or should have known of the mistake.
Statute of Frauds
Requirement that certain Ks be evidenced by some kind of writing: SLY ME Goods -
--Suretyship
--Land
--Nor performable within one Year
--Marriage Contracts
--Estate Executor's Contracts
--Goods more than $500

C/L requires all essential terms (parties, subject matter/qty, price) in writing. UCC only requires that a K has been formed and quantity.

But a K under the S of F will be enforceable w/o a writing under C/L if:
--Full performance by both sides
--Seller conveys prop to Buyer
--Buyer pays all or part of purchase AND performs some act explainable only by K's existence (e.g. constructing buildings on land)
---Promissory estoppel
--Waiver

Who needs to sign the writing?
C/L: person to be charged; modernly - fax/letterhead/rubber stamp may be enough

UCC:
--layperson(s) - same as C/L
--merchants - none required - if one merchant sends another a writing that sufficiently binds the sender, then recipient is also bound (if knows contents of writing) unless he objects in writing within 10 days of receipt
Parol Evidence Rule
PER bars extrinsic evidence of any prior or contemporaneous agreements that vary or contradict the essential terms of an "integrated" writing.

"Integrated" writing = one in which the parties intended to be a final and complete expression of the K.

Effect of PER?
Bars evidence of:
--contradictory, essential terms

Does not bar evidence of:
--whether writing intended to be the complete and final expression (e.g. merger clause)
--a separate agreement when parties intended the writing to be a partial integration (a final, but not complete integration; refers to a separate agreement)
--a "collateral" parol agreement when there is a completely integrated writing
--mere recital of fact
--no deal
--interpret integrated writing (e.g. ambiguity)
--reformation
--later deal/modification
Modification
Modification is an agreement to change the terms of the existing K. To be enforceable, a modification needs:
* an agreement to modify AND
* either consideration OR rescission OR good faith
Accord & Satisfaction
"The Compromise" - A valid accord & satisfaction requires: 1) a good faith dispute (usually over amount of $); 2) an accord - obligee offers to accept a stated performance (usually different than called for in original K) in satisfaction of the obligor's existing duty; and 3) a satisfaction - the stated performance is rendered.

Note: "Payment in Full" Dilemma

What is the exception to the general rule that there must be a good faith dispute (i.e. consideration)?
If there is any change in the debtor's performance (e.g. paying a day earlier than specified in the K), then the "additional" performance supplies consideration and there may be a valid A & S.
Novation
An express or implied agreement (consent is insufficient) between parties in which the original obligee agrees to release the original obligor and makes an entirely new agreement with a third party/delegatee.
Condition to a K
An event, other than the passage of time, that triggers, limits, or extinguishes an absolute duty to perform of one party to a K.

Conditions can be manifested expressly, impliedly, or by construction by the court. Express conditions require complete compliance. Thus, sub. perf. not sufficient (and nonbreaching party doesn't have to perform at all). However, sub. perf. is sufficient for implied or constructive conditions (other party will able to recover damages but still has to perform).

What are the types of conditions?
Precedent - must be satisfied before duty flows

Concurrent - must be simultaneously satisfied before duty flows

Subsequent - absolute duty can be extinguished if something happens after
Covenant vs. Condition?
Look for intent of parties: words, parties' relationship to the subject provision (if words are those of performer, then likely a covenant, and vice versa), or custom and usage.

Courts prefer covenants. If merely a covenant, then still a duty to perform, but may sue for breach.
When is a condition satisfied?
If satisfaction required by promisee of a commercial K, then it is an objective reasonable person standards; but for personal K (involving personal taste), it is a subjective good faith standard.

If satisfaction required by a 3rd party, then also a subjective good faith standard.

What about Time of Payment conditions?
Where one party's payment under a K appears to be conditional, but strict satisfaction of the "condition" would operate as a forfeiture or may never happen, the court will interpret the condition as merely being one governing time of payment and will imply a reasonable term.
What, if anything, will excuse a satisfaction requirement?
Bad faith
When is a condition excused?
Waiver (only for minor conditions)
Estoppel (withdrawal before reliance ok)
Breach (prevention of satisfaction, repudiation, voluntary disablement)
Forfeiture (substantial performance, divisibility, restitution)
When is a condition discharged?
When an obligation has become an absolute duty, but changed circumstances arise after formation of the K which may discharge the duty to perform - impossibility, impracticability, and commercial frustration.
Impossibility
Events or circumstances that arise after formation of a K that render performance of an absolute duty impossible by anyone (objective standard). This includes illegality, death (unless a commercial K), or destruction (of subject matter of K).
Impracticability
Generally courts reluctant to discharge b/c of impracticability, but courts have recognized that severe impracticability may be included within the meaning of "impossible."

The breaching party must show that it is extremely more burdensome and/or risky to perform and that s/he did not assume the risk. (Mkt fluctuation insufficient for discharge of duty.)
Commercial Frustration
Where performance of the K is both possible and practicable, but circumstances not the fault of either party and arising after formation have robbed one of the parties of the benefit anticipated from performance, that party's absolute duty of performance may be discharged.

What are the two requirements for commercial frustration to discharge duty?
Party seeking relief must have suffered total frustration of her principal purpose.
Breach (general)
Where an obligation has become an absolute duty to perform, either b/c not conditional or b/c any conditions have been satisfied or excused, and the absolute duty has not been discharged, failure to perform is a breach of K.

How aggrieved party may treat the K is affected by whether breach is minor, substantial, or a total breach of the K. If the breach was minor (where the other party has substantially performed), then aggrieved party must still render performance but may seek a remedy in damages. If the breach was material (breachor has not sub. performed), the aggrieved party may suspend performance, give time to cure and seek damages (even if B cures). If the breach was total (failure to sub. perform and no cure), aggrieved party may terminate K and sue for damages.

Where do problems arise?
Prospective inability to perform (anticipatory repudation, voluntary disablement)
Present breach (minor v. major)
Remedies for breachor
Anticipatory Repudiation
When a party, prior to the time specified for his performance, indicates by words or conduct that he does not intend to perform his absolute duty. If by words, they must be unambiguous and unequivocal - expressions of doubt are not sufficient to constitute A/R.

Effect: Excuses any conditions of breachor, discharges any duties of A, and frees A to make substitute arrangements (but duty to mitigate).
Voluntary Disablement
When a party voluntarily disables herself from performing; has same effect as A/R.
What are an aggrieved party's options in the event of a prospective breach?
Options: Aggrieved party may sue for damages immediately, urge retraction (unless A already relied), or sue after time of performance has passed (but has duty to mitigate).
What are the factors used to determine a minor vs. a major breach?
--Depriving A of expected benefit?
--Extent of performance
--Degree of wrongdoing
--Compensable in damages?
What are A's rights if only a minor breach by B?
C/L - A still has duty to perform, but can get damages

UCC - If the goods or tender of delivery fail in any respect to conform to the K, the Buyer may:
--reject entire delivery; OR
--accept entire delivery; OR
--accept any commercial unit(s) and reject the remainder

BUT subject to seller's right to cure!

What about if minor breach in an installment K?
Buyer can reject ONLY if the non-conformity substantially impairs the value of the entire K; if it doesn't and Seller gives adequate assurances of curing delivery, then Buyer must accept goods.
May a Buyer still reject goods after acceptance?
Yes, Buyer may revoke his acceptance of delivery/unit if non-conformity substantially impairs the value of entire K AND if he reasonably believed that the non-conformity would be cured but it wasn't seasonably cured OR if he failed to discover a non-conformity b/c it was reasonably undiscoverable or he was lulled by the Seller's assurances.
What are A's right if a major breach by B?
A can:
--suspend their performance AND
--recover damages even if B cures
What are A's right if a total (willful) breach by B?
A can:
--terminate the K AND
--sue for damages
3rd Party Beneficiary
3rd parties who are to receive the performance of one of the original parties and who were in contemplation/present at time of K formation.

What are the 3 types of 3rd party beneficiaries?
Creditor Beneficiary
Donee Beneficiary
Incidental Beneficiary (no rights under K!)
Can A & B modify or rescind the terms of a K without the 3rd party's consent?
If C's rights have NOT vested - then YES, can modify/rescind without consent.

If C's rights have vested - then NO, C's consent is required.

When do C's rights vest?
Trad. - Creditor's rights vest only when creditor detrimentally relies on the K; Donee's rights vest at time of K formation.

Modernly - (no distinction btw Creditor and Donee Bene's) - Intended beneficiary's rights vest if detrimental reliance or knowledge and assent or if s/he brings a suit to enforce her rights before the attempted modification/rescission.
What, if any, rights does the promisee (A) have against promisor (B) in the event of breach?
If C was a creditor of A, then A can recover either $ damages, or specific performance from B, or restitution.

If C was a donee bene., A can only recover specific performance or restitution from B.
What, if any, rights does the 3rd party bene. (C) have against promisor (B)?
If C's rights vested, then can bring suit against B.

What are B's defenses?
Any defenses B could have raised against A only.
What, if any, rights does the 3rd party bene. (C) have against promisee (A)?
If C was a creditor of A, then C can sue A based on the original debt.

If C was a donee bene., then C cannot sue A, because B's performance was only a gift.
Assignment
Where the original contracting party (the assignor) wishes to transfer to a 3rd person (the assignee) her right to the other party's (obligor) performance after formation. Partial assignments are fine.

What are the elements of an effective assignment?
--Adequate description
--Assignor must intend to completely and immediately transfer rights to the assignee

--Notice to the obligor is not a required element, however notice to the obligor estopps the obligor from asserting the affirmative defense of "I was never notified of the assignment."
What happens if a K prohibits assignments?
The power to assign still exists, but if assignor decides to assign anyways, maybe liable for breach.
What if the assignment increases the obligor's duty? risk?
Duty - (usually context of output/requirement K's) - generally NOT assignable

Risk - (usually context of insurance or credit situation) - generally NOT assignable
Can future rights be assigned?
Present rights are obviously assignable. Future rights granted in an existing K are assignable, but NOT future rights expected to arise out of a K not yet in existence.
What is the effect of an assignment?
The obligor's (B) obligation to the obligee (A) is extinguished, while the B's obligation to the assignee (C) is created. There must be notice to B.
What are the factors that would effectuate a revocation of an assignment of rights?
--Notice of revocation to the assignee or obligor
--Subsequent assignment of the right to another
--Death of the assignor
--Bankruptcy of the assignor
--Receipt by the assignor of the obligor's performance (to the assignor)
How would the assignor lose the power to revoke the assignment?
If assignor delivers a "token chose" to the assignee as evidence of the assignment.

What is a "token chose"?
A physical symbol of the intangible right (e.g. stock certificate).
How would the assignor lose the right to revoke the assignment? (thereby resulting in liability to the assignee for a wrongful revocation)
Even a gratuitous oral assignment is revocable until:
--assignee detrimentally relies on the assignment OR
--assignee receives performance from the obligor

* If the assignee supplies consideration for the assignment, or if the assignment is in writing, then assignor has no right to revoke!
What, if any, rights does the obligee (A) have against obligor (B) in the event of breach?
None, b/c B's obligation to A was extinguished
What, if any, rights does the assignee (C) have against obligor (B) in the event of breach?
Since C "stands in the shoes" of A, C has a direct cause of action against B; even if B rendered performance to A, B is still obligated to C.

B's defenses are the same it would have against A.
What, if any, rights does the assignee (C) have against obligee (A) in the event of breach?
If C paid consideration to A for the assignment, then the assignment includes implied warranties - rights assigned actually exist, subject to no defenses or limitations other than stated previously, any writings associated with assignment are genuine, and there are no other competing assignments.

If C paid NO consideration to A for the assignment, then cannot sue A.
Delegation
Where the obligor wishes to transfer to a 3rd person (the delegateee) her duty to perform, after formation of the K.

What are the elements of an effective delegation?
--Obligor must sufficiently identify the duties to be performed
--Obligor must manifest a present intention to transfer
--Delegatee must promise the obligor to perform the duties (modernly, acceptance of benefits of an assignment of K rights is held to be an implied promise to also perform the associated contractual duties)
What are the limitations on delegation?
--contractual provisions
--non-delegable duties (e.g. personal service Ks - these cannot be assigned either)

What is the effect of an invalid delegation?
NO breach has occurred; obligee may ignore the attempted delegation and demand performance from the obligor.

However, an invalid delegation + express repudiation by the obligor IS a material breach of K.
What is the effect of a valid delegation?
B (obligee) must accept the delegatee's satisfactory performance.

If satisfactory, both obligor and delegatee's duties to perform are discharged

If unsatisfactory, then gives rise to lawsuits.

ALSO, obligee becomes a creditor 3rd Party Beneficiary to the delegatee.
(Delegation) What, if any, rights does the obligee (B) have against obligor (A) in the event of breach?
If only a delegation, then C is primarily liable to B, while A is secondarily liable to B (as a surety).

If a novation, then B can only sue C (since A is no longer a party to the K).
(Delegation) What, if any, rights does the obligee (B) have against delegatee (C) in the event of breach?
Direct cause of action
(Delegation) What, if any, rights does the obligor (A) have against delegatee (C) in the event of breach?
If C fails to perform, then A has an action on the delegation agreement against the delegatee, and b/c she (obligor) is a surety, she may compel C to honor agreement through specific performance.
What are the 3 types of damages?
Compensatory - to put the aggrieved party in position as if K was performed

Punitive - generally n/a for K damages; if very egregious b/c of bad faith --> tort claim

Nominal - to show liability is proven, but no damages can be proven
What is a liquidated damages clause?
At time of K formation, parties attempt to establish what damages will adequately compensate an aggrieved party in event of breach. To be upheld, it must appear at the time of K formation that:
--damages to be anticipated were either uncertain or difficult to prove (if excessive, treat as unenforceable punitive dmgs)
--reasonable estimate (modernly, cts may look at actual losses v. LDC estimate - if huge disparity, then may invalidate LDC)
What is the effect of an invalid LDC?
Party must prove actual damages or expectation damages to recover
What are the limits on damages (either for Ks or Torts)?
Foreseeable AND Unavoidable AND Certain
What is the expectation/standard measure of compensatory damages?
Natural + Consequential + Incidental minus cost avoided or loss avoided
What is the duty of mitigation (re: damages)
To protect against economic waste, the aggrieved party is required to take reasonable steps to avoid as must of the damage occasioned by the wrongdoer's breach as possible under the circumstances.

Burden of proof on breaching party that aggrieved party failed to mitigate.

Effect: If shown that aggrieved party failed to mitigate, those losses are deducted from the damages he would otherwise be entitled to recover from breachor.
What are reliance damages?
Those costs expended in preparation for or partial performance prior to breach by wrongdoer. Aggrieved party may recover these if unable to prove expectation or consequential damages with certainty.

What is the limitation on reliance dmgs?
Reliance damages generally cannot exceed expectation damages if the breaching party can prove that, had the contract been performed, the aggrieved party would have been worse off than following breach.
What is the purpose of and formula for restitution?
To put the wrongdoer in the position he would have occupied if the K had never been formed - compelling wrongdoer to return to aggrieved party the value of any benefit the aggrieved party has conferred upon wrongdoer.

"Value conferred" = difference btw how much Aggrieved party expected to pay and what he will now have to pay another party to complete performance

Can the breachor recover as well?
Yes, breachor can recover the value of the benefit conferred on the aggrieved party minus damages caused by the breach. So, the difference btw how much Aggrieved party expected to pay and what he will now have to pay another party to complete performance minus damages caused by the breach.

Willful breach? (Maj) Yes; (Min) No.
What are the grounds for restitution?
Mistake/accident
Breach
Unenforceable K
Specific Performance (I'm Doing Fine Mom & Dad)
An equitable remedy directed at the breaching party compelling her to perform her contractual duty as called for in K; purpose is to make aggrieved party "whole" by actually receiving performance expected (rather than money as a substitute).

What are the elements necessary for SP to be granted?
--Definite & certain K
--Breach (by nonperf or repudiation)
--Inadequate legal remedy
--Feasible decree
--Mutuality of remedy
--No defenses
What are the defenses to SP?
--Usual K defenses to enforcement (e.g. S of F)
--Equitable defenses - laches, unfairness (unclean hands, hardship misrep/mistake), BFP
Rescission (Injunction)
No valid bargain. Rescission negates the existence of the contract, restoring the contracting parties to the positions they occupied prior to formation of the K and terminating all rights and liabilities flowing from the K. (Think of restitution after to get back benefit conferred!)

What will justify a rescission?
Any valid defenses to formation of a K and the bases for a discharge of contractual duties will justify termination of K. The usual grounds are misrepresentation and mistake.
Reformation (Injunction)
Valid bargain. Remedy that presumes the existence of a prior agreement and seeks to conform an erroneous document to the terms of the actual agreement. So, there must be a prior agreement and an error in expression (through mistake or fraud) of the current contract that needs to be reformed.
What are the defenses to Rescission and Reformation?
--Laches, unclean hands
--Estoppel

Defenses that won't work?
Negligence
Parol Evidence Rule
What happens if a K is not rescinded?
Aggrieved party can then try to sue in Tort. However, if aggrieved party tried to sue in tort before trying to rescind contract, the tort claim affirms the K, thus barring rescission
When does a revocation become effective?
When RECEIVED by offeree (maj)
UCC: "commercial impracticability"
A delay in delivery or sale by seller is not a breach IF performance made impracticable by occurrence of a contingency the non-occurrence of which was a basic assumption on which K was made. Court will look to whether parties implicitly or explicitly allocated to one party the risk of the non-occurrence of the condition.
UCC: Risk of loss of goods (default)
Default rule/Unless otherwise specified in K by parties, when a 3rd party carrier is used to ship goods, the risk of loss passes to buyer upon the seller's delivery of goods to the carrier.
UCC: FOB Seller's Place of Biz/Shipment K
Seller bears risk of loss until goods are delivered to the carrier.
UCC: FOB Buyer's Place of Biz/Destination K
Seller bears risk of loss until goods are delivered to destination/named location.
UCC: Attempted modification as a waiver
Waiver is a party's manifestation of a willingness to forego the benefit of a condition that occurs after the K is formed but before the condition fails to occur. So, an attempted modification may serve as a waiver, and therefore may negate requirement for modification to be in writing.
UCC: Can you prohibit the assignment of contractual rights?
Since assignments of rights also includes delegation of duties, generally prohibition of assignment of rights is only a prohibition of delegation of duties, but not the actual assignment. (?)
UCC: Lost Volume Seller's remedy
A "lost volume" seller is one who can obtain as many items from a supplier as she can sell. Damages to seller when buyer breaches are the profits, including reasonable overhead, which seller would have made from full performance by buyer + incidental damages.
Unconscionability (C/L and UCC)
A defense to enforcement of a K allowing a court to refuse to enforce part of or entire K, if in light of the general commercial background and needs of the parties, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time the K was formed.
UCC: Non-carrier cases
Instances where the parties did not intend that the goods be moved by carrier. Unless K provides otherwise, payment is due at the time and place at which the buyer is to receive the goods.
Incidental damages
Incidental damages are those the seller of goods can recover for the costs of storing, shipping, returning, and reselling the goods which are reasonably incurred as result of the buyer's breach. The seller can recover these incidental damages in addition to whatever "contract price minus market damages" and/or "lost volume profits" expectation damages the seller incurred.
Contracts Approach Mnemonic: Until February, Test Pressure, Exhaustion, Both Threaten Romance (UFTPEBTR)
U = UCC or common law or both? merchant parties?
F = Formation: has a K been formed?
T = Terms of K
P = Performance: have parties performed their contractual obligations?
E = Excuse & Defense for non-performance
B = Breach: If there is unexcused non-performance, is this a breach of the K?
T = Third party issues
R = Remedies
Implied in Fact Contract
An implied in fact contract may be formed without an express agreement, where the parties' conduct demonstrates mutual assent. Damages are measured by either 1) the intended price, or 2) if the price is unexpressed, the fair value of the services provided by the plaintiff.
Implied in Law Contract/Quasi-Contract
An implied in law/quasi contract permits recovery in the absence of an enforceable contract for a benefit received to avoid unjust enrichment, even if the recipient was not aware of the benefit. Damages are measured by the value of the benefit received by the defendant.
Infancy Defense
The infancy defense provides that a contract entered into by a minor is voidable. However, a contract for necessaries is an exception, requiring the monir to pay for necessities provided to the minor.
Ratification (infancy)
Ratification will be found when a minor enters into a contract and upon reaching age of majority, fails to act to void the contract within a reasonable time.
Waiver
A party waives their right to strict enforcement of a contract when they permit a breach to occur without complaint.
Installment Contract
An installment contract is one which requires delivery of good in separate lots to be separately accepted.
Gravamen Test (MD)
In MD, when goods and services are combined in a contract where the services predominate, if gravamen of the complaint involves the goods, the UCC still controls.
Unilateral Mistake
A unilateral mistake occurs when only one of the two parties to a K was mistaken about a material fact which was a basic assumption upon which the K was made. G/R is that the mistaken party is not excused from performance, unless the non-mistaken party: 1) knew or should have known of the mistake, or 2) had a duty to disclose the fact as to which the other party was mistaken.
Mutual Mistake
A valid defense when both parties are mistaken about a basic assumption on which the K was made, and the mistake has a material effect on the bargain.
Agent with Authority
An agent with authority may bind the principal in contract.
Disclosed Principal
In a disclosed principal situation, the third party may enforce the K against and may hold the principal liable.
Unilateral Mistake
A unilateral mistake occurs when only one of the two parties to a K was mistaken about a material fact which was a basic assumption upon which the K was made. G/R is that the mistaken party is not excused from performance, unless the non-mistaken party: 1) knew or should have known of the mistake, or 2) had a duty to disclose the fact as to which the other party was mistaken.
Mutual Mistake
A valid defense when both parties are mistaken about a basic assumption on which the K was made, and the mistake has a material effect on the bargain.
Actual Authority
Actual authority is given when principal gives express or implied power to an agent to bind principal to a contract. But agent has actual authority to do only what the principal authorizes.
Apparent Authority
Under apparent authority, if the agent reasonably appears to have the authority to act on behalf of the principal and a 3rd party reasonably relies on that apparent authority, the agent's actions may bind the principal.
Original Undertaking
An exception to the statute of frauds requirement that all suretyship contracts be in writing, whereby if the main purpose of the surety is to protect is own economic interest, then it is an original undertaking and does not need a writing.
Contract of Adhesion
A contract of adhesion is one where the offer is a "take it or leave it" proposition, but is valid unless unconscionable.
Expectancy Damages
Expectancy damages are the primary object of K damages and seek to put the non-breaching party in the same position that s/he would have been in had the K been performed.
Rejection/revocation of acceptance (UCC 2-608)
To properly reject or revoke acceptance, must (1) notify seller of defect, (2) follow seller's instructions concerning disposition of the goods, and (3) exercise reasonable care over the goods.
Predominant Factor Test
When goods and services are combined AND the value of goods "predominate," UCC controls.
Implied Warranty of Merchantability (UCC)
The implied warranty of merchantability is given by a merchant seller, who warrants that the goods are fit for their ordinary uses.
Warranty of Fitness for a Particular Purpose
The warranty of fitness for a particular purpose is given by any seller and requires that the seller has reason to know of the buyer's particular purpose and the buyer relied upon seller's skill to select suitable goods.
UCC - Perfect Tender Rule (2-601)
If the goods or tender of delivery fail to conform to the K, Buyer may: 1) reject entire delivery, 2) accept entire delivery, OR 3) accept any commercial unit and reject the remainder
UCC Right to Cure (2-508)
If there is still time, Buyer must give Seller time to cure the delivery
UCC Demand Assurances (2-609)
A party can demand assurances if there are: 1) reasonable grounds for feeling insecure, 2) make written demand for assurances (can suspend performance while waiting), and 3) if don't receive good assurance within 30 days, treat as repudiation and sue for breach
Undisclosed Principal
An undisclosed principal situation is where the 3rd party has no knowledge of a principal --> joint and several liability of agent and principal.
Partially Disclosed Principal
A partially disclosed principal situation is where the 3rd party knows there is a principal but not his/her/its identity --> joint and several liability.