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314 Cards in this Set

  • Front
  • Back
Statute of frauds applies to...
MYLEGS: Marriage, contract for term of years, land sale contracts, executory contracts, guarantee contracts (promise to answer for the debts of another), sale of goods > $500
Specially manufactured goods
Manufacturer has already started work, goods are specially manufactured for the buyer, goods are not sellable in the ordinary course of business
Armadillos from Texas play rap, eating tacos
Applicable law, Formation of contracts, Terms of contract, Performance, Remedies for unexcused nonperformance, Excuse of nonperformance, Third party problems
UCC/CL differences
Offer missing price (not offer, CL only); Firm offer rule (only in UCC); Mirror image rule (CL rule); Contract based on conduct (CL: acceptance of counteroffer; UCC: new contract based on conduct); Legal duty rule (CL requires consideration to change; UCC does not); contract provision requiring that all modifications be in writing (not effective under common law; effective unless waived under UCC); Perfect tender (UCC only; CL counterpart is "substantial performance"/"material breach")
Contract
legally enforceable agreement/promise
Quasi contract has a(n) ______________ remedy, meaning contract law doctrine ________.
equitable; does not apply
Elements of a quasi contract
P has conferred a benefit on D, and P reasonably expected to be paid, and D realized unjust enrichment if P not compensated
If the contract remedy doesn't seem fair, add a paragraph about __________
Quasi contract
Quasi contract measure of recovery
Value of benefit conferred, with the contract price as a ceiling if P is in default (contract price is not a measure of recovery)
Unilateral contract
Offer that expressly requires performance as the only possible method of acceptance
Question of whether unilateral or bilateral only matters when …
there is a question of whether there is a contract
Assume a contract is bilateral unless
Reward, prize or contest; offer expressly requires performance for acceptance
NBC offers Ashlee Simpson $25K to sing "Autobiography" on "Saturday Night Live." Is that an offer to enter into a bilateral contract or an offer to enter into a unilateral contract?
Bilateral contract - otherwise, Ashlee can't breach by refusing to sing
It's a ________ world
Bilateral contract
If a contract question is primarily a SALE of GOODS (by anyone, to anyone, for any amount), which law applies?
UCC
Contracts involving _______ and _________ will be common law
Real estate, services
How to determine whether UCC/common law applies to mixed deal contract?
General rule, with lump-sum payments: all or nothing - determine the law based on which is the more important part
Conviser agrees to buy a Duncan yo-yo and receive 10 lessons from Yo Yo Ma for $10K; which law applies to dispute about the Duncan yo-yo?
Common law
What is the exception to the mixed rule regarding whether UCC/common law applies?
If the contract divides payments among goods services, UCC applies to the sale of goods; common law to the sale of services
When does Article 2A of the UCC apply to California?
Never
The question of Applicable Law means
whether Article 2 or common law applies
What does Formation of Contracts test:
Whether there was an agreement (offer, termination of offer, acceptance); whether the agreement was legally enforceable
What are the three stages of the agreement process?
Offer, termination of the offer, acceptance
Offer ________ required to contain all material terms
is not
Rules re missing price term in sales contract
CL (real estate contracts) - price term IS required for there to be an offer; UCC - an offer without price term may be an offer, if the parties so intend
Can an offer contain vague/ambiguous terms?
Yes - but NOT vague/ambiguous material terms - "appropriate, fair, reasonable"
Requirements contract
Describes a sale of goods situation, in which the amount is not described in numerical terms but rather in terms of buyer's requirements (e.g., all, only, exclusively, solely)
In requirement contracts, an increase in requirements is valid if
The increase is not unreasonably disproportionate with prior demands (10% or less, OK; 50% or more, invalid)
Red flags for offer
Content (missing price term, vague/overbroad, requirements), context (ad?)
An advertisement _______ offer, unless _________
is not an; unless reward or specific to quantity and expressly indicates who can accept (e.g., first come first served)
Think of an offer that has been terminated as being ______.
dead
How can offer terminate?
Lapse (of time stated, or a reasonable time), Death of either party before acceptance (unless option, part performance of offer to enter into unilateral contract), Revocation (unambiguous statement by offeror), Rejection
___________ can revoke an offer, _________ can reject an offer
Only offeror, only offeree
How can offeror revoke?
Unambiguous words, unambiguous conduct - either requires offeree awareness
Revocation of an offer - by words or conduct - is a _____________ game
Two-player game. Sharon Stone must be in the shower with Epstein
Does the making of multiple offers revoke earlier offers?
No - that's not ambiguous. When one person accepts, thought, must notify other offerees unambiguously that the offer has been revoked
When is revocation effective?
When it is received (mailbox rule does not apply); ONLY before acceptance has become effective
When are offers irrevocable?
Option (promise not to revoke/or to keep the offer open, payment for that promise); Firm Offer Rule (UCC); Reliance that is reasonably foreseeable and detrimental; unilateral offer and performance has begun - offer irrevocable for a reasonable time to complete performance (mere preparation not enough)
S offers to sell B her car for $400; B pays S $10 for S's promise "to keep the offer open for a week." Can S still revoke the offer? Can B accept the offer 10 days later?
S can't revoke for a week; B can accept unless S has revoked (unambiguous words/conduct communicated to the offeree)
Firm offer rule (UCC only)
Offer cannot be revoked for up to three months if (i) offer to buy/sell goods, (ii) signed, written promise to keep the offer open, and (iii) party is a merchant (no need for payment)
"Merchant"
a person in business generally
S, a used car dealer, offers to sell B a car for $400. The written offer is signed by S and states that it will not be revoked for six months. Can S revoke?
Not for 3 months
S Used Cars makes an offer by signed writing to B to sell a 1973 Cadillac for $400. Can S revoke?
Yes, because S did not promise not to revoke - this is not a firm offer.
A bid is generally an…
offer
What situation exemplifies that an offer cannot be revoked if there has been reliance, that is reasonably foreseeable, and is detrimental
Subcontractor's bid, used by GC in making bid and GC is awarded contract
Is preparation by offeree enough to make unilateral offer irrevocable?
No - and if it's close, go with mere preparation (putting up scaffolding and drop cloths - everything until paint brush hits the wall)
Is preparation by offeree enough to make unilateral offer irrevocable because of reliance?
Only if reliance was foreseeable and - more important - detrimental
Counteroffers always __________ offers
kill
Difference between counteroffer/bargaining on bar exam?
Only bargaining is in the form of a question
Methods of indirect rejection
Counteroffer, conditional acceptance, mirror image rule
Conditional acceptance…
terminates the offer, becomes a new offer - just like a counter-offer - at Common Law and UCC
Words that identify conditional acceptances
"if," "only if," "provided," "so long as," "but, "on condition that"
Mirror image rule
A response that adds new terms = a counter-offer (so, an indirect rejection of original offer)
Approach to UCC 2-207 questions (a fact pattern where there is an offer to buy/sell goods, and a response with additional terms) =
Is there a contract (answer is always yes, unless language is conditional). Is the additional term a part of the contract? (If one or both parties is not a merchant - no; if both merchants - yes, unless new term is material alteration or offeror objects)
If the response insists on an additional term, it is a …
conditional acceptance
Six possible methods of acceptance
(1) Improper verbal response to offer, then later conduct indicating a contract (CL: treated as acceptance of a counteroffer; UCC - NEW CONTRACT, based solely on conduct); (2) offeree fully performs; (3) offeree begins performance; (4) offeree promises to perform; (5) mailbox rule; (6) seller sends wrong goods (general rule: acceptance and breach; exception (frequent) - counteroffer and no breach)
Full performance is ________, but what if offeree fails to notify?
always acceptance (so it creates a contract); offeror is excused from paying offeree
Start of performance is _________, except ______.
usually acceptance, except unilateral contract offers.
If unilateral contract can be accepted only by performance, does start of performance count?
No. But note - offeror may not revoke if performance has begun
Mailbox rule involves these four rules:
All communications other than acceptance are effective only when received; acceptance generally effective when mailed; if rejection is mailed before acceptance is mailed, then neither is effective until received; cannot use mailbox rule to meet an option deadline (i.e., exercise the option)
If seller sends the wrong thing in response to an offer to buy, is there a contract?
Yes, delivery is acceptance; seller has breached - unless accommodation exception - seller sends wrong goods with explanation, creating a counteroffer and no breach
Who can accept?
Person who knows about the offer (rewards), who is the person to whom the offer was made
Which can be assigned, offers, options, or both?
only options (and only if the option doesn't provide otherwise)
When is an agreement not a contract, generally?
When it is not legally enforceable
Reasons agreements aren't legally enforceable (11)
Lack of consideration, or consideration substitute for the promise at issue; lack of capacity of the person who made that promise; statute of frauds; existing laws that prohibit the performance of the agreement; public policy; misrepresentations; nondisclosure; duress; unconscionability; ambiguity in words of agreement; mistakes at the time of the agreement as to the material facts affecting the agreement
Consideration - three-step approach
Identify the person who is not doing what she promised to do; ask, did that person ask for something in return for her promise (i.e., bargain for something); did the other person sustain a bargained-for legal detriment
Forms of consideration
Performance (i.e., doing something not legally obligated to do); forbearance (i.e., not doing something legally entitled to do); promise to perform; promise to forbear
Consideration has to be ________ for
asked/bargained
One ___________ can be consideration for another's _________
promise; promise
An _____________ promise is not consideration
illusory - but these are too obvious; won't see them except as the wrong answer
Adequacy of consideration is ______________
not relevant in contract law
Past consideration is _________
generally not consideration - except when expressly requested and expectation of payment
Homer sees Lisa in danger and asks Apu to save her, knowing that Apu would expect to be paid. After Apu saves Lisa, Homer promises to pay Apu $3K. Is this legally enforceable?
Yes - because Homer expressly requested that Apu act, and knew that Apu would expect to be paid
Apu saves Lisa's life. Homer is so grateful that he promises to pay Apu $3,000. Homer later changes his mind. Is Homer's promise legally enforceable?
No - past consideration is generally not consideration
Legal duty rule
Generally, doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that. CL - new consideration is required for contract modification. Exception - addition to/change in performance; unforeseen difficulty so severe as to excuse performance; 3d party promise to pay; merely correcting mistake
Under UCC, S can modify contract to perform an existing legal duty without ____________, so long as _____________
consideration; S acted in good faith
If a debt is __________, then part payment is ______________ for the release
due and undisputed, NOT consideration
If a debt is _____________, then part payment is __________ for the release
not yet due or disputed, consideration
A seal ______ a substitute for consideration
is NOT
A promise to satisfy an obligation for which there is a legal defense (statute of limitations) is ___________________
enforceable without consideration - but only if promise is in writing
Substitutes for consideration:
Written promise to satisfy an obligation for which there is a legal defense; promissory estoppel (seal is NOT substitute)
What are the elements of promissory estoppel?
Promise, reliance that is reasonable, detrimental and foreseeable, enforcement necessary to avoid injustice
How to distinguish problems of consideration from promissory estoppel?
If someone did something she was asked to do - consideration; if someone did something no one asked her to do, look for promissory estoppel
Legal significance of lacking capacity
Person without capacity has right to disaffirm - but he can enforce agreement; and, implied affirmation by retaining benefits after gaining capacity; quasi-contract liability for necessaries
Who lacks capacity to contract?
Infant (under 18), mental incompetents (can't understand agreement), intoxicated persons (if other party has reason to know)
Court trend in statute of frauds questions
to limit application of statute of frauds
Approach to Statute of Frauds issues:
a. Is the contract within the statute of frauds? b. If so, is the statute of frauds satisfied (in which case, no defense). c. Is there a statute of frauds defense?
What is the "main purpose exception" to guarantee contracts within the Statute of Frauds?
If the main purpose of the obligation allegedly guaranteed was to benefit the guarantor, then not even that guarantee is within the statute of frauds
What's the difference between promising to pay someone else's debt and guaranteeing it?
Guarantee is a promise to pay only if the obligee does not pay.
We'll almost never see ___________ that brings a contract within the statute of frauds, because ____________
A promise to answer the debts of another - because only guarantees apply, and main purpose exception
If a estate representative guarantees _______ debts of the estate, that ________ the promise within the statute of frauds.
personally … brings
A promise to do something or refrain from doing something if we marry is _______ the statute of frauds.
within
A promise to marry is _________ the statute of frauds.
not within
A service contract not capable of being performed within a year from the time of the contract is ______ the statute of frauds.
within
If a service contract requires performance for a specific time more than one year, it is __________ the Statute of Frauds, even if ____________.
within … even if it can be terminated in less than one year.
If a service contract requires performance at a specific time more than a year from the date of the contract, it is _________ the Statute of Frauds.
within - the test isn't how long he actually performs; it's whether performance can be complete within a year of the contract date
P claims that O agreed to employ her for a year, starting next month. Is that contract within the Statute of Frauds?
Yes - it cannot be performed within a year.
The statute of frauds never applies to ____________, because "capable" means ____________.
tasks … "theoretically possibly with unlimited resources."
Courts are ___________ toward the Statute of Frauds, and so they consistently ___________ it.
hostile … limit
If P does not actually finish the contracted-for-task, does that bring a contract within the Statute of Frauds?
No.
Does a contract "for life" fall within the Statute of Frauds?
No - because P could die within the year, it can theoretically be performed within the year.
Transfers (sales/lease/easement) of interests in real estate are ________ the Statute of Frauds, except for _____________.
within… leases of a year or less.
Which contracts for sales of goods fall within the Statute of Frauds?
contracts for sales of goods for $500 or more
With oral services contracts, ___________ satisfies the Statute of Frauds, but ______ performance does not
full performance by either party… part
The statute of frauds offers a ____________ to enforcement of a contract; if it is ___________, there is no defense.
defense… satisfied.
If there is a statute of frauds defense, P cannot recover __________ but may be able to recover __________.
Under contract law… under quasi-contract.
Part performance by a seller of ordinary goods ________ the Statute of Frauds, but _________.
Satisfies…only to the extent of the part performance.
Seller who partly performs unwritten contract for the sale of goods has satisfied the Statute of Frauds with respect to _________ goods, but not with respect to ___________ goods.
Delivered… undelivered
With specially manufactured goods, the Statute of Frauds is satisfied as soon as the seller makes a _____________, meaning ___________.
Substantial beginning… seller has done enough work that it is clear that what she is working on is specially manufactured.
Whether buyer's part-performance satisfies the statute of frauds depends on whether ____________.
the contract involves multiple items, or a single item.
Partial payment by a buyer when the contract involves multiple items satisfies the statute of frauds…
to the extent of any fully paid for items, based on the per-item contract price
Partial payment by a buyer when the contract involves a single item satisfies the statute of frauds…
period.
Whether a written services contract satisfies the Statute of Frauds is determined by the ____________
All material terms test, meaning "who" is making the agreement and "what" it is that they've agreed on
Does this writing satisfy the Statute of Frauds: "Your offer of Jan. 15th is hereby accepted. I will work as Mulder's partner," - signed Dana Scully.
No - we can't name both parties to the contract
To satisfy the statute of frauds, a written services contract must be signed by ___________.
The person who is asserting the Statute of Frauds defense - i.e., who is saying there is no contract.
If the contract says "Firm B agrees to employ A as president for five years for a salary of $5,000,000/year, signed, X for Firm B" - can either party assert a statute of frauds defense?
Yes - only A, because B (through X) signed the contract. (This will be the person that breached)
To satisfy the statute of frauds, a written contract for sale of goods must ___________ and be signed by _________.
Indicate that there is a contract for the sale of goods and include the quantity term … signed by the party asserting the defense - unless exception applies.
To satisfy the statute of frauds, a written contract for sale of goods need not state the ___________.
Price
What is the exception to the rule that a written contract for sale of goods must be signed by the person asserting the Statute of Frauds defense?
The Merchant Failure to Respond Rule: If both parties are merchants, and the person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days of receipt, the statute of frauds is satisfied - merchant who fails to respond loses Statute of Frauds defense.
If the party asserting the statute of frauds defense _____________ in __________, the statute of frauds is satisfied - there is no defense.
admits that there was an agreement…. a judicial setting
Rules of law require that a person have written authorization in order to execute a contract for someone else ____________; this is called the _________.
only if the contract to be signed is within the statute of frauds… Equal Dignity Rule.
If a contract is ______________, then under the Equal Dignity Rule, you need ______________.
within the Statute of Frauds … written authorization to execute a contract for someone else.
When do rules of law require written evidence of modification of a written contract?
When the deal with the alleged change would be within the Statute of Frauds, then the alleged modification agreement must be in writing.
If a modification takes a contract out of the Statute of Frauds, must it be in writing?
No - the writing requirement depends on the modified deal
A contract provision requiring that all modifications be in writing is ___________ under common law; __________ under the UCC.
not effective (unless general rule re writing requirements for contract modification applies); effective unless waived
If a subject matter of a contract is legal, but the purpose is illegal, the agreement is enforceable ____________.
Only by the person who did not know of the illegal purpose
If the subject matter of a contract is illegal, is the agreement enforceable?
No
Exculpatory contracts dealing with ____________ are against public policy.
Intentional or reckless conduct
A misrepresentation of ____________ that induces the contract makes the contract _____________, even if _________________.
Existing fact… unenforceable… the party "honestly" or "innocently" believes the fact to be true
A nondisclosure makes a contract unenforceable ________________.
only if it is wrongful.
For economic duress to excuse performance under a contract, look for ___________.
"bad guy" - improper threat to refuse to enforce existing contract; "vulnerable guy" - no reasonable alternative
What does P need to void an agreement due to economic duress?
D's wrongful threat to breach an existing contract, coupled with the vulnerability of P
Unconscionability ________ limited to sales of goods contracts.
is not
Unconscionability empowers a court to _____________.
refuse to enforce all or part of an agreement
The two basic tests for unconscionability are
unfair surprise (procedural) and oppressive terms (substantive).
Unconscionability is tested as of ________________
the time of the contract
Unconscionability is a question for…
the court.
A contract is unenforceable because of ambiguity if…
the parties use a material term that is open to at least two reasonable interpretations, each party attaches different meaning to the term, and neither party knows or has reason to know that the term is open to at least two reasonable interpretations
If two parties use a material term that is open to at least two reasonable interpretations, each party attaches different meaning to the term, and B knows that A ascribes a different meaning, then the contract is _________.
enforceable under the terms as understood by A.
Careful to distinguish a mistake of fact from a ….
misrepresentation (which could be honest/innocent), mistake about judgment or an uncertainty.
A contract will be unenforceable because of mutual mistake of fact if…
both parties are mistaken, about a basic assumption of fact, which materially affects the agreed exchange, and the mistake does not involve a risk that the party trying to get out of the contract bears
S contracts to sell B a painting for $50K. Both believe it is a genuine Warhol. It is not. Both believe it is worth $50,000; it is worth only $5,000. Which of these is a basic and material mistake?
Only the question of what the painting Is - is It a Warhol?
A seller bears the risk of knowing what she ___________; if she is wrong, there is no _____________.
owns… right to rescind.
Courts grant relief for unilateral mistake only when…
the other party has reason to know of the mistake.
Whether parol evidence is admissible will always turn on
the purpose for which the evidence is being introduced
Parol evidence questions determine whether evidence is ___________, not whether evidence is ___________.
Admissible… not convincing/persuasive
Integration is…
a written agreement that courts finds is the final agreement between the parties, triggers the parol evidence rule
A partial integration is…
written and final, but not complete
A complete integration is…
written, final, and complete
A merger clause is ____________; it is ____________ on the Bar Exam
a contract clause such as "this is the complete and final agreement" … highly persuasive evidence
An answer using the phrase "partial integration" or "complete integration" is usually __________, because ___________.
wrong… it is usually irrelevant whether an integration is complete or partial, as long as there is an integration at all.
Parol evidence is…
an oral statement made at the time the contract was signed, or earlier oral or written statements, by a party or the parties to the contract
Is parol evidence oral or written?
It can be either
Reformation is…
equitable action to modify written contract to reflect the actual agreement
Triggering facts for the parol evidence rule:
Written contract that the court finds is the final agreement (an integration), AND an oral statement made at the time the contract was signed, or earlier oral or written statements by the parties to the contract
Is parol evidence admissible to change/contradict the written contract?
No, unless it is for the limited purpose of determining whether there was a mistake in putting the agreement into writing.
Evidence of post-contract oral and written statements is….
not parol evidence
Is parol evidence admissible to determine whether there is a defense to the enforcement of the agreement - i.e., ___________?
Yes … misrepresentation, fraud, duress, mistake, unconscionability
Is parol evidence admissible to explain ambiguous terms of the written deal?
Yes.
When does the question of complete v. partial integration matter?
Only when a court is considering whether parol evidence is admissible to add terms to an agreement.
Is parol evidence admissible to add terms to the deal?
Yes, IF the written agreement was only a partial integration or the additional terms would ordinarily be in a separate agreement.
What fact will most often trigger a Statute of Frauds question?
Absence of a writing
What fact will most often trigger a parol evidence rule question?
Superior reliability of a written agreement (no parol evidence problem if there's only an oral agreement)
In interpreting contract, courts look first to _____, then to fill in gaps or explain words, they look to ________, then ______, then ____________.
Express terms… course of performance… course of dealing … custom and usage.
_____________ involves same people, same contract.
Course of performance
_____________ involves same people, different but similar contract.
Course of dealing
_____________ involves different but similar people, different but similar contract
Custom and usage
In a shipment contract, seller is legally obligated to…
get the goods to a common carrier, make reasonable arrangements for delivery and notify the buyer
In a shipment contract, seller's delivery obligations are complete ______________.
before the delivery is complete.
In a destination contract, seller is legally obligated to…
get the goods to where the buyer is.
Most contracts with delivery obligations are ___________.
Shipment contracts.
FOB/city where seller or the goods are located means a _________contract.
Shipment
FOB/city other than whether the seller is located is a __________ contract.
Destination
Risk of loss issues arise where
After the contract has been formed but before the buyer receives the goods, the goods are damaged or destroyed and neither the buyer nor the seller is to blame
Four risk of loss rules - analyze in order
(1) Agreement of party controls; (2) breaching party is liable for any uninsured even though breach is unrelated to problem; (3) if delivery is by common carrier other than seller, risk of loss shifts from seller to buyer when seller completes delivery obligations; (4) if merchant seller, risk of loss shifts to buyer on buyer's "receipt" - if non-merchant seller, risk of loss shift to buyer when he/she tenders the goods.
For risk of loss, "receipt" means
buyer is in physical possession of goods
For risk of loss, "tender" means
seller tells buyer how to get the goods/makes the goods available
Express warranty
Statement of fact or a promise
Which is not a warranty: "all steel," "top quality," "guaranteed to operate for two years," seller's showing buyer a sample
"Top quality" is an opinion; showing a sample is an express warranty created by conduct
For purposes of the implied warranty of merchantability, "merchant" means
a person in the business of selling goods of this kind
Merchant means a person in the business of selling goods of this kind in the context of
the implied warranty of merchantability
What is the implied warrant of merchantability
A term added, when any person buys any good from any merchant, that the good is fit for the ordinary purposes for which such goods are used
Watch for the implied warranty of fitness for a particular purpose when…
the question tells why B is buying something
When does the implied warranty of fitness for a particular purpose apply?
When buyer has a particular purpose, buyer is relying on seller to select suitable goods, seller has reason to know of purpose and reliance
Vertical privity involves…
the manufacturing/distribution chain; D is someone other than the immediate seller
Horizontal privity involves…
P is someone other than buyer
Privity is involved in __________, not __________ actions.
contract, not tort
Disclaimer eliminates ___________, only if _____ or ________
implied warranties only - including merchantability/fitness for particular purpose (not express warranties), only if CONSPICUOUS language of disclaimer, mentioning merchantability, or words "as is" or "with all faults"
Limitation of remedies can apply to _________ warranties
express
What is the general test of limitation of warranties?
Prima facie unconscionable if breach of warranty on consumer goods causes personal injury
Perfect tender - 3 concepts
Only applies to the sale of goods; means that seller's performance must be perfect - perfect goods/perfect delivery; a less than perfect tender by seller gives buyer the option of rejecting the delivered goods
Rejection of goods - 2 concepts
rejection of an offer v. rejection of the goods; if S does not meet perfect tender standard, buyer has option to retain and sue for damages, or reject "any and all commercial units" and sue for damages (limited by cure/installment contract/acceptance)
Can buyer compel seller to cure?
No, no no never
Seller has the option to cure when…
Seller had reasonable grounds to believe it would be OK to deliver a less-than-perfect good (e.g., course of dealing), even if contract delivery date is past; OR, time for performance had not yet expired
Installment contracts …
require or authorizes multiple shipments with multiple payments
With installment contracts, buyer may reject an installment…
only when there is a substantial impairment in that installment that can't be cured
Does the perfect tender rule apply to installment contracts?
No - the test is the substantial impairment test
Once a buyer _________ goods, he cannot __________ them
accepts … reject
Is payment acceptance?
Not unless there is also opportunity for inspection
The effect of buyer keeping goods (for some period, maybe a month) is ____________.
implied acceptance
What seven concepts are involved in Performance?
Perfect tender, rejection, cure, installment contracts, acceptance of the goods, revocation of acceptance of the goods, payment
Buyer can revoke acceptance of the goods when
nonconformity substantially impairs the value of the goods, and excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction, and revocation within a reasonable time after discovery of nonconformity
Three payment problems to watch for:
Open price term means reasonable price at time of delivery; priced to be fixed by buyer/seller means it must be so fixed in good faith; price payable in goods means that each party is a seller of goods it provides.
Specific performance is __________ that is available _______________and usually ___________
an equitable remedy … when money damages are inadequate … usually the wrong answer
In what situations is specific performance appropriate?
Contracts for sale of real estate, when property hasn't been sold to a 3d party bona fide purchaser; sale of unique goods (antiques, art, custom-made) or other appropriate circumstances; never services - but maybe injunctive relief (aka negative specific performance)
Reclamation is the
right of an unpaid seller to get its goods back
Reclamation is available if…
Buyer was insolvent at the time that buyer received the goods, and seller demands return goods within 10 days of receipt (see exception), and buyer still has goods at time of demand
What is the exception to the 10-day rule?
It becomes a "reasonable time rule" if before delivery there had been an express representation of solvency by the buyer
How will the bar exam trick us on a reclamation question?
It will provide extra dates and hope we forget that the calendar for the 10-day rule starts when buyer receives the goods
What are the three non-monetary remedies?
Specific performance, reclamation, entrustment
What is the right of a right in the ordinary course of business of entrustment?
If owner leaves her goods with a person who sells goods of that kind and that person wrongfully sells the goods to a 3d party then such a good faith purchase from dealer cuts off rights of the original owner/entruster
If thief steals a watch from O and sells the watch to A which sells the watch to B, can O recover the watch from B?
Yes.
In California, the rules for money damages for breach of contract are based on protection of _____________
plaintiff's expectation interest.
Expectation damages
Pay P by putting P in the same economic position as if contract had been performed (i.e., $value of D's performance w/o breach v. D's performance w/ breach)
Reliance damages
Pay P by putting P in same economic position as if contract had never happened (like tort damages)
Restitution damages
Pay P by putting *D* in same economic position as if contract had never happened
Damages rules for sales of good are based on two factors:
Who breached, who has the goods
If seller breaches, buyer keeps the goods, the formula for damages under UCC is
fair market value if perfect - fair market value as delivered
If seller breaches, seller has the goods, the formula for damages under UCC is…
Either (market price at time of discovery of the breach - contract price) or (replacement price - contract price)
If buyer breaches, buyer keeps the goods, the formula for damages under UCC is…
contract price
If buyer breaches, seller has the goods, the formula for damages under UCC is…
Either (contract price - market price at time/place of delivery) or (contract price - resale price); for volume seller selling from regular inventory, provable lost profits
Lost profits for lost volume seller -
Volume seller selling from regular inventory may recover provable lost profits
Additions and limitations to damages
Plus Incidental damages, plus foreseeable consequential damages, less avoidable damages
Incidental damages
cost incurred in finding replacement performance; always recoverable
Consequential damages
damages arising from P's special circumstances; recovery of consequential damages is limited to situations in which D had reason to know of those special circumstances at the time of the contract
If damages arise from P's special circumstances, what's the fact that needs to be shown to determine whether P can recover consequential damages… and what other issue is implicated?
What P told D before the contract was executed… parol evidence rule
There is _________ recovery for damages that could have been avoided ____________.
no … without undue burden on P
________ has the burden of pleading and proving avoidable damages
Defendant
Damages must be provable with _____________; this comes up with __________
Reasonable certainty… new businesses/ventures… restitution … reliance
______________ provisions fix the amount of contract damages; the issue will be ___________, and __________ or ___________ damages may be substituted
Liquidated damages… validity - whether they're too high
Liquidation damages are only enforceable when…
damages were difficult to forecast at the time the contract were made, and the provision is a reasonable forecast
There are never __________ damages in contract law
punitive
A liquidated damages provision of $1,000/day for each day completion is delayed beyond a specified date is __________ because __________.
presumptively valid, because having a sliding scale makes it more likely that there is a relationship between breach and recovery
A liquidated damages provision of $10,000 for delay is __________, because __________________ because __________.
presumptively invalid, because it is not a reasonable forecast
Excuses deal with nonperformance and something happening ________ the contract was formed.
after
Damages can be recovered for _______ breach, but only a ________ breach is an excuse
any … material
Whether a breach is material is a question of __________
fact
If there is substantial performance, then the breach is _______
not material
Can P be excused from performing because of O's material breach and also sue for damages?
Yes
If the contract requires P to do 10 identical acts, and P does less than half, that is not __________; it is _______________. If O doesn't pay, P can recover only in __________.
substantial performances; it is material breach… quasi contract
A contract is divisible when price is stated on a ______________; P can recover for substantial performance of a _________ even through there has been a _____________
per performance basis; divisible part; material breach of the entire contract
____________ is the common law counterpart to the UCC perfect tender rule
Material breach/substantial performance
A condition is…
language in a contract that does not create a new obligation but merely limits obligations created by other language in the contract
Language that creates conditions:
If, only if, provided that, so long as, subject to, in the event that, unless, when, until, on condition that
Difference between conditional acceptance and condition
Conditional acceptance is a response to an offer (and it does NOT create a contract); condition is language in a contract
___________ is required for the satisfaction of a condition
Strict compliance
In a question re Reading pipe v. Cohoe pipe (or something analogous), the key question is _____________
whether the contract makes the use of Reading pipe an express condition; in that case, failure to satisfy the condition relieves buyer of obligation to pay for the house
How can a condition be excused?
Waiver/estoppel, prevention, avoidance of forfeiture
Who can waive the condition?
The party who benefits from/is protected by the condition
If a party ____ by the condition _____________ the occurrence of the condition, then the condition is excused and the contract must be performed
protected … hinders/prevents
Sometimes courts excuse the non-occurrence of a condition to avoid excessive harm to ______________
the party not protected by the condition
An anticipatory repudiation is…
an unambiguous statement or conduct indicating that the repudiating party will not perform, made prior to the time performance was due
Anticipatory repudiation ______ and also generally __________ unless ______________
excuses the other party's duty to perform… generally gives rise to an immediate claim for damages for breach unless claimant has already finished performance.
Excuses can stem from
Other party's improper performance; non-occurrence of condition (strictly construed); other party's anticipatory repudiation; reasonable grounds for insecurity; reason of a later contract; novation; later, unforeseen event
In an anticipatory breach situation, when can P sue immediately/not?
P can sue immediately if P has not finished performance; P must wait until date payment is due if P HAS finished performance.
Anticipatory breach can be reversed or retracted so long as __________
there has been no material change in position by the other party
After an anticipatory breach, if the repudiation is timely retracted, the duty to perform is _______, but performance ___________.
reimposed… can be delayed until adequate assurance is provided.
Anticipatory breach can be based on unambiguous ___________ or __________.
words or conduct of one of the contracting parties.
A contract may be excused for insecurity if…
reasonable grounds for insecurity, written demand for adequate assurance, commercially reasonable to stop performance
A rescission agreement _______________; it is valid only ____________.
cancels the contract; if performance is still remaining from all contracting parties
An accord and satisfaction is
An agreement by which parties to an already existing obligation accept a different performance in satisfaction of the existing obligation - the existing obligation is excused.
If the accord is not performed, the other party can sue on ________.
Either the original agreement or the accord.
Does making an accord excuse performance on the original contract?
No - the accord must be satisfied in order to excuse the original contract
A modification is …
an agreement by the parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation
What words may identify a later agreement as an accord and satisfaction, rather than a modification?
"If" and "then" - indicate an accord
What is a novation?
An agreement between both parties to an existing contract to the substitution of a party - i.e., same performance, different party
Who is liable after a novation?
Novation excuses the contracted-for performance of the party who is substituted/replaced.
How is a delegation different from a novation?
Novation requires agreement of both parties and excuses. Delegations do not require agreement of both parties, and they do not excuse
Performance of contractual duties (other than _________) can be excused if….
contractual duty to pay money… something that happens after contract formation but before completion of contract performance, that was unforeseen, that makes performance impossible or commercially impracticable or frustrates the purpose of the performance
Impossibility means ______; impracticability means ____________
can't be done; can only be done w/ extreme and unreasonable difficulty and expense
Impossibility/impracticability questions turn on:
which party is arguing that his performance is excused and the effect of the post-contract occurrence on that performance
Types of unforeseen occurrences that can excuse performance
Damage/destruction of subject matter of contract; death of a special person; subsequent law or regulation
Death after a contract has been formed is NOT an excuse, UNLESS
the party who died is a "special" person
If a later law makes performance of a contract illegal, there is an
excuse by impossibility
If a later law makes a mutually understood purpose of a contract illegal, there is an
excuse by frustration of purpose
Three kinds of third-party contracts problems
Third party beneficiaries, assignment of contract rights, delegation of contract duties
A third-party beneficiary is ___ a party to the contract but is ______________
not; able to enforce a contract others made for her benefit
The promisor _________ the promise that benefits the third party - e.g., insurance company
makes
The promisee ___________the promise that benefits the third party; e.g., e.g., insured
obtains
Only _______ beneficiaries have contract law rights; __________ third parties do not; ________ determines which a third party is.
intended… incidental… intent of parties.
Intended beneficiaries are either ___________ or __________
donees or creditors (usually donee; look at whether beneficiary was a creditor of promisee before contract)
On the bar exam ___________ will always be named in the contract.
the intended beneficiary
With third-party beneficiaries, contracts cannot be canceled changed if…
the third party knows of and has relied on/assented as requested to the contract
Who can sue whom, with a 3d party beneficiary?
Beneficiary or promisee (but not both) can recover from promisor; beneficiary cannot recover from promisee UNLESS there was a pre-existing debt
If the third-party beneficiary sues the promisor, the promisor can assert any defense __________-
that he would've had if sued by the promisee
An assignment is…
Contract between only two parties; one of the contracting parties later transfers rights under the contract to a third party
Assignor
party to the contract who later transfers rights under the contract to another
Assignee
not a party to the contract, but able to enforce the contract because of the assignment
Obligor
the other party to a contract where there has been an assignment
Courts ____________ assignments
favor
Language of prohibition
takes away the right to assign, but not the power to assign - "rights hereunder are assignable" - which means the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the agreement
Language of invalidation
takes away the right to assign and the power to assign "all assignments of rights under this contract are void"
Common law bars an assignment…
that substantially changes the duties of the obligor
An assignment of right to payment _________ substantially changes the duties of an obligor
never
An assignment of right to contract to performance other than a right to payment _________ changes the duties of an obligor
usually (on the bar)
___________ is not needed for an assignment, but __________ can be revoked.
Consideration … gratuitous assignments
In an assignment, _________ can recover from the obligor, but ____________ cannot.
Assignee … assignor for consideration
What defenses does an obligor have against an assignee?
The same defenses as it would have against the assignor
Big difference between third party beneficiaries and assignees -
3d party - either beneficiary or promisee can recover from promisor; Assignments - only assignee can recover from obligor - assignor cannot recover
Payment by obligor to assignor is effect until ________
obligor knows of the assignment
Implied warranties of assignor in an assignment for value
The right assigned actually exists, the right assigned is not subject to any defenses by the obligor, and the assignor will do nothing to impair the value of the assignment
Assignor does not warrant…
what the obligor will do
With multiple assignments, if all are gratuitous, ________________ generally wins
the last assignee (exceptions include - assignments are not revocable if it is the subject matter of a writing delivered to the assignee)
With multiple assignments, if any involve consideration, _______________ wins
The first assignee for consideration
In contract law, being the first to notify is __________
irrelevant
A delegation occurs when _______________
a party to a contract transfers work under the contract to a third party
A delegation transfers _________, while an assignment transfers __________
duties/burdens … rights/benefits
Delegations are permitted unless either _______________
the contract prohibits delegations or prohibits assignments, or the contract calls for very special skills, or the person to perform the contract has a very special reputation
A contract that prohibits assignments also…
prohibits delegations
When a contract calls for very special skills, or the person to perform the contract has a very special reputation, changing requires
a novation
What if after delegation the third party delegatee does not perform?
Delegating party always remains liable. Delegatee liable only if she receives consideration from delegating party
Is an advertisement likely to be an offer if it is sent in response to store owner's specific inquiries about prices on a specific computer and it included delivery terms and conditions of sale?
Yes
When an offer states that acceptance will not be valid unless received, does the mailbox rule apply?
No
When is consideration not required to modify a contract at common law?
When parties are modifying merely to correct an error.