Contracts

Front 1

CONTRACTS
"Armadillos from Texas play rap, eating tacos."

Back 1

Applicable law
Formation of contracts
Terms of contract
Performance
Remedies for unexcused nonperformance
Excuse of nonperformance
Third-party problems

Front 2

Unilateral Contract

Back 2

Results from an offer that expressly requires performance as the ONLY possible method of acceptance.

Front 3

Bilateral Contract

Back 3

All Other Contracts
(question of whether unilateral or bilateral is important only in answering questions about whether there is a contract)

Front 4

Bilateral Contract UNLESS:

Back 4

1. Expressly Requires Performance for Acceptance
2. Reward, Prize, Contest

Front 5

When article 2 of the UCC applies?

Back 5

"Sales of Goods"
"Goods" = tangible, personal property

Front 6

OVERVIEW OF FORMATION

Back 6

remember, a contract is an agreement that is legally enforceable. Accordingly, look first for an agreement. Then, second, determine whether the agreement is legally enforceable.

1. The initial communication (offer)
2. What happens after the initial communication (termination of the offer)
3. Who responds and how she responds (acceptance)

Front 7

INITIAL COMMUNICATION

Back 7

"Manifestation of Intent" -- words or conduct showing the commitment. The basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract.

Front 8

INITIAL COMMUNICATION
(Content)

Back 8

1. General rule: Offer is NOT required to contain all material terms. (Offer together with Acceptance must meet "reasonable certainty" test in order to determine the basis for existence and breach/remedies)

Front 9

INITIAL COMMUNICATION
(MISSING PRICE TERM IN SALES CONTRACT)

Back 9

1. Sales of real estate -- common law -- price and description only required. Not then offer.

Front 10

OFFER
(Vague or Ambiguous MATERIAL Terms)

Back 10

Appropriate, Fair, Reasonable

"Seller "offers" to sell her car to Buyer for a fair price. Offer? NO

Front 11

OUTPUT/REQUIREMENTS CONTRACTS

Back 11

OUTPUT = all that the seller produces

REQUIREMENT = Buyer agrees to purchase ALL of its items from Seller.

Front 12

OFFER
(Advertisements)

Back 12

the general rule is that advertisements do not constitute an offer.

EXCEPTIONS:
1. An advertisement can be an offer if it is in the nature of the reward
2. An advertisement can be an offer if it specifies quantity and expressly indicates who can accept. For example: "Macy's advertises 1 fur coat $10 --first-come, first-served."

Front 13

OFFER
(Termination of Offer)

Back 13

1. Lapse of Time
2. Death of a Party Prior to Acceptance. The exception: irrevocable offers (four different situations in which an offer is irrevocable)
3. REVOCATION of an OFFER
4. Words for Conduct of the Offeree (Rejection)

Front 14

OFFER
(Irrevocable Offer) 4 Types

Back 14

1. Options -- "an offer cannot be revoked if the offer has not only made an offer but also (i) promise to not revoke, AND (ii) the promise is supported by payment or other consideration "option"
2. "Firm Offer Rule": an offer cannot be revoked for three months if (i) offer to buy or sell goods (ii) signature of written promise to keep the offer open, and (iii) one of the parties is a merchant.
3. And offer cannot be revoked if there has been (i) reliance that is (ii) reasonably foreseeable and (iii) detrimental.
4. Unilateral Contracts with the start of performance makes the offer irrevocable for a reasonable time to complete performance.

Front 15

OFFER
(Rejection) Direct Versus Indirect

Back 15

Indirect
1. Counteroffer
2. Conditional Acceptance
3. Additional Terms (does not apply to contracts for sales of goods)

Front 16

OFFER
(Counteroffer versus Bargaining)

Back 16

Counteroffer = terminates the offer and becomes a new offer. But somewhere a counteroffer has been made there is no express contract unless that counteroffer has itself been accepted.

Bargaining= "Will you take $9000?" Offers still valid.

Front 17

OFFER
(Conditional Acceptance)

Back 17

Look for words like, "if, only if, provided, so long as, but, or on condition that"

Front 18

OFFER
(Additional Terms at Common Law)

Back 18

Under common law, a response to an offer that adds new terms is treated like a counteroffer rather than as an acceptance.

mirror image rule

Front 19

OFFER
(Additional Terms under the UCC)

Back 19

2 -- 207;
"seasonable expression of acceptance"

a. First question: is there a contract? Under the UCC, response to an offer that adds new terms, (but does not make the new terms a condition of acceptance),is generally treated as an acceptance -- Whether the parties are "merchants" is irrelevant in answering this first question of whether there is a seasonable expression of acceptance.
b. Second question: is the additional term a part of the contract? Now, look to see whether both parties are merchants. If at least one is not a merchant the additional term is merely a proposal that is to be separately accepted or rejected. If, however, both parties are "merchants", the GENERAL RULE is that the additional term is a part of the contract. There are two important bar exam exceptions to this general rule: (1) the additional term is NOT a part of the contract between merchants if it materially changes the offer or (2) the additional term is NOT a part of the contract between merchants if the offer objects to the

Front 20

ACCEPTANCE
(The Usual 6 Methods of Acceptance)

Back 20

1. Improper verbal response to an offer, then later conduct indicating the contract. Common law versus UCC.
2. Possible Acceptance Fact Pattern: the offeree fully performs. i. There is a verbal offer but ii. no words in response. Instead iii. only response is full performance. Is notice required? Answer of noticed turns on whether or not the offer requires the offeree to respond or the offeree has reasonable belief that the offeror will not learn of the acceptance.
3. The Offeree starts to perform. Again, watch for three characteristics. i) verbal offer ii) no words in response iii) start of performance. Start of performances acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract. UNILATERAL CONTRACTS = start of performances not acceptance. COMPLETION of Performance is required!
4. The offeree PROMISES to perform. Only words. Words of offer, words of acceptance but no performance. Look for the terms in the offer that require performance

Front 21

ACCEPTANCE
(Mailbox Rule)

Back 21

The offer and the offeree are in different places and there are conflicting communications. There are four different rules on the bar exam.
1. All communications OTHER THAN ACCEPTANCE are effective ONLY when RECEIVED.
2. Acceptance is GENERALLY effective when MAILED.
3. If a REJECTION is mailed before an ACCEPTANCE is mailed,then neither is effective until RECEIVED!
4. You cannot use the mailbox rule to meet an option deadline.

Front 22

ACCEPTANCE
(Wrong Goods)

Back 22

Accepts the offer, creates a K, breaches the K created.

ACCOMMODATION
"explanation" EXCEPTION: Counteroffer & NO BREACH.

Front 23

ACCEPTANCE
(Who Can Accept?)

Back 23

Generally, when offered can only be accepted by (i) a person who knows about the offer (ii) who is the person to whom it was made. Offers cannot be assigned; options can be assigned unless the option otherwise denies the assignment expressly.

Front 24

CONSIDERATION
(11 Legal Reasons for NOT Enforcing)

Back 24

1. Lack of consideration or a consideration substitute for the promise at issue.
2. Lack of capacity of the person who made that promise
3. SOF
4. Existing laws that prohibit the performance of the agreement.
5. Public Policy
6. Misrepresentation
7. Nondisclosure
8. Duress
9. Unconscionability
10. Ambiguity in words of agreement
11. Mistake at the time of the agreement as to the material facts affecting the agreement.

Front 25

CONSIDERATION
(Go through THREE STEPS)

Back 25

1. Identify the promise breaker, i.e., the person who is not doing what she promised to do.
2. Ask whether that person asked for something in return for her promise, i.e. bargained for something.
3. Look at the person who is trying to enforce the promise and ask what requested legal detriment that person sustained.

"In sum, look for bargained for legal detriment."

Front 26

CONSIDERATION
(Forms of Consideration)

Back 26

1. Performance, i.e. doing something not legally obligated to do.
2. Forbearance, i.e. not doing something legally entitled to do.
3. Promise to perform
4. Promise to for better

Front 27

CONSIDERATION
(Legal Detriment)

Back 27

Doing anything of that which you are not legally obligated to do, or not doing something that you are legally entitled to do.

Front 28

CONSIDERATION
(Past Consideration)

Back 28

General Rule: not consideration!
Hypo "Erin saves Lisa's life. Owner is so grateful that he promises to pay Erin $3000. Homer later changes his mind. Is there consideration for homers promise so it is legally enforceable? NO

Exception: EXPRESSLY requested by promisor and expectation of payment by promisee.
Hypo "Homer sees Lisa is in danger and asks Erin to save her. Knowing that Aaron would expect to be paid. After Erin saves Lisa, Homer promises to pay Aaron $3000. Is this promise legally enforceable? YES

Front 29

CONSIDERATION
(Pre-existing Contractual or Statutory Duty Rule)

Back 29

Common Law Different from Article 2.
A. Common Law -- General Rule: doing what you are already legally obligated to do is not new consideration for a new promise to pay more to do merely that. Under common law NEW consideration is required for contract modification.
EXCEPTIONS:
1. Addition to or change in performance
2. On for seen difficulty so severe as to excuse performance.
3. Third party promised to pay.

B. Article 2 -- new consideration is not required to modify sales of goods contracts. "Good Faith" is the test for changes in existing sale of goods contracts.

Front 30

CONSIDERATION
(Part Payment)
i.e. promised to forgive balance of debt

Back 30

Key is whether that is due in undisputed. If debt is due and undisputed, then part payment is NOT CONSIDERATION for release.
"Due and Undisputed"NO
"Not yet due" (or disputed) SETTLEMENTS so YES.

Front 31

CONSIDERATION
(Substitutes)

Back 31

1. Seals -- majority rule is now that seals are not a consideration substitute.
2. A written promise to satisfy the obligation for which there is a legal defense is enforceable without consideration.
3. Promissory Estoppel (Detrimental Reliance)

Front 32

CONSIDERATION
(Promissory Estoppel)
"Detrimental Reliance"

Back 32

1. Promise
2. Reliance that is reasonable, detrimental and foreseeable
3. Enforcement necessary to avoid injustice.

Front 33

CONSIDERATION
(Lack of Capacity)

Back 33

1. Infant -- under 18
2. Mental incompetence -- lacks ability to understand agreement
3. Intoxicated persons "if other party has reason to know"

CONSEQUENCES of incapacity:
Void or voidable?

Front 34

CONSIDERATION
(Lack of Capacity)

Back 34

1. Right to do so firm by person without capacity. The incapacitated party can enforce the contract.
2. Implied affirmation by retaining benefits after gaining capacity (RATIFICATION)
3. Quasi--contract liability for NECESSITIES. (Food, clothing, medical care, shelter... but is based on quasi--contract NOT contract law.)

Front 35

STATUTE OF FRAUDS
(SOF)

Back 35

a Statute of Frauds is a statute designed to prevent fraudulent claims of the existence of a contract -- more specifically to make it harder to "fool" the court by claiming falsely that there is a contract. SoF makes it harder to make such a false or fraudulent claim by requiring the claimant to have "special" proof that a contract exists. The "special" proof required to satisfy the SoF is typically proof of either;
1. PERFORMANCE
2. A WRITING SIGNED by the person who is ASSERTING that there was NO SUCH AGREEMENT.

Front 36

SoF

Back 36

Overview of the 3 primary SoF issues:
1. Is the contract within the SoF? There are FIVE "Historical" kinds of contracts. Article 2 of the UCC brings in TWO additional kinds of contracts.
2. If so, is the SoF satisfied? The SoF is evidentiary! If the SoF requirement is satisfied, then there is not a SoF defense.
3. Is there a SoF defense? REMEMBER if 2 is not satisfied and the defendant asserts a defense, no contract!

Front 37

SOF
Pneumonic: MY LEGS

Back 37

Marriage (promises in consideration of)
Years (CAN not be performed within one year)

Land Interest (sale, grant, easement)
Executory Promises to "answer for personally"*
Goods in excess of $500
Surety - answers for debts of another.*

Lease for $1000 or more.

Front 38

SOF
SURETYSHIP (Promises to ANSWER for (Guarantee) the Debts of Another.)

Back 38

Not merely a promise to pay but rather a promise to pay if someone else does not. LOOK FOR A GUARANTEE!!

LOOK ALSO FOR THE "MAIN PURPOSE EXCEPTION". 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.

Front 39

SOF
EXECUTOR (promises by executor to "answer for personally" or "guaranteed" the debts of the decedent.)

Back 39

Hypo -- Executor of David's estate, promises Cathi, a creditor of David's at the time of David's death, in consideration of Cathy's promise to forgo part of the debt, to guarantee payment of the balance by the estate. Is the executor was promise within the statute of frauds? YES

Front 40

"ANSWER FOR"

Back 40

Not merely a promise to pay, but rather a promise to pay if someone else does not. LOOK FOR A GUARANTEE!!

"Don't Worry! If X. does not pay, I will."

Front 41

SOF
(Not Capable of Being Performed Within 1 Year)

Back 41

Indefinite Duration Contracts are not within the SoF.

Used Primarily with Services Contracts.

Date from contract agreement. The right to terminate is early is not w/in sof.

Task with no time specific. Assume unlimited resources! No SOF!

Front 42

SOF
(PERFORMANCE)

Back 42

the statute of frauds can be satisfied by performance. The rules for satisfaction of the SoF by performance very depending on whether it be contract is a services contract or a sales of goods contract, or a real estate transfer contract.

Front 43

SOF
(PERFORMANCE)
"Services Contracts"

Back 43

1. Full performance by either party satisfies the SoF.
2. Part performance of a services contract does not satisfy the SoF.

Front 44

SOF
(PERFORMANCE)
"Goods Contracts"

Back 44

1. Sellers Part Performance. General rule is that the performance of a contract for the sale of goods satisfies the SoF but only to the extent of the performance. More specifically, look to see if the question is about SPECIALLY MANUFACTURE GOODS.

"Specially Manufactured Goods" = the SoF is satisfied as soon as the seller makes a "substantial which means that the seller has done enough work that it is clear that what she is working on is specially manufactured, i.e. custom made or made to order.

Front 45

SOF
(PERFORMANCE)
"Real Estate Transfers"

Back 45

part performance can satisfy the statute of frauds for real estate transfers. Part performance requires that the buyer have done any 2 of the following 3:
1) PAYMENT
2) IMPROVEMENTS
3) POSSESSION

Front 46

SOF
(WRITING)

Back 46

The requirements of the SoF can be satisfied by a writing. Remember 1) not every writing satisfies the required minutes of the SoF and 2) the requirements of the SoF can be satisfied without a writing (as we just learned in the performance materials.)
a. Statutes of Fraud other than that UCC's -- Look at the contents of the writing OR WRITINGS -- ALL "Material Terms" test. (WHO & WHAT)

Front 47

SOF
(WRITING)
Article 2, Statute of Frauds

Back 47

Again, look to the contents of the writing and who signed a writing. The writing must indicate that there is a contract for the sale of goods and contain the quantity term. (How many?)

Generally, the writing must be signed by the person asserting the SoF defense (i.e. the defendant). The UCC, however, as an exception to this general rule based on merchants failure to respond to a signed writing from another merchant.

This special UCC rule has three requirements.
1. Both parties must be merchants AND
2. The person who receives a signed writing with a quantity term that claims there is a contract
3. Fails to respond within 10 DAYS of receipt.

Front 48

SOF
(uses other than whether there is a statute of frauds defense to enforcement of agreement)

Back 48

1. Authorization to enter into a contract for someone else. "Equal Dignity"
2. Contract Modification
a. When do RULES of LAW REQUIRE written evidence of modification of a written contract? Sometimes, there is no LEGAL requirements of written evidence of an alleged modification of a written contract. Resolve any LEGAL issue of whether such written evidence of the modification is needed by 1) looking at the deal with the alleged changes and 2) determine whether the deal with the alleged change would be within the SoF. Yet the deal with the alleged change would be within the SoF,then the alleged modification agreement must be in writing.
b. What if the agreement is in writing and requires that all modifications be in writing or under Common Law provisions that all modifications be in writing are not effective -- ignore contract language. Under UCC, contract provisions regarding written modifications are effective unless waived.

Front 49

OTHER REASONS FOR NOT ENFORCING AN AGREEMENT
(SEVEN)

Back 49

1. Illegality
2. Public Policy
3. Misrepresentation
4. Nondisclosure
5. Duress
6. Unconscionability
7. Ambiguity in Words

Front 50

DURESS

Back 50

Physical or Economical
1. Elements of economic duress
a. "Bad guy" -- improper threat
b. "Vulnerable guy -- no reasonable alternative
2. Most common example of economic duress: Buyer needs something for a special occasion and Seller unreasonably makes an outlandish offer. "Take It or Leave It". Buyer left with no choice.

Front 51

ILLEGALITY

Back 51

1. Illegal Subject Matter
2. Illegal Purpose

If the subject matter is illegal, the agreement is not enforceable. If the subject matter is legal but the purpose is illegal, the agreement is enforceable only by person who did not know of the illegal purpose.

Front 52

PUBLIC POLICY

Back 52

Courts can refuse to enforce an agreement because of public policy. Look for an exculpatory agreement that exempts intentional or reckless conduct from liability or a covenant not to compete without a reasonable need or reasonable time and place limits.

Front 53

Misrepresentation

Back 53

look for a false assertion of a fact that induces the contract. No wrongdoing required for misrepresentations.

Front 54

Nondisclosure

Back 54

nondisclosure must be "wrongful" to be a reason for not enforcing the agreement.

Front 55

Unconscionability

Back 55

this doctrine, originally applicable only to sales of goods but 1) now a part of contracts law generally, 2) empowers a court to refuse to enforce all or part of the agreement. The two basic tests,
1. Unfair surprise (procedural) and oppressive terms (substantive) are tested as of the time of the agreement, i.e. when the agreement was made by the parties.

Under 2A, a court may grant relief from a consumer lease even though no provision of the lease is unconscionable. If there is unconscionable conduct in inducing or enforcing the lease, this will suffice.

Front 56

Ambiguity and Words of Agreement

Back 56

there will be no contract if;
1) parties use a MATERIAL TERM that is open to at least TO REASONABLE interpretations, AND,
2) each party attaches different meanings to the term, AND
3) neither party knows or has reason to know the term is open to at least two reasonable interpretations.

Front 57

MISTAKE OF FACT EXISTING @ TIME OF CONTRACT

Back 57

1. Mutual Mistake

2. Unilateral Mistake

Front 58

OVERVIEW OF TERMS

Back 58

look first for information about the words used by the people making the contract, particularly information about the words in the last written version of the deal. Look also for information about past or similar deals. And, think about "UCC warranty", "delivery in risk of loss" terms if it is a sale of goods.

Front 59

THE PAROL EVIDENCE RULE

Back 59

The "Parol Evidence Rule"is an evidence rule in the sense that 1) issue is whether the evidence is admissible and 2) purpose for which the evidence is to be introduced is often determinative. The underlying premise is that the final written version of a deal is more reliable than anything said or written earlier. The essence of the parol evidence rule is the exclusionary effect of the written contract on earlier (or contemporaneous) agreements as a possible source of terms of the contract. And, REMEMBER, to spell it correctly!

Front 60

THE PAROL EVIDENCE RULE
(Vocabulary)

Back 60

1. Integration "written agreement that the court finds is the final agreement, triggers the parol evidence rule"
2. Partial Integration "Written and final, but not complete"
3. Complete Integration "Written and final and complete."
4. Merger Clause "Contract Clause such as "this is the complete and final agreement"
5. Parol Evidence
a. Words of party (or parties)
b. Before Integration, i.e. before the agreement was put in written form.
c. Oral or Written
6. Reformation "Equitable action to modify the written contract to reflect the actual agreement."

Front 61

THE PAROL EVIDENCE RULE
(Triggering Facts)

Back 61

1. Written contract the court finds that the final agreement; AND
2. Oral statements made at the time the contract was signed OR earlier oral or written statements by the parties to the contract.

Front 62

THE PAROL EVIDENCE RULE
(Fact Patterns)

Back 62

CONTRADICTING the written deal!
The parol evidence rule prevents the court from invading evidence of earlier agreements for the purposes of contradicting the terms in the written contract. A court may, however, consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration i.e. a mistake in reducing the agreement to writing.

Front 63

THE PAROL EVIDENCE RULE
(Mistake in Integration Exception)

Back 63

Courts will not consider POST CONTRACT statements, but may use prior statements to prove a mistake in integration.

Front 64

THE PAROL EVIDENCE RULE
(Getting Out of the Deal)

Back 64

Regardless of if the writing is a complete or partial integration, the parol evidence rule does not prevent courts from the knitting evidence of earlier words of the parties for the limited purposes of determining whether there was MISREPRESENTATION, FRAUD, or DURESS.

Front 65

THE PAROL EVIDENCE RULE
(Explaining Term in the Written Deal)

Back 65

regardless of whether the writing is a complete or partial integration, parol evidence rule does not prevent the court from admitting evidence of earlier agreements to resolve ambiguities in the written contract.

Front 66

THE PAROL EVIDENCE RULE
(Adding to the Written Deal)

Back 66

the parol evidence rule prevents the court from admitting evidence of earlier agreements as a source of consistent, additional terms unless the court finds 1) that the written agreement was only a partial integration or 2) that the additional terms would ordinarily be in a separate agreement.

Front 67

THE PAROL EVIDENCE RULE
VERSUS
STATUTE OF FRAUD

Back 67

parol evidence rule = existence of a writing

SoF =triggered by an oral agreement.

Front 68

CONDUCT AND COURSE OF PERFORMANCE AND...

Back 68

the words of the parties are not the only source of contract terms. Conduct can also be a source of contract terms. On the bar, such conduct takes one of three forms.
1. Courts look FIRST to course of performance
2. SECOND to course of dealings
3. Courts look at custom and usage to explain words and contracts were to fill gaps in contracts.

Hypo: "Chickens"
Boiling Hens = course of performance
If Buyer complains = Similar but Different Contract, course of dealings
The term "chicken" refers to a hen under 6 pounds= Custom & Usage

Front 69

UCC FOR TERMS IN SALES OF GOODS CONTRACTS

Back 69

1. Delivery Obligations of Seller

a. Shipment Contract "the seller completes delivery obligation when it 1) gets the goods to a common carrier and 2) makes reasonable arrangements for delivery, and 3) notifies the buyer.

b. Destination Contracts "Seller does not complete its delivery obligation until the goods arrived where the buyer is."

FOB (city) = followed by the city where the seller is or where goods are shipment contract; followed by any other city means destination contract.

Front 70

RISK OF LOSS

Back 70

risk of loss problems arise where 1) after the contract has been formed before the buyer receives the goods 2) the goods are damaged or destroyed and 3) neither the buyer nor the seller is to be blamed.

Front 71

RISK OF LOSS
(Which party has the risk of loss?)

Back 71

If the risk of losses on the buyer, he has to pay the full contract price for the lost or damaged goods. If the Seller has the risk of loss, no obligation on the buyer possible liability on seller for non-delivery.

Front 72

RISK OF LOSS
(What are the risk of loss rules?)
FOUR SITUATIONS

Back 72

"Title" is irrelevant. Do rule #1 first, and if it does not apply, then #2 and if it does not apply, then:
1. Agreement: agreement of the parties controls
2. Breach: breaching party is liable for any UNINSURED loss even though breach is UNRELATED TO PROBLEM.

3. Delivery by common carrier other than seller. Risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligations.
4. "Catchall" the determining factor is whether the seller is a merchant. Whether the buyer is a merchant is irrelevant. Risk of loss shifts from a merchant seller to the buyer on the buyer's "receipt" of the goods; risk of loss shifts from a non-merchant seller and he or she "tenders" the goods.

Front 73

WARRANTIES OF QUALITY

Back 73

1. Express -- look for words that promise, describer state fax or for use of sample or model. Distinguish from sales talk which is more general. (An opinion)
2. Implied Warranty of Merchantability-- when any person buys any goods from a merchant, a term is automatically added to the contract by operation of law -- that the goods are fit for the ordinary purpose for which such goods are used.
TRIGGERING FACT: Seller is a "Merchant" which here means that deals in goods of that kind.
"Warranty" = goods are fit for ordinary purposes.

Front 74

IMPLIED WARRANTY of FITNESS for a PARTICULAR PURPOSE

Back 74

TRIGGERING FACT:Buyer has particular purpose; buyer is relying on Seller to select suitable good; Seller has reason to know of purpose and reliance.
"Warranty" goods fit for a particular purpose.

Front 75

CONTRACTUAL LIMITATIONS on WARRANTY LIABILITY

Back 75

1. Disclaimer eliminates IMPLIED warranties (e.g., "there are no warranties")
a. Express warranties generally cannot be disclaimed.
b. Implied warranties of merchantability and fitness can be disclaimed in EITHER of the following ways i) CONSPICUOUS language of disclaimer, mentioning "merchantability" OR
ii) "as is" or "with all faults"
2. Limitation of Remedies: does not eliminate warranty, slimits or sets recovery for any breach of warranty.
*possible to limit remedies even for express warranties
*Gen. test is unconscionability
*prima facie unconscionable breach of warranty on consumer goods causes personal injury.

Front 76

PERFORMANCE
(Goods Concepts -- 6 Concepts)

Back 76

1. "Perfect Tender" --i) only applies to sales of goods,ii) Seller's performance must be perfect, iii) a less-than-perfect tender by the seller generally gives the buyer the option of rejection of the delivered good.
2. Rejection of the Goods--i) you need to be able to distinguish rejection of an offer from rejection of the goods.ii) if the Seller does not meet the "perfect tender standard", the Buyer has the option to read pain and sue for damages OR reject "all or any commercial unit" and sue for damages. See Limitations
3. Cure-- in some instances, a Seller who fails to make a "perfect tender" will be given a "second chance" on option of curing. But the Buyer cannot compel the seller to cure.
4. Installment Contracts -- REQUIRES more AUTHORIZES (see card)
5. Acceptance of the Goods --i) effect of acceptance of the goods. Again, if the Buyer accepts the goods, it cannot later reject them. ii) affect the payment: Payment without opportunity for inspection is not acceptance.
6. Revocation of Acceptance of t

Front 77

TWO DIFFERENT WAYS OF BUYERS RETURNING GOODS AND RECOVERING ANY PAYMENT

Back 77

SEE CHART

Front 78

PERFORMANCE
("perfect tender" versus "substantial performance")

Back 78

Difference in the UCC and Common Law. Any sale of goods contract, if the seller makes a perfect tender than the buyer must perform by paying the contract price. In a common law contract, if one party substantially performs and the other party must pay or otherwise perform.

Front 79

REMEDIES
(Unexcused Nonperformance)

Back 79

Nonmonetary Remedies (in rem)
A. Specific Performance/Injunction
Equitable remedy. Look for adequacy of remedy at law or unclean hands, or other party's equities.
1. Contract for sale of real estate
2. Contract for sales of goods.Unique goods (antique, art, custom-made) or other appropriate circumstances.
3. Contract for services: NO SPECIFIC PERFORMANCE, but possible injunctive relief.

B. Reclamation -- "right of an unpaid Seller to get his goods back"
1.10 Day Rule
2. The buyer must have been insulted at the time that receives the goods,
3. The seller demands returned goods within 10 days of receipt
4. The buyer still has the goods at the time of demand.

Front 80

REMEDIES
(Money Damages for Breach of Contract)

Back 80

1. Policy: compensate plaintiff, not punish defendant
2. Vocabulary
EXPECTATION
RESTITUTION
INCIDENTAL
CONSEQUENTIAL
Avoidable
CERTAINTY
RELIANCE
LIQUIDATED

Front 81

REMEDIES
(Measure of Damages)

Back 81

1. General Approach -- protection of expectation. ALWAYS use unless told otherwise.

Front 82

Excuse of Nonperformance of Contract Because of Something That Happened after Contract Was Made

Back 82

Overview: look for information in fact pattern about 1) nonperformance of contract and 2) something happened after the contract.

Front 83

Excuse Because Other Guys improper Performance

Back 83

Common Law & Material Breach Rule (Four general rules)
1. Damages can be recovered by any breach
2. Only a material breach by one guy excuses the other guy from performing
3. Whether a breach is material is a fact question (and so whether a breach is material is not likely to be a bar exam question)
4. If there is substantial performance than the breach is not material. If the breach is material, then the performance was not substantial. (Mutually Exclusive)

Front 84

Excuse Because of Non-Occurrence of an Express Condition

Back 84

1. What is an express condition?
2. How can you identify an express condition?
3. How can an express condition be satisfied, and
4. How can an express condition be excused?

Front 85

EXCUSE
(What Is an Express Condition?)

Back 85

And express condition is a mutually agreed-upon promise modifier. It is language in a contract -- not merely language in a response to an offer -- that does not create a new obligation, but merely limits obligations created by other language in the contract.

Watch for words such as "if" "only if" "provided that" "so long as" "subject to" "in the event that" "unless" "when""until""on condition that" in the contract.
*Most contracts and most bar exam fact patterns do NOT have expressed conditions. BUT BEWARE of CONDITIONAL ACCEPTANCE!

Front 86

Excuse a Performance by Reason of the Other Parties Anticipatory Repudiation

Back 86

Anticipatory Repudiation is an unambiguous statement or conduct indicating:
1. That the repudiating party will not perform
2. Made prior to the time that performance was due.
3. Anticipatory repudiation by one-party excuses the other parties be performed. It also generally gives rise to an immediate claim for damages for breach unless the claimant has already finished her performance.
*Anticipatory Repudiation can be reversed or retracted so long as there has not been a material change in position by the other party. If the repudiation is timely retracted, the duty to perform is reimposed but performance can be delayed until "adequate assurances" are provided.

Front 87

NOVATION

Back 87

(Substituted Person)
You need to know 1) what is a novation? 2) who is liable after a novation? 3) what are the factual and legal differences between a novation and the delegation?

Front 88

NOVATION
(What is a "novation")

Back 88

innovation is an agreement between BOTH parties to an existing contract to the substitution of a new party, i.e., same performance, different party.

Front 89

NOVATION
(Who is liable after a novation?)

Back 89

Novation excuses the contract did for performance of the party who is substituted for or replaced.
Hypo: Paul contracts to paint owners house. Subsequently, Paul, Owner, and X. agree that Will do the work instead of Paul. Is this innovation? YES

If X. does not paint the house, can Owner recover damages from Paul for breach of contract? NO

Front 90

NOVATION
(How is delegation different from novation?)

Back 90

Novation requires the agreement of BOTH parties to the original contract and excuses the person replaced from any liability for nonperformance. Delegation does not require the agreement of both parties and does not excuse.
Hypo: Paul contracts to paint Owner's house. Subsequently, Paul, without consulting Owner, asks X. to do the work and X. agrees. X. doesn't paint the house. Can Owner recover damages from Paul for breach of contract? YES

Front 91

EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT.

Back 91

performance by contractual duties (other than a contractual duty to pay money) can be excused under IMPOSSIBILITY or IMPRACTICABILITY or FRUSTRATION of PURPOSE of:
1) something that happens after contract formation but before the completion of contract performance; and
2) the event was unforeseen; and
3) that makes performance IMPOSSIBLE or COMMERCIALLY IMPRACTICABLE or FRUSTRATES the The PURPOSE of the PERFORMANCE.
4) damage or destruction of subject matter of contract AFTER contract.

Front 92

EXCUSE
(Seller's Risk of Loss and Destruction)

Back 92

after the contract but before the risk of loss is past to the buyer or performer the subject matter is destroyed. Nonperformance IS EXCUSED.

Front 93

EXCUSE
(Sellers Risk of Loss and Destruction)

Back 93

DIFFERENT ANSWER -- if Seller is a merchant, and the goods are destroyed by an unforeseeable event, then before delivery, seller maintains the risk and is not excused from nonperformance.

Front 94

EXCUSE
(Buyer's Risk of Loss and Destruction)

Back 94

AFTER the risk of loss as past two the Buyer, then regardless of the unforeseen event, buyers failure to perform is a breach of contract. (Nonperformance is not excused)

Front 95

DEATH AFTER CONTRACT

Back 95

1. General effect of debt on contract obligations. "Death DOES NOT make a person's contract obligations disappear"
Hypo: David borrows $10,000 from Cathie and signs a contract promising to repay the $10,000. David dies, leaving an estate of $30,000. Under contract law, can Cathie recover the $10,000 from David to stay? YES -- contract performance is NOT excused by David's death.
2. Party to contract to is "Special" person. Owen Wilson hypo. If Owen Wilson contracts to play Kyle Tate in the "Kyle Tate Story" and calling dies before filming starts. IMPOSSIBILITY

Front 96

EXCUSE
(Subsequent Law or Regulation)

Back 96

1. Later law makes performance of contract illegal -- excuse by impossibility.
2. Later law makes mutual understood purpose of contract illegal -- excuse by FRUSTRATION of PURPOSE

Front 97

THIRD PARTY PROBLEMS

Back 97

You will be tested on 3 different kinds of third-party problems
1. THIRD PARTY BENEFICIARIES
2. ASSIGNMENT of CONTRACT RIGHTS
3. DELEGATION of CONTRACT DUTIES

Front 98

THIRD PARTY PROBLEMS
(APPROACH)

Back 98

1. Identify a problem as a third party beneficiary problem
2. Use the vocabulary of third-party beneficiary law
3. Deal with efforts to cancel or modify a third party beneficiary contract.
4. Figure out who can sue whom, and
5. Assert any available defenses.

Front 99

THIRD PARTY PROBLEMS
(VOCABULARY)

Back 99

1. "Third Party Beneficiary"= not a party to the original contract. Able to enforce contract others made for her benefit.
2. Promisor=look for person who is making the promise that benefits the third party
3. Promisee =look for person who obtains the promise that benefits the third party.
4. Intended/Incidental =*ONLY intended beneficiaries have contract law rights. Intent the parties to contract determines whether intended or incidental.
5. Creditor/Donee =Intended beneficiaries are either donees or creditors.Look at whether beneficiary was a creditor of the promisee.

Front 100

THIRD PARTY PROBLEMS
(Efforts to Cancel or Modify a Third Party Beneficiary Contract)

Back 100

the test is whether the third party KNOWS of and has RELIED on or ASSERTED as requested. If so, her right have VESTED in the contract cannot be canceled or modified without her consent, UNLESS the contract otherwise provides.

Front 101

THIRD PARTY PROBLEMS
(Who Can Sue Whom?)

Back 101

FOUR "bar exam important" Rules!
1. Beneficiary can recover from Promisor
2. Promisee can recover from Promisor
3. General rule. Beneficiary cannot recover from Promisee
4. Limited Exception = Creditor Beneficiary can recover from Promisee BUT ONLY on pre-existing debt.

Front 102

THIRD PARTY PROBLEMS
(Defenses)

Back 102

if the third-party beneficiaries sues the promisor, the promisor can assert any defense that he would have had if sued by the promisee.

Front 103

ASSIGNMENTS
(A Person Trying to Enforce a Contract She Did Not Make.)

Back 103

You need to know SIX THINGS:
1. What is an assignment?
2. The vocabulary of an assignment
3. The limitations on assignment
4. The requirements for assignments
5. The rights of assignee
6. How to deal with multiple assignments?

Front 104

ASSIGNMENTS
(#1 Definition)

Back 104

An Assignment is:The transfer of rights under a contract in two separate steps; FIRST STEP -- contract between only two parties; and SECOND STEP -- one of the parties later transfers rights under that contract to a third party.

Front 105

ASSIGNMENTS
(#2 Vocabulary)

Back 105

1. Assignor "Party to the contract who later transfers rights under the contract to another"
2. Assignee "Not a party to the contract. Able to enforce the contract because of the assignment.
3. Obligor "other party to the contract."

Front 106

ASSIGNMENTS
(Hypothetical Example)

Back 106

#1 "on January 15, Batman contracts with Gotham to provide security services for a year;the contract provides that Batman is to be paid $300,000 for the services. Batman later transfers his rights under the contract to Robin. This is an assignment."

#2."on January 15, Batman contracts with Gotham to provide security services for a year; this January 15 contract provides that Gotham will pay Robin $300,000 for Batman's services. This is a third-party beneficiary."WHY? Because it is in the contract -- not at a later date.
Batman = Assignor
Robin = Assignee
Gotham = Obligor

Front 107

ASSIGNMENTS
(#3 Limitations on Assignment)

Back 107

1. Contract Provisions. Courts LIKE assignments! Very reluctant to prevent one.
a. Prohibition = language of prohibition takes away the right to assign but not the power to assign which means that the assignor is liable for breach of contract but an assignee who does not know of the prohibition can still enforce the assignment.
b. Invalidation= language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.

Front 108

ASSIGNMENTS
(#4 Requirements for Assignment)

Back 108

General Rule: consideration is NOT REQUIRED but gratuitous assignments (and only gratuitous assignments) can be revoked.
Hypos: Batman assigns the right to payment under the contract with Gotham to Alfred for no consideration. Is this a valid assignment? YES (don't need consideration)

Before Gotham pays Alfred, that man changes his mind and tell Scott them to pay him instead. Whom should Gotham pay? BATMAN (revoked his assignment)

Front 109

ASSIGNMENTS
(Right of Assignee)

Back 109

1. Assignee can recover from the Obligor.
2. Assignor for consideration cannot recover from Obligor.
3. Obligor at same defenses against assignee as it would have against assignor.
4. Payment by obligor to assignor is effective until obligor knows of assignment. Similarly, modification agreements between obligor and assignor are effective if the obligor did not know of the assignment.
5. Implied Warranties of assignor IN AN ASSIGNMENT FOR VALUE! -- See Card!

Front 110

ASSIGNMENTS
(Implied Warranties of assignor IN AN ASSIGNMENT FOR VALUE)

Back 110

HYPOTHETICALS
#1. Tate signs a note promising to pay The $1000. Cathie assigns the note to Kevin for $800. Kyle was an infant when he signed the note and refuses to pay Kevin. Can assignee recover from assignor Cathi? YES
#2. Tate assigns the right to royalties from his splendid football book to Joy Kelly for $1000. Tate then writes the publishing company and releases it from any obligation to pay royalties. Can Miss Kelly collect from Tate for breach of implied warranty of assignment? YES
#3 Tate assigns the right to royalties from his book ball book to Joy Kelly for $1000. Two days later, the publishing company files for bankruptcy and refuses to pay any royalties. Can Miss Kelly collect from Tate for breach of implied warranty of assignment? NO!

Front 111

ASSIGNMENTS
(Hypotheticals Explained)

Back 111

#1. One such difference is that in an assignment for consideration only, the assignor warrants the rights assigned actually exists.
#2. Another difference is that in an assignment for consideration only, the right assigned is not subject to any defenses by the obligor.
#3. Another difference is that in an assignment for consideration only, the assignor will do nothing to impair the value of the assignment. The assignor, however, does not warrant what the obligor will do.

Front 112

ASSIGNMENTS
(Multiple Assignments)

Back 112

1. Gratuitous Assignments
General Rule: last assignee generally wins.Hypo: "Batman gives the right to the $300,000 payment from Gotham to SMU on January 15. On April 5, Batman makes a gift of the same payment right to TCU. Which as any has greater rights? TCU.
2. Exceptions -- A gratuitous assignment is not revocable if it is the subject matter of a writing delivered the assignee, the assignee has received some sort of "indicia" of ownership, or the assignee has relied on the assignment in a way that is reasonable, foreseeable, and detrimental. If the gift assignment is not revocable, then it will take priority over a later assignment.

Front 113

ASSIGNMENTS
(Multiple Assignments)
"Assignments for Consideration"

Back 113

General Rule first assignee for consideration wins. Hypo: on February 2, Batman assigns his rights under the contract with Gotham to Robin for one dollar. On March 3, Batman assigns his rights under the same contract with Gotham to take for $250,000. Whom should Gotham pay? $300,000 to Robin!!
1. Very Limited Exception
"a subsequent assignee takes priority over an earlier assignee for value only if he both i) does not know of the earlier assignment and ii) is the first to obtain 1) payment, 2) a judgment, 3) a novation, OR 4) indicia of ownership = FOUR HORSEMAN RULE

Front 114

DELEGATION
(You Need to Know Four Things)

Back 114

1. What is a delegation?
2. What is the relationship of assignment and delegation?
3. Which duties may you delegate?
4. What are the consequences of delegation?

Front 115

DELEGATION
(Definition)

Back 115

Party to a contract transferring work under that contract to a third party. For example, Kyle contracts to paint Joy's house for $1000. Kyle (delegating party) and Cathie (delegatee) agree that Cathie will paint Joy's (obligee) house.

Front 116

DELEGATION
(Relationship of Assignment and Delegation)

Back 116

the contract creates both rights and duties. For example if Kyle contracts to paint Joy's house for $1000, then Kyle has a duty to paint and a right to payment, and Joy has a duty to pay and a right to the painting of her house. Assignment is the transfer by a party to a contract of his right or benefits under the contract to a third party who is not a party to the contract. DELEGATION is the transfer by a party to a contract of his duties or burdens under the contract to a third party who was not a party to the contract.

Often a contracting party makes both an assignment and delegation of his rights and duties under the contract to a third party. Often the multistate examiners use the term "assignment" in a problem involving an assignment and a delegation and even a problem involving only a delegation.

Front 117

DELEGATION/ASSIGNMENTS

Back 117

DELEGATIONS = Detriment, Duties, Burdens

ASSIGNMENT = Rights, Benefits,

Hypo: "Kyle contracts with Joy to paint Joy's house for $1000. Kyle and James agree that James will do the painting and collect the $1000 from joy. Is this an assignment, a delegation, or both an assignment and a delegation? BOTH
Hypo #2; Same Facts, except that Kyle and James agree that James will do the painting and Kyle will pay James $1000. Is this both an assignment in the delegation? NO -- NO ASSIGNMENT, merely a delegation since Joy has no additional duty or obligation.

Front 118

DELEGATION
(Which Duties Can You Delegate?)

Back 118

Can generally contractual duties are able to be delegated. The limitations on delegations are very limited. Delegations are permitted unless either 1) contract prohibits delegations or "prohibits assignments" OR 2) contract calls for VERY SPECIAL SKILLS or 3) person to perform contract has a VERY SPECIAL REPUTATION. James has a contract with the St. Louis Cardinals. No contract provision regarding assignments or delegation. Can James delegate his performance to Kyle? NO.

Front 119

DELEGATION
(CONSEQUENCES FOR NONPERFORMANCE BY DELEGATEE)

Back 119

The house painting Hypo:
#3 Can James recover the $1000 from Joy if he performs? YES
But what if, after delegation James does not perform?
1) Delegating Party Always Remains Liable
2) Delegatee liable only if he receives consideration from delegating party.Example, James will receive an additional $200 if he completes it by Friday. (Additional Consideration)
Hypo: Kyle contracts to paint Joy's house for $1000. Kyle and James then agree that James will do the work and Kyle will pay James $900. James does not do the work. Can Joy recover from Kyle? YES -- ALWAYS
Can Kyle recover from James? YES
Can Joy recover from James? YES

Front 120

FINAL THOUGHTS ON CONTRACTS QUESTIONS

Back 120

1. Read the Mini Review
2. Think about the 4 stages in the "life-cycle" of a contract.
a. Making the deal
b. Doing the deal
c. Excusing not doing the deal
d. Compensating if deal neither done nor excused
3. Top 10
a. Statute of Frauds
b. Parol Evidence Rule
c. Money Damages
d. Revocation of Offer
e. Rejection of Goods/Revocation of Acceptance of Goods
f. Delegation/Novation
g. Third-Party Beneficiary
h. Rejection of Offer
i. Assignment
j. Warranty