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166 Cards in this Set
- Front
- Back
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Armadillos from Texas play rap, eating tacos
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1)Applicable Law
2)Formation of Contracts 3)Terms of Contract 4)Performance 5)Remedies for unexcused nonperformance 6)Excuse of nonperformance 7)Third-party Problems |
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Contract (definition)
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Legally enforceable agreement
1)Was there an agreement 2)If there was an agreement, was it enforcable? |
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Quasi Contract (definition)
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Equitable Remedy (rules of law do not apply)
Elements: 1)P has conferred a benefit on D 2)P reasonably expected to be paid 3)D realized unjust enrichment if P not be compensated Measure of Recovery Contract price is not the measure of recovery. Focus on value of benefit conferred. The contract price is a ceiling if P is in default Essays: where K law produce unfair result, add result about quasi-contract recovery |
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Bilateral Contract v. Unilateral Contract(definition)
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Bilateral: results from an offer that is open as to the method of acceptance
Unilateral: results from an offer that expressly requires performance as the only possible method of acceptance Bilateral contract unless 1)reward, prize, contest 2)offer expressly requires performance FOR ACCEPTANCE (“only by”) |
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Article 2 of the UCC (overview)
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Article 2 applies to contracts that are primarily for SALES OF GOODS.
Most, but not all UCC roles are the same as the common law rules The factors that determine whether Article 2 applies are: 1)type of transaction: sale 2)subject matter of transaction: goods (tangible, personal property) |
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Services contracts (UCC or Common law)
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Common Law
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Real Estate (UCC or Common law)
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Common Law
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Sales of goods (UCC or common law)
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UCC 2
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Mixed deal (UCC or common law)
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General rule: all or nothing/more important part
Exception: if the K divides payment, then apply UCC to sale of goods part and common law to the rest |
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Overview of Formation
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In looking for an agreement, watch for information in question about
1)Lev. 1: the initial communication (offer) 2)Lev. 2: what happens after the initial communication (termination of offer) 3)Lev. 3: who responds and how she responds (acceptance) |
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Offer (general test)
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An offer is a manifestation of an intention to contract- words or conduct showing 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 |
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Content (specific problems to watch for)
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Content: offer is not required to contain all material term
1)Missing price term in sales contract - Sale of real estate: CL, price and description required - Sale of Goods: Art. 2, no price requirement, offer if parties so intend 2)Vague or ambiguous material terms not an offer under either common law or UCC (“reasonable”, “fair”, “appropriate” not an offer) 3)Requirements contracts/output contracts: A contract for the sale of good can state the quantity of goods to be delivered under the contract in terms of the buyer's requirements of seller's output or in terms of exclusivity (“all”, “only”, “solely”) - Not Unreasonably disproportionate limitation on Increases |
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Advertisements (formation)
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General Rules: an advertisement is not an offer
Exceptions: 1)It is in the nature of a reward 2)It is specific as to quantity and expressly indicates who can accept |
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Termination of Offers (four methods)
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An offer cannot be accepted if has terminated
1)Lapse of Time (time statement or reasonable time) (Exam: date of offer and response) 2)Words or Conduct of Offeror (revocation) 3)Words or Conduct of the Offeree (rejection) 4)Death of a Party Prior to Acceptance |
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Revocation of an Offer (How)
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2 person game
1)Unambiguous statement by offeror to offeree of unwillingness or inability to contract 2)Unambiguous conduct by an offeror indicating an unwillingness or inability to contract that offeree is aware of |
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When is Revocation of an Offer not Effective?
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1)Revocation of an offer sent through “the mail” not effective until received
2)An offer cannot be revoked after it has been accepted 3)Detrimental reliance |
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Offers that cannot be Revoked
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Generally offers can be freely revoked by the offeror. There are four different situations in which an offer cannot be revoked
1)If the offeror has (i) promised to keep the offer open AND (ii) this promise is supported by payment or consideration (“option”) 2)For up to 3 months if (i) offer to buy or sell goods, (ii) signed, written promise to keep the offer open, and (iii) party is a merchant (“firm option rule) 3)If there has been detrimental reliance by the offeree that is reasonably foreseeable 4)The start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance (not mere preparation) |
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Result of offeror later making same offer to someone else:
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Nothing, offeree can still accept. No revocation.
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Three methods of indirect rejection
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1)Counterofferor
2)Conditional acceptance 3)Additional terms (common law only) |
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Counteroffer
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Counteroffer terminates the offer and becomes a new offer. (original offer “DEAD”)
Where a counteroffer has been made there is no express contract unless that counteroffer has itself been accepted. Counteroffers need to be distinguished from BARGAINING. Bargaining does not terminate. (if response is declarative sentence, Counteroffer; question, Bargain) |
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Conditional Acceptance
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A conditional acceptance operates the same way as counteroffer: it terminates the offer and becomes a new offer.
Look for “if”, “provided”, “so long as”, “but”, “on condition that” |
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Bid
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Offer
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Additional Terms to a Contract
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Mirror Image Rule
Under common law, an “acceptance” that adds new terms is treated like a counteroffer rather than an acceptance Under UCC, maybe still a contract |
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Additional Terms under UCC Article 2 (2-207)
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“Battle of the Forms”
Seasonable Expression of Acceptance Two questions: 1)Is there a contract? 2)Is the additional term a part of the contract? If one party not a merchant, the additional term is merely a proposal that is to be separately accepted or rejected. If both parties are merchants, the General Rule: the additional term is part of the Contract. Exceptions: 1)The additional term is NOT a part of the contract between merchants if it materially changes the offer 2)The additional term is NOT a part of the contract between merchants if the offeror objects to the change |
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Death of a Party Prior to Acceptance
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General Rule: death or incapacity of either party terminates offer
Exceptions: 1)option 2)part performance of offer to enter into unilateral contract |
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Who Can Accept?
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Generally, an offer can be accepted only by
(1)a person who knows about the offer (2)who is the person to whom it was made Offers cannot be assigned Options can be assigned unless the option otherwise provides |
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Methods of Accepting an Offer (5 fact patterns)
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1)Offeree fully performs
2)Offeree starts to perform 3)Offeree promises to perform 4)Offeror and the offeree are at different places and there are conflicting communications 5)The seller of goods sends the “wrong goods” |
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Offeree Fully Performs (Acceptance)
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Only possible issue is whether NOTICE of performance is required
Answer to question turns on 1)What offer requires 2)Whether offeree has reason to believe that offeror will not learn of the acceptance (look for geography) |
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If the Offeree starts to Perform (Acceptance)
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Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract
1)Bilateral: Offer is open as method of acceptance so start of performance is acceptance (treated as an implied promise) 2)Unilateral: Offers require “performance” for acceptance. (Performance means completion of performance. Start of performance is not an acceptance) |
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The Offeree promises to Perform (Acceptance)
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If the facts show that an offer has been made and the offeree promises to perform, a possible issue is whether the offer can be accepted by a promise to perform.
Most offers can be accepted by a promise to perform. Remember offers that expressly require performance for acceptance and reward offers require performance. |
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The offeror and the offeree are at different places and there are conflicting communications (acceptance)
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Generally, communication is effective when received.
An acceptance and ONLY AN ACCEPTANCE is effective when sent IF 1)made in “a manner and by a means invited” AND 2)the offeree has not already sent a rejection |
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Conviser receives a letter from Epstein offering to sell his 1973 Cadillac for $400. On January 10, Conviser mails his letter of acceptance. On January 11, Conviser receives a letter from Epstein revoking the offer. Is there a K?
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Yes (acceptance exception to mail rule)
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Conviser receives a letter from Phish inviting him to replace to Trey in a new version of the group. On August 8, Conviser mails a rejection. August 9, changes mind, mails acceptance. Is there a K?
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Depends on which one arrives first
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Seller of goods sends the “wrong” goods (Acceptance)
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General rule: Acceptance and Breach
Exception: Accommodation (explanation) Counteroffer and No Breach (“out of blue, can you use red?”) |
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Legal reasons for not enforcing an agreement include:
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1)Lack of consideration
2)Lack of capacity of the person who made that promise 3)Statute of Frauds 4)Existing laws that prohibit the performance of the agreement 5)Misrepresentations 6)Duress 7)Unconscionability 8)Ambiguity in words of agreement 9)Mistakes at the time of the agreement as to the material affecting the agreement |
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Consideration (definition)
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Bargained-for legal detriment
Look at each promise separately ID promisor (D) and ask what did he bargain for. ID promisee (P) and ask what detriment did she incur The doctrine of consideration is of limited practical significance. In most transactions, particularly most commercial agreements, there will be no issue as to consideration. Article 2 of the UCC has further reduced the practical significance of consideration in modification |
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Forms of Consideration
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1.Performance (doing something not legally obligated to do)
2.Forebearance (not doing something legally entitled to do) 3.Promise to perform 4.Promise to forebear |
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“Bargained for”
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Asked for by the promisor IN EXCHANGE for her promises
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Adequacy of consideration
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Not relevant in contract law
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Past Consideration
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General rule: not consideration
Exception: expressly requested and expectation of payment |
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Preexisting contractual or statutory duty rule
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Common law: doing what you are already legally obligated to do is not consideration for a promise to pay you more to do merely that. Under common law need new consideration for K modification.
Exceptions: 1)addition to or change in performance 2)unforeseen difficulty so severe as to excuse performance 3)3rd party promises to pay Article 2 does not have a pre-existing legal duty rule; good faith is the test for changes in an existing sale of goods. |
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Part payment as consideration for release
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Key is whether debt is due and undisputed. If debt is due and undisputed, then part payment is not consideration for release
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A written promise to satisfy an obligation for which there is legal defense
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Is enforceable without consideration (consideration substitute)
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Seal as a Consideration Substitute
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Majority rule is now that seal is not the a consideration substitute
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Promissory Estoppel (Consideration)
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Most Important Consideration Substitute
Elements: 1.Promise 2.Reliance that is reasonable, detrimental and foreseeable 3.Enforcement is necessary to avoid injustice |
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Who lacks capacity?
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1.Infant- under 18
2.Mental incompetents- lacks ability to understand agreement 3.Intoxicated persons- if other party has reason to know |
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Consequences of incapacity
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1.Right to disaffirm by person without capacity
2.Implied affirmation by retaining benefits after gaining capacity 3.Liability for necessaries (quasi-contract law) |
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Statute of Frauds Defense (three primary issues)
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1.Is the contract within the Statute of Frauds?
2.If so, is the Statute of Frauds satisfied? (if yes, no S/F defense) 3.Is there a Statute of Frauds defense? |
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Consideration is always a story
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About someone doing something they were asked to do
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Promissory estoppel is always a story
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About someone doing what they were NOT asked to do
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Contracts Within the Statute of Frauds
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1.Promises in Consideration of Marriage
2.Promises by Executor or Administrator to Answer for (guarantee) Debt of Decedent 3.Other Promises to Creditors Answer for (guarantee) the Debts of Another 4.Service contract not capable of being performed within a year from the time of the contract 5.Transfers of Interest in Real Estate of a Term of More than a Year 6.Sale of goods for $500 or more 7.Leases of goods with payments totaling $1,000 or more |
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Promises in Consideration of Marriage
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Statute of Frauds applies
Not merely a promise to marry but rather a promise to do something or refrain from doing something if we marry |
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Other Promises to Creditors Answer for (Guarantee) the Debts of Another
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Statute of Frauds apply
Not merely a promise to pay but rather a promise to pay if someone else does not (look for guarantee) Main Purpose Exception: principle purpose of the contract is to benefit guarantor |
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Service contract not capable of being performed within a year from the time of contract
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- “Capable” in essence means theoretically possible with unlimited resources; Ignore what actually happens; key is what might have happened with unlimited resources.
- Termination or possibility of irrelevance 1)Specific time period, more than a year- S/F applies 2)Specific time, more than a year from date of contract- S/F applies 3)Task (nothing said about time)- S/F does not apply 4)Life - S/F does not apply |
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How is the Statute of Frauds Satisfied
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1.Performance
2.Writing 3.Judicial Admission of Sale of Goods Agreement (statement by D that there was an agreement in testimony, pleadings or discovery) |
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P claims that D agreed to lease Blackacre for one year. Is this within the statute of frauds?
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No, exactly one year not “more than one year”
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Performance (Statute of Frauds)
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The statute of frauds can be satisfied by performance. The rules for satisfaction of the S/F by performance vary depending on whether the contract is:
1)service contract 2)a sale of goods contract 3)real estate transfer contract |
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Performance and Services Contracts (Statute of Frauds)
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1)Full performance by either party satisfies the statute of frauds
2)Part performance of a service contract does not satisfy the statute of frauds |
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Performance and Sales of Goods Contracts (Statute of Frauds)
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1)Ordinary goods: general rule is that part performance of a contract for the sale of goods satisfies the statute of frauds but only to the extent of the part performance. (Look to see if question is about delivered and undelivered goods)
2)Specially Manufactured Goods Exception: If the contract is for the sale of goods that are to be specially manufactured, then the Statute of Frauds is satisfied as soon as the seller makes a “substantial beginning” which means that the seller has done enough work that is clear that what she is working on is specially manufactured. (i.e. custom made or made to order making or obtaining goods) |
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P agrees to work for D for three years. P works for 13 months and then D fires her without cause. Does the statute of frauds apply? Is it satisfied? Is there a statute of frauds defense? Can P recover under contract law.?
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1) Is Statute of Frauds satisfied by P’s working for 13 months? NO, part performance satisfies
2) Does D have a Statute of Frauds defense? YES, not satisfied 3) Can P recover under contract law for the 13 months of work she had done? Not under contract law. No contract to base recovery on. Look to quasi-contract |
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Performance and transfers of interests in real estate (Statute of Frauds)
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1)Part performance by buyer of real estate can satisfy the statute. Part performance is generally any two of the following three: (i) full or part payment (ii) possession (iii) improvements
2)Full payments alone by buyer of real estate does not satisfy the statute of frauds |
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Writing (Statute of Frauds)
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Statutes of Fraud other than the UCC's: look at (i) the contents of the writing or writings- ALL MATERIAL TERMS test (who and what) and (ii) who signed the writing- signed by the person to be charged, i.e., the defendant
1) ID parties 2) K's subject matter 3) Terms and conditions 4) Recital of consideration 5) Signature of party to be charged UCC Statute of Frauds: look to contents and who signed. Must contain the quantity term. - Exception: if both parties must be merchants and the person who receives a signed writing with a quantity term that claims there is a K fails to respond w/in 10 days - “answer the damn letter” |
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Authorization to enter into a contract for someone else
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Issue is when do RULES OF LAW REQUIRE that a person have written authorization in order to execute a contract for someone else. The authorization must be in writing if the contract to be signed is within the statute of frauds, i.e. the authorization must be of “equal dignity”
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When do the rules of law require written evidence of modification of a written contract?
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Sometimes there is no legal requirement of written evidence of an alleged modification of a written contract. Resolve any legal issues of whether such written evidence of of the modification is needed by (i) looking at the deal with the alleged change and (ii) determining whether the deal with the alleged change could be within the statute of frauds. If so, then, as a matter of law, the alleged modification agreement must be in writing
1)Under common law, contract provisions requiring that all modifications be in writing are not effective – ignore the contract language 2)Under UCC contract provisions requiring written modifications effective unless waived |
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Illegal Subject Matter/Illegal Purpose
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If the subject matter is illegal, the agreement is void.
If the subject matter is legal but purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose |
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Misrepresentation
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Look for a false assertion of fact or concealment of facts that induces the K. No requirement of fraud in actions to rescind a contract because of misrepresentation; reformation may require fraud. (Recission-K, Damages-Tort)
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Duress
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Physical or Economic
Elements of economic duress: 1)“bad guy” - improper threat 2)“vulnerable guy” - no reasonable alternative |
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Unconscionability
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This doctrine, originally applicable only to sales of goods but now a part of contracts law generally empowers a court to refuse to enforce all or part of an agreement.
The two basic tests, (i) unfair surprise – procedural and (ii) oppressive terms- substantive, are tested as of the time the agreement was made by the court. |
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Misunderstanding (Ambiguity in Words of Agreement)
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There will be no contract if
1)parties use material term that is open to at least two reasonable interpretations 2)each party attaches different meaning to the term, and 3)neither party knows or has reason to know the term is open to at least reasonable interpretations |
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Mutual Mistake of Fact
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There will be no K if:
1)both parties mistaken 2)basic assumption of facts 3)materially affects the agreed exchange 4)not a risk that either party bears Subject matter(material) v. Value (not material) |
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Unilateral Mistake of Fact
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Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party
Exceptions: 1)“palpable mistakes": if the other party to the K knows or should have known of the mistake, courts grant relief to the mistaken party 2)Mistakes discovered before significant reliance by the other party |
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Parol Evidence Rule (Overview)
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An evidence rule in the sense that the issue is whether a court can consider evidence and the purpose for which the evidence is to be introduced is often determinative
1)Underlying premise is that final written version of deal is more reliable that anything said or written earlier 2)Importance of written contract as source of contract terms, exclusionary effect of written contract on earlier (or contemporaneous) agreements as a possible source of terms of the contract |
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Integration (definition)
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Written agreement that court finds is the final agreement, triggers the parol evidence rule
Whether “complete” or “partial” normally irrelevant |
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Partial integration (definition)
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Written and final, but not complete
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Complete integration (definition)
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Written and final and complete
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Merger Clause (definition)
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Contract clause such as “This is the complete and final agreement”
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Parol evidence (definition)
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1)Words of party or parties
2)Before integration. i.e. before the agreement was put in written form 3)Oral or written |
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Reformation (definition)
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Equitable action to modify written contract to reflect actual agreement
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Parol Evidence (triggering facts)
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1.Written contract that courts find is 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 |
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Changing the written deal (PE fact pattern)
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Regardless of whether the writing is a complete or partial integration, the PER prevents a court from considering earlier agreements as a source of terms that are inconsistent with the terms in the written contract. (Please, change it)
Exception: A court, may, however, consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration ie a mistake in reducing the agreement to writing |
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Establishing a defense to the enforcement of the written deal (PE fact pattern)
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Regardless of whether the writing is a complete or partial integration, the PER does not prevent a court from considering earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of agreement such as misrepresentation, fraud, duress (Please, let me out of the deal)
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Explaining term in the written deal (PE fact pattern)
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Notwithstanding the PER, earlier agreements can be considered to resolve ambiguities in the written K
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Adding to the written deal (PE fact pattern)
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The PER prevents a court from considering earlier agreements as a source of consistent, additional terms unless the court finds that the written agreement was only a partial integration or that the additional terms would ordinarily be in a separate agreement
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Fact most often triggers:
Parol Evidence Rule Statute of Frauds |
PER: written K
SOF: oral K |
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Extrinsic Evidence
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The words of the parties are not the only source of contract terms. Courts look to, in order:
1)Course of performance (same people, same contract) 2)Course of dealing (same people, different but similar contract) 3)Custom and usage (different but similar people, different but similar contract) |
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No place of delivery has been agreed upon (UCC default terms)
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Absent an agreement as to place of delivery is the seller's place of business unless both parties know that the goods are some place else in which case that place is the place of delivery
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Delivery obligation of seller if delivery is by “common carrier” (UCC default terms)
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If there is an agreement as to place of delivery by a common carrier, then the question is what does the seller have to do to complete its delivery obligation. Two possible answers
1)Shipment Contracts - Seller completes its delivery obligation when it (i) gets the goods to a common carrier, and (ii) makes reasonable arrangements for delivery and (iii) notifies the buyer 2)Destination Contracts - Seller does not complete its delivery until the goods arrive where the buyer is - Most K's with delivery obligations are shipment K's. Watch for the use of FOB: 1)FOB followed by city where seller is or where goods: shipment contract 2)FOB followed by any other city: destination contract |
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Risk of Loss problems arise when
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1)after the contract has been formed but before the buyer receives the goods
2)the goods are damaged or destroyed 3)neither the buyer nor the seller is to blame |
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When, after the K has been entered into, goods are lost or damaged without the fault of the buyer or seller, which party has the Risk of Loss:
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- If the ROL is on the buyer, he has to pay the full contract price for the lost or damaged goods
- If the seller has the ROL, buyer does not pay Four Risk of Loss Rules (in order) 1.Agreement (of the parties control) 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 obligation) 4.No agreement, no breach, no delivery by carrier: determining factor is whether the seller is a merchant. (whether buyer is a merchant is irrelevant), Risk of loss shifts from a merchant-seller to the buyer on the buyer's “receipt” of goods; ROL shifts from a non-merchant seller when he or she “tenders” the goods (anytime can get it) |
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Express Warranty
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Look for words that promise, describe or state facts or for use of sample or model.
Distinguish from sales talk which is more general, an opinion |
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Implied warranty of merchantability
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When any person buys any goods from any 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
1)Triggering fact: seller is a merchant, which here means its deals in goods of that kind 2)Warranty: goods are fit for ordinary purposes |
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Implied warranty for fitness for a particular purposes
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Triggering facts:
1. buyer has particular purpose 2. buyer is relying on seller to select suitable goods 3. seller has reason to know of purpose and reliance Warranty: goods fit for particular purpose |
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Disclaimer (Warranties)
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Eliminates IMPLIED warranties
Express warranties generally cannot be disclaimed Implied warranties of merchantability can be disclaimed 1)“as is” or “with all faults” OR 2)Conspicuous language of disclaimer, mentioning merchantability |
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Limitation of Remedies in K
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Does not eliminate warranty, simply limits or sets recovery for any breach of warranty
1)Possible to limit remedies even for express warranties 2)General test is unconscionability 3)Prima facie unconscionable if breach of warranty on consumer goods causes personal injury |
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Perfect Tender
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General standard of Article 2. Subject to limited exceptions, the seller is obligated to deliver perfect goods.
Buyer can reject imperfect tender in whole or in part. |
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Rejection of Goods
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Must occur BEFORE acceptance of the goods.
If the goods are less than perfect, the buyer has the option to reject “the whole” or any “commercial units” or retain and sue for damages, unless Cure or Installment Contract or Acceptance |
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Cure
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In some instances, a seller who fails to make a perfect tender will be given a second chance, an option for curing.
Note that every seller does not have the opportunity to “cure” and that the buyer cannot compel the seller to cure 1)Seller's reasonable ground to believe would be “ok”: in very limited situations, a seller has an option of curing even after the contract delivery date. The statutory test is whether the seller has reasonable grounds for believing that improper tender would be acceptable, perhaps with a money allowance. Look for information in the question about PRIOR DEALS between that buyer and seller with such an allowance 2)Time for performance has not yet expired |
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Installment Sales Contract
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An installment sales contract requires or authorizes (i) delivery in separate lots (ii) to be separately accepted.
The buyer has the right to reject an installment only where there is a substantial impairment in that installment that can't be cured. |
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Acceptance of the Goods by the Buyer
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1.If the buyers accepts the goods, it cannot later reject them
2.Payment without opportunity for inspection not acceptance 3.Implied acceptance: retention after opportunity for inspection look for the buyer's keeping the goods without objection; fact pattern that states when buyer first received goods and when buyer first complained to seller |
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Revocation of Acceptance of the Goods
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If a buyer accepts the goods, it cannot later reject the goods.
In limited circumstances, a buyer can effect a cancellation of the contract by revoking its acceptance of the goods. The requirements for revocation: 1)Nonconformity substantially impairs the value of the goods 2)Excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction, and 3)Revocation within a reasonable time after discovery of nonconformity |
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Is there an enforceable contract?
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Elements:
1) Mutual Assent - Offer - Acceptance 2) Consideration - Bargained for exchange - Substitute (ie promissory estoppel) 3) No defense - Mistake - Lack of Capacity - Illegality - Statute of Frauds |
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Employment Contract (requirement)
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Duration must be specified
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Mistake by Intermediary (Transmission)
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Usually operative as transmitted unless party should have known
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My Legs
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Agreements Covered by the Statute of Frauds
- Marriage - Year (within one) - Land - Executor (or Administrator) - Goods ($500 or more) - Surety |
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Quasi-Contractual Relief
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Failed K
1) Conferred benefit (not necessary) 2) Reasonable expectation of being compensated 3) Conferred at express or implied request of the other person 4) Unjust enrichment would result if the D were allowed to retain the benefit w/out compensating plaintiff |
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Delegation for Consideration
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Creates a 3rd party beneficiary obligation
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What if 3rd party delegatee does not perform
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1.Delegating party ALWAYS remains liable
2.Delegatee liable ONLY if she receives consideration from delegating party |
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Which duties are delegable
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Generally, contract delegable
The limitations on delegation are very limited Delegations are permitted unless: 1)K prohibits delegations or prohibits assignments 2)K calls for very special skills (not even to equal, must be a novation) 3)Person to perform K has a very special reputation |
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Relationship between assignment and delegations
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1)Assignment is the transfer by a party to a K of his rights or benefits
2)Delegation is the transfer by a party to a K of his duties or burdens under the K to a 3rd party who was not a party to K |
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Delegation (definition)
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Party to K transferring work under that K to 3rd party
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Assignment for Consideration (multiple)
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General rule: first assignee for consideration wins
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)judgment 3)novation 4)indicia of ownership |
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Gratuitous Assignments (multiple)
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1)General rule: last assignment wins
- Gratuitous assignments freely revocable. Later gift revokes earlier gift. 2)Exceptions: - A gratuitous assignment is not revocable if (i) it is the subject matter of a writing delivered to the assignee, (ii) the assignee has received some sort of indicia of ownership, or (iii) the assignee relied on the assignment in a way that is reasonable, foreseeable and detrimental - If the gift assignment is not revokable, then it will take priority over a later assignment |
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Rights of Assignee
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1)Assignee can sue obligor
2)Obligor has same defenses against assignee as it would have against assignor 3)Payment of 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 4)Warranties of assignor - Assignment for consideration, assignor warrants that he will do nothing to impair the value of the assignment (not donee assignee) - Assignor, however, only warrants what he has done or will do; he does not warrant what the obligor will do |
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Requirements for Assignment
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1)General rule is that consideration is NOT required
2)Present assignment(valid) v. promise to collect and pay or promises to assign (invalid) 3)Distinguish existing but conditional rights (valid) from future rights (invalid) |
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Limitations on Assignments
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1.Contract Provisions: determine whether K (i) prohibits assignment or (ii) invalidates assignment
- Prohibition: language takes way the right to assign, but not the power to assign which means that the assignor is liable for breach of K but an assignee who does not know of the prohibition can still enforce the assignment (“not assignable”) - Invalidation: takes away both right and power so there is a breach by the assignor and not rights in the assignee (“void') 2.Common Law: even if K does not limit right to assign, common law bars assignment that substantially changes the duties of the obligor - assignment of right to payment (valid) - assignment of right to K performance other than right to payment (barred) |
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Vocabulary of Assignment
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1)Assignor: party to K who later transfers rights under K to another
2)Assignee: Not a party to K. Able to enforce K because of the assignment 3)Obligor: Other party to K |
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What is an Assignment?
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Transfer of rights under a K in two separate steps:
1)K between only 2 parties 2)One of the parties later transfers rights under that K to a 3rd party |
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Defenses (3rd party beneficiary)
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If the 3rd sues the promisor, the promisor can assert any defense that he would have had if sued by the promisee
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Who can sue whom (3rd party beneficiary)
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1)Beneficiary can sue Promisor
2)Promisee can sue Promisor 3)Donee beneficiary can not sue promisee but creditor beneficiary can sue promisee on pre-existing K |
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Dealing with Efforts to Cancel or Modify (3rd party beneficiary)
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The test is whether the third party knows of and has relied on or assented as requested.
If so, her rights have vested and the K cannot be canceled or modified without her consent unless the K otherwise provides |
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Vocabulary of Third Party Beneficiary
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1)3rd party beneficiary: Not a party to K. Able to enforce K others made to her benefit
2)Promisor: look for person who is making the promise that benefits the 3rd party 3)Promisee: Person who obtains the promise that benefits the 3rd party 4)Intended/incidental (if K names person “intended”; if not named “incidental”) 5)Creditor/donee: Intended beneficiaries are either donees or creditors. Usually donees. Look at whether beneficiary was a creditor of the promisee |
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Third Party Beneficiary (steps)
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1)ID: look for two parties contract with the intent of benefit to a third party (ie insurance beneficiary)
2)Know the vocab 3)Deal with efforts to cancel or modify 4)Know who can sue whom 5)Defenses |
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Subsequent law or regulation
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1)Later law makes performance of contract illegal: excuse by impossibility
2)Later law makes mutually understood purpose of contract illegal: excuse by frustration of purpose |
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Death after Contract
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Death does not make a person’s contract obligations disappear unless “special” person
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Excuse of Performance by reason of later, unforeseen event
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Performance of contractual duties (other than contractual DUTY TO PAY MONEY) can be excused under impossibility or impracticability or frustration of purpose
1)something that happens after contract formation but before the completion of contract performance 2)that was unforeseen 3)that makes performance impossible or commercially impracticable or frustrates the purpose of performance Impossible: objective, can't be done Impracticable: subjective, can't be done with extreme unreasonable difficulty and expense |
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Accord v. Modification (sentence structure)
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Accord: IF x, THEN original debt excused
Modification: do x instead of original obligation |
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Novation
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Substituted Person
1)A novation is an agreement between BOTH parties to an existing contract to the substitution of a new party, i.e. same performance, different party 2)Novation excuses the contracted for performance of the party who is substituted for or replaced 3)Different from delegation: delegation does not require the agreement of both parties and does not excuse |
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Modification
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Substituted agreement
Modification is an agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation |
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Accord and Satisfaction
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Excuse by reason of later agreement
Substituted Performance - Accord – later agreement by parties to an already existing obligation to accept a DIFFERENT PERFORMANCE ($1000, can't accept $700) - Satisfaction – performance of later agreement excuses original, existing obligation 1) If the new agreement (accord) is performed (satisfaction), then performance of the original obligation is excused 2)If the accord is not performed, then the other party can sue on either the original obligation or the accord |
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Rescission
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Excuse by reason of later agreement
The key is whether performance is still remaining from each of the contract parties (executory) |
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Inability to Perform
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On test, not doing something for money, but rather for some unique item other person has
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Anticipatory Repudiation
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Unambiguous statement
1)that the repudiating party will not perform 2)made prior to the time that performance was due Excuses the other party's duty to perform Generally gives rise to an immediate claim for damages for breach unless claimant has already finished her performance 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 assurance is provided |
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S offers to sell B his house for $100,000. B responds that he will buy the house if it is appraised at $100,000.
Is there a contract? |
NO, words of condition appear in only a statement by one party (in response to the offer)
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B contracts to buy S’s house. The contract provides “this sale is conditioned on the house being appraised at $77,000.”
If the house is appraised at $76,000, has the condition been satisfied so that B has to perform? |
No, not satisfied
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C contracts with S for shipment of cargo from England to Cadiz. Contract provides “S agrees that it will sail the next day.”
If S carries the cargo to Cadiz but delays sailing beyond the next day, can C recover breach of contract damages from S? |
Yes, no conditional language in contract (covenant)
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C contracts with S for shipment of cargo from England to Cadiz. Contract provides for the payment of an additional 200 pounds provided that S sails the next day.
If S carries the cargo to Cadiz but delays sailing beyond the next day, does C have to pay the premium? Can C recover breach of contract damages from S? |
C does not have to pay premium
No, C cannot recover breach of contract damages |
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S and B enter into an agreement that provides that B will buy S’s house for $100,000 if it is appraised at $100,000.
Is there a contract? If the house is only appraised at $75,000, does B have to buy the house? If the house is only appraised at $75,000, can B recover breach of contract damages from S? |
Yes, contract
No duty to buy house No recovery of damages for breach of K |
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How can an Express Condition be excused
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- Identify the person who benefits from or is protected by the condition
- Then look for a statement by that person giving up the benefits and protection of the condition 1) ESTOPPEL is based on a statement by the person protected by the condition BEFORE the conditioning event was to occur and requires a change of position. 2) WAIVER is based on a statement by the person protected by the condition AFTER the conditioning event was to occur and does not require a change of position |
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Standard for satisfying an Express Condition
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General rule: strict compliance with performance conditions
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P contracts to paint 10 apartments for O for $10,000. P breaches after painting 3 apartments. O does not pay P. P sues O for payment for the 3 apartments he painted.
1)Is O excused from paying P because of P’s breach? 2)What if contract provides that P will be paid $1,000 an apartment? |
1)YES, numeric performance and completion was clearly less than half
2)Material breach judged on performance by performance basis. P would have a contract law right to recover for the three apartments that had been painted. |
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Performance Condition (definition)
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A 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 K Performance conditions are created by language of K. Watch for such words as “if”, “provided that”, “so long as”, “subject to”, “in event that”, “unless”, “when”, “until” and “on condition that” |
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Excuses
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1.Improper Performance
2.Failure of a Performance Condition 3.Anticapatory Repudiation or Inability to Perform 4.Later Contract 5.Later, Unforeseen Event |
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Common law and material breach rule
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Three General Rules
1)Damages can be recovered for any breach 2)Only a material 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) Exception: Divisible Contract When you see a numeric performance, if the party completes clearly less than half, it is a material breach, unless there is a divisible contract. |
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Contract provisions regarding damages
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Liquidated damages
Look for K provision fixing amount of damages Issue will be validity Concern is whether provision is too high (a penalty) Tests are: 1)damages were difficult to forecast at time contract was made 2)provision is a reasonable forecast |
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Additions and Limitations of Money Damages
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1.plus INCIDENTAL
2.plus CONSEQUENTIAL 3.less Avoidable damages 4.Certainty limitation |
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Avoidable Damages
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No recovery for damages that could have been avoided without undue burden on plaintiff.
Burden of pleading and proof on defendant (Not Mitigation) |
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Consequential Damages
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Foreseeable special damages
Damages arising from Plaintiff's SPECIAL circumstances; recoverable only if D had REASON TO KNOW at time of contract |
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Incidental Damages
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Costs incurred in dealing with breach: always recoverable
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Buyer breaches, seller has the goods (Article 2 damages fact pattern)
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Contract price – market price at time and place of delivery
OR Contract price – resale price In some situations, provable lost profits (lost volume seller – regular inventory) |
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Buyer breaches, buyer has goods (Article 2 damages fact pattern)
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Contract Price
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Seller breaches, seller keeps goods (Article 2 damages fact pattern)
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Market price at time of discovery of the breach - contract price
OR Replacement price - contract price |
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Seller breaches, buyer keeps the goods (Article 2 damages fact pattern)
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Fair market value if perfect - Fair market value as delivered
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General Contract Damages Policy
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Part 7 of Article 2 reflects the general contract damages policy putting the innocent party where it would have been had the contract been performed (expectation).
Two relevant factors: 1)who breached 2)who has the goods |
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Measures of damages
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1.Expectation: put plaintiff in same economic position as if K had been performed
2.Reliance: put plaintiff in same economic position as if K had never happened 3.Restitution: put defendant in same economic position as if K had never happened |
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Essay Money Damages Accurate Statement
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In California, courts generally base damages on the protection of the expectation interest
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Money Damages Checklist
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Expectation
Restitution Reliance Incidental Consequential Avoidable Liquidated Limitation of Remedies |
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Rights of Good Faith Purchaser in Entrustment
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If an owner leaves with a person who sells goods of that kind and that person wrongfully sells the goods to a third party then such a good faith purchaser from dealer cuts of rights off the original owner/entruster
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Reclamation
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Right of an unpaid seller to get its goods back. Key facts are that:
1)the buyer must have been insolvent at the time that it received the goods 2)that seller demand return of the goods within 10 days of receipt (10 day rule becomes “reasonable time rule” if before delivery there had been an express representation of solvency by the buyer 3)Buyer still has goods at time of demand If reclamation, no damages available |
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Epstein contracts with Conviser to lecture for Barbri in New York. Epstein breaches.
Can Conviser obtain a court order requiring Epstein to lecture for Barbri in New York? Can Conviser obtain a court order barring Epstein from lecturing for the competing Law and Order Bar Review course in New York? |
No specific performance in service contracts
Maybe, court has equitable discretion to grant injunctive relief |
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Specific Performance/Injunction
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Equitable remedy. Unclean hands, adequacy of remedy at law, etc.
1.Contracts for sale of real estate (in rem) 2.Contract for sale of goods: unique goods or other appropriate circumstances (“art”, “custom made”, “antique”) 3.Contract for services: no specific performance, possible injunctive relief |
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Nonmonteray Remedies
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1)Specific Performance/Injunction
2)Reclamation 3)Rights of good faith purchaser in entrustment |
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Payment concepts
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1)Payment can be made by “any manner current in the ordinary course of business”
2)Seller can demand cash 3)If seller demands cash, buyer has additional reasonable time |
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Meeting of the Minds (rescission)
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Parties must be of same mindset i.e. both know of valid K
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Mailbox Rule: options
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Acceptance of option effective when received
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Partial Peformance prior to Unforeseen Event (Impossibility)
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Partially performing party can receive reasonable compensation in quasi-contract
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A K is divisible if:
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1) the perfmormance of each party is divided into two or more parts
2) the number of parts due from each party is the same 3) the performance of each part by one party is the agreed upon equivalent of the corresponding part from the other party |
