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454 Cards in this Set

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What is a contract?
legally enforceable agreement

* not every agreement is a contract
What is a quasi-contract?
An equitable remedy.

* whether we have relief under quasi-contract does not depend on contract law principles

* Any time that application of contract law rule produces an unfair result, look for opportunity to write a few sentences on quasi contract (MA day)
1) Define Bilateral contract

2) DefineUnilateral
1) Bilateral results form an offer that is open as to method of acceptance

2) Unilateral results from an offer that expressly requires performance as the only possible method of acceptance
**Assume that all contracts are bilateral UNLESS
- reward, prize, or contest
- offer expressly requires performance for acceptance.
Bi or unilateral contract:

NBC offers A 25000 to sing on show.
Yes contract.
Bilateral contract because
1) not reward, prize or contest
2) contemplates that she will sing song to perform contract BUT contract doesn't say that the only way she can accept offer is to sing song.

Why important? She breaches contract if she lip-sings. There can only be a breach because we already decided there is a contract. If it was a unilateral contract, there would be no contract and thus no breach.
What is first question to ask when any kind of agreement or dealing?
What is the applicable law?
--common law
--Article 2 of the UCC
When does Article 2 of the UCC apply?
When transaction is primarily a sale of goods

* goods are something tangible and movable

* applies to everyone, whether business deal or deal between individuals

* applies regardless of price of contract (except one section applies when over 500)
Goods defined and why relevant?
1. Relevant because sales of goods covered by ucc art. 2

2. goods are something tangible and movable
UCC or common law

1. A contracts to lecture for Barbri.

2. A agrees to buy clubhouse.

3. A contracts to buy used cadillac for 400.

4. A buys used car and two driving lessons for 400.

5. A buys yo-yo and 10 lessons from yo yo ma.
1. apply common law to services contract

2. apply common law to real estate

3. UCC

4. Mixed deal bc part goods and part services. UCC applies to the whole deal because the goods part is the more important part of the deal

5. Apply common law bc lessons are more important part of deal.
How to handle mixed deals involving sales of goods and services?
Ask whether goods or services is most important part of deal and apply that law to the entire deal.

--either use UCC in full or not at all. Apply even to disputes over services in contract.
Common law or ucc:

A buys yoyo for 10 and lessons for 40,000
Apply common law to lessons disputes and UCC to yoyo disputes.

This is a mixed deal question where contract divides payment
What law applies when a contract divides payment between goods and services?
Apply ucc to goods part and common law to sales part.
Article 2A of the UCC
Applies to leases of goods, not sales.

--mostly acts like Article 2, except in few exceptions

--NOT ms, maybe ma
What if not sale of goods, what law applies?
Common law applies to anything other than the sale of goods
Overview of contract formation
1. Look for agreement
2. Ask whether legally enforceable
3. Level one: initial communication/offer
4. Level two: what happens after initial communication/termination of offer
5. level three: who responds and how responds/acceptance
Test for offer
Would a reasonable person in the position of the offeree believe that his or her assent creates a contract?

--Manifestation of an intention to contract--words or conduct showing commitment
Can an offer to contract be given without containing all material terms?
Yes
Valid offer?

1. S offers to sell Blackacere to B, doesn't say anything about price

2. S offers to sell car to B and says nothing about price
1. No offer bc offer must give price and description

2. Yes offer if parties so intent
When is price and desription required to make valid contract offer?
1. Price and description required in sales of real estate under common law

2. Sales of goods under Article 2 have no price requirement. Only needs intent from parties.
Use of reasonable, appropriate, fair in first contracts communication
Not a valid offer bc vague or ambiguous material terms
Requirements contracts
A contract for the sale of goods can state the quantity of goods to be delivered under hte contract in terms of buyer's requirements or seller's output or in terms of exclusivity
Offer?

1. B offers to buy widgets from S for five years. No specific quantity term in the offer. Says that B will purchase all widgets from S.
1. Yes, it is an offer to enter into a requirements contract.
Use of words all, only, solely in offer contracts questions...
Valid offer to enter into a requirements contract.
Can buyer in requirements contract increase requirements?
Yes, so long as the increase is in line with prior demands
Permissible?

B buys 1000 pounds of widgets in first three years.

1) B orders 1050 in 4th year

2) B orders 2000 in 4th year
1. valid increase in requirements contract

2. invalid increase in requirements contract because buyer can increase requirements only so long as the increase is in line with prior demands
Is an advertisement an offer?
No, it is an invitation to make an offer UNLESS

1. reward, prize, or contest can be an offer

2. An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept.
Offer?

1. A promises 100$ reward to anyone who catches the flue after using A's product as directed.

2. A advertises coat for 10$, first come first served.
1. Yes, offer even though advertisement. Reward, prize, contest exception applies.

2. Yes because an advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept.
Things to look for in offers questions
1. Common law real estate sales require price and description

2. Vague or ambiguous material terms are not an offer under common law or ucc

3. Requirements contracts / increase in requirements

4. Advertisments are not offers
Termination of offers
An offer cannot be accepted if it is terminated. It is DEAD.
I tell you I will sell you car for 4000 but not how long offer is kept open. Can you accept 5 years later?
No, terminated by lapse of time
Reasonable time until offer terminated by lapse
1. by time stated

OR

2. one month (says Epstein)
How can an offer be revoked?
1. unambiguous statement by offeror to oferee of unwillingness or inability to contract OR

2. unambiguous conduct by offerer indicating an unwillingness or inability to contract that offeree is aware of
A offers to sell cadillac for 400. Who can revoke offer?
Only A. Offer can only be revoked by guy who made it.
Why is offer revocation a two-player game?
Because it involves conduct by offeror that

offeree is aware of
1. On jan 15, A offers to sell cadillac to B for 1500. I say to myself next day that I don't want to sell car.
1. Offer is still valid. Nothing has been communicated to B. NO revocation of offer.

Same result if A has sold car to someone else without B's awareness.
On jan 15, A offers to sell cadillac to B for 1500. B sees C driving cadillac next day and learns that C has bought it. Can B accept offer?
1. No because conduct by A and B is aware.

**remember offer revocation is a two-player game involving offeror and offeree
On jan 15, A offers to sell cadillac to B for 1500. B learns that A offered car to C but C hasn't accepted it. Can B accept offer?
Yes, Making offer to another person is NOT revocation.
Is making multiple offers revocation?
No, not words or conduct unambiguously indicating an unwillingness or inability to contract.
When does a revocation become effective?
1. If sent through mail, revocation effective when received.

2. Offer cannot be revoked after accepted.
1. S offers to sell car to B for 400. B accepts. Can S still revoke?
No, bc offer can't be revoked until accepted.
Offers that CANNOT be revoked
1. Option (involves promise to hold offer open and some payment for it)

2. firm offer rule
Option
1. promise to hold offer open
AND
2. some payment for option
S offers to sell B car for 400. B pays S 10 for S's promise to keep offer open for week.

(1) Can S revoke?

(2) If no 10 payment?
1) No, bc option.

2) Yes, not option bc no payment.
Firm offer rule
(special article 2 rule)
An offer can't be revoked for up to 3 months if:

1) offer to buy/sell goods
2) signed,written promise to keep teh offer open
3) party is a merchant
What is a merchant?
Anyone connected with business.
S, used car dealer, offers to sell B car for 400. S signs written offer and promises it will be kept open for week. Can S revoke?
No, under firm offer rule.
Differentiate between option and firm offer rule

-why relevant
1. Option has paid for promise

2. Meet requiremetns of firm offer rule

3. relevant bc both prevent revocation of offer
Can offer be revoked?

1. Merchant S promises by signed writing to keep offer open for 6 months.

2. Merchant S by signed writing promises to keep offer open and doesn't state time period.
1. Can't be revoked for 3 months under the firm offer rule

2. Can't be revoked for time fixed by court for up to three months (limit under firm offer rule)
S Used Cars makes offer by signed writing to B to sell car for 400. Can S revoke?
Yes because no promise to keep the offer open
S offers to sell B house for 100,000 and the written offer promises that will be accepted for next 4 months. Can S revoke?
Yes, common law applies to real estate.

Firm offer rule only applies under Article 2.
When detrimental reliance by offeree that is reasonably foreseeable,
Offer cannot be revoked
Four times when can't revoke
1. option
2. firm offer rule (applies to signed writings by merchants)
3. when detrimental reliance by offeree that is reasonably foreseeable
4. offers to enter into unilateral contracts.
Offer states that can be accepted only by performance

Relevance?
Unilateral contract
O offers P 1000 to paint O's house. O's offer states that can be accpeted only by performance. P starts painting. Can O revoke?
No, offer irrevocable because start of performance pursuant to offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.
Revocability of unilateral contracts
Start of performance pursuant to offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.
Is mere preparation enough to accept unilateral contract?
No, it must be actual performance.

--Yet mere preparation might be enough to trigger detrimental reliance rule adn make offer irrevocable.
Effect of rejection of offer by offeree
Offer is terminated
How can offeree reject offer?
1. counteroffer
2. conditional acceptance
3. additional terms (common law only)
Effect of counteroffer
Terminates offer and becomes the new offer

**counteroffers kill

**distinguish from bargaining, which doesn't terminate offer
1) S offers to sell blackacre to B for 10,000. B responds, I will only pay 9000. Can B later accept S's offer for 10,000?

2) S offers to sell blackacre to B for 10,000. B responds, Will you take 9000? Can B later accept S's offer for 10,000?
1. No, By's counteroffer terminated S's offer.

2. Yes, this is bargaining
Distinguish between bargaining and counteroffer

--relevance
* Relevant bc counteroffers terminate offers and bargaining does not.

1. Statement is counteroffer
2. Question is bargaining, "Will you take X"
Conditional acceptance defined and why relevant
1. relevant because terminates offer and becomes new offer

2. Response to offer uses words if, provided, so long as, but, on condition that
Firm offers job. A answers I accept provided that I don't get assigned to tax team.
1) contract formed?
2) is offer terminated?
1. No contract formed
2. Yes, conditional acceptances terminate offer
B sends S purchase order. Purchase order makes no mention of disputes. B returns with statement "Acceptance is expressly conditioned on this arbitration term as part of contract"

Is there a contract?
No, conditional acceptance. This terminates offer and creates new offer.
Additional terms to a common law contract: Mirror image rule

-relevance
Under common law, an acceptance that adds new terms is treated like a counteroffer rather than an acceptance.

--Relevant because any added terms (not mirror image) terminates offer and creates new one.

--If sale of goods, apply UCC 2-207, not mirror image rules
L offers to lease building to T by sending T a signed lease that is silent about arbitration of disputes. T adds paragraph about disputes and signs. Did T accept L's offer creating a contract?
No, violates common law mirror image rule. Adding terms to a common law contract terminates the offer and creates a new one.

--If sale of goods, apply UCC 2-207.
When response to offer adds new terms, but does not make new terms a condition of acceptance

Acceptance?
Generally treated as acceptance.
Additional terms still acceptance under UCC article 2 (2-207)
Applies to fact patterns when
(1) offer to buy or sell goods and
(2) a response with additional terms raises two separate questions
Analysis under UCC 2-207
1. Is there a contract?
--yes if response adds something in sale of goods, without insisting on it.
--no if says that "acceptance is expressly conditioned" on additional term

2. Is the additional term a part of the contract?
- if both merchants, the additional term is part of contract UNLESS (1) material change or (2) offeror objects
-if one or both parties aren't merchants, adddition treated as proposal to be separately accepted or rejected. Contract still formed without additional terms.
4 ways that an offer can be terminated
1. Lapse of time (either by time stated or reasonable time)
2. Revocation of an offer
3. Words or conduct of the offeree (Rejection by offeree)
4. Death of a party prior to acceptance
Can buyer in requirements contract increase requirements?
Yes, so long as the increase is in line with prior demands
Permissible?

B buys 1000 pounds of widgets in first three years.

1) B orders 1050 in 4th year

2) B orders 2000 in 4th year
1. valid increase in requirements contract

2. invalid increase in requirements contract because buyer can increase requirements only so long as the increase is in line with prior demands
Is an advertisement an offer?
No, it is an invitation to make an offer UNLESS

1. reward, prize, or contest can be an offer

2. An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept.
Offer?

1. A promises 100$ reward to anyone who catches the flue after using A's product as directed.

2. A advertises coat for 10$, first come first served.
1. Yes, offer even though advertisement. Reward, prize, contest exception applies.

2. Yes because an advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept.
Things to look for in offers questions
1. Common law real estate sales require price and description

2. Vague or ambiguous material terms are not an offer under common law or ucc

3. Requirements contracts / increase in requirements

4. Advertisments are not offers
O offers P 1000 to paint O's house. O's offer states that it can be accepted only by performance. P orders paint. Can O revoke?
1. this is a unilateral contract and start of performance makes the offer irrevocable for a reasonable time to complete performance. But P has only prepared for performance. This is not enough. The offer can be revoked until P actually begins performance, not mere preparation.

2. The offer is not revocable under the rule of detrimental reliance by the offeree
A offers to sell car to B for 400. B responds "I accept. Deliver it on Saturday."
1. is there a contract?
2. is sat. delivery a contract term?
1. Yes contract formed because new terms not ecxplicitly made a condition of acceptance.

2. Sat. delivery not a contract term because A and B are not both merchants.
A offers to sell car to B for 400. B responds "I accept if the car is delivered on saturday"

1. is there a contract?
2. is sat. delivery a contract term?
1. No, conditional acceptance terminates offer and makes new offer.
What is the effect of death or incapacity of a party on an offer to enter into a contract?
Terminates offer

UNLESS

1. option
2. there has been part performance of an offer to enter into unilateral contract
Who can accept an offer?
1. person who knows about the offer

2. the person to whom the offer was made
Can offers or options be assigned?
1. offers cannot be assigned. Only available to the person to whom the offer was made.

2. Options can be assigned unless the option provides otherwise.
A finds and returns dog, not knowing about reward offered by owner. Is this acceptance of offer--can A later claim reward?
No, an offer can only be accepted by a person who knows about the offer at the time of acceptance.
Five fact patterns that arise in acceptance of offer questions
1. offeree fully performs
2. offeree starts to perform
3. offeree promises to perform
4. offeror and offeree are at different places and there are conflicting communications

5. seller of goods sends the wrong goods
When is notice of performance required to accept an offer?
1. when offer requires it
OR
2. offeree has reason to believe that offeror will not learn of the acceptance (e.g. lives in different place)
O lives in CA. O offers P 1000 to paint house in TX. P paints house but doesn't notify O. O pays X to paint house. Did P accept?
No. P had reason to believe that offeror would not learn of acceptance and therefore notice of performance was required.
Does an offeree accept an offer by starting to perform?
1. Yes if offer to enter into bilateral contract.

2. No if offer to enter into unilateral contract. This requires complete performance for acceptance.
O offers P 1000 to paint his house. Offer silent as to method of acceptance. P starts painting. Has P accepted O's offer?
Yes, preseumed bilateral contract. P obligated to finish painting.
O offers P 1000 to paint his house. Offer states that it can only be accepted by perofrmance. P starts painting. Has P accepted O's offer?
No, unilateral contract. This requires complete performance to accept.
Can an offeree accept an offer by promising to perform?
1. Yes, in most offers to contract.

2. Not unilateral offers, those that expressly require perofrmance for acceptance, such as rewards.
B faxes order for grits to S, requesting immediate shipment.

1. Can S accept by sending fax promising to ship grits?

2. What if offer stated that could only be accepted by shipment.
1. yes. Then S is obligated to immediately ship grits

2. Promise to ship doesn't constitute acceptance of offer and failure to ship is not breach.
Can an offeree accept an offer by promising to perform?
1. Yes, in most offers to contract.

2. Not unilateral offers, those that expressly require perofrmance for acceptance, such as rewards.
B faxes order for grits to S, requesting immediate shipment.

1. Can S accept by sending fax promising to ship grits?

2. What if offer stated that could only be accepted by shipment.
1. yes. Then S is obligated to immediately ship grits

2. Promise to ship doesn't constitute acceptance of offer and failure to ship is not breach.
When are mailed communications effective under contract law?
1. Acceptance effective when sent if (a) made in a manner and by means invited, and (b) the offeree has not already sent a rejection

2. other mailed communications are effecitve when received
A offers to sell car for 400 to B. On 1-10, B mails letter of acceptance. On 1-11, B receives letter revoking offer. Is there a contract?
Yes, revocation effective when received.

Acceptance effective when mailed.
A offers B to join band. A mails rejection of offer on 1-8. On 1-9, A mails acceptance. B receives rejection first. Is there a contract?
1. if rejection letter sent first and received first, no contract

2. if acceptance mailed first OR received first, valid contract.
B orders a case of vaseline from S. S ships case of jelly. Did S accept offer creating contract? Did S breach contract?
1. Yes S accepted offer by performance, sending jelly.

2. Yes S breached by sending the wrong goods.
B orders 100 red widgets. S sends 100 blue widgets with explanation, out of red, can you use blue? Is there a contract? IS there a breach by S?
1. No contract bc conditional acceptance.

2. No breach because no contract formed.
Legal reasons for not enforcing an agreement
1. lack of consideration or consideration substitute for promise at issue

2. lack of capacity of person who made promise

3. statute of frauds

4. existing laws that prohibit performance of the agreement

5. misrepresentations

6. duress

7. unconscionability

8. ambituity in words of agremeent

9. mistakes at time of agreement as to teh material facts affecting the agreement
What is consideration on MS?

On MA?
1. MS: bargained for legal detriment

2. MA: bargained-for legal detriment or benefit
Consideration analysis
1. What did defendant ask for?

2. What detriment did plaintiff incur?
types of consideration
1. performance/forbearance
2. promise to perform/forbear
Landlord promises T to renew lease at same rental rate. T paints apt. L increases rent. T sues. Who wins?
1. T incurred detriement of painting

2. BUT L didnt' ask for/bargain for anything.

NO CONSIDERATION.
A promises to pay B 100 if B stops listening to music for month. B complies and A doesn't pay? who wins.
1. B suffered detriment
2. A bargained for something.

Yes consideration adn A must pay.
Can a promise be consideration?
yes
A and B enter into agreement. A promises to buy house. B promises to sell. Valid contract?
Yes, A's promise serves as B's consideration and vice versa.
A promises to sell house unless changes mind. B promises to buy. Valid contract?
No, because A's promise is illusory.
What consideration is adequate?
Any consideratoin
How is past consideration treated?
Not consideration. Consideration can't be based on things that already happened.

Exception:
expressly requested and expectation of payment
A saves B's life. B's mom promises to pay A 1000. Is this promise legally enforceable?
No bc no consideration. A's detriment was in the past and past consideration not valid.
When is past consideratoin valid?
When act was expressly requested and actor expected payment for act.
A's mom sees A in danger and asks B to save A. A's mom knows that B would expect to be paid. B saves A. A's mom promises to pay B 1000. Is this promise legally enforceable?
Yes as the expressly requested adn expectation of payment exception to the general rule against past consideration.
How is past consideration treated?
Not consideration. Consideration can't be based on things that already happened.

Exception:
expressly requested and expectation of payment
A saves B's life. B's mom promises to pay A 1000. Is this promise legally enforceable?
No bc no consideration. A's detriment was in the past and past consideration not valid.
When is past consideratoin valid?
When act was expressly requested and actor expected payment for act.
A's mom sees A in danger and asks B to save A. A's mom knows that B would expect to be paid. B saves A. A's mom promises to pay B 1000. Is this promise legally enforceable?
Yes as the expressly requested adn expectation of payment exception to the general rule against past consideration.
Preexisting contractual or statutory duty rule for consideration
1. 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. New consideraiton is necessary

UNLESS (1) addition to or change in performance; (2) unforeseen difficulty so severe as to excuse performance; or (3) third party promise to pay

2. Article 2
Changes to existing sale of goods contract valid if in good faith. No need for new consideration.
A hires B to sing at concert for 15K. B agrees. Later B demands 20K to sing. A agrees to pay B 20K. B sings. A only pays 15K. Is the agreement to pay 20K legally enforceable?
No, not under the preexisting contractual or statutory duty rule.

B gave no consideratoin for A's promise to pay 20K. No contract formed bc no consideration.
Exceptoins to preexisting contractual or statutory duty rule for consideration
No new consideration required when:

(1) addition to or change in performance; (2) unforeseen difficulty so severe as to excuse performance; or (3) third party promise to pay
A and B contract for A to sing for 15K. Later B promises 20K if A sings certain song first. 20K contract legally enforceable?
Yes, because consideration from both parties.

Preexisting contractual or statutory duty rule doesn't apply
A and B contract for A to perform for 15K. At performance, sound system doesn't work. B agrees to pay 20K if A still performs. A performs. Is contract for 20K legally enforceable?
Yes, because of unforeseen difficulty so severe as to excuse performance exception to preexisting contratual or statutory duty rule.
A and B contract for A to sing for 15K. A later demands 20K to sing. C promises to pay additional 5K. Is C's promise legally enforceable?
Yes, because of third party promise to pay exception to preexisting contractual or statutory duty rule.
S contracts to sell widgets to B for 1000. Later S demands 1300 for widgets. B agrees. Is agreement for 1300 legally enforceable?
Yes, so long as S demanded more money for widgets in good faith.

Preexisting contractual or statutory duty rule doesn't exist under Article 2
Is agreement to pay part of debt in exchange for release of debt legally enforceable?
Not legally enforceable if
(1) debt is due
AND
(2) undisputed
Is agreement between A and creditor legally enforceable

when A and B agree that A pay 1000 early to satify 1500 debt completely.
Yes, early payment is new consideration for release of debt.
when is a promise enforceable without consideration?
When there is a consideration substitute

1. written promise to satisfy an obligation for which there is a legal defense

2. Seal is not consideration substitute on MS, but is sometimes in MA.

3. Promissary estoppel (detrimental reliance)
Elements of promissary estoppel and relevancde
1. Three elements
a. promise
b. reliance that is reasonable, detrimental, adn foreseeable
c. enforcement is necessary to avoid injustice

**Legally enforceable without consideration
D owes C 1000. C can't collect this debt because sof has run. D promises to pay 600. Is the 1000 or 600 promises legally enforceable?:
1. 1000 not legally enforceable because sof ran.

2. 600 is legally enforceable even though there is not new consideration. Promise to pay a debt barred by a techical defense is a consideration substitute.
Who lacks capacity to contract?
1. kids under 18
2. mental incompetents who don't have ability to understand agreement
3. intoxicated persons if other party has reason to know is intoxicated at time of contract formation.
Consequences of incapacity of defendant making a contract
1. D (without capacity) can disaffirm contract

2. If D retains benefits after gains capacity, D impliedly affirms the contract

3. D's who lack capacity are not liable for necessities under contract law. Liable only under quasi-contract law to pay value of necessities
A hires child B to lecture. B lectures and A doesn't pay.

1. Can child A sue B for payment?

2. Can B sue child for breach if child doesn't perform lectures?
1. Yes

2. No, as defendant, B has incapacity defense since under 18.
A sells 17 year old B car. B doesn't pay. B turns 18 and keeps car w/out complaint or objection. Can A enforce agreement against B?
Yes, because B retained car after turned 18 and gained capacity.

Implied affirmation of contract.
A is mentally incompetent and leases apt from B for 400. Does A have to pay?
Because A is incompetent, he is not liable for contracts for necessities under contract law. A will have to pay under quasi-contract law the value of the lease.
What is the purpose of the statute of frauds defense?
to prevent false claims of a contract

to require special proof that a contract exists
Statute of frauds analysis
1. Is the contract within the statute of frauds?

2. Is the statute of frauds satisfied?

3. Is there a statute of frauds defense?
Define "within the statute of frauds"
statute of frauds applies
How is the statute of frauds satisfied?
Generally by a writing or performance
What types of contracts are within the statute of frauds?
1. Promise in consideration of marriage

2. promise by executor or administrator to answer for debt of decedent

3. other promises to creditors to guarantee the debts of another

4. Service contracts not capable of being performed within a eyar from the time of the contract

5. Transfers of interest in real estate of a term of more than a year
Promise in consideration of marraige

1. define
2. relevance
1. A promise to do something or refrain from doing something if we marry.
--Not merely a promise to marry.

2. Relevant bc within statute of frauds
H claims that W agreed to renounce any claim to property that he owned prior to marriage if he would marry her. Within sof?
Yes, as promise in consideration of marriage.
H claims that W agreed to marry him. Within sof?
No, not promise in consideration of marriage

Only promise to marry, not within sof.
T or F: When executor or administrator promises to answer for debt of decedent, contract is within the sof
True--this means that executor or administrator promises to pay IF original debtor doesn't pay.
C is creditor of dead D. C claims that E personally guaranteed payment of D's debts in a contract. Is E's personal guarantee promise within the sof?
Yes, a promise by an executor or administrator to answer for debt of decedent (guarantee his debts) is within the sof
H promises S that she will pay for paint that S delivered to P. Is H's promise within the statute of fraud?
No, sof covers promises to creditors to answer for (guarantee) the debts of another. This means to pay if the debtor can't pay.

--This case is a promise to pay, not a promise to guarantee and is NOT w/in the sof.
D commits tort against P. G guarantees P full payment of all damages. Is G's promise w/in sof?
Yes, because G promised to answer for the debts of D
Main purpose exception to the rule that

a promise to a creditor to answer for the debts of another is within the sof.
Agreement to guarantee debts of another NOT within sof when:

the main purpose of the guarantee is to benefit the guarantor
P is painting H's house, using paint that P buys from S. P fails to pay S and S refuses to deliver. H promises S that if she contineus to provide paint to P, H will pay S if P fails to P.

Is H's promise within the sof?
No, because the main purpose exception to the

rule that a promise to a creditor to answer for teh debts of another is w/in the sof.
What is the relevance of a service contract not capable of being performed within a year from the time of the contract?
It is within the statute of frauds if it COULD NOT be performed within one year of making of contract.
P claims that D agreed to employ her for three years. W/in sof?
Yes because services contract not capable of being performed within a year from teh time of contract.
P claims that O agreed to employ her for 3 years and that P could terminate contract on 30 days notice. W/in statute of frauds?
Yes, early termination option is irrelevant. Contract is not capable of being performed in one year.
A claims that B hired him on 1-15-06 to perform on 12-24-07. Is this contract within sof?
Yes, because service could not be performed within one year from time of contract.
P claims that O agreed to employ her for a year, starting next month. SOF?
Yes, within statute of frauds bc can't be completed w/in one year.
When does statute of frauds apply to contracts to complete tasks?
Never
P claims that D hired him on 1-15-06 to cut all trees on land? Is this contract within sof?
No, contracts to complete tasks never within the sof.
How are lifetime contracts treated under sof?
Not covered by sof.
P claims that D hired her to work for her for rest of P's life? Is this contract w/in sof?
No. Contracts for life never within sof
What real estate transactions are within the sof?
TRANSFERS OF INTEREST in real estate

for a term of more than a year
P claims that D agreed to build a home on blackacre. Is this contract within sof?
No, bc no transfer of interest in real estate.
P claims that D agreed to sell Redacre for 400. SOF?
Yes, within sof bc transfer of interest in real estate for term of more than one year.
P claims that D agreed to sell an easement on Greenacre for 2 yrs. Within sof?
Yes, because transfer of interest in real estate for more than one year.
P claims that D agreed to lease blackacre for one year. W/in sof?
No, It is a transfer in an interest of property. BUT it is not for MORE THAN 1 year.
When is a sale of goods within sof?
When it costs 500 or more.

Includes 500
A claims B agreed to sell him car for 500. W/in sof?
Yes, because sale of good for 500 or more.
When are leases of goods within the sof?
When payments total 1000 or more.
Categories of contracts w/in the statute of frauds
1. Transfers of interest in real estate for term of more than one year

2. Service contracts not capable of being performed w/in a year from tie of contract

3. promise in consideration of marriage

4. promise by executor/adminiatrator to guarantee debt of decedent

5. Promises to creditors to answer for debts of another

6. Sale of goods for 500 or more

7. lease of goods with payments totally 1000 or more

NOT

a. service contracts for life

b. tasks
How is the statute of frauds satisfied?
By special proof of agreement

1. performance
2. writing
3. judicial admission of sale of goods contract
define

"Has the statute of fraud been satisfied?
This asks whether there has been special proof of agreement.

If so, then satisfied.
define

Is there a statute of frauds defense?
This asks whether there is special proof satisfying the statute of frauds.

If not, there is a sof defense.
What kind of performance will satisfy the statute of frauds

1. in a service contract?

2. in a sale of goods contract?

3. In a transfer of interest in real estate contract?
1.
--full performance by either party satisfies sof
--Not part performance

2.
--part performance but only to extent of part performance
--substantial beginning of specially manufactured goods

3. 2/3:
full or party payment
possession
improvement
--Not fully payment alone
A and B agree that A will write book and B will advertise for 5 years. A writes book and B doesn't advertise. A sues B for breach. Statute of frauds?
1) applies because service contract for more than one year.

2. satisfied because full performance by either party satisfies sof in service contract.
P agrees to work for D for 3 yrs. P works for 13 months and D fires her without cause. P sues. SOF?
1. Applies because service contract for more than 1 yr.

2. Not satisfied by performance because must be FULL performance by either party to satisfy sof in service contract
S orally agrees to sell 2000 widgets to B for 10,000. S delivers 600. S sues for payment. Does B have sof defense?
1. sof applies because sale of goods for price of 500 or more.

2. No sof defense for 600 goods delivered. Part performance satisfies sof to extent of part performance.
S orally agrees to sell 2000 widgets to B for 10,000. B sues for 2000 undelievered goods. Does S have sof defense?
yes, bc sof applies because goods contract for $500 or over.

No special proof to satisfy (part performance, writing, judicial admisison of sale of goods)
How can statute of frauds be satisfied for sale of specially manufactured goods?
1. writing
2. judicial admission of sale of goods
3. substantial beginning by seller
A orally orders custom made boots from B for 500. A changes mind and cancels order. Can B enforce?
SOF applies because sale of goods contract for 500 or over.

SOF satisfied if seller made substantial beginning on custom made goods.
How can sof be satisfied in contract for transfer of interest in real estate?
1. writing
2. 2/3:
possession
improvements
any payment
B orally agrees to buy blackacre from S for 10,000. B takes posession and pays 8000. SOF?
Applies bc transfer of interst in real estate for term of more than one year.

Satisfied because part performance (2/3 of possession, some payment, improvements)
Statute of frauds analysis
1. Does it apply?
2. Is it satisfied?
Full payment of oral agreement to purchase house. Valid?
No, doesn't satisfy sof unless also either improvements of possesssion--then satisfies sof as part performance
What must writing contain to satisfy the statute of frauds

1. under common law?

2. under ucc?
1.
--material terms (who, what)
--signed by person asserting sof defense

2.
--quantity term
--signature by person asserting sof defense OR "answer damn letter rule" when merchant sends merchant signed writing with quantity term and merchant fails to respond w/in 10 days
Agreement says

"Your offer of 1-15 is hereby accepted." signed by dana scully

valid contract?
No, writing doesn't satisfy sof because no material terms (who, what)
Contract states

"ABC agrees to employ Harriet Miers as attorney for three years at 200,000 a year" Signed by firm manager

valid contract
SOF applies bc service contract for more than one year

--contains material terms (who, what)
--Contains signature of firm, so firm can assert sof defense
--Doesn't contain signature of Miers so she can't assert sof defense.
Contract states

"I agree to buy 17 dolls" signed by buyer
price 500

valid?
1. sof applies bc sale of goods for 500 or more

2. Does writing satisfy sof?
--contains quantity term
--Satisfies so buyer can assert as defense bc buyer signed.
--seller didn't sign so can't assert sof defense
Answer the damn letter exception
Statute of fraud satisfied in sale of goods (UCC) when:

MERCHANT asserting sof defense

sent signed writing with quantity term to other MERCHANTand

other merchant didnt' respond w/in 10 days of receipt
Merchant S receives fax from B "as we agreed during our telephone call, you will be sending me 200 sacks of grits adn billing me 600" S never sends. B sues for breach. What result?
1. W/in sof because sale of goods for 500 or more

2. Is sof satisfied?
Yes under answer the damn letter rule bc

Statute of fraud satisfied in sale of goods (UCC) when:

MERCHANT asserting sof defense

sent signed writing with quantity term to other MERCHANTand

other merchant didnt' respond w/in 10 days of receipt
When do writings of leases of personal property satisfy the statute of frauds?
When writing

1. indicates its a lease

2. describes whats being leased

3. states duration of lease
Judicial admission of sale of goods agreement

defined?
relevance?
Relevant bc satisfies sof.

When an individual asserting the sof defense admits that there was an agreement in pleadings, testimony, or discovery
Judicial admission of sale of goods agreement

defined?
relevance?
Relevant bc satisfies sof.

When an individual asserting the sof defense admits that there was an agreement in pleadings, testimony, or discovery
Must an authorization to execute a contract for someone else be in writing?
Yes, when the contract to be signed is within the statute of frauds.

Concept of "equal dignity". If contract to be executed by authorized 3rd party is w/in the sof and requires writing, then the authorization to execute the contract for someone else must also be in writing.
Equal dignity rule in contracts
If contract to be executed by authorized 3rd party is w/in the sof and requires writing, then the authorization to execute the contract for someone else must also be in writing.
A authorizes B to sign 2 mth lease on apt for her. Must authorization be in writing?
No, because contract to be signed need not be in writing (not within sof).

This is equal dignity rule.
When is written evidence of a modification of a written contract necessary?
Written evidence of modification is necessary when:

contract with alleged modification is within the statute of frauds
T leases building from L for 1 yr. L claims they later agreed to increase term to 3 years. Must this modification be in writing to be enforceable?
Yes, bc contract with alleged change is w/in sof.
T leases building from L for three years. T later claims they agreed to reduce duration of lease from three to one year. Is writing of modificaiton required for it to be enforceable?
No, bc contract w/ alleged change is not w/in sof.
A agrees to buy 600 bottles of wine from B for 600. A later claims they agreed to increase number of bottles to 600. Does modification need to be in writing to be enforceable?
Yes, contract for sale of goods for 600 is w/in sof. Therefore any modification must also be in writing.
How are contract provisions requiring that all contract modifications be in writing treated

by common law?

by Ucc?
1. common law
Not effective

2. ucc
Effective unless waived
R employs E for 11 months. They sign contract which provides that all modifications should be in writing. Can R and E orally reduce term to 2 mths?
Yes bc provisions providing that all modifications must be in writing is NOT effective under COMMON LAW
E contracts to sell car to C for 400. They sign contract saying all modifications must be in writing. Can they orally increase price from 400 to 499?
No, provision is effective unless waives. Provision requires that all modifications must be in writing
When is contract void bc illegal subject matter or purpose?
1. Illegal subject matter voids agreement
--e.g. if agreement is to do something illegal

2. Illegal purpose is enforceable by womeone who didn't know of illegal purpose.
A agrees to pay 7000 to B to hurt C. A pays and B does nothing.

Can A recover for breach?
No, bc illegal subject matter.
A agrees to pay 7000 to B to hurt C in california.

B contracts w/ Delta to buy plane ticket to CA. B doesn't pay. Can Delta recover for breach?
Yes, bc Delta didn't know about illegal purpose of B's trip.
Misrepresentation in contracting

1. defined

2. effect
1.
False assertion of fact or
Concealment of facts
that induces contract

2. Contract can be rescinded by induced party

Even if no fraud involved. Even if party innocently told falsehood.
S tells B that house had no termites. B agrees to buy in reliance on S's representation. S thinks there are no termites. Can B rescind?
Yes, bc S made misrepresentation--false assertion of fact

--doesn't matter that S did so innocently
When can contract be rescinded based on physical or economic duress?
Economic duress requires

1. bad buy with improper threat

2. vulnerable guy with no reasonable alternative
D has contract to supply 1000 widgets to P for Xmas. D refuses to perform unless P also agrees to buy 5000 rugs. P needs widgets so agrees. Can P later rescined rugs agreement?
Yes, on grounds of economic duress.
When can an otherwise valid contract be rescinded?
1. illegality
2. misreprentation
3. economic/physical duress
4. unconscionability
5. misunderstanding
6. mistake of fact existing at time of contract
Unconscionability
Court can refuse to enforce all or part of agreement when

unfair surprise or oppressive terms

existed at time agreement made

(court can grant relief from consumer lease when unconscionable conduct in inducing or enforcing a lease, even when no provision unconscionable)
When can contract be rescinded based on physical or economic duress?
Economic duress requires

1. bad buy with improper threat

2. vulnerable guy with no reasonable alternative
D has contract to supply 1000 widgets to P for Xmas. D refuses to perform unless P also agrees to buy 5000 rugs. P needs widgets so agrees. Can P later rescined rugs agreement?
Yes, on grounds of economic duress.
When can an otherwise valid contract be rescinded?
1. illegality
2. misreprentation
3. economic/physical duress
4. unconscionability
5. misunderstanding
6. mistake of fact existing at time of contract
Unconscionability
Court can refuse to enforce all or part of agreement when

unfair surprise or oppressive terms

existed at time agreement made

(court can grant relief from consumer lease when unconscionable conduct in inducing or enforcing a lease, even when no provision unconscionable)
When does misunderstanding void a contract?
1. parties use a MATERIAL term that is open to at least two reasonable interpretations

2. each party attaches different meanings to the term

3. neither party knows or has reason to know the term is open to at least two reasonable interpretations.
What is the effect of misunderstanding on a contract? (think peerless)
Voided
B and S contract for cotton to be delivered on teh Peerless. Be intends the october peerless. S intends the december peerless. Neither B or S knows that 2 ships called peerless. What result?
No contract bc misunderstanding.
B and S contract for cotton to be delivered on teh Peerless. Be intends the october peerless. S intends the december peerless. S knows there are two peerlesses. What result?
Contract valid under terms as understood by B.
What is the difference between misunderstanding and misrepresentation?
1. misrepresentation happens before contract made

2. misunderstanding is based on words in contract.
Types of mistake of fact existing at time of contract
1. mutual mistake of material fact
(no contract if both parties mistaken on basic assumption of fact and the mistake materially affects the agreed exchange and neither party bears the risk)
---eg. barren cow case

2. unilateral mistake of material fact
(no contract if palpable mistake (obvious) or mistake is discvoered before significant reliance by other party)
S contracts to sell B a painting for 50,000. Both parties believe it is a genuine warhol. Its not. What result?
Contract not legally enforceable bc mutual mistake of material fact.

**Existence of agreed upon subject is material
S contracts to sell B a painting for 50,000. Both parties believe it is a genuine warhol. It is but only worth 20,000. What result?
Contract enforceable. No mutual mistake defense because mistake is not material.
Is a mistake over the value of a good material?

Why relevant?
No, not material.

Relevant because mutual mistake over material fact when neither party bears risk is grounds for voiding contract.
Types of mistake of fact existing at time of contract
1. mutual mistake of material fact
(no contract if both parties mistaken on basic assumption of fact and the mistake materially affects the agreed exchange and neither party bears the risk)
---eg. barren cow case

2. unilateral mistake of material fact
(no contract if palpable mistake (obvious) or mistake is discvoered before significant reliance by other party)
S contracts to sell B a painting for 50,000. Both parties believe it is a genuine warhol. Its not. What result?
Contract not legally enforceable bc mutual mistake of material fact.

**Existence of agreed upon subject is material
S contracts to sell B a painting for 50,000. Both parties believe it is a genuine warhol. It is but only worth 20,000. What result?
Contract enforceable. No mutual mistake defense because mistake is not material.
Is a mistake over the value of a good material?

Why relevant?
No, not material.

Relevant because mutual mistake over material fact when neither party bears risk is grounds for voiding contract.
What are parol evidence questions asking?
Whether the evidence is admissible
Rationale of parol evidence rule
final written version of deal is more reliable than anything said or written earlier
Integration
Written agreement that the court finds is the final agreement. This triggers teh parol evidence rule
Partial and complete integration

Why relevant?
Only relevant when determining whether parol evidence is admissible to show additions to a written deal.

Parol evidence admissible only when written agreement was a partial integration or that additional terms would ordinarily be in a separate agreement.

Partial integration means a written and final agreement that is NOT complete
Merger clause
Contract clause such as "This is the complete and final agreement"

--highly persuasive that is an integrated agreement, but not conclusive
Parol evidence defined
Words of party

before integration (before agreement put in written form)

can be oral or written
Reformation
Equitable action to modify a written contract to reflect an actual agreement.

This is a legal action to change a written contract to make it reflect what was actually agreed upon.
When does the parol evidence rule apply?
1. When written contract that court finds is final agreement (integrated) AND

2. there was on oral statement made at time contract signed

OR

earlier oral or written statements by the parties to teh contract.
Is parol evidence that is inconsistent with the integrated contract admissible to show that the written deal should be changed?
No, parol evidence is not admissible as a source of terms that are inconsistent with terms in written contract.

--doesn't matter whether writing is a complete or partial integration

EXCEPT admissible for limited purpose of determining whether there was a mistake in integration. A mistake that occurred when agreement reduced to writing.
S contracts in writing to sell B 1000 chickens/month for 12 months.

B sues for reformation of written contract, claiming that S told him just as they were signing the contract that he would deliver as many chickens as B needed. B offers evidence of pre-contract telefacxes from S supporting claim.

Can court consider any of this evidence?
No, this is parol evidence offered to show that integration was inconsistent with earlier conversations. Parol evidence is never admissible to show this

(unless to determine whether a mistake when agreement reduced to writing--clerical)

**Integrated writing is considered much more reliable than this parol evidence.
S contracts in writing to sell B 1000 chickens/month for 12 months.

B sues for reformation of written contract, showing evidence that intent was to contract for 1200 chickens for 10 months.

Can court consider any of this evidence?
Yes under the mistake in integration exception allowing parol evidence to be admitted to correct clerical type errors.
Is parol evidence admissible to establish a defense to the enforcement of a written deal?
Yes, for limited purpose of determining whether defense to enforcement of agreement such as misrepresentation, fraud or duress.

**Not admissible for purpose of changing deal
**regardless whether writing is partial or complete integration
Is parole evidence admissible for purpose of changing a deal?
No.

Admissible for purposes of establishing a defense to a contract

or

to explain term in written deal

or to correct mistake in integration (clerical error)

or

to add consistent additional terms to partial integration
Can parol evidence be admitted to resolve ambiguities in the written contract?
Yes.

E.g. to determine whether "chickens" meant fryiing or boiling birds
Is parol evidence admissible to add consistent additional terms to an integration?
Only if the written agreement was only a partial integration
OR
the additional terms would ordinarily be in a separate agreement

**only time it matters whether partial or complete integration
S contracts in writing to sell B chickens. The 102 page written contract does not specify how chickens are to be packaged and wratpped. Can court consider evidence of earlier agreements between B and S to show how chickens are to be packaged and wrapped?
Only if court finds the agreement to be a partial integration.

Under these facts, parol evidence probably not admitted because complete integration.
What fact required to trigger parol evidence rule question?
Written agreemetn
What fact will most often trigger statute of frauds question?
oral agreement
Is parol evidence admissible to add consistent additional terms to an integration?
Only if the written agreement was only a partial integration
OR
the additional terms would ordinarily be in a separate agreement

**only time it matters whether partial or complete integration
S contracts in writing to sell B chickens. The 102 page written contract does not specify how chickens are to be packaged and wratpped. Can court consider evidence of earlier agreements between B and S to show how chickens are to be packaged and wrapped?
Only if court finds the agreement to be a partial integration.

Under these facts, parol evidence probably not admitted because complete integration.
What fact required to trigger parol evidence rule question?
Written agreemetn
What fact will most often trigger statute of frauds question?
oral agreement
How do courts interpret contract terms?
1. parol evidence
2. course of performance
3. course of dealing
4. custom and usage
course of performance
Courts interpret contract terms based the same content between the same people

(basically prior installments under same contract)
Course of dealing
Courts interpret contract terms based on contracts between same people's different but similar contracts
Custom and usage
Courts interpret contract terms based on similar people's similar contracts.
S contracts to sell 1000 chickens/month to B for 12 months. It is customary in chicken industry to use word chicken when deal covers.....
Court interpreting contract terms based on custom and usage
S contracts to sell 1000 chickens a month to B fo r12 months. Court looks at first three shipments
Courrts use course of performance to interpret contract terms
S contracts to sell 1000 chickens a month to B for 12 months. Under prior contracts, S sent B....
Courts use course of dealing to intepret contract terms
S contracts to sell 1000 chickens a month to B fo r12 months. Court looks at first three shipments
Courrts use course of performance to interpret contract terms
S contracts to sell 1000 chickens a month to B for 12 months. Under prior contracts, S sent B....
Courts use course of dealing to intepret contract terms
What is delivery obligation of seller of goods when no place of delivery has been agreed upon?
Place of delivery is seller's place of business UNLESS

Both parties know that goods are someplace else AND that is teh place of delivery
What is delivery obligatio nof seller when delivery is by common carrier (3rd party transport co.)?
1. Under shipment contract
Seller completes delivery obligation when (1) gets goods to common carrier; (2) makes reasonable arrangements for delivery; and (3) notifies the buyer

2. Destination contracts
Seller completes delivery obligation when goods arrive where the buyer is
S, Texas store
contracts to deliver bugs to
B, buffalo store

What are S's delivery obligations if this is a shipmetn contract?
1. get goods to common carrier
2. make reasonable arrangements for delivery
3. notify buyer
How to determine whether contract is shipment or destination?

Why relevant?
Relevant bc affects seller's shipping obligations.

FOB--city where seller or goods are = shipment contract

FOB--other city
= destination contract
Are seller's obligations greater under shipmetn or destination contract?
Shipment contract means that seller's obligations are complete before delivery as longs as got goods to common carrier, make reasonable arrangements for delivery, and notifies buyer.

In destination contracts, obligations not complete until goods arrive where buyer is
Contract provides for shipment of armadillos to Chicago, F.O.B., Chicago

(seller in tx, buyer in ny)

Relevance?
Destination contract meaning seller has delivery obligation until armadillos arrive at place where buyer is.
When do risk of loss issues arise?
1) after contract formed
2) but before buyer receives goods and
(3) goods are damaged or destroyed and
(4) neither the buyer nor seller is to blame
Risk of loss rule
1. If agreement between parties, this controls

2. If one party breaches in any way, that party is liable for any uninsured loss. This is true whether or not breach is related to problem.

3. If delivery by common carrier, then buyer assumes risk after seller completes delivery obligation

4. When no agreement, no breach, no delivery by carrier, THEN:

1. if seller is merchant, risk of loss shifts to buyer when buyer recieves goods

2. If seller is non-merchant, risk of loss shifts to buyer when seller tenders goods

**tender means made goods available to buyer and doesn't require that buyer get physical possession
A contracts to sell to B. During delivery products ruined by no fault of either. A sends goods 2 weeks late. Who takes loss of destroyed goods?
1. first ask whether agreement controls. If not:

2. A takes loss bc breached, even though breach irrlevant to damage to goods.
B buys fridge from S appliances. S appliances tells B he can pick up fridge at loading dock. Before B can drive truck to dock, lightening hits fridge. Does B have to pay for fridge?
This is risk of loss question.

1. ask whether agreement controls
2. ask whether one party breached
3. Ask whether shipped by common carrier
4. Ask whether seller is merchant

Here seller is merchant, so buyer takes risk of loss when buyer gets actual physical possession. Here seller takes loss.
Analysis to see who bears risk of loss, buyer or seller?
ABCM
agreement
breach
common carrier
merchant
B, used car dealer, buys used van from friend S. S tells B to pick up the van at his convenience, that keys are behind teh front bumper. VAndals damage van before B gets it. Does B have to pay for van?
This is risk of loss question.

1. ask whether agreement controls
2. ask whether one party breached
3. Ask whether shipped by common carrier
4. Ask whether seller is merchant

Here seller is non-merchant, so buyer takes risk of loss when seller tenders (makes available) goods. So here buyer has risk of loss.
Who bears risk of loss in leases of personal property?
lessor
What are the types of warranties of property?
1. Express warranty
2. Implied warranty of merchantability
3. Implied warranty of fitness for a particular purpose
How to spot an express warranty?
Uses words that promise, describe or state facts
OR
use a sample model
("all steel" "guaranteed to operate for 2 years")

**distinguish from sales talk such as "top quality"
Implied warranty of merchantability

1. when applicable
2. effect
1. applicable whenever goods bought from merchant (person in business of selling that good regularly)

2. adds term to contract--that the goods are fit for the ordinary purpose for which such goods are used
How to spot an implied warranty of merchantability question
When seller is a merchant that deals in goods of a specific kind
C buys gold chian from jewelry store. C wears it and hair turns green. Does C have relief?
Yes under breach of implied warranty of merchantability theory bc chain not fit for ordinary purposes for which such goods are used
Implied warranty of fitness for a particular purpose
1. When buyer has particular purpose

2. buyer relies on seller to select suitable goods

3. and seller has reason to know of purpose and reliance

**adds term that the good sold is fit for a particular purpose
(general warranty of merchantability adds term that good sold is fit for ordinary purposes)
B tells clerk at shoe store that he needs shoes to wear to interview with wall street firm. Clerk sells him pink leather shoes. Relief?
Not general warranty of merchantability bc shoes are firt for ordinary purposes.

Yes implied warranty of fitness for a particular purpose bc

1. When buyer has particular purpose

2. buyer relies on seller to select suitable goods

3. and seller has reason to know of purpose and reliance
What warranties are implied on lease?
1. Same warranties as seller including express, merchantability, fitness for a particular purpose.

2. In finance lease (where pay third party to lease good), warranties made by supplier to lessor are enforceable by lessor
X selects car from ford dealership. Bank buys and leases car to X.

1) what is this called

If car is defective, does X have breach of warranty claims?

3) Can X stop making payments to Bank?
1. finance lease

2. Yes against Ford, but not against bank.

3. NO
How can warranties be limited?
1. Disclaimer

a. implied warranties of merchantability and fitness can be disclaimed by (1) as is or with all faults language; or (2) conspicuous language of disclaimer mentioning merchantability

b. express warranties can't be disclaimed

c. disclaimer eliminates other implied warranties

**In MA, can't disclaim implied warranties on consumer goods in consumer transactions.

2. Limitation of remedies

a. can limit all warranties unless unconscionable
--prima facie unconscionable if breach of warranty on consumer goods causes personal injury
Can warranties be limited in MA?
MA has greater consumer protection than most states. In most states, one can disclaim implied warranties with "as is" or "with no faults." In MA, can't disclaim implied warranties on consumer goods in consumer transactions.
B buys oven from S stove store. Contract provides that "all operating parts are guaranteed for two years" and "warranty liability shall be limited to replacement parts".

A defective heating element causes fire which causes 100 of property damages.

If B sues Stove store for breach of contract, what can b recover?
Replacement parts only unless that would be unconscionable.

Limitation of express warranty effective unless unconscionable.
B buys oven from S stove store. Contract provides that "all operating parts are guaranteed for two years" and "warranty liability shall be limited to replacement parts".

A defective heating element causes fire which injures B and causes 100 in medical bills

If B sues Stove store for breach of contract, what can b recover?
REplacement part and for personal injury.

There is a limitation on warranty in the contract but this is not effective when unconscionable.

Limitations on warranty when consumer goods cause personal injury is prima facie unconscionable.
Perfect tender rule
Seller is obligated to deliver perfect goods.

If not perfect, buyer can reject all or part.

UNLESS cure or installment contract or acceptance
Performance concepts in contracts law
1. perfect tender rule
2. rejection of goods rules
3. cure rules
4. installment contracts
5. Acceptance of goods rules
6. Revocation of acceptance of goods
B and S enter into contract for 100 green widgets for 200. S delivers 99 green and 1 yellow. What can B do?
B can reject all or one widget bc not perfect tender.

(unless cure or installment contract or acceptance)
If buyer rejects goods (e.g. not perfect tender), when must buyer reject?
Before acceptance of the goods
When does seller who fails to make perfect tender have an oppportunity to cure?
1. When reasonable grounds for believing that improper tender would be acceptable

E.g. when prior deals with such an allowance.

2. When time for performance has not yet expired
B ordered green widgets form S to be delivered by 6-6. S delivers yellow widgets on 5-5. B notifies S that rejecting widgets. Does S have remedy?
S can cure up until time for performance expires.
When does buyer have right to reject installment sales contract?
Only when substantial impairment in installment that can't be cured.

Perfect tender rule doesn't appply to installment contracts requireing or authorizing delivery in separate lots.
S and B enter into an installment sales contract for teh delivery of 10 kegs at 6 pm each night of week. One night S delivers 9 kegs at 630 pm. Does B have remedy?
No, perfect tender rule doesn't apply to installment sales contracts.

Only can reject when substantial impairment, not in this case.
What is the effect of a buyer accepting goods?
Can't later reject

But can revoke acceptance when
1) nonconformity substantially impairs value of goods and

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
Does a buyer accept goods when paying for them?
NO, payment without opportunity for inspection is not acceptance.
What is implied acceptance of goods?
When buyer keeps goods without objection. If keeps for one month of more, conclude implied acceptance.
In july, B buys sleeping bag from S insulated for temps as low as 10 degrees. B uses bag in summer months. When B goes camping in oct she realizes that bag not insulated for temps as low as 10.
1. can b reject goods?
2. can b revoke acceptance of goods?
1. no, bc implied acceptance of goods

2. Yes bc (1) nonconformity; (2) excusable ignorance of groudns for revocation; and (3) revocation w/in reasonable time after discovery of nonconformity
Can seller demand cash?
Yes, but then buyer gets additional reasonable time
What are the remedies for an unexcused nonperformance?
1. specific performance/injunction

2. reclamation

3. money damages
When is specific performance available as a remedy for unexcused performance?
Almost never.

1. In contracts for sale of real estate (bc land unique)

2. Contract for sale of unique goods (art, antiques, custom-made)

3. NEVER for contracts for services
S contracts to sell Blackacre to B. S breaches. Can B get specific performance?
Yes because contract for sale of real estate
S contracts to sell antique desk to B. S breaches. Can B get specific performance?
Yes, because unique good.
What remedies are available for unexcused performance of contract for services?
1. money damages
2. injunction is within discretion of court
3. NEVER specific performance
A contracts to lecture for Barbri. A breaches. What remedies for barbri?
1. injunctive relief w/in discretion of court

2. never specific performance

3. money damages
Reclamation
Right of unpaid seller to get goods back.

1. buyer must have been insolvent at time got goods

2. seller must demand return of good W/IN 10 DAYS of buyer's reciept of goods

3. buyer still has goods at time of demand by seller
S sells B grits on credit on 1-15. Grits delivered to B on 1-22. B is insolvent on 1-22. S learns of insolvency and demands return of grits on 1-27. Can S get grits by reclamation?
Yes, if B still has grits on 1-27
O takes watch to Jewler to be reparied. Jeweler repairs and sells watches. Jeweler wrongfully sells O's watch to B, a bonafide purchaser for value. Can O recover watch from B?
No, because good faith purchase from dealer cuts off rights of original owner to get property back.
Rights of good faith purchaser in entrustment
1) owner leaves good with person who sells goods of that kind (e.g. for repair)

2) person wrongfully sells goods to third party

3) good faith purchaser cuts off rights of original owner to get property.
How to calculate expectation damages
Put P in same dollar position as if the contract had been performed
When to calculate expectation damages
1. on any ma essay question involving money damages

2. on any ms question, unless specifies otherwise
P contracts O to paint house for 1000. O pays but P doesn't paint. O hires another painter for 1400. O's damages?
1400--expectation damages

Put p in same dollar position as if contract had been performed
What to write about expectation damages on ma essays.
Courts in MA consistently look to protection of the expectation interest. This means we compensate teh plaintiff by putting her in the same position as if the contract had not been breached.
P contracts to paint O's house for 1000, payable when work completed. P anticipates 200 profit. O breaches after P started work and used 100 of paint an dlabor. What is measure of P's damages?
300
How to calculate reliance damages
Put PLAINTIFF in same economic poition as if contract had never happened

(what did plaintiff lose by relying?)
P contracts to paint O's house for 1000, payable when P completes work. P anticipates 200 profit. O breaches after P started work adn used 100 in paint and labor. What is reliance measure of damages?
P gets 100 in reliance damages
How to calculate restitution interest
Put DEFENDANT in same economic position as if contract never happened

(punish defendant for bad behavior)
P contracts to paint O's house for 1000, payable when P completes work. O pays P 1000. P doesn't paint house. O hires another painter who charges 1400. What is restitution measure of O's damages?
1000
P contracts to paint O's house for 1000, payable when P completes work. P anticipates 200 profit. O breaches after P starts work and used 100 o fpaint and labor. What is restitution measure of P's damages?
O must pay value of paint work done.
What damages for breach of contract for sale of goods?
Expectation damages
Seller breaches, buyer keeps the goods

What damages?
Fair market value if delivered as promised - fair market value as delivered
Seller breaches, seller keeps the goods

What damages?
Fair market value of goods at time of discovery of breach - contract price

OR

replacement price - contract price
Buyer breaches, buyer has goods
contract price
Buyer breaches, seller has goods
If inventory: provable profit of sale

If one of kind good: contract price - resale price
OR
contract price - market price at time and place of delivery
Leather co contracts to sell leather clothes from regular inventory to C for 1000. C breaches. Leather co sells same items to J for 1000. Leather sues C.
Leather gets provable lost profits for damages

bc inventory item
Incidental damages defined

When recoverable?
Costs incurred in dealing with breach are always recoverable
P contracts to paint O's house for 1000. P breaches. O spends 20 finding another painter who agrees to paint for 1000. What result?
P pays 20 in incidental damages.
Consequential damages defiend

When recoverable?
Damages connected to unique situation of P

Recoverable only if D had reason to know at time of contract
M mill owner contracts with C carrier to transport broken shaft to another village for repair of 100. C breaches. M has to pay 150 to transport.

What result
C pays 50 in expectation damages.
M mill owner contracts with C carrier to transport broken shaft to another village for repair of 100. C breaches. Breach results in 5 day delay and M loses 1000 in profits from mill closure. What result?

What result
C pays 50 in expectation damages.

No consequential damages because D had no reason to know of these consequential damages at time of contract.
M mill owner contracts with C carrier to transport broken shaft to another village for repair of 100 and tells that mill closed until part back. C breaches. Breach results in 5 day delay and M loses 1000 in profits from mill closure. What result?
1050

1000-consequential
50- expectation
How are avoidable damages treated?
No recovery for damages that could have been avoided without UNDUE BURDEN on plaintiff.

Burdens of pleading and proof on defendant.
Duke hires P to teach for 200f for 100,000. Duke breaches. Duke shows that similar university later offered P teaching job for 2005 school year for 80,000. what result?
Duke owes P 20,000 in expectation damages.

Not extra 80,000 because avoidable damages.
To what extent must contract damages be proven?
Contract damages must be proven with reasonable certainty
Effect of liquidated damages in question
Not valid UNLESS

1. damages were difficult to forecast at time contract made AND

2. provision is a reasonable forecast

* flexible payments usually reasonable
* one time inflexible payments less reasonable
Define liquidated damages
Contract provision fixing amoutn of damages
B contracts to build store for O. Contract provides damages of 1000 a day for each day completeion delayed. What result.
Valid liquidated damages because (1) difficult to forecast at time of contractin and (2) provision is reasonable forecast
B contracts to build store for O. Contract provides damages of 10000 if delayed. What result.
Liquidated damages probably invalid bc not reasonable forecast

(bc same payment if one day or one year delayed)
Effect of liquidated damages in question
Not valid UNLESS

1. damages were difficult to forecast at time contract made AND

2. provision is a reasonable forecast

* flexible payments usually reasonable
* one time inflexible payments less reasonable
Define liquidated damages
Contract provision fixing amoutn of damages
B contracts to build store for O. Contract provides damages of 1000 a day for each day completeion delayed. What result.
Valid liquidated damages because (1) difficult to forecast at time of contractin and (2) provision is reasonable forecast
B contracts to build store for O. Contract provides damages of 10000 if delayed. What result.
Liquidated damages probably invalid bc not reasonable forecast

(bc same payment if one day or one year delayed)
When does a party have the excuse of nonperformance of a contract because of something that happened after contract was made?
1. Excuse bc other guy's improper performance

2. Excluse bc failure of a performance condition

3. Excuse of performance by reason of the other party's anticipatory repudiation or inability to perform

4. Excuse by reason of a later contract

5. Excuse by reason of a later, unforeseen event

**not perfect tender under UCC
When is nonperformance of a contract because of the other party's improper performance excusable?
When material breach
O hires P to paint house white for 1000. P paints house white but fails to paint closet. Is O excused from contract duties?
No, only excused for other party's MATERIAL BREACH
P contracts to paint 10 apts for 10,000. P breaches after painting 3 apts. O doesn't pay. What result?
O need not pay because P's breach was material.

**When less than half of multiple jobs completed, material breach.
UNLESS divisible contract, then evaluate each part separately for material breach.

--P can't recover under contract, but may under quasi-contract
P contracts to paint 10 apts for 10,000 per apt. P breaches after painting 3 apts. O doesn't pay. What result?
P can recover for 3 apts under divisible contract exception to material breach rule.

When divisible contracts, evaluate each one separately for breach. Here no material breach on apts 1-3.
When does a party have the excuse of nonperformance of a contract because of something that happened after contract was made?
1. Excuse bc other guy's improper performance

2. Excluse bc failure of a performance condition

3. Excuse of performance by reason of the other party's anticipatory repudiation or inability to perform

4. Excuse by reason of a later contract

5. Excuse by reason of a later, unforeseen event
When is nonperformance of a contract because of the other party's improper performance excusable?
Under common law, when material breach

Under UCC, when not perfect tender
O hires P to paint house white for 1000. P paints house white but fails to paint closet. Is O excused from contract duties?
No, only excused for other party's MATERIAL BREACH
P contracts to paint 10 apts for 10,000. P breaches after painting 3 apts. O doesn't pay. What result?
O need not pay because P's breach was material.

**When less than half of multiple jobs completed, material breach.
UNLESS divisible contract, then evaluate each part separately for material breach.

--P can't recover under contract, but may under quasi-contract
P contracts to paint 10 apts for 10,000 per apt. P breaches after painting 3 apts. O doesn't pay. What result?
P can recover for 3 apts under divisible contract exception to material breach rule.

When divisible contracts, evaluate each one separately for breach. Here no material breach on apts 1-3.
When is nonperformance of contract because of a failure of a performance condition excusable?
When performance condition fails

LOOK FOR:

if
provided
so long as
subject to
in the event that
unless
when
until
on condition that
Conditional acceptance

v.

performance condition
1. in conditional acceptance, "if" appears in response to offer

2. in performance condition, "if-word" appears in agreement itself
S offers to sell B house for 100,000. B responds that will buy house if appraised at 100,000. Contract?
No, bc conditional acceptance

(if appears in response to offer)
S and B enter into agreement that provides that B will buy S's house for 100000 if appraised at 100,000. Does B have to buy house if appraised at 75000?
1. Contract was formed with performance condition

2. B doesn't have to buy because excused by failure of performance contract.

**S owes B no breach damages
Can one get breach damages if performance condition fails?
No
C contracts with S for shipment of cargo. Contract provides for payment of additional 200 pounds provided that it sails the next day. If S delays sailing beyond next day, what result?
C doesn't have to pay extra 200 pounds bc

failure of performance condition (signalled by provided that) excuses nonperformance by C.
What is the standard for satisfying an express performance condition?
strict compliance
B contracts to buy S's house. Contract provides "this sale is conditioned on teh house being appraised at 77000." If house is appraised at 76000, what result?
Express condition.


Buyer excused from buying house bc condition not met.
B contracts to build O's house. Contract provides "O's payment for B's work is expressly conditioned on B's using Reading pipe throughout." B uses Cahoe pipe. What result?
O excused from contract law obligation to pay. Strict compliance required for express conditions.

--May have quasi-contract remedy.
C contracts with S for shipment of cargo. Contract provides for payment of additional 200 pounds provided that it sails the next day. If S delays sailing beyond next day, what result?
C doesn't have to pay extra 200 pounds bc

failure of performance condition (signalled by provided that) excuses nonperformance by C.
What is the standard for satisfying an express performance condition?
strict compliance
B contracts to buy S's house. Contract provides "this sale is conditioned on teh house being appraised at 77000." If house is appraised at 76000, what result?
Express condition.


Buyer excused from buying house bc condition not met.
B contracts to build O's house. Contract provides "O's payment for B's work is expressly conditioned on B's using Reading pipe throughout." B uses Cahoe pipe. What result?
O excused from contract law obligation to pay. Strict compliance required for express conditions.

--May have quasi-contract remedy.
When can an express condition be waived?
When person benefiting from condition

gives up benefits/protection of condition
B contracts to buy S's house. Contract provided that sale conditioned on house being appraised at 100,000 or more. HOuse appraised at 75,000.

Can S refuse to sell?

Can B refuse to buy?
B can refuse to buy because condition protects B.

S cannot refuse to sell because only the person who is protected by the condition can waive the condition.
When does other party's anticipatory repudiation
excuse nonperformance?

Effect?
1. unambiguous statement that repudiating party won't perform
2. made prior to time performance due

Excuses the other party's duty to reform and generally gives rise to immediate claim for breach damages
EXCEPT in MA, must wait until due date for performance of repudiator before claiming breach damages
When does other party's inability to perform
excuse nonperformance?
When Plaintiff agrees to contract for reason X
AND
Reason X no longer exists.
P contracts to paint O's house for 1000 with payment to be made on 4-5. On 3-13, before P has finished painting house, O tells P that P is painting well but O won't pay. P stops painting. What result?
1. P is excused from contract because of O's anticipatory repudiation.

2. On MS, P can recover damages for breach of contract immediately.

3. In MA, P must wait until 4-5 (due date for O's performance) before claiming damages.
When can an express condition be waived?
When person benefiting from condition

gives up benefits/protection of condition
B contracts to buy S's house. Contract provided that sale conditioned on house being appraised at 100,000 or more. HOuse appraised at 75,000.

Can S refuse to sell?

Can B refuse to buy?
B can refuse to buy because condition protects B.

S cannot refuse to sell because only the person who is protected by the condition can waive the condition.
When does other party's anticipatory repudiation
excuse nonperformance?

Effect?
1. unambiguous statement that repudiating party won't perform
2. made prior to time performance due

Excuses the other party's duty to reform and generally gives rise to immediate claim for breach damages
EXCEPT in MA, must wait until due date for performance of repudiator before claiming breach damages
When does other party's inability to perform
excuse nonperformance?
When Plaintiff agrees to contract for reason X
AND
Reason X no longer exists.
P contracts to paint O's house for 1000 with payment to be made on 4-5. On 3-13, before P has finished painting house, O tells P that P is painting well but O won't pay. P stops painting. What result?
1. P is excused from contract because of O's anticipatory repudiation.

2. On MS, P can recover damages for breach of contract immediately.

3. In MA, P must wait until 4-5 (due date for O's performance) before claiming damages.
Can an anticipatory repudiation be retracted?
Yes when

1. not a material change in position by non-retracting party

2. adequate assurance by repudiating party that will fulfill obligation (e.g. putting money in escrow account)
P contracts with O to paint house. O gives anticipatory repudiation. Then O changes mind and puts money to pay P in escrow account. Is P obligated to perform?
Yes, because anticipatory repudiation can be retracted and duty to perform reimposed when:

1. no material change in position by P
And
2. adequate assurance like escrow account
P contracts to paint O's house in exchange for unique autographed photo of Janet Reno that O owns. Before P finishes painting, O sells reno photo to C. Is p excused from continuing to perform?
Yes bc of O's inability to perform.
When is nonperformance because of a later contract excused?
1. Rescission legally effective when neither party has completed performance

2. Accord and satisfaction--agreement by parties to already existing obligation

to accept a different performance

in satisfaction of existing obligation

3. Modification (substituted agreement)

4. Novation
(substituted person agreed upon by both parties)
When is rescission of contract legally effective?
When neither party has completed performance.
P contracts to paint O's house for 1000 with payment to be made when work completed. After P completes work, P and O agree to rescind contract. Can P later recover for work under contract law?
Yes. Rescission was not legally effective because one party, P, had finished performance.
When should accord and satisfaction answer be selected?
When later agreement that agrees

that old agreement will disappear

IF parties do something different instead
D borrows 1000 from C and agrees to pay loan with interest. Later
D and C agree that if D delivers 20 widgets by end of month, then debt will be excused.

If D delivers 20 widgets, can C collect on debt?
No, This is valid accord and satisfaction. It invalidates the previous agreement.
D borrows 1000 from C and agrees to pay loan with interest. Later D and C agree that if D pays 700, the rest of debt will be excused. D pays 700. Can C collect on other 300?
Yes, This is not an accord and satisfaction because the parties did not agree to something different instead of original deal.

Rather they just agreed to do less of the same thing.
accord and satisfaction
v.
modification
accord and satisfaction agrees to eliminate old deal IF something different is done

Modification agrees definitively to new deal in lieu of old
D borrows 1000 from C and agrees to pay the loan with interst. Later D and C agree that if D delivers 20 widgets by the end of the month, then the debt will be excused. D doesn't deliver widgets. What can C do?
Sue to recover either widgets or loan

but not both.
Modification defined
Agreement by parties to an existing obligation

to accept a different agreement in satisfaction of the existing loan

**Here the parties accept a new agreement. Not conditional like accord and satisfaction
D borrows 1000 from C and agrees to repay loan with interest. Later D and C agree that D will deliver 20 widgets instead of paying 1000 with interest. D doesn't deliver widgets. What can C recover?
Only the widgets.

Not the 1000 with interest

bc this was a modification and parties agreed on new agreement in lieu of old one.
Novation defined
Agreement between both parties to an existing contract to the substitution of a new party.

**both parties must agree
P contracts to paint o's house. P, O, and X agree that X will do work instead of P. What is this called?

Can O enforce agreement against P?
Novation

O can't enforce against P bc P is excused from agreement by novation.

Novation is Agreement between both parties to an existing contract to the substitution of a new party.
What is the effect of novation
Excuses the contracted for performance

of party who is replaced
novation
v
delegation
novation requires agreement of both parties and excuses person replaced

delegation doesn't require agreement of both parties and doesn't excuse
P contracts to paint O's house. Then P asks X to do work and X agrees. If X doesn't paint house, can O recover damages from P for breach?
Yes, This is delegation, which doesn't excuse delegating party.

Novation would excuse P, but that would have required that P AND O agreed to substitution of X for P.
When is nonperformance by reason of a later event excused?
1. when something happens between formation and performance

2. that was unforeseen

3. that makes performance commercially impracticable
impossible
or
frustrates purpose of performance
Situations where nonperformance by reason of later unforeseen event is excused
1. sometimes damage or destruction of subject matter of contract

2. sometimes death or party

3. sometimes subsequent law or regulation
P contracts to paint O's house for 1000. After P begins painting, the house burns down. Is P excused from performing on this contract so that P is now free to take another painting job?
Yes, excuse of performance by reason of later unforeseen event making performance impossible.
B contracts to build house for O for 100,000. After B begins work, the house burns down. Is B excused from performing on this contract?
No, yes unforeseen event but performance still possible
A contracts to sell C 100 sacks of grits for 300. Grits destroyed by flood. Must A complete contract?
Yes, not impossibility bc grits widely available.
A contracts to sell car to B for 700. Car and risk pass to buyer. Car destroyed by unforeseen event. Must B pay?
Yes, no defense of impossibility bc risk passed to buyer. Buyer can always perform.
How does death of a party affect parties' obligations?
No effect UNLESS

the party who died was a special person

e.g. famous artist hired to paint portrait, then nonperformanc eof this special person is excused by death
What happens to contract when later law makes performance of contract illegal?
Parties excused from performing due to impossibility.
What happens to contract when purpose of contract made illegal?
Parties excused from performing due to frustration of purpose.
C tells surgeon that he needs plastic surgury so can nude dance and look good. Contract formed. Nude dancing then outlawed. Must C perform?
No, excused due to frustration of purpose because purpose of surgery is now illegal.
What happens to contract when later law makes performance of contract illegal?
Parties excused from performing due to impossibility.
What happens to contract when purpose of contract made illegal?
Parties excused from performing due to frustration of purpose.
C tells surgeon that he needs plastic surgury so can nude dance and look good. Contract formed. Nude dancing then outlawed. Must C perform?
No, excused due to frustration of purpose because purpose of surgery is now illegal.
Types of third party contract questions
1. Third party beneficiaries

2. Assignment

3. Delegation
When does a third-party beneficiary arise?
When two parties contract with then intent of benefiting a third party.

**then 3rd party can enforce
**e.g. life insurance policy
C has insurance with A. Contract provides that C will make premium payments and A will pay H 250000 when C dies.

C dies and A refuses to pay H.

Can H enforce against A?
Yes. H is third party beneficiary and can enforce and recover from A.
Define terms for 3rd party beneficiary

1. promisor
2. promisee
1. promisor is person making promise that benefits 3rd perty

2. promisee is person who obtains promise that benefits third party
Relevance of intended beneficiaries
Only intended beneficiaries have contract law rights.

Incidental beneficiaries do not.
When can contract benefiting third party be cancelled or modified?
1. if 3rd party beneficiary knows of contract and relies on it
--can't be modified or canceled without 3rd party's consent UNLESS contract so provides

2. If 3rd party doesn't know of contract, can be cancelled or modified
Who can recover from promisor in 3rd party contract?
Either 3rd party beneficiary or promisee

but not both
Who can recover from promisee in 3rd party contract?
Promisor

and

3rd party beneficiary who is also a creditor ot promisee to extent of promisee's pre-existing debt

NOT donee beneficiary (who gets benefit of contract as gift)
Who can a creditor-beneficiary sue to recover?
Both promisor and

Promisee to extent of promisee's pre-existing debt to creditor-beneficiary
What defenses can promisor assert when sued by 3rd party beneficiary?
Same defenses that could assert against promisee.
Assignment defined
Transfer of rights under contract to a third party after the contract has been formed


1. contract between two parties
2. one of the parties later transfers rights under that contract to a third party
Assignment
v.
Third party beneficiary
In assignment transfer of rights occurs after contract formed

In third party beneficiary situation, third party rights are contemplated IN the CONTRACT.
B contracts with G to provide security for a year. Contract provides that G will pay R 300,000 for batman's services.

What kind of contract?
This is third party beneficiary contract because third party rights are contempleted IN contract.

NOT assignmetn because that involves transfer of rights to third party AFTER contract formed
Define
1. assignor
2. assignee
3. obligor
1. party to contract who later transfers rights under contract to another

2. assignee is not party to contract, but can enforce contract bc of assignment

3. obligor is other party to contract
When can't an assignment be made?
1. when language of prohibition in contract
--not assignable, can't assign, don't assign
--effect is that assignor is liable for breach BUT assignee who doesn't know of prohibition can enforce

2. when language of invalidation in contract
--gives consequences of violating prhobition, e.g. void
--effect is breach by assignor and NO rights in assignee

3. Under common law, when assignment substantially changes duties of obligor (then can't be assigned)
Language of invalidation

defined

relevance

effect
Relevant when in contract bc takes away right and power to assign.

--Effect is breach by assignor and no rights in assignee

--identifiable bc gives consequences of violating the prohibition, e.g. voided
Language of prohibition

defined, relevance, effect
When in contract, takes away right to assign, but not power to assign

--Effect is breach by assignor BUT assignee who doesn't know of prohibition has power to enforce

--identifiable bc says contract not assignable, can't be assigned, don't assign
Contract between A and B provides "rights hereunder are not assignable." A assigns right to payment to C anyway. Can C collect from B.
Yes, this is language of prohibition when takes away right to assign (so A is in breach) but not power to enforce by assignee who didn't know of phibition (so
C can enforce)
Contract between A and B provides "all assignments of rights under this contract are void." A assigns right of payment to C. Can C collect from B.
No, this is language of invalidation bc mentions consequence of assignment (voided). This takes away
A's right and power to assign.

A is in breach and C can't enforce.
When is assignment permissible under common law?
When

1. no words of prohibition
2. no language of invalidation
3. assignment does NOT substantially change duties of obligor (assignment of rt to payment is ok. assignment of right to contract performance invalid)
Batman assigns rights to payment under service contract with Gotham to Robin. Valid?
Yes, because assignmetn of right to payment does not substantially change the duties of the obligor and is therefore valid.
In contract between Gotham and Batman:

Gotham assigns rights to security services of Batman to Metro. This means Batman is to defend Metro.

Valid?
No, bc assignment substantially changes the duties of the obligor, batman and is therefore invalid under comomn law.
What is required for a valid assignment

(when not invalidated by language of prohibition or invalidation or common law rule against assignments that substantially change the duties of the obligor)?
1. consideration NOT required for valid assignment. Can be gift.

2. Promise to collect and pay AND promise to assign ARE NOT assignments

3. Must be assignmetn of existing rights, even if conditional. Future rights cannot be assigned.
Contract between B and G.

B promises to collect money from G and pay to R. What are r's rights?
R has no rights against G because this is only promise to collect and pay.

It is not an assignment.
B and G have contract.

B promises R that he will assign right to payment form G to R. What are R's rights?
No rights against G. Not an assignment--only a promise to assign.
E assigns right to royalties from just published book. Valid?
Yes, bc assignment of existing right.
E assigns right to royalties from book not yet written or osld. valid?
No bc can't assign a future right. Can only assign an existing right.
Can assignee sue obligor?
Yes

Obligor has same defenses against assignee as would have against assignor
Can assignee collect from obligor if assignor didn't fulfill contractual obligations?
No, obligor has same defenses against assignee as would against assignor.
A rents from Acme. In March, Acme assigns your rental contract to Baker. You don't know of assignment and make next payment to Acme. Baker sues for payment. Result?
Baker loses. Payment by obligor to Acme is effective until obligor is notified of assignment.
Difference between assignment for consideration and
gratuitous assignment
Assignment for consideration gives rise to warrant that assignor won't mess up to prevent assignee from collecting under contract.

**obligor not under warranty here
E assigns royalties to S for 1000. E writes publisher and releases it from obligation to pay royalties. Does S have remedy?
Yes. ASsignment for consideration includes warranty that assignor will do nothing to impair value of assignment.

S has breach of warranty of assignment claim against E
E assigns royalties to S for 1000. Publisher goes insolvent Does S have remedy based on warranty?
No, assignment for consideration carries warranty that ASSIGNOR won't impair value of assignment.

No warranty covering obligor.
When assignor makes multiple gratuitous assignments of same good, who gets it?
Last assignee wins.

All prior assignments revoked.
Can gift assignments be revoked?
Yes, at any time directly or by making new assignemtn.

EXCEPT can't revoke when
1) relied on assignment in way that was reasonable, foreseeable, and detrimental
OR
2) assignee has recieved some sort of indicia of ownership
OR
3) assignmetn is subject matter of a writing delivered to assignee
B gives right to 300 payment fro A to C on 1-15. On 2-1, B gives same payment right to D. Sho has rt to assignmetn?
D because all gratuitous assignments and D is last in time.
When multiple assignees for consideration of same rright?
First assignee for consideration wins

EXCEPT
subsequent assignee take priority over earlier assignee when:
(1) doesn't know of earlier assignment
AND
(2) first to obtain judgmetn, payment, novation, or indicia of ownership
On 2-2, B assigns contract rights to R for 1. ON 2-5, B assigns rights udner same contract to C for 250,000. Who owns rights?
R bc first assignee for consideration wins
On 2-2, B assigns contract rights to R for 1. ON 2-5, B assigns rights udner same contract to C for 250,000. C obtains payment under contract. Who owns assignmetn
C under exception to "first assignee for consideration wins" rule.

subsequent assignee takes priority over earlier assignee for value when
(1) didn't know of earlier assignemtn AND
(2) is first to recieve payment, judgment, novaiton, or indicia of ownership
Delegation defined
When one party to contract transfers her work under that contract to a third party

e.g. P contracts to paint O's house for 1000. P (delegatin gparty) and X (delegatee) agree that X will paint O's (obligee's) house
Delegation
v.
assignmetn
Delegation transfers obligation

Assignment transfers rights

**often occur in tandem in real world but separately on bar exam
Meaning of term "assignment" on bar exam
Sometimes means delegation
E contracts with C to deliver lectures for 20/hour. E and S agree that S will do lectures and collect 20/hour from C. What is this called?
Both dlegation (bc transfer duty) and assignment (bc transfer benefit/rights)
What duties are delegable?
All duties unless

(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
Motel contracts with C to clean rooms for 10/room. C delgates duty to E. Motel refuses to pay E. Can E recover payment from Motel?

Can C recover payment from Motel?
C can recover. E cannot.

REason: this is a delegation which does not transfer rights under contract. Only assignment transfers rights under contract and this was not given in fact pattern.
Motel contracts with C to clean rooms for 10/room. Contract says "no delegations." C delgates duty to E. Motel refuses to pay E. What result?
Delegation so E can't recover. C can't recover because prhobitied in contract.
Motel contracts with C to clean rooms for 10/room. Contract says "no assignments." C delgates duty to E. Motel refuses to pay E. What result?
Delegation so E can't recover. C can't recover because assignments prhobitied in contract. When assignments are prohibited, so are delegations
Chipper jones has contract with Braves. Can he delegate performance to Alex Rodriguez?
No, bc obligations requiring very specila skills are not delegable
What happens if A delegates obligations under contract to C and C doesn't perform?
1. A remains liable

2. B is liable only if she recieved consideration from delegating Party A
Delegation
v.
Novation
Delegation only requires one party to delegate

Novation requires both original contracting parties to agree to substitute
P contracts to paint O's house for 1000. X then agrees with P that X will do painting for P. X doesn't do work.
1) can o sue p?
2. Can p sue x?
3) can o sue x?
1. Yes, delegating party always remains liable

2. No, bc X didn't recieve consideration from delegating party

3. No bc X got no consideration from p
P contracts to paint O's house for 1000. P an dX then agree that X will do work and P will pay 900. X doesn't do work.

1) Can O sue P?
2) Can P sue X?
3) Can O sue X?
1. Yes delegating party always liable.

2. Yes bc X got consideration from P.

3. Yes, bc X got consideration from P.
What does a delegation for consideration create?
A third party beneficiary.
Armadillos from Texas play rap, eating tacos
Applicable law
Formation of contracts
Terms of contract
Performance
Remedies for unexcused nonperformance
Excuse of nonperformance
Third-party problems