Contracts

Front 1

What happens to a party who does not substantially perform?

Back 1

they are not entitled to a recovery, unless performance is excused or the case comes under 1 of the 4 exceptions: 1) divisibility, 2) Independant promise, 3) quasi contract, 4) statutory relief

Front 2

Divisibility

Back 2

a contract is divisible if the performances of each party are divided into two or more parts and the performance of each part by one party is the agreed exchange for a corresponding part by the other party. If a divisible portion is substantially performed, recovery may be had for that portion despite a material breach of the overall contract

Front 3

Independant Promises

Back 3

A promise is independant (unconditional) if it is unqualified or if nothing but a lapse of timme is necessary to make the performances of the promise enforceable. The promisee may enforce an independant promise without rendering substantial performance

Front 4

wrongful prevention

Back 4

In every contract there is a contructive condition that one will not wrongfully prevent or substantially hinder the other parties performance

Front 5

Equitable Estoppel (Estoppel in Pais)

Back 5

Traditionally held to exist where one party has misrepresented a fact and the other party has injuriously relied upon that misrepresentation. Today, an estoppel may be based upon even an innocent misrepresentation of fact or upon a promise

Front 6

Waiver before failure of condition

Back 6

1) A waiver of a condition that constitutes a material part of an agreed exchange is eneffective in the absense of consideration, its equivalent, or an estoppel
2) A waiver of a condition that is not a material part of the agreed exchange is effective but it may be reinstated by notice prior to any material change of position by the other party
3) An effective waiver disables the party from canceling but does not discharge the aggrieved party's right to damages

Front 7

Who can waive conditions

Back 7

only the party for whose benefit the condition has been imposed can waive

Front 8

Waiver after failure of condition

Back 8

A waiver after a failure of express or constructive condition is an election. An election may take place by conduct or by promise. no consideratiion is needed for an election and, according to the majority rule, an election once made cannot be withdrawn

Front 9

Repeated waivers

Back 9

if a party repeatedly waives a condition, the other party can reasonably expect that future waivers will be made unless the first party reinstates the condition by reasonable notice

Front 10

forfeiture

Back 10

when one party doesn't make the condition, they must forfeit every thing they put into the contract and the thing they are trying to get

Front 11

Excuse of conditions involving forfeiture

Back 11

Sometimes courts will excuse the condition to prevent forfeiture as an equitable rememdy becaue of an unfair result

Front 12

When are courts likely to excuse conditions because of forfeitures

Back 12

when it involves an 1) extreme forfeiture, 2) its occurance is not a material part of the agreed exchange, 3) if one of the foundations for equitable jurisdiction exists

Front 13

Excuse of conditions because if impossibility

Back 13

Impossibility excuses a condition if it becomes impossible for it to occur, it is not the fault of the party, the condition is not a material part of the agreed exchange, and a forfeiture would otherwise occur

Front 14

prospective inability or unwillingness to perform

Back 14

may be manifested by words or conduct, destruction of the subject matter, death or illness of a person whose performance is essential under the contract, encumbrance or lack of the title in a contract vendor at the time of the making of the contract, or a sale of the property to another subsequent to the making of a contract, existing or supervening illegality of a promised performance, insolvency of the party, and defective performances rendered under other contracts between the parties or even under a contract with third parties

Front 15

Repudiation

Back 15

a promisor's unjustified statement positively indicating tht he or she will not or cannot substantially perform, or the promisor's voluntary act that renders the promisor's substantial performance impossible or apparently impossible

Front 16

When is repudiation a total breach

Back 16

a repudiation is a total breach whether or not performance is due now or in the future
Exception: in the case of a unilateral obligation not yet due

Front 17

To establish a cause of action for prospective unwillingness and inability to perform, what must the aggrieved party prove

Back 17

1) there was a contract
2) there was a breach by repudiation
3) the aggrieved party would have been willing and able to perform but for the repudiation

Front 18

Prospective inability to perform (Common Law)

Back 18

The insecure party must ask for assurances.
If answer is yes, the insecure party has to be ready, willing, and able to perform on that date
If answer is no, the the insecure party cannot treat it as an anticipatory breach, they can suspend performance (dont have to make any preparations, don't have to be ready, able and willing to perform)
If the person shows up on the date anyway, and the insecure party is not ready, willing, and able to perform, the court will give you a reasonable time to perform because they were already told that the person would not show up on the date

Front 19

Prospective inability to perform (UCC)

Back 19

The insecure party must ask for assurances
After they ask for assurances and the person says no, then you can treat it as an anticipatory breach
If he says yes, then you must be ready, willing, and able to perform on the date. There can be no material breach until that date

Front 20

Retraction of a repudiation or prospective failure of condition

Back 20

a repudiation may be retracted, and a prospective unwillingness or inability or perform can be cured unless the aggrieved party has canceled or materially changed position or otherwise indicated that the contract is at an end

Front 21

What constitutes repudiation?

Back 21

1) a positive statment
2) transferring of specific property
3) volunatary acts which renders substatntial performance impossible or apparently impossible
4)

Front 22

Goal of damages

Back 22

the basic goal of contract damages is to place aggrieved parties in the same economic position they would have achieved had their contracts been fully performed. The aggrieved party is entitled to the "benefit of the bargain"

Front 23

General Damages

Back 23

must be foreseeable to the parties at the time of contracting, and must be calculated with reasonable certainty

Front 24

Economic Breach/Efficient Breach

Back 24

purposeful breach...sometimes contracts are breached because money can be made een though there was a breach of a contract and damages have been paid

Front 25

Damages: Sale of Goods
Seller's Non-Delivery

Back 25

purchaser recovers as general damages the difference between market price and contract price or between cover price (price reasonably paid even if in excess of market) and contract price

Front 26

Damages: Sale of Goods
Seller's breach of warranty

Back 26

purchaser can recover as general damages the difference between the value the goods would have had f they had been as warranted and their actual value. Value is determined as of the time and place of acceptance

Front 27

Duty to mitigate damages

Back 27

if you are a non-breaching party you have a duty to get up and do something, you can't just let your damages escalate...if you don't mitigate damages, you will be held responsible for the amount of damages that you could have offset
* the burden is on the breaching party to prove the failure of the other party to mitigate

Front 28

duty to mitigate damages
Landlord/tenant exception

Back 28

when a tenant breaches a contract by abandoning the property, the landlord can just sue for all the rent. The landlord does not have a duty to go out and mitigate damages

Front 29

Duty to mitigate damages
covenant not to compete

Back 29

covenant not to compete can alleviate the duty to mitigate damages by seeking similar employment

Front 30

Damages: Employment Contracts....Employer's breach

Back 30

when an employee is wrongfully discharged the employee is entitled to the payment he would have received during the remainder of the term, but that will be reduced by the income an employee, will earn, could earn, or should have earned in reasonable diligence

Front 31

Damages: Employment contracts...Employee's breach

Back 31

if an employee quits in breach of contract, the employer recovers the difference between the market value of the employee's service minus the contract price

Front 32

Damages: construction contracts: contractor's delay

Back 32

damages for delay are measured by the rental value of the completed premises for the period of delay

Front 33

Damages: construction contracts; Contractor's failure to complete

Back 33

failure to complete is compensated by the additional cost of completion plus delay damages

Front 34

Damages: Construction contracts; Defect in Construction

Back 34

If the breach consists of a defect in construction, the damages are the cost of correcting the defect, unless this would constitute unreasonable economic waste

Front 35

Damages: Construction Contracts; Owner's breach

Back 35

if no work has been done, the contractor recovers the anticipated profit, the contract price minus the projected costs of performance. If the work has been started, the contractor recovers the anticipated profit plus the cost of labor and supplies actually expended

Front 36

Damages: Construction Contracts; Consequential damages

Back 36

If foreseeability is shown, consequential damages are available against a breaching contractor but if an owner breaches by failure to pay or by repudiating, consequential damages are never available to the contractor

Front 37

Damages: Realty
Buyer's total breach

Back 37

if a contract buyer totally breaches the contract, the vendor may recover the difference between the contract price and the value of the realty at the time of breach

Front 38

Damages Realty
Seller's total breach

Back 38

English Rule: Limits recovery to the deposit

American Rule: Doesn't limit the return to the deposit, it also is possible to get the benefit of the bargain

Front 39

What are the remedies for breach in real estate contracts

Back 39

First is always specific performance, if that is not possible, then damages.

Front 40

Damages: Certainty

Back 40

the fact of loss and its amount must be proved with reasonable certainty.

Front 41

Damages: Where certainty of loss cannot be shown

Back 41

where the aggrieved party cannot establish the lost expectancy interest with sufficient certainty, the agrieved party can recover expenses for preparation and part performance as well as other foreseeable expenses incurred in reliance upon the contrac

Front 42

mitigation of damages

Back 42

damages that could have been avoided by reasonable efforts cannot be recovered. Conversely, the aggrieved party may recover reasonable costs incurred in an effort to minimize damages

Front 43

stipulated damages

Back 43

courts will not enforce a stipulated damages clauses when it is clear the purpose is to act as a penalty

Front 44

The test for determining whether a stipulated damages clause is valid (totality of the circumstances)

Back 44

(1) DID THE PARTIES INTEND TO PROVIDE FOR DAMAGES OR FOR A PENALTY? (2) IS THE INJURY CAUSED BY THE BREACH ONE THAT IS DIFFICULT OR INCAPABLE OF ACCURATE ESTIMATION AT THE TIME OF CONTRACT? (3) ARE THE STIPULATED DAMAGES A REASONABLE FORECAST OF THE HARM CAUSED BY THE BREACH?

Front 45

Enforcement of stipulated damages clauses is urged because

Back 45

1) allows parties to control their exposure by setting payment for breach in advance
2) they avoid uncertainty, delay, and expense of using the judicial system
3) allow the parties to correct what the parties perceive to be inadequate judicial remedies
4) considerations of judicial economy and freedom of contract favor enforcement of stipulated damages clauses

Front 46

Reasons why enforcement of stipulated damage clauses are not urged

Back 46

1) public law to private law ordinarily defines the remedies
2) stipulated damages allow private parties to perform the judicial function of providing the remedy in breach of contract cases, namely compensation of the non-breaching party and courts must ensure that the private rememdy does not stray too far from the legal principle of allowing compensatory damages
3) stipulated damages substantially in excess of injury may justify an inference of unfairness in bargaining and may act to punish the breaching party

Front 47

Reasonableness test for determinine the validity of Stipulated damage clauses

Back 47

1) did the parties intend to provide for damages or for a penalty
2) is the injury caused by the breach one that is difficult or incapable of accurate estimation at the time of contract
3)Are the stipulated damages a reasonable forecast of the harm caused by the breach

* the harder it is for the courts to calculate damages, the more likely they will defer to the terms of the stipulated clause
* Courts look to when the contract was formed (prospective view) and see if the clause looks reasonable. The court will also after the breach has occurred and use hindsight to see if the stipulated clause is reasonable

Front 48

Restitution

Back 48

reasonable value minus the benefit received

Front 49

Situations where restitution is available

Back 49

1) total breach of contract
2) avoidance of a contract for incapacity, duress, misrepresentation, mistake, etc.
3) the agreement is not a contract because of indefinateness, misunderstanding, and agents lack of authority
4) the agreement is unenforceable because of the statute of frauds and certain kinds of illegality
5) the agreement is discharged because of impracticability or frustration
6) the defaulting party seeks to recover for part performance

Front 50

Restitution: When there is a total breach of contract, the non-breaching party may:

Back 50

1) seek regular damages
2) seek the reasonable value of services rendered to date

Front 51

When will a court order Specific Performance

Back 51

only if the legal remedy of damages or restitution is inadequate

Front 52

Specific Performance
Uniqueness

Back 52

Courts will order specific performance if the subject matter of a contract is unique. The legal remedy is inadequate because the disappointed purchaser cannot replace the subject matter on the market
Ex. Real property is always unique
Heirlooms, works of art, and other one of a kind objects
patents, copyrights, closely held stock, and other intangibles not readily available on the market

Front 53

Specific Performance
Mutuality

Back 53

if a purchaser could have obtained a decree of specific performance in the event of the seller's breach, the seller can obtain a decree of specific performance in the event of the purchaser's breach

Front 54

Specific Performance

Back 54

when a court orders a party to do something or to stop doing something

Front 55

Specific Performance
Sales of goods

Back 55

are less likely to have specific performance ordered because of the lack of uniqueness

Front 56

Specific Performance
What if a party cannot afford damages

Back 56

if a court finds that a party cannot afford the damages, they will sometimes order specific performance

Front 57

Specific Performance
Service Contracts

Back 57

no court in the US will order specific performance for personal services

Front 58

Specific Performance
Unclean Hands

Back 58

Specific performance will be denied if the plaintiff is guilty of any inequitable conduct with respect to the transaction, even if the questionable conduct was done in concert with the defendant so that no unconscionability exists

Front 59

Specific Performance
Difficulty of Supervision

Back 59

Courts will refuse to order specific performance of contracts where supervision of performance by the court will be unduly burdensome

Front 60

Specific Performance
Undue risk

Back 60

if performance of the contract would impose an undue risk that the counterperformance will not be received, specific performance will be denied

Front 61

Specific Performance
impossibility

Back 61

courts will not order specific performance that is impossible even where impossibility will not excuse a breaching party in an action for damages

Front 62

Specific Performance
Problems with contract

Back 62

courts will not order specific performance if there was never a valid contract

Front 63

Breach of covenant not to compete

Back 63

breaching a covenant not to compete is a breach and there will be remedies. Courts are split on the remedy. Some courts will "blue pencil" or strike out the unreasonable parts and enforce the reasonable parts. Some courts won't do that because they feel that employers will make the broadest restrictions and rely on the courts to narrow it if challenged

Front 64

Third Party Beneficiary's rights

Back 64

the rights of the 3rd party stem from the original contract between the primary parties. therefore any defenses that one party have against the other party within the contract can be used against the third party

Front 65

Can 3rd party Beneficiary Contracts be modified?

Back 65

yes, they may be modified unless the rights of the 3rd party have been vested

Front 66

Types of 3rd Party Beneficiaries

Back 66

1) intended - promisee intended to confer on the beneficiary the right to bring suit to enforce the contract
2) incidental - a party who receives benefits from a promisor's performance, but who was not intended to be a beneficiary and therefore has no rights in the contract

Front 67

Types of Intended Beneficiaries

Back 67

1)Creditor - when the promisee extracts from the promisor a promise to render a performance to a third person because the promisee is indebted to the third person, then the third person is a creditor beneficiary
2)Donee - if the promisee's purpose in extracting the promise is to confer a gift upon the third person
3

Front 68

Modern View of Donee and

Back 68

is not ordinarily important on the issue of intent to benefit, but may be important on other issues, such as when rights vest

Front 69

Creditor Beneficiearies: When do the rights vest?

Back 69

Rights vest as soon as the beneficiary learns of the promise and assents to it. silence is assent in this context because the beneficiary can only benefit from the contract

Front 70

Donee Beneficiaries: When do the rights vest?

Back 70

Restatement 1: says the rights vest immediately upon making the contract
Restatement 2: States that the same rules of Creditor beneficiaries apply

Front 71

May the parties of contracts provide in the contract when the rights of 3rd parties vest?

Back 71

yes

Front 72

Who do the rights of a creditor beneficiary extend to?

Back 72

A creditor beneficiary has rights against both the promisor and the promisee and may obtain judgment against both. The beneficiary may only receive 1 satisfaction

Front 73

Who do the rights of a donee beneficiary extend to?

Back 73

The donee beneficiary has rights against the promisor, but no rights against the promisee, unless after the donee's rights have vested, the promisee has received a consideration to discharge the promisor. The donee's rights are limited to the value of consideration

Front 74

Rights of the promisee against the promisor?

Back 74

the promisor is under an obligation to the promisee for performance of the contract

Front 75

Assignments: Obligor

Back 75

person who pays the assignee

Front 76

Assignments: Assignor

Back 76

the person who assigns the rights of the contract

Front 77

Assignments: Assignee

Back 77

person getting the rights of the contract

Front 78

Assignment

Back 78

is a manifestation of intent by the owner of a right to effectuate a present transfer of the right. The manifestation must be addressed to the assignee or someone on the assignee's behalf

Front 79

Two types of Assignments

Back 79

1) Gratuitous
2) Creditor

Front 80

Gratuitous Assignments

Back 80

No value: can be terminated or revoked by
1) subsequent assignment of the same right (if you give a gratuitous assignment of the same right to more than one person it can be revoked)
2) notice of termination of assignment
3) if the assignment is already complete, it can not be revoked
4) if the person who has been assigned a right gratuitously, and that person has relied on that, it cannot be revoked ---Assignment will be complete if someone has relied on it

Front 81

Creditor Assignments

Back 81

is for value, and therefore not terminable

Front 82

Do assignments have to be supported by consideration?

Back 82

no

Front 83

What type of an assignment is one that was given for a pre-existing debt?

Back 83

Creditor: the pre-existing debt will be considered value for the assignment

Front 84

Proper and Improper Assignments

Back 84

Proper - is enforceable
Improper - two things can happen
1) Accept it - by accepting it the party is waiving the improper nature of the assignment
2) Reject it - an improper assignment is not a breach, unless the party attempts to force the assignment on the other party. The party rejecting the assignment is not breaching the original contract by the rejection of the assignment

Front 85

Rights that are not assignable

Back 85

A right is assignable except where the assignment:
1) would materially change the duty of the other party
2) would materially vary the burden of risk of the other party
3) would impair materially the other party's chance of obtaining return performance
4) would be contrary to public policy

Front 86

Defenses of the obligor against the assignee

Back 86

the obligor may assert against the assignee any defense which the obligor could have asserted against the assignor

Front 87

Delegation

Back 87

a delegation occurs when an obligor appoints another person to render a performance that is owed to a third party

Front 88

Proper and Improper delegation

Back 88

Proper is enforceable
Improper - two things can happen
1) Reject - a rejection is presumed to be a breach, but you are able to take back performance (the party rejectiing the delegation of the duties must give notice to the original party of their rejection and that party will then have a chance to perform on their original duties...if they refuse, there is a breach
2) accept - the improper nature of the delegation is waived

Front 89

Difference of "rejection" in assignment and delegation

Back 89

A rejection of an assignment is noto presumed to be a breach, while the rejection of a delegation is presumed to be a breach but the party will have a chance to take back performance before being liable for a breach

Front 90

What types of duties are non-delagable?

Back 90

The test is whether performance by the original obligor is required by the contract?
1) where the contract is predicated on the unique skills of the obligor, AND
2) where the contract is predicated on the trust and confidence that the obligee has placed in the obligor

Front 91

Capacity of the parties?
What kind of issue is it?

Back 91

it is a performance issue

Front 92

What does it mean to disaffirm a contract

Back 92

repudiate or nullify the contract

Front 93

What does it mean to ratify the contract? (ratification)

Back 93

A person who ratifies their contract are surrendering their power to disaffirm
- a person cannot ratify until the age of majority

Front 94

How can ratification take place

Back 94

1) express notification
2) conduct
3) If you fail to do anything for a reasonable period of time after you reach the age of majority, you will have surrendered your right to disaffirm

Front 95

Can a minor avoid a contract?

Back 95

Yes

Front 96

Two Views of Avoidance by Minors

Back 96

1) The minor can avoid the contract and is not liable for any damages ( A minor may purchase property and keep it for an indefinite time, if he chooses, until it is worn out and destroyed, and then recover the payments made on the purchase price, without allowing the seller anything whatever for the use and depreciation of the property)
2) the minor can avoid the contract but is liable for restitution for any damages, depreciation, or wear and tear. ((Protection of minor is balanced with the other party) (where the transaction is fair and reasonable, and the minor was not overcharged or taken advantage of in anyway, and he takes and keeps the property and uses or destroys it, he cannot recover the payments made on the purchase price, without allowing the seller for the wear and tear and depreciation of the article while in his hands)

Front 97

Minors who engage in contracts for necessities

Back 97

If a minor makes a contract for necessities, they are not going to be held to pay the contract price, but they will be held under a quasi contract to pay restitution. They will be allowed to disaffirm the contract, but will have to pay the reasonable value of those necessities

Front 98

2 legal statuses of Mentally Infirm

Back 98

adjudicated incapable - court determines that a person is not mentally capable....they have no power to contract....any contract with them is void

Mentally incapable - this is a voidable contract, but not void per se

Front 99

How do courts determine if the contract is voidable?
(mentally infirm)

Back 99

they balance the interest of the parties (stability of contracts v. the protection of the mentally ill)

Front 100

What questions do the courts ask to determine the reasonableness?

Back 100

1. did the other party know or should have known of the mental infirmity? if yes, the contract is more likely to be voided
If no, the contract is not likely to be avoided if it has been performed or it is unfair to rescind

Front 101

Avoidance: Duress

Back 101

any wrongful act or threat that is the inducing cause of a contract constitutes duress and is grounds for avoiding the contract

Front 102

Avoidance: Duress
What to look for

Back 102

Must look to the actions of the accused party
1. was there a wrongful threat or act - must violate a person's rights
2. did the wrongful threat induce the signing of the contract

Front 103

May a contract induced by duress be ratified?

Back 103

yes, a contract induced by duress may be ratified by the actions of the party trying to avoid it

Front 104

Economic Duress

Back 104

two elements
1) a threat tp stop delivery or breach contract
2) Regular remedies won't help
The aggrieved party usually must show that there was no reasonable alternative but to assent

Front 105

Avoidance: Elements of Undue Influence

Back 105

1. has to be a special/close relationship between the parties
2. psychological dominance - one party must exert control over the other party
3. the controlling party has subverted the free will of the weaker party to get them to do something
* the controlling party, in order to rebut tht a contract was signed under undue influence, they must have "clear and convincing evidence"

Front 106

What is the remedy for Undue Influence?

Back 106

the remedy for undue influence is to void/rescind the contract

Front 107

Can a contract formed through undue influence be ratified?

Back 107

yes, it can be ratified by the actions of the party trying to avoid it

Front 108

Avoidance: Misrepresentation

How to determine if a party was misrepresented?

Back 108

1. did the buyer rely on the contract
2. where the statements of fact that the buyer relied on material?
3. Was the reliance justified?
* usually the material statements relied upon by the buyer must be statments of fact. However, there is an exception to the rule, where one party has superior knowledge and their statement may be regarded as a statement of fact even though it would be regarded as opinion if the parties were dealing on the basis of equal knowledge, that statement will be regarded as fact

Front 109

Avoidance: Mistake in Fact
3 reasons which are sufficient to rescind the sale

Back 109

1. Buyer is guilty of fraud in inducement
2. mistake in identity of the object (usually a mutual mistake) (mistake of value of something is NOT mistake in identity)
3. Mistake in Essence - does the mistake affect the essence (substance) of what the contract was formed for

Front 110

Avoidance: Unilateral Mistake in Fact

Back 110

must focus on whether the enforcement of the contract on the party that was mistaken, would be oppressive or unconscionable against them, if yes, would there be a hardship on the party that wasn't mistaken, if no, they rescind the contract

Front 111

Avoidance: Mistake in Fact Predictions

Back 111

the identity of an object must be a fact thata is current. We do not avoid contracts because of future events...i.e. you bought something because you thought it would be a great but it did not turn out that way

Front 112

Reformation because of a Mistake:

Back 112

1. has to be a mutual mistake
2. there has to be a record of an agreement
3. must be a difference between the agreement and a record
4. difference must be mutual

Front 113

Procedural Unconscionability

Back 113

1. Procedural (PU the process stinks) - process of making the contract ( a burdensome clause will be struck down if a reasonable person would not expect to find it in the contract and the reason it was not noticed was its burial in small print, or the inability of the adhereing party to comprehend the language

Front 114

Two kinds of Unconscionability

Back 114

1. Procedural (PU) - the process stinks
2. Substantive (SU)The terms suck

Front 115

Substantive Unconnscionability

Back 115

Harsh Terms: provisions of a contract that are assented to but are grossly one-sided. The contract suffers from total overall imbalance

Front 116

What must be proven to show a contract is Unconscionable

Back 116

Both forms of unconscionability must be shown, but if one is really strong, the other can be weak

Front 117

Avoidance: Hardship

Back 117

Hardship exists if the “equilibrium of the K” is fundamentally altered by events that occur or become known after contracting. However, in addition, it must be shown that the events could not reasonably have been taken into account, are not within the party’s control, and the risk was not assumed.

Front 118

Avoidance: Impossibility

Back 118

The court here has “constructed a condition” in that “the thing in the contract” has to still be in existence
- occurs when the thing that was the subject of the contract has been destroyed

Front 119

what do courts look to to determine when something is impossible

Back 119

Look to see what the contract is for

Front 120

Avoidance: Impracticability

Back 120

“commercial impracticability.” This means that the cost is so disproportionate to one party that, to make them perform, would be impractical. It has to be so disproportionate as to what was reasonably contemplated by the parties, that it becomes impracticable

Front 121

commercial impracticability

Back 121

the cost is so disproportionate to one party, that to make them perform is not practicable, but the circumstance has to be unforeseeable

Front 122

Avoidance: Frustration

Back 122

The doctrine of frustration of purpose states when a party’s purpose is frustrated by intervening events the duties of the parties will be discharged

Front 123

3 Questions to determine Frustration

Back 123

1) What was the foundation of the contract
2) Was the performance of the contract prevented?
3) Was the prevention of performance not reasonably in contemplation of the parties? (Was it something they both contemplated)

Front 124

What must we need to allow a party to get out of their obligation to perform because it is impossible or impractical

Back 124

1) something different must have happened after the contract was formed
2) Whether the risk of this occurence was allocated, by agreement or matter of law
- risk allocated by law...the risk is foreseeable

- risk allocated by agreement...the parties contemplate the risk
3) Is it actually commercially impossible or impracticable to perform the contract

Front 125

3 Events which are automatic causes for nonperformance

Back 125

1) Death in a personal services contract, and the death of the person to perform ends the obligation to perform (Unless it is a personal service contract, death does not invalidate a contract because it is always foreseeable)
2. Illegality - if the thing promised for performance becomes illegal to perform
3. Destruction of subject matter

Front 126

When do courts grant relief?

Back 126

When one party has a loss, and the other has a windfall

Front 127

Mutual Rescission

Back 127

If A and B enter into a bilateral executory contract, they can rescind it by mutual agreement. The surrender of rights under the original agreement by each party is the consideration for the mutual agreement

Front 128

What happens when parties agree to rescind the contract but there has been partial performance and the intent of the parties cannot be determined?

Back 128

1) Most courts will rule that all the rights of the parties will be obtained
2) Some courts will rule that rescission of the contract dissolves all the rights of the parties
3) If one party has substantially performed, or fully performed, a contract cannot be rescinded

Front 129

If the contract has been partially performed, and then there has been a mutual rescission what will courts do?

Back 129

They will look to the intention of the parties and ask:
1)
2) Are there any damages arising out of partial performance?
3) When does the rescission start? Does it apply to future promises or to promises that are going on now?

Front 130

Executory Accords

Back 130

1. an agreement that an existing claim shall be discharged in the FUTURE by the performance of a new agreement
2. All prior obligations suspended, but if debtor materially breaches new agreement, prior obligation is revived and creditor can enforce the original claim or accord

Front 131

When can an Executory Accord be enforced?

Back 131

1. if the agreement is in writing
2. if the agreement is signed by party to be held

Front 132

Substituted Agreement

Back 132

Old agreement is discharged upon a promise
1. Agreement that existing claim will be discharged now, based on a promise to perform new agreement in the future
2. Prior obligation is immediately discharged. If debtor materially breaches new agreement, the only action available is on the substituted agreement, unless the new agreement is void
3. Enforceable as per regular contract rules (not void) and only needs to be in writing if required under the statute of frauds

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Novation

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1. discharge a duty immediately
2. creates a new duty based on a new promise
3. creates a new obligor or new obligee

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Account Stated

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1. relationship between a debtor and creditor
2. occurs when the person providing the service sends the bill which is met with silence, it becomes rebuttably presumed that the bill is agreed upon
3. silence after receipt of accounts stated makes a rebuttable presumption and the silent party should be allowed to rebut the account stated

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Statute of Frauds

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The statute of frauds is a collective term describing the various statutory provisions which render unenforceable certain types of contracts unless they are evidenced by a writing

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Partial lists of contracts within the Statute of Frauds

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1) promise to answer the debt or duty of another
2) Contract's not to be performed within One year from the making
3) Contracts to sell any Interest in Real Property
4) Contracts not to be performed within the lifetime of the promisor
5) Provisions of UCC 2-201 Contracts for the sale of goods for 500 or more