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156 Cards in this Set

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What two types of law does the MBE test on
1) CL of contracts - applies to everything other than the sale of goods (property, services, loans, service with included good)

2) Article 2 of Uniform Commercial Code. Applies only to sale of goods

Goods are movable, personal property.
What 3 types of law does NY test on?
1) CL of contracts - applies to everything other than the sale of goods (property, services, loans, service with included good)

2) Article 2 of Uniform Commercial Code. Applies only to sale of goods

Goods are movable, personal property.

3) Article 2A of UCC for LEASES of goods (e.g. leasing a car, not an apt.)
What is the definition of a contract
a legally enforceable agreement
what is an express contract
one created by parties words, eithe oral or written
what is an implied contract
one created by parties conduct.

same rules apply to both implied and express contracts
What is a quasi contract
an equitable remedy that applies whenever K law yields an unfair result

NOT limited by contract rules, but governed by equitable principles
what is the remedy under quasi-contract
reasonable value of benefit conferred, not contract price
What about NY and quasi-contract?
whenever it yields an unjust result, add a paragraph about quasi-contract

this is ultimate remedy if all else fails, look for cause of action in quasi contract
What is a bilateral contract
A contract where offer can be accepted in any reasonable way.

Very flexible.

DEFAULT RULE - all Ks are assumed to be bilateral, unless offer states it can only be accepted through performance
What is a unilateral contract
a K where offer can only be accepted through performance
If you have an contract formation question. what should you look for?
1) is there an agreement - offer that has been accepted.
a) is there an offer
b) is it still open
c) has it been accepted

2) is it legally enforceable, or are there defenses against formation?
What is an offer?
A manifestation of an intention to be bound, created by words or conduct
Are advertisements offers?
no, b/c no quantity term as to # of people who can accept it.

EXCEPT if ad specifies quantity and who can accept (1 fur coat for first person to bring $10 to store)
Are Requirements Contracts offers? I.e. "I will buy all of my goods from you?"
Requirements contracts are definite enough even though there is no specific quantity mentioned.

If you see all or only, this is a requiremenst contract. They are valid.

BUT no sudden increases in buyers needs - even if in good faith.
Are offers with an open price contracts?
1) Under CL - no they are too indefinite. E.g. offer to sell real property must have a price

2) under Art. 2 - they are NOT too indefinite. Offer to sell goods doesn't need to have a price
In an offer to sell goods with an open price, under Article 2, where does a price term come from in a K dispute?
A reasonable price will be filled in by the court.
How do you tell if an offer is still open?
If it has not been terminated. If it has been terminated, it is not open.
How can an offer be terminated?
1) it can lapse after a stated term, or if no term stated after a REASONABLE time has passed

2) offer terminates if offeror revokes offer

3) offer terminates if offeree rejects offer

4) offer terminates with the death of either party before acceptance, EXCEPT death does not terminate an irrevocable offer (like an option K)
How can an offer be revoked?
Either 1) directly, or 2) indirectly.
What is a direct revocation
when an offeror unambiguously indicates to offeree he has changed his mind
What is an indirect revocation
when offeror has engaged in conduct unambiguously indicating he has changed his mind AND offeree is aware of conduct.
When is revocation of an offer effective
upon receipt! no mailbox rule!
when can an offeror revoke
any time prior to acceptance, EXCEPT in 4 situations

1) an option contract - where promise to keep option open has been paid for

2) reasonabely forseeable reliance by offeree has occurred before acceptance (very rare) - E.g. subcontractor

3) Beginning performance in an offer to enter into a unilateral contract, but mere preparation to perform (buy supplies) is NOT enough. Must actually start performance

4) a Firm Offer under Art. 2
What is the special NY rule on Revocation in Unilateral contracts?
Offer can be revoked up until performance is COMPLETED.
What is a Firm Offer under Article 2?
It is a signed, written promise by a MERCHANT to keep offer open.

Signing can just be initials, etc.

Signing itself serves as consideration.
How long may an offer remain open in an Firm Offer by merchant?
3 month maximum. Anything longer specified in K will be scaled back to 3 months

If offer is still open after three months, it can be revoked.
In NY, what else might limit an offerors ability to revoke?
If offeror made a writing, signed by offeror, that states that offer is irrevocable, then the offer is not revocable during hte time stated or for a reasonable time EVEN IF OFFER IS NOT SUPPORTED BY CONSIDERATION.
How can an offeree Reject an offer? Thus terminating it?
1) counteroffer operates as a rejection (but mere bargaining, question asking, does not)

2) conditional acceptance is a rejection

3) acceptance containing additional terms is a rejection under the CL, but not under art. 2.
a) under CL - acceptance must mirror offer or its a rejection"mirror image rule"
b) under Art. 2., no mirror image rule -- additional terms do not prevent acceptance BUT additional terms do not automatically become part of contract.
Under Article 2, If an offeree adds additional terms to the K, how can they become part of the K?
Only if
1) both parties are merchants
2) term is not a material change (disclaimer of warranty is material; trade custom or minor detail like delivery date is not material)
3) offeror does not object w/i reasonable time period - if offeree does object, term is not included, no matter how insignificant).

Article 2 favors offeror!
How can an offer be accepted?
Generally, through a promise, performance, start performance.
Who controls the manner of acceptance?
Generally the offeree, except in unilateral contracts.
When is an offer accepted by performance in a bilateral contract?
when performance is begun.

After performance has begun, an offeree MUST FINISH
When is an offer accepted by performance in a unilateral contract?
at the completion of performance.

BUT offeror cannot revoke offer, once offeree has started performance.

NY - offeror can revoke until performance is completed (MBE - until start)
What if an offer is accepted by improper performance?
This usually operates as acceptance (and simultaneous breach).
What can a seller do, under ARticle 2, if he knows he is sending wrong goods?
He can use "as an accomodation language" -- in this case there is not an acceptance/breach, but rather just a counteroffer that buyer can accept or reject.
Can silence be acceptance?
no. never.
When is acceptance effective?
when it is mailed - "mailbox rule" - doesn't matter if it gets lost in mail, burden of loss is on the offeror.
What are the exceptions to the mailbox rule? when does it not apply?
1) if offeror states otherwise
2) if it is an irrevocable offer (then receipt rule governs)
3) if acceptance then rejection (think mail/fax) acceptance governs, unless Rejection got there first, and offeror relied upon it.

4) for rejection, then acceptnace - its whichever gets there first.
how do we know if there is a valid agreement?
1. was there an offer
2. was the offer terminated?
3. if not, was offer accepted.
How do we know if an agreement is legally enforceable
It is, so long as there are no defenses against formation
What are the defenses against formation of a K.
1. incapacity of D

2. duress

3. misrepresenation or non-disclosure

4. ambiguity of term

5. mistake

6. lack of consideration

7. illegality

8. public policy

9. unconscionability
What defendants lack capacity?
1) infants under 18
3)mentally incompetent.
What are the rights of an incapacitated defendant?
has right to disaffirm/avoid K, but other person can't use incapacity of D to get out of K with D (think kids entering into contracts, they can use age to get out of K, but other person can't use age against them to get out of K)
What if incapacitated person lied about condition of incapacity, does that make K valid?
no. doesn't matter if person lied about age. can still use it to get out of K.
Can an incapacitated nonetheless validate an otherwise invalid K?

1) incapacitated party can impliedly affirm the K
2) by retaining benefit of K without complaint
3) after gaining/regaining capacity
Are there any exceptions to the rule that incapacitated person will not be liable for K?
yes, incapacitated person is liable for necessaries (food, clothing, shelter, medical care) BUT only on a quasi-contract basis for reasonable value of goods conferred.
What about legal agreement made under duress?
it is not enforceable
what constitutes duress
1) physical harm
2) economic harm.

economic harm includes
a) threat to break existing K unless person gets a better deal.
b) when other party agrees, but only b/c he needs to get first deal done
3) when there are no reasonable alternatives.

BUT NOT raising price of umbrellas when it rains!
What is the rule regarding misrepresentations and non-disclosures?
even an honest and innocent misrepresentation about a material fact can be a fatal falw in the agreement process. Must be an important fact.

2) nondisclosure must be about a material fact to be a fatal flaw
How can an ambiguity in terms void a contract?
If parties say the same thing, but mean different thing (b/c of ambiguity - two ships named peerless) - there is NO CONTRACT.

however, if buyer knows or has reason to know of ambiguity, there is a contract on seller's terms.

rule -- innocent party's meaning will govern.
What if there is a mutal mistake about a material fact.
if parties are on the same wave length, but their shared belief about a crucial aspect of K is mistaken, e.g. house burnt down pre-k, painting is by a different artist, then mutual mistake excuses parties from K.

BUT mistake as to market value is generally not considered material, so buyer is stuck with the deal.
What if there is a unilateral mistake about a material fact.
one party's mistake is not a fatal flaw to an agreement, UNLESS other party knows or had reason to know about it from facts and circumstances.
What is consideration?
bargained for legal detriment to promisee or benefit to promisor. It can take the form of a promise, a performance or forbearance
Can an offer to pay for past performance serve as consideration?
MBE - no. past consideration is not consideratoin at all (thanks for helping me move, i promise i'll give you $20 for it).

NY - Past consideration is binding if
1) promise is in writing
2) past consideration is expressly stated and
3) past consideration can be proven
4)writing is signed by promisor
How much consideration is needed for consideration to be valid?
adequacy of consideration is not relevant. any amount will do - person can get a crappy deal
What is the pre-existing duty rule of contract modification (PEDR)?
CL - must have new consideration to modify a K, can't just be doing pre-existing duty.

Art 2 - No consideration is needed to modify just GOOD FAITH

NY -PEDR does not apply if modification is signed, in writing.

NOTE - PEDR is only a defense to parties to original K, not 3rd parties.
Can part-payment serve as consideratoin for a promise to forgive the rest of a disputed debt?
YES, but only if debt is in dispute! Then agreement to forgive debt is valid.

If not disputed, but promise to forgive is in signed writing, not valid on MBE BUT valid in NY.
Is a written promise to pay a debt collection valid, even though debt collection is barred by SOL?
Yes, it is enforceable
What if there is no consideration, can a K ever still be enforced?
yes, under promissory estoppel. promissory estoppel can serve as a substitute -- so long as there is a promise, and forseeable detrimental reliance on promise.
What if an agreement is illegal?
that is a defense against the agreement.

BUT if party doesn't know other party's illegal purpose, that is not an effective defense against formation. (e.g. airline co. sells ticket to person to go kill someone, airline can't use that as defense against k formation)
What are NY's special rules on consideration?
1) no consideration is needed for the partial discharge of modification by contract IF modification is in writing and signed by party to be charged or his agent

2) any claim can be released by a written instrument, without consideration.
What about covenants not to compete?
NY - will invalidate or narrow a covenant not to compete that operates as a restraint on trade. Look to scope and need of covenant.
1) are geographic and time constraints reasonable? (balance freedom of K with restraint on trade)
2) is there a reasonable need for this protection?

NY - A covenant not to compete will ONLY BE ENFORCEABLE against someone whose services are unique (chef, not busboy)
What about exculpatory clauses, can they eliminate liability?
Yes, for negligence (on both MBE and NY), but not for gross negligence or intentional torts
What is unconscionability?
An agreement that shocks the conscience of the court. an unconscionable agreement is not enforceable.
how do we know if an agreement is unconscionable?
look for oppressive terms or unfair surpise at time of agreement

1) substantive - are terms of agreement unfair

2) is the process by which the agreement is reached unfair? fine print, legalese, unequal bargaining power.
What is the statute of frauds
a statute designed to prevent fraud by requiring a writing in certain kinds of cases for K to be performed.
What questions do you need to ask in a Statute of Frauds question (SOF)?
1) do you need a writing?

2) is the writing satisfactor?

3) if there is not a writing, does it fall into one of the exceptions?
Do you need a writing to make a contract enforceable?
RULE - most oral contracts are enforceable. Only certain kinds of contracts (those within the Sof) have to be evidenced by a writing to be enforced
Which contracts fall within the SoF and thus need a writing?
1) any transfer (sale, grant of easement, lease) of an interest in real property must be evidenced by a writing EXCEPT leases under 1 year

2) service contract that theoretically could not be performed within one year from date of agreement. doesn't matter when its actually completed, just if, in theory, it could take longer than a year to complete.
a) realize, this can never be a specific task, b/c that could always take less than a year
b) duration of performance is irrelevant, can be a 1 day performance, 18 months from now.
c) lifetime contracts Don't fall within SOF on MBE, but DO on the NY BE (b/c by its terms, the contract is not performable within a year).

3)Sale of goods for $500 or more under Art. 2

4) NY - Lease of goods where total lease payments are greater than or equal to $1000 under Art. 2A

5) a promise to "answer for" the debt of another (if X doesn't pay you, i will)

6) promise by an estate representative to use her own funds to pay estate expenses.

7) a promise given in consideration of marriage (pre or post nup, not a promise to marry)

Also in NY
1) promise to pay a discharged debt
2) an assignment of an insurance policy or a promise to name a beneficiary of such policy
3) contracts to pay a commission or finders fee unless an attorney, auctioneer or licensed real estate broker is involved.
Does the statute of frauds apply to K modifications?
YES - but only if K modificaiton (not original K) falls within SoF
Can you include a clause in your original K prohibiting oral modification of K (even if later modification wouldn't fall within SoF)?
Under CL, such clauses prohibiting oral modification are NOT ENFORCEABLE

BUT under Art. 2 they are enforceable! Parties can create their own, private statute of frauds prohibiting oral modification
Art 2 -- If you need a writing under the SoF what kind of writing will satisfy the SoF requirements?
So, sale of goods for $500 or more NEED
1) writing must contain a quantity term AND
2) be signed by D (party asserting SoF defense)
Art 2A -- If you need a writing under the SoF what kind of writing will satisfy the SoF requirements?
Lease of Goods greater than or equal to $1000 in NY

1) writing must state it is a lease
2) it must include the number of items leased
3) it must include the term and rental payments
4) it must be signed by the D
Everything else (not sale of goods or leases in NY)-- If you need a writing under the SoF what kind of writing will satisfy the SoF requirements?
Writing must contain Material Terms - who and what signed by D.
Can SoF be a one-way street?
YES! If only 1 person signs document, writing can only be enforced against that person
What are the exceptions to the SoF?
1) Statutory exception for leases < 1 year (short term)

2) Real estate "part performance" for transfer of interest in real estate eliminates the need for a writing if 2 out of 3 of these considerations are met
a) there has been some payment
b) buyer makes permanent improvements
c) buyer is in possession of the property

3) full perfomrance eliminates the need for a writing (partial performance is not enough).
NOTE - in NY you an recover on quasi-contract for reasonable value of benefit of part performance.

4) Sale of Goods
a) Goods buyer accepted and paid for
b) custom goods not suitable for sale to others
c) judicial admission in a pleading, testimony, or in response to discovery?
D) merchants confirmatory memo IF
i)both parties are merchants
ii) writing claims there is a prior oral agreement
iii)reciepient of memo doesn't object in writing w/i 10 days of receipt
(e.g. 2 merchants agree on phone and one follows up with a writing

5) suretyship - if surety's main purpose in making promise (I'll pay if X doesn't) is to benefit himself, no writing is needed on the MBE.

NY - Still neeed a writing for suretyship

6) NY -- SoF is not applicable where there has been a part performance of a lease agreement.
What is the equal dignities rule?
In NY, in a principal/agent relationship, when dealing with an "interest in land" the agent must be authorized in writing or the principal must ratify. This is known as the equal dignities rule.

KEY - written authority to enter K on behalf of another person is required if underlying K itself falls within SoF
What is the parol evidence rule?
it keeps out evidence of a prior agreement (either oral or written) that contradicts a later writing.
What if you see an oral agreement question on the bar?
this is SoF question, not Parol evidence rule (requires a writing!)
When will parol evidence be allowed in?
1) to correct a clerical error -- typo, trespassing, numbers, etc

2) to establish a defense against formation - flaw in agreement process

3) to explain vague or ambiguous terms in written K (for interpretation)
a) generally words get plain meaning; can't introduce evidence to create an ambiguity that isn't facially there

4) to supplement a "partially integrated" writing (final, but not complete statement of terms agreed to)
NOTE - if there is a "merger clause" K is complete on face and can't be supplemented.
How does the parol evidence rule effect things that happened after the K was reduced to writing?
it doesn't! it is only backward looking!
Can conduct be used to explain terms or fill in gaps in contract?

1) course of performance - what parties actually did under this K. BEST evidence of what K meant

2) course of dealing - what parties have done under earlier Ks with one another

3) usage of trade - what others in trade do under similar circumstances
What are Seller's Warranties of Quality under ARticle 2 for Sale of Goods?
1) seller is liable for breach of any express warranty that seller makes
a) statemetns of fact, promises, descriptions of goods NOT opinions/expressions
b) express warranty must be the basis for the bargain

2)implied warranty of merchantability

3) implied warranty of fitness for a particular purpose
what is the implied warranty of merchantability
Guarantee that goods are fit for ordinary purpose.

Arises when a seller is a merchant who generally deals in this type of good. E.g. footlocker selling shoes, not footlocker selling its deliver van.

NOTE - narrower definition of merchant is being used here.
What is implied warranty of fitness for a particular purpose?
guaranty that goods are fit for a buyer's special purpose.

requires that
1. buyer had a special purpose in mind,
2. seller knew of it,
3. and buyer is relying on seller for select suitable goods
4. seller knows buyer is relying on him

NOTE - seller does not have to be a merchant here.
What are Seller's Warranties of Quality under ARticle 2A for Sale of Leases (NY only)?
same as sale of goods.
1) express warranties
2) implied warranty of merchantability
3) implied warranty of fitness

NOTE - no implied warranties against a bank, just against manufacturer
What Limitations exist on Warranty Liability in Sale and LEase of Goods?
1) seller can disclaim implied warranties, but not express warranties.
a) If K provides for lease/sale "as is" or "with all faults" these are magic words -- NO implied warranties
b) K can also use other conspicuous disclaimers likely to draw notice of a reasonable person (bold, large font, etc).
c) to disclaim merchatability, though you must specifically mention it.

2) seller can limit buyer's remedies for breach of any warranty if limitations are not unconscionable.
a) with consumer goods limiting remedies for personal injury is presumed unconscionable.
Who bares the risk of loss in sale of Goods under Art 2? That is, what if goods are damaged before buye rgets goods, and neither seller nor buyer is liable?

Realize -
1. If seller, seller must provide new goods at no extra cost or be liable for breach
2. if buyer, buyer must still pay K price
1) agreement of parties controls
2) breaching party bares any uninsured loss even if loss is not related to breach (e.g. if you sent package late, but not damaged, and then it becomes damaged - you're liable b/c of lateness)

3) Delivery by Common Carrier - UOS, FED EX, Red ball Freight -- Risk shifts to buyer when seller completes delivery obligations
a) shipment contract -- get goods to common carrier, make reasonable delivery agreements and notify buyer
b) destination contract - seller must get goods to specific destination
c)NOTE "FOB" - seller has obligation to get goods to whatever city follows FOB and upon doing so, buyer becomes liable.

4) Non- carrier cases (buyer picks up, seller delivers). Depends on
a) if seller is a merchant, seller bares the risk of loss until buyer takes possession
b) if seller is not a merchant, seller bares risk until "tenders" (makes available) goods.

5) If K gives buyer right to return goods, key is whether buyer is primarily buying for resale (same rules apply) or buyer's own sale (risk of loss reamins on seller till buyer accepts).
Who bears the risk of loss in a lease of goods under Article 2A (NY)?
Lessor bares risk of loss, except in finance cases.

So, if you lease a computer for 2 years, and next day it is destroyed in a hurricane - Dell has risk of loss, even though computer was in your possession.
How can a contract be performed for a sale of goods?
1) perfect tender rule
2) option to cure if not perfect tender
3) installement sales contract
4) acceptance of goods
5) revocation of acceptance
what is the perfect tender rule for sale of goods?
seller must deliver perfect goods in right place, at right time.

If not, buyer has right to reject.
what is the option to cure for sale of goods?
if seller fails to make perfect tender, he has the option to cure.

If contract deadline has passed, but selle rhas a reason to believe buyer will take sub-perfect goods b/c of prior conduct, seller can cure.
what performance is required for sale of goods under installement sales contracts
requires/authorizes S to deliver goods in separate installments.

Perfect tender rule does not apply. B can only reject if there is a substantial impairment that cannot be cured.

Can reject the entire contract, only if the installment impairment impairs the value of the entire contract.
What happens if a buyer accepts goods for sale of goods?
implied acceptance occurs when B keeps goods w/o objection, after having an opportunity to inspect.

if enough time has passed, acceptenc will be assumed.

RULE - if buyer accepts goods, buyer can't then reject goods. BUT can get damages, after accepting, for non-conforming goods.
Any situations where a buyer CAN revoke acceptance of goods for sale of goods?
Only if
1) non-conformance substantially impairs value AND
2) it was difficult to discover.

Process - return goods, get $, sue for breach
What sort of performance is required for CL contracts?
Performance does not have to be perfect.

Rather, Substantial performance is all ther required.

So, since perfection is not required, any breach must be material
What excuses exist for non-performance?
1) other party's breach

2) anticipatory repudiation

3) later agreement - recission, modification, accord, novatoin

4) impossibility

5) failure of express condition
What constitute's another party's breach, for a sale of goods, justifying non-performance?
If tender is not perfect, buyer can

a) accept all goods (even non-conforming), and get damages for breach from S.

b) reject all goods (even ones that conform); and get damages for breach from S

c) accept any commercial units and reject the rest
What constitute's another party's breach, for CL Contracts, justifying non-performance?
Damages are available for any breach, but only a material breach excuses the injured party from having to perform. So,
1) if breach - get damages,
2) if material breach - get damages AND excused from paying K price

nOTE - seller can recover in quasi-contract for reasonable value of benefit conferred.

NOTE - if payment is on a per unit basis, substantial performance is on a per unit basis.

If payment is by lump sum, substantial performance is on the whole.
What constitutes another party's anticipatory repudiation, providing an excuse for non-performance of K?
Usually anticipatory repudiation operates just like a material breach (so excused from performing and can sue for damages).

BUT you can retract anticipatory repudiation so long as seller has not relied on it (by taking another job, or reselling goods).

NOTE - conduct can repudicate K. (i tell you i will sell you painting, then have you over for dinner, and you ese painting has been sold)
What later agreemetns b/w the parties may provide an excuse for non-performance?
1) rescission - agreement to cancel K. To be effective each party must have some performance remaining, or there has been no consideration and no rescission

2) modificatoin - agreement replacing existing K takes effect immediately. Can't sue on original K anymore, just modification

3) Accord - agreement to accept stated performance in future satisfaction of an existing duty AND satisfaction (performance of accord)
*Original debt is not excused until accord is satisfied, so can sue on original K and new agreement -- new agreement takes effect only upon satisfaction.

4) novation -- agreement substituting a new PARTY for an existing one.
*if new agreement w/ new party, and you agree to substitution -- you no longer have rights against original party, BUT you must have opposite party's consent for valid novation.
When can an unforseen event rendering seller's performance impossible (CL) or impracticable (Art 2) provide an excuse for non performance?
1)Destruction of something necessary for performance excuses performance. Note 2 art. 2 tricks
a) only if good destroyed were IDENTIFIED to this particular K, and
b) if buyer bore the risk of loss anyway, don't need an excuse!
c) if fungible (not distinctive, easily replaced), seller cannot be excused from performance

2) death/incapacity of someone essential for performance -- must be unique and special skills)

3) supervening govt. regulation or order makes performance impossible

4) frustration of purpose. This is a buyer's remedy. If buyer's purpose has been frustrated by unforsee events, AND
a) at time of K, seller knows purpose of buyer's purchase, AND
b) later unforseen event thwarts that purpose.

NOTE - mere lack of profitability is not enough to raise to level of frustration of purpose.
When will failure of an express condition (created by K language "if" "so long as" "when" excuse non-performance?
1) if express condition in K, strict compliance is required

2) if condition is not strictly satisfied, buyer does not have to fulfill obligation

3) express conditions don't create obligations, just limit obligations otherwise created by K
What is a satisfaction clause and how does it relate to express conditions?
Satisfaction clauses apply a reasonable person standard (if reasonable person would pay, you must pay)
EXCEPT if K deals with art, aesthetics, matters of personal taste -- then subjective standard pertaining to Buyer herself
When can the occurrence of a condition be excused b/c of a later action/inaction by the person protected by the condition?
1) Failure to cooperate may excuse occurence of condition. So, if condition doesn't happen b/c you don't put in effort - there si sstill a breach. BUT if powers beyond your control, no breach.

2) WAIVER - can excuse occurrence of condition (voluntary relinquishment of right) BUT waivers can be retracted to the extent the other party has not relied.
what types of remedies exist
1) in rem

2) monetary damages 9usual)
what are the in rem remedies
1) specific performance

2) right to reclaim

3) entrustment

4) adequate assurance
what is specific performance
equitable remedy available ONLY IF monetary damages are clearly inadequate to compensate the injured party.

Whether specific performance is available depends on the subject of the contract
when is specific performance available
1) real property - which is unique will require specific performance

2) sale of goods under art 2 - SP is available only for goods and services that are unique, or if buyer cannot cover (art, antiques, custom goods), b/c similar goods are not available in market

3) sale of services - SP generally NOT available with service contracts (SLAVERY!) BUT court may bar employee from working for competitor (negative specific performance)
what rights exist for an unpaid seller to reclaim goods under Article 2?
Generally unpaid seller has no rights under Art. 2 for goods it has delivered to a buyer, EXCEPT

1) unpaid seller has a right to reclaim goods from buyer if buyer was insolvent when it received goods AND seller demands return w/i 10 days of B's receiving goods (receipt date, not K date)
BUT if B has already sold goods to 3P, then seller has no right to reclaim goods from 3P, only right to reclaim against original buyer.

2) seller has right to reclaim goods at any time if B has misrepresented its solvency to the seller in writing w/i 3 months of delivery
what is entrustment under Art. 2
owner who entrusts her property to a merchant who deals in goods of this kind (dealer) has no right against a bona fide purchaser.

Only right is to sue dealer for conversion. No right against 3P to get good back!

Examples - drop watch off to get fixed and its resold - sue dealer for conversion; can't get good back!

Only examples on bar woudl be car or jewelry repair
What is the right to request assurance under article 2
party, with reasonable grounds for insecurity, request in writing adequate assurance from the other party.

Cannot be used to rewrite K or demand specific kind of performance.
what are the types of monetary damages (substitution, not specific)
1) punitive damages

2) liquidated damages

3) expectation damages

4) incidental damages

5) consequential damages

6) avoidable damages
What type of punitive damages are awarded?
none! no punitive damages for breach of contract.

only purpose of damages in contract law is to compensate injured party, NOT to punish breaching party
what are liquidated damages
mechanism by which parties, nto court, through contract determine what they think damages will be if there is a breach
are liquidated damages clauses permissible?
yes, if damages were
1) difficult to estimate at time of K, and
2) liquidsated damages clause is a reasonable forecast of probable damages.

KEY -- liquidated damages cannot act as a penalty. Generally fixed fees are not valid, but graduated/per diem fees are (look to construction Ks as reasonable contract).
what happens if a liquidated damages clause is struck down by court?
still get actual damages
what are expectation damages?
usual measure of damages. if party has not fixed damages in K court will likely award injured party expectation damages.

It is the sum that leaves injured party in as good a position as would have been with full performance.

Designed to give injured party the benefit of the bargain
how are expectation damages determined under CL?
difference b/w K price and replacement price.

Or, if i expend $ on project, and you refuse to pay me, i get
1) expenses, AND
2) expected profit
what are expectation damages for a BUYER for breach of contract under ARt 2?
Cover Price - K price OR Market Price - K price

1) If B does not cover, or does not cover in good faith, B gets (mkt price- K price)
2) if B does cover in good faith, gets Cover price - K price, EVEN IF cover>market
3) if B keeps goods even though not perfect, B gets (value of promised good-value of good delivered)
what are expectation damages for a SELLER for breach of contract under ARt 2?
K price-Resale price OR K price-Mkt price

1) If seller sells in good faith, K price-Resale price
2) if don't resell, or not in good faith, K price-Mktprice

what are expectation damages for a SELLER for breach of contract under ARt 2? LOST VOLUME SELLERS
what are lost volume sellers? someone with an unlimited supply of goods that will lose profit even if manage to resell (used car lot dealer).

Here - damages are Total profit from losing first car!

KEY - if seller resells exact same goods to anohter buyer for same price, Damages to lost volume seller are expected profit of additional sale!
what are incidental damages
cost of caring for/transporting goods after breach and cost of arranging for substitute transaction
who gets incidental damages
1)anyone under both article 2 and CL

2) damages are available to buyer and seller

3) incidental damages are always recoverable. No forseeability requirement
what are consequential damages??
Damages that are
1)special to this particular P AND
2) reasonably forseeable by breaching party at time of K.

Limited by forseeability requirement.

Provided for under both CL and Art. 2
What are avoidable damages
cannot recover for damages you could have avoided with reasonable effort - mitigation rule.

"comparable job - same kind of job, same city"
What is third party beneficiary law?
two people enter a K with intent to benefit a 3P (the third party beneficiary -TPB)
what is an intended beneficiary?
3rd party NAMED in K (if not named, just an incidental beneficiary).

only an intended beneficiary has rights.
What is a creditor vs. donee beneficiary
if promisee's main reason for entering K is to discharge a debt owed to 3P, 3P is a creditor beneficiary, otherwise he is a donee, beneficiar
What rights does a TPB have?
1) can enforce a K
2) BUT promisor/promisee can rescind/modify K until TPB rights have "vested", after rights have vested, can only modify/rescind TPB with TPB's consent.
*except if K allows parties to change beneficiaries, then parties can terminate TPBs rights, K language controls, even if reliance
3) TPB can sue breaching promisor, even though no privity of K b/w them

4)NOTE only a creditor beneficiary can sue promisee
What right do a promisor and promisee have in third party beneficiary K?
1) can modify/rescind TPB until right has vested

2) promisor can raise same defenses against tPB it could have raised against promisee

3) promisee can still recover from breaching promisor.
what does it mean for a TPB rights to have "vested"
When beneficiary
1) manifests asset to the promise in a manner invited or requested by parties,
2) brings suit to enforce promise, or
3) materially changes position in justifiable reliance on the promise.
Can duties under K be delegated (transferred)?
yes, contractual duties may be delegated without consent of person to whom performance is owed (obligee).

As long as delegated person does job right, payment is owed.
Are there any situations where a duty cannot be delegated?
1) yes - K language controls. If K prohibits delegation, then delegation is not permissible (if it says no assignment, that means no delegation)

2) duties involving special skills/reputation cannot be delegated. even to someone else with special skills or reputation
if a duty has been delegated, who is liable on the contract?
1) delegating party remains liable on K to obligee (different from a novation - where you consent to substitution of new party and give up rights to original party)

2) Delegate is also liable to obligee if delegation received consideration (that is if delegate got paid for performance)
what is an assignment of rights?
2 people make a K. Later on, one person transfers his rights under K to a 3P
who is an assignor
person who later transfers his right under k
who is an assignee
person to whom rights are transferred
who is an obligor
person who owes assigned performance
what does an assignment do
it transfers rights, NOT obligations.

BUt an assignment "of an entire contract" transfers rights and obligations
how does an assignment differ from a TPB?
B/c 3rd party with assignment is not involved from the beginning, but appears later on.
what needs to happen to make an effective assignment
1) you do not need consideration to make a valid assignment, BUT lack of consideration will effect revocability
2) need language of present assignment to be valid "i assign" NOT "i will assign"
what restrictions exist on assignments?
1) K language controls (can prohibit or invalidate assignments).
a) if K prohibits assignment - that does not invalidate an assignment, rather it just gives a cause of action for breach of K
b) if K prohibits assignment, then assignment is not valid

2) assignement cannot substantially change the duties of the obligor (so assign checks, but not services)

3) requirements contracts can be assigned, so long as assignee's requirements are not out of line with assignors.
what are an assignee's rights?
can sue obligor for breach of K, but assignee is subject to same defenses obligor could have raised against assignor.

So, assignment transfers right to enforce K to assignee, BUT assignee has rights of assignor "steps into shoes"
what happens if, despite assignment, obligor still makes payment to assignor?
it is effective, UNLESS obligor is aware of assignment.
what is NY's rule on an assignment not for consideration (gratuitous assignment)?
it is irrevocable if in writing and signed by assignor.
Generally, what happens if there are multiple gratuitous gift assignments?
last gratuitous assignee in time prevails b/c later assignment revokes earlier assignment

NY - gratuitous assignment is irrevocable if in writing, signed by assignor
Generally, what happens if there are multiple assignments for consideration?
1) first assignee for consideration prevails b/c assignments for consideration are much more durable (first in time)

2) assignments for consideration WIPE OUT earlier gift assignments; and the amount of consideration is irrelevant


3) later assignee for consideration will win if
a) does not know about prior assignment, and
b) is first to obtain payment from obligor (payment, not just first to notify)
what is ny's additional exception about assignment of construction contracts or money due thereunder?
assignment of construction contract, or money due thereunder, is not valid until filed.

thus a subsequent assignee, in good faith, who filed first, prevails over party who failed to file
What does a check marked "payment in full" indicate if there is a dispute over payment?
tender and acceptance of a check marked "payment in full" where there is a bona fide dispute as to amount owed indicates that an accord and satisfaction have been satisfied.

an accord is an agreement in which one party to an exsting contract agrees to accept, in lieu of the performance tha t he is supposed to receive from the other party, someother, different performance.

Satisfaction is the performance of the accord agreement.
What happens to a contractor's duty to perform if the building burns down before it is completed?
while contractual duties are discharged if impossible to complete, or if subject matter is destroyed -- a contractor's duty to construct a buidlign is not discharged by destruction of the work in progress, unless the ohter party has assumed the risk.

KEY - construction is not rendered impossible, other party can rebuild.

Risk of loss during ocnstruction, absent contrary provisions, lies with the builder who is in a better position to acquire insurance during construction process.
what if offeree accepts through mail, and then tries to call on phone and reject?
contract is accepted - mailbox rule applies, so contract is accepted as soon as mailed. doesn't matter that offeree called to reject, before offeror received acceptance in mail.

NOTE - an offeree, however, will be estopped from enforcing K in this situation if offeror receives rejection first and changes his position in reliance on it. BUT offeree can not use the later rejection to cancel K.
What is the rule pertaining to an assignment of rights under a requirements contract?
Right might be assignable if quantity requirement is NOT unreasonably disproportionate to the quantity originally contemplated by the parties
what does a provision of a K that prohibits an "assignment of contract" be construed?
as prohibiting only the delegation of the assignor's duties, and not the assignment of the rights of proceeds made.
What happens if destruction occurs such that performance becomes impossible -- but destruction occurs after performance has begun?
if impossibility, each party is excused from duties that have yet to be performed.

if either party has partially performed prior to the existence of facts resulting in impossibility, that party has a right to recover in quasi-contract at contract rate or for reasonable value of his performance if that mode of valuation is more convenient. (but note, this does not apply to construction builders; more like plumber doing work in house that is destroyed by hurricane)
what is promissory estoppel
if offeror could reasonably expect that the offer would induce offeree to detrimentally change position in reliance on the offer, the court will hold the offer to be irrevocable option due to the detrimental reliance