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183 Cards in this Set
- Front
- Back
- 3rd side (hint)
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OVERALL MEMORY LADDER
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OACLLS VIPR TAD
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FORMATION ELEMENTS OF A CONTRACT
OACLLS |
• Offer by offeror with definite terms expressing intent to be bound that is not yet revoked or rejected creating a power of acceptance in offeree
• Acceptance by offeree (prior to revocation or rejection) through a return promise or performance of the act requested • Consideration - benefit to promisor or detriment to promise • Legal capacity of contracting parties - no Infancy, Insanity, or Intoxication • Legal subject matter and not against public policy • Statute of Frauds compliance if a MOULS contract - Marriage, Over one year, UCC if over $500, Land sale or lease, Suretyship promise |
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CONTRACT PERFORMANCE
VIPR |
• Void or voidable circumstances - MUFFED (Mistakes, Unconscionability, Fraud, Fiduciary’s undue influence, Estoppel defenses, Duress)
• Interpretation of contract - II PACC (Intentions of parties control, Incorporation by reference, Parol evidence rule, Ambiguity, Controlling statute, Conflict of Laws) • Performance and breach • Remedies - MRS DAISI (Money damages, Rescission/reformation/replevin/restitution, Specific performance, Declaratory judgment, Accounting, Injunctions, Statute of limitations bar, In-quasi contract) |
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THIRD PARTY ISSUE
TAD |
• Third party beneficiary - creditor or donee
• Assignment of rights by promisee to assignee • Delegation of duties by obligor to delegatee |
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OFFER
Definiteness |
offer must be clear and unambiguous on all material terms and offeror’s actions must indicate a clear intention to contract. Objective intent to be bound.
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OFFER
Definiteness Objective Test |
How would a reasonable person in the recipient’s position have interpreted the offeror’s expressions of intention?
Under Berg case and “context rule,” all evidence may be considered to determine parties’ intentions |
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OFFER
Open Items Common Law |
Essential Terms include parties, subject matter, price, quantity, and time of performance. Land must include description and price.
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OFFER
Open Items UCC |
Is there a reasonable basis to determine the terms and appropriate remedy? Reasonable market price may be imposed [UCC 2-204]
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OFFER
Revocability |
offers generally revocable before acceptance and are effective when received by offeree. May be implied when offeree leans of an inconsistent act on part of offeror (selling item to another). Public offer must be revoked with comparable degree of publicity.
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OFFER
Revocability FOD |
Firm Offer
Option with Consideration Detrimental Reliance |
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OFFER
Revocability Firm Offer |
explicit assurances signed in writing that offer will be held open and only applies to merchants [UCC 2-205]
a. Irrevocability: if stated time, IR not to exceed three months; if time is not stated, then IR for a reasonable period of time b. Rejection and Subsequent Acceptance: under UCC, offeree’s rejection does not terminate the offer - a subsequent acceptance may result in a valid contract |
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OFFER
Termination Usual Situations |
express revocation by offeror or expiration of time. Implied termination when offeree learns that offeror has taken inconsistent action. Operation of law if no leagal capacity to contract or offeror dies.
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OFFER
Termination Refusal or Rejection |
unequivocal refusal -- may lead to a counteroffer in which parties switch positions
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OFFER
Contractor/Subcontractor Rules |
1. Bids by Subcontractors: IR offers for a reasonable time until contractor’s bid is awarded or rejected
2. Contract Formation: general contractor has a reasonable period to accept subcontractor’s bid 3. Low or Suspect Bids: general contractor may not rely on unreasonably low bids and subcontractor is not forced to perform (see Mistakes) |
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ACCEPTANCE
In general |
a return promise on a bilateral contract (“mirror rule”)
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ACCEPTANCE
Intended Offeree |
personal to and must be accepted by offeree (not assignable)
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ACCEPTANCE
Stipulated Terms |
binding on the offeree. If acceptance contains terms, then it is a counteroffer and parties switch positions. Offer may contain any method for acceptance (rejecting mailbox rule)
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ACCEPTANCE
Knowledge Necessary |
performance without knowledge does not create a K
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ACCEPTANCE
Objective Standard |
Reasonable person standard of offeree’s outward manifestation of assent to show acceptance
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ACCEPTANCE
Silence |
does not usually constitute acceptance
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ACCEPTANCE
Silence Exceptions |
Expressly permit acceptance through silence or past dealings through parties or trade/industry custom. Offeree may have duty to speak.
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ACCEPTANCE
Silence Unsolicited Items |
Gifts (newspapers, periodicals) - receiver has no duty to return or pay for such items received.
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ACCEPTANCE
Auction Items |
Bid is the offer and the fall of the hammer is acceptance. Bid may be withdrawn before the fall of the hammer. If without reserve, auctioneer must accept the highest bid.
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ACCEPTANCE
Retail Installment K |
Buyer may cancel (revoke acceptance) up to midnight of the 3rd day if sale was solicited in person or at a place other than the seller’s place of business.
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ACCEPTANCE
Counteroffer |
Rejects original offer and substitutes a new offer with new terms in its place
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ACCEPTANCE
Unilateral Contract |
requires acceptance in form of performance within a time limit (promise to perform is not enough)
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1. Offer Revocation Common Law: substantial part performance is enough to prohibit revocation of offer
2. UCC – Acceptance Creating Bilateral Contract: offer seeking shipment of goods may be accepted by actual shipment or promise to ship. Offeror should explicitly state that promise to ship is not acceptance. [UCC 2-206] 3. UCC Notification Necessary: To bar right to revoke, offeree must notify that she is beginning performance |
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ACCEPTANCE
Conditional or Additional Terms Common Law |
does not constitute acceptance, but rather a rejection and counteroffer
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a. Mere Inquiry: neither acceptance nor rejection. Original offer stays open and a 2nd offer may be created (“would you be willing to accept $x?”)
b. Request for Additional Terms: valid acceptance unless add’l terms are an express condition of the acceptance (grumbling acceptance) “I accept, but will you pay $500 more?” c. Acceptance With a Demand for Different Terms: usually a rejection with a counteroffer |
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ACCEPTANCE
Conditional or Additional Terms UCC |
acceptance in any manner and any medium is adequate [UCC 2-206]
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a. Minor Additional Terms: mere proposals that offeror must expressly approve unless both are merchants. Offeree may make acceptance contingent on offeror’s acceptance of proposed terms [UCC 2-207]
b. Merchant to Merchant: part of K unless offer precluded new terms. Offeror may avoid add’l terms by notifying offeree of objections in reasonable amount of time. If terms materially alter original bargain, explicit assent is required. (1) Minor Additional Terms: ex. delivery dates, credit terms, interest on overdue notices, limitation of right to refuse defective goods w/in trade tolerance (2) Materially Altering Terms – MOP: Materially change the essence of the bargain, Objected to by the offeror w/in reasonable amount of time, or Precluded in the offer. Ex. negate standard warranty, arbitration requirements |
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ACCEPTANCE
Conflicting Terms Common Law |
“Last shot rule” - terms of last communication prevail (non-conforming acceptance is a counteroffer). A party may accept the last counteroffer by performance
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ACCEPTANCE
Conflicting Terms UCC |
assume both parties object to the treatment of the term, so term is knocked out of the K. Resulting K is remaining terms to which both parties expressly agree plus any UCC gap-fillers. Both parties do not have to be merchants [UCC 2-207]
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ACCEPTANCE
Effective Date Revocation by Offeror |
effective upon receipt by offeree
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ACCEPTANCE
Effective Date Common Law Mailbox Rule |
Effective on Dispatch: if same of faster means as the offeror used.
Effect of Offeror’s Revocation or Unawareness: May result in a valid K if offeree sends acceptance and offeror sends a revocation before recipt of acceptance or acceptance is lost |
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ACCEPTANCE
Effective Date Common Law Mailbox Rule Exceptions |
Exception – Terms of Offer: require acceptance upon receipt, then mailbox rule does not apply
Exception – Options: exercise of option only effective upon receipt - mailbox rule does not apply Exception – Rejection: if offeree first rejects and then accepts offer, then it depends on which arrived to offeror first (mailbox rule does not apply) |
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ACCEPTANCE
Effective date UCC treatment of Mailbox Rule |
Acceptance by offeree need only be w/in a reasonable time by reasonable means. Acceptance could be slower than medium used by offeror [UCC 2-206]
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CONSIDERATION
In general |
Bargained for exchange requires something for something
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CONSIDERATION
Legal sufficiency |
Benefit to the promisor or detriment to the promise.
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CONSIDERATION
Mutuality and Illusory Promises |
a promise to make a voluntary gift or not to commit an illegal act is not consideration. Moral commitments or performing if it is convenient is not consideration. Past consideration is not consideration.
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CONSIDERATION
Pre-existing duty rule |
defense to K recovery where a new promise (or modification) is given for an act that the promise has already promised to perform
1. Exam Questions: “hold up game” - contractor refusing to finish the job unless he gets paid more; lawyer to finish writing will for an extra $500 |
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CONSIDERATION
Pre-existing duty rule Exceptions |
honest dispute about a job, contractor agrees to complete a job earlier, contractor agrees to add’l labor (detriment to promise is add’l consideration)
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CONSIDERATION
Partial Payment Rule |
if good faith about debt is in dispute, then remainder of debt may be recovered. If genuine compromise and payee accepts amount as full payment, acceptance discharges balance of the debt [UCC 3-311]
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CONSIDERATION
Surrendering a Legal Claim |
promise not to pursue a bona fide claim (detriment) in exchange for money. Even if claim is invalid, still consideration if holder of claim reasonably believed claim was founded and enforceable.
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What are the three requirements to form a contract?
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Offer, acceptance, and consideration.
Also referred to as "mutual assent" or a "bargained for exchange" |
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CONSIDERATION
Promissory Estoppel |
if promise reasonably changed her position in reliance on the promise - the necessary consideration is implied by law to avoid injustice resulting from detrimental reliance
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CONSIDERATION
Promissory Estoppel Forseeable Reliance |
detrimental reliance must have been reasonably foreseeable by the promisor
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CONSIDERATION
UCC Modifications |
if sought in good faith do not need consideration to be binding [UCC 2-209]. Ex. a buyer promises to pay more for goods because manufacturer’s cost for gas for shipping has increased.
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LEGAL CAPACITY
In general |
Infants, Insane, and Intoxicated lack legal capacity to K and is a defense to K enforcement action
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LEGAL CAPACITY
Infants Basic Rule |
Ks may be disaffirmed by children under 18 at their option. Infant remains liable for FMV of necessaries not provided by parents (food, shelter, clothing, medical aid) - Parent not liable unless guarantees K
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LEGAL CAPACITY
Infants Ratification |
after reaching age of majority, infant has a reasonable time to avoid/disaffirm or ratify/affirm entire contract or ratification is implied if infant does not disaffirm. Infant must return remainder of luxuries if disaffirms
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LEGAL CAPACITY
Infants Possible Recoveries |
child misrepresented his age and is over age 14, may be able to recover under tort/fraud action
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LEGAL CAPACITY
Insanity |
Court must declare ∆ incapacitated on K date. Unadjudicated incompetence is not enough unless other party had knowledge or reason to know of mental deficiency
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LEGAL CAPACITY
Intoxication |
if not aware of legal consequences of act and other party took advantage of their condition
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LEGAL CAPACITY
Agency Liability |
1. Agency Authority: liability for K entered into by agent is imputed to principal if agent had express, implied, or apparent authority to enter into K
2. Agent’s Personal Liability: agent may be personally liable if he fails to disclose that he lacks capacity, misrepresents scope of authority, etc. |
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LEGAL SUBJECT MATTER
Violation of Law |
contract to commit a crime or tort violates statutory laws. Also, no collection of fee for services without a state license
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LEGAL SUBJECT MATTER
Violation of Law Exceptions |
1. Exception for Beneficiaries: If lawyer fails to be currently licensed by the bar, the client may still recover damages for breach of contract
2. Not “In Pari Delicto”: K may still be enforced by innocent party 3. Divisible Contract: if primary purpose is not illegal, K may be divisible and court may enforce the legal portions of K |
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LEGAL SUBJECT MATTER
Violation of Law Subsequent Illegality |
statute creating illegality after the offer but before acceptance - offer terminates. Statute creating illegality after acceptance - K is discharged under impossibility of performance
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LEGAL SUBJECT MATTER
Violation of Public Policy In general |
court may strike the portion inconsistent with public policy, or if offensive portion is the heart of the K, will hold entire K as unenforceable
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LEGAL SUBJECT MATTER
Violation of Public Policy Consumer Protection Act |
unfair or deceptive business practices that affect the public on this occasion and in the future. Injunctive relief and treble damages up to $25k
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LEGAL SUBJECT MATTER
Violation of Public Policy Restraint of Trade |
Antitrust violations such as agreement to fix prices, allocate markets, and some corp mergers and aquisitions
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LEGAL SUBJECT MATTER
Violation of Public Policy Non-Competition Employment Agreement |
a. Consideration Required: valid, independent consideration is required b/c K might impact a person’s ability to earn a living
b. Reasonable Subject, Area and Time – SAT: court will enforce K only to extent necessary to protect employer. Must be reasonable as to Subject matter covered, Geographic Area, and durational Time period |
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LEGAL SUBJECT MATTER
Violation of Public Policy Business Sale |
non-compete restraint usually deemed to be reasonable to protect buyer and purchased goodwill
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LEGAL SUBJECT MATTER
Violation of Public Policy Tortious Interference |
K promotes tortuous interference with a 3rd party
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LEGAL SUBJECT MATTER
Violation of Public Policy Exculpatory Clauses |
relieves a contracting party from liability due to his own negligence or breach of K - if public interest is involved, then against public policy
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LEGAL SUBJECT MATTER
Violation of Public Policy Defense Waiver Clause |
any provision in a retail installment K in which a buyer agrees not to assert a defense against the seller’s lawsuit or requiring a consumer to submit to suit in a county other than her residence or where the contract is signed
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STATUTE OF FRAUDS
MOULS Contracts |
1. Marriage Including Property Transfer Promise
2. Over One Year 3. UCC If $500 US or More 4. Land Sale or Lease 5. Suretyship Promises |
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STATUTE OF FRAUDS
Marriage Including Property Transfer Promise |
Prenuptial and CPAs. Mutual promises to marry without property transfer may be oral.
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STATUTE OF FRAUDS
Over One Year |
K performance duty is expressly required to extend more than one year (ex. employment contracts lasting 18 mos.)
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STATUTE OF FRAUDS
Over One Year Immediate Beginning |
exactly one year term beginning immediately is not “over one year” and is not required to be in writing.
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STATUTE OF FRAUDS
Over One Year Later Beginning |
a K for one year beginning tomorrow must be written. The period begins when offer is made.
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STATUTE OF FRAUDS
Over One Year Indefinite Term |
usually excluded from SOF because could conceivably end within a year (ex. employment K for life - employee could die in a month). Does not matter if performance eventually exceeds one year.
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STATUTE OF FRAUDS
Over One Year Executed or Part Performance |
one party’s performance takes the performed portion out of SOF. Oral employment K would be enforceable for time employee worked, but unenforceable for future work time.
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STATUTE OF FRAUDS
UCC if over $500 |
UCC sales Ks for goods for more than $500 must be in writing. Construction Ks do not apply b/c heart of K is labor (common law).
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STATUTE OF FRAUDS
UCC if over $500 PAWS exceptions |
1. Part Performance
2. Admission 3. Written Merchant-to-Merchant Confirmations 4. Specially Manufactured Goods 5. Quantity Required 6. “Some Writing” Sufficient |
1. Part Performance: oral Ks are enforceable for the performance already performed
2. Admission: ∆ admits K was made 3. Written Merchant-to-Merchant Confirmations: written confirmations that are not objected to between merchants binds both merchants 4. Specially Manufactured Goods: goods made for that particular buyer that are not suitable for sale to others in ordinary course of business 5. Quantity Required: UCC K is not enforceable beyond quantity of goods specified in agreement 6. “Some Writing” Sufficient: Any written authentication that identifies the ∆ will suffice; signature of ∆ not required - letterhead or email will suffice |
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STATUTE OF FRAUDS
Land Sale or Lease |
sales must state the price and be signed by the seller; leases of more than one year must be written and signed by the lessor
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STATUTE OF FRAUDS
Land Sale or Lease Included Agreements |
K for land resources (timber, oil), K authorizing an agent to sell property, liability encumbrances, conveyancing deeds. Crops harvested from land need not be in writing unless over $500.
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STATUTE OF FRAUDS
Land Sale or Lease Land Possessor Exception |
Oral conveyance may be enforced if land possessor makes a down payment, takes possession, and performs substantial improvements to the property. Paying taxes is a strong indicator of ownership. Must be more than a mere tenant.
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STATUTE OF FRAUDS
Suretyship Promises General Rule |
A guarantee for the debts or default of another must be in writing. Ex. “I will pay the debts of my child if she cannot” and not “ship the goods to my child and I will pay for them.”
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STATUTE OF FRAUDS
Suretyship Promises SOF Exception |
If the main promise of the surety’s undertaking is to substantially benefit his own economic interest, then an oral K may be enforceable. Ex. Parent corp’s guarantee of subsidiary’s debts or a parent’s oral guarantee of a child’s debt for necessaries. In contrast, an oral promise to pay the debt of a friend is unenforceable.
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STATUTE OF FRAUDS
"No oral Modifications" |
Unenforceable - improperly restrict parties’ future rights to modify since the provision is subject to modifications itself
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STATUTE OF FRAUDS
Divisability |
Part performance may take the executed portion out of SOF and make part of the oral K enforceable and part unenforceable
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STATUTE OF FRAUDS
Promissory Estoppel |
if ∆ represented that no writing was necessary or he would sign an agreement later
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STATUTE OF FRAUDS
Other Remedies |
tort recovery or quasi-contract through unjust enrichment
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VOIDABLE CONTRACTS
MUFFED |
1. Mistakes
2. Unconsionability 3. Fraud 4. Fiduciary's Undue Influence 5. Estoppel Defenses 6. Duress |
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VOIDABLE CONTRACTS
Mistakes |
a party’s basic assumption about a significant aspect of the exchange is not in accordance with the truth. Usual remedy is rescission
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VOIDABLE CONTRACTS
Mistakes Unilateral Mistake |
only one party was mistaken - misunderstands the legal consequences or the facts on which the K was based (contractor makes a mechanical calculation mistake in preparing a bid)
General Rule – Contract Enforceable: mistaken party must generally perform based on terms of K b/c it would deprive non-mistaken party the benefit of the bargain (right to be stupid) |
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VOIDABLE CONTRACTS
Mistakes Unilateral Mistake Exception Excusing Performance |
(1) Had Knowledge: actual or constructive knowledge of other’s mistake
(2) Aided in Mistake: substantially contributed to mistake (not disclosing an important defect) |
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VOIDABLE CONTRACTS
Mistakes Mutual |
a. Mutual Mistake of Value: both parties believed item had no value when it was actually very valuable is NOT grounds for rescission
b. Mutual Mistake of Fact: factual dispute is so material that there is no meeting of the minds (selling a painting that is an original versus a good copy or seller thinks he is selling one car, buyer thinks he is buying another) - this is grounds for rescission c. Mixed Value and Fact: usually courts interpret as a factual mistake allowing for rescission |
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VOIDABLE CONTRACTS
Unconscionability Characteristics |
Facts must “shock the conscience.” Must be either Procedural (unfair, high-pressure bargaining process resulting in absence of meaningful choice) or Substantial unconsionability (extreme harshness and oppression in the outcome) - do not need both
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VOIDABLE CONTRACTS
Unconsionability Adhesion Ks and UCC |
Adhesion Contract: K presented by a superior party on a take-it-or-leave-it basis
UCC Treatment: requires good faith in all transactions |
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VOIDABLE CONTRACTS
Fraud Fraud in the Execution |
Look to the instrument itself - signing a delivery receipt that was later doctored into a promissory note
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VOIDABLE CONTRACTS
Fraud Fraud in the Inducement FIRD |
a. False Statement of a Material Fact: must rise above mere puffing (“this car gets 30 miles per gallon” versus “this car is in great shape”)
b. Intention to Deceive the P: “scienter” - ∆ intends to deceive c. Reliance by P on the D’s False Statement: π must both in fact and reasonably rely on ∆’s misrepresentation in entering the K d. Damages: benefit of bargain is measure of damages |
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VOIDABLE CONTRACTS
Fiduciary's Undue Influence |
1. Undivided Loyalty Required: high degree of loyalty, good faith, and due care. All relevant facts must be disclosed or a fiduciary may be liable
2. Unfair Persuasion: not entering into a K at arm’s length and taking advantage of a position of trust. Ex. a lawyer that enters into a land conveyance with an elderly client 3. Constructive Trust: if fiduciary acquires legal title, court may impose a constructive trust to hold the property for the benefit of the beneficiary when acquired through fraud, undue influence, theft, or extreme duress. |
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VOIDABLE CONTRACTS
Estoppel Defenses |
1. Equitable Estoppel: false statement is one of fact, not a promise. π wrote ∆ stating that he would not sue for enforcement of K and π then sues
2. Judicial Estoppel: π gave sworn testimony in court that is inconsistent with position in subsequent proceeding. |
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VOIDABLE CONTRACTS
Duress |
1. Coercion or Threat: impeding free will - ex. threat of physical harm or pursue criminal prosecution (civil litigation is not enough). Must prove that threat would have coerced a reasonable prudent person to assent to K against his will. K is voidable by victim.
2. Economic Duress: necessities were immediately needed and could not be obtained from another source (insulin from sole supplier) |
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INTERPRETATION OF CONTRACT
II PACC |
1. Intentions of Parties Control
2. Incorporation by Reference 3. Parol Evidence rule 4. Ambiguity 5. Controlling Statute 6. Conflict of Laws |
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INTERPRETATION OF CONTRACT
Intentions of Parties Control |
Objective standard according to “context rule” - follow language of the K
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INTERPRETATION OF CONTRACT
Incorporation by Reference |
K refers to another document or agreement with absolute certainty. If treatment of a term between two docs differ, most recent document agreement controls.
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INTERPRETATION OF CONTRACT
Parol Evidence Rule In general |
Excludes from evidence any prior or contemporaneous discussions that are not embodied in or contradict the written agreement. An integrated K is intended to be the final expression of the entire agreement. Merger clause will invoke PER. The PER is a question of law to be decided by the judge.
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions DUCAS |
1. Defect in Formation
2. UCC Performance, Dealings, Trade Terms 3. Condition Precedent 4. Ambiguity Clarification 5. Subsequent Modifications |
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions Defect in Formation |
Context Rule
All evidence may be introduced to show intentions of parties and circumstances under which a written K was executed. Berg. May be voidable by illegality or lack of capacity (See MUFFED) |
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions UCC Performance, etc |
a. Course of Performance: Parties’ earlier course of performance in present K may clarify uncertainty or schedule of repeat performances for consistency
b. Past Course of Dealings: decides how ambiguous term was handled in previous contexts (method of billing, price, etc) c. Usage of Trade: regularly accepted practice or method used in the industry or trade |
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions Condition Precedent |
if K was not to be effective until the occurrence of a certain condition, evidence of the non-occurrence of the condition may be introduced
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions Ambiguity Clarification |
Extrinsic conversations may be admitted to define, interpret or clarify an ambiguous term in an agreement if there is more than one interpretation
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INTERPRETATION OF CONTRACT
Parol Evidence Rule Exceptions Subsequent Modifications |
May always be admitted into evidence if they change one or more terms (goes with accord and satisfaction)
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INTERPRETATION OF CONTRACT
Ambiguity |
Question of law for court. Latent ambiguity is where K appears clear at formation, but subsequent facts show a term may be interpreted in more than one way. A term generally has an ordinary, usual, and popular meaning unless a contrary intent in clearly demonstrated.
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INTERPRETATION OF CONTRACT
Ambiguity Construction |
ambiguous terms are usually construed against the drafter since they had the power to use more exacting language
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INTERPRETATION OF CONTRACT
Ambiguity Contradictory Terms |
a. Narrative-Time Conflict: Handwritten terms prevail over typewritten terms; typed terms prevail over standard form language; most recent expression of term prevails
b. Amount Designation Conflict: if both words and numbers appear in a K, words prevail (“eighty” versus “8”) |
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INTERPRETATION OF CONTRACT
Controlling Statute |
missing term may be supplemented by a statutory provision
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INTERPRETATION OF CONTRACT
Conflict of Laws |
1. Substantial Relationship Required: unless nexus identified in K, must have substantial relationship to jurisdiction
2. Most Significant Relationship: absent a specific K designation, the forum with most significant relationship with parties, subject, and performance has jurisdiction 3. Forum Selection Designation: Usually enforceable. Party seeking to invalidate must establish that designated forum is very unfair or unreasonable. |
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PERFORMANCE AND BREACH
Full Satisfactory Performance Condition Precedent |
Must occur before promisor’s duty to perform matures.
a. Objective Standard: Reasonable person test is adopted if approval requires a mechanical utility or operational fitness (architect certifies plans before building occurs) b. Subjective Standard: Personal taste or fancy performed in good faith (portrait) c. Time of the Essence: This condition will be enforced if damages are created because of late performance (versus a slight delay that does not cause a material breach) |
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PERFORMANCE AND BREACH
Full Satisfactory Performance Condition Concerrent |
Conditions that both parties must perform simultaneously or about the same time. Ex. delivery of goods in exchange for payment. Court will usually divide a K if one condition is not fulfilled.
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PERFORMANCE AND BREACH
Full Satisfactory Performance Condition Subsequent |
Predefines uncertain future event that operates to discharge the performance of one or both parties.
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PERFORMANCE AND BREACH
Substantial Performance Basic Test |
prevents a total forfeiture from a minor breach -- determines whether breach was material or minor (rejects UCC’s “perfect tender rule”)
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PERFORMANCE AND BREACH
Substantial Performance Damage Reduction |
damages flowing from the defect are deducted from the K price -- a reduction in value. Ex. contractor laying a different brand of pipe than was specified - must show deficiency is more than cosmetic
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PERFORMANCE AND BREACH
Substantial Performance Quasi-K |
even if breach is material, may be quasi-contract recovery
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PERFORMANCE AND BREACH
Excusable Nonperformance CIISSU |
Discharges contractual duty where performance has been impossible or unduly burdensome, not merely difficult or expensive
1. Coorporation or Hinderence 2. Illegality after Formation 3. Incapacity 4. Source of Supply Destroyed 5. Subject Matter Destroyed 6. UCC Failure of Presupposed Condition |
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PERFORMANCE AND BREACH
Excusable Nonperformance Cooperation or Hindrance |
party failed to provide necessary cooperation - may discharge other party’s performance
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PERFORMANCE AND BREACH
Excusable Nonperformance Illegality After Formation |
Legislation subsequent to K formation
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PERFORMANCE AND BREACH
Excusable Nonperformance Incapacity |
incapacity or death of personal service contractor (ex. death of portrait painter). If other employees may perform, sick employee not excused.
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PERFORMANCE AND BREACH
Excusable Nonperformance Source of Supply Destroyed |
Source of supply specifically designated in K destroyed through no fault of promisor. If source not specified, then party must buy goods to meet K performance duty.
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PERFORMANCE AND BREACH
Excusable Nonperformance Subject Matter Destroyed |
Frustration of Purpose. Unique subject matter of performance is destroyed through no fault of the parties (ex. antique car is stolen that is subject to a sale -- standard car would probably not rise to this level - seller would have to provide a substitute)
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PERFORMANCE AND BREACH
Excusable Nonperformance UCC Failure of a Presupposed Condition |
Commercial impracticality or govt regulation - a mere increase in cost or difficulty is not enough
a. Examples: Unforeseeable conditions: war, fire, terrorist attack, crop failure b. Part Performance: if part performance is still possible, seller must fairly and reasonably allocate production and deliveries among customers and customers must be notified of delay and what they will receive. |
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PERFORMANCE AND BREACH
Nonperformance But Agreement Accord and Satisfaction |
Accord: Parties agree to modify performance from original K into a new K. Satisfaction of new agreement discharges the original and new obligation. If satisfaction is not performed, oblige may sue on either original K or accord agreement.
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PERFORMANCE AND BREACH
Nonperformance But Agreement Novation |
Parties enter into t new K in which a different party is substituted for one of the original parties and includes an express release of the original obligor (corp formation)
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PERFORMANCE AND BREACH
Nonperformance But Agreement Cancellation |
Rescission of entire K by mutual agreement - terminates all rights and duties
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PERFORMANCE AND BREACH
Nonperformance But Agreement Waiver |
one party voluntarily relinquishes the right to sue for breach either expressly or implied through actions - performance after failure to meet a condition
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PERFORMANCE AND BREACH
Nonperformance But Agreement Release or Promise Not to Sue |
mutual release terminates the K relationship
a. Joint Obligor: release of one joint obligor releases others from breach unless release contains an express reservation of rights b. Mere Negative Covenant: a release does not affect the liability of other obligors (“I release you” versus “I promise not to sue you”) |
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PERFORMANCE AND BREACH
Breach In general |
not substantial performance, performance not excused, and parties did not agree to an accord and satisfaction, novation, cancellation, or release.
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PERFORMANCE AND BREACH
Breach Performance Presently Due |
failure to perform a duty presently due
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PERFORMANCE AND BREACH
Breach Anticipatory Repudiation |
a party positively states he will not render required future performance, which substantially impairs whole K. Must go beyond performance uncertainty but be objectively unequivocal and unambiguous. Non-repudiating party is entitled to suspend performance, cancel the K, and immediately sue for damages or may wait until performance date for a retraction of the repudiation (but is not bound to).
a. Retraction Before Position Change: No breach if ∆ retracts before π has materially changed position b. UCC Assurance of Performance: Insecurity creates a right to submit a written demand for adequate assurance of performance. If no response within 30 days, then treated as anticipatory repudiation. |
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PERFORMANCE AND BREACH
Breach Breach of Divisible Contract |
a. Common Law: to avoid total forfeiture, court will treat K as having multiple divisible portions rather than one entirety
b. UCC Sales Contracts: single delivery is assumed - if more than one delivery, price is apportioned. If deliveries are missed, UCC will enforce what has been delivered and paid for. |
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PERFORMANCE AND BREACH
Breach Material or Minor Breach |
Material - undermines basis of the bargain and allows non-breaching party to cancel own performance. Minor - non-breaching party must continue performance but has a claim for damages.
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REMEDIES
MRS DAISI |
1. Money Damages
2. Rescission/Reformation/Replevin/Restitution 3. Specific Performance 4. Declatory Judgment 5. Accounting 6. Injunctions 7. Statute of Limitations Bar 8. In Quasi-Contract |
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REMEDIES
Money Damages Liquidated Damages |
specified in K where it may be difficult to calculate damages accurately (ex. $200 per day for late performance in building)
a. Sole Remedy: when amount is a reasonable estimation of either anticipated or actual harm b. Penalty Interpretation: if court determines that liquidated damages are so large as to constitute a penalty π is limited to actual damages. |
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REMEDIES
Money Damages Compensatory or Expectation Damages |
compensatory - actual damages expectation - benefit of the bargain
a. Benefit of Bargain: compensate π in the amount that would have resulted if ∆ did not breach the K (tenant terminating lease early) b. Construction Contracts: defective performance = cost of completion by another contractor c. Interest Award: if amount can be computed with exactness (liquidated damages), π is entitled to interest since π could have had use of the money if ∆ had not breached |
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REMEDIES
Money Damages Reliance Interest (Costs) |
π is entitled to recover any out of pocket expenses incurred in reliance that ∆ would perform
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REMEDIES
Money Damages Punitive Damages |
intended to punish ∆ for reprehensible conduct and deter future behavior. Not awarded in WA for simple breach of K, but breach of fiduciary duty or violation of CPA may allow for punitive damages.
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REMEDIES
Money Damages Recovery Limitations |
a. Foreseeability: ∆ must have been able to reasonably foresee the resulting damages would occur as a probable consequence of the breach (Hadley v Baxendale)
b. Certainty: π must establish with certainty the amount of loss and that the loss would have been avoided but for the breach |
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REMEDIES
Money Damages UCC Remedies |
Seller receives K price and incidental costs. Buyer may buy replacement goods elsewhere and recover incidental and consequential costs
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REMEDIES
Money Damages Damage Mitigation |
Non-breaching party has a duty to mitigate losses caused by breach - losses that could have reasonably been avoided are not recoverable
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REMEDIES
Money Damages Litigation Expenses |
court costs, attorney’s fees, discovery costs, etc., but only if authorized by K, statute or court rule
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REMEDIES
Rescission/Reformation/Replevin/Restitution Rescission |
Complete undoing; places both parties in a pre-K position and discharges all duties (formation defects, mutual mistake, fraud in inducement, excusable nonperformance)
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REMEDIES
Rescission/Reformation/Replevin/Restitution Reformation |
Changing the K; conforms to parties’ original true intent - changes only the mistaken or offensive portion but leaves remainder in place
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REMEDIES
Rescission/Reformation/Replevin/Restitution Replevin |
recover possession of goods taken from true owner
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REMEDIES
Rescission/Reformation/Replevin/Restitution Restitution |
alternative to other damages - compensation to be made whole
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REMEDIES
Specific Performance |
1. Performance Order: order breaching party to complete performance as promised in K
2. Remedy Availability: (1) money damages are inadequate or (2) subject of K is unique (real estate, painting, antique car) 3. Non-Availability: personal service Ks like employment or work by an attorney |
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REMEDIES
Declaratory Judgment |
Judicial determination covering some or all provisions of a K before or after a breach (ex. ambiguous terms, mutual mistake)
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REMEDIES
Accounting |
determination of judgment amount (in addition to liability) - ex. amount of royalties
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REMEDIES
Injunctions |
court orders to stop an action, such as trespassing, or to prevent a ∆ from working with anyone other than the π
1. Temporary Restraining Order (TRO): immediate protection of person or property 2. Preliminary Injunction: issued prior to trial on the merits of dispute - maintains status quo until there is a proper judicial resolution on ultimate controversy 3. Permanent Injunction: after full trial on merits and may be part of the final resolution of dispute |
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REMEDIES
Statute of Limitations Bar Common Law |
K may stipulate length of time cause of action remains alive. Absent this, WA statute controls
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REMEDIES
Statute of Limitations Bar Contract Rule (WA law) |
Under WA, 6 years to file complaint on written agreement and 3 years on oral agreement. Time period is triggered on date K is breached
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REMEDIES
Statute of Limitations Bar Tort Rules |
a. 3 Years: most actions
b. 2 Years: short-lived tort (assault, battery, libel, slander) c. Trigger Date: date tort was committed d. Discovery Rule: SOL may be tolled until date π actually discovered or should have discovered the tort |
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REMEDIES
Statute of Limitations Bar UCC Treatment |
action for sale of goods must be commenced within 4 years, which usually starts on date of delivery
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REMEDIES
Statute of Limitations Bar Tolled Time Period |
∆’s absence from WA state or π’s disability (infancy, temporary insanity, coma)
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REMEDIES
Statute of Limitations Bar Laches |
Affirmative defense for ∆ - π must have unreasonably delayed commencement of lawsuit to unfairly prejudice ∆
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REMEDIES
In Quasi-Contract Purpose |
Promotes fairness and avoids unjust enrichment where there is no enforceable K. ∆ knowingly received a benefit from P who had a reasonable expectation of compensation.
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REMEDIES
In Quasi-Contract Recovery Amount |
FMV of the benefit that unjustly enriched ∆.
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REMEDIES
In Quasi-Contract Examples |
Agreement violated SOF, minor purchased luxuries, doctor rendered emergency treatment, innocent π provided a valuable service to wrong party
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REMEDIES
In Quasi-Contract Laches |
no SOL because no K - laches is the affirmative defense to quasi-K
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THIRD PARTY BENEFICIARIES
General Concepts Intention to Bestow Rights |
K may specifically grant rights to a 3rd party giving them standing to sue and enforce the K against the promisor (if after K, then an assignment)
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THIRD PARTY BENEFICIARIES
General Concepts Legal Rights |
K must give 3rd party express right to sue directly
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THIRD PARTY BENEFICIARIES
General Concepts When Rights “Vest” |
Bene must know that rights have been bestwed and make some movement towards affirmative reliance. Before vesting, original parties may modify or rescind benefits - after, must have consent of bene
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THIRD PARTY BENEFICIARIES
Creditor Beneficiary |
if K spells out that promise will pay 3rd party to which promisor owes money, creditor may go after promise, promisor, or both (Bank to whom you owed a preexisting debt)
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THIRD PARTY BENEFICIARIES
Donee Beneficiary |
cannot sue party who made gift to bene (no consideration), but may sue other party to K for enforcement
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THIRD PARTY BENEFICIARIES
Incidental Beneficiary |
not intended by parties for bene to receive rights and is thus not enforceable
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ASSIGNMENT OF RIGHTS
General Concepts |
Introduction of 3rd parties to K - may receive a pre-existing K right or may agree to perform a pre-existing K duty. Unlike 3rd party benes, no pre-existing debt or gift due to the assignee, but an obligation created after K is formed (assignee not on scene at time of signing K; assignee gets all rights of assignor and can sue and raise defenses available to assignor)
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ASSIGNMENT OF RIGHTS
Time Created |
after K formation and once other party is notified. Assignment will extinguish the assignor’s ability to enforce K rights
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ASSIGNMENT OF RIGHTS
Limitations on Assignability |
a. Common Law: non-assignable rights: mere offer, right to receive personal services of another, payment from a future K not yet in existence, insurance coverage
b. UCC: unless otherwise agreed in K, all rights of either seller or buyer are assignable unless assignment would materially increase a party’s burden or risk |
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ASSIGNMENT OF RIGHTS
Oral Assignment |
enforceable unless involving land, goods over $500, or wage assignments
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ASSIGNMENT OF RIGHTS
Revocability |
assignment with consideration is irrevocable
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ASSIGNMENT OF RIGHTS
Effect of Notice |
if notice is not given to promisor, he can continue to render performance to the promisee/assignor. After notice, rights in assignee vest.
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ASSIGNMENT OF RIGHTS
Promisor’s Defenses |
promisor may assert all defenses he would have had against original promisee
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ASSIGNMENT OF RIGHTS
Holder In Due Course |
rights to sue a promisor are not subject to defenses that are personal to promisee, such as fraud in inducement or failure of consideration
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ASSIGNMENT OF RIGHTS
Prohibition on Assignment Common Law |
prohibition of assignment traditionally enforceable
a. Modern View: if assignor fully performs, then courts are reluctant to enforce provision. Also, assigning right to sue is always okay b. Assignee’s Rights: innocent assignee who lack knowledge of prohibition may enforce assigned K rights |
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ASSIGNMENT OF RIGHTS
Prohibition on Assignment Legal Prohibition and Future Rights |
prohibition of assignment of child support and alimony; wage assignments; rights not yet in existence
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ASSIGNMENT OF RIGHTS
Prohibition on Assignment UCC Treatment |
prohibition only bars delegation of performance duties.
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ASSIGNMENT OF RIGHTS
Multiple Assignee Priority Common Law |
if assignment is irrevocable, the assignee first in time is first in right
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ASSIGNMENT OF RIGHTS
Multiple Assignee Priority UCC Treatment |
first assignee to “perfect” prevails (file a UCC financing statement)
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ASSIGNMENT OF RIGHTS
Multiple Assignee Priority Waiver of Defense Clause |
Clause to not assert defenses against assignee that could have been asserted against assignor seller are not effective in WA
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DELEGATION OF DUTIES
General Concept |
Original promisor delegates performance duty to 3rd party who affirmatively promises to perform. Consent to perform is not required except in 3 situations
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DELEGATION OF DUTIES
When Consent to Perform is Required |
1. Prohibition on Delegation: acceptance of delegated performance without complaint waives delegation prohibition
2. Personal Skill of Obligor 3. Material Risk or Burden Imposed |
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DELEGATION OF DUTIES
Right to Assurances |
any delegation may be anticipatory repudiation - may create reasonable ground for insecurity and provide the oblige the right to demand assurances
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DELEGATION OF DUTIES
Delegatee Liability to Obligee |
delegatee may be liable to original obligee if performance is inadequate - oblige is intended 3rd party beneficiary so original obligee can sue 3rd party
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DELEGATION OF DUTIES
Delegator Liability to Obligee |
delegator remains liable to obligee unless novation or release
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