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238 Cards in this Set
- Front
- Back
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Overview of contract
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Applicable law
Formation of contracts Terms of contract Performance Remedies for unexcused nonperformance Excuse of nonperformance Third party problems |
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Definition of contract
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Legally enforceable agreement (or legally enforcement promise)
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Quasi contract
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Equitable remedy
Elements: P has conferred a benefit on D and P has reasonably expected to be paid and D realized unjust enrichment if P not compensated Measure of recovery: contract price is not the measure of recovery focus on value of benefit conferred. |
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Elements of quasi contract
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P has conferred a benefit on D and P has reaosnably expected to be paid and D realized unjust enrichment if P not compensated
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Unilateral contract
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Results from an offer that expressly requires performance as the only possible method of acceptance
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Bilateral contract
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Focus on other.
Usually bilateral unless: a. reward, prize, contest OR offer expressly requires performance for acceptance. |
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Irrevocable
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For some reason, it CANNOT be revoked. cannot be canceled. offeror is lock in.
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Revocable
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Capable of being revoked, but hasnt been revoked yet
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Applicable contracts law
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Common law (services, real estate)
Article 2 of UCC (law of sales) |
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Common law governs
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real estate; services
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Article 2 of the UCC applies
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to contracts that are generally the sale of goods. most, but not all, UCC are the same as common law.
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Factors to determine if UCC Article 2 applies
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Type of transaction-sale
Subject matter of the transaction-goods, ie tangible personal property. Mixed deal: general rule all or nothing. Look at more important part EXCPETION: If contract divdes payment, then apply UCC sale of goods part and common law to the rest |
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Article 2a of UCC
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Not on multistte.
Applies to leases of goods. in most controversies, involving only the lessor and lesser. article 2a is similar to article 2. in controversies involving default by the lessee or n priority contests btwn lessor and third parties |
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Overview of formation of contracts
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A contract is an agreement or a promise that is legally enforceable. most contracts in the real world and on the bar exam are based on agreement. first look for an agreement. then determine whether the agreement is legally enforceable
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Watch for THREE steps of formation of contract
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level one: initial communication between the people (offers)
level two: what happens after the initial communication (termination of offers) level three: who responds and how she responds (acceptance) |
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General test for offers
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manifestation of commitment
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What is an offer
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An offer is a manifestation of an intent. not an actual manifestation. but looking at words and conduct, and seeing how a reasonable person would manifest a contract
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Specific problems to work for with regard to offer
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1. content
2. context |
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General rule for content problems with offer
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Gneral rule: an offer is not required to contain all material terms.
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Specific problem to watch for: missing price term in sales contracts.
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1. If common law (real estate) then ABSOLUTE requirement of price. Until price is mentioned, no offer. doesn't matter whether communication is labeled offer
2. sales of goods: article 2: no price requirement, offer is so if parties so intend. |
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Vague or material terms rule (in offer content probs)
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If vague or ambiguous terms, not an offer under common law or UCC. If see 'appropriate, fair, or reasonable' thats vague!
prevents first communication from being an offer |
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Requirements contract/output contracts content problems
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A contract for the sale of goods can state the quantity of goods to be delivered under contract in terms of buyer's requirements or seller's output or in terms of exclusivity. Use 'all, only, exclusively, solely' Valid!
not unreasonably disproportionate limitation on increases. buyer can increase requirements so long as increase is in line with prior demands. |
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Context problems with offer
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General rule: an advertisement is not an offer!
Exceptions: an advertisement can be an offer it is in the nature of a reward an advertisement can be an offer if it specific as to quantity and expressly indicates who can accept |
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Is an advertisement an offer?
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No. two exceptions:
1. if an advertisement can be an offer if it is in the nature of reward an advertisement can be an offer if it specific as to quantity and expressly indicates who can accept |
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Termination of offers (four methods)
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1. lapse of time-time stated or reasonable time
2. death of a party prior to acceptance 3. words or conduct of offeror: revocation 4. words or conduct of offeree |
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Termination
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An offer cannot be accepted if its been terminated. terminated is dead
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Lapse of time method of termination
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Time stated or reasonable time. Watch for fact pattern that says time offer received and time of response.
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Death of a party prior to an acceptance method of termination
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general rule: death of either party after offer but before acceptance terminates offer.
Exception: -option -part performance of offer to enter into unilateral contract |
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Words or conduct of offeror. revocation method of termination
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Only offer maker can revoke. BUT two player game. must always be offeree awareness. doesnt have to learn from offereor
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How can an offeror revoke in order to terminate contract
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Only through unambiguous statement by offeror to offeree to unwillingness or inability to contract.
-unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of Merely making multiple offers is not a revocation |
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When does revocation become effective?
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If revocation is sent through mail, not effective until it is received.
An offer cannot be reovked after it has been accepted. |
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Offers that cannot be revoked
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Generally offers can be freely revoked by offeror. however, three are four different situations in which offer cannot be revoked (option, firm offer, reliance rule, start of performance)
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Option
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'An offer plus.' an offer plus a promise to keep the offer open. and some payment for that promise. offeror has promised not to revoke (or promised to keep the offer open) AND this promise is upposed by pament or othre consideration (option)
after the time period has passed, its revocable. can still be accepted, but can be revoked) |
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UCC firm offer rule
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an offer cannot be revoked for up to three months if:
1. offer to buy or sell goods 2. signed written promise to keep offer open AND 3. party is a merchant (generally a person in business) Does not require payment (unlike option) Three month cap (unlike option, have no limit) If states more than three months, three months imposed. if signs nothing, but signed and by a merchant and promises to keep ofer open, S may not revoke. Courts will impose a reasonable time, but no longer than three months for firm offer rule, has to say will keep offer open, not just make an offer |
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Difference btwn options and firm offer rule
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Firm offers to not require payment, unlike options.
Three month cap on firm offer, options have no limit |
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Inability to revoke an offer due to reliance
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If reliance is reasonably foreseable and detrimental, offer cannot be revoked
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Inability to revoke an offer in unilateral contract...
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Start of performance pursant to an offer to en enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.
Unilateral performance (Sentence will have 'offer' followed by 'only by') Unilateral.mere preparation |
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Wwords/conduct of offeree
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Can terminate an offer
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Three methods of indirect rejects
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Counteroffer
Condtional acceptance additional terms (first two apply to all contractsl addition terms does not apply to contracts for sales of good, only common law) |
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Counteroffer
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counteroffer always terminates the offer and becomes a new offer., thus, where a counteroffer has been made, there is no express contract unless that counteroffer has itself been accepted
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Counteroffers v bargaining
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Bargaining does NOT terminate offer.
Signal for bargaining? respons in form of question and not statement |
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Conditional acceptance method of indirect rejection
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a conditional acceptance always operates the same way as a counter offer. it terminates the offer and becomes a new offer. look for a response to an offer with the word accept, followed by one of these words of phrase. 'if' only i, provided, so long as, but, or on condition that
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additional terms to a common law contracts (mirror image rule)
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ONLY common law
under common law, an order for a reasponse to be an acceptance, but looks exactly like offer new terms treated like a counteroffer than than acceptance |
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Additoinal terms still acceptance under UCC article 2: seasonable expression of acceptance
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1. a fact pattern in which there is an offer to buy or sell goods and response with additional terms raises two seaparate questions:
first question: is there a contract second contract: is additional terms part of contract |
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Additional terms, UCC: Is there a contract?
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under the UCC, a response to an offer that adds new terms, but does not make the new terms a condtion of acceptance, is generally treated as an acceptance is generally a seasonable expression of acceptance.
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Additional terms, UCC. Is the additional terms part of the contract
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Look to see whether both parties are merchants. if at least one is not a merchant, the additonal term is merely a proposal that is to be separately accepted or rejected. if however, both parties are merchanges, the GENERAL RULE is that the additoinal term is part of contract.
Two exceptions: the additoinal term is nOT part of the contract btwn merchants if it materiall changes the offer or 2. the additional term is nOT part of the contract between mechants if the offeror objects to the change |
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Overview of acceptance
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Look at the offer for information about how the offer was accepted and who accepted
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Methods of accepting an offer:
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1. later conduct by offeror implying contract notwithstanding improper response to an offer
2. the offeree fully performs 3. the offeree starts to perform 3. the offeree promises to perform 5. mail box rules 6. the seller of goods sends the wrong goods |
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'Later conduct by offeror implying contract notwithstanding improper response to an offer' acceptance
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under both common law and article 2, a conditoinal acceptance does not qualify as an acceptance. under common law a response with additoinal terms does not qualify as an acceptance. sometimes, notwithstanding a response to an offer than does not qualify as an acceptance, the parties act as if there is a contract. under common law, such conduct is treated is treated as cceptance; under article 2, such conduct is treated like a new contract
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the offeree fully performs form of acceptance
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fact patterns in which 1) there is a verabl offer but 2) no words in response. instead 3) only response is full performance. no question that full performance is acceptance.
What about notice of performance? turns on 1) what offer requires, or 2) whether offeree has reason to believe that offeror will not learn of the acceptance. can be excused by offeree's failure to give notice. look for geographical |
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The offeree starts to perform method of acceptance
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Watch for a fact pattern with three characeristics: 1) verbal offer; 2) no words in response and 3) start of performance
stat of performance is acceptance of an offer to enter into a bilateral contract, but is not acceptance of an offer to enter into a unilateral contract General rule: start of performance is acceptance treated as an impled promise to perform and so there is a contract Exception: start of performance is not acceptance of unilateral contract offers; completion of performance is required. if offer requires performance for acceptance, then perfromance for purposes of acceptance of that offer means completion of performance. |
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The offeree promises to perform mehtod of acceptance
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Only words. words of offer, words of acceptance, but not performance.
most offers can be accepted by a promie to perform and offers that expressly require performance for acceptance and reward offers require perfromance for acceptance |
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Mail box rules and acceptance
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The offeror and the offeree are at different places and there are conflicting communications.
Acceptance is GENERALLY effective when mailed. second, all other communications are effective only when received. third, if a rejection is mailed before an acceptance is mailed, then neither is effective until received |
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The seller of goods sends the wrong goods method of acceptance
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General rule: acceptance and breach
accomodation counteroffer and no breach |
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Who can accept
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an offer can be accepted only by
1) a person who knows about the offer 2) who is the person to whom it was made. offers cannot be assigned; options can be assigned unless the option provides otherwise. |
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Rewards and knowing of the offer with regard to acceptance
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At time of accepting the offer by performance, offeree must know about the offer. usually only happens in rewards situations.
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Nonassignability of offers
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mere offers cannot be transferred (contracts but not offers)
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Assignability of options
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yes, unless option otherwise provides
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Second/over view of formation
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Remember that a contract is more than an agreement. some agreements are not legally enforceable. legal reasons for not enforcing an agreement include 1) lack of consideration
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Lack of consideration
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reason for not enforcing agreement
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What is consideration?
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The doctrine of consideration is of limited practical signifance. in most transaction, particularly most commercial agreements, there will be no issue as to consideration.
article 2 of the ucc has further reduced the practical signifcance of consideration in modiation |
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Three steps in dealing with consideration
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First, identify the promiser maker/promise maker.
second, ask whether the person asked for something in return for her promise. third, look at the person who is trying to enforce and ask what requested legal detriment that person sustained |
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Forms of consideration
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1. performance (doing something not legally obligated to do)
2. forbearance not doing something legally entitled to do 3. promise to perform 4. promise to forbear |
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Possible consideration issues:
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1. Bargained for
2. legal detriment 3. promise as consideration 4. adequacy of consideration 5. past consideration 6. pre existing statutory duty rule 7. part payment as consideration for release. ie promise to forgive balance of debt |
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Bargained for issue in consideration
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Asked by the promisor IN EXCHANGE for her promises.
people doing stuff they were asked to do |
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Promise as consideration issue in consideration
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one promise can be promise for another promie.
illusory promise exception: S promises to sell unless she changes her mind |
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Adequacy of consideration issue in consideration
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not relevant in contract law
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Past consideration issue in consideration
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General rule: not consideration. stuff that happened before a promise cannot be later consideration for promise.
exception: expressly request and expectation of payment |
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Pre existing contractual statutory duty rule issue in consideration (common law)
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Common law: general, doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that. under common law, new consideration is required for contract modification
exceptions: addition to or change in performance. any change in performance, new consideration, promise to pay more is legally enforceable. 2 unforeseen difficulty so severe as to excuse performance 3. third party promies to pay |
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Pre existing contractual statutory duty rule issue in consideration (article 2)
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Article 2 does not have a pre existing legal duty rule
new consideration is not required to modify sale of goods contract good faith test for changes in an existing sale of goods contract |
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part payment as consideration for release issue in consideration
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Promise to forgive balance of debt. key is whether debt is due and undisputed. if debt is due and undisputed, then part payment is not consideration for release.
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Consideration substitutes
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A promise can be legally enforceable even though there is no consideration if there is one of the following consideration substitutes:
-a written promise to satisfy an obligation for which there is a legal defense -seals -promissory estoppel |
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Seals and consideration
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Majority rule is now that seal is not a consdieration substitute. In MD, can be
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Promissory estoppel
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Detrimental reliance.
courts in MD are reluctant to find promissory esstoppel. Elements: promise b. reliance that is reasonable, detrimental and foreseeable c. enforcement necessary to avoid injustice |
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Elements of promissory estoppel
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Promise
-reliance that is reasonable, detrimental and foreseeable -enforcement necessary to avoid injustice |
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Written promise as consideration substitute
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A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration
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If defandant promissor lacks capacity
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It's a reason to not enforce agreement
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Who lacks capacity to contract?
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1. infant (under 18)
2. mental incompetents- lacks ability to understand agreement 3. intoxicated person IF other party has reason to know |
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Consequences of incapacity
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1. right to disaffirm by person without capacity
2. implied affirmation by retaining benefits after gaining capacity (ratification) 3. quasi contract liability for necessaries |
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Implied affirmation by retaining benefts after gaining capacity (ratification)
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if at time of agreement lacked capacity, then gains capacity, and retains benefits of agreement without ocmplaint, must pay.
If, with capacity, you keep, it's like making a new agreement |
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Quasi contract liability for necessaries
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a person who does not have capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care, or shelter, but that liability is based on quasi contract, not contract law
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Statute of frauds defense
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Statute of fraud is a statute or statutes designed to prevent fraudelent claims-more specifically to make it harder to fool the court by claiming there was a contract.
makes it harder to make such a false or fraudulent claim by requiring the claimant have 'special' proof that a contract exists. the spercial proof required to satisfy the statute of fraud is styppically proof of either performance, or writing signed by the person who is asserting that there was no such agreement |
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Overview of three primary statute of fraud issues
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first issue: the statute does not cover all cotnracts. at common law, five kinds of contracts were covered by, ie, within the S of F. article 2/2a brings two additional kinds of contract within SoF
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Contracts within the S o F
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1. Promises to answer for guarantee the debters of another
2. promises by executor to answer for personally the debts of the decent 3. promises in consideration of marriage 4. services contract not capable of being performed within a year from the time of the contract 5. transfers of interest in real estate 6. sale of goods for 500 or more 7. lease of goods with the payments totaling 1k or more |
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Promises to answer for guarantee the debts of another (SoF)
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Not merely a promise to pay, but rather a promise to pay if someone else does not. LOOK FOR A GUARANTEE.
A guarantee has 'if' only guaranteses, not alleged promises main purpose exception: guarantee of payment where primarily benefts. not within judicial SoF |
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Promises by executor to answer for personally and SoF
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If there is a promise by executor to answer for personally the debts of the decent is within statute of frauds
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Promises in consideration of marriage SoF
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Within statute of frauds
Includes prenups and postnups concerned about fraud |
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Services contract not capable of being performed within one year from time of contract (SoF)
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Specific time period/more than a year: Early termination possibilities are irrelevant in determining whether or not to apply statute of frauds.
Specific time, more than a year from date of contract: matters not how long it takes, matters 'is there any way if can be finished within a year.' date of contract v date of performance. if specific time that is more than a year from time of contract, within SoF! 3. Task (nothing said about time): SoF does not apply. ignore what actually happens, think if had unlimited resources 4. life: statute of frauds does not apply. dont know how long to live |
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Transfers of interest in real estate (with exception for leses of one year or less) in SoF
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Transfers of interest in real estate fall within SoF
Exception: leases of year or less) |
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Sale of goods for 500 or more
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Fall within statute of frauds
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Lease of goods with payments totaling 1k or more
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Falls within SoF
Focus on total of lease payment |
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Statute of Fraud defense
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If the SoF is applicable, then requirements of SoF must be met (satisfied) in order for the agreement to be enforceable. if the requirements of the S of F, are not satisfied, there is a SoF defense. and, if there is a S of F defense asserted and established, there is no legally enforceable agreement. No contract liability
Question might ask is SoF satisfied, or question might ask, is there a S of F defense |
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Two ways to satisfy S of F
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Performance
Writing |
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Can statute of frauds be satisfied by performance?
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S of F can be satisfied by performance. the rule for satisfaction of the S of F by performance vary depending on whether the contract is a service contract, a sale or goods contract or real estate transfer contract
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SoF performance for services contracts
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a Full performance by either party satisfies the S of F
Part perfromance of a services contract does not satisfy the SoF. Services contract no writing only part performance; no right to recover. quasi contract might be a means of recovery |
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SoF performance for sales of goods contracts of ordinary goods
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General rule is that prat performance of a contract for the sale of goods satisfies the S of F,, but only to the extent of part performance. more specifically, look to see if the question is about
-delivered goods OR undelivered goods |
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SoF Performance for sale of goods contract for specially manufactured exception
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If the contract is for the sale of goods that are to be specially manufactured, then the S of F is satisfied as soon as seller makes substantial beginning. Which means that the seller has done enough work that is clear that what she is working on is specially manufactured. ie custom made or made to order
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SoF Performance in transfers of real estate contracts
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Part performance by buyre of real estate can satisfy the statute. part perfromance is generally any two of the following 3: !) full or part payment 2) possession and/or 3)improvements
Full payment alone by buyer of real estate does not satisfy the SofF |
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Can writing satisfy the SofF
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Yes, the S of F can be satisfied by a writing. However, remember that not every writing satisfies the requirements of S of F and he requirements of S of F can be satisfied without writing ( by performance)
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S of F and writing outside the UCC
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Look at the contents of writing and writings
All material term test: who and what look at who signed the writing. it must be signed by the person who is asserting the S of F defense. by the person who is saying there is no such agreement |
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S of F and writing inside the UCC
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a. look to contents of writing and who signed writing. writing must contain quantity term. doesnt need to say who. doesnt need to mention price.
writing must be signed by person asserting S of F defense (exception: based on that person's failure to respond to a signed writing. both parties must be merchants and the person who receives a signed writing with a quanity term claims there is a contract fails to respond w/in ten days of receipt) |
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Sof F (writing) and 2A leases of personal property
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2a's writing requirements are more similar to common law than article 2.
the writing must indicate that 1) it is a lease 2) descrbes whats being leased and 3) states the duration of the lease |
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Judicial admission and Sof F
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this is based on the common sense recogntion that if the D asserting a S of F admit in a pleading or testimony that he had entered into an agreement with P, the purpose of S of F is fulfilled and S of F is satisfied
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Equal dignity rule
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Authorization to enter into contract for someone else. issue is when do rules of law require that a person have written authorization in order to execute a contract for someone else.
Rule of law requires that the authorization must be in writing only if the contract to be signed is within the S of F. ie. authorization must be of equal dignity |
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When do rules of law require written evidence of modification of a written contract
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Sometimes, there is no legal requirement of written evidence of an alleged modification of a written contract. resolve any legal issue of whether such written evidence of the modication is need by:
-looking at the deal with the alleged change and -determining whether the deal with the alleged change would be within the S of F. if the deal with the alleged change would be w/in the S of F then the alleged modication agreement must be in writing |
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What if the agreement is in writing and requires that all modifications be in writing
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Under common law, contract provisions requiring that all modications be in writing are not effective. IGNORE contract language. one of few times.
under ucc, contract provisions requiring written modifcations are effective unless waived |
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Reasons for not enforcing an agreement
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-Lack of consideration
-Illegality -Public policy -misrepresentation -Duress -Statute of Frauds -D's promissor lack of capacity |
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Illegality and contracts
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If the subject matter of an agreement is illegal, the agreement is not enforcement.
if the subject matter is legal but the purpose of illegal, the agreement is enforceable only by the person who did not know of illegal purpose |
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Public policy and contracts
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probably not on bar.
Courts can refuse to enforce an agreement because of public policy. look for an exculpatory agreement that exempts intentional or reckless conduct from liability or a covenant not to compete without a reasonable need or reasonable time and place limits. intentional torts, gross negligence, etc |
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Misrepensentation of nondisclosure
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Look for a false assertion of fact or concealment of facts. No requirement of fraud in actions to rescind a contract because of misrepresentation, nondisclosure may require fraud.
if relief being questioned in just 'let me out of deal 'contract question (rescind or cancel) contracts question. in torts, remedy is always money damages also look for honesty or innocently |
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Duress and contracts
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Physical or economic
Elements of economic duress: 1. bad guy-improper threat 2. vulnerable guy-no reasonable alternative most common example of economic duress: wrongfully threatening to breach an existing contract |
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Unconscionability and contract
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Originally applicable to only sale of goods, but
1. now part of contracts law generally 2. empowers a court to refuse to enforce all or part of an agreement. 3. two basic tests: unfair surprise (procedural) and oppresive terms (substative 4. test as of the time the agreement was made 5. by a court |
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2a and unconscionability
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A court may grant relief from a consumer lease even though no provision of the lease is unconscionable, if there is unconcionable conduct in inducing or enforcing the issue
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Not enforcing an agreement due to misunderstanding, ie ambiguity in words of contract
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there will be no contract if:
1. parties use a material term that is open to at least 2 reasonable interpretations and 2. each party attaches a different meaning to the term and 3. neither party knows or has reason to know the term is open to at least 2 reasonable interpretations |
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Not enforcing an agreement for mutual mistake of material fact
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There will be no contract if:
1. both parties mistaken and 2. basic assumption of fact and 3. materially affects the agreed exchange and 4. not a risk that either party bears. seller bears the risk at to what she owns and is selling. also, look at whether the mistake on what the thing IS not what the thing is WORTH.Turns on the facts. one fact to turn to is whether the agreed upon subject matter exists. mutual mistake as to what it is, ie existence of subject matter, means the agreement is not legally enforceable |
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Not enforcing an agreement for unilateral mistake of material fact
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Generally, courts have been reluctant to allow a party to avoid a contract for a mistake bade by only one party. look for situation in which the other party had reason to know of the mistake
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Terms of the contract generally
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Look first for information about words used by people making the contract. partiularly information about words in the last written version of the deal. look also for information about part or similar deals. and think about UCC warranty, delivery, and risk of lss terms if it is a sale of goods
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Parties words and the parol evidence rule overview
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It's in evidence rule in the sense that 1) issue is whether ourt can consider evidence and 2) prupose for which the evidence is to be introduced is often determinative. the underlying premise is that the final written version of a deal is more reliable than anything said or written earlier. the essence of the parol evidence rule is the exclusionary effect of written contract on earlier (or contemporaneous agreements) as a possible source of terms of the contract.
Question is always admissibility and purpose for which it is offered |
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Integration
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Written agreement that court finds is the final agreement, triggers the parol evidence rule
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Partial integration
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Written and final, but not complete (prop wrong answer)
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Complete integration
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Written and final and complete
prob wrong answer |
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Merger clause
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Contract caluse such as 'this is the complete and final agreement'
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Parol evidence
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Limited to words of party (or parties)
before integration ie before agreement was put in written form. looks back in time. final writing MORE persuasive oral or written |
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reformation
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equitable action to modify written contract to reflect actual agreement
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Triggering facts for parol evidence rule
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Written contract that ourt finds is the final agreement AND
oral statement made at the time the contract was signed OR earlier oral or written statements by the parties to contract |
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Contracting the written deal and parol evidence
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regardless of whether the writing is a complete or partial integration, the parol evidence rule prevents a court from admitting evidence of earlier agreements for the purpose of contradicting the terms in the written contract. a court may, however, consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration, ie a mistake in reducing the agreement to writing
2. general rule: cannot use parol evidence for the prupose of contradiction 3. mistake in integration exception can contradict to the extent that all you are trying to do is show a mistake in integration. a typographical error. |
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Getting out of written deal and parol evidence rule
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1. and regardless of whether the writing is a complete or partial integration, the parol evidence rule does not prevent a court from admitting evidence of earlier words of the parties for the limited purpose of determining whethere there is a defense to the enforcement of the agreement such as misrepresentation, fraud, or duress
2. defense exception: admit evidence for the limited purpose of determining whether there is a misrepresentation defense to the enforcement of the agreement |
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Explaim term in the written deal and parol evidence
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Regardless of whether the writing is a complete or partial integrating the parol evidence rule does not prevent a court from admitting evidence of earlier agreements to resolve ambiguities in the written contract
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Adding to the written deal and parol evidence
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the parol evidence rule prevents a court from admitting evidence of earlier agreements as a source of consistent, additonal terms unless the court finds 1) that the written agreement was only a partial integration or 2) that the additional terms would ordinarly be in a separate agreement
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Comparison of parol evidence rule and statute of frauds
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What fact is required to trigger parol evidence rule question? has to be a written agreement
what fact will most often trigger S of Fquestion? if told just an oral agreement |
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Conduct and course of performance and terms
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The words of the parties are not the only source of contract terms. conduct can also be a source of contract terms. on the bar, such conduct takes on one of those forms. courts look FIRST to course of performance, SECOND to course of dealing, THIRD to custom and usage to explain words in contracts or to fill gaps in contracts.
course of performance: same people same contract: what already done under this contract course of dealings: same people, different but similar contract custom and usage: different but similar people |
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Delivery obligation of seller of goods if delivery by common carrier
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If there is an agreement as to the place of delivery by a common carrier, then the question is what does the seller have to do to complete its delivery obligation. There are two possible UCC answers to the question. Seller and buyer in different places. Buyer is not picking up the goods itself,s eller not picking up, third party. common carrier
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Shipment contract and delivery obligations
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If the contract is a shipment contract, the seller completes its delivery obligations when it 1) gets the goods to a common carrier and 2) makes reasonable arrangments for delivery and 3) notifies the buyer
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Destination contracts and delivery obligations
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If a destination contract, the seller does not complete its delivery obligation until the goods arrive where the buyer is
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Determining difference between shipment and destination contract
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Most contracts with delivery obligations are shipment contracts.
Watch for use of FOB (free on board) as source for determining whether the contract is a shipment contract or a destination contract. FOB followed by city where the seller is or where goods are means shipment contract; FOB followed by any other city means destination contract |
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What is risk of loss problem?
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Risk of loss issues arise where 1) after hte contract has been formed but before the buyer receives the goods 2) goods are damaged and destroyed and 3) neither the buyer nor the seller is to blame.
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What are the possible consequences in a risk of loss problem?
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When, after the contract has been entered into, goods are lost or damaged without fault of either party, which party has risk of loss: buyer or seller?
if the risk of loss is on the buyer, he has topay the full contract price for the lost or damaged goods. if the seller has risk of loss, no obligation on the buyer, possible liability on seller for non delivery |
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What are the risk of loss rules? there are four risk of loss rules. (Titlte is irrelevant)
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1. Agreement: agreement of the parties controls
2. Breach: breaching party is liable for any uninsured loss even though breach is unrelated to problem. Breach can be unrelated. 3. delivery by common carrier other than seller: risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations 4. no agreement, no breach, no delivery by a carrier. the determining factor is whether the seller is a merchant. COMPLETELY irrelevant if buyer is a merchant. For a merchant seller, risk of loss shifts from a merchant seller to a buyer on buyer's receipt of goods. Risk of loss shifts from a non-merchant seller when he or she tenders the goods (aka made goods available by saying where they are and how to get it) |
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Risk of loss and 2a leases on personal property
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General rule: unallocated risk of loss is on the lessor
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Warranties of quality
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Think warranty when sale of goods; B has goods, not happy
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Express warranty
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Look for words that promise, desrcibe or state facts or for use of sample or model. distinguish from sales talk whichismore general, an opinion
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Implied warranty of merchantability
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Wwhen a person buys any goods from any person, a term is automatically added to the contract by operation of law that the goods are first for the ordinary purpose for which goods are used.
Remember: seller is a merchant which here means it deals in goods of THAT kind 2and goods fit for ordinary purpose |
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Implied warranty of fitness for a particular purpose
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Triggering facts:
Buyer has a particular purpose, buyer is reling on seller to select suitable goods. seller has reason toknow of purpose and reliance. warranty; goods fit for particular purpose |
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2a warranties on leases
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General rule: lessor of personal property makes the same warranties as a seller: express, merchantability, fitness.
Finance lease: in a finance lease, warranties made by supplier to lessor are enforceable by lessee |
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Disclaimer
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Eliminates implied warranties
1.Express warranties generally cannot be disclaimed 2. implied warranties ofmerchantability and fitness can be disclaimed in either of the following ways: -conspicuous langauge of disclaimer, mentioning merchantability OR 'as is' or with all faults' |
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Limitation of remedies with regard to warranties
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Does not eliminate warranty, simply limits or sets recovery for any breach of warranty:
1) possible to limit remedits even for express warranties 20 general test is unconscionability 3) prima facie unconscionable if breach of warranty on consumer goods causes personal injury |
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Maryland, and warranties in a consumer transaction
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MD law is more protective of consumers than most states law. MD generally prohibits disclaimers and limitation of remedies in connection with warranties on consumer transactions
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Six goods concepts
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1. perfect tender
2. rejection of goods 3. cure 4. installment sales contracts 5. acceptance of goods 6. revocation of acceptance of the goods |
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Perfect tender
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1. It only, only applies to sales of goods
2. perfect tender means specifically that seller must be perfect 3. is seller is less than perfect, gives buyer otpion of rejecting goods |
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Rejection of goods concept
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Rejection of the goods NOT the same as rejection of an offer.
If the option to retain and sue for damages or reject all or any commercial unit, and sue for damages. This rejection alternative is limited by CURE or INSTALLMENT CONTRACT or ACCEPTANCE |
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Cure
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Sometimes, a seller who fails to make a perfect tender will be given a second chance, an option of curing. Two situations to have opportunity to cure (buyer cannot compel)
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Two situations in which seller has an opportunityt o cure
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a. seller's reasonable ground to believe would be 'okay.' in a very limited situations, a seller has option of curing even after contract delivery date. the statutory test is whether the seller has reasonable grounds for believing that the improper tender would be acceptable, perhaps with a money allowance. look for info in question about prior deals between that buyer and seller with such an allowance.
2. time for performance has not yet expired. look for contract imposed deadline AND wrong goods sent early |
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Installment sales contracts
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An installment sales contract REQUIRES or AUTHORIZES 1) delivery of the goods in separate lots 2) to be separately accepted.
The buyre has the right ot reject a installment only where there is a substantial impariment in that installment that can't be cured. not a perfect tender rule |
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Acceptance of goods
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1 Effect of acceptance of the goods: again, if the buyer accepts the good, it cannot later reject them.
2 Effect of payment: payment without opporunity for inspection not acceptance 3. effect of buyer's keeping goods implied acceptance-LOOK FOR THE BUYER KEEPING THE GOODS without objection. more specifically, look for a fact pattern that states when buyer first received goods and when buyer first complained to seller |
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Revocation of acceptance of the goods
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Remember that if a buyer accepts the goods, it CANNOT later reject the goods. In limited circumstances, a buyer can effect a cancellation of the contract by revoking its acceptance of goods. The requirement for revocation are as follows:
1. nonconformity substantially impairs the value of the goods and 2. excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction and 3. revocation within a reasonable time after discovery after nonconformity |
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Common law performance concepts
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Perfect tender is not common law. Common law counterpart is substantial performance: in a sale of goods contract, if the seller makes a perfect tender then the buyer must perform by paying the contract price. in a common law contract, if one party substantially performs then the other party must pay or otherwise perform. more on the substance of susbtantial performance later
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Specific performance/injunction
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usually not right answer.
-Equitable remedy. look for adequacy of remedy at law or unclean hands or other parties equities. -Contract for sale of real estate: nothing like land specific performance in land sales. -contract for sale of goods: unique goods, such as art, antiques, custom made, can do specific performance. -contract for services: NEVER specific performance. possible injunctive relief |
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Reclamation
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Right of unpaid seller to get its goods back. Key facts are
1) the buyer msut have been insolvent at the time it received the goods and 2) the seller demand return goods within ten days of receipt (the ten day becomes a reasonable time rule if before delivery there had been an express representation of solvency by the buyer) and 3) the buyer still has goods at time of demand. |
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Rights of good faith purchaser in entrustment
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1. if owner leaves her goods with a person who sells goods of that kind and that person wrongfully sells the goods to a third party then such a good faith purchaser from dealer cuts off rights of the original owner/entruster
2. true owner VOLUNTARILY turns off her stuff. to be serviced, repaird, stored, cleaned, etc. but that place sells when shouldnt.c ant recover |
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Money damages for breach of contract: general concept
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Overview: Compensate P, not punish D
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Expectation
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All various contract rules are basedon protection of P's expectation. P's expectation simply means expect no breach.
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General approach to measure of damages
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Protection of expectatoin. Put P in same economic positoin as if contract had been performed. IE compare money value of D's performance without breach with money value of what D actually did
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Protection of reliance interest approach to money damages
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Put P in same economic position as if contract had never happened
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Protection of restitution interest
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Pay P by putting D in same economic position as if contract had never happened (confusing because money goes to P but you focus on what got in determining how much P can recover)
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Part 7 of Article 2
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Reflects the general cotnract damages policy of putting the innocent party where it wold have been had the contracted been performed. IE expectation. There are two relevant facts: who breached and 2) who has the goods. Four basic set of rules
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Seller breaches, buyer keeps the goods
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Fair market value if perfect fair market value as delivered
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Seller breaches, seller keeps the goods
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Market price at time of discovery minus the contract price OR replacement goods minus contract price
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buyer breaches, buyer has the goods
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always contract price
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Buyer breaches, seller has the goods
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Contract price minus market price at time adn place of delivery OR contract price minus resale price. sometimes, provable lost profits
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Lost profits for lost volume seller
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Provable lost profits. usually inventory questions
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(Plus) Incidental damages
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Cost of finding a replacement.
Always recoverable |
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(Plus) Consequential damages
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Damages arising from P's special circumstance. recoverable only if D had reason to know at time of contract. consequential are SPECIAL damages. special to that person
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(Less) avoidable damages
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No recovery for damages that could have been avoided without undue burden on P. Burdens ofpleading and proof on D
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Certainty limitation
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Reasonable certainty test. look for a fact pattern involving a new business or new business activity
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Liquidated damages
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Contract provisions regarding damages. Look for contract provision fixing amound of damages. issue will be validity. concern is whether the provision is too high-a penalty. tests are 1) daages were difficult to forecast at time contract was made and 2) provision is a reasonable forecast
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Excuse of nonperformance of contract because of something that happened after contract was made overview
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Look for information 1) nonperformance of contract and 2) somethign ahppened after contract. ie. one guy is arguing doesnt have to do what he agreed to do because of somethign that happened after the contract
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Common law and material breach rule (after contract)
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1. damages can be recovered for any breach
2. only a material breach by one guy excuses the other guy from performing 3. whether a breach is material is a fact question (not likely to be on bar exam) 4. if there is a substnatial performance then the breach is not material. if the breach is material, then the performance was not substantial (number based: lump sum payment.. some work done, but less than half. not substantial. excused. UNLESS divisible contract) |
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Article 2 and perfect tender rule
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For sale of goods, dont need material breach
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Can contracts be excused because of non occurence of a condition?
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Yes, look at 1) what is a condition 2) how can yo identify a performance condition 3) how can a condition be satisfied and 4) how can a condition be excused
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What is a condition?
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A condition is a mutually agreed upon promise modifier. it is langauge in a contract-not merely language in response to an offer-that does not create a new obligation but merely limits obligations created by other language in the contract. conditions in contracts are created by lanaguage in that contract. watch for words such as 'if' ''only if' 'provided that' so long as 'subject to' in the event that 'unless' when 'until and 'on condition that' most contracts and bar exams do NOT have express conditions
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What is the standard for satisfying express conditions
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General rules: strict compliance with conditions
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How can a contract be excused?
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Good faith/avoidance of forfeiture
Lack of good faith on part of O and avoidance of forfeiture |
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Waiver/estoppel
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1. identify the person who benefits from or is protected by the condition. then look for a statement by that person giving up the benefits and protection of the condition
2) estoppel is based on as tatement by the person protected by the conditoin BEFORE the conditoin event was to occur and requires releance. waiver is based on a statement by the person protected by teh condition AFTER the condition event was to occur and does nt require reliance |
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Excuse of performance by reason of the other party's anticipatory repudiation
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1. look at words or conduct showing not going to pay
2. an unambiguous statement or conduct indicating 1) that the the repudiating party will not perform 2) prior to the time that performance was due. anticipatory repudiation by one party excuses the others duty to perform. it also generally gives rise to immeidate claim for damages for breach (does not give rise to immediate claim for damages if claimant has alraedy finished her performance) 2. has to occure BEFORE the other party has finished 3. can be reversed or retracted so long aas there has ot been a material change in position by the other party. if the repudiation is timely retracted, the duty to perform is reimposed but performance can be delayed until adequate assurance is provided |
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Insecurity
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Wwords or conduct of a party merely makres performance uncertain.
-usually in sales of goods problem -if the words or conduct of one party gives 'reaosnable grounds for insecurity' then the other party can demand adequate assurance and if it is commercially reasonable can suspend performance until it gets adequate assurance. |
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Three concepts of insecurity
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1. reasonable grounds of insecurity
2) demand for adequate assurance and 3) commercially reasonable to stop performance |
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Recission
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Cancellation.
The key is whether performance is still remaining from each of the contract parties (executory) |
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Accord and satisfaction
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Meaning of: accord questions will have an agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation satisfaction that difference performance
effect: if the new agreement, the accord is performed, then the performance of the original obligation is excused. if the accord is not performed, then the other party can sue on either the original obligation or the accord * |
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Modification
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An agreement by the parties to an existing agreement to accept a different agreement in satisfaction of the existing obligation
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What is a novation?
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An agreement between BOTH parties to an existing contract to the substituion of a new party. IE. Same performance, different party
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Who is liable after novation?
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Novation excuses the contracted for performance of the party who is substituted for or replaced
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How is delegation different from novation?
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In novation, BOTH parties to original agreement agree. In delegation, both parties are not required to agree and orginal party not excused
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Excuse of performance by later, unforeseen event
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Performance of contractual duties (other than duty to pay money) can be excused under impossibility or impractability or frustration of purpose
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Later unforseen event to excuse contracts
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Soemthign that happens after contract formation but before the completion of contract performance and
that was unforeseen and that makes the performance impossible or commerically impracticable or frustrates the purpose of the performance |
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Difference between impossibility and impractiability
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Include 1) former is objective/latter subjective. 2) former means cant be done while latter means can be done with EXTREME and UNREASONABLE difficulty and expense.
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Damage or destruction matter of contract AFTER contract
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If impossible, excused., if still possible, not excused
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Death AFTER contract
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General effect of death on contract obligations: death does not make a person's contract obligations disappear.
Except: death of a party to contract who is a special person: excused by impossibility |
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Subsequent law or regulation and illegality
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If later law makes performance of contract illegal, then excuse by impossibility
If later law makes mutually understood purpose of contract illegal, excuse by frustration of prupose. later even has noe ffect on performance of contract. later event instead effects the mutually understood prupose |
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Who is a third party beneficiary
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Not a party to the contract. but trying to enforce a contract another made for his benefit
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Promisor:
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Person who's makign the promise that benefits the third party
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Promisee
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Person who obtains the promise to benefit the third party
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Intended/incidental
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Only intended beneficiaires have contract law rights. intent of parties to contract determines whether intended or incidental.
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Creditor/donee
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Look to see if intended beneficiary is donee or creditor. usually donee. look at whether beneficiary was a contract of the promise
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Later unforseen event to excuse contracts
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Soemthign that happens after contract formation but before the completion of contract performance and
that was unforeseen and that makes the performance impossible or commerically impracticable or frustrates the purpose of the performance |
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Difference between impossibility and impractiability
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Include 1) former is objective/latter subjective. 2) former means cant be done while latter means can be done with EXTREME and UNREASONABLE difficulty and expense.
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Damage or destruction matter of contract AFTER contract
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If impossible, excused., if still possible, not excused
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Death AFTER contract
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General effect of death on contract obligations: death does not make a person's contract obligations disappear.
Except: death of a party to contract who is a special person: excused by impossibility |
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Subsequent law or regulation and illegality
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If later law makes performance of contract illegal, then excuse by impossibility
If later law makes mutually understood purpose of contract illegal, excuse by frustration of prupose. later even has noe ffect on performance of contract. later event instead effects the mutually understood prupose |
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Who is a third party beneficiary
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Not a party to the contract. but trying to enforce a contract another made for his benefit
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Promisor:
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Person who's makign the promise that benefits the third party
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Promisee
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Person who obtains the promise to benefit the third party
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Intended/incidental
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Only intended beneficiaires have contract law rights. intent of parties to contract determines whether intended or incidental.
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Creditor/donee
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Look to see if intended beneficiary is donee or creditor. usually donee. look at whether beneficiary was a contract of the promise
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Dealing with efforts to cancel and modify in a third party beneficiary situation
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The test is whether the third party knows of and has relied on or assented as requested. knowledge is essential but ot enough. if so, her rights have vested and the contract cannot be canceled or modified without her consent, unless the contract otherwise provides
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Who can sue whom in third party ben situation
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-Benficiary can recover from promisor
-Promisee can recover from promisor -Donee beneficary cannot recover from promisee -Creditor ben. can recover from promisee |
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Defenses in third party beneficiary situations
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If third party sues the promisor, the promisor can assert any defense he would have had if sued by the promisee
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What is an assignment?
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Transfer of rights under a contract in two separate steps:
1) contract between only two parties (no mention of third person) and 2) one of the parties later transfers rights under that contract to a third party |
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Assignor
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Party to the contract who later transfers right under the contract to another
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Assignee
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Not a party to the contract. able to enforce because of the assignment
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Obligor
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Other party to the contract
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Contract provisions in assignability
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Courts favor assignability of contract rights and are so reluctant to read contract language preventing assignemnt' but contract may prohibit or invalidate contract
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Prohibition and assignments
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langauge of prohibition takes away the right to assign, but not the power to assign which means that the assignor is liable for any breah of contract but an assigness who does not know of the prohibition can still enforce the assignment
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Invalidation and assignments
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language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee
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Common law and assignments
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Even if the contract does not in any way limit the right to assign, common law bars an assignment that substantially cahnges the duties of the obligaor.
Assignment of right to payment is NOT a substantial change Assignment of right to contract performance other than right to payment is usually a substantial change |
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Requirements for assignments
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Consideration is not required, but gratituous assignments (and only grat) can be revoked.
Watch for present assignment and not promsie to collect and pay or promise to assign |
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Rights of assignee
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-Assignee can recover from obligor
-Assignor for consideration cannot recover from obligor * -obligor has same defenses agaisnt assignee as it would have against assignor -payment by obligor to assigner is effective until obligor knows of assignment. similarly, modification agreements between obligor and assignor are effective if obligor did not know of assignment. |
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Implied warranties of assignor in an assignment for value
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In an assignment for consideration only, the assignor warrants
1)the right assigned actually exists and 2) the right assigned is not subject to any defenses by obligor and 3) the assignor will not nothing to impair the value of the assignment. assignor, however, does not warrant what obligor will do. |
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multiple assignments in gratuitous assignments
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-Last assignee generally wins. it is possible to make a grat. assignment. such a gift assignment can be freely reoked. since a later gift assignment revokes an earlier gift assignment, the general rule for resolving claims amoung assignees who did not provide consideration is a last in time rule
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Exceptions to the last in time rule for multiple assignments in gratuitous assignmetns
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A grat. assignment is not revocable if it is the subejct matter of a writing delivered to the assignee, the assignee has received soem sort of indicia of ownership, or the assignee has relied on the assignment in a way that is reasonable, foreseeable, or detrimental. if the gift assignment is not revocable, then it will take priority over a later assignment
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Multiple assignments for assignments for consideration
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General rule: first assignee for consideration wins
Very limited exception: a subsequenct assignee takes priority over an earlier assignee for value only if he both 1) does not know of the earlier assignemnt and 2) is the first to obtain a) payment b) judgment c) novation OR d) indicia of ownership. |
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In MD, is first assignee to notify relevant
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YES, though not true on mutlistate
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What is a delegation?
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Party to a ocntract transferring wrok under that contract to third party. For example, P contracts to paint O's house for 1k. P and X agree that X will paint O's house
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Relationship of assignment and delegaton
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A contract creates both rights and duties
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Can assignee recover from obligor?
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Yes
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Can assignor for consideration recover from obligor?
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NO!
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What defenses does obligor has against assignee?
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Any that it would have had against assignor
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When is payment to assigner by obligor effective?
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until obligor knows of assignment.
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When ar emodification agreements between obligor and assignor effective?
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If the obligor did not know of the assignment
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