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244 Cards in this Set

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What is a contract?
Legally enforceable agreement (promise)
What is a quasi-contract?
an equitable remedy where:
a plaintiff conferred a benefit on a defendant AND plaintiff reasonably expected to be paid AND defendant realized unjust enrichment if plaintiff is not compensated.
What is a unilateral contract?
an offer that exxpressly requires performance AS THE ONLY POSSIBLE METHOD OF ACCEPTANCE.

Exs. rewards, prizes, contest, offer expressly requires performance for acceptance
When does Art. 2 of the UCC apply?
to contracts that are primarily sales of goods (tangible personal property)
When does common law apply to contracts?
all situations not involving sales of goods ex. services contracts, real estate
If a contract contains both sales of goods and other types of transactions, which rule of law applies, the common law or UCC? why?
The more important part of the deal determines whether the UCC or common law governs the whole transactions

EXCEPTION: if the contract divides payment between the different aspects of the contract, then apply UCC to sale of goods part and common law to the rest.
What are the two types of contract formation questions?
1. Is there an agreement?
2. Is the agreement legally enforceable?
What is an offer?
a MANIFESTATION of an intention to contract - words or conduct showing committment.
For a communication to be an offer, it must create a REASONABLE EXPECTATION in the offeree that the offeror is willing to enter innto a contract on the basis of the offered terms. To determine this reasonable expectation, what three questions do you need to answer?
1. Was there an expression of a PROMISE, UNDERTAKING OR COMMITTMENT to enter into a contract?
2. Were there CERTAINTY AND DEFINITENESS in the essential terms?
3. Was there COMMUNICATION of the the above to the offeree?
What is the basic inquiry for determining whether the terms were certain and definite enough to create an offer?
Whether enough of the essential terms have been provided so that a contract including them would be capable of being enforced. What is essential depends on the type of contract.
What essential terms are required in an offer to enter into a real estate transaction?
1. identification of the offeree or a class of person to which she belongs
2. Identify the land involved
3. price terms.
What essential terms are required in an offer to enter into a sale of goods (UCC)?
1. identity of offeree or class of person to which she belongs
2. quantity of goods being offered must be certain or capable of being made certain. (Requirements and output contracts are ok if parties act in good faith because although no specific quantity is mentioned, the offers are sufficiently definite b/c the quantity is capable of being made certain by reference to objective extrinsic facts. However, some courts will not enforce a requirements contract with a new business b/c the requirements of a new business are uncertain)
What is a requirements contract?
A buyer promises to buy a from a certain seller all the goods she requires, and the seller agrees to sell that amount to the buyer
What is an output contract?
a seller promises to sell to a certain buyer all the goods the seller produces, and the buyer agrees to buy that amount from the seller.
What essential terms are required in an offer of employment?
1. identification of the offeree
2. duration of employment. If not specified, contract will be terminable at will.
An offer CANNOT be accepted if it has been terminated. What are the four ways an offer can be terminated?
1. Lapse of time (either stated or reasonable under the circumstances.)
2. Death (or insanity) of a either party prior to acceptance UNLESS the rules limiting an offeror's power to terminate are applicable (eg option contract or part performance to enter into a unilateral contract).
3. words or conduct of OFFEROR ie revocation of an offer
4. words or conduct of OFFEREE ie rejection
How does an offeror revoke an offer?
1. unambiguous statement by offeror to offeree of an unwillingness or inability to contract
OR
2. unambiguous conduct by offeror indicating an unwillingness or inability to contract that OFFEREE IS AWARE OF.

unambigous action by offeror + offeree knows = Death of offer/revocation.
If an offeror makes multipe offers has he revoked previous offers?
No. multiple offers are not revokation.
If a revocation of an offer is sent in the mail when does it become effective?
when it is received.
Can an offer be revoked after its been accepted?
Nope
What are the definitions of:
irrevocable?
revocable?
revoked?
Irrevocable - offer is bulletproof an can't be undone by the offeror
Revocable - its possible for an offeror to undo.
Revoked - offeror did undo.
What are the 4 situations where offers are irrevocable (offeror can't revoke)?
1. Options
2. UCC "Firm Offer Rule"
3. if there has been reliance that is reasonably foreseeable and detrimental
4. offeree starts performing pursuant to an offer to enter into a unilateral contract (irrevocable for a reasonable time to complete performance).
What is an option?
when the offeror makes an offer than:
1. promises not to revoke ie keep the offer open for an amount of time
AND
2. this promise is supported by consideration.

exists under both common law and Art. 2
What happens once an option expires?
the offer becomes revokable and the offeror may then revoke it if he chooses.
What is the UCC "Firm Offer Rule"?
An offer cannot be revoked for up to three months (if offer doesn't specify time the court will impose a reasonable time period not to exceed three months) if:
1. offer to buy or sell goods
2. signed, written promise to keep the offer open
3. party is a merchant (merchant is generally a person in any kind of business)
If pursuant to a unilateral contract, the offeree begins preparing to perform, will mere preparation trigger irrevocability?
No. Mere preparation doesn't count as the beginning of performance in order to trigger rule #4 for irrevocability but should look at rule #3 - is there reliance that is reasonably foreseeable and detrimental?
What are the three methods of indirect rejection?
1. counteroffer
2. conditional acceptance of
3. additional terms.

First two apply to all contracts; additional terms rule does not apply to contracts for sale of goods (UCC)
When an offeree makes a counteroffer, what happens?
the offer is TERMINATED and the counter offer creates a new offer which must be accepted by the original offeror.
What is the difference between a counteroffer and bargaining?
on the bar exam, any time response to an offer is a quesstion and not a statement going to have mere bargaining and offer is still alive.
What is a conditional acceptance?
an acceptance that is followed by "if" "only if" "provided" "so long as" "but" or "on condition that"

A conditional acceptance operates like a counter offer. It terminates the original offer and becomes a new offer that must be accepted by the original offeror.
What is the Mirror Image Rule?
under common law, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
Under the UCC Art. 2, does an acceptance that adds new terms create a contract?
Yes. A response to an offer that adds new terms, but does not make the new terms a condition of acceptance is generally treated as an acceptance.
If an acceptance that adds new terms creates a contract under UCC Art. 2, are the additional terms part of the contract?
If at least one party is NOT a merchant, the additional term is merely a proposal that is to be separately accepted or rejected.

If, however, BOTH PARTIES ARE MERCHANTS: the general rule is that the additional term is a part of the contract. EXCEPTIONS: the additional terms is NOT part of the contract if: (1) if the additional term materially changes the offer or (2) if the offeror objects to the term.
What are the six ways an offeree can accept an offer?
1. Improper verbal response (ie counter offer or addition of terms) followed by the parties acting as if there is a contract.
2. where there is a verbal offer, offeree can acceptance through full performance (required to notify offeror of performance if the offer requires it or the offeree has reason to belive that offeror will not learn of the acceptance.)
3. the offeree starts to perform (bilateral contracts only). Starting to perform implies a promise to perform completely
4. offeree promises to perform (bilateral Ks only)
5. mail box rule - an acceptance is generally effective when mailed.
6. seller sends the (wrong) goods. Sending creates a contract.
What is the mailbox rule?
occurs when the offeror and the offeree are in different places and there are conflictinng communications.
1. all communications OTHER THAN ACCEPTANCE are effective only when RECEIVED.
2. acceptance is generally effective when mailed.
3. if a rejection is mailed before an acceptance is mailed, then neither is effective until received.
4. you cannot use the mailbox rule to meet an option deadline.
What is the accomodation exception to an offer?
if a seller of goods sends the wrong goods then a contract is both created and breached however if a seller sends the wrong stuff with an explanation then no contract is created.
Who can accept an offer?
1. a person who knows about the offer
2. who is the person to whom it was made. offers cannot be assigned unless it is an option.
What are the 11 legal reasons for not enforcing an agreement?
1. lack of consideration or consideration substitute for a promise
2. lack of capacity of the person who made that promise
3. statute of frauds
4. existing laws that prohibit the performance of the agreement
5. public policy
6. misrepresentation
7. nondisclosure
8. duress
9. unconscionability
10. ambiguity in words of agreement
11. mistakes at the time of the agreement as to the material facts affecting the agreement.
What are the three steps for dealing with consideration on the bar?
1. identify the promise breaker
2. ask whether that person asked for something in return for her promise (bargained for)
3. look at the person who is trying to enforce the promise and ask what legal detriment that person sustained.
What are the four forms of consideration?
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
Is a promise adequate consideration?
Yes unless it is illusory.

ex. I promise to sell, unless I change my mind.
Apu saves Lisa's life, Homer's so grateful he promises Apu $1000, is this consideration?
No. cannot have bargained for exchange over something that has already happened unless there was an express request AND expectation of payment. ie Homer asks Apu to save Lisa's life knowing Apu would want to be paid, Apu does and Homer promises to pay $1000 as a result.
What is the pre-existing duty rule under the common law?
Doing what you are already legally or statutorily obligated to do is not new consideration for a new promise to pay you more to do merely that. New consideration is required for contract modification.
EXCEPTIONS:
(1) if there is an addition to or change in the performance
(2) unforeseen difficulty so severe as to excuse performance
(3) third party promises to pay
Under Art. 2, what is required to modify a sale of goods contract?
Good faith only. New consideration is NOT required to modify a sale of goods.
Is part payment consideration for forgiving the balance of a debt?
If debt is DUE and UNDISPUTED then part payment is NOT consideration for relase. If debt is either not yet due OR undisputed then part performance IS consideration for release b/c sustained new legal detriment.
What are the three consideration substitutes?
1. Seal
2. a written promise to satisfy an obligation for which there is a legal defense
3. promissory estoppel.
What are the three elements of promissory estoppel?
1. promise
2. reliance that is reasonable, detrimental and foreseeable.
3. enforcement necessary to avoid injustice.
Who lacks capacity to contract?
1. infant (under 18)
2. mental incompetents (lacks ability to understand agreement)
3. intoxicated persons (if the other party has reason to know)
What are the consequences of contracting with a party who lacks capacity?
1. Person w/o capacity has a RIGHT TO DISAFFIRM (get out of) the contract. The contract is NOT automatically void.
2. Implied affirmation, if person w/o capacity retains the contract benefitss after gaining capacity.
3. Quasi-contract liability for necessities - a person who doesn't 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.
What is the statute of frauds?
state statute that requires there be extra proof of a contract's existence. Proof is usually performance or a writing signed by the party who is claiming there is not a contract.
What are the six kinds of contracts that are w/in the statute of frauds?
1. promises to GUARANTEE the debts of another UNLESS the main purpose of the obligation was to benefit the gurantor.
2. Promises by executor to personally guarantee the debts of the decedent.
3. promise IN CONSIDERATION of marriage
4. Service contract not CAPABLE of being performed within a year from the time of the contract
5. Transfers of interest in Real estate (unless lease for one year or less)
6. Sales of goods for $500 or more.
What does CAPABLE mean in determining whether a contract fits within the statute of frauds?
Theoretically possible with unlimited resources therefore SOF applies to:
1. contracts that will specifically last more then a year
2. contracts where the performance is to occur more than a year from now

SOF does NOT apply to:
(1) tasks
(2) life.
For Art 2A what is the amount lease payments that will trigger the SOF?
if the total amount of lease payments is $1000 or more.
If the SOF is applicable what must occur for their to be contract liability? no contract liability?
Contract liability - requirements of SOF must be met

No contract liability - SOF requirements were not met which creates a SOF defense which must be asserted and established to eliminate contract liability.
What are the three ways in which the SOF can be satisfied?
1. Performance (rules vary depending on the type of contract)
2. Writing
3. Judicial Admission
When can performance satisfy the SOF if the contract is a services contract?
1. Full performance by either party satisfies the SOF

2. Part performance of a services contract DOES NOT satisfy the SOF. (but might be able to recover for partial performance under quasi-contract)
When can performance satisfy the SOF when the contact is for sale of goods (UCC Art. 2)?
(1) Specially manufacturered goods - the SOF is satisfied as soon as the seller makes a SUBSTANTIAL BEGINNING ie the seller has done enough work that it is clear that what she is working on is specially manufacturered.
2. Partial Performance or Delivery of ordinary goods - when payment made and accepted, the contract is enforceable to the extent of the payment received and accepted. Similarly when delivery has been made and accepted, the contract is enforceable to the extent of the goods received and accepted.
What is the material terms test?
(SOF)
Under the common law (not the UCC) for a writing to satisfy the SOF it must contain: (1) Identity of the parties (2) subject matter of contract (3) terms and conditions of contract (4) consideration (5) signatures (of at least the person who is trying to assert the SOF defense)
What does Art. 2 require of a writing to satisfy the SOF?
(1) quantity
(2) signature of party asserting the SOF defense (defendant) EXCEPTION: if both parties are merchants, and one party sends the other a confirmation of their agreement meeting the other two requirements. If the receipient fails to respond within 10 days then the writing will be accepted w/o his signature.
(3) the writing is sufficient to indicate that a contract was formed.
What does the Art. 2 A require of a writing to satisfy the SOF?
the writing must:
(1) indicate that it is a lease
(2) describe what is being leased
(3) state the duration of the lease
What is a judicial admission such that the SOF is satisfied?
When a defendant asserting a SOF defendse admits in a pleading or testimony (under oath) that he had entered into an agreement with the plaintiff the SOF is satisfied.
When does a person have to have WRITTEN authorization to enter into a contract for someone else?
When the underlying contract is within the SOF ie the authorization must be of EQUAL DIGNITY.
When is written evidence of a modification of a written contract needed?
If the contract WITH the change included would be within the SOF then the change needs to be in writing.
If an agreement in writing would a contract provision requiring that all its modifications be in writing be valid?
Under the common law: NO.

Under the UCC: YES unless waived.
What is the difference between illegal subject matter and illegal purpose?
Illegal subject matter - the subject matter of the contract is illegal. Agreement is NOT enforceable.

Illegal purpose - the subject of the contract is not illegal, but the purpose for the contract is. The agreement is enforceable ONLY to the party who did not know of the illegal purpose.
What are the elements of economic duress?
(1) bad guy - improper threat
AND
(2) vulernable guy - no reasonable alternative.
Unconscionability empowers a court to refuse to enforce all or part of an agreement. What are the two basic tests for determining whether unconscionability exists?
1. unfair surprise (procedural)
2. oppressive terms (substantive)

Tested AT THE TIME THE AGREEMENT WAS MADE by the court.
When may a court grant relief from a consumer lease for unconscionability?
when a provision of the lease is unconscionable or where there is unconscionable conduct in inducing or enforcing the lease.
What are the Raffles v. Wichelhous elements for nonenforcing a contract due to ambiguity in the words of the agreement.
1. parties use a MATERIAL terms that is open to at least two reasonable interpretations
AND
2. each party attaches different meaning to the term
AND
3. neither party knows or has reason to know that the term is open to at least two reasonable interpretations. If one party knows of ambiguity then the K will be under the terms as the other party understands them.
A court will not enforce a contract if there has been a mutual mistake of material fact. What are the elements required?
1. both parties mistaken
AND Mistake was both:
2. a basic assumption of fact AND
3. materially affects the agreed exchange AND
4. not a risk that the party trying to get out of the deal bears.
What is the purpose of the parol evidence rule?
determines whether evidence is admissible and the purpose for which the evidence is to be introduced.

Premise: the final written version of a deal is more reliable than anything said or written earlier.
What is the parol evidence rule (PER)?
Where the parties to a contract express their agreement in a writing with the intent that it embody the full land final expression of their bargain (ie the writing is an integration), any other expressions - written or oral - made PRIOR TO the writing, as well as any oral expressions contemporaneous with the writing, are INADMISSIBLE to vary the terms of the writing.
what is an integration? (PER)
Final written express of an agreement

2 types:
Partial - written and final but not complete
Complete - written, final and complete.
What is a merger clause? (PER)
Contract clause stating that this version of the contract is the complete and final agreement. Highly persuasive evidence of an integration but not conclusive.
What is parol evidence?
Oral or Written
Words of the party (parties)
Before integration
What is reformation?
equitable action to modify written contract to reflect actual agreement
When may parol evidence be introduced?
1. Determining whether there was a mistake when the agreement was reduced to writing.
2. Determining whether there is a defense to the enforcement of the agreement such as misrepresentation, fraud or duress.
3. to resolve ambiguities in the written contract.
4. additional terms IF the writing is a PARTIAL integration OR the additional terms would ordinarily be in a separate agreement. (only situation where it matters whether integration is partial or complete)
What is the difference between PER triggers and SOF triggers?
SOF: absence of a writing
PER: existence of a writing
Conduct can create a contract term in three ways, what are those three ways?
1. course of performance - same people same contract
2. course of dealing - same people different but similar contract
3. custom and usage to explain words in contracts or to fill gaps - different but similar people, different but similar contract.

Listed from strongest to weakest.
UCC imposes terms in sales of goods contracts where they are not expressly contracted called gap fillers. What are the three main areas for UCC gap fillers?
1. Delivery obligations of seller of goods if delivery by common carrier
2. Risk of Loss
3. Warranties of Quality
Under the UCC, if there is an agreement as to the place of delivery by a common carrier, what the seller has to do to complete its delivery obligation depends on whether the contract is a shipment or destination contract, how do you tell which kinda of contract it is?
Most contracts with delivery obligations are shipment contracts. Look for FOB (city) if the city listed is where the seller is or where the goods are its a shipment contract, any other city its a destination contract.
If the contract is a shipment contract, under the UCC what does the seller have to do to complete his delivery obligation?
1. get the goods to the common carrier
2. make reasonable arrangements for delivery
3. notify the buyer.

ie delivery obligations are complete BEFORE delivery completed.
If the contract is a destination contract, under the UCC what does the seller have to do to complete his delivery obligation?
Seller completes his delivery obligations when the goods arrive where the buyer is.
What is a risk of loss problem?
Risk of loss issues arise where (1) after the contract has been formed but before the buyer receives the goods (2) the goods are damaged or destroyed and (3) neither the buyer nor the seller is to blame.
There are four risk of loss rules to determine who bears the loss. If the risk of loss is on the buyer he pays the full contract price for the goods. If the risk of loss is on the seller, no obligation on the buyer and possiblity liability on seller for nondelivery. What are the four risk of loss rules?
Work through the rules in descending order.
1. Agreement of the parties controls
2. Breaching party is liable for any uninsured loss even though breach is unrelated to the loss.
3. If the goods are being delivered by a common carrier other than the seller, the risk of loss shifts from seller to buyer at the time that the SELLER completes its delivery obligations.
4. Catch all if none of the above the determining factor is whether the SELLER is a MERCHANT (whether the buyer is a merchant is irrelevant). If seller is a merchant then the risk of loss shifts from the seller to the buyer one the buyers receipt (physical possession) of the goods. If the seller is not a merchant, the risk of loss shifts from a non-merchant seller to a buyer when he tenders the goods (ie makes the goods available)
Who bears the risk of loss under Art. 2A (leases of personal property)?
Unallocated risk of loss is on the lessor.
What are the three warranties of quality for sale of goods?
1. Express warranties
2. Implied warranty of merchantability
3. Implied warranty of fitness for a particular purpose
What is an express warranty of quality?
words that promise, describe or state facts, or use of sample or model. Distinguishable from puffing which is more general.
What is the implied warranty of merchantability?
When any person buys goods from any MERCHANT (someone who deals in goods of that kind), a term is automatically added to the contract by operation of law - that THE GOODS ARE FIT FOR THE ORDINARY PURPOSE for which such goods are used.
What is the implied warranty of fitness for a particular purpose?
When a buyer has a particular purpose, buyer is relying on seller to select suitable goods AND seller has reason to know of purpose and reliance..
What are the 2A warranties on leases?
lessor of personal property makes the same warranties as a seller: express, merchantability, fitness
In a finance lease, if a seller breaches one of the three warranties, may a buyer stop making payments?
No, buyer must address the warranty claims to the seller but still has to keep paying the 3rd party intermediary.
What contractual limitations can be placed on warranties?
1. Disclaimer (ie there are no warranties) eliminates IMPLIED warranties only NOT express warranties.
2. Limitation of remedies for breach.
How can implied warranties be disclaimed?
1. conspicuous languaage of disclaimer, mentioning merchantability
OR
2. "as is" or "with all faults"
What are the rules for limiting remedies for breach of warranty?
1. it is possible to limit remedies for even express warranties
2. the general test is unconscionability
3. prima facie unconscionable if breach of warranty on consumer goods causes personal injury
What is perfect tender?
1. only applies to sales of goods (UCC)
2. the seller's performance must be perfect: perfect goods, perfect delivery
3. a less than perfect tender by the seller generally gives the buyer the option of retaining or rejecting of any or all of the delivered goods AND suing for damages.
When does the seller have the option to cure a less than perfect tender of goods?
1. Seller has reasonable grounds to believe that less then perfect would be ok. (look for info on prior deals b/w buyer and seller)
2. the time for performance hasn't expired.
What is an installment contract?
contract that requires or authorizes delivery of goods in separate lots to be separately accepted.
When does a buyer have a right to reject an installment?
ONLY where there is substantial impairment in that the installment can't be cured.

Make sure to distinguish between an installment contract and buying something on credit and paying for it in installments.
What is the effect of acceptance of goods?
buyer cannot reject the goods (can later revoke his acceptance)
Is payment, acceptance of goods?
Payment without opportunity for inspection is NOT acceptance
What will be implied if the buyer keeps the goods without objection?
implied acceptance.
What are the requirements for a buyer to revoke acceptance of a good?
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 of nonconformity.
If there is an open price term in a sale of goods, what happens?
the price will be a reasonable price at the time of delivery
If a price is to be fixed by a buyer or seller, how must it be fixed?
in good faith
What does price payable in goods mean?
that each party is the seller of the goods it provides.
What is the common law counterpary to "perfect tender"?
substantial performance
When is specific performance available as an equitable remedy?
when the remedy at law is inadequate. Occurs in sales of real estate, and sales of unique goods. Possible injunctive relief for service contracts but NOT specific performance.
When may a seller reclaim his goods (reclamation is ONLY available under the UCC)?
1. buyer must have been insolvent at the time that it received the goods
AND
2. the seller demands return goods w/in 10 days of receipt (10-day rule becomes a reasonable time rule if before deliveryy there had been an express represtation of solvency by the buyer)
AND
3. the buyer still has goods at the time of the demand
What are the rights of a buyer in ordinary course of business in entrustment?
If an owner leaves her goods (voluntarily entrusts) with a person who sells goods of that kind and that person wrongfully sells the goods to a thrid party then such a good faith purchaser from dealer cuts off rights of the original owner/entruster.
What are expectation damages?
Amount of damages that will put the plaintiff in the position she would have been in had the defendant not breached.

Plaintiff's position without breach minus Plaintiff's position now
What are reliance damages?
Pay plaintiff by putting plaintiff in the same economic position as if the contract never happened.
What are restitution damages?
Pay plaintiff by putting DEFENDANT in same economic position as if contract had never happend.
Under UCC, Art. 2, what damages can a plaintiff recover if seller breaches and buyer keeps the goods?
Fair market value of goods if perfect minus fair market of the goods as delivered
Under UCC Art. 2, what are the remedies the plaintiff can recover if the seller breaches, and the seller has the goods?
Market price at the time of the discovery of the breach minus the contract price OR replacement price minus the contract price.
Under UCC Art. 2, what are the remedies the plaintiff can recover if the buyer breaches, and the buyer keeps the goods?
the contract price.
Under UCC Art. 2, what are the remedies the plaintiff can recover if the buyer breaches, seller has the goods?
contract price minus market price at time and place of delivery
OR
contract price minus resale price
AND in some situations, provable lost profits.
Under UCC Art. 2, when can a plaintiff recover lost profits?
If the plaintiff is a volume seller, and defendant purchases goods from plaintiff's regular inventory then plaintiff can recover lost profits.
What are incidental damages?
costs incurred in finding replacement performance - always recoverable (not just if foreseeable)
What are consequential (special) damages?
Kind of loss that is special to the plaintiff (ie not generally the kind of loss a plaintiff would sustain). Recoverable when a defendant had reason to know of these special circumstances at the time of the contract.
What are avoidable damages?
Damages that could have been avoided without undue burden on plaintiff. No recovery for avoidable damages. The burdens of pleading and proof are on the defendant (b/c this is a defense)
What is the reasonable certainty test for contract damages?
money damages must be established with reasonable certainty.

Watch out for fact patterns with new businesses or new business activities.
What are liquidated damages?
a contractual provision that determines the amount of damages if a party breaches the contract.

Courts will determine if the provision is valid by making sure its not a penalty. The two tests are: (1) damages were difficult to forecast at time contract was made. (2) provision is a reasonable forecast.
What is the material breach rule to excuse nonperformance of a contract?
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.
4. if there is a substantial performance then the breach is not material and vice versa if the breach is material then the performance was not substantial.
What is the divisible contract exception to the material breach rule? (common law - NOT UCC)
In a divisible contract there can be a contract law recovery for substantial performance of a divisible part (must be divisible in both units and money per unit) even though there has not been a material breach of entire contract.
Under the UCC, is it necessary that a breach be material to excuse performance of the non-breaching party?
No b/c of the perfect tender rule, any breach no matter how small will excuse performance.
What are the six ways a party can be excused from performance of a contract because of something that happened after the contract was made?
1. Excuse because of other party's improper performance
2. Excuse because of the non-occurrence of a condition
3. Excuse because of the other party's anticipatory repudiation
4. Insecurity
5. Excuse by reason of a later contract
6. Excuse by reason of a later, unforeseen event.
What is a contract condition?
a mutually agreed upon promise modifier. Language in a contract (not merely language in response to an offer) that does not create a new obligation, but limits obligations created by other language in the contract.

Watch for words like: if, only if, provided that, so long as, subject to, in the event that, unless, when, until and on condition that
What is the standard foor determining whether a contract condition has occurred (ie been satisfied)?
strict compliance is required for satisfaction of a condition.
What happens if a condition does not occur?
performance of all remaining contract obligations is excused.
When is the occurrence of the condition excused (which means that even though the condition did not occur, all remaining contract obligations are not excused)?
1. waiver/estoppel
2. prevention
3. avoidence of forfeiture.
How do you determine if the non-occurrence of a condition is excused by estoppel/waiver?
Identify the person who benefits from or is protected by the condition - only that person can give up the benefit/protection.

If the benefitted person makes a statement giving up benefits of the condition:
BEFORE the conditioning event AND there's reliance then estoppel has occurred.
AFTER the condition event was to occur (no reliance needed) there is waiver.
When is the non-occurrence of a condition excused by prevention?
when the party protected by the condition hinders or prevents the occurrence of the condition.
When is the non-occurrence of a condition excused by avoidance of forfeiture?
the courts decide to avoid excessive harm to the party not protected by the condition.
What is the difference between a condition precedent and a condition subsequent?
Condition precedent - condition must occur before there is any obligation to perform

Condition subsequent - conditions that occur after the start of performance and the occurrence excuses any further performance.
What are the elements of anticipatory repudiation?
*1. unambiguous statement or conduct indicating
2. that the repudiating party will not perform
3. made prior to the time that performance was due.
What happens if one party committs anticipatory repudiation?
other party is excused from performance and may make an immediate claim for breach UNLESS the claimant has already finished performing then the claimant must wait until the date the contract was to be completed to sue.
Can anticipatory repudiation be retracted? How?
Yes so long as there has not 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 under adequate assurance is provided.
When is contract performance excused due to insecurity?
If the words or conduct of one party give rise to (1) REASONABLE GROUNDS FOR INSECURITY then the other party can in (2) WRITING demand ADEQUATE ASSURANCE and (3) if it is COMMERCIALLY REASONABLE can suspend performance until it gets adequate assurance.
What are the four ways to excuse a contract through a later contract?
1. Rescission (cancellation)
2. Accord and Satisfaction (substituted performance)
3. Modification (substituted agreement)
4. Novation (substituted person)
When can the parties rescind (cancel) a contract?
any time before either party has completed performance. (any recovery for work done must be made in quasi-k)
What is accord and satisfaction?
Accord: when the parties agree to accept a different PERFORMANCE to an already existing obligation.
Satisfaction: that different performance
What is the effect of accord AND satisfaction?
if the new agreement (the accord) is performed (satisfaction), tthen performance of the original obligation is excused.
If no satisfaction then original obligation is not excused and the plaintiff can recover on either the original agreement OR the accord.
When can the parties excuse a contract through modification?
Modification is an agreement by parties to an existing obligation to accept a different AGREEMENT in satisfaction of the existing obligation.
How is modification different from accord and satisfaction?
Mere making of a substituted agreement (modification) excuses original contract unlike accord and satisfaction which requires performance to excuse.
What is a novation?
a novation is an agreement between BOTH parties to an existing contract to the substitution of a new party ie same performance, different party.
Who is liable after novation?
Novation excuses the contraced for performance of the party who is substituted for or replaced.
How is delegation different from novation?
Novation requires BOTH parties to the original contract agree to substitute AND excuses performance of substituted party. Delegation does neither.
When can performance be excused for impossibility, impracticability or frustration of purpose?
1. something happens afteer contract formation but before the completion of contract performance AND
2. it was unforeseen AND
3. it makes performance impossible or commercially impacticable or frustrates the purpose of the performance.
What are the two main differences between impossiblity and impracticability?
1. impossibility is objective/impracticability is subjective
2. impossbility means can't be done/impracticability means can only be done with extreme and unreasonable difficulty and expense.
What is the three question test for determining if a contract is excused by impossibility or impracticability?
1. which party is arguing that his performance is excused?
2. what was that party obligated to do?
3. what is the effect of the post-contract occurrence on THAT obligation?
What is the effect of death on contract obligations?
Death does NOT make a person's contract obligations disappear EXCEPT if party to contract is a "special person" such that he is the ONLY person who could do the contract then dead special person is excused for impossibility.
What happens when a later law makes performance of a contract illegal?
parties excused by impossibility
What happens when a later law makes the mutually understood purpose of a contract illegal?
parties excused by frustration of purpose.
How do you identify a third-party beneficiary problem?
look for two parties contracting with the intent of benefitting a third party.

(most common is an insurance problem)
What is a third-party beneficiary?
not a party to the contract. able to enforce contract others made for her benefit.
What is a promisor?
(third-party beneficiary vocab)
person who makes the promise for the benefit of the third party
What is a promisee?
(third-party beneficiary vocab)
a person who obtains the promise that benefits the third party
What is an intended vs. incedental beneficiary?
intended beneficiars are usually named. Based on intent of the parties. Only intended beneficiaries have contract law rights
What is a creditor vs. a donee?
(third-party beneficiary vocab)
Intended beneficiaries are either donees or creditors.

Creditor only if already creditor of promisee when became beneficiary.
When may the promisor and promisee cancel or modify a contract w/ a 3rd party beneficiary?
If the thrid party knows of and has relied on or assented as required. If so, her rights have vested and the contract cannot be canceled or modified without her consent unless the contract otherwise provides.
What are the 4 "who can sue whom" 3rd party beneficiary situations?
1. beneficiary can recover from promisor
2. promisee can recover from promisor
BOTH promisee and beneficiary cannot recover from promisor - one or the other.
3. Beneficiary can NOT recover from promisee.
4. Limited EXCEPTION: creditor beneficiary can recoover from promisee but ONLY on pre-existing debt.
What defenses does a promisor have against a third party beneficiary?
Any defense that he would have had if he was sued by the promisee.
What is an assignment?
a later transfer (after the contract was made) of rights under a contract to a third party.
Who are the three parties to an assignment transaction?
1. Assignor - party who transfers his rights
2. Assignee - not a party to the original contract. Able to enforce the contract because of the assignment
3. Obligor- other party to the contract.
What are the two ways assignments can be limited?
1. contract provisions
2. common law
What is the effect of contract language prohibiting assignments?
No rights to assign but still have power to assign which means that the assignor is liable for breach of a contract but an assignee who doesn't know of the prohibition can still enforce the assignment.
What is the effect of contract language invalidating assignments?
No rights to assign OR power to assign so that there is a breach by the assignor and no rights in the assignee.
Under common law, assignments that do what are barred?
substantially change the duties of the obligor.

Assignments of right to pay - never substantial change

Assignments of right to contract performance - usually substantial change.
Is consideration required for an assignment?
No but gratuitous assignments can be revoked.
What are the rights of the assignee?
1. Assignee can recover from obligor for breach of contract.
2. Assignor for consideration can NOT recover from obligor.
3. Obligor has the same defenses against an assignee as it would have against assignor.
4. payment by obligor to assignor is effective until obligor knows of assignment.
5. IN AN ASSIGNMENT FOR VALUE: assignor warrants that (a) the right assigned actually exists (b) the right assigned is not subject to any defenses by the obligor AND (c) the assignor will do nothing to impair the value of the assignment.
If multiple assignments are made for the same contract rights, which assignee prevails if all the assignments were gratuitous?
The last assignee prevails
EXCEPTION: if the gift assignment is not revocable then it will take priority over a later assignment. Gift assignments become irrevocable if: (1) it is the subject matter of a writing delivered to the assignee (2) the assignee has received some sort of indicia of ownership or (3) the assignee has relied onthe assignment in a way that is reasonable, foreseeable and detrimental.
If multiple assignments are made for the same contract rights, which assignee prevails if any of the assignements are for consideration?
First assignee for consideration wins.

VERY limited EXCEPTION: a subsequent assignee takes priority over an earlier assignee for value only if he both (1) does not know of the earlier assignment and (2) is the first to obtain payment, a judgment, a novation or indicia of ownership (four hourseman rule)
What is a delegation?
a party to a contract transfers work under the contracct to a third party.
What is the difference between an assignment and a delegation?
Assignment - transfer of rights and benefits under a contract to a third party
Delegation - transfer of duties or burdens of a contract to a third party.

Often a party makes both an assignment and delegation to a third party.
Which duties are delegable?
any contractual duties UNLESS (1) contract prohibits delegations or prohibits assignments (2) contract calls for very special skills OR (3) person to perform contract has a very special reputation.
What happens if, after delegation, the third party delegatee does NOT perform?
1. Delegating party always remains liable
2. Delegatee liable only if she receives consideration from delegating party.
Under DE law, what law determines the existence of a contract?
The law of the place where the contract is formed.
How does DE law determine which state's substantive law will govern contract issues?
DE applies the MOST SIGNIFICANT RELATIONSHIP TEST:
1. the place of contracting
2. the place of negotiation of the contract
3. the subject matter of the contract
4. the domicile, residence, nationality, place of incorporation and place of business of the parties to the contract.
Pharmathene Inc v. SIGA Technologies (2008)
However, DE generally honors contractually designated choice of law provisions as long as the jurisdiction selected bears some material relationship to the transaction.
How does DE law determine what state's law governs procedural or remedial questions?
The law of the forum governs procedural or remedial questions even if the substantive law is governed by another state.
Section 2708 of Title 6 of the Delaware Code authorizes the court to uphold a Delaware choice of law clause in a contract, despite contrary conflict of laws principles, when?
When the contract involves more than $100K b/c such a provision is itself presumed to be a significant, material and reasonable relationship w/ DE.
Under DE law, what is an express contract?
a contract where the terms of the agreement are state in words
Under DE law, what is an implied contract?
a contract where the law infers the existence of a contratual relationship from the conduct of the parties, rather than words.

Implied in law (quasi contracts) will be implied without regard to the intention of the parties to prevent unjust enrichment.
Under DE law, what is unjust enrichment?
the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental preinciples of justice or equity and good conscience ie plaintiff performed w/ expect to be paid and recipient should have known the performing party expected to be paid.
Under DE law, what are the elements of unjust enrichment?
1. an enrichment
2. an impoverishment
3. a relation between the enrichment and impoverishment
4. the absence of justification
5. the absence of a remedy provided by law.
Under DE law, if a contract comprehensively governs the rights of the parties, what will be the result of a claim for unjust enrichment?
Denied. can't use quasi just cause you don't like the result.
Under DE law, when may a contract to make a future contract be enforced?
the agreement specifies all of the material and essential terms including those to be incorporated in the future contract. A mere agreement to agree will not be enforceable. BAE Systems v. Lockheed Martin (2009)
Under DE law, is an agreement to negotiate in good faith enforceable?
Yes. Liability for breach will ensue not if the parties fail to reach an agreement but if they fail to negotiate in good faith.
Under DE law, can parties bind themselves to an oral agreement to execute a written agreement?
Yes provided the terms are fully agreed on. Breach of such oral agreement (by failing to execute the written agreemtn) will support an action at law in whichh the same damages would be recoverable as for a refusal to perform the contract after its execution in writing.
Under DE law, who decides questions of procedural arbitrability?
the courts decide whether the parties agreed to arbitrate.

Courts should not assume that the parties agreed to arbitrate arbitrability unlesss there is CLEAR AND UNMISTAKABLE evidence that they do so.
Under DE law, who decides questions of substantive arbitrability?
arbitrator decides substantive issues of the applicability of the arbitration clause and scope.
Under DE law, what must a contract under seal contain?
1. language that it is under seal
2. recital affixing the seal
AND
3. extrinsic evidence showing the parties' intent to conclude a sealed contract.
EXCEPTION: contracts of debt (ex. mortgages or promissory notes) need only contain the most minimal references to a seal.
Under DE law, what are the statute of limitations for:
1. breach of contract?
2. actions to enforce a promissory note.
3. contracts under seal
1. 3 years
2. 6 years
3. no SOL, common law presumption of 20 years.
Under DE law, are contracts to marry enforceable?
No.
Under DE law, what is an offer?
the signification by one person to another of his willingness to enter into a contract w/ him on the terms specified in the offer.

Mere willingness to negotiate is NOT an offer.
Under DE law, how may intention to be bound by a contract be shown by performance?
continued performance in accordance with an agreement's terms.
Under DE law, what is the objective test for contract formation?
it is a party's objective intent ie its overt manifestations, which determine the existence of a contract, rather than a party's subjective intent.

A contract is formed if a reasonable person would conclude, based on objective manifestations of assent and surrounding circumstances that the parties intended to be bound to their agreement on all essential terms.
Under DE law, consideration is required for all contracts except...
contracts under seal.
Under DE law, what are the elements of promissory estoppel?
a plaintiff must show by CLEAR AND CONVINCING EVIDENCE that (1) a promise was made (2) it was the reasonable expectation of the promisor to induce action or forbearance on the part of the promisee (3) the promisee REASONABLY RELIED on the promise and took action to his detriment (4) such promise is binding b/c injustice can only be avoided by enforcement of the promise.
What are the differences between RST 90s requirements for promissory estoppel and DE law?
DE promissory estoppel requires a higher standard of proof and reasonable reliance.
In DE, what is the level of mental incapacity sufficient to permit cancellation of an agreement?
individual must be incapable of understanding nature and effect of transaction.
In DE, is an agreement between a mentally incompentant person void or voidable?
voidable at the insistence of the mentally incompetent party.
In DE, what is the defense of mistake?
when an agreement is formally reduced to writing and stands unrescinded, contracting pparties are held to its term, unless through mutual mistake, or mistake of one party together w/ a contracting party, the agreement fails to express the contract actually made
In DE, when does a mutual mistake occur?
when the parties have a common intention and each labors under the same misconception or where there is a common fundamental error.
In DE, when may a party rescind a unilateral mistake?
If enforcement of agreement would be unconscionable, mistakke relates to the substance of the consideration, mistake occurred regardless of exercise of ordinary care, and it is possible to place the other party in status quo.
In DE, what is the standard for reformation of a written contract on the grounds of mutual mistake?
CLEAR AND CONVINCING AND FREE FROM DOUBT that the instrument sought to be reformed does not b/c of mutual mistake, properly record aall of the material provision of a prior, definite and specific oral agreement made between parties.
In DE, when may a contract be voidable on the basis of misrepresentation?
1. a misrepresentation
2. was fraudulent OR material (can be innocent if material)
3. induced recipient to enter into contract
4. recipient's reliance on the misrepresentation was reasonable.
In DE, when may a failure to disclose material information be actionable?
if the contracting parties had a pre-existing fiduciary relationship
OR
where one party made prior statements that would be incomplete and misleading in the absence of disclosing the additional info.
In DE, what consistutes coercion, such that a contract is invalidated?
the ocnduct of the party alleged to have coerced the transaction must be:
1. a wrongful act
2. which overcomes the will of the aggrieved party
3. who has no adequate legal remedy to protect himself.
In DE, how may a victim ratify a contract created under duress?
1. expressly
2. if victim accepts the benefits of the contract
3. remains silent
4. acquiesces in contract for considerable length of time after the opportunity arises to annul or avoid agreement.
In DE, what are the elements of undue influence?
1. person who is subject to influence
2. an opportunity to exert undue influence
3. disposition to exert such influence
4. result indicating presence of undue influence

If fiduciary or confidential relationship then presumption of undue influence.
In DE, what are the elements of unconscionability?
1. absence of meaningful choice on the part of one of the parties (substantive)
2. terms which are unreasonably favorable to the other party (procedural)

DE VERY reluctant to find unconscionability - a mere disparity in bargaining power will NOT support a finding of unconscionability.
What is the exception to the rule that DE courts will not violate public policy?
if the contract is divisible to the extent that the lawful area can be separated from the unlawful area, equity will enforce the contract to the extent that it is lawful, and refuse recognitiion to the unlawful portion.

Whether contracts are divisible depends on the INTENT of the parties.
What are liquidated damages and when are they enforceable (in DE)?
when parties stipulate to the amount of damages payable in the event of a breach under a liquidated damages clause PROVIDED THE SUM STIPUTATED DOES NOT AMOUNT TO AN UNENFORCEABLE PENALTY.

In order to not be considered a penalty (which invalidates the contract) the liquidated damages provision:
(1) damages which the parties might reasonably anticipate must be difficult to ascertain at the time of contracting
AND
(2) the amount must be either a reasonable estimate of the damages which would probably be cause by a breach
OR
(3) must be reasonably proportionate to the damages which have been caused by the breach.
In DE, statute of limitations only apply to contracts at law, not in equity. What is the equivalent equity defense?
Laches
In DE, What are the elements of a laches defense?
1. plaintiff's knowledge that she has a basis for legal action
2. plaintiff's unreasonable delay in bringing a lawsuit
3. identifiable prejudice suffered by the defendant as a result of the plaintiff's unreasonable delay.

A party's failure to file w/in an analogous statute of limitations, is typically conclusive evidence of laches.
In DE, the statute of frauds requires a writing, signed by the party asserting the defense, for what type of contracts?
1. consideration of marriage (abolished)
2. any contract for sale of lands
3. any agreement thta is not to be performed w/in the sapce of one year from the making thereof.
4. any agreement to charge any person to answer for the debt, default or miscarriage of another.
5. (DE adopted UCC) which covers contracts for the sale of goods over $500
In DE, is a modification of an agreement within the statute of frauds required to be in writing?
Only if the contract as modified still fell within the statute of frauds.
In DE, when will multiple writings satisfy the SOF?
1. if they reasonably identify the subject matter of the contract
2. indicate that a contract has been made between the parties or an offer extended by the signing party and
3. state with reasonable certainty the essential terms of the unperformed promises in the contract
4. at least one of the writings must be signed by the parties against whom the documents are to be enforced.
5. if unsigned, the unsiged documents must clearly relate to the same transaction and the party to be charged has to acquiesce in the contents of the unsigned writing.
In DE, when will part performance satisfy the SOF?
in land contracts
In DE, can the defendant admit making an agreement w/in the SOF and still rely on the SOF to bar its enforcement?
No. an admission of an oral agreement precludes assertion of the SOF as a defense (in land contracts at least)
In DE, if a contract is invalidated due to a SOF defense, what can a party who has partially performed do?
get restitution for any benefit that the injured party has conferred on the other. (unjust enrichment)
In DE, when can reliance estopp a SOF defense?
when a party RELIES on the promise that the other party will perform and CHANGES HIS POSITION.
What is DE's objective theory of contract construction?
that a contract's construction should be that which would be understood by an objective, reasonable third party. Words are given their ordinary meaning.
In DE, when is a contract considered ambiguous?
when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.

Contract terms are not ambiguous merely because the parties to the contract disagree.
In DE, when is the only situation where a court will consider extrinsic evicen to interpret an agreement?
where the contract language is ambiguous
In DE, what is the forthright negotiator principle?
in cases where the extrinsic evidence doesn't lead to a single, commonly held understanding of a contract's meaning, a court may consider the SUBJECTIVE UNDERSTANDING of one party that has been OBJECTIVELY MANIFESTED and is KNOWN or SHOULD BE KNOWN to the other party
In DE, what is the contra proferentem principle?
if an ambiguity does exist, the contra proferentem principle of construction requires ambiguous contract language to be construed AGAINST THE DRAFTER

usually applied in adhesion or standardized contract situations.
Is the question of whether a contract is ambiguous a matter of fact or law?
a matter of law to be resolved by the court.
In DE, a contract must be reasonable definite in its ..... to be enforceable.
material or essential terms.
In DE, what is required to make a contract modification?
consent of both parties
AND
consideration
In DE, what covenant is implied to protect "the spirit of an agreement"?
the implied covenant of good fiath and fair dealing.

a claim for breach of implied covenant of good faith and fair dealing must reference specific terms of the contract
In DE, what is the difference between the effect of a material breach and the effect of an immaterial breach?
Material breach - other party is excused from performance

Immaterial breach - obligations of injured party may not be terminated but will give rise to an action for damages.
In DE, what are the requirements to state a claim for breach of contract?
1. the existence of a contract
2. breach of the obligation imposed
3. damage to the plaintiff
In DE, what is the recovery for promissory estoppel?
it can (but need not be) limited to damages which compensate the party based on his RELIANCE interest.
In DE, what must a party establish to recover specfic performance?
Party seeking specific performance must establish by CLEAR AND CONVINCING evidence that:
1. a valid enforceable agreement exists between the parties
2. the party seeking specific performance was ready, willing and able to perform under the terms of the agreement
3. a balancing of equities favors an order of specific performance.
In DE, what happens when a party fails to fix a time for contract performance?
the court will determine a reasonable period for performance
In DE, if an agreement is partially integrated, is evidence of prior agreements or negotiations admissible?
Yes but only to supplement the writing NOT to contradict it.

If the agreement is completely integrated not even a consistent additional term is allowed.
In DE, what is a merger clause?
clause that spefically states that prior negotiations are merged into the final integrated writing.

Significant weight but not conclusive of whether an agreement is integrated.
In DE, what types of evidence are NOT excluded by the parol evidence rule?
1. evidence of negotiations that took place AFTER the written agreement was made
2. evidence that there was no agreement or the agreement was not supported by consideration
3. evidence that helps interpret the language of the writing
4. evidence to prove fraud, illegality, duress, mistake or another invalidating cause
5. evidence to establish grounds for granting or denying rescission, reformation, specific performance or other remedy.
6. parol evidence when the terms of the agreement are ambiguous.
In DE, when will restrictive covenants be upheld?
when they are reasonable
In DE, to be enforceable, a covenant not to compete must be....
1. reasonable in scope: both duration and geographic
AND
2. advance a legitimate economic interest of the party enforcing the contract.
AND
3. survive a balancing of the equities.

To gain specific performance of a covenant not to compete the element must be established by CLEAR AND CONVINCING EVIDENCE
In DE, may employment or continued employment be consideration for an at-will employee's agreement to a restrictive covenant?
yes.
In DE, what are the three elements to establish that a party is a third-party beneficiary?
1. an intent between the contracting parties to benefit a thrid party through the contract
2. an intent that the benefit serve as a gift or in satisfaction of a preexisting obligation to the third party and
3. a showing that benefiting the third party was a material aspect to the parties entering into the contract.