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352 Cards in this Set

  • Front
  • Back
What is the applicable law for contracts?
Article 2 UCC applies to the sale of goods (moveable, personal property); CL applies to all other k's
Does it matter whether the parties are merchants for Art. 2 to apply?
No. It also doesn't matter what the k price is.
Which law governs loans?
The common law
What is the applicable law when there is a mix of goods and services?
The law corresponding to the more important element
What is the applicable NY law for leases of goods?
Article 2A of the UCC
Does Article 2A apply to the lease of real property?
Define "contract"
A legally enforceable agreement. A promise or a set of promises for breach of which law gives a remedy
What is an express contract?
Created by the parties' words, either oral or written
What is an implied contract?
Created by the parties' conduct
What is a quasi-contract?
An equitable remedy. Used when k law yields an unfair result. It protects against unjust enrichment
What is the recovery under a quasi-contract?
Reasonable value of the benefit conferred (NOT the k price)
What is a bilateral k?
The offer can be accepted in any reasonable way (EVERY k unless it says)
What is a unilateral k?
An offer that can be accepted only by performing. The offeror clearly indicates that performance is the only manner of acceptance OR makes an offer to the public clearly contemplating acceptance by performance
What is a void k?
A k without any legal effect FROM THE BEGINNING. Can not be enforced
What is a voidable k?
A party may elect to avoid or ratify the k (ex: k by a minor)
What is an unenforceable k?
A k that is otherwise valid BUT FOR which some defense exists extraneous to formation
How should you approach a contracts question generally?
Look for an offer that has been accepted, then see if it is legally enforceable (look for defenses against formation). In other words, Mutual assent (offer and acceptance) - words or conduct manifested a present intention to enter a k; consideration or substitute; AND no defenses to formation
What are the requirements for an offer?
Must be (a) expression of a promise, undertaking, or commitment to enter into a k; (b) definite and certain in its terms; and (c) communicated to the offeree
What are some factors that you might consider when answering whether an offer is sufficient?
Language used, prior relationship of the parties, method of communication, custom of industry, degree of definiteness and certainty of terms
How is the "power of acceptance" important to an offer?
An offer must sufficiently identify the offeree or class to justify the inference that the offeror intended to create such a power
What does the offer have to do with regards to real estate?
identify the land and price terms
What does the offer have to do for the sale of goods?
the quantity must be certain or capable of being made so. It is sufficient if the offer specifies a reasonable range of choices
What does the offer have to do for an employment k?
Specify the duration of employment
What happens if there are missing terms in the offer?
Certain missing terms may be supplied by the court if consistent with the parties' intent.
What terms can be supplied by the UCC?
A reasonable price term and time for performance
Why is a vague term a problem?
A vague term may defeat k formation unless acceptance or part performance makes the term clear
What happens if a k says that a material term will be agreed on at a future date?
The k fails
Are there other requirements for a valid offer?
The offer must be communicated to the offeree; it must manifest an intention to be bound (by words or conduct)
Are advertisements offers?
Usually not. Usually do not contain a quantity term. An unlimited number of people could accept
How should we analyze the content of the offer?
Look to see if the terms are too indefinite to be performed
What is a requirements k?
"Offer to buy all of its requirements of beans from seller for 6 years for $1 per can" Acceptable. Look for words like "all" or "only"
Are offers for requirements k's acceptable?
Yes, if they are sufficiently definite (even though there is no quantity mentioned
What happens when after entering a requirements k, there is a sudden change in the buyer's requirements?
The buyer cannot take the seller by surprise. Any increase can't be out of line with the buyer's prior demands
What is an open price term?
Ex: letter does not state a price
Is an open price term acceptable?
No. too indefinite under CL (but NOT under Art. 2). Under CL, not an offer
After answering whether the offer is acceptable, what do we ask next?
Is the offer still open?
What happens once an offer has terminated?
It cannot be accepted (dead)
When does an offer lapse?
After a stated term or after a reasnoable time has passed
When does an offer terminate?
When the offeror revokes the offer
How does an offeror revoke an offer
Direct: offeror unambiguously indicates directly to offeree that he changed his mind.
Indirect: offeror engages in conduct that unambiguously indicates he's changed his mind AND offeree is AWARE of the conduct
When is revocation effective?
On receipt only. If had already accepted the offer before receipt, too late to revoke
What is the general rule for revocation?
Offeror can revoke at any time before acceptance
Are there times when the offeror CANNOT revoke before acceptance?
1. option k
2. reasonably foreseeable detrimental reliance before acceptance
3. beginning performance
4. firm offer under Art. 2
What is an option k?
A promise to keep the offer open that is paid for (consideration). Merely promising to keep the offer open is not enough
What is reasonably foreseeable detrimental reliance before acceptance?
Ex: contractor relies on subcontractor's bid in computing its own bid (this is the ONLY case where this works)
When does beginning performance eliminate the offeror's option to revoke before acceptance?
When it occurs in an offer to enter a unilateral k - if beginning performance, cannot revoke (MBE). Mere preparation is not enough to make the offer irrevocable
What is the NY rule for beginning performance?
An offer can be revoked until performance is COMPLETED
What is a firm offer under Art. 2?
A signed, written promise by a merchant to keep an offer open. Does not have to be paid for. No consideration
Is there a time limit for a firm offer?
Has a three month cap (if says "will not revoke for 6 mo's," scale back to 3
Can you have an option under Art. 2?
Yes. It is not subject to the same restrictions as a firm offer. If you have consideration in exchange for the promise to keep the offer open.
What if the firm offer does not state a time period?
The offer will be open for a reasonable time, not to exceed three months
In NY, is a signed, written promise not to revoke enough to keep the offer open?
Yes, even without payment
How does an offeree reject an offer?
Express or by counteroffer
When is a rejection effective?
When received
What happens when offeree rejects an option?
Does not terminate the offer; still free to accept within the option period unless the offeror has detrimentally relied on the rejection
Can bargaining tactics count as a rejection?
No - mere bargaining is not a rejection ("will you take 100k?")
Is conditional acceptance a rejection?
Yes ("on the condition that," "provided that," "so long as," "if")
Does acceptance containing additional or different words operate as a rejection?
Under the CL, yes, but not under Art. 2
What is the CL rule for acceptance containing additional words?
Mirror image rule: terms of acceptance must mirror terms of an offer
What is the Art. 2 rule for acceptance containing additional words?
Does not have to mirror offer. Do not prevent acceptance. But, additional terms do not automatically become part of the k
Under Art. 2, what happens to additional terms in an acceptance?
Become part of the k ONLY if (a) both parties are merchants, (b) the term is not a material change, and (c) the offeror does not object within reasonable time
How do we know if the change is material?
If the term the offeree adds is customary in the trade, not a material change
What is an example of a material change?
A provision that disclaims all warranties. Likely to cause hardship or surprise to the offeror
What if the seller added "Saturday delivery" and then buyer responded that it was not convenient?
The term would be out - offeror objected to it
How can an offer terminate by operation of law?
Death or insanity of either party, destruction of the k's subject matter, or supervening illegality
Is there an exception to the rule that states death of either party before acceptance terminates an offer?
Irrevocable offer: X makes offer to Y. X promises not to revoke offer for 7 days in exchange for $100. Y pays X 100. Y can still accept X's offer as long as during 7 day period
Once we determine that there has been a valid offer and that the offer has not been revoked/terminated, what do we ask next?
Has the offer been accepted?
What are the requirements for an acceptance?
1. offeree with power of acceptance
2. unequivocal terms of acceptance
3. communication of acceptance
What is the CL rule for acceptance?
Must mirror the offeror's terms (otherwise, may be a counteroffer)
What is the UCC (sale of goods) rule for acceptance?
Need not mirror terms. If indicates the intention ot enter into a k, valid unless it is made conditional on the acceptance of new or different terms
What happens between merchants to additional terms in an acceptance?
Become part of the k unless they materially alter the agreement, the offer expressly limits acceptance to the terms of the offer, or the offeror objects within a reasonable time
What are some usual methods of accepting an offer?
By giving a promise, performing, or starting performance
When do the usual methods of acceptance not apply?
When the language of the offer, which controls, says otherwise. Ex: "only by" indicates unilateral k. "Only by shipping within 23 hours. S faxes back "I accept. I will ship within 24 hours." If S does not ship within 24 hours, did NOT accept the offer and is not liable for breach. Cf: widgets must be shipped within 24 hours. S faxes: I will ship within 24 hours. If S does not ship within 24 hours, S liable for breach. Promise is good enough here. S has accepted buyer's offer.
What if an acceptance is transmitted by an unauthorized means?
It is effective if received by the offeror while the offer is still open
Can a k be formed without communication of acceptance?
A bilateral k may be formed this way when (a) there is express waiver of communication in the offer, (b) the offer requires an act as acceptance, and (c) offeree silently takes the offered benefits
Is the start of performance an acceptance of an offer?
Yes, for an offer to enter into a bilateral k (NOT for offer to enter unilateral k)
Is the start of performance an acceptance of a unilateral k offer?
No, only by completing performance. BUT once an offeree starts to perform, it is too late for offeror to revoke
Does improper performance operate as an acceptance?
Yes, but also operates as a simultaneous breach
Does improper performance operate as acceptance under Art. 2?
Yes. BUT if send an accommodation in the hope that it meets B's needs, S has not accepted. Therefore, no breach
Does silence operate as acceptance?
No. The offeror cannot turn the offeree's silence into acceptance
What is the mailbox rule?
Acceptance is effective when it's mailed (offeree can rely on a k having been formed once he sends an acceptance)
What happens when parties' communications conflict?
Need to figure out which communication controls
On whom does the burden of loss fall?
On the offeror - so if acceptance letter is lost, still can be an acceptance
Are there exceptions to the mailbox rule?
1. does not apply if offer provides otherwise
2. does not apply to an irrevocable offer (offeree does not need protection of the rule here)
3. acceptance, then rejection
What is the "acceptance, then rejection" exception to the mailbox rule?
Here, the mailbox rule applies UNLESS the rejection gets there first and the offeror relies on the overtaking rejection
What about when there is a rejection, followed by an acceptance?
Whichever arrives first controls. Offeree who rejects first does not need protection of the rule (he isn't going to rely on a k being formed). Here, acceptance effective ONLY onl receipt
What is the rule of formation for a unilateral k?
Offeree must act with knowledge of the offer and be motivated by it. Duty to give notice of performance to the offeror if he requests notice or if the act would not normally come to his attention
What is the rule of formation for a bilateral k?
Offeree's ignorance of certain k terms may be a defense to formation. Oppressive terms or terms contrary to public policy may prevent formation. Blanket form recitals will not prevent court from holding that there is no k if a reasonable person would not understand the provisions
What are the defenses against k formation?
1. D's lack of capacity
2. duress
3. misrepresentation or non-disclosure of a material fact
4. mistake about a material fact
5. lack of consideration
What is the defense of lack of capacity?
If under 18, intoxicated, or mentally incompetent. Incapacitated D has the right to void the k. Only D needs capacity, not P. Doesn't matter whether D said he was 18.
Can an incapacitated party ever affirm a k?
Yes, by retaining the benefit of the k without complaint after regaining capacity
What is an incapacitated person liable for in a k?
Necessaries (food, clothing, shelter, medical care), but only on a quasi-contract basis (only for the reasonable value of these, not the k price)
What is economic duress?
Threat to break existing k unless the other party gets another or a better deal. The other party agrees only because he needs to get the first deal done. No other alternative
How does misrepresentation affect a k?
Even an honest or innocent misrepresentation can be fatal (as long as it's material); same for nondisclosure
When is a k voidable for misrepresentation?
When an innocent party justifiably relied on it
When is a k void rather than voidable?
Fraud in the factum (party tricked into assenting without understanding significance of her action), rather than fraud in the inducement (misrepresentation)
What are the kinds of mistakes about material facts?
Mutual mistake and unilateral mistake
What is a mutual mistake?
Both parties are under the mistaken belief that the facts are one way. Whether something exists or what something is, NOT mistake as to value
What are the steps to mutual mistake?
1. basic assumption on which k made
2. mistake had material adverse effect on agreed-upon exchange
3. adversely affected party did not assume the risk of the mistake
When parties know that their assumption is doubtful, mutual mistake is not a defense - assumed the risk that their assumption is wrong
Why doesn't mistake as to market value count for mutual mistake?
Courts assume that the buyer should have had deal appraised before agreeing to pay
What is unilateral mistake?
Usually not a fatal flaw. Mere fact that one party has mistaken believe is not fatal in the agreement process UNLESS the other party is aware of the mistake
Why is consideration important?
In a k, you need a BARGAIN and you need the exchange of legal value. The combination of these two factors is consideration
What is consideration?
Bargained-for legal detriment/benefit. Can take the form of a promise, performance, or forbearance
Is an exchange required for consideration?
Yes. You must exchange something (in bilateral, parties exchange promises; in unilateral, they exchange promise for an act). Ex: seller's promise to sell the dog is consideration for buyer's promise to buy it. One promise can be consideration for another promise
What is consideration as forbearance?
Promise to pay if stop something and you stop. This forbearance is consideration, so the other party has to pay the money
Can past consideration be consideration?
No. NY exception: "as thanks for helping me, I promise to pay you $300" - binding if expressly stated in signed writing and can be proved
Does the amount of consideration matter?
No. Adequacy of consideration is irrelevant (as long as there is a bargain)
What if consideration is devoid of value?
Then it is insufficient
What if consideration is "sham"?
If recited in the k, but not actually paid, it is insufficient
What is the general rule for adequacy of consideration?
Where there is the possibility of value, it will be found even if the value never comes into existence
Does consideration have to be economic benefit?
Is an act or forbearance by the promisee sufficient for consideration?
Yes, if it benefits the promisor
Is a legal benefit and detriment required for consideration?
MAJ: party must incur a detriment (do something not legally obligated to do or refrain from something you have a legal right to do) to satisfy the legal value requirement.
MIN: conferring a benefit on the other party is also sufficient
What is the pre-existing legal duty rule for consideration?
Performing or promising to perform an existing legal duty is insufficient consideration
Are there exceptions to the pre-existing legal duty rule?
1. new or different consideration is promised
2. promise is to ratify a voidable obligation
3. preexisiting duty is owed to a third person rather than the promisor
4. there is an honest dispute as to the duty OR there are unforeseen circ's sufficient to discharge a party
Does the UCC require consideration for modifying a k?
Good faith agreement modifying a k subject to the UCC needs no consideration
Is a promise to refrain from suing on a claim consideration?
May be if the claim is valid or claimant in good faith believed the claim was valid
What is an illusory promise?
Consideration must exist on both sides of a k. If only one party is bound to perform, the promise is illusory. Not enforced. But courts can supply an implied promise ("party must use her best efforts") to infer mutuality
Must all consideration be valid?
Is consideration required to modify a k under the CL?
Yes (pre-existing duty rule). If you are only doing what you already were obligated to do, no consideration
What is the NY rule for whether consideration is needed in a k modification?
If the modification is contained in a signed writing, the pre-existing duty rule does not apply. The signed writing takes the place of consideration
Does the pre-existing duty rule apply to a promise made by a third party?
No. It is a bar only between the two parties to the original k
What does Art. 2 say about the pre-existing duty rule?
Only good faith is needed to modify a k. Consideration not required
Can part payment be consideration?
Yes, for a promise to forgive the rest of a DISPUTED debt
How does NY modify the "part payment as consideration" rule?
In NY, you don't need consideration if the promise to forgive the balance of the debt was in a signed writing
Is a written promise to pay a debt, the collection of which is barred by the SOL, enforceable?
Yes, even without consideration. The writing serves as a substitute for consideration (NY and MBE)
What is promissory estoppel?
A consideration substitute. Need a promise and foreseeable, detrimental reliance on the promise by the other party
What are the steps for promissory estoppel?
1. promisor reasonably expected her promise to induce action or forbearance
2. of a definite and substantial character
3. such action is in fact induced
What effect does illegality at the time of an agreement have on a k?
If the subject matter of an agreement is illegal, the k is unenforceable
Is there an exception for illegality?
You can recover from someone if you do not know about their illegal purpose
What is the effect of a latent ambiguity on a k?
1. if neither party is aware, no k unless both parties intended the same meaning
2. if both parties aware, no k unless both parties intended the same meaning
3. if one party is aware, k based on what the ignorant party reasonably believed to be the meaning of the ambiguous words
How will a court interpret a covenant not to compete?
Will invalidate or narrow it if it operates as a restraint on trade. Consider the SCOPE and NEED for the covenant. Scope: is the geographic limit and time limit reasonable? Need: is there a reasonable need for the protection?
How will a court interpret an exculpatory clause?
It can eliminate liability for negligence, but not for gross negligence or intentional tort
How will a court interpret unconscionable terms in a k?
Terms that are oppressive or an unfair surprise AT THE TIME of agreement will not be allowed. Can be substantive (terms unfair) or procedural (process by which agreement was reached was unfair - fine print, legalese, unequal bargaining power)
How will the court test for unconscionability?
Tested at the time a k was made. Include k's with inconspicuous risk-shifting and k's of adhesion (take it or leave it)
What is the analysis under the Statute of Frauds?
Do we need a writing, do we have a satisfactory writing, and if we don't, is there an exception?
What does "within the SOF" mean?
Means you have to evidence the k by a writing for it to be enforced.
Are most oral k's enforceable?
What kinds of k's have to be in writing?
1. transfer of interest in RE
2. service k that cannot be fully performed within 1yr from date of agreement
3. sale of goods for 500+
4. lease of goods where lease payments total 1000+
5. promise to answer for the debt of another
6. promise by an estate representative to use her own funds to pay estate expenses
7. promise given in consideration of marriage (NOT a promise to marry)
8. misc. provisions of NY SOF (assignment of ins policy, agreement to pay commission or finder's fee)
Does a transfer of interest in RE fall within the SOF?
Yes (easements, leases, other transfers covered), but k's to do something on the land do not fall within SOF. Leases for 1yr or less don't count
Is a service k that cannot be fully performed within 1 yr from the date of agreement within the SOF?
Yes. Focus on what might have happened under the terms. See if something on the face of the k would prevent it from being fully performed within a year. Oral agreements to employ for rest of life don't fall within SOF - could die within 1yr (but NY - ARE within SOF!)
How do we measure the time for SOF questions?
Clock starts from time of agreement, not when performance is to begin
Do modified k's fall within the SOF?
Only if the k as modified falls within the SOF
If the original k prohibits oral modification, can oral modification be effective?
Yes, under CL. Clauses that require a modification to be in writing are not enforceable (are enforceable under Art. 2)
What kind of writing satisfies the SOF for a sale of goods?
Must contain a quantity term and be signed by the D (party asserting SOF defense), doesn't need a price term
What kind of writing satisfies the SOF for a lease of goods?
Writing has to state that it's a lease, include the number of items leased, the term and rental payments, and be signed by D
Other than the writing requirement, what are the other prongs of the SOF?
Writing must contain all material terms (who and what) and be signed by the D (one-way street). Identify parties sought to be charged, ID k's subject matter, terms and conditions of agreement, recital of consideration, AND signature of the party to be charged
Does everything have to be in one writing to satisfy the SOF?
No, several pieces of writing will suffice
What are some exceptions to the SOF?
1. One year prong - full performance eliminates need for a writing
2. RE prong: part performance eliminates need
3. Sale of goods: goods buyer accepted or paid for (but not the rest of the goods)
4. Guarantee: if guarantor's main purpose in making the promise was to benefit himself, then no need for a writing on the MBE
5. Equal dignities rule: only for real property. Written authority to enter a k on behalf of another person is required if underlying k falls within SOF
How to avoid the one year prong for the SOF?
Full performance eliminates need for writing. P doesn't need a writing to satisfy SOF against D. Part-performance is not enough to satisfy. Can STILL recover in quasi-k for reasonable value of benefit conferred
How to avoid the RE prong for SOF?
Part performance eliminates need for writing. Need 2 out of 3: (a) some kind of payment, (b) buyer makes improvements to property, (c) buyer is in possession of the RE. Payment alone, even full payment, is not enough to satisfy part performance
How to avoid the sale of goods prong for SOF?
Goods buyer accepted or paid for. BUT goods not yet accepted by the buyer - seller can raise the SOF defense. If buyer paid for all goods, seller can't raise SOF defense.
Are there other exceptions under sale of goods for SOF?
Judicial admission (party admits in judicial context that k was made); custom made goods (if goods not suitable for sale to others) - here, little chance of fraud, so no writing required; merchant's confirmatory memo of prior oral agreement (buyer can use its OWN letter to satisfy the SOF against seller!)
What are the requirements for a merchant's confirmatory memo for a prior oral agreement?
(a) both parties must be merchants, (b) writing must allege the prior oral agreement, (c) there must not be a response - it's the lack of response that PROVES lack of fraud
Why is a guarantee an exception to a SOF?
If guarantor's main purpose in making a promise is to benefit himself, then there's no need for a writing (MBE). Very little chance of fraud if promise is to secure his own benefit. NY: NO main purpose exception
What is the equal dignities exception to the SOF?
Applies only in context of RP transactions. Written authority to enter a k on behalf of another person is required if the underlying k falls within SOF
Once a k is formed and proven, how do we interpret it?
K is construed as a whole, according to ordinary meaning of words. Written or typed prevail over printed. Ambiguities construed against party preparing k. Look to custom and usage of business and locale to determine parties' intent
What is the Parol Evidence Rule?
Evidence of prior or contemporaneous negotiations/agreements that contradict, modify, or vary k terms is INADMISSIBLE if the written k is intended as a complete and final expression of the parties.
What are exceptions to the PER?
Evidence of the following is admissible: formation defects, existence of condition precedent to a k, intent regarding ambiguous terms, consideration problems, prior valid agreement that by mistake is incorrectly reflected in the writing, collateral agreement if it does not contradict or vary the main contract and subsequent modifications
How does the PER relate to writings?
PER keeps out evidence of what the parties said and wrote before they reduced the terms of their agreement to writing. Assumes that a written version of an agreement is more reliable than anything that came before it
Where does parol evidence get in?
1. to correct a clerical error (typo, transposing)
2. to establish a defense against formation of an agreement (if saying a flaw in the agreement process that led to the deal - evidence gets in
3. to explain a written k (if sign k to lease and claims a certain room and has a fax from plaza sent before k, can get in PE to show what term means)
4. to supplement a partially-integrated writing (a final statement of the terms included in the writing, but not a complete statement of all terms agreed to)
When does parol evidence get in to supplement a partially-integrated writing?
Can supplement or add to a writing because it doesn't appear complete on its face. BUT if k has a merger clause (this k is limited to terms herein), this is evidence that the writing is complete on its face
Can we use PER after an agreement has been reduced to writing?
No - at this point the rules of modification apply. PER looks BACKWARD
How can we use conduct of the parties to interpret a k?
Can be used to explain terms or fill gaps. Court will consider
1. couse of performance - what parties have done under THIS contract - best possible evidence
2. course of dealing - what these parties have done under their earlier k's with one another
3. usage of trade - what others in the trade do under similar circumstances (in this kind of k generally)
How do we analyze seller's warranties of quality in a sale of goods under Art. 2?
First look for express and implied warranties, then for disclaimers/limitations. Seller is liable to the buyer for breach of any express warranty the seller makes
What is an express warranty?
Statement of fact, promise, or description of goods. Mere expressions of opinion are NOT express warranties
What is an implied warranty of merchantability?
Goods are fit for their ordinary purpose. Seller must be merchant who deals in goods of the kind, not just any merchant, since this implied warranty is associated with specialized knowledge about the goods (REGULAR INVENTORY)
What is an implied warranty of fitness for a particular purpose?
Goods are fit for the buyer's special purpose. Buyer has a special purpose in mind. Buyer is relying on the seller to select suitable goods. AND seller knows both of these facts (seller does NOT have to be a merchant at all!)
What is a seller's warranty of quality for lease of goods under Art. 2A?
Have the same implied warranties in a lease as in a sale of goods (merchantability, etc.). Exception: finance lease. Lease computer from Citibank, which bought the computer from gateway. No implied warranty of merchantability. No implied warranties are made by the bank. Only made by the computer company
Are there ways to limit warranty liability in sales and leases of goods?
1. seller can disclaim implied warranties, but not express
2. seller can limit a buyer's remedies for breach of any warranty if the limitation is not unconscionable
What is an example of a seller disclaiming implied warranties?
K provides for sale or lease of computer AS IS. No implied warranties under k. AS IS disclaims implied
What if a k provides that there are "no implied warranties of fitness or merchantability"
There are no implied warranties. Effective because conspicuous. Bold or different typeface, large print, etc.
May a seller limit a buyer's remedies for breach of any warranty?
Yes, if the limit is not unconscionable. However, limiting a buyer's remedies for personal injury is prima facie unconscionable if consumer goods are involved. NATURE OF BUYER'S INJURIES MATTERS
What is the test for unconscionability?
Whether the limitation was unconscionable at the time of the k, not at the time of the mishap
What is a seller's delivery obligation in a sale or lease of goods involving a common carrier - for a shipment k?
S must get the goods to a common carrier, make reasonable delivery arrangements, and notify the buyer about the arrangements (not obligated to get the goods to the buyer)
What is the seller's delivery obligation in a sale or lease of goods involving a common carrier - for a destination k?
Seller must get the goods to a specific destination (usually place where B is located)
What is the risk of loss in sales of goods when goods are damaged before the B gets the goods and neither B nor S is to blame?
If S bears risk of loss, the S must provide new goods to the buyer for no additional cost, or is liable for breach of k. If B bears risk, B must still pay k price
How do we determine who bears the risk of loss?
Agreement of the parties controls. A breaching party bears any uninsured loss, even if loss is completely unrelated to the breach (ex: if ship one week after k deadline, bears risk of loss)
When delibery is by common carrier, when does the risk shift to the buyer?
When S has completed delivery obligations
What is Free on Board?
IN k's that specify that delivery is FOB a paticular point, the FOB point is the delivery point. The delivery point may be seller's place of shipment or goods' final desination.
What if the FOB is not the city in which the seller is located?
Then we're dealing with a desination k
Who bears the risk of loss if there is no common carrier (the buyer picks up or the seller delivers)?
Depends on whether the seller is a merchant. If a merchant, the seller bears the risk of loss until the buyer takes possession of the goods. If seller is non-merchant, S bears risk of loss until S tenders goods (makes them available to B, such as by letting B know where the item is and how to get it)
If a k gives the buyer the right to return goods, who bears the risk of loss?
If buying primarily for resale, same rules apply. If for B's own use, risk of loss remains on the S until B has actually accepted the goods
Who bears the risk in a lease of goods under 2A?
Lessor bears the risk, except in a finance lease
Performance of a k for sale of goods: what is the perfect tender rule?
A S must deliver perfect goods in the right place at the right time. If seller fails to make perfect tender, B has right to reject the goods
What is the option to cure?
S who fails to make perfect tender may have option to cure. Depends on whether time for seller's performance has expired. Can make it right before the deadline. If time for performance expired, no option to cure.
Are there exceptions to the option to cure?
If buyer in the past had accepted yellow T-shirts instead of green in exchange for 10% discount, S has right to cure even though the k deadline has passed
What is an installment sales k?
Requires or authorizes the seller to deliver the goods in separate installments. Perfect tender rule does not apply (assumes S will cure in the course of ongoing performance). B can reject only if there is a substantial impairment in an installment sales K (if less than perfect tender but not substantial impairment, cannot reject)
What is implied acceptance?
When buyer keeps the goods without objection after having an opportunity to inspect. Merely paying for goods is not acceptance
Can a buyer who accepted goods reject?
It's too late to reject. However, B who accepts nonconforming goods can still get damages
What is the rule for revoking acceptance of nonconforming goods?
Can revoke only if the non-conformity substantially impairs their value and was difficult to discover
What is the buyer's payment obligation?
Checks are OK but a seller can insist on cash. If S insists on cash, B will have reasonable time within which to get the cash
What is the general CL rule for performance of k's?
Does not have to be perfect. Substantial performance is all that is required - no material breach if so
Can performance be excused based on later events (after k has been formed)?
1. failure to cooperate
2. other party's anticipatory repudiation
3. prospective inability/unwillingness to perform
4. substantial performance
5. divisibility of k
6. waiver or estoppel
7. impossibility, impracticability, or frustration
How does failure to cooperate excuse a condition?
If it wrongfully prevents a condition from occurring
How can the other party's breach provide an excuse for non-performance?
Sale of goods (art 2): if seller does not make perfect tender, B can reject ALL goods and is excused from paying k price (also entitled to get damages from the seller, even if accepts the goods)
CL: damages available for any breach of k, but only a material breach excuses the injured party from having to perform (and then can still sue to recover under Q-k for reasonable value of benefits conferred)
How can a party's anticipatory repudiation provide an excuse for nonperformance?
If the party repudiates the k before the time performance is due. AR operates as a material breach. Can retract AR so long as they have not relied on it. Can repudiate the k by conduct - other party is excused from performing
What is the general rule for anticipatory repudiation?
Must be unequivocal, not just expression of doubt. Applies only if there are executory (unperformed) duties on both sides of a bilateral k
What options does the nonrepudiating party have?
1. treat the k as totally repudiated and sue immediately
2. suspend his own performance and wait until performance is due to sue
3. treat repudiation as an offer to rescind and treat the k as discharged or
4. ignore repudiation and urge performance (by doing this, not waiving the repudiation - can still sue for breach and is excused from performing unless repudiation is retracted)
How does prospective inability/unwillingness to perform excuse a condition?
If reasonable grounds to believe the other party will be unable/unwilling to perform when performance is due (reasonable person standard), the innocent party may suspend her own performance until she receives adequate assurances of performance. Retraction is possible, but may be ineffective if the other party changed her position in reliance on the prospective performance
How does substantial performance excuse a condition?
If there are almost completely performed duties, but breached in some minor way - avoids forfeiture of a return performance. Usually applied only when constructive conditions are involved (apply to express might defeat express intent of parties)
How does divisibility of k excuse a condition?
Performs one of the units of divisible k, entitled to agreed equivalent for that unit even though she fails to perform other units
How do we know when a k is divisible?
1. performance of each party is divided into 2+ parts under the k
2. number of parts due from each party is the same
3. performance of each part by one party is the agreed equivalent of the corresponding part by the other party
May a buyer declare total breach of an installment k if there is breach of an installment?
Only if defects in an installment are such as to substantially impair the value of the entire k
How does waiver or estoppel excuse a condition?
A party can waive a condition by indicating he will not insist on it. Such a waiver may be retracted at any time unless the other party relies on the waiver and changes her position to her detriment
How do we discharge a duty to perform?
Once established that there is an immediate duty to perform (because the duty is unconditional or the condition has been satisfied or excused), the duty must be discharged.
How do we discharge a duty to perform?
1. performance or tender of
2. condition subsequent (occurrence of)
3. illegality (of the subject matter)
4. impossibility (objective), impracticability, frustration
May a party who rendered part performance prior to impossibility recover in quasi-k?
What counts as impossibility?
1. Death or physical incapacity of a person necessary to effectuate the k (NOT if can be delegated and services not unique)
2. subsequent law rendering k subject matter illegal
3. subsequent destruction of the k's subject matter (as long as promisor was not at fault and it is truly impossible to fulfill the terms of the k at any price)
When a k to build's subject matter is accidentally destroyed, is the performance discharged?
Not discharged by impossibility because builder is still capable of starting over and rebuilding
When a k to repair's subject matter is destroyed, is performance discharged?
Yes, because nothing left to repair
What counts as impracticability?
Subjective. Party encouters extreme and unreasonable difficulty or expense that was not anticipated
What counts as frustration of purpose?
1. supervening event
2. not reasonably foreseeable at the time of entering into k
3. completely or almost completely destroys the purpose of the k and
4. purpose was understood by both parties
How else might we excuse non-performance?
By later agreement between the parties
What are examples of later agreements that can provide excuse for non-performance?
Rescission, modification, accord, novation
What is rescission?
Agreement to cancel the k. Before services, agree to rescind the k. Excused by the rescission agreement
What if agree to rescind after services are finished?
Obligation to pay is not excused. For agreement to be effective, both parties must have some performance remaining under the k (here, there's no consideration for promise to let party off the hook)
When is rescission usually enforced?
Where a bilateral k has been partially performed
When is rescission not enforced?
Where a unilateral k and only one party still has duty to perform UNLESS (a) there is offer of new consideration by nonperforming party, (b) there are elements of PE, or (c) original offeree manifests an intent to make a gift of the obligation owed her
How do the rights of third party beneficiaries affect rescission?
Where rights of 3rd party beneficiary has already vested, a k will NOT be discharged by mutual rescission by promisor and promisee
What is the general requirement for rescission?
Both parties expressly agree - mutual (where one party rescinds, it is unilateral and unenforceable)
What is modification?
An agreement substituting a new k for an existing one. Takes effect immediately. Must be mutual assent. Consideration usually necessary (where each party has limited his right to enforce the original k). Not necessary where mod is only a correction or modification for sale of goods
Is consideration necessary for modification under the UCC?
No, modification is enforceable if made in good faith even without consideration
What is accord and satisfaction?
Agreement to accept a stated performance in satisfaction of an existing duty; performance of the accord
What is the effect of an accord?
Accord extinguishes an existing obligation only when an accord is satisfied. B can sue for original and new agreement
What are the requirements for an accord?
One party to a k agrees to accept performance different from what originally promised. Requires consideration (if less than that of original k, sufficient that it is of different type or is to be paid to a third party)
What is the effect of an accord on a contractual duty?
Does not discharge. Merely suspends the other party's right to enforce it. Performance of the accord (satisfaction) discharges the accord and original debt
Is partial payment of the original debt valid consideration?
Yes, if made in good faith and bona fide dispute as to the claim
What is novation?
An agreement that substitutes a new party for an existing party. If agreed to substitution, gave up rights against existing party
What are the steps to novation?
1. previous valid k
2. agreement among all parties, including new party
3. immediate extinguishment of k duties as between original k parties
4. valid new k
What are other ways to discharge performance?
1. Cancellation of original agreement
2. release and/or covenant not to sue - in writing and supported by new consideration or PE elements
3. substituted k where partes to a k enter into a second k that expressly or impliedly immediately revokes first k
4. account stated - parties agree to an amount as a final balance due. Necessary that there have been more than one prior transaction. Settlement of all previous transactions
5. by lapse: if each party's duty is a condition to the other's duty and neither party performs her duty (discharged)
6. by operation of law: discharge in BR bars any right of action on the k
7. by running of SOL - action for breach of k may be barred - k unenforceable
8. later unforeseen event that makes performance impossible
9. failure of an express condition
What are some later unforeseen events that would make performance impossible?
Seller's excuse; destruction of something necessary for performance; if not a merchant, under the risk of loss rule, not liable (risk remains on seller until seller tenders car); S excused if goods ID'd to the k are unexpectedly destroyed (impossible to deliver that particular good); if destroyed after tendered to B, can still pay, not excused; if good fungible, nothing distinctive, destruction does not excuse seller from performing; death or incapacity; supervening government regulation or order; frustration of purpose (B's remedy); failure of express condition
Is death or incapacity of a person essential to performance an excuse?
Unless some evidence that person who died has special skill or reputation, does not provide excuse
What are the requirements for the buyer's frustration of purpose excuse?
At time of k, knew what B's purpose was and (b) a later unforeseen event thwarted purpose (if just less profitable, not enough for frustration)
How does failure of an express condition excuse non-performance?
Express condition: k language that does not create an obligation, but limits obligations created by other k language (if, so long as, provided). Strict compliance required.
How do we decide whether a satisfaction clause will excuse non-performance?
Apply an objective (reasonable person) standard unless the k deals with art, aesthetics or matters of personal taste
How do we decide whether conditions precedent, concurrent, or subsequent excuse non-performance?
Ex: if it rains on July 4 (precedent) - condition has to be fulfilled before you're obligated
Ex: as long as keeps the clubs in good repair (concurrent) - runs alongside obligation
Ex: until the Mets win the WS (subsequent) - performance comes first, and then the occurrence of the condition cuts it off
What is the general rule for an express condition?
Occurrence of a condition may be excused by the later action (or inaction) of the person who is protected by the condition. Failure to cooperate may excuse the occurence of a condition - can lose the protection of the condition. Person may be estopped from insisting that a condition occur (requires later statement by the protected party and reliance by the other party on that statement). Not fair to let one insist on the absence of something and reliance by other party
What is an in rem remedy?
P seeks the actual thing itself, not monetary damages
What are the kinds of in rem remedies?
Specific performance, right of reclamation, entrustment, right to request assurance,
What is specific performance of a k?
An equitable remedy, only available if monetary damages are clearly inadequate to compensate the injured party. RP is viewed as unique, so specific performance is available. For sale of goods, SP available only if the goods are unique (work of art, antique, custom-made). For sale of services, not entitled to get specific performance of a sale of services (but can seek injunction to bar employee from working for competitor)
What is the seller's right of reclamation?
Art. 2: An unpaid seller has no right to claim the goods from a buyer unless buyer was insolvent when he received the goods and seller makes a demand within 10 days thereafter
When does the 10 day period for right of reclamation start to run?
On the date the buyer received the goods
Does the seller have any right to get the goods back from a third party?
What is the remedy of entrustment?
Art. 2: an entrusting owner has no rights against a BFP. Only right is to sue for conversion if place gave your item to a BFP.
What is the right to request assurance?
Art. 2: party with reasonable grounds for insecurity may request adequate assurance from the other party. Can request IN WRITING that seller give him adequate assurance about the item. If S fails to provide adequate assurance, B can treat this as repudiation of k
Is there a caveat to the right to request assurance?
Can't use insecurity to get the other party to rewrite the k, nor can you demand a particular kind of assurance - just entitled to adequate assurance
What is the general principle behind monetary damages?
We are only trying to compensate the injured party, not punish the breaching party
Can we get punitive damages for k breach?
Not awarded for breach of k because the purpose of k damages is to compensate, not punish
What are liquidated damages?
LDC in the k - valid if damages were difficult to estimate at the time of k and the clause is a reasonable forecast of the probable damages. Look for flexibility (per diem basis, graduated in some way). Fixed figures usually not valid
What are expectation damages?
Give the party a sum that leaves her in the same position as full performance (benefit of the bargain damages). Compensate the party by leaving her in the same position. It's the usual measure
What are CL expectation damages?
Loss in value: what had to pay somebody else MINUS cost avoided
What are Art. 2 expectation damages for the buyer?
cover minus contract or market minus contract
B contracts to buy carpeting for 2500. S does not deliver. Market price is 2700 for similar. What are B's damages if B pays 2800 for same carpeting?
Damages are 300. Cover price of 2800 minus contract price of 2500 (AS LONG AS buyer used good faith)
What if the B uses the S's breach to benefit himself at S's expense?
Here, the B will get the difference between market price and k price
What if the B does not buy a replacement?
B still gets the difference (damages are based on what B WOULD HAVE paid)
B contracts to buy antique rug for 4k. Later finds not antique. Keeps rug and sues. Rug is worth 2k. Had it been antique, would have been 7k. What are the damages?
Gets difference between market value of the goods as promised and the market value of the goods that were actually delivered. Gets 5k (fulfills expectations)
When do sellers usually seek damages?
When buyer breaches, typically in a falling market
What are S's damages?
K price minus resale price as long as in good faith, or k price minus market price
What is a lost volume seller?
Party contracts to buy an outfit out of a shop's regular inventory for 900. Party breaches. Store sells the exact same outfit to B for exact same price. Damages - could have sold one to A and ANOTHER to B
What are incidental damages?
Costs of caring for/transporting goods after breach and the costs of arranging a substitute transaction (CL and Art. 2). ALWAYS recoverable. Not subject to foreseeability requirement
What are consequential damages?
Damages special to this P that are reasonably foreseeable at the time of the k
What are avoidable damages?
Cannot recover damages that you could have avoided with reasonable effort (rule of mitigation)
What is the main mitigation requirement?
Same kind of work in the same city - comparable
Who has the burden of proof in an avoidable damages case?
The employer (a defense)
What is a delegation of duties?
A person transfers burdens or obligations under a k
What is the rule of delegation of duties?
K duties may be delegated without the consent of a person to whom the performance is owed (the obligee)
What if the k between parties prohibits delegation?
You can't. Also, if k prohibits assignment, means no delegation either
Can you delegate duties in a k involving someone with special skills or reputation?
To whom does the delegating party remain liable to?
The obligee
To whom does the delegating party remain liable in a novation?
Here, the excused party is off the hook
What if the delegate received consideration?
Then the delegate is also liable to the obligee
What is an assignment of rights in a k?
Two people make a k and later one person transfers his rights under the k to a third party (ONLY rights)
Who is the assignor?
Person who transfers
Who is the assignee?
Person to whom rights are transferred
Who is the obligor?
Person who owes the assigned performance
How do we make an effective assignment?
Do not need to give consideration to make the assignment valid. Gift assignments are valid. But lack of consideration will affect revocability. If assignment is 5k+, not enforceable if oral
What if any language requirement is there for an assignment?
Must have language of present assignment (I assign or I hereby assign), words of present transfer, if promises to assign the right to receive payment to someone else
Are there restrictions on assignment?
Clauses can prohibit assignment or completely invalidate the assignment
How does a clause merely prohibit assignment?
"Rights under this k are not assignable"
What happens if a clause merely prohibits assignment?
Will be liable for breach of k, but the assignment itself is still valid
How does a clause completely invalidate the assignment?
"All assignments under this k are void"
What is the CL rule for assignment?
An assignment cannot substantially change duties of the obligor. Can always assign the right to payment
City 1 contracts to buy all of x that it needs from distributor. Later assigns its rights under the k to City 2
Used to be the case that requirements k's were not assignable. Now, assignable as long as assignee's requirements are not out of line with the assignor's
What are the rights of an assignee?
Can sue the obligor for breach of k if doesn't perform (assignment creates privity between assignee and obligor - transfers right to enforce the k)
How does assignment transfer the rights of the parties?
Assignee steps into the assignor's shoes - has only the rights that the assignor would have had. So if assignor wouldn't have any rights because failed to perform services, nor does assignee
Can the obligor pay the assignor?
Effective unless the obligor is aware of the assignment
What is the rule for multiple assignments?
If none of the parties gives consideration, it is extremely fragile, easily revoked
What is the rule for gratuitous multiple assignments?
Last gratuitous assignee in time wins because a later gift assignment revokes an earlier one. Writing doesn't matter (MBE), but in NY, written assignment means that party will prevail (sub for consideration)
What is the rule for assignments for consideration (multiple)?
The first assignee for consideration prevails (more durable in nature). Being the first to notify the obligor is not enough. To prevail, would have to be the first to obtain payment from or judgment against person who has to pay. Can sue for breach of warranty of assignment (which comes along with consideration - he paid for the right, so if doesn't get the money, can recover for breach)
What is the basic rule for third party beneficiaries?
Two enter a k with intent to benefit 3rd party. The intended beneficiary can enforce the k
Who is a third party beneficiary?
Person who did not make a k, but still has rights under k because the k was intended to benefit him
Who is the promisor?
Person who promises to do somethign for third party
Who is the promisee?
Other contracting party
Who is the intended/incidental beneficiary?
If third party is named in k, he is intended bene; if not, he is incidental bene. ONLY intended bene has legal rights
Who is a creditor/donee beneficiary?
If promisee's primary reason for entering k is to discharge a debt he owes to third party, the third party is a creditor bene; otherwise he is a donee bene
Compare third party bene with assignment
Third party bene - all three parties are involved from the beginning. Assignment - 2 people contract and a third person appears later on
What is the rule for rescinding or modifying the k if it benefits a third party?
Can do so until the rights of the third party bene have vested. Once party knows about the k and has relied on it, rights have vested. Now, can't change without their consent
What are the rights of a third party beneficiary?
1. sue the breaching promisor
2. intended bene can sue breaching promisor even though there's no privity between them
3. promisor can raise same defenses against 3rd party bene it would have raised against promisee
4. only a creditor-bene can sue the promisee (rare)
5. if merely a donee-bene, no rights
6. promisee can recover from the breaching promisor (even if 3rd party is a donee beneficiary)
What are the memorandum requirements for the SOF?
SOF is satisfied if the writing contains:
1. identity of parties sought to be charged
2. ID of the contract's subject matter
3. Terms and conditions of the agreement
4. Recital of the consideration
5. Signature of the party to be charged or his agent
Does the writing need to be on one page to satisfy the SOF?
No - several pieces of correspondence could be sufficient (even a fax or memo on a napkin)
Does the memo need to be signed by both parties to the k to satisfy the SOF?
Only the party to be charged (to be sued) must sign
What happens if we don't comply with the SOF?
The k is unenforceable
What is a typical third-party beneficiary situation
A (promisee) contracts with B (promisor) that B will render some performance to C (third-party beneficiary)
Who is an intended beneficiary?
Only intended beneficiaries have contractual rights, not incidental beneficiaries. See if
1. is identified in the k
2. receives performance directly from promisor or
3. has some relationship with the promisee to indicate intent to benefit
What are the types of intended beneficiaries?
A creditor bene (person to whom a debt is owed by promisee) and a donee bene (a person the promisee intends to benefit gratuitously)
When can a third party enforce a contract?
Only when his rights have vested. When (a) manifests assent to a promise in the manner requested by the parties; (b) brings a suit to enforce the promise or (c) materially changes position in justifiable reliance on the promise
What can happen prior to the vesting of a third party right?
Promisee and promisor can modify or rescind the bene's rights under the k
Third party beneficiary vs. Promisor
Promisor can raise any defense that the promisor has against the promisee. If the promisor made an absolute promise to pay what promisee owes the bene, the promisor cannot assert promisee's defenses; if promise is not absolute, can assert promisee's defenses
Third party beneficiary vs. Promisee
A creditor bene can sue the promisee on the existing obligation between them. She may also sue the promisor, but may obtain only one satisfaction. A donee beneficiary has no right to sue the promisee unless grounds for detrimental reliance remedy exist
Promisee vs. Promisor
Promisee may sue the promisor both at law and in equity for specific performance if the promisor is not performing for the third person
What is an assignment?
X (obligor) contracts with Y (assignor). Y assigns his right to X's performance to Z (assignee)
What rights may be assigned?
All k rights. Exceptions:
1. assignment that would substantially change the obligor's duty or risk (like a requirements k)
2. assignment of future rights to arise from future contracts (not future rights in already existing k's)
3. an assignment prohibited by law
How do we interpret a clause prohibiting assignment of "the contract"?
Construed as barring only delegation of the ASSIGNOR'S duties
How do we interpret a clause prohibiting assignment of contractual rights?
Generally does not bar assignment, but merely gives the obligor the right to sue for damages
What if the k provides that attempts to assign will be void?
The parties can bar assignment. If the assignee has notice of the nonassignment, an assignment will be ineffective
What is necessary for an effective assignment?
Assignor must manifest intent to immediately and completely transfer her rights. A writing is usually not required to have an effective assignment. Right being assigned must be adequately described
Is consideration required for a gratuitous assignment?
Is an assignment revocable?
An assignment for consideration is irrevocable. Gratuitous assignment is usually revocable
When is a gratuitous assignment irrevocable?
1. The obligor has already performed
2. a token chose (like a stock certificate) is delivered
3. an assignment of a simple chose (intangible claim such as a k right) is put in writing
4. assignee can show detrimental reliance on the gratuitous assignment
How do we terminate a revocable gratuitous assignment
1. death or bankruptcy of the assignor
2. notice of revocation by the assignor to the assignee of the obligor
3. assignor taking performance directly from the obligor OR
4. subsequent assignment of the same right by the assignor to another
What is the effect of an assignment?
To establish privity between obligor and assignee while extinguishing privity between obligor and assignor
Assignee v. Obligor
Yes, because assignee is the the real party in interest - entitled to performance under the k
Assignee v. Assignor
Can sue assignor for wrongfully exervising the power to revoke in an irrevocable assignment. Or where obligor successfully asserts a defense against the assignor in an action brought by the assignee against the obligor to enforce the obligation. Assignor will not be liable to the assignee if the obligor is incapable of performing
What if there are successive assignments of the same rights?
If the first assignment is revocable, a subsequent assignment revokes it. If it is irrevocable, the first assignment will usually prevail over a subsequent assignment. Several exceptions exist (IF the second assignee has paid value and taken without notice of the first assignment):
1. subsequent assignee gets the first judgment against the obligor
2. subsequent assignee gets the first payment of a claim from the obligor
3. subsequent assignee gets delivery of a token chose
4. subsequent assignee is the party to a novation releasing the assignor OR
5. subsequent assignee can proceed against the first assignee on an estoppel theory
Delegation of duties
In the typical delegation situation, Y (the obligor/delegator) promises to perform for X (the obligee). Y delegates her duty to Z (the delegate)
What duties may be delegated?
Generally, all duties. Exceptions: (a) duties involve personal judgment and skill; (b) delegation would change the obligee's expectancy (requirements and output contracts); (c) a special trust was reposed in the delegator by the other party to the k, and (d) there is a contractual restriction on delegation
Requirements for effective delegation
Must manifest a present intention to make a delegation. There are no special formalities to be complied with to have a valid delegation. May be written or oral
What are the rights and liabilities of parties?
The obligee must accept performance from the delegate of all duties that may be delegated. The delegator remains liable on the k; thus, the obligee may sue the delegator for nonperformance by the delegate. The obligee may sue the delegate for nonperformance, but can require the delegate to perform only if there has been an assumption (ie, the delegate promises he will perform the duty delegated and this promise is supported by consideration or its equivalent. This promise creates a contract between the delegator and the delegate in which the obligee is a third-party beneficiary
When does breach of k occur?
If the promisor is under absolute duty of performance and this duty has not been discharged
When is a breach material?
As a result of the breach, the nonbreaching party does not receive the substantial benefit of her bargain
What are the rights of the nonbreaching party in a material breach?
May treat the k ended (no counterperformance) and has immediate right to all remedies for breach of the entire contract (including total damages)
What are the rights of the nonbreaching party in a minor breach?
May be allowed to recover damages, but still must perform
What do we look at for determining whether breach is material?
1. amt of benefit received by nonbreaching party
2. adequacy of compensation for damages to injured party
3. extent of part performance by breaching party
4. hardship to breaching party
5. negligent or willful behavior of breaching party
6. likelihood that breaching party will perform remainder of k
What must the nonbreaching party prove?
That he was willing and able to perform
How does time factor into whether the breach is material?
Failure to perform in time stated is generally not material breach if rendered within reasonable time UNLESS k makes timely performance essential or says "time is of the essense"
What are the remedies for breach?
1. damages
2. specific performance
3. rescission and restitution
4. quasi-k relief
What are the kinds of damages?
Compensatory, nominal, punitive. Compensatory puts nonbreaching party in as good a position as the party would have been in had the other fully performed
What is the standard measure of damages?
Expectation damages - permit the P to buy a substitute. Where expectation damages are speculative, P may recover reliance damages (cost he incurred by performing)
What if the damages are speculative?
Court will not reward - must be reasonably certain
What are damages for k for sale of goods?
Difference between k price and market price when seller tenders the goods or when buyer learns of breach. If BUYER breaches, seller may withhold delivery or stop delivery by the carrier, resell the goods and recover the difference, or recover ordinary k damages for nonacceptance. If buyer had already accepted the goods, or if the seller is unable to resell identified goods, seller may recover the k price.
If seller breaches, under the UCC the B may reject nonconforming goods, cancel, cover, recover goods identified to the k, obtain specific performance (in some cases), or recover damages for nondelivery. If the buyer accepts the nonconforming goods, the B may recover the difference between value the goods would have had if they had been as warranted and the actual value of the goods
What are damages for k for sale of land?
Difference between k price and fair market value
What are damages for an employment k?
If breached by employer, measure is full k price (less wages actually earned elsewhere after breach); if by employee, whatever it costs to replace employee.
What are damages for construction k's?
If breached by the owner, the builder will be entitled to profits that would have resulted from the k plus any costs expended.
If breached after construction is completed, the measure is the full contract price plus interest
If breached by the builder, the owner is entitled to cost of completion plus reasonable compensation for the delay.
Most courts: builder can offset or recover for work performed to date to avoid unjust enrichment of the owner
What are damages for installment payment k's?
If payment is not made, only partial breach. Aggrieved party is limited to only missed payment, not entire k price. But k may have an acceleration clause making the entire amount due on any late payment
What are consequential damages?
In addition to standard measure. Given if a reasonable person would have foreseen at the time of entering k that such damages would result from the breach. P bears burden of proving foreseeability of damages where "special circumstances" are involved
What are punitive and nominal damages?
Punitive - generally NOT awarded.
Nominal - when breach shown but no actual loss proven
Liquidated damages provision
Valid if
1. damages were difficult to ascertain at the time the k was formed and
2. amount agreed upon was a reasonble forecast of compensatory damages. If so, P receives liquidated damages amount EVEN THOUGH no actual money damages suffered. If liquidated damages amt is unreasonable, the courts will construe this as a penalty and will not enforce the provision
What is the duty to mitigate damages?
Nonbreaching party has a duty to mitigate. If not, damages reduced. Employment - reasonable diligence to find a like position. Sale of goods - cover must be reasonable, in good faith, and without unreasonable delay. Construction - builder to cease work unless completion would decrease damages
What is specific performance?
Where legal remedy is inadequate, nonbreaching party can seek specific performance (essentially an order from the court to perform or face contempt of court charges). Legal remedy is inadequate when subject matter of the k is rare or unique
What equitable defenses are available for specific performance?
Laches: a claim that the P has delayed bringing the action and that the delay has prejudiced the D
Unclean hands: party seeking specific performance is guilty of wrongdoing in the transaction
Sale to a BFP: subject matter has been sold to a person who purchased for value and in good faith
What is rescission and restitution?
Nonbreacher may rescind and sue for damages at law or in equity. If nonbreacher transferred a benefit to the breacher while attempting to perform, the nonbreacher is entitled to restitution for the benefit transferred