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350 Cards in this Set
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Define contract (K)
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A promise or set of promises which the law will enforce & the performance of which the law recognizes as a duty & will provide a remedy in case of breach.
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Source of K law
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Generally CL governs Ks. UCC Art 2 contains special rules which govern transac/ns in goods. When Art 2 & CL differ, Art 2 prevails re: sale of goods. If K involves both goods and services, look to predominant purpose
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Goods
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moveable objects at time of ID in K
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CL covers
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services, real estate, intangibles, construction Ks
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Merchants
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Persons who deal in goods of the kind involved in trans/n &/or hold themselves out as having expertise in those particular goods. UCC applies to anyone engaged in sale of goods. Some Art 2 provisions require one or both of the parties to be a merchant.
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Types of Ks as to method of formation
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Express--by language
Implied in fact--parties' conduct shows intent to be bound Quasi Ks |
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Quasi Ks are
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not Ks at all but implied in law--constructed by courts--to avoid unjust enrichment.
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Types of Ks as to acceptance--traditional & mod
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Traditional--Bilateral--mutual promises
Unilateral--acceptance by completion of request act Modern--1. most Ks are bilateral Ks formed when offeree returns promise OR begins performance. 2. unilateral Ks are limited to Ks in which (1) offeror clearly communicates only way to accept is by performance and (2) offers to the gen public (rewards). |
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When silence constitutes acceptance
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1. offeree takes benefit of services w/ reasonable opportunity to reject & know of offeror's intention
2. offeror led offeree to believe silence equal acceptance OR 3. previous dealings between the parties made it reasonable that silence would be seen as acceptance |
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Types of Ks as to validity
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valid, void, voidable, unenforceable
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Voidable K
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Aggrieved party may elect to avoid
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Void K
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No legal effect from beginning & neither party can enforce
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Unenforceable K
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Agreement otherwise valid but cannot be enforced due to valid def.
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Elements of K
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Mutual assent (offer + acceptance)
Consideration or substitute Lack of enforcement defs |
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For communication to be an offer
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it must create the power of acceptance & reasonable expectation in offeree that offeror is willing to be bound
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Elements of offer
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1. expression of promise, undertaking or commitment
2. certainty & definiteness in essential terms such that K including them would be capable of being enforced. 3. communication to offeree |
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Criteria to determine if communication shows intent to K
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1. language used
2. surrounding circumstances 3. prior practice & re/ship of parties 4. method of communi/n (use of broad communi/s media likely solicit/n of an offer.) |
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Whether advertisements are offers
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Generally construed as invitations for offers. Not offers, because quantity terms missing & no clear offeree. In rare cases, advertisement is offer if terms are sufficiently definite (quantity) and offeree clearly identified (i.e. first come first served)
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Essential terms of offer
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Identity of offeree
Definiteness of subj. matter Communication to offeree |
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Essential terms in real estate trans/ns
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ID land
Price |
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Essential term in sale of goods K
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Quantity
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UCC output & requirements Ks
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Quantity is measured by seller's output or buyer's needs
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UCC assumptions in output & requirements Ks
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Parties will act in good faith & not tender nor demand unreasonably disproportionate quantity than estimated or normal. In exclusive dealership K, imposition on supplier to produce the number ordered
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Term requirement for service Ks
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nature of work
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How courts handle missing terms
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Don't prevent the format/n of a K if parties intended to make a K & there is a reasonable certain basis for giving a remedy. MAJ jurisd/s & UCC hold court can supply reasonable terms for those missing.
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Failure to set price
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Except in real prop Ks, failure to state price does not prevent K. UCC price will be a reasonable price at time of delivery.
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When offer states that terms will be decided later
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it is too uncertain if the term is material
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Vague terms
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Court cannot presume party's intent. Missing terms cannot be supplied if parties have included a term that makes K too vague to be enforced. Can be cured by part performance
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The offeree lacks power of acceptance w/o
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knowledge of offer. Why element of communication essential.
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Ways to terminate offer
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1. own terms
2. act of parties--revocation, rejection 3. operation of law |
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Revocation is. . . Methods of....
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retraction of offer by offeror prior to acceptance. Express (I revoke) or indirect (offeree learns from reliable source offeror sold subj of offer to someone else)
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When is revocation effective?
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when received by offeree. If by publica/n, when published. Exception UCC--when transmission of revocation made to appear as an ad--so then person not at fault for not reading it
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List types of irrevocable offers
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1. Option Ks
2. Merchant's Firm Offer 3. Offer supported by detrimental reliance 4. Offeree beginning performance on a unilateral K |
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Option Ks involve--when is offer binding as an option K? when is acceptance binding under option K?
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Option is payment of consideration to keep K open. Offer cannot be revoked w/in time frame specified. If time not stated for a reasonable time. Offer is binding if it is in writing signed by offeror & recites a purported consideration & proposes an exchange on fair terms w/in a reasonable period. Option agreement is NOT in fact invalidated by proof recited consid/n was not in fact given. 2nd restmt, acceptance under option K not operative until received by offeror. MIN (CA) acceptance of option valid upon dispatch, so can depend on jurisdiction
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Merchant's Firm Offer is
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offer by merchant
signed writing to hold offer open for a specified period. If no time period stated, for a reasonable period but not longer than 3 months. |
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Rule about revoca/n and offer detrimentally relied on by offeree
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When offeror could reasonably expect that the offeree would rely to his detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option K for a reasonable length of time.
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Rule about revoc/n of unilateral K & start of performance
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Once performance has begun on unilateral K, offer becomes irrevocable. Offeror must give offeree a reasonable time for performance. Offeree under no obligation to complete performance.
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Distinguish begininning performance from prep to perform in unilateral Ks
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Substantial preparation to perform does not constitute the beginning of performance such that offer becomes irrevocable but may constitute detrimental reliance
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Part performance when offer indifferent as to manner of acceptance
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may consist of acceptance making K complete & revocation impossible. (Notice may be necessary)
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2 ways offer terminated by offeree
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Rejection
Lapse of time |
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Express rejection
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Statement by offeree that he does not intent to accept offer
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Whether rejection of option terminates offer
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No. Option is agreement to keep offer open. Offeree is still free to accept the original offer unless offeror has detrimentally relied on rejection of option.
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Counteroffer
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offer made by the offeree to the offeror that contains the same subj matter of the original offer but differs in its terms. Counteroffer is both a rejection & a new offer.
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Distinguish mere inquiry from counteroffer...test?
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Inquiry will not terminate offer. Test is whether a reasonable person would believe that original offer has been rejected.
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Rejection is effective
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when received by the offeror.
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Termination by lapse of time..if offer silent depends on . . .
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If offer silent as to duration, open for a reasonable time--depends on subj matter & nature of communication
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What events will terminate offer by operation of law
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1. Death or insanity of either party
2. Intervening illegality 3. Destruction of subj. matter |
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Acceptance
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Manifestation of assent to terms of the offer
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Knowlegde of offer & acceptance
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Offeree must know of offer to accept it.
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Method of acceptance
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unless otheriwse provided an offer is construed as inviting acceptance in any reasonable manner--UCC: gen. rule is that an acceptance may be "in any manner & by any medium reasonable under the circumstances."
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How offeree accepts offer for unilateral K
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complete performance
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How offeree accepts offer for bilateral K
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either by promise or beginning performance
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Notice & unilaterial Ks
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Offeree need not give notice of beginning performance but is generally required to notify the offeror of completion unless the offeror waived notice or the offeree's performance would normally come to offeror's attention.
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UCC--In what ways can seller accept an offer from buyer for shipment of goods?
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By making a prompt promise to ship or by shipping conforming or nonconforming goods.
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Shipment of nonconforming goods
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both an acceptance + a breach unless seller seasonably notifies buyer than nonconforming goods are being offered as an accomodation.
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Accommodation acceptance
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acceptance of offer to buy goods by current or prompt shipment by shipping nonconforming goods after notifying the buyer that the shipment is intended as an accommodation. This type of acceptance is not truly an acceptance under K law but operates as a counteroffer if buyer is duly notified.
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Mirror image rule
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Under CL, a valid acceptance must be absolute & unequivocal acceptance of each term of the offer. Otherwise it is a rejection/counter-offer.
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Battle of forms
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conflict of standard forms exchanged b/n buyer & seller during K negotiations. UCC attempts to resolve by abandoning mirror image rule. Under UCC, if definite & timely acceptance contains additional or diff terms, it is not counteroff or rejection unless the acceptance is expressly made conditional on acceptance of the additional or diff terms.
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Mailbox rule
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Acceptance by mail (properly address & stamped) or similar means creates a K at the moment of dispatch.
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If acceptance transmitted by unauthorized means
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it may still be effective if actually received by offeror
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Exceptions to mailbox rule
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1. offer stipulates acceptance is not effective until received
2. option K 3. offeree sends a rejection & then an acceptance--whichever arrives 1st is effective. 4. offeree sends an acceptance & then a rejection--the acceptance is effective unless the rejection arrives 1st & offeror detrimentally relies. |
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Whether forebearance by promisee sufficient consid/n?
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Yes, if it benefits promisor
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Actioneer--offeror or offeree?
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W/reserve auctioneer is offeree & bidders are offerors. If auctioneer does not get price he wants, he does not have to accept.
W/O reserve--the auctioneer is the offeror. Once bid is made, the offer cannot be w/drawn. i.e. when auctioneer calls for bids, goods cannot be w/held unless no bids are made w/in reasonable time. |
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Elements of consideration
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1. bargained for exchange
2. legal value--constitute a benefit to the promisor or a detriment to the promisee 3. mutually binding or obligatory on both sides |
to be valid & enforceable, a K must contain mutuality of obligation or bargained for exchange involving legal detriment on both sides.
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Gift as consideration?
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no bargain so no cons/n
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Bargained for exchange requires
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promise induce the detriment and the detriment induce the promise
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Moral or past consideration
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Traditionally not enforced, b/e promise given in exchange for past acts.
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subsequent promise to pay for services rendered at request of promisor--issue is whether courts will enforce even though there is no consideration for the promise--generally courts will enforce a subsequnt promise to pay for services rendered if the services were rendered at the request of the promisor
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Modern exceptions to enforceability of promises to pay for past obligations
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1. enforced if past obligation unenforceable b/e def (stat of limit/s) & new promise in writing or is partially performed.
2. enforced if past act benefited promisee & was made in response to promisee's request or to an emergency. |
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Legal benefit & legal detriment theories (MAJ & MIN)
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MAJ require party to incur legal detriment (do somethg he is not legally obligated to do or refrain from doing something he has a legal right to do). MIN--conferring benefit on another party sufficient consid/n.
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Adequacy of Consider/n
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Courts generally do not inquire as to adequacy of consider/n. Do not care who got better deal unless sham or token consider/n.
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Preexisting duty rule
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Promising to do something person already has an obligation to do or agreeing to refrain from an act the ind has no right to do is not adequate consid/n b/e no legal detriment has been created.
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Exceptions to preexisting duty rule
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1. new or diff consid/n promised.
2. promise to ratify a voidable debt 3. duty is owned to 3rd person rather than the promisor 4. honest dispute as to the duty OR 5. unforeseen circumstances sufficient to d/c a party. |
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UCC whether good faith agreement modifying K needs consid/n
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No
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Promise not to sue--adequate consideration?
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Yes if claim valid or claimant in good faith believed claim was valid.
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Mutuality of K means
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consid/n must exist on both sides and both parties to a K to be bound in some way. both parties must be bound or neither is bound.
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Illusory promises
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Lack mutuality and/or consid/n e,g, one party has a right to renege or neither intend legal consequences for breach. Trad CL promise illusory if K did not express specific quantifiable action. Mod courts imply a promise to use best efforts. UCC--good faith.
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Whether promise to choose one of several alternatives is illusory
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Yes, unless every alternative involves legal detriment to promisor.
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Promissory estoppel or detrimental reliance
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1. promise made w/o consid/n may still be enforced
2. to prevent injustice 3. if promisor should have reasonably expected the promisee to rely on the promise & 4. promisee did actually rely on the promise to his or her detriment. |
Consideration substitute--even if no bargain for exchange or if promise is a gift, it may still be enforceable it if was reasonable and foreseeable that one would rely on the promise & promisee did actually rely on it to his or her detriment.
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Diff b/n 1st & 2nd Restmt w/ re: promissory estoppel
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1st requires the reliance to be definite & substantial. 2nd provides remedy "may be limited as justice requires." Jurd/ns following 1st likely to award expectation damages. Those using 2nd reliance.
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Defs to K forma/n--overview
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1. Defective form/n--ambiguity, mistake, consid/n issues
2. Capacity--infancy, mental incapacity 3. Social/pub policy--illegality, unconscionability 4. Defs based on tactics--misrep/n, fraud, duress 5. Form of K--SoF |
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Effect of mutual mistake
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K is voidable when both parties are mistaken ABOUT EXISTING FACTS which concerns A BASIC ASSUMPTION on wh K made, the mistake has a MATERIAL EFFECT on the exchange & the party seeking avoidance DID NOT ASSUME THE RISK of the mistake.
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Effect of unilateral mistake
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will not prevent formation of K unless nonmistaken party KNEW OR HAD REASON TO KNOW OF MISTAKE made by other party.
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Effect of ambiguous K language
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K includes term w/ at least 2 diff meanings. Result depending on parties' awareness. One place in wh subjective intent is taken into account.
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If both parties aware of ambiguity
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No K unless both intended same meaning.
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If neither party aware of ambiguity
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No K unless both intended same meaning
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If only one party aware of ambiguity
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K binding based on what ignorant party reasonably believed to be the meaning.
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2 types of misrepresentation & K defs
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Fraudulent misrep/n--K voidable
Nonfraudulent misrep/n--K voidable if material |
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Fraudulent misrep/n--elements
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1. untrue stmt or thru conduct
2. scienter 3. intent to mislead 4. innocent party justifiably relied |
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Nonfraudulent misrep/n--elements
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1. Negligent or innocent false stmt
2. material to K 3. on which innocent party justifiably relied 4. no scienter but for negligent misrep/n, perpetrator would have known false if he had exercised reasonable care. |
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Misrep/n is material if
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1. info asserted would induce a reasonable person to agree or
2. party making misrep/n knew the info asserted would cause a particular person to agree. |
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If consid/n absent at form/n stage,
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no K exists (illusory)
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Illegality as def to K form/n
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public policy def that court should not enforce K due to illegality. If purpose or subj matter of K illegal, K void. Exception if P unaware of illegality but D knew. Exception if illegality is failure to obtain a license when purpose of license is to raise revenue rather than protect gen pub.
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In context of Ks what is duress?
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Occurs when one party's assent is induced by wrongful act or threat of violence, imprisonment, wrongful seizing of P's prop, blackmail.
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Effect of duress
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Renders K voidable at option of innocent party.
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Unconscionability in K
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Extreme unfairness. Court may refuse to enforce K that is unfair b/e of procedural abuses during form/n or b/e of overreaching K terms favorable to one party & not allowing other meaningful choice.
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Common instances of procedural unconscionability
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1. Inconspicuous risk shifting provisions
2. Ks of adhesion 3. Exculpatory clauses |
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Lack of capacity defs include
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1. Ks of infants
2. mental incapacity 3. intoxicated persons |
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Disaffirmance & Ks of infants
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Declaraction that K is void, can occur anytime before infant reaches age of majority or right after. Must return any consider/n that still remains. Exceptions: necessaries
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Affirmance & Ks of infants
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Expression of ratification of K expressly upon attaining majority or by failing to disaffirm w/in reasonable time.
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Sof F
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Universal stat which requires certain types of Ks to be in writing & signed by the party to be charged.
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Types of agreements covered by SoF
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1. marriage
2. year 3. Land 4. Executor to pay personally (guarantee Ks) 5. Goods $500+ 6. Sureties |
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Part performance doctrine--sale of land
Part performance doctrine--implied promise to complete |
Conduct that unequivocally indicates parties have Ked for the sale of land will take K out of SoF. Jurisd/s vary as to conduct required. Usually at least 2: payment (whole or part), possession &/or valuable improvements.
As a gen rule, when offeree begins performance contemplated, he impliedly promises to complete it. Act of part performance may be treated as implying a promise to complete if: 1. offer was for entire K, not a series of sep Ks 2. that wh is begun must be part of actual performance 3. such implied acceptance is communicated to offeror or offeror has knowledge of it. |
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Main Purpose or leading object rule
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If promise to pay debts of another is made primarily for the benefit of the promisor then SoF does not apply, and it does not have to be in writing.
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A promise that by its own terms cannot be performed w/in one yr is
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subject to SoF, part performance does not satisfy & lifetime Ks not included b/e person can die at any time.
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Examples of interests in land which must be in writing under SoF
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Leases & easements for more than one yr., real prop sales, mining rights if they are to be severed by buyer
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4 things which take K for sale of goods over $500 out of SoF
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1. specially made goods
2. admissions in pleading or court 3. payment or delivery of goods 4. merchant's confirmatory memo |
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Specially manufactured goods are
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1. not suitable for sale to others in normal course of bus.
2. seller has substantially begun performance or made commitments for purchase 3. before receiving notice of repudiation. |
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Elements of Merchant's letter of confirmation
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1. must evidence a K for the sale of goods
2. B/N merchants 2. signed & evidence the party to be charged--"signed" as used in UCC refers to any form of authentication or adoptive signature wh IDs the party to be charged 3. specify a quantity--but price to be paid does not have to be included Oral K enforceable if w/in reasonable time after oral K BETWEEN MERCHANTS one of them send a WRITTEN CONFIRMATION, it is DELIVERED TO RECEPIENT who DOES NOT OBJECT w/in 10 DAYS of receiving it. |
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Effects of noncompliance w/ SoF
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K rendered unenforceable at option of party to be charged. If def not raised, it is waived.
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Parol Evid Rule
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When parties to a K express agreement in writing with intent that the writing be full & final expression of their agreement, no contemporaneous or prior evid which contradicts the writing is admissible to vary the terms.
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Integrated K
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one or more writings wh parties agree constitute the full & final expression of their agreement
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Merger or integration clause
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Stmt w/in K stating this is full & final expression of agreement. Strengthens presumption that all negotiations were merged into writing.
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Ways to determine if K fully integrated
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Judge decides, 4 corners--trad. rule, merger clause
Williston test--how would reasonable person interpret Corbin (MAJ) looks at specific circumstances of trans/n & actual intent of parties |
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Extrinsic evid. falling outside parol evid rule
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Attacks on validity of K (e.g. facts entitling party to reformation)
Conditions precedent Interpretation of terms Showing of "true consider/n"--i.e. evid showing lack of consideration |
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UCC extrinsic evid falling outside parol evid rule
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trade usage, course of dealing, performance
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Collateral agreements & parol evid rule
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In dispute concerning a written K, proof of a 2nd oral agreement will not be excluded if independent, not inconsistent w/ K & would not ordinarily be expected to be included in the written K.
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Parole evid re: subsequent modifications or d/c of K
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Parole evid is admissible to show subsequent modifications or d/c of K
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UCC Ks involving nonmerchant when acceptance has additional or different terms than offer
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Additional term are consdered proposal to modify & do not become part of the K unless offeror expressly agrees
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UCC Ks b/n merchants when acceptance has additional terms than offer
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Additional terms become part of K unless they:
1. materially alter the original terms 2. offer expressly limits acceptance to terms of offer or 3. offeror has already objected to particular terms or objects w/n a reasonably time after receiving notice. |
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UCC Ks b/n merchants when acceptance has different (as opposed to additional) terms than offer
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Split of authority. Some treat just like additional term--i.e. becomes part of the K unless it materially alters K, offer expressly limits acceptance to terms of offer or offeror objects w/in reasonable time. Other courts use knockout rule & state that conflicting terms are not included. Then gap filing measures used.
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UCC open price term
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K will not fail for indefiniteness if price term left open--price will be reasonable price at time of delivery
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Gap filler if place of delivery is not specificed
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place is seller's place of business. If he doesn't have one, seller's home
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Gap filler if time for shipment or delivery not set
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due in reasonable time
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Gap filler if time for paymt is not specified
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payment due at time & place buyer is to receive goods
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Gap filler if K provides for "assortment"
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assortment is at buyer option
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Risk of loss when no carrier involved
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If seller is a merchant--risk of loss passes to buyer only when buyer takes physical possession. If seller not a merchant, risk of loss passes to buyer upon tender of delivery.
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Shipment Ks & risk of loss
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Risk of loss passes to buyer when goods are delivered to carrier
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Destination Ks & risk of loss
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Risk of loss passes to buyer when goods are tendered to buyer at the destination.
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C.I.F. & C. & F.
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delivery terms meaning cost, insurance, freight & cost and freight. Means price includes. Risk of loss passes to buyer as soon as goods are turned over to carrier.
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F.A.S.
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deliver term meaning "free alongside" used when goods shipped by boat. Risk of loss passes to buyer once goods delivered to dock.
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F.O.B.
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Delivery term meaning free on board--a destination location follows the term. Seller bears risk & expense of getting goods to destination.
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Sale or Return K
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Buyer takes goods for resale but may return them if unable to resell. If goods returned, risk remains on buyer while goods are in transit.
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Sale on Approval K
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Buyer takes goods for trial period & may return them even though they conform to K. If buyer returns goods, return is at seller's risk.
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Types of warranties
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Warranty of title & against infringment
Implied Warranty of Merchantability Implied Warranty for a Particular Purpose Express Warranties |
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Warranty of title
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Seller has title, transfer rightful, no liens of which buyer unaware. Automatic & does not have to be mentioned in K. Can be disclaimed--i.e. "sheriff's sale"
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Warranty against infringement
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Merchant seller warranty that goods do not violate any patent, copyright, trademark. Does not arise if buyer provides seller w/ specifications for goods purchased.
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Implied Warranty of merchantability
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Goods are fit for the ordinary purpose for which such goods are used. Implied in every K for sale of goods by MERCHANT. Can be disclaimed orally or in writing only by mentioning merchantability. If writing, disclaimer must be conspicuous.
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Implied warranty of fitness for a particular purpose
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When ANY SELLER has reason to know the particular purpose for which goods are to be used & the buyer is relying on seller's skill & judgment & buyer in fact relies. Can only be disclaimed by a conspicuous writing.
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Express warranties
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Affirmation of fact or promise by seller whcih forms basis of the bargain & at a time when buyer could have relied. Stmts of value or opinion (puffing) NOT warranties. Once made, express warranty difficult to disclaim.
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"as is" language
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method for disclaiming implied warranties
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Gen damages for breach of warranty
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diff b/n goods tendered & as warranted.
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Modification & consider/n--CL, Mod Restm, UCC
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CL--mod invalid unless consideration to support it
Mod 2nd Restmt--if K not fully performed on either side & modification fair & equitable in view of circumstances not anticipated when K made UCC--promises of new & diff terms are valid w/o consider/n if negotiated in good faith. |
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Writing & modification--CL & UCC
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Written K can be modifed orally. UCC, modifications must be in writing if K as modified involves goods over $500
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Provision prohibiting oral modification--CL & UCC
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CL--parties can modify even if writing expressly forbids. UCC, provision is given effect. If original K b/n merchant & nonmerchant, the nonmerchant is required to have separately signed provision. Can be seen as waived if parties attempt to orally modify a K requiring written modification.
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Perfect tender rule
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UCC required delivery & condition of goods exactly as promised in K.
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UCC obligation of good faith
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honesty in fact & observation of reasonable commercial standards of fair dealing
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Promise
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commitment to do or refrain from doing something. If unconditional, failure to perform is breach of K.
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Condition, general definition
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Uncertain act or event that triggers or negates a duty to render a promised performance. Failure of condition is not a breach of K but d/cs the liability of the promisor whose obligations have not matured.
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Whether provision is a promise or cond/n depends on
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the intent of the parties
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Classification of cond/ns w/regard timing
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precedent, concurrent, subsequent
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Cond/n precedent
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is event or state (other than the passage of time) which must occur before an absolute duty of immediate performance arises in the other party.
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Cond/ns concurrent
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are those capable of happening together. In effect, ea is precedent to the other
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Cond/n subsequent
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occurence which cuts off an already existing absolute duty of performance.
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Express cond/n
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explicit contractual provision
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Express cond/n of satisfaction--2 types & how satisfac/n fulfilled
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1. Ks involving mechanical fitness, marketability or utility. Satisfac/n fulfilled by performance that would satisfy a reasonable person.
2. Ks involving personal taste, satisfied if the promisor is personally satisfied. Must be honest in good faith or cond/n of satisf/n excused. |
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Satisf/n of 3rd persons as cond/n
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K involves personal taste or judgment of 3rd person. Courts usually require actual personal satisf/n of 3rd person. Dissatisfaction must be honest & in good faith.
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Constructive condition
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implied in law to do justice.
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Constructive conditions include
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1. cond/s of performance
2. cond/s of cooperation & notice 3. order of performance |
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2 common constructive cond/ns re: time for performing
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1. Simultaneous performances are ea a cond/n precedent to the other--ea party must tender his own performance to put the other under a duty of immediate performance
2. If one performance take time while the other does not, the one taking longer is a constructive cond/n to the execution of the shorter performance. |
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Effect of failure of condition when one of parties has fully or partially performed
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equitable remedy to prevent unjust enrichment
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Duty to perform on a conditional promise becomes absolute when
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all conditions are performed or legally excused.
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Ways excuse of cond/ns can arise
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1. Hindrance or failure to cooperate
2. Actual breach 3. Anticipatory repudiation 4. Inability or unwillingness to perform 5. Substantial performance 6. Divisibility of K. 7. Waiver or Estoppel 8. Impossibility, impracticability or frustration of purpose. |
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Excuse of cond/n by hindrance or failure to cooperate
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If one party, whose duty is subj to a cond/n, prevents the cond/n from occurring, the cond/n will be excused if the prevention wrongful--e.g. failure to take action necessary for the cond/n's fulfillment. Since the other party did not assume the risk of this sort of behavior, the cond/n is excused & the parties are obligated to perform w/o it.
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Excuse of cond/n by actual breach
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breach of K when performance is due will excuse the duty of counterperformance. CL: Counterperformance will be excused only if the breach is material.
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Excuse of cond/n by anticipatory repudiation
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Prior to time set for performance when K executory on both sides; one party unequivocally indicates he will not perform. Non breaching party can await performance, sue, suspend own performance, ignore the repudiation and urge party to perform--nonbreaching party has duty to mitigate
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To excuse cond/s, anticipatroy repudiation requires
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1. bilateral K with executory duties on both sides
2. must be unequivocal |
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4 alternatives for agrieved party in anticipatory repudiation
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1. Treat anti repud as a total repudition and sue immediately.
2. Suspend his own performance & wait to sue until performance date 3. Treat repud as an offer to rescind & treat K as d/ced 4. Ignore the repudiation & urge promisor to perform |
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Can repudiating party retract his anticipatory repud?
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Yes any time before his next performance is due unless other party has canceled or materially changed his positon in reliance on the repud.
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Excuse of cond/n by prospective inability or unwillingness to perform
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occurs when one party has reasonable grounds to think other party will not perform.
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Adequate assurances
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In writing demand by party who has reasonable grounds for insecurity that other party will not perform. If other party fails to provide adequate assurances, innocent party may be excused from her performance & may treat failure to provide assurances as a retraction.
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Excuse of cond/n by substantial performance
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Generally, complete performance may be excused if the party has rendered substantial performance. Here, other party's duty becomes absolute.
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To what type of cond/ns does court generally apply substantial performance doc?
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Constructive not express cond/ns
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How will agrieved party who receives substantial rather that complete performance be able to mitigate?
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Deducting damages suffered due to the 1st party's incomplete performance.
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To what types of Ks is doctrine of substantial performance not applicable?
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Sale of goods
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Whether court will apply substantial performanc doc if breach willful
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No, not likely
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What are elements of a divisible K?
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1. Performance of ea party is divided in 2 or more parts
2. # of parts due from each party is the same AND 3. performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party |
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How does excuse of condition by divisibility of K work?
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Failure to perform one of promises does not necessarily put party in breach of entire K. That is, it is not a condition precedent to the other party's liability that the whole K be performed.
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UCC installment K
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K authorizing delivery of goods in separate lots or payments in sep increments to be separately accepted .
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Excuse of condition by waiver or estoppel occurs
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when party having the benefit of the cond/n indicates by words or conduct that he will not insist on the fulfillment of the cond/n.
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2 types of waivers which apply to K law.
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estoppel waiver
election waiver |
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Estoppel waiver
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1. Party set to benefit by the cond/n indicates he is relinquishing the fulfillment of a cond/n before it is to happen AND
2. Other party detrimentally relies on the waiver SO 3. Courts will hold this to a binding BUT 4. waiver may be retracted any time before the other party has changed position to his detriment. |
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Election waiver
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When cond/n or a duty of performance is broken the benficiary of the condition or duty must make an election to either: terminate her liability or continue under the K. If party continues, he is deemed to have waived the condition or duty.
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What conditions may be waived
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If no consideration for waiver, condition must be anxillary or collateral to the main subj & purpose of K--i.e. the entire or substantially entire performance can't be waived.
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Waiver in installment Ks
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If waiver not supported by consider/n, the beneficiary of the waived condition can insist on strict compliance w/ terms of K in future installments--unless detrimental reliance.
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Whether party has right to damages for conditions waived
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Party does not waive right to damages--only right to treat the failure of cond/n as a total breach by excusing counterperformance.
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List ways absolute duty can be discharged (D/C)
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1. performance
2. tender of performance 3. occurrence of condition subsequent 4. illegality 5. impossibility, impracticability or frustration 6. rescission 7. partial modification of K 8. novation 9. cancellation 10. release 11. substituted K 12. accord & satisfaction 13. account state 14. lapse 15. effect of running of SoL. |
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D/C of K duty by performance is
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full, complete performance
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D/C of K duty by tender of performance
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good faith tender of performance according to K duties
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D/C by occurrence of condition subsequent
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happening of event contemplated by parties which d/cs duty of performance that has matured
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D/C by illegality
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subject matter of K has become illegal by "supervening illegality"
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D/C by impossibility, impracticability or frustration
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occurs when an unanticipated or extraordinary event where the nonoccurrence was a basic assumption of the parties in making the K and neither assumed the risk
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D/C by impossibility
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when Kual duties have become OBJECTIVELY impossible to perform AFTER K entered into.
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Impossibility is a valid defense to performance when, from an objective viewpoint, ev ents reasonably unforeseen at formation make performance impossible.
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Effect of impossibility
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ea party excused from yet to be fulfilled duties. Either party may sue for rescission & receive restitution of any goods delivered, paymts made, etc.
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If performance becomes only partially impossible
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duty may be d/ced only to that extent.
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If performance becomes temporarily impossible
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contractual duties are suspended, not d/ced. When performance becomes possible again, duty springs back unless duty or burden on either party sig different from original.
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Effect of part performance prior to impossibility
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quasi Kual recovery
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D/C due to death or physical incapacity
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K d/ced if a person necessary to effectuate the K dies or becomes disabled. Has to be services of a unique kind--not those which can be delegated.
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D/C due to destruction of K's subj matter not applicable to
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contractor's duty to construct a building which has been destroyed, b/e contractor can still rebuild.
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Compare destruction of building under construction w/ K to repair or remodel.
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If building destroyed, contractor still obligated & not entitled to anything other than K price. If K for repair & building destroyed, contractor entitled to recover in restitution the value of the work done prior to building's demise.
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Destruction of subj matter will render a K d/ced due to impossibility only if
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very thing actually needed for K destroyed.
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If source for fulfilling K destroyed, K will be d/ced due to impossibility only if
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source is only one specified by parties.
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Test for D/C by impracticability
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Party to perform has met
1. extreme & unreasonable difficulty &/or expense AND 2. Its nonoccurence was a basic assumption of the parties. |
Impracticability can be a valid defense where events reasonably unforeseen at formation would cause a severe hardship if D forced to person
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UCC--events sufficient for D/C due to impracticability
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Shortage of raw materials or inability to use them in product b/e of war, strike,embargo, etc. Catastrophic local crop failure (but not mere shortage) also sufficient. Increases in cost rarely sufficient.
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UCC--seller's responsibility if partial inability to perform
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MUST ALLOCATE DELIVERIES among customers.
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D/C by Frustration
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1. some supervening act or event
2. at the time of entering in the K the parties did not reasonably foresee the act or event occurring 3. the purpose of the K has been completely or almost completely destroyed by this act or event AND 4. the purpose was realized by both parties at the time of making the K. |
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Distinguish seller/buyer uses of defenses of impossibility/impracticability & frustration
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A seller more likely to raise impossibility & impracticability as defenses that d/ces performance. Buyer more likely to raise frustration of purpose as a defense.
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D/C by rescission--2 types
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mutual or unilateral
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Mutual rescission
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express agreement b/n parties to call it off. Consideration is the giving up by each party of the right to counter performance by the other.
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Mutual rescission & 3rd party beneficiary whose rights have vested
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K cannot be d/ced by mutual rescission by the promisor & promissee.
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Elements of effect d/c by mutual rescission
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1. K must be executory on both sides
2. If one party has performed, offer to rescind must be supported by new consid/n by nonperforming party, detrimental reliance or manifestation of an intent by original offeree to make a gift of obligation owed to her. |
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Does mutual rescission require a writing
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May be oral even if K to be rescinded expressly states rescission requires a writing UNLESS FALLS W/IN SofF
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Unilateral rescission
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when one of the parties to K desires to undo K, but the other party does not. For unilateral rescission, must be adequate legal grounds. Most common are mistake, misrepresentation, duress & failure of consideration.
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Requirements for modification of K
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1. mutual assent (but either party may bring equity action for modification under doctrine of reformation)
2. consideration a. not needed for correction of an error. b. UCC does not require consideration to modify sale of goods Ks. |
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Novation
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act of substituting for an old obligation a new one that either replaces an existing obligation for a new one or replaces an original party w/ a new one.
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Elements of D/C by novation
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1. previous valid K
2 agreement among all parties to substitute new party & new performance in place of original parties & performance 3. K duties b/n original parties immediately extinguished 4. valid & enforceable new K |
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D/C by cancellation
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Destruction or surrender of a written K will d/c the K if the parties manifest their intent to have these acts serve as D/C.
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D/C by release
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or K not to sue will release K duties--usually must be in writing & supported by new consideration or promissory estoppel elements.
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Accord
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Agreement to accept different performance than due under original K. Effect is to suspend right to enforce original K.
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Satisfaction
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performance of the accord. D/Cs both the accord & the original K.
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Whether consideration is required for accord & satisfaction
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Yes. If lesser value than originally bargained for cons/n, sufficient that new consideration is to be paid to 3rd party or is of a different type.
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Whether smaller payment of original debt can satisfy accord & satisfaction
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MAJ is yes if there is a bona fide dispute as to claim or there is some alteration, even slight in debtor's consideration.
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If debtor breaches accord before satisfaction, creditor may
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sue on the original undischarged K or sue for breach of the accord.
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If seller breaches accord (i.e. sues on original K) debtor can:
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1. raise accord agreement as an equitable def & ask K action be dismissed OR
2. wait until he is damaged (creditor successfully sues) & bring action at law for damages on breach of accord |
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A check tendered as "payment in full" acts as an accord & satisfaction if
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1. claim uncertain or subj to bona fide dispute
2. check has conspicuous stmt that it is full satisfaction of debt 3. tendered in good faith 4. satisfaction is creditor's acceptance of check. |
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D/C by account stated
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Agreement by parties to computation of amount as a final balance due. Manifestation by assent by both parties as to amount debtor owes creditor as a way to d/c unliquidated or disputed K.
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Discharge by lapse
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If each party is condition concurrent to the other's duty, it is possible that on day set for performance, neither party is in breach & their duties lapse. If K states "time is of the essence" lapse is immediate. If not, lapse is w/in a reasonable time.
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Effect of running of SoL
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SoL may bar action for breach of K such that judicial remedies are barred. Does not d/c K duties (as does lapse) but makes K unenforceable.
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When does breach occur?
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1. promisor is under absolute duty to perform &
2. absolute duty of performance has not been d/ced 3. nonbreaching party much show willingness & ability to perform |
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Breach is minor if
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obligee gains the substantial benefit of her bargain despite the obligor's defective performance.
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Effect of minor breach
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aggrieved party not relieved of duty of performance but gets right to damages (set off).
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Breach is material if
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obligee does not receive the substantial benefit of her bargain.
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Effect of material breach
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nonbreaching party may
1. treat K as at an end such that nonbreaching party is d/ced of any performance due and 2. will have an immediate right to all remedies for breach of entire K |
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If minor breach coupled w/ anticipatory repud.
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the nonbreaching party may treat as a material breach. (Indeed courts hold that the aggrieved party must not continue on, b/e to do so would show failure to mitigate damages.)
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UCC directive re: manufacturer of goods when buyer communicates anticipatory repudiation.
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permits party to complete manufacture of the goods to avoid having to sell at lower salvage value
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If breach is a material breach of divisible K
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recovery is available for substantial performance of a divisible part
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To determine materiality of breach, courts look at:
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1. Amt of benefit received by nonbreaching party
2. adequacy of compensation for damages to the injured party 3. extent of part performance by breaching party 4. hardship to the breaching party 5. Neg or willful behavior of the breaching party 6. Likelihood the breaching party will perform rest of K |
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Perfect tender rule
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UCC. If goods or their delivery fail to conform to the K in any way, the buyer generally may reject all, accept all or accept any commercial units & reject the rest.
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UCC buyer accepts when
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1. After a reasonable opportunity to inspect the goods, buyer indicates to the seller they they conform to requirements of K or they do not conform, & he will keep them anyway.
2. she fails to reject w/in a reasonable time after tender or delivery or fails to seasonably notify seller of rejection OR 3. Buyer acts inconsistently w/ seller's ownership. |
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Merchant buyer's responsibility when rightfully rejected goods in physical possession
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1. obey seller's instructions as to the rejected goods
2. If seller gives no instructions, the buyer may reship, store them or resell them. When buyer sells the goods he is entitled to reimbursement out of the proceeds for reasonable expenses of caring for & selling them. The amt should not exceed 10% of gross proceeds. |
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Buyer can revoke his acceptance
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when goods have a defect that substantially impairs their value to her
AND (1) she accepted them on reasonable belief defect would be cured Or can (2) she accepted them because of difficulty of discovering defects or seller's assurance goods conformed to K. |
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When (timing) revocation of acceptance must occur
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1. w/in reasonable time after discovery of defects.
2. before any substantial change in goods occurs |
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Installment Ks & exception to the perfect tender rule
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In installment K, an installment can be rejected only if the nonconformity substantially impairs the value of that installment and cannot be cured. The whole K is breached only if the nonconformity substantially impairs the value of the entire K.
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Seller's right to cure w/in time for performance
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If buyer has rejected goods b/e of defects, the seller may w/in the time originally provided for performance "cure" by giving reasonable notice & making a new tender of conforming goods which buyer must accept.
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Seller's right to cure beyond original K time
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Ordinarily, seller does not have right to cure beyond original K time. However, if the buyer rejects a tender of nonconforming goods that the seller REASONABLY believed would be acceptable the seller, w/ reasonable notice to buyer, has a FURTHER REASONABLE TIME beyond K time to make a conforming tender.
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Seller's right to cure a defective shipment in installment K
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UCC provides buyer cannot reject if DEFECT CAN BE CURED.
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2 broad branches of remedies in breach of K cases
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Nonmonetary
Monetary |
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Specific performance
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Order from court to breaching party to fulfill obligation under K when legal damages are inadequate such as w/sale of real prop or rare article.
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Whether specific performance is available for service Ks.
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No even if rare or unique because of enforcement problems & tantamount to invol servitude which is prohibited by Con.
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Injunction
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A court may enjoin a breaching employee from working for a competitor if services Ked for are rare or unique
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Whether court will grant an order of specific performance to enforce K not to compete
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Yes, if
1. services to be performed are unique (thus $ damages inadequate) 2. geographic area& duration reasonable 3, covenant must not harm the public |
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Equitable Defs available in action for specific performance
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1. Laches
2. Unclean hands 3. Sale to bona fide purchaser |
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Laches as def to specific performance
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Unreasonable delay in pursuing a claim & the delay has prejudiced D
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Unclean hands as def to specific performance
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claim that the party seeking specific performance is guilty of wrongdoing in the trans/n being sued upon
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Sale to a bona fide purchaser as def to specific performance
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claim that the subj matter has been sold to a person who purchased for value & in good faith.
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Art 2 buyer's nonmonetary remedies
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cancellation
replevy specific performance |
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UCC Seller's nonmonetary remedies
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right to w/hold goods (includes right to stop delivery of goods in possession of carrier when buyer repudiates or fails to make pymt due before delivery)
right to recover goods right to force goods on buyer limited right to demand assurances |
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Cancellation
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Buyer can annul or terminate K when rightfully rejecting nonconforming goods
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When can buyer replevy goods from seller
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Buyer has made at least partial payment & seller has not delivered AND
1. seller becomes insolvent w/in 10 days after receiving buyer's payment OR 2. buyer purchased goods for personal, family or household purposes. OR 3. After reasonable effort, buyer unable to cover (secure adequate substitute goods) For either, buyer must tender any unpaid part of price. |
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Seller's right to w/hold goods
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if buyer fails to pay, seller may w/hold delivery. Seller may refuse delivery if goods bought on credit & seller discovers buyer is insolvent.
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Seller has right to recover goods
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If seller learns is insolvent after delivery of goods made, seller may reclaim the goods upon demand made w/in 10 days. 10 days limitation does not apply if buyer misrepresented his solvency in writing w/in 3 mos of deliver
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Right to demand assurances--Art 2
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If one party reasonably fears other will not perform, he may demand assurances that the performance is still forth coming. Until he receives adequate assurances, he may suspend his own performance. If proper assurances are not given w/in reasonable time, he may then treat the K as repudiated.
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Distinguish anticipatory repudiation & adequate assurances
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right to demand assurances arises when there are REASONABLE GROUNDS FOR INSECURITY. Anticipatory repudiation requires much more--a CLEAR INDICATION that other party is unwilling or unable to perform.
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General types of K $ damages
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compensatory
punitive nominal liquidated |
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Usual goal of damages in breach of K
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put the nonbreaching party where she would have been had the promise been performed (so far as $ can do this)
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Standard measure of expectation damages
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based on expectation or enough to buy substitute performance--also called BENEFIT OF THE BARGAIN damages
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Damages are monies awarded to person who has suffered or will suffer a loss due to actions of a person at fault. Gen. purpose of K damages is to put P in a position she would have been if K had been performed. Gen. rule of K damages is person is entitled to value of her expectancy & any reliance costs reasonably foreseeable at the time of formation
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Reliance damage measure
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used when expectation damages are too speculative; designed to put P in position she would have been in had the K never been formed.
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Consequential damages
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losses resulting from the breach that any reasonable person would have foreseen at time K formed would occur from the breach. (Note: in UCC Ks only a buyer may recover consequential damages.)
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Incidental Damages--Ks for sale of goods
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For buyer, include expenses incurred in inspection, receipt, transport, care, etc of goods rightfully received.
For seller in storing, shippping, returning, reselling goods as a result of buyer's breach. |
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Whether punitive damages are awarded in K cases
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Generally no
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Nominal damages
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Token damages (e.g. $1) may be awarded when a breach is shown but no actual loss is proven
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Liquidated damages
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stipulated damages--must be reasonable in view of the actual or anticipated harm caused by breach
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Requirements for enforcement of liquidated damages clause
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1. damages must have been difficult to estimate or ascertain at the time the K was formed AND
2. Amt must have been a REASONABLE FORECAST. If not, courts will construe this as a PENALTY & not enforce. |
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Buyer's damages if seller does not deliver or buyer rightfully rejects or revokes acceptance
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Either the market $ (benefit of the bargain damages) or the cost of buying replacement goods (cover) plus incidental & consequential damages less expenses saved (if any) as a result of seller's breach.
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If buyer measures his damages by diff b/n K & market$, when is market price determined?
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as of the time the buyer learns of the breach
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Buyer--cover rule when buyer faced w/ actual or total breach by seller
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must make a REASONABLE K for substitute goods IN GOOD FAITH & W/O UNREASONABLE DELAY.
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If buyer accepts goods that breach seller's warranty, what is the measure of damages?
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Difference b/n value of goods delivered & value had they been according to K plus incidental & consequential damages..
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Buyer's notice requirement
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Buyer must notify seller of defect w/in a reasonable time after she discovers or should have discovered defect.
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Seller is liable to buyer for consequential damages if
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1. he had reason to know of buyer's general & particular requirements
2. the subsequent loss could not reasonably be prevented by cover. |
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3 measures for seller's damages when buyer repudiates or refuses to accept conforming goods
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1. Diff b/n market price (measured as of the time & place of delivery) + K $ OR
2. resell goods & recover the diff b/n K$ & resale $. AND 3. Recover lost profits (if applicable) PLUS incidental damages less expenses saved. |
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Lost volume seller
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Seller's supply of goods is unlimited (he can obtain all he can sell) seller is lost volume seller & lost profits measure appropriate. If supply limited, the lost profits measure cannot be used.
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Action for price
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Suit by seller for full K price, because buyer accepted goods & not paid or has not accepted & seller is UNABLE TO RESELL.
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Standard measure of damages for breach of land sale Ks
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Diff. b/n K$ & FMV of land
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Standard measure of damages in employment Ks when employer breaches
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$ employee would have made or would have made taking a similar position
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Standard measure of damages in employment Ks when employee breaches
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Costs to replace minus $ owed to employee for work done (some courts allow offset only if breach was unintended)
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Standard measure of damages when owner breaches in construction Ks before completion
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Builder entitled to profits that would have resulted from K plus any costs expended
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Standard measure of damages when owner breaches after completion
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Ful K $
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Certainty rule
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P must prove the losses were certain and NOT SPECULATIVE
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Avoidable damages rule
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Nonbreaching party cannot recover avoidable damages. P must make reasonable effort to cut losses. Generally can recover mitigation expenses.
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Mitigation in employment Ks when employer breaches
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employee under a duty to use REASONABLE CARE in finding similar position.
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Mitigation in sale of goods Ks when buyer breaches
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Seller usually cannot bring suit against buyer for full K price unless goods cannot be resold at a reasonable price or were damaged or lost when the risk of loss was on the buyer.
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Mitigation in manufacturing Ks if buyer breaches
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Manufacturer under a duty not to continue work after breach unless completion will decrease rather than increase damages
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Mitigation in construction Ks when owner breaches
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Builder does not have to secure other work but does have a duty to mitigate by not continuing work unless completion will decrease damages.
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Restitution
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quasi contractual remedy available where original K failed one party was unjustly enriched by the other party's actions
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Implied in law or quasi K
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When K is unenforceable or no K exists, an action to recover restitutionary damages is referred to as an action implied in law or action in quasi K.
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Measure of restitution
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value of benefit conferred
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Whether P can pursue restitution if P has fully performed
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No P who has fully performed is limited to damages under the K.
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Restituion available in quasi K action in which no K existed if:
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1. P conferred a benefit on D
2. w/ reasonable expectation of compensation 3. D knew or had reason to know of P's expectation + 4. D would be unjustly enriched if allowed to retain the benefit w/o compensating P |
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Rescision is
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remedy whereby K considered voidable & rescinded.
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Grounds for rescision which must occur before or at the time K formed
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1. mutual mistake
2. unilateral mistake if the other party knew or should have known 3. Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party's expectations under the K 4. Misrepresentation of fact or law 5. Other grounds such as duress, undue inf, illegality, lack of capacity, failure of consid/n. |
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Defenses available in a rescission action
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all equitable defs--laches, unclean hands
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quantum meruit
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action for reasonable value for ones servicesreasonable value of services; damages awarded in an amt considered reasonable to compensate a person who has rendered services in a quasi kual r/ship.
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Reformation
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writing is changed so it conforms to the intention of the parties.
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Evid standard for establishing the variance b/n agreement & writing in a reformation action
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clear & convincing evid.
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Whether parol evid rule & SoF applies to reformation actions
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No except if reformation would add land to K w/o complying w/ SoF
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Defenses available in reformation ac/n
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In addition to general equitable defs, the existence of a bona fide purchaser for value--i.e. reformation is not permitted if the right of 3rd parties will be unfairly affected.
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SoL under UCC
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4 yrs. Parties may change but not shorten to less than one yr. begins to run when breach occurs. Does not matter if aggrieved party knows about breach.
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When SoL begins to run in breach of warranty actions
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upon delivery of goods. True even if buyer does not discover breach until later.
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Intended v. Incidental beneficiaries
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Only intended have K rights. Intended beneficiary is:
1. IDed in K 2. receives performance directly from promisor or 3. has some re/ship w/ promisee to indicate intent to benefit |
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Creditor beneficiary
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person to whom a debt is owed by the promisee
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Donee beneficiary
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person whom the promisee intends to benefit gratuitously
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When do the rights of the beneficiary vest
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1. when he manifests assent to a promise in manner requested by the parties
2. brings a suit to enforce OR 3. materially changes position in justifiable reliance on the promise. |
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Significance of vesting in intended 3rd party beneficiary Ks.
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Before vesting, promisee & promisor are free to modify their K w/o consulting the 3rd party. Once 3rd party's rights vest, the promisor & promisee cannot vary his rights w/o his consent.
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3rd party bene v. promisor
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3rd party can enforce the K against the promisor subj to the promisor's defenses against the promisee (unless the promisor made an absolute promise to perform).
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3rd party bene v. promisee
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creditor can sue the promisee on the existing obligation b/n them. She may also sue the promisor--but obtain only 1 satisfaction.
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Promisee v. promisor
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promisee may sue the promisor both at law & in equity for specific performance if the promisor is not performing for the 3rd person.
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What rights may be assigned?
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Generally all K rights.
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Exceptions to general rule that all K rights can be assigned
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1. an assignment that would substantially change the obligor's duty or risk
2. an assignment of future rights to arise from future Ks. 3. assignment prohibited by law or pub policy (e.g. wage assignments, govt pensions, alimony) |
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How will express Kual provision against assignment be construed?
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will be construed as barring only delegation of duties. If K states attempts to assign will be void, the parties can bar assignment. Also if assignee has notice of nonassignment clause, an assignment will be ineffective.
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Effect of assignment
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establish privity to K b/n obligor & assignee while extinguishing privity b/n obligor & assignor.
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For an assignment to be effective
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assignor must manifest an intent to immediately & completely transfer rights. Writing not required. Right being assigned must be clearly IDed. Consid/n not required.
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2 categories of assignment
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1. Assignment for value
2. Gratuitous |
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Assignment for value
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1. done for consid/n OR
2. taken for paymt on existing debt. |
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Are assignments for value revokable?
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No
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Gratuitous assignment is
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not for value
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Are gratuitous assignments revokable?
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Yes, generally.
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When are gratuitous assignments not revokable?
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1. obligor already performed
2. token chose or symbol of assignment has been transferred 3. assignment is put in writing (some states) OR 4. assignee can show detrimental reliance & such reliance should have been foreseeable to assignor |
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How are gratuitous assignments terminated?
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1. death or bankruptcy of the assignor
2. notice of revocation by the assignor to the assignee or obligor 3. assignor taking performance directly from obligor OR 4. subsequent assignment of the same right by assignor to another |
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Effect of revocation of gratuitous assignment
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Privity b/n the assignor & obligor is restored & assignor is the real party in interest.
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Assignee v. obligor
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Assignee can sue the obligor. Obligor cannot raise defense the assignor may have against the assignee.
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Assignee v. assignor
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Assignee can sue the assignor for wrongfully exercising the power to revoke. An action by assignee against the assignor may lie where the obligor successfully asserts a defense agianst the assignor in an action brought by the assignee against the obligor to enforce the obligation. The assignor will not be liable to the assignee if the obligor is incapable of performning.
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What if there has been successive assignment of same rights?
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If 1st assignment is revocable, a subsequent assignment revokes it. If it is irrevokable, the 1st assignment will usually prevail unless 2nd has paid value & taken w/o notice of the 1st assignment.
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Other exceptions to the 1st assignee prevailing.
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Subsequent assignee will prevail if subsequent assignee
1. gets the 1st judgment against the obligor 2. gets the 1st payment from the obligor 3. gets delivery of a token chose 4. is party to a novation releasing the asssignor 5. can proceed against the 1st on an estoppel theory. |
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What duties may be delagated?
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Generally all duties
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Exceptions to general rule that all duties may be delagated
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1. duties involving person judgment & skill
2. delagation that changes the obligee's expectancy 3. a special trust was reposed in the delator by the other party to the K 4. there is a Kual restriction on delagation |
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What is necessary for effective delagation?
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Delagator must manifest a present intention to make a delegation. No special formalities, written or oral.
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In delagation, does delagator remain liable?
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Yes the obligee may sue the delator for nonperformance by the delgate
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Can the obligee sue the delagate for nonperformance?
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Yes but can require delagate to perform ONLY IF delagate promises obligee he will perform and that promise is supported by consid/n (ASSUMPTION)
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Entrustment
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Transfer of possession of goods to merchant who deals in goods of the kind involved in ordinary course of business.
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Voidable title concept
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Generally if sale is induced by fraud, the seller can rescind the sale & recover the goods. However the defrauded seller may not recover goods from a good faith purchaser for value who bought from fraudulent buyer. The rights of a defrauded seller are cut off by a buyer & by person who takes a security interest in goods.
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Can thief pass title?
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If thief steals goods & then sells, the thief is unable to pass title, because his title is void. Therefore, even a good faith buyer cannot cut off the rights of the true owner.
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Exceptions to rule that BFP's rights are cut off in favor of true owner if seller is a thief
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1. buyer has made accessions (valuable improvements)
2. true owner is estopped from asserting title (e.g. if true owner represented theif had title). |
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Open price term--UCC
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for seller to establish price must be done in good faith. If evid of bad faith, buyer can fix a reasonable price
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Express promise to pay debt barred by SoL or bankruptcy--consideration
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Enforceable w/o new consideration. The promise is supported by part consideration of the unpaid debt wh is still operative to give validity to the new promise.
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Express promise to pay debt barred by SoL or bankruptcy--is writing required?
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SoL--most states require a signed writing
Bankruptcy--only a few states require a signed writing |
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UCC--buyer's right to cancel for failure of timely performance
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When time set for performance has passed the party awaiting performance may agree to a new commercially reasonable time for performance prior to cancellation. Where seller fails to make delivery, buyer may cancel & cover or recover damages for nondelivery. If aggrieved party awaits performance obligation of good faith requires a reasonable notification before K may be treated as breached b/e reasonable time for delivery or demand has expired.
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Assignment--gen rule
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transfer of the assignor's right to performance in whole or part by the obligor to assignee who acquires the right to the performance
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Order assignment
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differs from gen assignment (in wh the negotiations are entirely bn the assignor & the assignee) & involves a written order by assignor directed to the obligor to pay assignee.
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partial assignment--CL
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CL--partial assignment deemed invalid b/e it imposed an additional burden on the obligor to make performance to 2 parties instead of the original obligee
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partial assignment--restmt
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modernly, partial assignment have been validated on the same basis & to same extent as if the part had been created as a sep right
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Replevin--UCC
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Replevin provides a remedy for P to recover goods prior to determination of a dispute upon a hearing to determine whether P had title to the goods & upon P posting a bond to secure any damages that might be due D if replevin wrongful. UCC when goods have been specifically identified under a K and buyer is unable to cover by purchasing other goods, then the buyer has a right to replevy the goods in seller's possession even though title not yet passed.
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