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127 Cards in this Set
- Front
- Back
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Contract test card
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Contracts
I. APPLICABLE LAW a. Two kinds i. CL 1. real estate, personal services, ii. UCC Article 2: read sales lecture 1. Governs transactions that involve a sale of goods, things that are moveable at the time of transaction (always inc. growing crops) 2. Not applicable if goods to be severed by buyer and is sale of un-extracted oil, gas, minerals, timber or structures iii. Mixed . 1. determine predominant purpose of the contract 2. apply that law to the entire contract, UNLESS a. K divides payment based on goods and services |
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Formation of Contract
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II. FORMATION OF CONTRACT
a. Valid K must have: mutual assent; consideration; no defenses to formation b. OFFERS i. Offer is a manifestation of intent to be presently bound to a specific undertaking communicated to offeree creating power of acceptance in offeree, unless offer terminates ii. General RULE: offer need NOT contain all material terms |
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General RULE: offer need NOT contain all material terms
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1. but, terms must be definite and certain enough to be capable of being enforced
2. Except: sale of real estate must have price and land desc. |
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Formation of K - General Rule - UCC
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a. Must contain quantity :
b. If no price, then offer if parties so intend (agreement can be shown by conduct) c. CL Mirror-image rule abandoned |
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Formation of K - If ambiguous of price
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(eg, “a fair” or “reasonable”) price, then no offer under CL or UCC
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Formation of K - Output/Requirements contracts
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a. Offer can be vague
b. Increased quantities so long as not “unreasonably disproportionate” c. Parties must use best efforts to perform |
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Formation of K - Employment Ks
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a. Must have duration of employment
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Formation of K - Advertisements
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a. General RULE: An advertisement is not an offer, UNLESS
i. Promise in nature of a reward ii. Specific as to quantity and expressly indicate who can accept |
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Termination of Offers - Lapse of time
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1. reasonable time
Lapse of time 2. stated time |
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Termination of Offers - Words or Conduct of Offeror - Revocation
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1. unambiguous statement by offeror to offeree of unwilingess or inability to contract
Words or Conduct of Offeror -- Revocation 2. unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of |
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Termination of Offers - When is revocation effective?
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1. RULE: Revocation of offer sent through the mail is not effective until received
2. RULE: An offer cannot be revoked after it has been accepted |
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Termination of Offers - Offers that cannot be revoked
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1. Option contract
a. Promise to keep offer open; and b. Promise supported by payment or other consideration i. Can accept until lapse or revocation |
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Termination of Offers - Offers that cannot be revoked
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2. UCC Firm Offer
a. Cannot be revoked for up to 3 months (max) if: i. Offer to buy of sell goods ii. Signed, written promise to keep the offer open for state period or reasonable period; iii. Party is a merchant 1. merchant: engaged in a business or profession or one who regularly deals in goods of the kind |
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Termination of Offers - Offers that cannot be revoked
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3. Detrimental Reliance
a. Offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable |
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Termination of Offers - Offers that cannot be revoked
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4. Executory Unilateral K
a. Start of performance, not mere preparation, makes unilateral contract irrevocable for reasonable time i. NB: if only preparation, check detrimental reliance!! |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - COUNTEROFFER
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1. Counteroffer
Words or Conduct of the Offeree – Rejection a. Terminates offer; and becomes a new offer b. Watch out for: i. Mere bargaining (Will you take $200?) ii. If a statement (I’ll pay $200) = counteroffer |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - CONDITIONAL ACCEPTANCE
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a. Terminate offer; and becomes new offer
b. “I accept” if, provided that, so long as, but, on condition that |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - ADDITIONAL TERMS - CL
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CL only Mirror Image Rule
i. An acceptance adding new terms b. UCC permitted alterations if is treated as a counteroffer |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - ADDITIONAL TERMS - UCC - Permitted Alterations if...
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i. Seasonable expression of acceptance
ii. Questions to ask? creates a contract 1. is there a contract? (seasonable issue) 2. is additional term a part of the contract? a. If at least one party is NOT a merchant, then additional term is merely a proposal b. If both are merchants, then: i. Additional term is part of the contract, UNLESS offeror rejects within a reasonable time OR it materially changes the original offer OR offer expressly limits acceptance to original terms |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - ADDITIONAL TERMS - UCC Different terms ("Knock-Out" Rule
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i. If acceptance contains contradictory terms, the K consists only of the terms on which the offer and acceptance agree.
ii. Inconsistent terms replaced by gap-fillers |
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Termination of Offers - Words or Conduct of the Offeree - Rejection - ADDITIONAL TERMS - UCC Written confirmation of Oral Agreements
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i. After oral agreement, written confirmation with additional terms treated same as alteration rule (non-merchant: proposal; merchant: reject or material change)
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Termination of Offers - Death of Party Prior to Acceptance
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1. RULE: Death or incapacity of either party terminates offer
Death of Party Prior to Acceptance 2. Exceptions: a. Option K b. Part performance of offer to enter into unilateral K |
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ACCEPTANCE - Who can accept?
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i. Who can accept?
1. Only a person who knows about the offer; or 2. the person to whom the offer was made 3. Look out for assignment: a. Offers canNOT be assigned b. Options can be assigned UNLESS the option otherwise provides [thus, txfr ability to accept underlying offer] |
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Method of Acceptance - 1/5
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Method of acceptance? FIVE main types:
1. In response to offer, Offeree fully performs a. Full performance is always acceptance, UNLESS failure to notify of performance i. Failure to notify discharges contractual duty ii. NB: watchout for geographic separation of parties |
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Method of Acceptance - 2/5
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2. If the offeree starts to perform
a. RULE: If offer does not require a particular method of acceptance, then start of performance indicates acceptance i. NB: if states performance required to accept, then we have a unilateral K and full performance required for acceptance |
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Method of Acceptance - 3/5
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3. offeree promises to perform
a. RULE: most offers can be accepted by a promise to perform |
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Method of Acceptance - 4/5
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4. offeror and offeree are at different places and there are conflicting communications (“mail box rule”)
a. RULE: a communication is effective when received. i. N/A to 1. offer stipulating “accepted when received” 2. option contracts b. RULE: but an acceptance i. Made in a manner and by a means invited; and is effective when sent IF ii. Offeree has not already sent a rejection 1. Then, whichever arrives first is operative |
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Method of Acceptance - 5/5
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5. UCC: acceptance may be in any reasonable manner and by any reasonable medium
a. Buyer inspects and indictes goods conform or that will keep inspite of nonconformance; b. Buyer fails to reject within a reasonable time or fails to notify seller seasonably of rejection; or c. Buyer does anything inconsistent with seller's ownership d. NB: seller of goods sends the wrong goods i. RULE: a buyer’s offer to buy seeking prompt shipment can be accepted either by seller’s 1) promise to ship or 2) by shipment of conforming or non-conforming goods ii. RULE: Shipping the “wrong” goods is simultaneously an acceptance and a breach iii. Exception: Accommodation 1. Shipping nonconforming goods with explanation of why different goods are sent and belief that they will be acceptable 2. Creates NO contract; and NO resultant breach; merely creates counteroffer |
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CONSIDERATION or a CONSIDERATION SUBSTITUTE
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a. Def: bargained-for legal detriment
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CONSIDERATION or a CONSIDERATION SUBSTITUTE
b. Analysis steps: |
i. Look at each promise separately
ii. Identify each promisor and determine if detriment was incurred |
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CONSIDERATION or a CONSIDERATION SUBSTITUTE
c. Types of Consideration |
i. Performance, something not legally obligated to do
ii. Forebearance, not doing something legally entitled to do iii. Promise to perform iv. Promise to forbear |
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CONSIDERATION or a CONSIDERATION SUBSTITUTE
d. Probable Bar issues (esp, v-vii) |
i. Was there anything bargained for
ii. Did the party incur a ? legal detriment iii. Was the ? promise consideration for another promise 1. illusory promise exception: “I promise unless I change my mind.” ? iv. Amount of consideration irrelevant v. 1. exception: expressly requested Past consideration is NOT consideration and vi. CL only: expectation of payment 1. RULE: doing what legally obligated to do is not sufficient consideration for consideration Pre-existing duty rule 2. Exceptions: a. Addition to or change in performance b. Unforeseen difficulty so severe as to excuse performance c. Third party promise to pay additional money 3. UCC has no pre-existing duty rule, but uses the good faith a. NB: no need for new consideration test for changes in existing sale of goods contracts vii. 1. if debt is due and undisputed, then part payment is NOT consideration for the release of the debt Part payment of a debt 2. if not due or is disputed, then part payment is consideration |
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CONSIDERATION or a CONSIDERATION SUBSTITUTE
e. Consideration substitutes |
i. Written promise to satisfy an obligation for which there is a defense to payment
ii. A seal is not a consideration substitute (ie, no legal significance) iii. Promissory estoppel 1. promise is the main substitute: 2. reliance that is reasonable, detriment, and foreseeable 3. enforcement necessary to avoid injustice |
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DEFENSES TO ENFORCEMENT
PROMISSORS LACK OF CAPACITY a. Who lacks capacity? |
i. Under 18
ii. Mental incompetent/insanity iii. Intoxicated person, if other party has reason to know |
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DEFENSES TO ENFORCEMENT
PROMISSORS LACK OF CAPACITY b. Consequences of incapacity |
i. Right to disaffirm by person without capacity
1. NB: incapable party may still sue for breach! 2. if incapable is sued, then assert defense of incapacity ii. implied affirmation by retaining benefits after gaining capacity 1. K made before capacity; person gains capacity; keeps subject matter of K without complaint after capacity gained iii. Liability for necessaries 1. this is quasi-contract |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS a. Three main issues: |
i. Is the K within the SF?
ii. If so, is the SF satisfied? iii. Is there a SF defense? |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS Is the K within the SF? |
i. Promise in consideration of marriage: eg, prenup, postnup
ii. Promise by estate rep to pay debt of decedent: ie, look for a personal guarantee of payment iii. Promise to pay debt of another 1. Main purpose exception iv. Service contract not capable of being performed within one year : if guarantee has main purpose of benefiting the guarantor, then not in SF 1. look for specific time period mentioned 2. specific date more than one year from date of K 3. BUT, a. task mentioned but no time mentioned is OUTSIDE SF b. lifetime deal not in SF because could die in less than year v. Transfer of interest in real estate of a term of more than one year 1. sale of land is forever 2. easement/lease greater than one year vi. Sale of goods for $500 or more |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS If within SF, is the SF satisfied? |
i. If yes, then there is no SF defense
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? PERFORMANCE - Services K |
Full performance by either party satisfies the SF
Part performance does NOT satisfy the SF |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? PERFORMANCE - Sale of Goods Contracts |
i. Ordinary goods
1. RULE: Part performance of K satisfies SF to the extent of the performance © BarExamMind.com Page - 7 a. delivered b. goods: satisfies SF undelivered ii. Specially Manufactured Goods Exception goods: no satisfaction 1. SF is satisfied as soon as seller makes a substantial beginning: ie, enough work to know the good is custom made |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? PERFORMANCE - Real Estate |
i. Part performance requires 2 of the 3:
1. full or part payment; 2. possession; and/or 3. improvements ii. NB: full payment alone does NOT satisfy the SF |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? A Writing/Memorandum a. Non-UCC SF issue |
i. Examine the writing for:
1. contents of writing to see if it contains all material terms and subject matter of contract; 2. recital of the consideration; and 3. signed by the person to be charged [ie, D] |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? A Writing/Memorandum b. UCC SF issue |
i. Examine for:
1. the ONLY material term: QUANTITY a. if quantity incorrect, creates a “ceiling” on enforcement 2. signed by D, UNLESS a. both parties are merchants and party receiving the signed writing fails to respond within 10 days |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS How to satisfy? Judicial Admission Rule [not very important] |
a. Statement by D that there was an agreement; and
b. Statement is made either in testimony, pleading, or discovery |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS Is there a SF defense? |
If SF is NOT satisfied, then YES, there is a defense.
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS Indirect Testing of the SF |
i. Authorization to enter into contract for someone else
1. written proof not always required. 2. Required when: a. Equal dignities doctrine: if underlying K is within SF, then need written authorization from principal |
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DEFENSES TO ENFORCEMENT
STATUTE OF FRAUDS Contract Modification |
1. when does law require written evidence of modification of a written contract?
a. RULE: Would agreement, as modified, fall within the SF? i. Yes, need written evidence of modification ii. Applies to CL and UCC 2. What if agreement in writing and requires that all modifications be in writing? a. Ignore K language at CL; apply above modification rule b. Under UCC, provision requiring written modification is valid unless waived |
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DEFENSES TO ENFORCEMENT
ILLEGALITY, MISREPRESENTATION, DURESS Illegality |
Illegality
i. If subject matter is illegal, the agreement is void ii. If subject matter is legal but purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose |
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DEFENSES TO ENFORCEMENT
ILLEGALITY, MISREPRESENTATION, DURESS Misrepresentation - words before contract |
False assertion OR concealment of fact that
1. can be an INNOCENT misrepresentation ii. Induces the contract |
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DEFENSES TO ENFORCEMENT
ILLEGALITY, MISREPRESENTATION, DURESS Duress |
i. Physical or economic
ii. Economic duress most common: elements: 1. bad guy 2. threat to breach a contract 3. vulnerable guy (no reasonable alternative |
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DEFENSES TO ENFORCEMENT
UNCONSCIONABILITY |
a. Not heavily tested
b. Empowers court to refuse to enforce all or part of an agreement c. Unfair surprise or oppressive terms d. Tested at time agreement was made |
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DEFENSES TO ENFORCEMENT
AMBIGUITY |
a. No contract if:
i. Parties use a material term that is open to at least two reasonable interpretations; and ii. Each party attaches different meaning to the term; and iii. Neither party knows or has reason to know the term is open to at least two reasonable interpretations b. If one party knows of the ambiguity, then i. There is a K under the terms as understood by the OTHER party |
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DEFENSES TO ENFORCEMENT
MISTAKE OF FACT EXISTING AT TIME OF CONTRACT a. Mutual Mistake [words in contract] |
i. There will be no contract if:
1. both parties mistaken; and 2. basic assumption of fact; and 3. materially affects the agreed exchange; and 4. not a risk that either party bears ii. Bar Exam fact patterns 1. subject matter mistake a. eg, painting turns out to be fake b. this is material 2. value mistake a. no matter how much difference in price, value never meets materiality requirement |
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DEFENSES TO ENFORCEMENT
MISTAKE OF FACT EXISTING AT TIME OF CONTRACT Unilateral mistake |
i. RULE: no legal significance, UNLESS
ii. Other party takes advantage of obvious mistake by other party |
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Policy: |
final writing of deal is more reliable than things said earlier
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Vocabulary |
i. Integration: written agreement that is final agreement
ii. Partial Integration: writing is final, but not complete iii. Complete Integration: writing is final and not complete iv. Merger clause: “this is the complete and final agreement” v. Parol evidence: 1. words of a party/parties to contract 2. came before integration 3. oral or written vi. Reformation: equitable action to modify written K to include parol evid |
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Triggering facts: |
i. Court finds a final agreement; AND
ii. Oral statement at time of agreement OR earlier oral or written statement by the parties (prior or contemporaneous) NB: parol evidence rule does not apply to POST-CONTRACT statements or writings |
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Four possible fact patterns: Changing |
1. court cannot even consider parol evid where there is attempt to change the written deal the written deal (“reformation”)
2. Mistake in integration exception (scrivener’s error) |
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Four possible fact patterns: Is there a defense enforcement (ie, misrepresentation, fraud, duress) |
here, P will ask for rescission, not reformation
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Four possible fact patterns: Explaining term in the written deal |
1. notwithstanding parol evid, earlier info can be considered to resolve ambiguities in the final agreement term in the written deal
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TERMS OF THE CONTRACT
PAROL EVIDENCE RULE Four possible fact patterns: ADDING to the written deal |
1. only fact pattern where level of integration matters
2. fully integrated: can’t consider parol evid 3. partially integrated OR that the additional terms would ordinarily be in a separate agreement: may consider parol evid |
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TERMS OF THE CONTRACT
CONDUCT AND COURSE OF PERFORMANCE (use in UCC parol evidece case) |
a. Important vocabulary: listed in order of persuasive force; used as gap-fillers
i. Course of performance: same people, same contract (ie, installment K) ii. Course of dealing: same people, different but similar contract iii. Custom and usage: different but similar people, different but similar contract |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) a. Delivery Obligations of a seller of goods |
i. No place of delivery has been agreed upon
ii. Delivery obligations of seller if delivery by a common carrier 1. Shipment contracts a. Seller completes obligation when: [highly tested] i. Gets the goods to a common carrier; ii. Make reasonable arrangements for delivery; and iii. Notifies the buyer 2. a. Seller does not complete delivery obligation until goods arrive where buyer is Destination contracts 3. determining which a. FOB city name i. If city is where seller is, then shipment contract ii. If city where buyer is, then delivery contract b. FAS i. Free alongside a vessel |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT b. Risk of loss [UCC issue] |
i. K is formed but before buyer gets goods
ii. Goods damaged iii. Neither party is at fault |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT b. Risk of loss [UCC issue] iv. Four risk of loss rules listed in order of application (if unsatisfied, go to next rule) |
1. Is there and agreement on loss allocation?
2. A breaching party liable for uninsured loss even if breach is unrelated to the real problem 3. Delivery by common carrier other than seller [often tested] a. Risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligations b. Seller must give Buyer 4. Is seller a merchant? (buyer’s status is irrelevant!!) notice of shipment a. Risk stays on merchant-seller until buyer receives goods b. If not a merchant, then risk shifts to buyer when he “tenders” the goods i. Tender = anytime seller tells buyer where something is and how to get it |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT b. Risk of loss [UCC issue] v. Effect of Breach on ROL |
1. if tender so non-conforming that Buyer had right to reject, then ROL remains on seller until cure or acceptance.
2. if Buyer wrongfully rejects, ROL remains on buyer for a reasonable time |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT c. Miscellaneous terms |
i. Price: a reasonable price at time of delivery
ii. Place of tender: seller’s location iii. Time for performance: within a reasonable time iv. When payment Due: time of delivery |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT d. Warranties of Quality EXPRESS |
i. Express
1. words that promise, describe, state facts OR use of sample or model (non-verbal express warranty) and become basis of the bargain 2. not mere opinion or puffing |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT d. Warranties of Quality Implied warranty of merchantability |
1. added by operation of law. Elements:
a. purchase good from a merchant (special def here: “deals in goods of the kind”) b. Means the warranty is: goods are fit for ordinary purpose |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT d. Warranties of Quality Implied warranty of fitness for a particular purpose |
1. Added by operation of law. Elements:
a. Buyer has a particular purpose; b. Buyer is relying on seller to select suitable goods; and c. Seller has reason to know of purpose and reliance |
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TERMS OF THE CONTRACT
UCC TERMS IN SALES OF GOODS CONTRACTS (“gapfiller” terms) TERMS OF THE CONTRACT Contractual Limitations on Warranty Liability |
i. Disclaimer: eliminates only implied warranties
1. disclaim by “as is” or “with all faults”; or 2. conspicuous written language of disclaimer mentioning merchantability ii. Limitation of remedies 1. possible to limit remedies, even for express warranties 2. general test is unconscionability 3. prima facie unconscionable if breach of warranty on consumer goods causes personal injury |
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PERFORMANCE
XIII. COMMON LAW PERFORMANCE TEST a. Look to terms of contract |
a. Look to terms of contract
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance i. Perfect tender |
1. general std of Art 2
2. seller obligated to deliver what K called for 3. Creates three choices: a. Accept and sue for damages b. Reject everything and sue for damages c. Keep some and reject others and sue for damages |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance ii. Rejection of the goods (always seasonably notify S when rejecting) |
1. Must occur within a reasonable time after delivery or tender and before acceptance
2. Options: a. Reject the whole or any commercial units or retain and sue for damages b. Can also cure, installment contract, acceptance 3. Duty of Care: a. Buyer must take reasonable care of rejected goods and obey reasonable requests from seller for their disposition b. Can resell goods that are perishable or threaten to decline in value (B keeps fee for his trouble) |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance iii. Cure |
1. seller’s reasonable ground to believe the goods would be “ok”
a. NB: normally with info about “prior dealings” 2. time for performance has not yet expired 3. S notifies B of intention to cure and tenders conforming goods |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance iv. Installment Sales Contracts |
1. Def: requires or authorizes delivery in
a. Separate lots to be b. Separately accepted 2. Buyer can reject ONLY where there is a substantial impairment in the installment that cannot be cured (imperfect tender not enough) |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance v. Acceptance of the Goods |
1. if acceptance, can’t reject
2. payment without opportunity for inspection is NOT acceptance 3. NB: implied acceptance if retention after opportunity to inspect and no objection made by buye |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS a. Six concepts of importance Revocation of acceptance of the goods [on MBE for sure] |
1. nonconformity substantially impairs
2. the value of the goods; excusable ignorance of grounds for revocation or reasonable reliance 3. revocation NOTICE within a on seller’s assurance of satisfaction; reasonable time after discovery 4. buyer can of nonconformity; and return the good |
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PERFORMANCE
XIV. SALE OF GOODS PERFORMANCE CONCEPTS b. Payment concepts |
i. By any manner current in ordinary course of business
ii. Seller can demand cash, but iii. If demand in cash, buyer gets additional reasonable time |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
a. Specific Performance/Injunction i. Equitable remedy |
**
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
a. Specific Performance/Injunction ii. Look at equitable maxims: |
1. does P have unclean hands? Laches? Sale to BFP?
2. are money damages adequate? If yes, no equitable remedy |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
a. Specific Performance/Injunction iii. Areas where there is specific performance: |
2. when we have unique goods
a. antique; art; custom-made 3. No specific performance for services contracts a. But may get injunction to bar other similar performance |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
a. Specific Performance/Injunction iv. Areas where there is reclamation |
1. right of seller to get its goods back. Elements:
a. buyer was insolvent when receiving goods b. seller demands return within 10 days of receipt i. NB: “reasonable time” if buyer expressly claims he is solvent c. buyer still has goods at time of demand |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
a. Specific Performance/Injunction Rights of good faith purchaser in entrustment |
1. owner leaves goods with a person who sells goods of that kind
2. seller wrongfully sells goods to 3rd 3. BFP of goods from seller cuts off rights of original owner/entruster party 4. Remedy: owner sues seller for conversion |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
b. Money Damages |
i. Damages vocabulary
1. expectation: 2. reliance: 3. restitution 4. incidental 5. consequential 6. avoidable 7. liquidated 8. limitation of remedies |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
b. Money Damages ii. Measure of Damages |
1. Default RULE: courts generally base damages on the protection of the expectation interest (ie, put P in same economic position as if contract had been performed
2. Alternative RULE) 4: Protection of the reliance interest (ie, put P in same economic position as if the K had never happened 3. Alternative RULE: protection of the restitution interests (ie, put D in the same economic position as if K had ) never happened) |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
b. Money Damages iii. Damage rules for Sales of Goods (mainly expectation based) |
1. Two relevant facts for the answer:
a. Who breached?; and b. Who has the goods? 2. Seller breaches, buyer keeps goods a. FMV if perfect minus FMV value as delivered 3. Seller breaches, seller keeps the goods a. Market prices at time of discovery of the breach minus contract price; OR b. replacement price (covering) minus contract price i. replacement must be reasonable 4. Buyer breaches, buyer has goods a. Contract price 5. Buyer breaches, seller has goods a. Contract price minus market price at time and place of delivery; OR b. Contract price minus resale prices c. In some situations, provable lost profits [aka “lost volume selling”] i. Regular inventory; unlimited supply; damages are lost profits |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
b. Money Damages iv. Additions and Limitations |
1. Incidental
a. Costs incurred in dealing with breach damages 2. Foreseeable consequential a. Damages arising from P’s special circumstances; AND (special/unique to P) damages [essay question] b. Recoverable only if D had reason to know at the time of the contract 3. Subtract avoidable a. No recovery for damages that could have been avoided without undue burden on P damages b. Burden of pleading and proof is on D 4. Certainty a. Proof of damages must be reasonably certain |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
b. Money Damages v. Contract provisions regarding damages: Liquidated damages |
1. if term exists, the key is whether it is VALID:
a. damages were difficult to forecast at time K was made; and b. provision is a reasonable forecast 2. ie, it can’t be so high as to be a punishment a. where there is a “single number” to cover ANY and all situations of breach, always INVALID |
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REMEDIES FOR AN UNEXCUSED NONPERFORMANCE
c. Quasi-contractual relief i. If no valid contract was formed, then perhaps quantum meruit recovery where: |
1. P has conferred a benefit on D by redering services or expending properties;
2. P conferred benefit with reasonable expectation of being compensated for its value by D; 3. D knew or had reason to know of P's expectation; and 4. D would be unjustly enriched if he were allowed to retain benefit without compensating P |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVI. EXCUSE B/C OTHER PARTY’S IMPROPER PERFORMANCE a. CL and material breach rules; three general rules: |
i. Damages can be recovered for any breach;
ii. Only a material breach by one party excuses the other party from performing iii. Whether a breach is material is a FACT question: 1. amount of benefit received by nonbreaching party; 2. adequacy of compensation to injured party; 3. extent of part performance by breaching party; 4. hardship to the breaching party; 5. negligent or willful behavior by breaching party; and 6. likelihood that he breaching party will perform remainder of the contract |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVI. EXCUSE B/C OTHER PARTY’S IMPROPER PERFORMANCE iv. NB: Don’t forget divisible contract exception |
b. UCC and Perfect Tender Rule
i. Less than perfect tender gives buyer option of rejecting goods (which is same as excuse not to perform) |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVII. EXCUSE B/C OF FAILURE OF PERFORMANCE CONDITION a. What is a performance condition? |
i. If condition appears in response to an offer, then this is conditional acceptance (see above)
ii. If condition is inside the agreement, then it is a performance condition. iii. Def performance condition: A mutually agreed upon promise modifier. 1. Words that give it away: if, provided that, so long as, subject to, in the event that, unless, when, until, and on condition that. |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVII. EXCUSE B/C OF FAILURE OF PERFORMANCE CONDITION b. What is the standard for satisfying an express condition? |
i. General RULE: strict compliance with performance conditions
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVII. EXCUSE B/C OF FAILURE OF PERFORMANCE CONDITION c. How can an express condition be excused? |
i. Identify person who benefits from or is protected by the condition
ii. The protected person has legal power to give up the protection |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVIII. EXCUSE OF PERFORMANCE BY REASON OF OTHER PARTY’S ANTICIPATORY REPUDIATION OR INABILITY TO PERFORM a. Anticipatory Repudiation |
i. An unambiguous statement that
1. the repudiating party will not perform 2. made prior to the time that performance was due ii. Therefore, nonperformance of the OTHER party is excused by the anticipatory repudiation iii. Anticipatory repudiation 1. gives rise to immediate claim for damages, UNLESS performance complete, then must wait until contract payment date |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVIII. EXCUSE OF PERFORMANCE BY REASON OF OTHER PARTY’S ANTICIPATORY REPUDIATION OR INABILITY TO PERFORM a. Anticipatory Repudiation iv. Retraction/Reversal |
1. of AR is possible, so long as
a. no material change 2. thus, duty to perform is reimposed, but may be in position by the other party a. delayed until adequate assurance |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVIII. EXCUSE OF PERFORMANCE BY REASON OF OTHER PARTY’S ANTICIPATORY REPUDIATION OR INABILITY TO PERFORM b. Waiver or Estoppel |
i. A party may waive a condition by not insisting on it
ii. Waiver may be retracted at any time unless: 1. the other party relies on the waiver and 2. changed position to her detriment |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVIII. EXCUSE OF PERFORMANCE BY REASON OF OTHER PARTY’S ANTICIPATORY REPUDIATION OR INABILITY TO PERFORM c. Inability to Perform |
Usually requires that other side’s performance is unique and cannot be replaced by $$ (eg, a barter transaction for artwork)
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XVIII. EXCUSE OF PERFORMANCE BY REASON OF OTHER PARTY’S ANTICIPATORY REPUDIATION OR INABILITY TO PERFORM d. UCC right to demand assurances: |
i. If "reasonable grounds for insecurity
ii. The other party may in writing demand adequate assurance of due performance; and " arise; iii. May suspend his own performance for 30 days |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XIX. EXCUSE BY REASON OF A LATER CONTRACT a. Rescission (cancellation) |
i. Is performance still remaining from each of the contract parties?
1. yes, it is executory, so valid 2. no, if one party has completely performed, then cannot rescind |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XIX. EXCUSE BY REASON OF A LATER CONTRACT b. Accord and Satisfaction (“if” and “then”) |
i. Definitions:
1. Accord: An agreement by the parties to an existing obligation to accept a different performance6 2. Satisfaction: the different performance is completed in satisfaction of the existing obligation ii. Effect of Accord and Satisfaction 1. if satisfaction fulfilled, then parties' former performance is excused 2. if neither original nor satisfaction performance accomplished, then can sue on either contract, but not both |
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EXCUSE OF NONPERFORMANCE OF CONTRACT BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XIX. EXCUSE BY REASON OF A LATER CONTRACT c. Modification/Substituted Agreement |
i. Agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation
ii. Once modification made, then old obligation disappears (unlike A & S) iii. Know the difference just in case |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XIX. EXCUSE BY REASON OF A LATER CONTRACT d. Novation |
i. Agreement between BOTH parties to an existing contract to
ii. Substitute a new party 1. same performance, different party iii. Effect 1. Excuses the contracted for performance of the party who is substituted for or replaced iv. Vs. Delegation 1. no need for both parties to agree, but 2. does not excuse performance of original party |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT a. Bar exam: likely to get question where something bad happens, but is NOT an excuse to performance Elements |
b. Elements:
i. Something happens after contract, but before performance; ii. It was unforeseen (at time contract made); and iii. Makes performance impossible, commercially impracticable, or frustrates the purpose of the performance |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT c. Impossibility |
i. Objective: unforeseeable and supervening event rendering performance impossible for anyone
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT d. Impracticable |
i. Subjective
ii. Only be done with extreme and unreasonably difficulty and expense |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT e. Frustration of purpose |
i. Supervening event that was not reasonably foreseeable which completely or nearly completely destroys the purpose of the contract as understood by BOTH parties
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT f. Types: i. Damage or destruction of subject matter AFTER contract formation |
1. Sale of goods: combine with risk of loss rules!
a. Risk of loss on seller: i. If goods unique, then excused ii. If goods replaceable, then not excused b. Risk of loss passes to buyer i. Nonperformance NEVER excused |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT f. Types: ii. Death AFTER contract formation |
1. General RULE: Death does not make contract obligations disappear
2. Exception: one party is a “special” person a. Ie, if impossible to replace performance by money or another person (eg, famous painter), then performance is excused |
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BECAUSE SOMETHING HAPPENED AFTER CONTRACT WAS MADE
XX. EXCUSE OF PERFORMANCE BY REASON OF A LATER, UNFORESEEN EVENT f. Types: iii. Subsequent law or regulation |
1. later law makes performance
a. excused by impossibility of the contract illegal 2. later law makes mutually understood purpose a. excuse is by frustration of purpose |
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THIRD PARTY PROBLEMS
XXI. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE TPB: a. Five elements need |
i. Identify a problem as TPB problem
ii. Use vocabulary of TPB law iii. Deal with efforts to cancel or modify a TPB contract iv. Figure out who can sue whom v. Assert any available defenses |
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THIRD PARTY PROBLEMS
XXI. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE TPB: b. Vocabulary: Master This! |
i. Third-party beneficiary
ii. Promisor: person making promise that benefits the third party and who renders performance to Beneficiary iii. Promisee: person who obtains the promise that benefits the third party iv. Intended/incidental Beneficiary 1. unlikely on bar; highly fact specific 2. if TPB named, then intended and has K rights 3. if TPB not named, then incidental and NO K rights v. intended donee beneficiary or creditor beneficiary 1. donee: majority 2. creditor: if money owed prior to formation of contractor |
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THIRD PARTY PROBLEMS
XXI. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE TPB: c. Efforts to cancel or modify |
i. Does third party know of, has relied on, or assented as requested
ii. If so, then rights have vested and K cannot be 1. cancelled or modified without TPB’s consent UNLESS 2. K provides otherwise |
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THIRD PARTY PROBLEMS
XXI. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE TPB: d. Who can sue whom? |
i. Beneficiary can sue promisor
ii. Promisee can sue promisor 1. but, no recovery by TPB if promisee recovers iii. Donee beneficiary cannot sue promisee, but creditor beneficiary can sue promisee on pre-existing debt |
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THIRD PARTY PROBLEMS
XXI. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE TPB: e. Defenses |
i. If TPB sues promisor, promisor can assert any defenses that he would have if had been sued by promisee, if Promisor has not made an ABSOLUTE promise to pay (CMR, p. 18)
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THIRD PARTY PROBLEMS
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS a. What is an assignment? |
i. Transfer of rights under a contract in two steps: [TPB: one step]
1. contract between only two parties 2. one of the parties’ later transfer of rights under that contract to a third party |
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THIRD PARTY PROBLEMS
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS b. Vocabulary |
i. Assignor: party to K who later transfers rights under K to another
ii. Assignee: not a party to original K; can enforce K due to assignment iii. Obligor: other party to original contract |
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THIRD PARTY PROBLEMS
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS c. Limitations on Assignment |
i. Contract provisions
1. prohibition: “rights hereunder not assignable a. RULE: prohibition takes away the right to assign, but not power to assign. i. Therefore, an assignment would be a breach, but assignee who does not know of prohibition can still enforce K 2. invalidation: “all assignment of rights under this K are void” a. RULE: takes away BOTH the right and the power to assign. i. Therefore, breach by assignor and no rights in assignee |
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TPP
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS c. Limitations on Assignment ii. Common Law: common on MBE |
1. Even if K says nothing about assignments, CL
a. Prohibits assignment that substantially changes the b. Examples: duties of the obligor i. Assignment of right to payment [permitted] ii. Assignment of right to contract performance other than right to payment [often prohibited] |
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TPP
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS c. Limitations on Assignment iii. UCC |
1. unless indicated to contrary, a prohibition on assignment means only bar to delegation to assignee of assignor’s performance
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TPP
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS d. Requirements for Assignment |
i. General RULE: consideration is NOT required
ii. Watch for present assignment, not a promise to assign 1. if promise, then we need consideration iii. distinguish existing but conditional rights from future rights 1. existing may be assigned 2. future, non-existent rights, CANNOT be assigned |
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TPP
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS e. Right of Assignee |
i. Assignee can sue obligor
ii. Obligor has same defenses against assignee as it would have against assignor iii. Payment by obligor to assignor is effective until obligor knows of the assignment 1. similarly, modification agreements between obligor and assignor are effective if the obligor did not know of the assignment iv. Warranties of assignor IN AN ASSIGNMENT FOR VALUE 1. exception to notion that no consideration needed 2. assignor warrants that he will not do anything to impair the value of the assignment |
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TPP
XXII. PERSON TRYING TO ENFORCE A CONTRACT SHE DID NOT MAKE: ASSIGNMENT OF RIGHTS f. Multiple Assignmets |
i. Gratuitous assignments
1. General RULE: last assignee in time wins 2. Exception: detrimental reliance or writing indicating ownership ii. Assignments for consideration 1. General RULE: first assignee for consideration wins 2. Limted Exception: a. Later assignee does not know of earlier assignment and is first assignee to receive payment/judgment/novation/indicia of ownership. |
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TPP
XXIII. DISPUTES ARISING FROM A PERSON’S PERFORMING A CONTRACT SHE DID NOT MAKE: DELEGATION OF DUTIES a. What is delegation? |
i. Party to a K transfers work under the K to a 3rd party
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TPP
XXIII. DISPUTES ARISING FROM A PERSON’S PERFORMING A CONTRACT SHE DID NOT MAKE: DELEGATION OF DUTIES b. Relationship of assignment and delegation c. Which duties are delegable? |
i. General RULE: all duties are delegable, except:
1. delegations prohibited by K 2. assignments prohibited by K 3. changes the obligee's expectancy 4. K calls for very special skills 5. person to perform has very special reputation |
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TPP
XXIII. DISPUTES ARISING FROM A PERSON’S PERFORMING A CONTRACT SHE DID NOT MAKE: DELEGATION OF DUTIES d. What if third party does not perform? |
i. Where mere duty is delegated, delegatee cannot recover from obligee if obligee refused to pay
ii. Delegating party always remains liable iii. Delegatee liable only if she receives consideration from delegating party 1. NB: a delegation for consideration creates a TPB contract |
