E6 // Fl(K) F12

Front 1

CONTRACT:

Back 1

A contract is a promise that is enforceable by law. It usually has two basis elemnts: MUTUAL ASSENT (meaning each party must intend to enter into the K and must agree to do so on mutually acceptable terms) and CONSIDERATION (bargined-for-exchange).

FORMATION: In order to have an enforceable K, there must be (1) and OFFER; (2) ACCEPTANCE; and (3) CONSIDERATION; and (4) NO DEFENSES.

Front 2

What will constitute a valid OFFER? And what are the (3) ELEMENTS of an offer?

Back 2

OFFER: A valid offer must create a reasonable expectation in the offeree that the offeror is willing to enter into a K on the basis of the offered terms.

ELEMENTS of an OFFER:

(1) IDENTIFICATION of the OFFEREE;
(2) Definiteness of the SUBJECT matter (Must contain the ESSENTIAL K TERMS)
(3) COMMUNICATION of the offer to the offeree

Front 3

K FORMATION - OFFER & ACCEPTANCE

General Rules for Effective Offers & Acceptance:

Back 3

General Rules for Effective Offers & Acceptance:

(1) Offer are effective when RECEIVED.

(2) Rejects are effective when RECEIVED.

(3) Revocations are effective when RECIEVED.

Under the MAILBOX RULE:

(a) An acceptance is generally effective when SENT

(b) When an offeree sends a REJECTION and THEN AN ACCEPTANCE, the Mailbox Rules does NOT apply, and the 1st communication to be received is effective.

(c) When an oferee sends an ACCEPTANCE and THEN A REJECTION, the Mailbox Rule generally applies, UNLESS the offeror receives the rejection 1st and CHANGES his POSITION IN RELIANCE on it.

Front 4

OFFERS: REVOCABILITY

Back 4

Generally, an offer is revocable. However, an offer will become IRREVOCABLE if:

(1) OPTION K: Consideration was paid to keep the offer open for a certain period of time. (Must be timely exercised or the option lapses)

(2) FIRM OFFER: Offeror was a Merchant who signs a written offer giving assurances that it would be held open for a period of time not to exceed 3 months. (No consideration required)

(3) DETRIMENTAL RELIANCE: Offeror could reasonably expect that the offeree would rely on the offer, then the offer will be irrevocable for a reasonable period of time.

(4) UNILATERAL K: The offer was for a unilateral K in which performance has begun (the offeree has a reasonable time in which to perfom.

Front 5

OFFERS - COMMON LAW

MATERIAL TERMS

Back 5

Common Law Essential K Terms:
(a) Parties
(b) Subject Matter
(c) PRICE

Under the common law, real estate contracts require price, parties and legal description of the land.

Front 6

OFFERS - UCC

MATERIAL TERMS

Back 6

UCC Material K Terms:

QUANTITY

UCC has no price requirement. The offer is an offer if the parties so intend. Quality is the only required K term - UCC "gap fills" will supply the rest if not agreed upon by the parties.

Front 7

OPTION K
(Common Law)

Back 7

OPTION K (Common Law)

(1) Offeror promises to keep offer open for a specific period of time (if not time stated, the offer will be held open for a "reasonable period of time")

(2) Offeree pays consideration - In FLORIDA, an option K requires "SUBSTANTIAL" CONSIDERATION

(3) The option must be timely and properly exercised

(4) Options are assignable

Front 8

UCC MERCHANT'S FIRM OFFER RULE

Back 8

UCC Merchant's Firm Offer Rule:

(a) Offeror is a MERCHANT;
(b) Offer to buy or sale goods;
(c) SIGNED, WRITTEN promise to keep the offer open;
(d) NO consideration required;
(e) Offer will be HELD OPEN UP TO 3 MONTHS.

Front 9

CONSIDERATION

FLORIDA Rule

Back 9

CONSIDERATION = Bargained-for exchange. In FLORIDA, consideration is present if there is EITHER a BENEFIT to one party OR a DETRIMENT to another. (Minority View)

Note: Option Ks in FL require "substantial" consideration. (More than a mere peppercorn - A peppercorn will not suffice for an option k in Florida.)

Front 10

SUBSTITUTES FOR CONSIDERATION

DETRIMENTAL RELIANCE / PROMISSORY ESTOPPLE

Back 10

Promissory Estoppel - Elements:
(1) Promise is made by one party to another;
(2) Its the type of promise that the promissor should reasonably expect to induce action of a definite and substantial nature on the part of the promisee.
(3) Promisee did in-fact reasonably rely on the promise to his detriment.
(4) Injustice would result if the promise was not enforced.

Front 11

DEFENSES TO FORMATION:

Defense of Lack of Mutual Assent

Back 11

The defense of Lack of Mutual Assent may be based upon:
(a) Mutual Mistake
(b) Latent Ambiguities
(c) Misrepresentation/Fraud

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DEFENSES TO FORMATION: Defense of Lack of Mutual Assent

MUTUAL MISTAKE

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Defense of Lack of Mutual Assent based upon MUTUAL MISTAKE:

(1) BOTH parties are mistaken;
-Mistaken as to what it is = NO K
-Mistaken as to what it worth = K

(2) Mistake concerns a basic assumption on which the K was made;

(3) Mistake has a material adverse effect on the agreed-upon exchange;

(4) The adversely affected party did not assume the risk of the mistake.


[NOTE: UNILATERAL Mistake - G/R: Unilateral mistakes are generally insufficient to make a K unenforceable. The K will be enforced unless (i) K is unconscionable; or (ii) non-mistaken party knew or should have known of the mistake.]

Front 13

DEFENSES TO FORMATION: Defense of Lack of Mutual Assent

LATENT AMBIGUITIES

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Defense of Lack of Mutual Assent based upon LATENT AMBIGUITIES:

(1) Material term open to at least 2 reasonable interpretation;
(2) Each party attached a different meaning to the term.
(3) Neither party knew of had reason to know that the term is open to 2 interpretations.

Front 14

DEFENSES TO FORMATION: Defense of Lack of Mutual Assent

MISREPRESENTATION / FRAUD

Back 14

Defense of Lack of Mutual Assent based upon MISREPRESENTATION / FRAUD

(1) False Assertion of fact OR
(2) Concealment of facts
(3) Effect:
(a) FRAUDULENT OR MATERIAL misrepresentation of TERM(S) is VOIDABLE;
(b) Misrepresentation of NATURE of the K is VOID.

Front 15

DEFENSES TO FORMATION:

LACK OF CONSIDERATION

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Preexisting Contractual or Statutory Duties

Common Law General Rule:

(a) Doing what you were already required to do is not consideration for a promise to do it

(E.g., A agrees with B to perform 5 songs for $5000 at B’s event. A then says he won’t perform unless he’s paid $6000. B promises to pay $6000, but after the gig, pays the original price. The promise to pay the additional $1000 is not enforceable because no new detriment to A.)

Exceptions to Common Law General Rule:

(a) Addition to or Change in Performance Exception

(E.g., A agrees with B to perform 5 songs for $5000 at B’s event. A then says he won’t perform unless he’s paid $6000. B promises to pay $6000 if he does 5 more songs. The promise to pay the additional $1000 is enforceable because new detriment. (5 more songs))

(b) Unforeseen Difficulty so Severe Excuses Performance

(E.g., A agrees with B to perform 5 songs for $5000 at B’s event. Sound equipment doesn’t work right. B promises to pay $6000 if A puts on the show. The promise to pay the additional $1000 is enforceable because new detriment (playing with inoperative sound))

(c) Third Party Promise to Pay for Preexisting Obligations or Duties are Enforceable

UCC Rule:

(a) "Good faith test" for changes in existing sale of goods contract

(E.g., A agrees to sell toys to B for $1000. Before delivery, A says he can’t do it for less than $1500 because of a shortage. B agrees to pay the $500. B’s promise is enforceable.)

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Defenses to Formation:

PUBLIC POLICY Defense: ILLEGALITY OF THE SUBJECT MATTER

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PUBLIC POLICY Defense: ILLEGALITY OF THE SUBJECT MATTER

(1) Illegal Subject Matter: agreement is void

(2) Legal Subject matter but illegal purpose: The agreement is enforceable by the person who did not know of the illegal purpose

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Defenses to Formation:

INCAPACITY DEFENSES: (5)

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(1) Age (Minority)
(2) Mental Incapacity
(3) Intoxication
(4) Coercion or Duress
(5) Fraud in the Inducement

Front 18

Defenses to formation based on Lack of CAPACITY DEFENSE:

Age (Minority); Mental Incapacity; Intoxication

Back 18

Defense to formation of K based on Lack of Capacity:

Who can claim this defense?
(1) Infants
(2) Mentally incompetent
(3) Intoxicated unless other person knows


Consequences:
(1) Party without capacity can avoid or disaffirm the contract
(2) Party without capacity affirms by retaining benefit after gaining capacity

Liability for Necessaries:
(1) Food, clothing, medical care, shelter
(2) Liability based on quasi-contract law

Front 19

Defenses to Formation:

INCAPACITY DEFENSES

Coercion or Duress

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Defense to formation of K based on Duress:

(1) Improper threat to breach unless new deal made and
(2) Other party has no reasonable alternative source of supply

Front 20

Defenses to Enforcement:

STATUTE OF FRAUDS DEFENSE:

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To be enforceable, certain types of agreements (including a promise creating an interest in land, and a promise that cannot be performed in 1 year) MUST be EVIDENCED by a WRITING containing every ESSENTIAL TERM of the oral K that it supports (identity of the party sought to be charged and the subject matter, the terms and conditions of the agreement, and a recital of consideration) and the SIGNATURE of the party sought to be charged.

The party being charged with the breach of the K may raise the lack of a sufficient writing as an affirmative defense, which is otherwise waived.

Front 21

Defenses to Formation:

STATUTE OF FRAUDS [FL]

Fraud in the Inducement

Back 21

STATUTE OF FRAUDS [FL]

Front 22

STATUTE OF FRAUDS

WRITINGS that Satisfy the SOF:

Back 22

STATUTE OF FRAUDS

WRITINGS that Satisfy the SOF:

Common Law (Land Ks)
(i) All material terms: who and what?
1) ID Parties;
2) Price;
3) Legal Description of the land;
(ii) Signed by the party to be charged.
(iii) FL requires 2 subscribing witness.


UCC (Sale of Goods $500 or More)
(i) Quantity: How many?
(ii) Signed by the party to be charged
(iii) Exception to Signature Requirement:
1. Merchants and
2. Party claiming no contract receives a writing with the quantity term
3. Fails to respond within 10 days

Front 23

Defenses to Enforcement:

STATUTE OF FRAUDS

Back 23

STATUTE OF FRAUDS

Satisfying Statute of Frauds by PERFORMANCE:

Service Contracts
(i) Full performance satisfies the statute of frauds
(ii) Part Performance does not satisfy statute.

UCC Sale of Goods
(i) Ordinary Goods
1. Delivered Goods: part performance satisfies the state
2. Undelivered goods: part performance does not satisfy
(ii) Specially Manufactured Goods
1. Custom made goods and
2. Substantial beginning

Real Estate Transfer Contract
(i) Full cash payment does not satisfy the statute of frauds
(ii) Part performance and two of the following satisfies:
1. Payment
2. Possession
3. Improvements

Front 24

STATUTE OF FRAUDS

Back 24

STATUTE OF FRAUDS

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STATUTE OF FRAUDS

Back 25

STATUTE OF FRAUDS

Front 26

Defenses to Enforcement:

UNCONSCIONABILITY

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Unconscionability:

(i) Unfair surprise and oppressive terms;

(ii) At the time agreement made;

(iii) Determined by the court.

Front 27

Contract Interpretation and Enforcement:

Parol Evidence Rule

Back 27

Contract Interpretation and Enforcement:
Parol Evidence Rule

Under the majority view, the judge must determine, as a question fact, whether the agreement was intended by the parties to be the final and complete integration of all the agreements between them.

If it was, any other expressions made prior to or contemporaneously with the writing are inadmissible to vary the terms of the writing, and contradictory or supplemental evidence would be excluded.

However, if it was only determined to be a partial integration, the writing cannot be contradicted, but may be supplemented by evidence of consistent additional terms.

The test is whether similarly situated parties would normally have included the extrinsic terms in the writing.

Front 28

Contract Interpretation and Enforcement:

Parol Evidence Rule (Fact Patterns)

Back 28

- Integration: final agreement
- Partial Integration: written and final, but incomplete
- Complete Integration: written, final, and complete


Triggering Facts for Parol Evidence Rule = Written contract that court finds is the final agreement and
(1) Oral statement made at the time the contract was signed or
(2) Earlier oral or written statements by the parties to the contract


Fact Patterns for Parol Evidence Rule

(a) Changing the Written Deal
(i) Partial or complete integration
(ii) General Rule: can’t change the written deal based on earlier agreements that are inconsistent with the terms of the contract
(iii) Exception: clerical errors

(b) Establishing a Defense to the Enforcement of the Written Deal
(i) Partial or complete
(ii) Earlier words of parties to determine defenses like misrepresentation, fraud, duress

(c)Explanatory Terms
(i) Despite the parol evidence rule,
(ii) Parol can be considered to resolve ambiguities in the written contract

(d) Adding to the Written Deal:
(i) Partial Integration: agreements with consistent additional terms admissible
(ii) Complete Integration: agreements with terms that would naturally and normally be in a separate agreement are admissible


Conduct & Course of Performance (In order of Importance)
(i) Course of Performance: Same Parties, Same Contract
(ii) Course of Dealing: Same Parties, different but similar contract
(iii) Custom & Usage: Different but similar people, different but similar contract

Front 29

Contract Interpretation and Enforcement:

Modification

Back 29

Modification of a K discharges the terms that are subject to the modification, but not the entire K.

Such partial discharge requires mutual assent to the modification and valuable consideration, but the courts usually consider that the parties have given consideration by limiting their right to enforce the original K as is, unless the modification operates to the benefit of only one party.

Front 30

Contract Interpretation and Enforcement:

Breach of Contract

Back 30

To establish a breach, P must prove that D had an absolute duty to perform that was not discharged, and that D failed to perform as promised.

Front 31

Breach

Back 31

To establish breach of K, a party must prove that the other party is under a PRESENT DUTY TO PERFORM and that the DUTY HAS NEITHER BEEN PERFORMED OR DISCHARGED.

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Breach of K: Material Breach

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Material Breach

To determine whether a breach is material. courts look at whether the non-breaching party has received the SUBSTANTIAL BENEFIT OF THE BARGAIN.
- Specifically, the courts will look at these factors:
(1) The AMOUNT of the benefit received;
(2) The ADEQUACY of DAMAGES;
(3) The extent of PART PERFORMANCE (or the extent to which performance has been completed or preparation);
(4) HARDSHIP that might occur if the K was terminated;
(5) Any NEGLECT or WILLFUL BEHAVIOR (e.g., repudiation or refusal to perform constitutes a material breach.);
(6) Likelihood of FULL PERFORMANCE (or the completion of performance).

-If the breach is MATERIAL, the nonbreaching party WILL NOT HAVE TO PAY THE K PRICE and WILL BE ENTITLED TO DAMAGES, less the value (if any) of the goods/services already provided by the breaching party.

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Breach of K: Minor Breach

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Minor Breach

In the breach is minor, the non-breaching party must:
(1) Pay the breaching party the K price, less the cost of repairs or reconstruction;
(2) Pay the breaching party the K price, less the diminution in value as a result of the breaching party's minor breach.

-Which remedy is used depends largely on the extent of economic waste associated with repair and/or reconstruction.

-In either circumstance, the court will attempt to place the nonbreaching (wronged) party in the position he would have been in had the K been performed as agreed.

Front 34

UCC Breach of Express Warranty

Back 34

UCC Breach of Express Warranty

Under the UCC, if a Seller breaches a warranty by delivering goods that do not conform to the parties' K, the Buyer may seek damages measured by the difference between the value of the goods as delivered and the value of the goods if they were as warranted.

Front 35

Anticipatory Repudiation

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[AR applies where there is a bilateral K with executory duties on both sides.]

Anticipatory Repudiation occurs when a promisor, PRIOR TO THE TIME SET FOR PERFORMANCE, indicates in unequivical terms that he WILL NOT PERFORM when the time comes.

The non-repudiating party has 4 alternatives:

1) Treat the AR as a total repudiation and sue immediately;
2) Suspend performance and wait until the performance date to sue;
3) treat the repudiation as an offer to rescind and treat the K as discharged; or
4) Ignore the repudiation and urge the promisor to perform.

Front 36

Excuses for Failure to Perform:

IMPOSSIBILITY

Back 36

(1) Objective Test
(2) No just that the party could not perform, but that NO ONE COULD PERFORM under there terms of the K.

Impossibility excuses a party's performance. It is measured by an objective standard (nobody could perform according to the terms of the contract). The impossibility must arise AFTER the contract was entered into.

Impossibility: (4) Examples:
(1) Death or physical incapacity of a person necessary to perform the contract;
(2) A Subsequently enacted law rendering the contract illegal;
(3) Subsequent destruction of the contract's subject matter or means of performance IF the promisor wasnt at fault and it is truly impossible to fulfill the terms of the contract at ANY price.
(4) Destruction of a Building doesnt relieve a builder of the duty to build because he MAY rebuild (i.e., its not objectively impossible).

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Excuses for Failure to Perform:

FAILURE OF A CONDITION

Back 37

Conditions - Generally

A condition is an event other than the passage of time that must occur or fail to occur, unless excused, before perfomance comes due (a condition precedent) or that will release a party from an existing duty to perform (a condition subsequent).

In determining if a provision is a condition, FL courts will look at the subsequent conduct of the parties.

Failure to meet a condition by 1 party will excuse the other party's duty to perform.

Condition PRECEDENT: The condition has to happen before the performance.

Condition SUBSEQUENT: The condition must happen after the performance

Concurrent Condition: The condition must happen at the same time as performance.

Front 38

Conditions - Waiver

Back 38

Conditions - Waiver

A party to whom a duty is owed may waive the duty||one having the benefit of a condition may indicate by words or by conduct that she wont insist on it.

The courts, in certain circumstances, will enforce this expression on the basis that the party has "waived" the condition or is "estopped" from asserting it.

Front 39

Excuses for Failure to Perform:

Impracticability (UCC)

Back 39

The UCC excuses performance on a showing of something less than impossibility.

Impracticability requires that a party encounter extreme and unreasonable difficulty or expense that wasnt anticipated.

A mere change in the difficulty or expense due to normal risks that could have been anticipated (increase in price of raw materials) is NOT enough.

Front 40

Excuses for Failure to Perform:

Frustration of Purpose

Back 40

Frustration of Purpose can also excuse a party's performance IF:
(1) A supervening event;
(2) That was not reasonably foreseeable at the time of entering into the contract;
(3) Completely or almost completely destroys the purpose of the contract; AND
(4) the purpose was understood by BOTH parties.

Note: Frustration is not an argument that performance is impossible, it is an argument that it is pointless.

Front 41

Excuses for Failure to Perform:

Discharge by Substituted Contract

Back 41

Discharge by Substituted Contract - Generally: Discharge by substituted contract occurs where the parties to a contract enter into a second contract that immediately revokes the 1st contract.

- The 2nd contract may revoke the 1st either expressly or impliedly.

- The 1st contract will be impliedly revoked if the second contract's terms are inconcistent with the terms of the 1st contract


Discharge by Substituted Contract - Determination: Whether a 2nd contract will constitute a substituted contract depends on whether the parties intend an immediate discharge or a discharge only after performance of the 2nd contract.

- If an immediate discharge is intended, there is a substituted contract.

Front 42

Excuses for Failure to Perform:

Discharge by Divisibility

Back 42

Discharge by Divisibility - Generally:

Discharge by divisibility is designed to achieve equity between the parties, avoiding unnecessary hardship to one party or the other.

A contract is divisible IF:

(1) The performance of each party is divided into 2+ parts under the contract;

(2) The number of parts due from each party is the same; AND

(3) The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party (each performance is the quid pro quo of the other).

Front 43

Breach - UCC Perfect Tender Doctrine:

Buyer's Rights

Back 43

Breach - UCC Perfect Tender Doctrine: Buyer's Rights Under the UCC, the buyer is said to have the right to a perfect tender and can reject goods for any nonconformity - even a minor one.

Front 44

Breach - UCC Perfect Tender Doctrine:

Seller's Rights

Back 44

Breach - UCC Perfect Tender Doctrine: Seller's Rights

The seller has a right to cure IF:

(1) There is time left under the contract to perform and the seller gives notice of the intent to cure and does cure;

(2) After the time for performance has passed if the seller had grounds to believe that the nonconforming goods would be acceptable but the buyer rejects.

Front 45

Damages - Things to Consider: (8)

Back 45

(1) Risk of Loss
(2) Expectation Damages
(3) Incidental Damages
(4) Consequential Damages
(5) Specific Performance
(6) Punitive Damages
(7) Unjust Enrichment
(8) Duty to Mitigate

Front 46

Damages - Risk of Loss

Back 46

The K may specify which party bears the risk of loss (in an FOB contact, risk passes when the goods reach the specified destination).

IF NOT SPECIFIED:

Shipment Cases - If the goods are being shipped, risk passes to the buyer when the seller turns the goods over to a common carrier unless the contract specifically provides otherwise (in an FOB contract, the seller has the risk until the goods reach the FOB destination).

Nonshipment Cases: If the goods aren't shipped, if the seller is a merchant, risk passes on delivery to the buyer...if the seller is a non-merchant, risk passes on tender of the goods.

Front 47

Damages - Expectation Damages

Back 47

Expectation Damages: Gives a party the benefit of her bargain...they attempt to put the non-breaching party into the position she would have been in had the contract been performed.

MEASURE: A seller's normal damages are for the difference between:
(1) K price -- market price, or
(2) K price -- resale price

If the seller has an unlimited supply of goods and has lost volume in sales by the buyer's breach, the seller can recover lost profits.

Front 48

Damages - Incidental Damages

Back 48

The expenses that a nonbreaching party incurs in responding to a breach (the costs of finding substitute performance).

Front 49

Damages - Consequential Damages

Back 49

Any damages that are a reasonably foreseeable result of breach.

Recoverable only if they are:
(1) Reasonably foreseeable by the parties when the K was made;
(2) Unavoidable through reasonable efforts; AND
(3) Provable with reasonable certainty;

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Damages - Specific Performance

Back 50

Can be awarded in equity if the K is for something rare or unique (land, one-of-a-kind goods, or goods in short supply).

Cannot be granted to force someone to perform under a personal service contract, because that would be tantamount to slavery.

The breaching party CAN be enjoined from performing services for someone else during the term of the contract.

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Damages - Punitive Damages

Back 51

Generally are NOT awarded in contractual situations.

Front 52

Damages - Unjust Enrichment

Back 52

- If there is no contract; OR
- If the contract fails, consider awarding quasi-contractual relief.

A Quasi-K remedy imposed by courts to disgorge unjust enrichment.

Usually measured by the gain to the D; But it can be measured by the loss to the P if the normal measure wouldn't provide an appripriate remedy.

The damages can exceed what could have been recovered in a contract action.

Front 53

Damages - Duty to Mitigate

Back 53

The nonbreaching party has a duty to mitigate damages, generally by seeking substitute performance (similar goods, similar job, etc).

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Damages - Duty to Mitigate - Employment Situation

Back 54

In an employment situation, an employee who is discharged in breach of contract has a duty to mitigate damages by making reasonable efforts to obtain a position of the same rank and type of work in the same locale.

The burden is on the employer to show that such positions were available.

Front 55

Warranties - UCC Generally (3)

Back 55

(1) Implied warranty of merchantability
(2) Implied warranty of fitness for a particular purpose
(3) Express warranty

Front 56

UCC Warranties - Implied Warranty of Merchantability

Back 56

In every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantible.

They key question is: Are the goods fit for the ordinary purpose for which such goods are used?

The implied warranty of merchantability can be disclaimed through the use of a conspicuous disclaimer mentioning "merchantability" if in writing.

Front 57

UCC Warranties - Implied Warranty of Fitness for Particular Purpose

Back 57

This implied warranty arises when any selller, merchant or not, has reaosn to know the particualr purpose for which the goods are to be used and that the buyer is relying on teh seller's skill and judgment to select suitable goods

- This implied warranty can be disclaimed through a conspicuous written disclaimer

- No specific words are necessary

Front 58

UCC Warranties - Express Warranty

Back 58

Arise by any affirmation of fact, promise, descrition, model or sample which is part of the basis of the bargain (the buyer could have relied on it).

They are extremely difficult (but not impossible) to disclaim since the language limiting express warranties must be read consistently with the waranty and to the extent they are inconsistent, the disclaimer isn't given effect.

Front 59

Third-Party Rights - Who is a Third Party Beneficiary?

Back 59

A 3rd party beneficiary is a person who isn't a party to the bargain and who gives no consideration to support it, but who will benefit by a contract's performance.

Front 60

Third-Party Rights - Types of Third Party Beneficiaries (3)

Back 60

Third-Party Rights - Types of Third Party Beneficiaries (3)

(1) Creditor beneficiary - A person is a creditor beneficiary if the promissee's primary intent is to discharge an obligation owed to the fiduciary.

(2) Donee beneficiary - A person is a donee beneficiary if the promisee's primary intent was to make a gift to the beneficiary

(3) Incidental beneficiary - Other beneficiaries (persons who benefit but whom the donee didn't specifically intend to benefit) are incidental beneficiaries.

[Ex: If a promisee provides that the promisor must use American Standard brand plumbing fixtures, the American Standard company benefits from the contract, but it is doubtful that that was the parties' intent.]

Front 61

Third-Party Rights - Rights of Third Party Beneficiaries

Back 61

Third-Party Rights - Rights of Third Party Beneficiaries:

Generally, a creditor or donee beneficiary (but not an incidental beneficiary) can enforce the K against the promisor directly, but is subject to any defense that the primisor could have raised against the promissee.

Front 62

Third-Party Rights - Changing the Contract

Back 62

The promisor and promissee are free to change the terms of the contract until the 3rd party beneficiary's rights vest.

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Third-Party Rights - Vesting

Back 63

RIghts of a Creditor beneficiary or Donee beneficiary will vest when the beneficiary:

(1) ASSENTS to the K;

(2) SUES to enforce the K; or

(3) Materially CHANGES POSITION in justifiable RELIANCE on the K.

Front 64

Third-Party Rights - Enforcement of Contract

Back 64

If the promissee doesn't perform, a 3P Creditor beneficiary generally can sue the promissee on the obligation that was supposed to have been discharged by the promisor's performance; But a 3P Donee beneficiary generally cannot sue the promissee (because as between the promisee and the 3rd-party beneficiary, all that exists is a failed gift).

Front 65

Assignment of Rights/Declaration of Duties - Generally

Back 65

G/R: Any contractual right may be assigned and any contractual duty may be delegated, UNLESS the duty involves personal judgment or skill.

Front 66

Third Party Beneficiary Quick Rules

Back 66

Third Party Beneficiary Quick Rules:

Did the Right Vests?
(1) Detrimental reliance
(2) 3d party accepts in a manner expressly stated by the agreement
(3) 3d party files lawsuit

Creditor or Donee Beneficiary?
(1) Facts are silent, donee beneficiary
(2) Donee beneficiary can only sue promisor; Creditor beneficiary can sue promisee

- 3d party has no greater rights than the original parties

Front 67

Assignment and Delegation Quick Rules

Back 67

Assignment and Delegation Quick Rules:


- When rights are assigned, assignor cannot receive further benefits

- When duties are delegated, delegating party is secondarily liable

Consequences of Delegation:
(1) Delegating party always remains liable.
(2) Delegatee liable only if she receives consideration from delegating party.
(3) Delegation and assignment combined can create a third party beneficiary relationship.

Front 68

Damages: Sale of Goods

Back 68

Sale of Goods:

(1) Seller breach, buyer keeps goods: Fair market value if perfect tender – fair market value as delivered.

(2) Seller breach, seller has the goods: Replacement price – contract price.

(3) Buyer breaches, buyer has the goods: Seller gets contract price.

(4) Buyer breaches, seller has the goods: Contract price – market price and provable lost profits. Lost Profits:
(a) Regular inventory
(b) Breach followed by resale at the same price
(c) Provable lost profit is recoverable

Front 69

Accord and Satisfaction

Back 69

Accord and Satisfaction (substituted performance):

(1) Accord: agreement to an existing obligation to accept different performance to satisfy the existing obligation;

(2) Satisfaction: performing the newly agreed performance to fulfill the obligation;

(3) Accord Alone: Suspends enforcement of the original obligation to provide time to perform the accord.

Front 70

Novation

Back 70

Novation (substituted party):

(1) Mutual agreement;

(2) Substitute a new party;

(3) Performs the same performance;

(4) Excuses the party that was substituted