Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
425 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
When does Common Law govern contracts?
|
When the contract does not involve the sale fo goods.
|
Real estate, service contracts
|
|
|
When does UCC Article 2 govern contracts?
|
When the contract is primarily for the sale goods.
|
Tangible, personal property
|
|
|
Must a price be included in a valid offer?
|
Common Law: Yes, price and description reqiured.|UCC: No.
|
Under both the Common Law and UCC, an offer cannot be based on vague or ambiguous material terms.
|
|
|
What is the main limitation on requirement contracts?
|
Demand during one period cannot be unreasonably disproportionate to demands from preceding periods.
|
Requirements contract/output contracts are not invalid for vagueness or ambiguity.
|
|
|
When can an offer not be revoked?
|
1. Acceptance;|2. Option;|3. UCC Firm Offer;|4. Reasonably foreseeable detrimental reliance;|5. Reasonable time after start of performance on a unilateral contract
|
The last four categories are irrevocable offers.
|
|
|
What are the three methods of rejecting an offer?
|
1. Counteroffer;|2. Conditional acceptance; and|3. Additional terms
|
The first two apply to all contracts; additional terms rule does not apply to contracts for sale of goods.
|
|
|
On the bar exam, how can you differentiate counteroffers from mere bargaining?
|
Counteroffers will be declaratory, bargaining will be interrogatory.
|
Bargaining does not terminate an offer.
|
|
|
How is a conditional acceptance recognized?
|
Look for an acceptance, followed by "if," "only if," "so long as," "but," or "on condition that."
|
A conditional acceptance always operates the same way as a counteroffer: it terminates the offer and becomes a new offer.
|
|
|
What is the effect of additional terms under the UCC?
|
As long as the response does not make the new terms a condition of acceptance, it is treated as a seasonal expression of acceptance and there is a contract.
|
Whether the parties are merchants is irrelevant.
|
|
|
How is start of performance treated regarding acceptance?
|
Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract.
|
Starting to perform is treated as an implied promise to perform and so there is a bilateral contract. Further, since start of performance is a promise to perform, it cannot constitute acceptance of a unilateral contract because a unilateral contract requires performance for acceptance, which means completion of performance.
|
|
|
What is the mailbox rule?
|
1. All commincations other than acceptance are effective only when received;|2. Acceptance is generally effective when mailed;|3. If a rejection is mailed before an acceptance is mailed, then the first to arrive is effective; and|4. The mailbox rule cannot be used to meet an option deadline.
|
An acceptance is effective when mailed, unless a rejection has been sent first. Then the first to arrive is effective.
|
|
|
How is the shipment of nonconforming goods treated regarding acceptance?
|
Acceptance and breach.
|
If there is an explanation, then there has been an accommodation, which is treated as a counteroffer and no breach.
|
|
|
When will someone who lacks capacity be liable on the contract under quasi-contract?
|
When the contract is for necessaries. However, since this exception is based on quasi-contract, the incapable person will only be required to pay as much as is equitable.
|
Necessaries include such things as food, clothing, medical care, or shelter.
|
|
|
What contracts are within the Statute of Frauds?
|
1. Promises in consideration of marriage; |2. Promises by executors to pay an estate's obligation from his own funds; |3. Promises gauranteeing another's debt; |4. Contracts for which full performance cannot be completed within one year from date of contract; |5. Transfers of real estate interests more than a year;|6. Sale of goods $500 or more.
|
1. Marriage;|2. Year;3.|Land;|4.Executor;|5. Gaurantees of suretyship;|6. Sales of goods $500 or more
|
|
|
Other than a signed writing, how can the Statute of Frauds be satisfied in service contract?
|
Full performance by either party.
|
Part performance of a services contract does not satisfy the Statute of Frauds.
|
|
|
What is the effect of part performance on a sale of goods contract?
|
The general rule is that part performance of a contract for the sale of goods satisfies the Statute of Frauds, but only to the extent of the part performance.
|
If the contract is for the sale of goods that are to be specially manufactured, then the Statute of Frauds is satisfied as soon as the seller makes a substantial beginning, which means that the seller has done enough work that it is clear that what she is working on is specially manufactured.
|
|
|
For contracts that are under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. The writing must indicate that there is a contract for the sale of goods and contain the quantity term; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
There is an exception to the signing requirement: If both parties are merchants and the person who receives a signed writing with a quantity term fails to respond within ten days, then that merchant cannot claim there is no contract.
|
|
|
When will a contract be unenforceable because of a misrepresentation?
|
When one party made a false assertion of fact that induced the other to contract.
|
No wrongdoing is required for misrepresentations.
|
|
|
When will a contract be unenforceable because of non-disclosure?
|
When the non-disclosure was wrongful.
|
Usually requires some affirmative act.
|
|
|
When may a court refuse to enforce a contract for unconscionability?
|
1. Unfair surprise (procedural); and|2. Oppressive terms (substantive)
|
Unconscionability is test at the time the agreement was made and allows the court to refuse to enforce all or part of the agreement.
|
|
|
When may a court refuse to enforce a contract for ambiguity?
|
1. Parties use a material term that is open to at least two reasonable interpretation;|2. Each party attaches a different meaning to the term; and|3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations.
|
If one party has reason to know that the material term is open to more than one reasonable interpretation, then there is a contract based on the understanding of the other party.
|
|
|
When will a contract be unenforceable because of a mutual mistake?
|
A mutual mistake will render a contract unenforceable if both parties are mistaken as to an assumption of fact which materially affects the agreed upon exchange.
|
Mistake as to value is not sufficient
|
|
|
When will a contract be unenforceable because of a unilateral mistake of material fact?
|
Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party.
|
Look for situations in which the other party had reason to know of the mistake.
|
|
|
What is the parol evidence rule?
|
Extrinsic evidence of prior or contemporaneous agreement not admissible to prove inconsistent or additional terms in a fully-integrated written contract.
|
A court may consider such terms for the limited purpose of determining whether there was a mistake in integration, i.e., a mistake in reducing the agreement to writing.||A court may also consider earlier statements for determing if there was a misrepresentation, fraud, or duress.
|
|
|
How can a seller disclaim implied warranties?
|
1. By using conspicuous language of disclaimer which mentions merchantability; or|2. Using language like "as is" or "with all faults."
|
Express warranties cannot be disclaimed.
|
|
|
What is the general test of whether a seller's limitation of warranties is effective?
|
It is effective if it isn't unconscionable. It is prima facie unconscionable if breach of warranty on consumer goods causes personal injury.
|
It is possible to limit remedies, even for express warranties.
|
|
|
Under UCC, when may a buyer reject goods?
|
If the seller does not meet the perfect tender standard, the buyer has the option to retain the goods and sue for damages, or reject all or any commercial unit and sue for damages (rejection is limited by cure, installment contract, and acceptance).
|
Perfect tender only applies to the sale of goods, it means perfect goods and perfect delivery, and a less than perfect tender by the seller generally gives the buyer the option of rejecting the delivered goods.
|
|
|
When does a seller have the right to cure under UCC?
|
1. Seller has reasonable grounds to believe that imperfect tender would be acceptable; or|2. The time for performance has not yet expired.
|
The reasonable grounds acception applies even after the performance date has passed.
|
|
|
What is an effective acceptance of goods?
|
1. Express acceptance;|2. Implied acceptance when buyer retains the goods without objection after an opportunity for inspection.
|
Payment without opportunity for inspection is not acceptance.
|
|
|
When is specific performance an appropriate remedy for breach?
|
When damages would be inadequate, as in the case of real estate or unique goods, and judical administration of the injunction would not be overly burdensome.
|
Specific performance is an equitable remedy, so look first for an adequate remedy at law or unclean hands or other parties' equities.
|
|
|
When does a seller have the right to reclaim delivered goods?
|
1. Buyer must have been insolvent at the time that it received the goods;|2. The seller demands return of goods within 10 days of receipt; and|3. The buyer still has goods at time of demand.
|
The 10 day rule becomes a reaonable time rule if before delivery there had been an express representation of solvency by the buyer.
|
|
|
What duty does the non-breaking party have regarding damages?
|
Duty to mitigate: No recovery for damages that could have been avoided without undue burden on non-breaching party.
|
Burdens of pleading and proof on breaching party.
|
|
|
What burden of proof does non-breaching party have regarding damages?
|
Must prove damages with reasonable certainty.
|
Hard to recover damages if new business or new business activity. Here, consider damages based on reliance instead of expectation interest.
|
|
|
When is a liquidated damages provision enforceable?
|
1. Damages were difficulat to forecast at time contract was made; and|2. Provision is a reasonable forecast.
|
Liquidated damages provision cannot constitute a penalty. Fixed numbers are presumptively invalid as a penalty.
|
|
|
Under Common Law, what are the four rules regarding excuse due to other party's improper performance?
|
1. Damages can be recovered for any breach;|2. Only a material breach by one party excuses the other party from performing;|3. Whether a breach is material is a question of fact; and|4. If there is substantial performance, then the breach is not matieral (if the breach is material, then the performance was not substantial).
|
Divisible contract exception: In a divisible contract, there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract (look at whether price is stated as a lump sum or on a per performance basis).
|
|
|
What is the general rule and the exception to excuse from performance due to failure of an express condition.
|
Express conditions are normally enforced srictly, but when performance is subject to a party's "approval," the performance will be demmed approved if a reasonable person would approve (excluding matters of personal taste).
|
An express condition is a mutually agreed upon promise modifier. Most contracts on the bar are not subject to express conditions (and don't confuse this with a counteroffer).
|
|
|
When can anticipatory repudiation be retracted?
|
When the other party has not materially changed his position.
|
Performance is then reimposed, but can be delayed until the non-repudiating party receives adequate assurance that the repudiating party will perform.
|
|
|
What is the difference between accord and satisfaction and modification?
|
Accord and satisfaction allows a party to satisfy his obligation with a different performance; modification is an agreement by the parties to an existing obligation to accept a differetn agreement in satsifaction of the existing obligation
|
The distinction is different performance vs. different agreement.
|
|
|
When is a party's performance excused due to impossiblity because of someone's death?
|
Only when that person was a "special" part of the contract.
|
Generally, death does not make a party's contract obligations disappear.
|
|
|
How does a third party beneficiary's interest in a contract vest?
|
1. Knowledge of the contract; and|2. Reliance on or assent as requested to the contract.
|
If so, third party's rights have vested and the contract cannot be cancelled or modified without her consent unless the contract otherwise provides.
|
|
|
What's important to look for when a contract limits assignments?
|
Whether the contract prohibits or, alternatively, invalidates assignments.
|
Courts favor assignability of contract rights and so they are reluctant to read contract language as preventing an assignment.
|
|
|
Even when not mentioned in the contract, when how does Common Law limit assignments?
|
Even if a contract does not limit the right to assign, Common Law bars an assignment that substantially changes the duties of the obligor.
|
Assignment of right to payment is never a substantial change.||Assignment of right to contract performance other than right to payment is usually a substantial change.
|
|
|
What implied warranties accompany an assignment for consideration?
|
Assignor warrants:1.|The right assigned actually exists;|2. The right assigned is not subject to any defenses by the obligor; and|3. The assignor will do nothing to impair the value of the assignment.
|
Assignor, however, does not warrant what the obligo will do.
|
|
|
What is kidnapping?
|
Unlawful confinement of a person that involves either:
1) some movement of the victim, or 2) concealment of the victim in a “secret” place. NY: Abducting someone (2 degrees) |
|
|
|
What mnemonic should you use to help you remember contracts analysis?
|
Armadillos From Texas Play Rap, Eating Tacos = 1. applicable law; |2. formation; |3. terms; |4. performance; |5. remedies; |6. excuse for nonperformance, 7. third-party problems.
|
|
|
|
What is a bilateral contract?
|
One that is open as to method of acceptance.
|
|
|
|
What is a unilateral contract?
|
one that expressly requires performance as the only possible method of acceptance.
|
|
|
|
When does Common Law govern contracts?
|
When the contract does not involve the sale fo goods.
|
|
|
|
When does UCC Article 2 govern contracts?
|
When the contract is primarily for the sale goods.
|
|
|
|
What are goods for UCC purposes?
|
Movable chattel
|
|
|
|
When a contract involves both sale of goods and other provisions, what law applies?
|
The law governing the more important part of the contract, unless the contract itself divides payment between goods and non-goods. Then, UUC 2 applies to goods part and Common Law to other parts.
|
|
|
|
What is the basic definition of a contract?
|
A legally enforceable agreement
|
|
|
|
Based on the basic definition of a contract, what should you look for in determining whether whether a contract exists?
|
Look first for an agreement. Then, second, determine whether the agreement is legally enforceable.
|
|
|
|
In looking for an agreement, what general analysis should be followed?
|
1. Was there an offer?|2. Has the offer terminated?|3. If not, has there been acceptance?
|
|
|
|
What is the general test for whether an offer has been made?
|
Manifestation of commitment: Based on words or conduct, would a reasonable person in the position of the offeree believe that his assent creates a contract?
|
|
|
|
What must the content of an offer generally contain?
|
An offer does not have to contain all meterial terms; there must simply be enough, between the offer and acceptance, to determine the existence of a contract and a breach.
|
|
|
|
Must a price be included in a valid offer?
|
Common Law: Yes, price and description reqiured.|UCC: No.
|
|
|
|
What is the main limitation on requirement contracts?
|
Demand during one period cannot be unreasonably disproportionate to demands from preceding periods.
|
|
|
|
When can an advertisement be an offer?
|
Generally, an advertisement is not an offer.||However, an advertisement can be an offer if it specifies quantity and expressly indicates who can accept, or if it is in the nature of a reward.
|
|
|
|
What are the four methods of terminating an offer?
|
1. Lapse of time;|2. Revocation by offeror;|3. Rejection/Counteroffer by offeree;|4. Death of a party prior to acceptance
|
|
|
|
Under what circumstances does a contract terminate due to lapse of time?
|
Offer expires after a reasonable amount of time or at the time stated.
|
|
|
|
How does an offeror revoke an offer?
|
1. Unambiguous statement by offeror to offeree of unwillingness or inability to contract; or|2. Unambiguous conduct by offeror indicating unwillingness or inability to contract that the offeree is aware of.
|
|
|
|
When does a revocation of an offer sent through the mail become effective?
|
When it is received.
|
|
|
|
When can an offer not be revoked?
|
1. Acceptance;|2. Option;|3. UCC Firm Offer;|4. Reasonably foreseeable detrimental reliance;|5. Reasonable time after start of performance on a unilateral contract
|
|
|
|
How is an option created?
|
1. Offer;|2. Promise to not revoke or to keep the offer open; and|3. This promise is supported by consideration.
|
|
|
|
What is the UCC Firm Offer Rule?
|
An offer cannot be revoked for up to three months if:|1. Offer to buy or sells goods;|2. Signed, written promise to keep the offer open; and|3. Party is a merchant.
|
|
|
|
What are the three methods of rejecting an offer?
|
1. Counteroffer;|2. Conditional acceptance; and|3. Additional terms
|
|
|
|
On the bar exam, how can you differentiate counteroffers from mere bargaining?
|
Counteroffers will be declaratory, bargaining will be interrogatory.
|
|
|
|
How is a conditional acceptance recognized?
|
Look for an acceptance, followed by "if," "only if," "so long as," "but," or "on condition that."
|
|
|
|
What is the mirror image rule?
|
Under Common Law, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
|
|
|
|
What is the effect of additional terms under the UCC?
|
As long as the response does not make the new terms a condition of acceptance, it is treated as a seasonal expression of acceptance and there is a contract.
|
|
|
|
If there is a seasonal expression of acceptance, are the additional terms part of the contract?
|
If at least one party is not a merchant, the additional term is merely a proposal that is to be separetly accepted or rejected.||If both parties are merchants, the general rule is that the additional term is a part of the contract.
|
|
|
|
What are the exceptions to the rule that additional terms are part of a contract between merchants?
|
1. The additional term materially changes the offer; or|2. The offeror objects to the change.
|
|
|
|
What is the general rule about death terminating an offer?
|
Death or incapacity of either party after the offer but before acceptance terminates the offer.
|
|
|
|
What is the exception to the rule that death terminates an offer?
|
Irrevocable offers.
|
|
|
|
How is an improper verbal response (i.e., counteroffer or conditional acceptance) followed by later conduct indicating a contract treated regarding acceptance?
|
Common Law: The conditional acceptance is treated as a counteroffer and the later conduct is treated as acceptance of that counteroffer. Thus, all the terms of the conditional acceptance are part of the contract.||UCC: The contract is based solely on the conduct. The conditional acceptance is not treated as a counteroffer and is not part of the contract. The terms appearing only in the conditional acceptance are not part of the contract.
|
|
|
|
How is full performance treated regarding acceptance?
|
Full performance is acceptance, but there may be an issue as to notice to the offeror.||Notice turns on:|1. What the offer requires; or|2. Whether the offeree has reason to believe that offeror will not learn of the acceptance.
|
|
|
|
How is start of performance treated regarding acceptance?
|
Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract.
|
|
|
|
How is a promise to perform treated regarding acceptance?
|
A promise to perform is acceptance for bilateral contracts, unless the offer states otherwise.
|
|
|
|
What is the mailbox rule?
|
1. All commincations other than acceptance are effective only when received;|2. Acceptance is generally effective when mailed;|3. If a rejection is mailed before an acceptance is mailed, then the first to arrive is effective; and|4. The mailbox rule cannot be used to meet an option deadline.
|
|
|
|
How is the shipment of nonconforming goods treated regarding acceptance?
|
Acceptance and breach.
|
|
|
|
Who may accept an offer?
|
A person who knows about the offer who is the person to whom it was made.
|
|
|
|
Can offers be assigned by the offeree?
|
No, unless there's an option contract that does not restrict the right to assign.
|
|
|
|
When is silence effective acceptance?
|
When custom indicates that silence is effective acceptance or offeree agrees that silence is effective acceptance by his words or conduct.
|
|
|
|
What are the eleven legal reasons for not enforcing an agreement?
|
1. Lack of consideration or a consideration substitute;|2. Lack of capacity;|3. Statute of Frauds;|4. Illegality;|5. Public policy;|6. Misrepresentations;|7. Nondisclosure;|8. Duress;|9. Unconscionability;|10. Ambiguity; and|11. Mistake.
|
|
|
|
What is consideration?
|
A bargained-for legal detriment.
|
|
|
|
What four forms does consideration gernally take?
|
1. Doing something not legally obligated to do;|2. Not doing something legally entitled to do;|3. Promise to perform; and|Promise to forbear.
|
|
|
|
When is a contractual promise illusory and, therefore, innefective as consideration?
|
When the promisor alone fully controls whether she will actually be require to perform.
|
|
|
|
When is past consideration sufficient to form a contract?
|
When the consideration was expressly requested by promisor and promisee knew that payment for performance was expected.
|
|
|
|
Under Common Law, when can doing something you already have a legal duty to do serve as consideration?
|
Generally, doing what you are already legally obligated to do is not new consideration for a new promise to pay more, unless:|1. Addition to or change in performance; |2. Unforeseen difficulty so severe as to excuse performance; and|3. Third party promise to pay.
|
|
|
|
Under the UCC, can a preexisting legal duty serve as effective consideration?
|
Yes. Article 2 does not have a pre-existing legal duty rule. New consideration is not required to modify sale of goods contract. Good faith is the test for changes in an existing slae of goods contract.
|
|
|
|
When may partial payment serve as cosideration for release of a debt?
|
When payment is not yet due or is disputed.
|
|
|
|
When is a promise legally enforceable even though there is no consideration (what are the types of consideration substitutes)?
|
1. Written promise to satify an obligation for which there is a legal defense; |2. Promissory estoppel
|
|
|
|
What are the elements of prmissory estoppel?
|
1. Promise;|2. Reliance that is reasonable, detrimental, and foreseeable; and|3. Enforcement necessary to avoid injustice.
|
|
|
|
Who lacks capacity to contract?
|
1. Minors (under 18);|2. Mental incompetents (lack ability to understand agreement); and|3. Intoxicated persons (if the other party has reason to know of intoxication).
|
|
|
|
What is the risk of entering into a contract with someone who lacks capacity?
|
The incapable party may disaffirm the contract.
|
|
|
|
When may a person who entered a contract while incapable no longer disaffirm?
|
When they expressly or impliedly affirm the contract after obtaining capacity (ratification after obtaining capacity).
|
|
|
|
When will someone who lacks capacity be liable on the contract under quasi-contract?
|
When the contract is for necessaries. However, since this exception is based on quasi-contract, the incapable person will only be required to pay as much as is equitable.
|
|
|
|
What contracts are within the Statute of Frauds?
|
1. Promises in consideration of marriage; |2. Promises by executors to pay an estate's obligation from his own funds; |3. Promises gauranteeing another's debt; |4. Contracts for which full performance cannot be completed within one year from date of contract; |5. Transfers of real estate interests more than a year;|6. Sale of goods $500 or more.
|
|
|
|
When does the Statute of Frauds not apply to promises gauranteeing the debts of another?
|
When the main purpose for the guarantee was to benefit the promisor.
|
|
|
|
Does a contract for the duration of someone's life fall under the Statute of Frauds?
|
No, the person could die within a year.
|
|
|
|
How is the Statute of Frauds generally satisfied?
|
Performance or a writing.
|
|
|
|
Other than a signed writing, how can the Statute of Frauds be satisfied in service contract?
|
Full performance by either party.
|
|
|
|
What is the effect of part performance on a sale of goods contract?
|
The general rule is that part performance of a contract for the sale of goods satisfies the Statute of Frauds, but only to the extent of the part performance.
|
|
|
|
What is the effect of part performance on a contract to transfer real estate?
|
Part performance can satisfy the Statute of Frauds if the buyer has done any two of the following three:|1.Payment;|2. Improvements; or|3. Possession
|
|
|
|
For contracts not under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. Look to see if all material terms are included: who and what; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
|
|
|
For contracts that are under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. The writing must indicate that there is a contract for the sale of goods and contain the quantity term; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
|
|
|
What is the effect of a judicial admission of the existence of a contract on a Statute of Frauds defense?
|
If the defendant asserting a Statute of Frauds defense admits in a pleading or testimony that he had entered into an agreement with the plaintiff, the purpose of the Statute of Frauds, is fulfilled and there is no defense.
|
|
|
|
What is the equal dignity rule?
|
Authorization to enter into a contract for someone else must be in writing only if the contract to be signed is within the Statute of Frauds.
|
|
|
|
When must a contract modification be in writing?
|
If the deeal with the alleged change would be within the Statute of Frauds, then the alleged modiciation agreement must be in writing.
|
|
|
|
Are contracts requiring written modification of a contract effective?
|
Common Law: Contract provisions requiring written modifications are not effective.||UCC: Contract provisions requiring written modifications are effective unless waived.
|
|
|
|
Is a contract with illegal subject matter enforceable?
|
If the subject matter is illegal, the agreement is not enforceable?
|
|
|
|
Is a contract with illegal purpose enforceable?
|
If the subject matter is legal, but the purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose.
|
|
|
|
When may a court refuse to enforce an agreement on public policy grounds?
|
If, for example, there is an exculpatory agreement that exempts intentional or reckless conduct from liability or there is a convenant not to compete without a reasonable need or reasonable time and place limits.
|
|
|
|
When will a contract be unenforceable because of a misrepresentation?
|
When one party made a false assertion of fact that induced the other to contract.
|
|
|
|
When will a contract be unenforceable because of non-disclosure?
|
When the non-disclosure was wrongful.
|
|
|
|
When will a contract be unenforceable because of duress?
|
1. When a party is induced to contract by improper threat; and|2. The vulnerable party is taken advantage of because he had no reasonable alternative.
|
|
|
|
When may a court refuse to enforce a contract for unconscionability?
|
1. Unfair surprise (procedural); and|2. Oppressive terms (substantive)
|
|
|
|
When may a court refuse to enforce a contract for ambiguity?
|
1. Parties use a material term that is open to at least two reasonable interpretation;|2. Each party attaches a different meaning to the term; and|3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations.
|
|
|
|
When will a contract be unenforceable because of a mutual mistake?
|
A mutual mistake will render a contract unenforceable if both parties are mistaken as to an assumption of fact which materially affects the agreed upon exchange.
|
|
|
|
When will a contract be unenforceable because of a unilateral mistake of material fact?
|
Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party.
|
|
|
|
What is the parol evidence rule?
|
Extrinsic evidence of prior or contemporaneous agreement not admissible to prove inconsistent or additional terms in a fully-integrated written contract.
|
|
|
|
What evidence does the court use to explain contract terms or fill gaps, and what priority does it give to each?
|
1. Course of performance (same people, same contract);|2. Course of dealing (same people, different but similar contract);|3. Custom and usage (different but similar people, different but similar contract
|
|
|
|
Under the UCC, if goods are to be delivered by a common carrier under a shipment contract, what is the obligation of the seller?
|
The seller completes his delivery obligation when he|1. Gets the goods to a common carrier;|2. Makes reasonable arrangements for delivery; and|3. Notifies the buyer.
|
|
|
|
Under the UCC, if goods are to be delivered by a common carrier under a destination contract, what is the obligation of the seller?
|
The seller completes his delivery obligation when the goods arrive where the buyer is.
|
|
|
|
How can you identify a shipment contract versus a delivery contract?
|
Most contracts with delivery obligations are shipment contracts (FOB [seller's/good's city]); FOB [any other city] is a destination contract).
|
|
|
|
When does a risk of loss issue arise?
|
1. After contract has been formed and before buyer has received goods, the goods are damaged through no fault of either party.
|
|
|
|
Who bears the risk of loss?
|
1. Agreement.|2. The breaching party, even if breach is unrelated to loss.|3. If delivery by common carrier other than seller, risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligation.|4. If no agreement, no breach, no delivery by carrier, and seller is a merchant, risk of loss shifts from the merchant-seller to the buyer on the buyer's receipt of the goods (risk of loss shifts from a non-merchant seller when he tenders the goods).
|
|
|
|
When does an express warranty exist?
|
When seller has made a promise, description, or other factual assertion. (Not "sales talk.")
|
|
|
|
When does an implied warranty of merchantability exist and what is warranted?
|
When seller deals of goods in the kind, there's an implied warranty that the goods are fit for the ordinary purpose for which such goods are used.
|
|
|
|
When does an implied warranty of fitness for a particular purpose exist?
|
When buyer relies on selle to select suitable goods for a particular purpose and seller has a reason to know of that purpose.
|
|
|
|
How can a seller disclaim implied warranties?
|
1. By using conspicuous language of disclaimer which mentions merchantability; or|2. Using language like "as is" or "with all faults."
|
|
|
|
What is the general test of whether a seller's limitation of warranties is effective?
|
It is effective if it isn't unconscionable. It is prima facie unconscionable if breach of warranty on consumer goods causes personal injury.
|
|
|
|
Under Common Law, when is a party's performance adequate?
|
If one party substanitally performs then the other party must pay or otherwise perform.
|
|
|
|
Under UCC, when may a buyer reject goods?
|
If the seller does not meet the perfect tender standard, the buyer has the option to retain the goods and sue for damages, or reject all or any commercial unit and sue for damages (rejection is limited by cure, installment contract, and acceptance).
|
|
|
|
When does a seller have the right to cure under UCC?
|
1. Seller has reasonable grounds to believe that imperfect tender would be acceptable; or|2. The time for performance has not yet expired.
|
|
|
|
What is required for an installment contract?
|
1. Delivery of the goods in separate lots;|2. The separate lots are to be separately accepted.
|
|
|
|
When does a buyer have the right to reject an installment?
|
Only where there is a substanital impairment in that installment that can't be cured.
|
|
|
|
What is an effective acceptance of goods?
|
1. Express acceptance;|2. Implied acceptance when buyer retains the goods without objection after an opportunity for inspection.
|
|
|
|
When can a buyer of goods revoke acceptance?
|
1. Nonconformity substantially impairs the value of the goods;|2. Excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction; and|3. Revocation within a reasonable time after discovery of nonconformity.
|
|
|
|
What other requirements are there for rejection and revocation?
|
1. Seasonably notify seller;|2. Hold goods for seller; and|3. Follow reasonable seller instructions.
|
|
|
|
What are the three things to remember about payment?
|
1. Open price term means reasonable price at time of delivery;|2. Price to be fixed by buyer or seller means that the price must be so fixed in good faith; and|3. Price payable in goods means that each party is seller of goods it provides.
|
|
|
|
When is specific performance an appropriate remedy for breach?
|
When damages would be inadequate, as in the case of real estate or unique goods, and judical administration of the injunction would not be overly burdensome.
|
|
|
|
Is specific performance available for personal service contracts?
|
No specific performance, but possible injunctive relief.
|
|
|
|
When might the courts reform a contract?
|
1. when there was a mistake in the writing of an agreement (such as a clerical error), or |2. there was fraudulent misrepresentation as tow hat was included in an agreement.
|
|
|
|
When does a seller have the right to reclaim delivered goods?
|
1. Buyer must have been insolvent at the time that it received the goods;|2. The seller demands return of goods within 10 days of receipt; and|3. The buyer still has goods at time of demand.
|
|
|
|
What is the risk of entrusting goods to a seller?
|
If owner leaves goods with seller of like kind and that seller wrongfully sells the goods, a good faith purchaser for value gains superior rights to the property.
|
|
|
|
What measure of damages is the non-breaching party normally entitled to?
|
Expectation damages: Put non-breaching party whaere it would have been if contract had been performed.
|
|
|
|
Explain damages based on reliance interest?
|
Puts non-breaching party in the position it was in before the contract (as if the contract never happened).
|
|
|
|
Explain damages based on restitution interest?
|
Prevents unjust enrichment to breaching party.
|
|
|
|
Appropriate damages when seller breaches and buyer keeps the goods?
|
FMV if goods were perfect - FMV as delivered.
|
|
|
|
Appropriate damages where seller breaches and seller keeps the goods.
|
Market price at time of discovery of breach - contract price; or|Replacement price - contract price.
|
|
|
|
Appropriate damages where buyer breaches and buyer has the goods.
|
Contract price.
|
|
|
|
Appropriate damages where buyer breaches, seller has the goods.
|
Contract price - market price at time and place of delivery; or|Contract price - resale price;|In some cases, add on provable lost profits.
|
|
|
|
What are incidental damages?
|
Costs incurred in dealing with the breach.
|
|
|
|
When are incidental damages recoverable?
|
Always
|
|
|
|
What are consequential damages?
|
Damages arising from non-breaching party's special circumstances.
|
|
|
|
When are consequential damages recoverable?
|
When breaching party had reason to know of the special circumstances at the time of the contract.
|
|
|
|
What duty does the non-breaking party have regarding damages?
|
Duty to mitigate: No recovery for damages that could have been avoided without undue burden on non-breaching party.
|
|
|
|
What burden of proof does non-breaching party have regarding damages?
|
Must prove damages with reasonable certainty.
|
|
|
|
When is a liquidated damages provision enforceable?
|
1. Damages were difficulat to forecast at time contract was made; and|2. Provision is a reasonable forecast.
|
|
|
|
When will limitations on remedies be unenforceable?
|
When unconscionable at time of contract.
|
|
|
|
Under Common Law, what are the four rules regarding excuse due to other party's improper performance?
|
1. Damages can be recovered for any breach;|2. Only a material breach by one party excuses the other party from performing;|3. Whether a breach is material is a question of fact; and|4. If there is substantial performance, then the breach is not matieral (if the breach is material, then the performance was not substantial).
|
|
|
|
Generally, when will a party's performance be excused under the UCC?
|
1. The other party's tender was not perfect; or|2. Something happened after formation that excuses nonperformance.
|
|
|
|
What is the general rule and the exception to excuse from performance due to failure of an express condition.
|
Express conditions are normally enforced srictly, but when performance is subject to a party's "approval," the performance will be demmed approved if a reasonable person would approve (excluding matters of personal taste).
|
|
|
|
How can failure of an express condition be excused, requiring the other party to perform?
|
1. Estoppel: Party gives up the condition before performance by the other party;|2. Waiver: Party gives up condition after the other party has performed;|3. Prevention: The party protected by the express condition hinders or prevents the occurrence of the express condition; and|4. Avoidance of forfeiture: Court excuses the non-occurrence of the express condition to avoid excessive harm to the party not protected by the express condition.
|
|
|
|
When is failure to perform excused by the other party's anticipatory repudiation?
|
Prior to the time that performance is due, the repudiating party makes an unambiguous statement or engages in conduct indicating that the repudiating party will not perform.
|
|
|
|
What other effect does anticipatory repudiation have aside from excusing performance?
|
Allows an immediate action for damages.
|
|
|
|
When can anticipatory repudiation be retracted?
|
When the other party has not materially changed his position.
|
|
|
|
When can a contract be rescinded?
|
When neither party has fully performed.
|
|
|
|
What is accord and satisfaction?
|
Parties to an existing contract agree to accept a different performance in satisfaction of the existing obligation.
|
|
|
|
How is an accord satisfied?
|
By the different performance.
|
|
|
|
What happens if an accord is not satisfied?
|
The other party may sue for the original obligtion or the accord.
|
|
|
|
What is the difference between accord and satisfaction and modification?
|
Accord and satisfaction allows a party to satisfy his obligation with a different performance; modification is an agreement by the parties to an existing obligation to accept a differetn agreement in satsifaction of the existing obligation
|
|
|
|
What is a novation?
|
An agreement by both parties to the original contract to substitute an original party with a new third party. Novation excuses the person replaced from any liability for non-performance.
|
|
|
|
What is delegation?
|
A unilateral decision by one party to have a third party perform his obligation under the contract. Delegation does not excuse the person replaced from liability for non-performance.
|
|
|
|
When is performance excused due to imposibility, impracticability, or frustration of purpose?
|
After the contract was formed but before performance, some unforeseen event makes performance impossible, commercially impracticable, or frustrates the original purpose for entering into the contract.
|
|
|
|
When is a party's performance excused due to impossiblity because of someone's death?
|
Only when that person was a "special" part of the contract.
|
|
|
|
When does a third party beneficiary have the right to sue to enfoce a contract?
|
1. the third party was intended to be a beneficiary of the contract, and |2. that party's interest in the contract has vested.
|
|
|
|
What is a third party beneficiary?
|
1. Not a party to the contract;|2. Able to enforce contract others made for her benefit
|
|
|
|
Who is the promisor?
|
The person who is making the promise that benefits the third party.
|
|
|
|
Who is the promisee?
|
The person who obtains the promise that benefits the third party.
|
|
|
|
How does a third party beneficiary's interest in a contract vest?
|
1. Knowledge of the contract; and|2. Reliance on or assent as requested to the contract.
|
|
|
|
What defenses are available on a third party beneficiary contract?
|
If the beneficiary sues the promisor, the promisor can assert any defense he would have had against the promisee.
|
|
|
|
Who can sue whom on a third party contract?
|
1. Beneficiary can recover from promisor;|2. Promisee can recover from promisor; and|3. Beneficiary can recover from promisee if beneficiary is a creditor on a pre-existing debt.
|
|
|
|
What is an assignment?
|
A transfer of rights under a contract in two separate steps:|1. Contract between two parties; and|2. One of the parties later transferes rights under that contract to a third party.
|
|
|
|
What's important to look for when a contract limits assignments?
|
Whether the contract prohibits or, alternatively, invalidates assignments.
|
|
|
|
What is the effect of a prohibition on assignment?
|
Language of prohibition takes away the right to assign, but not the power to assign. This means that the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the assignment.
|
|
|
|
What is the effect of an invalidation on assignment?
|
Language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
|
|
|
|
Even when not mentioned in the contract, when how does Common Law limit assignments?
|
Even if a contract does not limit the right to assign, Common Law bars an assignment that substantially changes the duties of the obligor.
|
|
|
|
May assignee sue obligor for performance?
|
Yes, however, performance by obligor to assignor is still effective unless obligor knows of the assignment.
|
|
|
|
Is consideration required for an assignment?
|
Generally, no. But gratuitous assignments may be revoked.
|
|
|
|
What implied warranties accompany an assignment for consideration?
|
Assignor warrants:1.|The right assigned actually exists;|2. The right assigned is not subject to any defenses by the obligor; and|3. The assignor will do nothing to impair the value of the assignment.
|
|
|
|
What is the general rule for priority where there have been multiple gratuitous assignments?
|
Last assignee wins; since gratuitous assignments can be revoked, a later gift assignment revokes an earlier gift assignment.
|
|
|
|
What is the exception to the general rule that the last gratuitous assignment takes priority?
|
A gratuitous assignment is not revocable if:|1. It is the subject matter of a writing delivered to the assignee;|2. The assignee has received some indicia of ownership; or|3.The assignee has relied on the assignemnt in a way that is reasonable, foreseeable, and detrimental.
|
|
|
|
What is the general rule for priority where there have been multiple assignments for consideration?
|
First assignee wins.
|
|
|
|
What is the exception to the general rule that the first assignee for consideration takes priority?
|
A subsequent assignee for consideration takes priority over an earlier assignee for value only if he both:|1. Does not know of the earlier assignment; and|2. Is the first to obtain payment, a judgment, a novation, or indicia of ownership.
|
|
|
|
May an assignor for consideration recover from an obligor?
|
No.
|
|
|
|
What defenses are available to an olbigor again an assignee?
|
The defenses the obligor would have against assignor.
|
|
|
|
What are the limitations on delegation?
|
Generally, contractual duties are delegable unless either:1. Contract prohibits delegations or prohibits assignments;|2. Contract calls for very special skills; or|3. Person to perform contract has a very special reputation.
|
|
|
|
What if, after delegation, the third party delegatee does not perform?
|
1. Delegating party always remains liable.|2. Delegatee liable only if she receives consideration from delegating party.
|
|
|
|
When does Common Law govern contracts?
|
When the contract does not involve the sale fo goods.
|
Real estate, service contracts
|
|
|
When does UCC Article 2 govern contracts?
|
When the contract is primarily for the sale goods.
|
Tangible, personal property
|
|
|
Must a price be included in a valid offer?
|
Common Law: Yes, price and description reqiured.|UCC: No.
|
Under both the Common Law and UCC, an offer cannot be based on vague or ambiguous material terms.
|
|
|
What is the main limitation on requirement contracts?
|
Demand during one period cannot be unreasonably disproportionate to demands from preceding periods.
|
Requirements contract/output contracts are not invalid for vagueness or ambiguity.
|
|
|
When can an offer not be revoked?
|
1. Acceptance;|2. Option;|3. UCC Firm Offer;|4. Reasonably foreseeable detrimental reliance;|5. Reasonable time after start of performance on a unilateral contract
|
The last four categories are irrevocable offers.
|
|
|
What are the three methods of rejecting an offer?
|
1. Counteroffer;|2. Conditional acceptance; and|3. Additional terms
|
The first two apply to all contracts; additional terms rule does not apply to contracts for sale of goods.
|
|
|
On the bar exam, how can you differentiate counteroffers from mere bargaining?
|
Counteroffers will be declaratory, bargaining will be interrogatory.
|
Bargaining does not terminate an offer.
|
|
|
How is a conditional acceptance recognized?
|
Look for an acceptance, followed by "if," "only if," "so long as," "but," or "on condition that."
|
A conditional acceptance always operates the same way as a counteroffer: it terminates the offer and becomes a new offer.
|
|
|
What is the effect of additional terms under the UCC?
|
As long as the response does not make the new terms a condition of acceptance, it is treated as a seasonal expression of acceptance and there is a contract.
|
Whether the parties are merchants is irrelevant.
|
|
|
How is start of performance treated regarding acceptance?
|
Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract.
|
Starting to perform is treated as an implied promise to perform and so there is a bilateral contract. Further, since start of performance is a promise to perform, it cannot constitute acceptance of a unilateral contract because a unilateral contract requires performance for acceptance, which means completion of performance.
|
|
|
What is the mailbox rule?
|
1. All commincations other than acceptance are effective only when received;|2. Acceptance is generally effective when mailed;|3. If a rejection is mailed before an acceptance is mailed, then the first to arrive is effective; and|4. The mailbox rule cannot be used to meet an option deadline.
|
An acceptance is effective when mailed, unless a rejection has been sent first. Then the first to arrive is effective.
|
|
|
How is the shipment of nonconforming goods treated regarding acceptance?
|
Acceptance and breach.
|
If there is an explanation, then there has been an accommodation, which is treated as a counteroffer and no breach.
|
|
|
When will someone who lacks capacity be liable on the contract under quasi-contract?
|
When the contract is for necessaries. However, since this exception is based on quasi-contract, the incapable person will only be required to pay as much as is equitable.
|
Necessaries include such things as food, clothing, medical care, or shelter.
|
|
|
What contracts are within the Statute of Frauds?
|
1. Promises in consideration of marriage; |2. Promises by executors to pay an estate's obligation from his own funds; |3. Promises gauranteeing another's debt; |4. Contracts for which full performance cannot be completed within one year from date of contract; |5. Transfers of real estate interests more than a year;|6. Sale of goods $500 or more.
|
1. Marriage;|2. Year;3.|Land;|4.Executor;|5. Gaurantees of suretyship;|6. Sales of goods $500 or more
|
|
|
Other than a signed writing, how can the Statute of Frauds be satisfied in service contract?
|
Full performance by either party.
|
Part performance of a services contract does not satisfy the Statute of Frauds.
|
|
|
What is the effect of part performance on a sale of goods contract?
|
The general rule is that part performance of a contract for the sale of goods satisfies the Statute of Frauds, but only to the extent of the part performance.
|
If the contract is for the sale of goods that are to be specially manufactured, then the Statute of Frauds is satisfied as soon as the seller makes a substantial beginning, which means that the seller has done enough work that it is clear that what she is working on is specially manufactured.
|
|
|
For contracts that are under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. The writing must indicate that there is a contract for the sale of goods and contain the quantity term; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
There is an exception to the signing requirement: If both parties are merchants and the person who receives a signed writing with a quantity term fails to respond within ten days, then that merchant cannot claim there is no contract.
|
|
|
When will a contract be unenforceable because of a misrepresentation?
|
When one party made a false assertion of fact that induced the other to contract.
|
No wrongdoing is required for misrepresentations.
|
|
|
When will a contract be unenforceable because of non-disclosure?
|
When the non-disclosure was wrongful.
|
Usually requires some affirmative act.
|
|
|
When may a court refuse to enforce a contract for unconscionability?
|
1. Unfair surprise (procedural); and|2. Oppressive terms (substantive)
|
Unconscionability is test at the time the agreement was made and allows the court to refuse to enforce all or part of the agreement.
|
|
|
When may a court refuse to enforce a contract for ambiguity?
|
1. Parties use a material term that is open to at least two reasonable interpretation;|2. Each party attaches a different meaning to the term; and|3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations.
|
If one party has reason to know that the material term is open to more than one reasonable interpretation, then there is a contract based on the understanding of the other party.
|
|
|
When will a contract be unenforceable because of a mutual mistake?
|
A mutual mistake will render a contract unenforceable if both parties are mistaken as to an assumption of fact which materially affects the agreed upon exchange.
|
Mistake as to value is not sufficient
|
|
|
When will a contract be unenforceable because of a unilateral mistake of material fact?
|
Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party.
|
Look for situations in which the other party had reason to know of the mistake.
|
|
|
What is the parol evidence rule?
|
Extrinsic evidence of prior or contemporaneous agreement not admissible to prove inconsistent or additional terms in a fully-integrated written contract.
|
A court may consider such terms for the limited purpose of determining whether there was a mistake in integration, i.e., a mistake in reducing the agreement to writing.||A court may also consider earlier statements for determing if there was a misrepresentation, fraud, or duress.
|
|
|
How can a seller disclaim implied warranties?
|
1. By using conspicuous language of disclaimer which mentions merchantability; or|2. Using language like "as is" or "with all faults."
|
Express warranties cannot be disclaimed.
|
|
|
What is the general test of whether a seller's limitation of warranties is effective?
|
It is effective if it isn't unconscionable. It is prima facie unconscionable if breach of warranty on consumer goods causes personal injury.
|
It is possible to limit remedies, even for express warranties.
|
|
|
Under UCC, when may a buyer reject goods?
|
If the seller does not meet the perfect tender standard, the buyer has the option to retain the goods and sue for damages, or reject all or any commercial unit and sue for damages (rejection is limited by cure, installment contract, and acceptance).
|
Perfect tender only applies to the sale of goods, it means perfect goods and perfect delivery, and a less than perfect tender by the seller generally gives the buyer the option of rejecting the delivered goods.
|
|
|
When does a seller have the right to cure under UCC?
|
1. Seller has reasonable grounds to believe that imperfect tender would be acceptable; or|2. The time for performance has not yet expired.
|
The reasonable grounds acception applies even after the performance date has passed.
|
|
|
What is an effective acceptance of goods?
|
1. Express acceptance;|2. Implied acceptance when buyer retains the goods without objection after an opportunity for inspection.
|
Payment without opportunity for inspection is not acceptance.
|
|
|
When is specific performance an appropriate remedy for breach?
|
When damages would be inadequate, as in the case of real estate or unique goods, and judical administration of the injunction would not be overly burdensome.
|
Specific performance is an equitable remedy, so look first for an adequate remedy at law or unclean hands or other parties' equities.
|
|
|
When does a seller have the right to reclaim delivered goods?
|
1. Buyer must have been insolvent at the time that it received the goods;|2. The seller demands return of goods within 10 days of receipt; and|3. The buyer still has goods at time of demand.
|
The 10 day rule becomes a reaonable time rule if before delivery there had been an express representation of solvency by the buyer.
|
|
|
What duty does the non-breaking party have regarding damages?
|
Duty to mitigate: No recovery for damages that could have been avoided without undue burden on non-breaching party.
|
Burdens of pleading and proof on breaching party.
|
|
|
What burden of proof does non-breaching party have regarding damages?
|
Must prove damages with reasonable certainty.
|
Hard to recover damages if new business or new business activity. Here, consider damages based on reliance instead of expectation interest.
|
|
|
When is a liquidated damages provision enforceable?
|
1. Damages were difficulat to forecast at time contract was made; and|2. Provision is a reasonable forecast.
|
Liquidated damages provision cannot constitute a penalty. Fixed numbers are presumptively invalid as a penalty.
|
|
|
Under Common Law, what are the four rules regarding excuse due to other party's improper performance?
|
1. Damages can be recovered for any breach;|2. Only a material breach by one party excuses the other party from performing;|3. Whether a breach is material is a question of fact; and|4. If there is substantial performance, then the breach is not matieral (if the breach is material, then the performance was not substantial).
|
Divisible contract exception: In a divisible contract, there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract (look at whether price is stated as a lump sum or on a per performance basis).
|
|
|
What is the general rule and the exception to excuse from performance due to failure of an express condition.
|
Express conditions are normally enforced srictly, but when performance is subject to a party's "approval," the performance will be demmed approved if a reasonable person would approve (excluding matters of personal taste).
|
An express condition is a mutually agreed upon promise modifier. Most contracts on the bar are not subject to express conditions (and don't confuse this with a counteroffer).
|
|
|
When can anticipatory repudiation be retracted?
|
When the other party has not materially changed his position.
|
Performance is then reimposed, but can be delayed until the non-repudiating party receives adequate assurance that the repudiating party will perform.
|
|
|
What is the difference between accord and satisfaction and modification?
|
Accord and satisfaction allows a party to satisfy his obligation with a different performance; modification is an agreement by the parties to an existing obligation to accept a differetn agreement in satsifaction of the existing obligation
|
The distinction is different performance vs. different agreement.
|
|
|
When is a party's performance excused due to impossiblity because of someone's death?
|
Only when that person was a "special" part of the contract.
|
Generally, death does not make a party's contract obligations disappear.
|
|
|
How does a third party beneficiary's interest in a contract vest?
|
1. Knowledge of the contract; and|2. Reliance on or assent as requested to the contract.
|
If so, third party's rights have vested and the contract cannot be cancelled or modified without her consent unless the contract otherwise provides.
|
|
|
What's important to look for when a contract limits assignments?
|
Whether the contract prohibits or, alternatively, invalidates assignments.
|
Courts favor assignability of contract rights and so they are reluctant to read contract language as preventing an assignment.
|
|
|
Even when not mentioned in the contract, when how does Common Law limit assignments?
|
Even if a contract does not limit the right to assign, Common Law bars an assignment that substantially changes the duties of the obligor.
|
Assignment of right to payment is never a substantial change.||Assignment of right to contract performance other than right to payment is usually a substantial change.
|
|
|
What implied warranties accompany an assignment for consideration?
|
Assignor warrants:1.|The right assigned actually exists;|2. The right assigned is not subject to any defenses by the obligor; and|3. The assignor will do nothing to impair the value of the assignment.
|
Assignor, however, does not warrant what the obligo will do.
|
|
|
What is the exception to the general rule that the last gratuitous assignment takes priority?
|
A gratuitous assignment is not revocable if:|1. It is the subject matter of a writing delivered to the assignee;|2. The assignee has received some indicia of ownership; or|3.The assignee has relied on the assignemnt in a way that is reasonable, foreseeable, and detrimental.
|
If the gift assignment is not revocable, then it will take priority over a later assignment.
|
|
|
CONTRACTS
|
|
|
|
|
What mnemonic should you use to help you remember contracts analysis?
|
Armadillos From Texas Play Rap, Eating Tacos = 1. applicable law; |2. formation; |3. terms; |4. performance; |5. remedies; |6. excuse for nonperformance, 7. third-party problems.
|
|
|
|
What is a bilateral contract?
|
One that is open as to method of acceptance.
|
|
|
|
What is a unilateral contract?
|
one that expressly requires performance as the only possible method of acceptance.
|
|
|
|
APPLICABLE LAW
|
|
|
|
|
When does Common Law govern contracts?
|
When the contract does not involve the sale fo goods.
|
Real estate, service contracts
|
|
|
When does UCC Article 2 govern contracts?
|
When the contract is primarily for the sale goods.
|
Tangible, personal property
|
|
|
What are goods for UCC purposes?
|
Movable chattel
|
|
|
|
When a contract involves both sale of goods and other provisions, what law applies?
|
The law governing the more important part of the contract, unless the contract itself divides payment between goods and non-goods. Then, UUC 2 applies to goods part and Common Law to other parts.
|
|
|
|
FORMATION: IS THERE AN AGREEMENT
|
|
|
|
|
What is the basic definition of a contract?
|
A legally enforceable agreement
|
|
|
|
Based on the basic definition of a contract, what should you look for in determining whether whether a contract exists?
|
Look first for an agreement. Then, second, determine whether the agreement is legally enforceable.
|
|
|
|
In looking for an agreement, what general analysis should be followed?
|
1. Was there an offer?|2. Has the offer terminated?|3. If not, has there been acceptance?
|
|
|
|
INITIAL COMMUNICATION: OFFERS
|
|
|
|
|
What is the general test for whether an offer has been made?
|
Manifestation of commitment: Based on words or conduct, would a reasonable person in the position of the offeree believe that his assent creates a contract?
|
|
|
|
What must the content of an offer generally contain?
|
An offer does not have to contain all meterial terms; there must simply be enough, between the offer and acceptance, to determine the existence of a contract and a breach.
|
|
|
|
Must a price be included in a valid offer?
|
Common Law: Yes, price and description reqiured.|UCC: No.
|
Under both the Common Law and UCC, an offer cannot be based on vague or ambiguous material terms.
|
|
|
What is the main limitation on requirement contracts?
|
Demand during one period cannot be unreasonably disproportionate to demands from preceding periods.
|
Requirements contract/output contracts are not invalid for vagueness or ambiguity.
|
|
|
When can an advertisement be an offer?
|
Generally, an advertisement is not an offer.||However, an advertisement can be an offer if it specifies quantity and expressly indicates who can accept, or if it is in the nature of a reward.
|
|
|
|
TERMINATION OF OFFERS
|
|
|
|
|
What are the four methods of terminating an offer?
|
1. Lapse of time;|2. Revocation by offeror;|3. Rejection/Counteroffer by offeree;|4. Death of a party prior to acceptance
|
|
|
|
Under what circumstances does a contract terminate due to lapse of time?
|
Offer expires after a reasonable amount of time or at the time stated.
|
|
|
|
How does an offeror revoke an offer?
|
1. Unambiguous statement by offeror to offeree of unwillingness or inability to contract; or|2. Unambiguous conduct by offeror indicating unwillingness or inability to contract that the offeree is aware of.
|
|
|
|
When does a revocation of an offer sent through the mail become effective?
|
When it is received.
|
|
|
|
When can an offer not be revoked?
|
1. Acceptance;|2. Option;|3. UCC Firm Offer;|4. Reasonably foreseeable detrimental reliance;|5. Reasonable time after start of performance on a unilateral contract
|
The last four categories are irrevocable offers.
|
|
|
How is an option created?
|
1. Offer;|2. Promise to not revoke or to keep the offer open; and|3. This promise is supported by consideration.
|
|
|
|
What is the UCC Firm Offer Rule?
|
An offer cannot be revoked for up to three months if:|1. Offer to buy or sells goods;|2. Signed, written promise to keep the offer open; and|3. Party is a merchant.
|
|
|
|
What are the three methods of rejecting an offer?
|
1. Counteroffer;|2. Conditional acceptance; and|3. Additional terms
|
The first two apply to all contracts; additional terms rule does not apply to contracts for sale of goods.
|
|
|
On the bar exam, how can you differentiate counteroffers from mere bargaining?
|
Counteroffers will be declaratory, bargaining will be interrogatory.
|
Bargaining does not terminate an offer.
|
|
|
How is a conditional acceptance recognized?
|
Look for an acceptance, followed by "if," "only if," "so long as," "but," or "on condition that."
|
A conditional acceptance always operates the same way as a counteroffer: it terminates the offer and becomes a new offer.
|
|
|
What is the mirror image rule?
|
Under Common Law, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
|
|
|
|
What is the effect of additional terms under the UCC?
|
As long as the response does not make the new terms a condition of acceptance, it is treated as a seasonal expression of acceptance and there is a contract.
|
Whether the parties are merchants is irrelevant.
|
|
|
If there is a seasonal expression of acceptance, are the additional terms part of the contract?
|
If at least one party is not a merchant, the additional term is merely a proposal that is to be separetly accepted or rejected.||If both parties are merchants, the general rule is that the additional term is a part of the contract.
|
|
|
|
What are the exceptions to the rule that additional terms are part of a contract between merchants?
|
1. The additional term materially changes the offer; or|2. The offeror objects to the change.
|
|
|
|
What is the general rule about death terminating an offer?
|
Death or incapacity of either party after the offer but before acceptance terminates the offer.
|
|
|
|
What is the exception to the rule that death terminates an offer?
|
Irrevocable offers.
|
|
|
|
ACCEPTANCE OF OFFERS
|
|
|
|
|
How is an improper verbal response (i.e., counteroffer or conditional acceptance) followed by later conduct indicating a contract treated regarding acceptance?
|
Common Law: The conditional acceptance is treated as a counteroffer and the later conduct is treated as acceptance of that counteroffer. Thus, all the terms of the conditional acceptance are part of the contract.||UCC: The contract is based solely on the conduct. The conditional acceptance is not treated as a counteroffer and is not part of the contract. The terms appearing only in the conditional acceptance are not part of the contract.
|
|
|
|
How is full performance treated regarding acceptance?
|
Full performance is acceptance, but there may be an issue as to notice to the offeror.||Notice turns on:|1. What the offer requires; or|2. Whether the offeree has reason to believe that offeror will not learn of the acceptance.
|
|
|
|
How is start of performance treated regarding acceptance?
|
Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract.
|
Starting to perform is treated as an implied promise to perform and so there is a bilateral contract. Further, since start of performance is a promise to perform, it cannot constitute acceptance of a unilateral contract because a unilateral contract requires performance for acceptance, which means completion of performance.
|
|
|
How is a promise to perform treated regarding acceptance?
|
A promise to perform is acceptance for bilateral contracts, unless the offer states otherwise.
|
|
|
|
What is the mailbox rule?
|
1. All commincations other than acceptance are effective only when received;|2. Acceptance is generally effective when mailed;|3. If a rejection is mailed before an acceptance is mailed, then the first to arrive is effective; and|4. The mailbox rule cannot be used to meet an option deadline.
|
An acceptance is effective when mailed, unless a rejection has been sent first. Then the first to arrive is effective.
|
|
|
How is the shipment of nonconforming goods treated regarding acceptance?
|
Acceptance and breach.
|
If there is an explanation, then there has been an accommodation, which is treated as a counteroffer and no breach.
|
|
|
Who may accept an offer?
|
A person who knows about the offer who is the person to whom it was made.
|
|
|
|
Can offers be assigned by the offeree?
|
No, unless there's an option contract that does not restrict the right to assign.
|
|
|
|
When is silence effective acceptance?
|
When custom indicates that silence is effective acceptance or offeree agrees that silence is effective acceptance by his words or conduct.
|
|
|
|
FORMATION: IS THE AGREEMENT LEGALLY ENFORCEABLE
|
|
|
|
|
What are the eleven legal reasons for not enforcing an agreement?
|
1. Lack of consideration or a consideration substitute;|2. Lack of capacity;|3. Statute of Frauds;|4. Illegality;|5. Public policy;|6. Misrepresentations;|7. Nondisclosure;|8. Duress;|9. Unconscionability;|10. Ambiguity; and|11. Mistake.
|
|
|
|
NON-ENFORCEABLE CONTRACTS: LACK OF CONSIDERATION
|
|
|
|
|
What is consideration?
|
A bargained-for legal detriment.
|
|
|
|
What four forms does consideration gernally take?
|
1. Doing something not legally obligated to do;|2. Not doing something legally entitled to do;|3. Promise to perform; and|Promise to forbear.
|
|
|
|
When is a contractual promise illusory and, therefore, innefective as consideration?
|
When the promisor alone fully controls whether she will actually be require to perform.
|
|
|
|
When is past consideration sufficient to form a contract?
|
When the consideration was expressly requested by promisor and promisee knew that payment for performance was expected.
|
|
|
|
Under Common Law, when can doing something you already have a legal duty to do serve as consideration?
|
Generally, doing what you are already legally obligated to do is not new consideration for a new promise to pay more, unless:|1. Addition to or change in performance; |2. Unforeseen difficulty so severe as to excuse performance; and|3. Third party promise to pay.
|
|
|
|
Under the UCC, can a preexisting legal duty serve as effective consideration?
|
Yes. Article 2 does not have a pre-existing legal duty rule. New consideration is not required to modify sale of goods contract. Good faith is the test for changes in an existing slae of goods contract.
|
|
|
|
When may partial payment serve as cosideration for release of a debt?
|
When payment is not yet due or is disputed.
|
|
|
|
When is a promise legally enforceable even though there is no consideration (what are the types of consideration substitutes)?
|
1. Written promise to satify an obligation for which there is a legal defense; |2. Promissory estoppel
|
|
|
|
What are the elements of prmissory estoppel?
|
1. Promise;|2. Reliance that is reasonable, detrimental, and foreseeable; and|3. Enforcement necessary to avoid injustice.
|
|
|
|
NON-ENFORCEABLE CONTRACTS: LACK OF CAPACITY
|
|
|
|
|
Who lacks capacity to contract?
|
1. Minors (under 18);|2. Mental incompetents (lack ability to understand agreement); and|3. Intoxicated persons (if the other party has reason to know of intoxication).
|
|
|
|
What is the risk of entering into a contract with someone who lacks capacity?
|
The incapable party may disaffirm the contract.
|
|
|
|
When may a person who entered a contract while incapable no longer disaffirm?
|
When they expressly or impliedly affirm the contract after obtaining capacity (ratification after obtaining capacity).
|
|
|
|
When will someone who lacks capacity be liable on the contract under quasi-contract?
|
When the contract is for necessaries. However, since this exception is based on quasi-contract, the incapable person will only be required to pay as much as is equitable.
|
Necessaries include such things as food, clothing, medical care, or shelter.
|
|
|
NON-ENFORCEABLE CONTRACT: STATUTE OF FRAUDS
|
|
|
|
|
What contracts are within the Statute of Frauds?
|
1. Promises in consideration of marriage; |2. Promises by executors to pay an estate's obligation from his own funds; |3. Promises gauranteeing another's debt; |4. Contracts for which full performance cannot be completed within one year from date of contract; |5. Transfers of real estate interests more than a year;|6. Sale of goods $500 or more.
|
1. Marriage;|2. Year;3.|Land;|4.Executor;|5. Gaurantees of suretyship;|6. Sales of goods $500 or more
|
|
|
When does the Statute of Frauds not apply to promises gauranteeing the debts of another?
|
When the main purpose for the guarantee was to benefit the promisor.
|
|
|
|
Does a contract for the duration of someone's life fall under the Statute of Frauds?
|
No, the person could die within a year.
|
|
|
|
How is the Statute of Frauds generally satisfied?
|
Performance or a writing.
|
|
|
|
Other than a signed writing, how can the Statute of Frauds be satisfied in service contract?
|
Full performance by either party.
|
Part performance of a services contract does not satisfy the Statute of Frauds.
|
|
|
What is the effect of part performance on a sale of goods contract?
|
The general rule is that part performance of a contract for the sale of goods satisfies the Statute of Frauds, but only to the extent of the part performance.
|
If the contract is for the sale of goods that are to be specially manufactured, then the Statute of Frauds is satisfied as soon as the seller makes a substantial beginning, which means that the seller has done enough work that it is clear that what she is working on is specially manufactured.
|
|
|
What is the effect of part performance on a contract to transfer real estate?
|
Part performance can satisfy the Statute of Frauds if the buyer has done any two of the following three:|1.Payment;|2. Improvements; or|3. Possession
|
|
|
|
For contracts not under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. Look to see if all material terms are included: who and what; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
|
|
|
For contracts that are under the UCC, how is the Statute of Frauds satisfied through a writing?
|
1. The writing must indicate that there is a contract for the sale of goods and contain the quantity term; and|2. The writing must be signed by the person asserting the Statute of Frauds defense.
|
There is an exception to the signing requirement: If both parties are merchants and the person who receives a signed writing with a quantity term fails to respond within ten days, then that merchant cannot claim there is no contract.
|
|
|
What is the effect of a judicial admission of the existence of a contract on a Statute of Frauds defense?
|
If the defendant asserting a Statute of Frauds defense admits in a pleading or testimony that he had entered into an agreement with the plaintiff, the purpose of the Statute of Frauds, is fulfilled and there is no defense.
|
|
|
|
What is the equal dignity rule?
|
Authorization to enter into a contract for someone else must be in writing only if the contract to be signed is within the Statute of Frauds.
|
|
|
|
When must a contract modification be in writing?
|
If the deeal with the alleged change would be within the Statute of Frauds, then the alleged modiciation agreement must be in writing.
|
|
|
|
Are contracts requiring written modification of a contract effective?
|
Common Law: Contract provisions requiring written modifications are not effective.||UCC: Contract provisions requiring written modifications are effective unless waived.
|
|
|
|
NON-ENFORCEABLE CONTRACTS: ILLEGALITY, PUBLIC POLICY, MISREPRESENTATION, NON-DISCLOSURE, DURESS, UNCONSCIONABILITY
|
|
|
|
|
Is a contract with illegal subject matter enforceable?
|
If the subject matter is illegal, the agreement is not enforceable?
|
|
|
|
Is a contract with illegal purpose enforceable?
|
If the subject matter is legal, but the purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose.
|
|
|
|
When may a court refuse to enforce an agreement on public policy grounds?
|
If, for example, there is an exculpatory agreement that exempts intentional or reckless conduct from liability or there is a convenant not to compete without a reasonable need or reasonable time and place limits.
|
|
|
|
When will a contract be unenforceable because of a misrepresentation?
|
When one party made a false assertion of fact that induced the other to contract.
|
No wrongdoing is required for misrepresentations.
|
|
|
When will a contract be unenforceable because of non-disclosure?
|
When the non-disclosure was wrongful.
|
Usually requires some affirmative act.
|
|
|
When will a contract be unenforceable because of duress?
|
1. When a party is induced to contract by improper threat; and|2. The vulnerable party is taken advantage of because he had no reasonable alternative.
|
|
|
|
When may a court refuse to enforce a contract for unconscionability?
|
1. Unfair surprise (procedural); and|2. Oppressive terms (substantive)
|
Unconscionability is test at the time the agreement was made and allows the court to refuse to enforce all or part of the agreement.
|
|
|
NON-ENFORCEABLE CONTRACTS: AMBIGUITY, MISTAKE
|
|
|
|
|
When may a court refuse to enforce a contract for ambiguity?
|
1. Parties use a material term that is open to at least two reasonable interpretation;|2. Each party attaches a different meaning to the term; and|3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations.
|
If one party has reason to know that the material term is open to more than one reasonable interpretation, then there is a contract based on the understanding of the other party.
|
|
|
When will a contract be unenforceable because of a mutual mistake?
|
A mutual mistake will render a contract unenforceable if both parties are mistaken as to an assumption of fact which materially affects the agreed upon exchange.
|
Mistake as to value is not sufficient
|
|
|
When will a contract be unenforceable because of a unilateral mistake of material fact?
|
Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party.
|
Look for situations in which the other party had reason to know of the mistake.
|
|
|
TERMS OF THE CONTRACT
|
|
|
|
|
What is the parol evidence rule?
|
Extrinsic evidence of prior or contemporaneous agreement not admissible to prove inconsistent or additional terms in a fully-integrated written contract.
|
A court may consider such terms for the limited purpose of determining whether there was a mistake in integration, i.e., a mistake in reducing the agreement to writing.||A court may also consider earlier statements for determing if there was a misrepresentation, fraud, or duress.
|
|
|
What evidence does the court use to explain contract terms or fill gaps, and what priority does it give to each?
|
1. Course of performance (same people, same contract);|2. Course of dealing (same people, different but similar contract);|3. Custom and usage (different but similar people, different but similar contract
|
|
|
|
Under the UCC, if goods are to be delivered by a common carrier under a shipment contract, what is the obligation of the seller?
|
The seller completes his delivery obligation when he|1. Gets the goods to a common carrier;|2. Makes reasonable arrangements for delivery; and|3. Notifies the buyer.
|
|
|
|
Under the UCC, if goods are to be delivered by a common carrier under a destination contract, what is the obligation of the seller?
|
The seller completes his delivery obligation when the goods arrive where the buyer is.
|
|
|
|
How can you identify a shipment contract versus a delivery contract?
|
Most contracts with delivery obligations are shipment contracts (FOB [seller's/good's city]); FOB [any other city] is a destination contract).
|
|
|
|
When does a risk of loss issue arise?
|
1. After contract has been formed and before buyer has received goods, the goods are damaged through no fault of either party.
|
|
|
|
Who bears the risk of loss?
|
1. Agreement.|2. The breaching party, even if breach is unrelated to loss.|3. If delivery by common carrier other than seller, risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligation.|4. If no agreement, no breach, no delivery by carrier, and seller is a merchant, risk of loss shifts from the merchant-seller to the buyer on the buyer's receipt of the goods (risk of loss shifts from a non-merchant seller when he tenders the goods).
|
|
|
|
When does an express warranty exist?
|
When seller has made a promise, description, or other factual assertion. (Not "sales talk.")
|
|
|
|
When does an implied warranty of merchantability exist and what is warranted?
|
When seller deals of goods in the kind, there's an implied warranty that the goods are fit for the ordinary purpose for which such goods are used.
|
|
|
|
When does an implied warranty of fitness for a particular purpose exist?
|
When buyer relies on selle to select suitable goods for a particular purpose and seller has a reason to know of that purpose.
|
|
|
|
How can a seller disclaim implied warranties?
|
1. By using conspicuous language of disclaimer which mentions merchantability; or|2. Using language like "as is" or "with all faults."
|
Express warranties cannot be disclaimed.
|
|
|
What is the general test of whether a seller's limitation of warranties is effective?
|
It is effective if it isn't unconscionable. It is prima facie unconscionable if breach of warranty on consumer goods causes personal injury.
|
It is possible to limit remedies, even for express warranties.
|
|
|
PERFORMANCE
|
|
|
|
|
Under Common Law, when is a party's performance adequate?
|
If one party substanitally performs then the other party must pay or otherwise perform.
|
|
|
|
PERFORMANCE: REJECTION
|
|
|
|
|
Under UCC, when may a buyer reject goods?
|
If the seller does not meet the perfect tender standard, the buyer has the option to retain the goods and sue for damages, or reject all or any commercial unit and sue for damages (rejection is limited by cure, installment contract, and acceptance).
|
Perfect tender only applies to the sale of goods, it means perfect goods and perfect delivery, and a less than perfect tender by the seller generally gives the buyer the option of rejecting the delivered goods.
|
|
|
When does a seller have the right to cure under UCC?
|
1. Seller has reasonable grounds to believe that imperfect tender would be acceptable; or|2. The time for performance has not yet expired.
|
The reasonable grounds acception applies even after the performance date has passed.
|
|
|
What is required for an installment contract?
|
1. Delivery of the goods in separate lots;|2. The separate lots are to be separately accepted.
|
|
|
|
When does a buyer have the right to reject an installment?
|
Only where there is a substanital impairment in that installment that can't be cured.
|
|
|
|
PERFORMANCE: ACCEPTANCE
|
|
|
|
|
What is an effective acceptance of goods?
|
1. Express acceptance;|2. Implied acceptance when buyer retains the goods without objection after an opportunity for inspection.
|
Payment without opportunity for inspection is not acceptance.
|
|
|
PERFORMANCE: REVOCATION
|
|
|
|
|
When can a buyer of goods revoke acceptance?
|
1. Nonconformity substantially impairs the value of the goods;|2. Excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction; and|3. Revocation within a reasonable time after discovery of nonconformity.
|
|
|
|
What other requirements are there for rejection and revocation?
|
1. Seasonably notify seller;|2. Hold goods for seller; and|3. Follow reasonable seller instructions.
|
|
|
|
What are the three things to remember about payment?
|
1. Open price term means reasonable price at time of delivery;|2. Price to be fixed by buyer or seller means that the price must be so fixed in good faith; and|3. Price payable in goods means that each party is seller of goods it provides.
|
|
|
|
REMEDIES FOR UNEXCUSED NONPERFORMANCE
|
|
|
|
|
NON-MONETARY REMEDIES: SPECIFIC PERFORMANCE
|
|
|
|
|
When is specific performance an appropriate remedy for breach?
|
When damages would be inadequate, as in the case of real estate or unique goods, and judical administration of the injunction would not be overly burdensome.
|
Specific performance is an equitable remedy, so look first for an adequate remedy at law or unclean hands or other parties' equities.
|
|
|
Is specific performance available for personal service contracts?
|
No specific performance, but possible injunctive relief.
|
|
|
|
When might the courts reform a contract?
|
1. when there was a mistake in the writing of an agreement (such as a clerical error), or |2. there was fraudulent misrepresentation as tow hat was included in an agreement.
|
|
|
|
NON-MONETARY REMEDIES: RECLAMATION
|
|
|
|
|
When does a seller have the right to reclaim delivered goods?
|
1. Buyer must have been insolvent at the time that it received the goods;|2. The seller demands return of goods within 10 days of receipt; and|3. The buyer still has goods at time of demand.
|
The 10 day rule becomes a reaonable time rule if before delivery there had been an express representation of solvency by the buyer.
|
|
|
What is the risk of entrusting goods to a seller?
|
If owner leaves goods with seller of like kind and that seller wrongfully sells the goods, a good faith purchaser for value gains superior rights to the property.
|
|
|
|
MONEY DAMAGES: GERNEAL CONCEPTS
|
|
|
|
|
What measure of damages is the non-breaching party normally entitled to?
|
Expectation damages: Put non-breaching party whaere it would have been if contract had been performed.
|
|
|
|
Explain damages based on reliance interest?
|
Puts non-breaching party in the position it was in before the contract (as if the contract never happened).
|
|
|
|
Explain damages based on restitution interest?
|
Prevents unjust enrichment to breaching party.
|
|
|
|
Appropriate damages when seller breaches and buyer keeps the goods?
|
FMV if goods were perfect - FMV as delivered.
|
|
|
|
Appropriate damages where seller breaches and seller keeps the goods.
|
Market price at time of discovery of breach - contract price; or|Replacement price - contract price.
|
|
|
|
Appropriate damages where buyer breaches and buyer has the goods.
|
Contract price.
|
|
|
|
Appropriate damages where buyer breaches, seller has the goods.
|
Contract price - market price at time and place of delivery; or|Contract price - resale price;|In some cases, add on provable lost profits.
|
|
|
|
What are incidental damages?
|
Costs incurred in dealing with the breach.
|
|
|
|
When are incidental damages recoverable?
|
Always
|
|
|
|
What are consequential damages?
|
Damages arising from non-breaching party's special circumstances.
|
|
|
|
When are consequential damages recoverable?
|
When breaching party had reason to know of the special circumstances at the time of the contract.
|
|
|
|
What duty does the non-breaking party have regarding damages?
|
Duty to mitigate: No recovery for damages that could have been avoided without undue burden on non-breaching party.
|
Burdens of pleading and proof on breaching party.
|
|
|
What burden of proof does non-breaching party have regarding damages?
|
Must prove damages with reasonable certainty.
|
Hard to recover damages if new business or new business activity. Here, consider damages based on reliance instead of expectation interest.
|
|
|
When is a liquidated damages provision enforceable?
|
1. Damages were difficulat to forecast at time contract was made; and|2. Provision is a reasonable forecast.
|
Liquidated damages provision cannot constitute a penalty. Fixed numbers are presumptively invalid as a penalty.
|
|
|
When will limitations on remedies be unenforceable?
|
When unconscionable at time of contract.
|
|
|
|
EXCUSE OF NON-PERFORMANCE
|
|
|
|
|
Under Common Law, what are the four rules regarding excuse due to other party's improper performance?
|
1. Damages can be recovered for any breach;|2. Only a material breach by one party excuses the other party from performing;|3. Whether a breach is material is a question of fact; and|4. If there is substantial performance, then the breach is not matieral (if the breach is material, then the performance was not substantial).
|
Divisible contract exception: In a divisible contract, there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract (look at whether price is stated as a lump sum or on a per performance basis).
|
|
|
Generally, when will a party's performance be excused under the UCC?
|
1. The other party's tender was not perfect; or|2. Something happened after formation that excuses nonperformance.
|
|
|
|
What is the general rule and the exception to excuse from performance due to failure of an express condition.
|
Express conditions are normally enforced srictly, but when performance is subject to a party's "approval," the performance will be demmed approved if a reasonable person would approve (excluding matters of personal taste).
|
An express condition is a mutually agreed upon promise modifier. Most contracts on the bar are not subject to express conditions (and don't confuse this with a counteroffer).
|
|
|
How can failure of an express condition be excused, requiring the other party to perform?
|
1. Estoppel: Party gives up the condition before performance by the other party;|2. Waiver: Party gives up condition after the other party has performed;|3. Prevention: The party protected by the express condition hinders or prevents the occurrence of the express condition; and|4. Avoidance of forfeiture: Court excuses the non-occurrence of the express condition to avoid excessive harm to the party not protected by the express condition.
|
|
|
|
When is failure to perform excused by the other party's anticipatory repudiation?
|
Prior to the time that performance is due, the repudiating party makes an unambiguous statement or engages in conduct indicating that the repudiating party will not perform.
|
|
|
|
What other effect does anticipatory repudiation have aside from excusing performance?
|
Allows an immediate action for damages.
|
|
|
|
When can anticipatory repudiation be retracted?
|
When the other party has not materially changed his position.
|
Performance is then reimposed, but can be delayed until the non-repudiating party receives adequate assurance that the repudiating party will perform.
|
|
|
When can a contract be rescinded?
|
When neither party has fully performed.
|
|
|
|
What is accord and satisfaction?
|
Parties to an existing contract agree to accept a different performance in satisfaction of the existing obligation.
|
|
|
|
How is an accord satisfied?
|
By the different performance.
|
|
|
|
What happens if an accord is not satisfied?
|
The other party may sue for the original obligtion or the accord.
|
|
|
|
What is the difference between accord and satisfaction and modification?
|
Accord and satisfaction allows a party to satisfy his obligation with a different performance; modification is an agreement by the parties to an existing obligation to accept a differetn agreement in satsifaction of the existing obligation
|
The distinction is different performance vs. different agreement.
|
|
|
What is a novation?
|
An agreement by both parties to the original contract to substitute an original party with a new third party. Novation excuses the person replaced from any liability for non-performance.
|
|
|
|
What is delegation?
|
A unilateral decision by one party to have a third party perform his obligation under the contract. Delegation does not excuse the person replaced from liability for non-performance.
|
|
|
|
When is performance excused due to imposibility, impracticability, or frustration of purpose?
|
After the contract was formed but before performance, some unforeseen event makes performance impossible, commercially impracticable, or frustrates the original purpose for entering into the contract.
|
|
|
|
When is a party's performance excused due to impossiblity because of someone's death?
|
Only when that person was a "special" part of the contract.
|
Generally, death does not make a party's contract obligations disappear.
|
|
|
When does a third party beneficiary have the right to sue to enfoce a contract?
|
1. the third party was intended to be a beneficiary of the contract, and |2. that party's interest in the contract has vested.
|
|
|
|
THIRD PARTY PROBLEMS
|
|
|
|
|
What is a third party beneficiary?
|
1. Not a party to the contract;|2. Able to enforce contract others made for her benefit
|
|
|
|
Who is the promisor?
|
The person who is making the promise that benefits the third party.
|
|
|
|
Who is the promisee?
|
The person who obtains the promise that benefits the third party.
|
|
|
|
How does a third party beneficiary's interest in a contract vest?
|
1. Knowledge of the contract; and|2. Reliance on or assent as requested to the contract.
|
If so, third party's rights have vested and the contract cannot be cancelled or modified without her consent unless the contract otherwise provides.
|
|
|
What defenses are available on a third party beneficiary contract?
|
If the beneficiary sues the promisor, the promisor can assert any defense he would have had against the promisee.
|
|
|
|
Who can sue whom on a third party contract?
|
1. Beneficiary can recover from promisor;|2. Promisee can recover from promisor; and|3. Beneficiary can recover from promisee if beneficiary is a creditor on a pre-existing debt.
|
|
|
|
What is an assignment?
|
A transfer of rights under a contract in two separate steps:|1. Contract between two parties; and|2. One of the parties later transferes rights under that contract to a third party.
|
|
|
|
What's important to look for when a contract limits assignments?
|
Whether the contract prohibits or, alternatively, invalidates assignments.
|
Courts favor assignability of contract rights and so they are reluctant to read contract language as preventing an assignment.
|
|
|
What is the effect of a prohibition on assignment?
|
Language of prohibition takes away the right to assign, but not the power to assign. This means that the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the assignment.
|
|
|
|
What is the effect of an invalidation on assignment?
|
Language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
|
|
|
|
Even when not mentioned in the contract, when how does Common Law limit assignments?
|
Even if a contract does not limit the right to assign, Common Law bars an assignment that substantially changes the duties of the obligor.
|
Assignment of right to payment is never a substantial change.||Assignment of right to contract performance other than right to payment is usually a substantial change.
|
|
|
May assignee sue obligor for performance?
|
Yes, however, performance by obligor to assignor is still effective unless obligor knows of the assignment.
|
|
|
|
Is consideration required for an assignment?
|
Generally, no. But gratuitous assignments may be revoked.
|
|
|
|
What implied warranties accompany an assignment for consideration?
|
Assignor warrants:1.|The right assigned actually exists;|2. The right assigned is not subject to any defenses by the obligor; and|3. The assignor will do nothing to impair the value of the assignment.
|
Assignor, however, does not warrant what the obligo will do.
|
|
|
What is the general rule for priority where there have been multiple gratuitous assignments?
|
Last assignee wins; since gratuitous assignments can be revoked, a later gift assignment revokes an earlier gift assignment.
|
|
|
|
What is the exception to the general rule that the last gratuitous assignment takes priority?
|
A gratuitous assignment is not revocable if:|1. It is the subject matter of a writing delivered to the assignee;|2. The assignee has received some indicia of ownership; or|3.The assignee has relied on the assignemnt in a way that is reasonable, foreseeable, and detrimental.
|
If the gift assignment is not revocable, then it will take priority over a later assignment.
|
|
|
What is the general rule for priority where there have been multiple assignments for consideration?
|
First assignee wins.
|
|
|
|
What is the exception to the general rule that the first assignee for consideration takes priority?
|
A subsequent assignee for consideration takes priority over an earlier assignee for value only if he both:|1. Does not know of the earlier assignment; and|2. Is the first to obtain payment, a judgment, a novation, or indicia of ownership.
|
|
|
|
May an assignor for consideration recover from an obligor?
|
No.
|
|
|
|
What defenses are available to an olbigor again an assignee?
|
The defenses the obligor would have against assignor.
|
|
|
|
What are the limitations on delegation?
|
Generally, contractual duties are delegable unless either:1. Contract prohibits delegations or prohibits assignments;|2. Contract calls for very special skills; or|3. Person to perform contract has a very special reputation.
|
|
|
|
What if, after delegation, the third party delegatee does not perform?
|
1. Delegating party always remains liable.|2. Delegatee liable only if she receives consideration from delegating party.
|
|
