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166 Cards in this Set

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Key Issue 1/Applicable Law: What are the 2 types of K law that the MBE tests?
CL of K, and A2 of UCC.
Key Issue 1/Applicable Law: To what does A2/UCC apply?
A2 applies to sale of goods (SOG) moveable, personal property.
Key Issue 1/Applicable Law: To what does CL law of K apply?
CL applies to all other Ks. (RP, services)
Key Issue 1/Applicable Law: In a hybrid K (SOG and Services), how determine which law applies?
Key is which element is more important.
Key Issue 1/Applicable Law: In SOG K, does status of party matter?
No. Doesn't matter whether parties are merchants, nor does it matter what the price is. A2 applies to every SOG.
Key Issue 1/Applicable Law/NY: What kinds of K law are tested on NY Section?
3 kinds: CL of Ks, A2 UCC, & A2A UCC. [A2A not on MBE, not adopted in every state, but is in NY]
Key Issue 1/Applicable Law/NY: How do you know which law applies?
A2 UCC applies to a SOG. A2A UCC applies to a lease of GOODS. CL w/ NY distinctions applies to all other Ks. (like lease of RP)
Key Issue 2/K Formation: What is a K?
A legally enforceable agreement.
Key Issue 2/K Formation: What is an express K?
A K created by the parties' words (oral or written).
Key Issue 2/K Formation: What is an implied K?
A K created by the parties' conduct.
Key Issue 2/K Formation: What is a quasi-K?
Quasi-K protects against unjust enrichment (equity) whenever K law yields an unfair result. QK is remedy of last resort [NY essay - if all else fails, look for QK to avoid unjust enrichment]
Key Issue 2/K Formation: What can a P recover in quasi-K?
The reasonable value of benefit conferred, not K price. Usually will be less than the K price. K price is ceiling on recovery.
Key Issue 2/K Formation: How can an offer in a bilateral K be accepted?
In any reasonable way.
Key Issue 2/K Formation: How can an offer in a unilateral K be accepted?
Only by performing
Key Issue 2/K Formation: What are MS fact patterns for uni-Ks?
1. Look for offer that expressly says that it can be accepted only by performing.
2. A reward, a contest, or a prize.
Key Issue 2/K Formation:

1. Formation methodology?

2. What are the steps to making an agreement?
1. Look first for an agreement (an offer that's been accepted), then see if the agreement is legally-enforceable (are there any defenses against formation?).

2. An agreement involves a 3 step process:

(1) Was an offer ever made?

(2) Was the offer terminated b/f accepted?

(3) Was the offer accepted?
Key Issue 2/K Formation/Offer: What is an offer?
An offer is a manifestation of an intention to be bound. Bar - 2 types of offer problems - ads and indefiniteness.
Key Issue 2/K Formation/Offer: Is an ad an offer?
General rule - an ad is not an offer. EXCEPTION - Unless the ad specifies a quantity term and who can accept.
Key Issue 2/K Formation/Offer: What to look for with regard to terms too indefinite to be enforced?
Common bar issues: requirements Ks (A2) and open price terms (CL).
Key Issue 2/K Formation/Offer: Examples of requirement Ks and open price terms.
1. Requirement Ks (A2): S accepts C's offer to buy all beans it requires from S for 6 years @ $1 a can. For 3 years, C orders 1k cans/yr. Can C require S to deliver 8k cans this year? No. C can't take S by surprise, even if ordering cans in good faith. Any increase can't be out of line w/ C's prior requirements.

2. Open price term (CL): An open price term is too indefinite under CL, but not too indefinite under A2. If W sends you letter offering to sell ranch, but doesn't state a price, no offer, b/c ranch is RP, so CL governs. Under CL offer must contain a price term. But if W sends letter offering to sell you a painting, it's an SOG, so A2 applies. Under A2, don't need price b/c A2 will fill in gap w/ reasonable price.
Key Issue 2/K Formation/Offer/Termination: What 4 ways can an offer be terminated?
1. Lapse
2. Revocation
3. Rejection
4. Death before acceptance
L R R D
Key Issue 2/K Formation/Offer/Termination: What is lapse.
An offer lapses after a stated term or after a reasonable time has passed.
Key Issue 2/K Formation/Offer/Termination: What is revocation?
An offer terminates when offeror revokes the offer.
Key Issue 2/K Formation/Offer/Termination: Can an offer be revoked any time before acceptance?
Yes.
Key Issue 2/K Formation/Offer/Termination: How to revoke an offer before acceptance?
Direct revocation: the offeror indicates directly to the offeree that he has changed his mind about the deal.

***Indirect revocation: offeror engages in conduct that indicates he's changed his mind and the offeree is aware of the conduct.
Key Issue 2/K Formation/Offer/Termination: In what 4 situations is an offer not revocable?
1. Option.
2. Foreseeable reliance b/f K (very rare)
3. Starting to perform a uni-K
4. Firm offer (A2)
F O F S
Key Issue 2/K Formation/Offer/Termination: What's an option?

***NY Distinction?
An option is a promise to keep the offer open that is paid for.

***NY DISTINCTION 1: While in MS, it's not enough to create an option by promising to keep an offer open in writing w/o payment, a signed written promise not to revoke is enforceable even w/o payment.
Key Issue 2/K Formation/Offer/Termination: What's an example of foreseeable reliance?
Sub-K-or S submits bid to do work on project for 250k. K-or C relies on S's bid in computing its own bid on the project. S can't revoke offer, b/c it is foreeseeable to S that C will rely.
Key Issue 2/K Formation/Offer/Termination: Is prep to perf enough to make an offer irrevocable?
Mere preparation to perf not enough to make an offer irrevocable under this exception. (Prep would be enough under S-K-or ex)
Key Issue 2/K Formation/Offer/Termination: What's a firm offer (FO) under A2?
(A2) In a sale of goods if

(1) a merchant promises in a

(2) signed writing to keep an

(3) offer open, then the offer is irrevocable [almost every business person is a merchant under A2's broad definition].
Key Issue 2/K Formation/Offer/Termination: How is the term "signed" defined under A2?
Broadly. Includes signature, initials, symbols, and letterhead.
Key Issue 2/K Formation/Offer/Termination: Under A2, what's the time limit of FO?
Under A2, an FO has a 3 month time limit. It's only firm or irrevocable for 3mths But if paid for, it's an option.

[Tip: If you don't have an option, look for FO under A2 in sale of goods, FO is a fallback if not option]
Key Issue 2/K Formation/Offer/Termination: What if a promise not to revoke (FO) does not state a time period?
A2 - Offer will be firm for a reasonable time not to exceed 3 months.
Key Issue 2/K Formation/Offer/Termination: May a seller revoke a signed, written offer to sell a car?
Yes. What's missing is a promise to keep offer open. Not every signed offer is an FO. Needs to promise to keep offer open. Under A2 need all 3. Don't fall for this bush league shit.
Key Issue 2/K Formation/Offer/Termination/Revocation: When is revocation of an offer effective?
Only on receipt [MS loves to test on timing]. Distinguish from acceptance, which is effective when dispatched (mailbox).
Key Issue 2/K Formation/Offer/Termination: May an offer be revoked after it has been accepted?
No. An offer can't be revoked once it has been accepted.
Key Issue 2/K Formation/Offer/Termination: How does an offeree terminate an offer?
An offer terminates when an offeree rejects it (inappropriate respons).
Key Issue 2/K Formation/Offer/Termination: What is the effect of a counteroffer? Does bargaining terminate an offer?
A counteroffer operates as a rejection, but mere bargaining does not (Asking a question).
Key Issue 2/K Formation/Offer/Termination: If S offers to sell for $X, and B says I'll only pay $X-1, If S refuses, can B later accept S's orig offer?
No. B's counteroffer terminated the offer, it's too late for B to accept S's original offer. BUT: IF B had said, "will you take $X-1?" this is bargaining. If S said no, B could later come back and accept S's original offer to sell for $X.
Key Issue 2/K Formation/Offer/Termination: What does conditional acceptance operate as?
It operates as a rejection. Can't agree on condition, "provided that"/"so long as"/"if" A conditional acceptance is not an acceptance at all. Just like saying no.
***Key Issue 2/K Formation/Offer/Termination: Does an acceptance that varies the terms of the offer operate as a rejection under CL? How about under A2?***
***An acceptance varying offer operates as a rejection under CL, but not under A2.***

CL - Acceptance must mirror offer (mirror image rule)
***Key Issue 2/K Formation/Offer/Termination: How about under A2?***
A2 Sale of goods - An acceptance does not have to mirror the terms of the offer
1. Under A2, adding a term or changing a term doe not prevent acceptance [policy - facilitate K formation]
2. However, the offeree's terms ar not automatically included in the K. They become part of the K only if:
(A) Both parties = merchants,
(B) The term is not a "material" change, AND
(C) The offeror does not object w/in a reasonable time.
BOTTOM LINE: Offeree's terms very rarely become part of the K.
Key Issue 2/K Formation/Offer/Termination: Example of A2 acceptance?
B makes written offer to buy 100 widgets from S for 1k. Offer doesn't mention any warranties. S's written acceptance disclaims all warranties. Is there a K? YES, the acceptance is valid, but S's additional terms are material, so they are not part of the K, even though the K was validly accepted. Still a K, just w/o S's additional terms. If S's acceptance had merely added the terms "saturday delivery," and B didn't object w/in a reasonable time, those additional terms would then become part of the K.
Key Issue 2/K Formation/Offer/Termination: What effect does death of either party have on a revocable offer?
Death of either party terminates a revocable offer.
Key Issue 2/K Formation/Offer/Termination: What effect does death of either party have on an irrevocable offer?
An irrevocable offer like an option is not terminated by death.
Key Issue 2/K Formation/Offer/Acceptance: What controls how an offer is to be accepted?
The language of the offer controls. If A emails B a job offer that states "you can accept this offer only by reporting for work on Monday," if B replies "I accept," this is not a valid acceptance. B can only accept by reporting for work on Monday. Ordinarily, offer can be accepted by a promise, but not in this case.
Key Issue 2/K Formation/Offer/Acceptance: What effect does starting performance have in a bilateral K?
Starting perf is acceptance (b/c bi-K can be accepted in any reasonable way) of an offer to enter a bi-K and carries with it an implied promise to finish the job.
Key Issue 2/K Formation/Offer/Acceptance: What effect does starting performance have in a uni-K?
Starting perf is not acceptance of an offer to enter a uni-K, only completing perf is acceptance.
Key Issue 2/K Formation/Offer/Acceptance: Once performance of a uni-K begins, can offeror revoke offer?

***NY?
Not in MS. Once offeree starts perf. Offeror can no longer revoke. Offeror chose this kind of offer and is stuck w/ consequences.

***NY DISTINCTION: Offeror can still revoke until offeree completes performance.
Key Issue 2/K Formation/Offer/Acceptance: How does improper performance operate?
CL: Improper performance operates as acceptance and breach.
A2: Improper performance operates as acceptance and breach unless S is sending the goods as an accommodation to B. Such accommodation would then operate as a counteroffer which B is free to accept or reject.
Key Issue 2/K Formation/Offer/Acceptance: Does silence on the offeree's part constitute acceptance?
No. Offeree's silence is generally not acceptance.
Key Issue 2/K Formation/Offer/Acceptance: Generally, when is an acceptance effective?
When it is mailed [Mailbox Rule. Policy: protects the offeree against revocation once he's mailed an acceptance]
***Key Issue 2/K Formation/Offer/Acceptance: What are the 4 exceptions to the Mailbox Rule?***
1. Offer provides otherwise: MBR is the default rule. Only applies when offer silent on when acceptance is effective.

2. Irrevocable offer: MBR does not apply to an irrevocable offer. [rationale: if the offer is irrevocable, then the offeree doesn't need the protection of the MBR]

3. Offeror relies on overtaking rejection [Where an acceptance is sent first, but rejection arrives first]: MBR will still apply UNLESS offeror relied on the rejection.

4. Rejection sent first: MBR rule doesn't apply. It's a race. Whichever one gets there first is effective.
Key Issue 2/K Formation/Defenses Against: What are the Ds against formation? (8)
1. Capacity, Lack of,
2. Duress
3. Misrepresentation/non-disclosure of a material fact
4. Ambiguity/Misunderstanding
5. Mistake
6. Lack of Consideration
7. Public Policy
8. Unconscionability
MAD CLUMP
Key Issue 2/K Formation/Defenses Against: What categories of people can use capacity as a D against formation?
Three Is: Infants (under 18), Intoxicated, mentally Incapacitated.
Key Issue 2/K Formation/Defenses Against: What is the general rule for D of lack of capacity?
An incapacitated D (D only) has the right to disaffirm the K if he wants to avoid it.
Key Issue 2/K Formation/Defenses Against: When does an incapacitated party impliedly affirm a K?
An incapacitated impliedly affirms a K by retaining the benefit of it w/o complaint after gaining capacity.
Key Issue 2/K Formation/Defenses Against: What is the exception to the rule of lack of capacity?
An incapacitated party is liable for necessaries (i.e., food, shelter, clothing, medical care), but only on a quasi-K basis.
Key Issue 2/K Formation/Defenses Against/Duress: Examples of Duress?
1. S threatens to shoot P unless P works for him. P agrees. Is their agreement legally enforceable (a K)? No. Can't threaten physical harm.
2. S Ks to sell B 100 Caps for 2k. S later refuses to deliver unless B also agrees to buy 50 J caps for 1k. S only source for G Caps, which B needs right away. B agrees to buy the J caps. Is the K to buy the J caps enforceable? No, b/c B vic of economic duress. Arises where threat to break existing K or vic agrees only to get K done, and where there is no reasonable alternative.
3. S sells umbrella $ 3/ea. When it rains, S ups price to $10. During storm, B pays S $10 and gets an umbrella. After, B can't get money back on ground of duress b/c it doesn't rise to econ duress, just taking advantage of the situation.
Key Issue 2/K Formation/Defenses Against/Misrep or non-disclosure of a material fact: May even an honest/innocent misrep be a fatal flaw in the agreement process?
Under K law, yes, so long as it goes to a material fact. Non-disclosure of a material fact will also be a D.
Key Issue 2/K Formation/Defenses Against/Ambiguity or Misunderstanding: When does issue arise?
When B and S are on different wavelengths. Ex: B & S K for delivery of cotton on ship P. B means one sailing in May, S, the one in July. Neither knows or has reason to know there are 2 ships named P. Result: No K, b/c of misunderstaning.
Key Issue 2/K Formation/Defenses Against/Ambiguity or Misunderstanding: In the above example, what if B knows or has reason to know that there are 2 ships named P?
There will be a K on S's term. The innocent parties meaning governs.
Key Issue 2/K Formation/Defenses Against/Mistake: What are the 2 types of mistakes that might be Ds against formation?
1. Mistake about a material fact.
Ex 1: S agreed to sell home to B for 3M. Neither aware that a fire had destroyed home 3 days earlier. B not bound. Excuse by parties' mutual mistake b/c existence of house was central to K.
Ex 2: S agrees to sell B print for 75k. Both believe print is by W. After K, parties learn not by W. K unenforceable b/c artist ID was critical aspect of K.
***Ex 3: If above print by W, but worth only 10k and not 75k, as both believed - a mistake as to market value is generally not considered material. B stuck with bargain, should have had print appraised b/f agreeing to buy.***
2. Unilateral mistake
Ex: S agrees to sell B print for 75k. B believes print by W, S doesn't. After agreement, B learns that print not by W. B is still obligated to buy print b/c a unilateral mistake is generally not a fatal flaw unless other party knew about it or had reason to know about it. Too easy to invent 'mistake.' B stuck w/ bargain.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: What's the definition of consideration?
Consideration is a 'bargained-for legal detriment/benefit.'
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: What forms can consideration take?
Can bargain for a promise, performance or even forbearance.
Ex 1: C promise to sell E dog in exchange for her promise to pay him $400. E refuses to pay. E has no D of lack of consideration b/c C's promise to sell was consideration for E's promise to pay.
Ex 2: A prom to pay B $100 if B stops listening to NIN. B does what A asks. There is consideration for A's promise to pay $100 (B forbearance), A bound.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: Is past consideration OK?

***NY Exception
No. "Past consideration" is not consideration at all.
Ex 1: S helps P move in. Later P promises to pay S 300 for helping P move in. P now refuses to pay. There was no consideration for P's promise to pay S 300 b/c P didn't ask for anything in return for her promise. P just made a promise. Can't bargain for something that has already been done.
Ex 2: Same facts as above, except P writes S: "As thanks for helping me move, I promise to pay you 300. /signed/ P"
Writing wouldn't change outcome in MBE.

*But in NY - Past consideration is binding if it is expressly stated in a signed writing and can be proven.*
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: Does the law care about adequacy of consideration (Paying $500 for $20 CD)
No, as long as there is a bargain.
***Key Issue 2/K Formation/Defenses Against/Lack of Consideration: What are the rules on K modification?***
***CL rule Differs from A2 SOG, NY Distinction***
CL: New consideration is required to modify a K. Performing a pre-existing duty not enough. [Pre-existing Duty Rule, PEDR]

***NY Distinction:

PEDR doesn't apply if modification is in a signed writing.

A2: Consideration is not required to modify a K, but you must show good faith.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: Examples of Modification rules?
1. CL - A Ks to sing at O's club for 25k. On arrival, A demands 30k instead. O agrees. After A sings, O refuses to pay her the extra 5k. No consideration for O's promise to pay the extra 5k, b/c A didn't do anything extra (consideration) for the 5k. PEDR. If A agreed to sign autographs for an hour in exchange for the 5k, that would make O's promise legally enforceable. NOTE: PEDR can't be used as a D by a TP. So if TP agreed to pay the 5k, TP wouldn't have a K modification D. Only available to party to original K.
2. NY - It wouldn't matter in MS if O's promise in writing, but in NY, PEDR doesn't apply if modification in a signed writing.
3. A2 SOG - Consideration not required to modify K, but must show good faith. So if M Ks to sell frock to H for 4k, and later they agree to increase price to 4.5k, H's promise to pay the additional 500 enforceable as long as there was a good faith reason for raising price. Just need good faith.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: When is consideration required for a promise to forgive the balance of the debt in exchange for paying off less than what is owed?
It depends on whether the debt is in dispute.
Ex: A owes V 2.5k. Debt undisputed. A and V orally agree that if A pays 2k now, V will forgive the balance. A pays V 2k. V sues for the balance. A's payment of 2k isn't consideration for V's promise to forgive the balance b/c there is no new benefit to V, and no new detriment to A, since A already owed the money.
Ex: If above agreement between A and V was in writing, under MBE, same outcome. But in NY, no consideration needed if promise to forgive the balance was in signed writing.
Ex: If the 2.5k debt was in dispute, then no consideration would be required, b/c law favors settlement of disputed claims for efficiency reasons.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: Is a written promise to pay a debt whose collection is time barred by S/L enforceable even w/o consideration?
Yes. The signed writing promising to repay the uncollectable debt serves as a substitute for consideration both MS and NY.
Key Issue 2/K Formation/Defenses Against/Lack of Consideration: When does PE (AKA reliance) operate as a substitute for consideration?
PE makes a promise enforceable if there is foreseeable reliance on the promise, even if there was no consideration for the promise. IF L promises to renew lease, and in foreseeable reliance on that promise, T repaints, enforceable even w/o cons
NOTE: This is never 1st choice as answer. Always look for consideration first, if none, look for PE as a sub for cons.
Key Issue 2/K Formation/Defenses Against/Public Policy: When will a court invalidate or narrow a covenant not to compete (CNTC)?
A court will invalidate or narrow a CNTC that operates as a restraint on trade. Factors for consideration:
1) Scope of the covenant (breadth) [consider duration and geography] - depends on the facts, and whether court finds that geographic and time limits are reasonable. Policy: Balance freedom of K against restraint of trade. Fact sensitive.
2) Need for the CNTC [consider uniqueness of services] - Ask was there a need for the protection. Chef - has unique talents, enforceable. Busboy - not unique, no need for CNTC, unenforceable.
NOTE: Important on NY Bar.
Key Issue 2/K Formation/Defenses Against/Public Policy: How far can exculpatory clause go towards eliminating liability?
An exculpatory clause can eliminate liability for negligence, but not for gross negligence or intentional torts.
Key Issue 2/K Formation/Defenses Against/Unconscionability: When is uncon measured?
Unconcsionability is measured at the time of the agreement, not at the time of the breach.
Note: Not heavily tested.
Key Issue 2/K Formation/Defenses Against/Unconscionability: What types of uncon?
Substantive: Terms of the agreement are unfair (servitude)
Procedural: Tactics (process) by which the agreement was reached was unfair (fine print, legalese, unequal barg power).
NOTE: May have both, but don’t need both, just one.
WARNING: Don't fixate on this, easy to do. When reading Q, if all you see is uncon, read it again.
Key Issue 3/Statute of Frauds/Overview: What 3 questions to aks when analyzing a S/F Q?
1. Do you need a writing to satisfy S/F?
2. Do you have a satisfactory writing?
3. If w/in S/F, do you fall w/in an exception to the S/F?
Note: Think about S/F as completely separate from formation issues. If you don't need a writing, still to need to see if formation valid. S/F - designed to preven fraud, remember this when analyzing possible S/F issue. Several Qs MBE/NY.
Key Issue 3/Statute of Frauds/When Writing Required: What kinds of Ks need a writing to be enforced (are "w/in the S/F")?
MY LEGS KM

1. MARRIAGE

2. YEAR (Ks incapable of performing w/in)

3. LAND Sale

4. EXECUTORS and Administrator

5. GOODS (SOG $500+) [***NY ONLY: LOG for $1000 or more (A2A)]

6. SURETYSHIP

8. K modifications

9. MISCELLANEOUS ***provisions of the NY S/F***: RE commissions, finders' fees, change of beneficiary on insurance policy
M Y L E G S K M
Key Issue 3/Statute of Frauds/When Writing Required/Transfer of interest in RP: What types of RPKs are w/in S/F?
Includes leases. Equal Dignities applies (An O's A must have signed authorization to buy/sell RP). Note: Building something on land doesn't involve interest in RP.
Key Issue 3/Statute of Frauds/When Writing Required/Performance w/in 1 year: Does it matter if performance actually takes more than 1 year?
No. TIP: Doesn't matter that performance actually takes more than 1 year. All that matters is whether performance could have been complete w/in 1 year. As long as full performance w/in 1 year was theoretically possible under the K, no writing required by S/F.
Key Issue 3/Statute of Frauds/When Writing Required/Performance w/in 1 year: Is a lifetime employment agreement w/in S/F?
Not on the MBE. BUT:
***NY DISTINCTION: A lifetime employment is w/in S/F in NY. Writing required.
Key Issue 3/Statute of Frauds/When Writing Required/Performance w/in 1 year: When evaluating whether K w/in S/F or not, when does the clock start to run?
Clock starts to run when agreement made, and not when K begins. If today E agrees to hire W for 1 year starting next Monday. Performance would take 1yr + from date agreement made, w/in S/F.
Key Issue 3/Statute of Frauds/When Writing Required/A2 SOG: For what does A2 UCC require a writing?
A SOG $$500 requires a writing to be enforceable under A2 UCC S/F. A2 as a whole applies to every SOG, but A2 also has a S/F provision which has a minimum price threshold.
Key Issue 3/Statute of Frauds/When Writing Required/A2A LOG: What's the threshold for LOG under A2A UCC
Under A2A UCC (NY only) If lease for goods worth >= $1k over the term of the lease, w/in S/F. Ex: 1yr lease @ $300 per month, = 3600. Falls w/in S/F.
Key Issue 3/Statute of Frauds/When Writing Required/Suretyship: What is a suretyship?
It's a promise by a 3P to answer for the debt of another. Must be K relationship between B/S, S/Sty, B/Sty.
Key Issue 3/Statute of Frauds/When Writing Required/Estate Representative: What is the S/F for estate representatives?
Rare: A promise by an estate representative to use her own funds to pay estate expenses is w/in the S/F.
Key Issue 3/Statute of Frauds/When Writing Required/Promise in consideration of a marriage?
Pre-nuptial and post-nuptial Ks fall w/in S/F. Promise given in consideration of marriage. Note: A promise to marry w/o more is not in consdieration of marriage. Not w/in S/F.
Key Issue 3/Statute of Frauds/When Writing Required/K Modification: What is the rule for K modification?
A modification must be in writing ONLY if the K as modified (not the original K) is w/in the S/F. Exception: when the original written K prohibits oral modification. A2 lets parties create their own private S/F. If the original K required mods to be written, then the mod has to be in writing, regardless of whether the mod falls w/in S/F or not. Note: Under CL, clauses that prohibit oral modifications are un-enforceable.
Key Issue 3/Statute of Frauds/When Writing Required/Miscellaneous provisions of NY S/F: In addition to 1-8, which apply both to MS and NY, what additional transactions fall w/in NY S/F?
The assignment of insurance policy, a promise to pay a discharged debt, and an agreement to pay a finder's fee or broker's commission, except to an attorney, auctioneer, or real estate agent.
Key Issue 3/Statute of Frauds/A Satisfactory Writing: On what does a satisfactory writing depend?
A satisfactory writing depends entirely on the nature of the K.
Key Issue 3/Statute of Frauds/A Satisfactory Writing: Key Issue 3/Statute of Frauds/A Satisfactory Writing: What's required in a writing to satisfy A2's S/F?
To satisfy A2's S/F, a writing must contain (1) a quantity term and (2) be signed by the party to be charged w/ breach of K [D].
Key Issue 3/Statute of Frauds/A Satisfactory Writing/ NY ONLY: In NY ONLY, what's required to satisfy A2A's S/F?
NY ONLY: To satisfy A2A's S/F, a writing must (1) state that it is a lease, (2) include the quantity, duration, and rental payments, and (3) be signed by the party to be charged w/ breach.
Key Issue 3/Statute of Frauds/A Satisfactory Writing: What to all other Ks that fall w/in S/F require?
For all other Ks w/in S/F, a writing must (1) contain all material terms (who and what,) and (2) be signed by the party to be charged w/ breach.
Key Issue 3/Statute of Frauds/A Satisfactory Writing/Exceptions: What's the policy behind the exceptions to the S/F writing req? What are the RP exceptions to the S/F?
The exceptions to the S/F writing requirement are carved out where there is less chance of fraud:
(1) Leases of one year or less (to prevent short term leases from being voided by S/F).
(2) Part performance [need 2/out of following 3: (i) some payment, (ii) improvements, (iii) possession.
Key Issue 3/Statute of Frauds/A Satisfactory Writing/Exceptions: What is the exception to the rule on the 1 year prong of the S/F?
One-Year Prong of S/F: This prong gets an exception for ***full*** performance only. Ex: SS orally agrees to hire B for 2 years for 50k. B works for SS for 2 years, but then SS won't pay. Even though this is w/in S/F (b/c couldn't be completed w/in 1 year), B's completed performance triggers the exception for full performance of the 1 year prong of the S/F. Little chance of fraud since B already worked for SS for entire 2 year period.
Key Issue 3/Statute of Frauds/A Satisfactory Writing/Exceptions: What are the exceptions to the A2 S/F rule on sale of goods for $500 or more? (5)
(1) Goods accepted *or* paid for by the *buyer* [but note: exception applies only to the goods accepted or paid for, not to the whole oral K] A-Rod bats - keeps 20/50 bats he ordered.

(2) Custom made goods - if seller has started to make them

(3) Judicial Admission - testimony, deposition, interrogatories, etc.

***(4) Merchant's confirmatory memo*** (MHT w/in categ) - one party can use its *own* signed writing against other party if:

(i) Both parties are merchants,

(ii) The writing claims a prior oral agreement and has a quantity, and

(iii) The recipient doesn't object in writing w/in 10 days.

(5) Suretyship - Main purpose exception - If Sty's main purpose in making promise to answer for B's debts is to secure Sty's own benefit.

(i) MBE only.

(ii) ***NY DISTINCTION: NY doesnt' have a main purpose exception. Seller would still need a writing to enforce Sty's against her.
Key Issue 4/K Terms/Words of the Parties/Parol Evidence Rule: What is the PE rule?
The PE rule keeps *out* evidence of a prior agreement (either oral or written) that contradicts a later writing on the theory that prior agreement was subsumed into the later written instrument. Assumes that a later writing is more reliable than anything that came b/f. Bars a party from getting in prior agreement that contradicts later writing.
TIP: PE rule problem requires a writing. So if fact pattern involves oral agreement, it's S/F problem, not a PE problem.
Key Issue 4/K Terms/Words of the Parties/Parol Evidence Rule/Exception: What are the 4 exceptions to the PE rule? [Evidence gets in]
(1) To correct a clerical error [typo]
(2) To establish a D against formation (capacity, duress, misunderstanding)
(3) To interpret a vague or ambiguous term
(4) To supplement a partially integrated writing [a writing that is a final statement of the terms included, but not a complete statement of all terms agreed to] Liz hypo throw in suite after K
*Note: w/ (4), look out for merger clause, "This K limite to the terms herein." Means that writing complete on its face, can't be supplemented (everything that happened prior merged into K)*
***Key Issue 4/K Terms/Words of the Parties/Parol Evidence Rule/Subsequent developments: Does PE rule apply to what happens after agreement reduced to writing?***
***MS Favorite***
PE Rule has *nothing* to do w/ what happens *after* an agreement is reduced to writing. PE Rule looks backward. Modification rules apply to what happens after writing. May have consideration problem, S/F problem, etc. But NO PE Rule problem.
Key Issue 4/K Terms/Conduct: What can conduct be used to explain?
Can be used to explain terms or fill in gaps: Most imp - least imp
(1) Course of performance: What the parties did under *this* K. Course of perf best evidence of what parties intended.
(2) Course of dealing: What they did *under prior Ks w/ each other.* Course of dealing more removed from K in question. It's about prior deals.
(3) Usage of trade: What others in the trade do in similar Ks. Usage of trade is furthest removed from this K - it's about how other people act.
Key Issue 4/K Terms/Seller's warranties of quality in a SOG (A2): What are the 2 main types of S warranties?
(1) Express warranties - statements of fact, promises, description of the goods, and the use of a sample or model *are* express warranties. An opinion is *not* EW [general or subjective statements]
(2) Implied warranties (2 different types)
(i) Implied warranty of merchantability IWM
(ii) Implied warranty of fitness for buyer's particular purpose IWFBPP
Key Issue 4/K Terms/Seller's warranties of quality in a SOG (A2): What is an IWM?
The goods are fit for their ordinary purpose. Triggered by the fact that S is a special kind of merchant--a merchant who deals in goods of the kind [he has special knowledge about the particular goods involved in the K]. Foot locker/running shoes
Key Issue 4/K Terms/Seller's warranties of quality in a SOG (A2): What is an IWF for a buyer's particular purpose?
Definition - That the goods are fit for buyer's particular purpose.
Triggering facts -B has a special purpose in mind, B is relying on S to select suitable goods, and S knows it. Note: S doesn't have to be a merchant. White shoe hypo - not fit for B's particular purpose (law firm job), but look out on MBE - shoes don't breach IWM - shoes are still fit for ordinary use.
Key Issue 4/K Terms/Lessor's warranties of quality in a LOG (A2A) [NY ONLY]: What's the general rule on lessor's warranties of quality in a lease of goods under A2A? What's the exception to the rule?
***NY ONLY*** General rule - The same warranties exist in a LOG under A2A as in a SOG under A2.
Exception - Where you have a finance lease, somebody leases goods from bank, which bought goods from manufacturer. Ex: BG leases computer from Citibank, which bought computer from Gateway. No IW made by bank, IW only by Gateway.
Key Issue 4/K Terms/Limitations on Warranty Liability in Sales and Leases of Goods: What warranties may a seller disclaim?
A seller can disclaim implied warranties, but not express warranties.
Key Issue 4/K Terms/Limitations on Warranty Liability in Sales and Leases of Goods: How can a seller disclaim an IW?
Either by using magic words "as is," or "w/ all faults," or if no magic words, a conspicuous (ALL CAPS) disclaimer: "NO IMPLIED WARRANTES OF MERCHANTABILITY OR FITNESS" must have 'merch' in it.
Key Issue 4/K Terms/Limitations on Warranty Liability in Sales and Leases of Goods: Can S limit B's remedies for breach of warranty?
General rule - S can limit buyer's remedies for breach of any warranty (express or implied) if the limitation is not unconscionable.
Exception - Limiting B's remedies for personal injury in the case of consumer presumed to be unconscionable (prima facie). Why --> consumer protection clause.
Key Issue 4/K Terms/Risk of Loss in Sales of Goods (A2): [MS, NY in Feb '08] What does risk of loss refer to?
When goods are damaged before B gets the goods and neither the B nor the S is to blame, who bears the risk of loss?
Key Issue 4/K Terms/Risk of Loss in Sales of Goods (A2): What are the significant consequences of this issue?
If S bears the RoL - S must provide new goods to B for no additional cost, or be liable for breach of K.
If B bears the RoL - B must still pay the K price.
Key Issue 4/K Terms/Risk of Loss in Sales of Goods (A2): What's the hierachy in determining which party bears the RoL? (5)
(1) Agreement: The agreement of the parties controls.

(2) Breach: The breaching party bears any uninsured loss, even if the loss is unrelated to the breach.

(3) ***USUAL MBE SCENARIO*** Delivery by common carrier (UPS): Risk of loss shifts to B when S completes its delivery obligations. Types:
(i) Shipment K - S must (1) get the goods to a common carrier, (2) make delivery arrangements, and (3) notify B. Then RoL shifts from S to B, long b/f B gets goods.
(ii) Destination K - S must get the goods to a specific destination (usually where B located). S on hook until goods get to B.
***Bar exam tip: Look for a shipment K, where B bears the risk of loss long b/f it actually gets goods. Tests frequently b/c counterintuitive.***

***If the K provides for delivery FOB "Seller's City," it's a shipment K, and the RoL is on the B long before B gets the goods***

****If it's FOB followed by the name of any other city, it's a destination K, and the RoL remains w/ the seller until the shipment gets to its destination***

(4) Non-carrier cases (B to pick up or S to deliver goods): Answer depends on whether S merchant:
(i) If S merchant - S bears the risk of loss until B takes possession of goods
(ii) If S not merchant: S bears risk of loss until it 'tenders' goods (makes available to B).

(5) Right to return goods : If K give B right to return goods, key whether he is buying for resale or his own use -
(i) "Sale or Return:" Means where B buying goods for resale, the same rules apply and exact same hierarchy
(ii) "Sale on Approval:" Means where B buying goods for his own use, RoL remains on S until B has accepted the goods.
Key Issue 4/K Terms/Risk of Loss in a lease of Goods (A2A) [*NY ONLY*]: What the general rule?
The lessor bears the risk of loss
Key Issue 4/K Terms/Risk of Loss in a lease of Goods (A2A) [*NY ONLY*]: What the exception?
In a finance lease, the lessee bears the risk of loss
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What's the perfect tender rule?
S must deliver (i) perfect goods (ii) in the right place (iii) at the right time. If tender is not perfect, B has the right to reject goods.
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): When does S have an option to cure?
S who fails to make perfect tender may have an option to cure. It usually depends on whether the time for performance has expired.
(1) Time for performance has not expired> S has an option to cure.
(2) Time for performance has expired>
(i) General rule: Once the time for performance has expired, seller does not have an option to cure.
(ii) Exception: [Fact specific] based on course of performance and course of dealing. (Look for specific facts where B had been flexible in past)
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What is an installment sales K?
An installment sales K requires or authorizes S to deliver the goods in separate installments.
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What are the rules on B's rights to reject either an installment or the entire K?
The Perfect Tender Rule does not apply to an installment sales K, so it is more difficult for a B to reject. [Policy: Assumes seller will cure in the course of ongoing performance]
i. Buyer's right to reject an installment: A buyer has the right to reject an installment only if there is substantial impairment in the installment that can't be cured.
ii. Buyer's right to reject the entire K: A buyer has the right to reject the entire K only if a defect in an installment substantially impairs the value of the whole K.
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What is implied acceptance?
***Implied acceptance occurs when the buyer keeps the goods w/o objection after having an opportunity to inspect.***
Merely paying for goods does not equal acceptance. B has to have chance to inspect 1st.
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What are the legal consequences of acceptance?
i. Once a buyer accepts goods, it is too late for the buyer to reject.
ii. However, a buyer who accepts non-conforming goods can still get damages.
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What's the general rule, and the exception to the rule, on B's revocation of acceptance of goods?
General Rule: A B cannot revoke his acceptance of goods.
Exception: A B can revoke his acceptance of goods if (i) the non-conformity substantially impairs the value fo the goods and (ii) the non-conformity was difficult to discover (i.e., it was a latent defect)
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What are the consequences of rejection/revocation of acceptance?
1. Return: B can return the goods to S at S's expense.
2. Refund: B can get back money already paid, and
3. Damages: B can sue S for damages for breach
Key Issue 5/Performance of the K/Performance of Ks for a sale of goods (A2): What is B's payment obligation?
B can pay by check, but S can refuse it. If S refuses, B has an additional reasonable time to get cash, even if K deadline has passed.
Key Issue 5/Performance of the K/Performance of CL Ks: Does performance have to be perfect under CL?
No. Substantial performance is all that is required [i.e., a party can't commit a material breach]
Key Issue 6/Excuse based on later events/Other Party's Breach: Can the other party's breach provide an excuse for non-performance of a K?
Yes, it may provide an excuse for non-performance. Whether it does depends on the nature of the K.
Key Issue 6/Excuse based on later events/Other Party's Breach: What's the rule in an A2 sales of goods situation where S fails to make perfect tender?
It excuses B from having to pay [Perfect Tender Rule], but B has 3 options:

1. Options: If S fails to make perfect tender, B can

(i) Accept all the goods,

(ii) Reject all the goods,

or

(iii) Accept any commercial units and reject the rest.

2. Damages: Whichever option B selects, B can still get damages as a result of S's breach.
Key Issue 6/Excuse based on later events/Other Party's Breach: In K between A and B, what are the rules on B's breach in a CL K (services)?
1. Damages: A can recover damages for any breach of K, whether breach is material or not

2. Excuse: But only B's material breach excuses A from having to perform.

Note: In a situation where B(martha stewart decorating house) commits a material breach, even though A is excused from having to pay, B can still recover in quasi-K for the reasonable value of the work that she did.

3. Divisible Ks: Where payment is to be made on a per unit basis, the breaching party can recover the K price for any unit on which he has substantially performed
Key Issue 6/Excuse based on later events/Anticipatory Repudiation: Is anticipatory repudiation of the K an excuse for non-performance?
1. Yes, unless the repudiation is retracted. When one party declares AR, other party can stop work and sue for damages. AR for the most part operates like material breach. AR can occur either through words or conduct, depending on the circumstances.

2. The party who declares AR can retract it, so long as other party has not relied on the AR by taking another job. Distinction between AR and MB:

(i) AR occurs b/f time for party's performance has arisen.

(ii) Breach occurs when party doesn't perform when the obligation to perform arises.

(iii) AR can be retracted so long as no reliance. MB can't.
Key Issue 6/Excuse based on later events/Later Agreement: What does a later agreement do and what flavors do they come in?
May provide an excuse for non-performance. 4 flavors:

(i) Rescission (cancel): To be effective each party must have some performance remaining; otherwise, no consideration.

(ii) Modification: an agreement to replace an existing K w/ a new K (looking at effect of K and not in context of formation). The modification takes effect immediately.

(iii) Accord and Satisfaction: an Accord is an agreement to accept performance in future satisfaction of an existing duty. Satisfaction is performance of the accord.

(iv) Novation: A novation is an agreement to substitute a new party for an existing one. Takes place between all parties to K. Distinguish from delegation, which is a delegation of duties from one party to a 3P w/o other K'ing party's consent. Delegating party still liable to other party.
Key Issue 6/Excuse based on later events/Impossibility or impracticability: What is this?
A later unforseen event that makes S's performance impossible [under CL] or impracticable [under A2] (much harder or more expensive) may provide the seller w/ an excuse for non-performance. Tip: Impossibility or impracticability rarely excuses the seller on MBE. Types:

1. Destruction of something necessary for performance

2. Death/incapacity of essential person.

3. Supervening governmental regulation

4. Frustration of B's primary purpose.
Key Issue 6/Excuse based on later events/Impossibility or impracticability: What are the rules for destruction of something necessary for performance?
1. CL - Destruction provides an excuse for performance

2. A2 - A2 adopts the same general rule as CL, but there are 2 trick Qs:

(i) Unidentified goods - If the damaged/destroyed goods had not been 'identified to the K,' [Earmarked or set aside for sale to this particular B] S is not excused.

(ii) Risk of loss - S who bore the risk of loss when goods were damaged or destroyed is excused by impracticability, but a B who bore the risk of loss is not.
Key Issue 6/Excuse based on later events/Impossibility or impracticability: What's the rule on death/incapacity of essential person (not just any person)?
If the person who is unable to perform possesses unique skills, she will be excused. (van gogh excused, but not barn painter) If the person paying for the service dies after performance, estate will pay
Key Issue 6/Excuse based on later events/Impossibility or impracticability: What's the rule on supervening government regulation?
A supervening governmental regulation excuses performance
Key Issue 6/Excuse based on later events/Impossibility or impracticability: What's the rule on frustration of B's primary purpose?
[B's analogue to S's excuse of impossibility/impracticability]

If:

1) At time of K, S knew H's purpose for K'ing, and

2) a later unforeseen event thwarted that purpose,

H is excused from performance by frustration of purpose.

***but diminished profits not enough to rise to level of frustration of purpose.***
Key Issue 6/Excuse based on later events/Failure of an Express Condition: What is the definition of this?
An express condition limits obligations created by other K language. It doesn't create an independent obligation. Look for words like "if," "as long as," "when," provided that," "on condition that," and "unless."
Key Issue 6/Excuse based on later events/Failure of an Express Condition: Is strict compliance required?
***Yes. Most important excuse on MBE. The express condition must be completely fulfilled, if not, it creates an excuse from performance. BUT:
Express conditions don't create independent obligations. All they do is limit the obligations created by the K.***
Key Issue 6/Excuse based on later events/Failure of an Express Condition: How is satisfaction measured in a satisfaction clause?
"Satisfaction" is measured by a reasonable person standard [objective: Satisfaction means reasonable satisfaction. If a reasonable person would be satisfied, B has to pay], unless K deals with art or matters of personal taste [subjective: All that matters is whether B herself is satisfied].
Key Issue 6/Excuse based on later events/Failure of an Express Condition: What are the different types of express conditions?
T agrees to let D use his golf clubs for $100/wk ...

1. Condition Precedent: …if it rains on July 4. [T only obligated if it rains on 7/4. Event must occur b/f performance due. Most likely to be tested]

2. Condition Concurrent: …as long as D is a Yankee. [condition concurrent runs with T's obligation. Starts now and continues as long as D is a Yankee]

3. Condition Subsequent: until the Mets win the World Series. [performance occurs first, then occurrence of the condition cuts it off]
Key Issue 6/Excuse based on later events/Failure of an Express Condition: When may the occurrence of a condition be excused?
By the later action or inaction of the person who is protected by the condition [every condition protects someone]. The condition may be excused (and protected party made unconditionally bound w/o regard to condition) by:

(i) Failure to cooperate [makes no effort to meet the condition that was there to protect party, i.e., B's failure to even look for a mortgage when B's obligation to perform was subject to the condition that B could obtain a mortgage at 5% interest] or

(ii) Waiver [where the party who is protected by the condition voluntarily relinquishes the protection of the condition. NOTE: Waiving party can retract waiver in the future to the extent that other party has not relied on waiving party's waiver]
Key Issue 7/Remedies/Non-monetary (in rem) remedies: When is specific performance available as a remedy?
Equitable remedy, available only if monetary damages are clearly inadequate to compensate the injured party. Whether SP is available in any given case depends on the nature of the K.

TIP: SP rarely the right answer on the MBE. Note: SP as an EQ R almost never 1st choice. Types:

(1) RP: SP generally available b/c RP considered unique (even if not).

(2) A2 SOG: Much less available than SP for RP. SP available only if the goods are unique or there are "other proper circumstances" (e.g., an inability to buy substitute goods in the market)

(3) Service Ks: SP not available in service Ks (b/c courts won't force person to work against will), but injunctive relief may be (if W refuses to work for A, court may enjoin W from working for B instead).
Key Issue 7/Remedies/Non-monetary (in rem) remedies: What right does an unpaid S have to reclaim goods (A2)?
Issue usually only arises in credit transactions

(1) General rule: An unpaid S has no rights under A2 in goods it has delivered to B [S may have rights under Fed Bkrptcy law]

(2) Exception: An unpaid S has a right to reclaim goods from buyer if

(i) B was insolvent when it received the goods AND

(ii) S demands return of the goods w/in 10 days after B receives them. (By implication, if S has already sold the goods to TP, S has no rights under A2 to get goods back from TP.)

(3) Exception: Unpaid S can reclaim goods at any time if B misrepresented its solvency to S in writing w/in 3 months before delivery.
Key Issue 7/Remedies/Non-monetary (in rem) remedies: What's the rule on Entrustment of goods (A2)?
***MBE*** An O who entrusts her goods to a merchant who deals in goods of the kind (a dealer) has no rights against a BFP of the goods. O's only recourse would be to sue merchant. Review: merchant who deals in goods of the kind seen in the rule on IWM - IWM only if S an M who deals in goods of the kind.
Key Issue 7/Remedies/Non-monetary (in rem) remedies: What is a right to request assurances in an A2 SOG?
In an A2 SOG, a party w/ reasonable grounds for insecurity may request in writing adequate assurance that the other party will perform in accord w/ the K.

If requestee doesn't provide requestor w/ adequate assurance, requestor can treat this failure to give adequate assurance as an anticipatory repudiation of the K.

A party can't use this provision to re-write K or to demand a particular kind of assurance.

Party only entitled to adequate assurance.
Key Issue 7/Remedies/Monetary remedies (damages): Are punitives awarded for breach of K?
No, b/c the purposes of K damages is to compensate, not punish.
Key Issue 7/Remedies/Monetary remedies (damages): When will liquidate damages be upheld?
Upheld if the damages were difficult to estimate in advance and are a reasonable forecast of probable damages. Liquidated damages cannot operate as a penalty. Common in constr Ks
Key Issue 7/Remedies/Monetary remedies (damages): What do expectation damages do?
Put an injured party in as good a position as full performance. (benefit of the bargain) Expectation damages are the general rule. In NY essay say "designed to leave injured party in exactly the same position as if K was performed."
Key Issue 7/Remedies/Monetary remedies (damages): How are expectation damages calculated at CL?
(i) D agrees to paint H's house for 10k. D breaches. H pays another painter 13k to paint the house. D liable to H for 3k in expectation damages. Subtract the smaller number from the bigger number. H expected to get house painted for 10k. D has to pay H 3k to put him in exactly the same position he would have been had D performed.

(ii) D agrees to paint H's house for 10k. H refuses to pay D after D starts job. D has already spent 5k. D expected to clear 1.5k in profit. H owes D 6.5k in damages. Added the amt D had spent to the amt D expected to clear in profit. H has to give D 6.5k to put D in same position D would have been had H performed. It's where D expected to be had K been fully performed.
Key Issue 7/Remedies/Monetary remedies (damages): How are B's damages calculated in an A2 SOG?
Usual remedy is expectation damages.
B's damages 3 options:
1. Cover damages: cover price minus K price if B covers (substitutes goods) in good faith [usual measure]. Even if B paid more than market price, OK, so long as B covered in good faith.

2. Market damages: market price minus K price if B doesn't cover in good faith or doesn't cover at all. B can't recover the difference b/t his "cover" price and K price because B can't take advantage of S's breach at S's expense. B limited to difference between market price and K price. If B doesn't replace item at all, B can still get diff b/t market price and K price

3. Loss in value: value as promised minus value delivered if B keeps non-conforming goods. If B makes a good deal, B still entitled to keep the benefit of the bargain.
Key Issue 7/Remedies/Monetary remedies (damages): How are S's damages calculated in an A2 SOG?
1. Resale damages: K price minus resale price if S resells in good faith [usual measure]

2. Market damages: K price minus market price if S does not resell in good faith or does not resell at all. If S decides not resell at all, S still entitled to difference b/t K price and market price.

3. ***Lost Profit: Lost profit, if S is a volume dealer, and had the item in inventory. D's damages are the profits lost on the deal w/ B. On MBE: Always seen as this - D resells same goods for same price. Trick - want you to say damages = 0. But D has lost profit it would have made on initial sale.

4. K Price: entire K price, If S can't resell the goods. S's analog to B's SP remedy.
Key Issue 7/Remedies/Monetary remedies (damages): How are incidental damages calculated?
Incidental damages involve the cost of transporting or caring for goods after breach and costs associated w/ arranging a substitute transaction. Available to both B and S. In the dish example, S has to store/insure dishes, and an advertise for sale (cover). S can recover these expenses from B.
Key Issue 7/Remedies/Monetary remedies (damages): ***How are consequential damages calculated?
***Consequential damages are damages that are special to this P and were reasonably foreseeable by the breaching party at the time of K. [NOTE: NOT available to A2 S]***

NOTE: Cons damages are about more than causation. Don't focus on whether the breach caused the damage, focus on whether the breaching party could reasonably foresee the possibility of this happening at the time of K.
Key Issue 7/Remedies/Monetary remedies (damages): How are avoidable damages calculated?
An injured party can't recover damages he could have avoided ("mitigated") w/ reasonable effort. P fired in violation of K. Makes $900/wk. P can get a comparable job for $800/wk. P's damages are $100/wk. P can't sit around doing nothing and collect $900/wk from Er. On bar, comparable means same kind of work for same kind of effort. P doesn't have to take other job, (even though damages won't change) but if she does, damages will be reduced accordingly.
Key Issue 8/Third-Party Problems/TP Beneficiaries: What is a TPB?
When 2 ppl enter a K intending to benefit a TP. Ex: A pays T 5k to sing for W on July 4. W is the TPB of the K between A and T.
Key Issue 8/Third-Party Problems/TP Beneficiaries: What other vocabulary used? (7)
1. TPB - person who is not party to K, but has rights under K b/c K intended to benefit him.

2. Promisor - Party who promises to perform for TP

3. Promisee - Party who secures the promise

4. Intended B: A person who is intended to benefit from a K made by others (usually named in K)

5. Incidental B: A person who just happens to benefit. Only an Intended B has legal rights.

6. Creditor B: When performance will satisfy a debt Promisee owes to TP, TP is a creditor B.

7. Donee B: If not creditor
B, then is Donee B. (Almost TPBs are donee Bs)
Key Issue 8/Third-Party Problems/TP Beneficiaries: When can Promisor and Promisee rescind or modify K?
They can rescind or modify the K until the rights of the TPB have vested (when TPB knows about K and relies on it).

Exception: Contrary language in the K controls.

Ex: K lets A change beneficiaries. Even if TPB has relied, A can still terminate TPB's rights.
Key Issue 8/Third-Party Problems/TP Beneficiaries: What rights does TPB have?
1. Against Promisor: TPB can sue the breaching promisor, but is subject to same Ds promisor could have raised against the promisee.

2. Against Promisee: Only a creditor B can sue the promisee.
Key Issue 8/Third-Party Problems/TP Bs: What rights does promisee have against the promisor?
Promisee can recover damages from promisor if promisor doesn't perform, just as he could w/ any other K. Applies whether TPB is a creditor-B or a donee-B. If TPB is donee-B, promisee can recover, but in that case, promisee will not have suffered very much damage.
Key Issue 8/Third-Party Problems/Delegation of Duties: What does delegation of duties involve? What's the general rule on delegation of duties?
A delegation of duties involves a transfer of burdens (obligations) under a K. Contractual duties may be delegated w/o the consent of the person to whom performance is owed (the "obligee").
Key Issue 8/Third-Party Problems/Delegation of duties: What are the exceptions to the general rule?
1. K language controls: If the K between obligor and and obligee prohibits delegation, the duty can't be delegated.

***On MBE, if the K says no assignment, it means no delegation either***

2. Special skill or reputation: If someone w/ special skill or reputation is hired b/c of that special skill or rep, even if there is no K language prohibiting delegation or assignment, specialist still can't delegate duties to someone else, b/c of that special reputation (if they wanted someone else, they would've hired that person instead).
Key Issue 8/Third-Party Problems/Delegation of duties: ***What rights does the obligee have?***
***1. Against delegating party: The delegating party [obligor] remains liable to the obligee [in contrast w/ novation, the obligee would have given up rights against the obligor]***

2. Against the delegate: Delegate is liable to obligee only if the delegate received consideration for its services.
Key Issue 8/Third-Party Problems/Assignment of Rights: What is an assignment of rights?
Involves the X-fer of benefits under a K.

2 ppl make a K. Later on one person (assignor) X-fers his rights under the K to a 3P (assignee). The party who owes a duty to perform is called the obligor.

***An assignment of rights X-fers only rights [usual case on bar], BUT an assignment of an entire K X-fers both rights and obligations.

Ex: B Ks to provide security to GC for 200k. B the assignor assigns his right to payment to R, assignee. R has the right to get payment from GC, the obligor.

***In an assignment, 2 parties enter a K and a third person (the assignee) appears later on. In a 3PB situation, all 3 parties are present from the outset. Don't confuse.
Key Issue 8/Third-Party Problems/Assignment of Rights: What does an assignment require?
Language of present assignment: "I assign, I hereby assign." "I promise" is NG, that's more like a gift. Has to happen in the present.
Key Issue 8/Third-Party Problems/Assignment of Rights: Does an assignment require any consideration?
No. Gift assignments are valid, BUT

the lack of consideration will affect revocability.
Key Issue 8/Third-Party Problems/Assignment of Rights: Are they any restrictions in assignment?
1. K language controls: Distinguish a clause that prohibits assignment from one that completely invalidates assignment.

2. ***Can't substantially change duties of obligor!
Key Issue 8/Third-Party Problems/Assignment of Rights: Examples of how K language controls?
Ex1: Rights under K not assignable, but B assigns rights to R anyway. Can R collect from GC? Yes, b/c clause only prohibits assignments. B will be liable to GC for breach, but assignment still valid.

Ex2: Same hypo, but K states "all assignments under this K are void": This will completely invalidate the assignment. Not only don't, but it won't be valid if you do.
Key Issue 8/Third-Party Problems/Assignment of Rights: Examples of how can't substantially change duties of obligor?
Ex1: If B assigns right to payment to R, doesn't substantially change duties of GC, so OK.

Ex2: But, GC can't assign its rights to B's service to MC. That would substantially change B's duties.

MBE twist: GC K'd to buy all kryptonite it needs in 2008 from distributor. Can GC validly assign its right under K to MC? Under current rule, req. Ks assignable, as long as assignee's rights are not out of line w/ assignor's rights.
Key Issue 8/Third-Party Problems/Assignment of Rights: What are assignee's rights against obligor?
1. Defenses: Assignee can sue obligor but is subject to same defenses obligor could have raised against assignor.

2. Payment by the obligor to the assignor is effective unless obligor is aware of the assignment.
Key Issue 8/Third-Party Problems/Assignment of Rights: What are rules for multiple assignments?
1. Gratuitous ("gift") assignments: The last gratuitous assignee in time prevails over earlier gratuitous assignees b/c a later gift assignment revokes an earlier one.

2. Assignments for consideration:

a. General rule is that first assignee for consideration prevails b/c assignments for consideration are much more durable.

b. Exception: A later assignee for consideration prevails if:

i. he does not know of the earlier assignment and

ii. is the first to get payment from or a judgment against the obligor.

Exception:***Tip: If you encounter multiple assignments in a question, analyze each assignment in the order it was made to see if that particular assignment was valid.