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152 Cards in this Set

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What kind of contracts does Article 2 of the UCC apply to?
Article 2 of the UCC applies to sales of goods ("goods” are moveable, personal property), regardless of what the K price is or whether parties are merchants.
What kind of contracts does Common Law apply to?
All contracts EXCEPT contracts for sales of goods.
When a contract is a mixed contract for both goods and for services, how do you determine whether Common Law of UCC Article 2 applies?
When there is a mixed K of goods and services, it depends which one is more important to determine whether Article 2 or Common Law applies.
When contracts are for a lease of goods, what kind of law applies?
In NY, UCC Article 2A applies to a lease of goods (NOT a lease of real property), regardless of whether it is a commercial lease or consumer lease

On MBE, you would apply common law (as not all states have adopted A2A for leases)
What is a K?
A K is a legally enforceable agreement (note: not all agreements are Ks!)
How Is an express K created?
Express K is created by parties’ words (oral or written)
How is an implied-in-fact K created?
An Implied-in-fact K is created by parties’ conduct
What is restitution and what type of recovery does it give?
Restitution protects against unjust enrichment whenever K law yields an unfair result. Restitution is the remedy of last resort. Recovery is the reasonable value of benefit conferred, not K price (usually less than K).
What is a bilateral K?
With a Bilateral K, an offer can be accepted in any reasonable way (flexible)
What is an unilateral K?
With an Unilateral K, an offer can be accepted only by performing (inflexible). This occurs 1) when the offer states that it can be accepted only by performing; or 2) the K involves a reward, a contest, or a prize.
What is an offer?
A manifestation of an intention to be bound (opens up possibility of K formation, gives offeree the ability to accept)
Are advertisements offers?
Generally, advertisements are not offers (because there are no quantity term). The exception is where the ad specifies a quantity.
How does indefiniteness in a K regarding an open price term impact ithe K's enforcement?
If there is an open price term, the Court will read in a “reasonable” price except in a K for the sale of real property.
Are requirements K okay despite their indefiniteness?
Requirements K, where the K may be measurable by the buyer's needs or requirements, are okay under UCC Article 2, despite the uncertain quantity. However, even if in good faith, buyer cannot take seller by surprise; in other words, buyer’s needs cannot be out of line with buyer’s prior demands
When does an offer lapse?
An offer lapses after stated term or reasonable time has passed (offer doesn’t last forever)
What happens when the offeror revokes the offer?
The offer is terminated
When can an offer be revoked?
An offer can be revoked any time before acceptance.
What are the two ways an offer can be revoked?
1) DIRECT REVOCATION: The offeror indicates directly to the offeree that he has changed his mind about the deal. (Note: offeror doesn’t need to use word revoke/revocation.)

2) INDIRECT REVOCATION: The offeror engages in conduct that indicates he has changed his mind AND the offeree is aware of the conduct
What are the four exceptions when an offer cannot be revoked?
1) Option
2) Foreseeable Reliance Before Acceptance
3) Starting to perform in a unilateral K
4) Firm Offer under Article 2 of the UCC
What is an option?
An option is a promise to keep the offer open that is paid for
An option be created under common law or the UCC. Merely promising to keep an offer open is not enough on the MBE. Also, there is no built in time limit, so the option can keep the offer open for 6 months, 9 months, 1 year etc. But an option can lapse if it doesn’t state a time, and will expire after a reasonable time has passed

Note, in NY a signed, written promise not to revoke is enforceable even without payment.
Is foreseeable reliance often applicable to prevent revocation of an offer?
No, it is rarely applicable, because an offeree should accept first and then relied. However, it will come up when a subcontractor knows contractor relies on sub-contractor’s bid before accepting since contractor has to submit his own bid and wait for owner to accept.
Does preparation make an offer irrevocable under the starting to perform in a unilateral K exception?
Mere preparation does not make the offer irrevocable. However, preparation can be foreseeable reliance under the previous exception.
What is the difference between the NY and MBE approaches to the starting to perform in a unilateral K exception?
-MBE: once the offeree starts to perform in a unilateral K, the offer cannot be revoked (e.g. 0ffer accepted by painting the house, OE starts painting house, OR cannot revoke)
-NY: offer can be revoked until performance is completed.
What is a firm offer?
Under Article 2 of the UCC, in a sale of goods, if a merchant promises in a signed writing to keep an offer open, the offer is irrevocable. Unlike an option, which has no time limit, a firm offer has a three month maximum
and if OR makes promise not to revoke but does not state a time period, the offer will stay open for reasonable time, not to exceed three months

Note, the terms “merchant” and “signed” are broadly defined under A2; signed documents include letterhead, initials, sign/symbol; and electronic signatures. Also note, there can still be an option under A2, if you have paid for the promise to keep the offer open, you don’t need to rely on a firm offer.
When does the revocation of an offer become effective?
A revocation is effective only when it is received
What happens when an offeree rejects an offer?
An offer terminates when OE rejects it (which includes any inappropriate response)
What is the effect of a counteroffer?
A counteroffer operates as a rejection; however, mere bargaining does not (a question, for example, is considered mere bargaining and not a rejection)
Is a Conditional Acceptance an acceptance of an offer?
No, it is not an acceptance at all!
It doesn’t matter if common law or UCC
Under common law, what happens if the acceptance varies the offer?
Under common law, adding or changing a term constitutes a rejection.
What is the Common Law's Mirror Image Rule?
Acceptance must mirror offer (an offeree cannot vary the offer when accepting)
For sale of goods Ks governed by UCC A2, may an acceptance vary the offer?
Yes, Acceptance does not have to mirror offer. Thus, there is no common law mirror image rule and an OE’s adding or changing a term does not generally prevent acceptance under A2.
If an offeree changes a term in a K when he accepts the offeror's offer, when will the offeree's changes be included in the K?
An OE's term is included only if: 1) both parties are merchants;2) the term is not a material change note, (if the term is customary in the industry, it’s not material); AND 3) there is no objection from the offeror w/in a reasonable time (note, an OR can keep out even a minor change by rejecting in a reasonable time).

Remember, OE’s term sometimes does not make it into K
How does the death of one of the parties affect an offer when there has been no acceptance?
Death of either party before acceptance terminates a revocable offer, but not an irrevocable offer, like an option
What controls when determining how an offer can be accepted?
Language of the offer controls. (e.g., OR tells OE he can only accept by reporting to work on Monday; OE can only accept by reporting to work, not by sending an email saying he accepts)

Note, look for “only by” language
Is starting performance acceptance of an offer to enter a bilateral K?
Starting performance is acceptance of an offer to enter a bilateral K and carries w/ it an implied promise to finish the job.
Is starting performance acceptance of an offer to enter an unilateral K?
Starting performance is not acceptance of an offer to enter an unilateral K; only completing performance is acceptance.

Remember, on the MBE, OR cannot revoke his offer (OR stuck with the consequences). But, in NY, OR can revoke offer until OE completes performance
When starting performance is acceptance of an offer, what is the affect of improper performance?
-COMMON LAW: simultaneous acceptance and breach
-SALE OF GOODS (A2): simultaneous acceptance and breach unless seller is sending goods as an accommodation to buyer (e.g., “I’m out of Glee, but am sending Incubus instead to try to accommodate you”; this is not acceptance/breach but a counteroffer)
Is an offeree's silence acceptance?
No, the offeror cannot singlehandedly turn an offeree's silence into acceptance
When is acceptance generally effective?
Under the general rule, acceptance is effective when mailed (“Mailbox Rule”)
What are the three exceptions to the Mailbox Rule?
1) OFFER STATES OTHERWISE (the Mailbox Rule is the default rule, but doesn’t apply if offer says otherwise; thus, OR can override the mailbox rule, such as “acceptance must be received by May 9”)
2) IRREVOCABLE OFFER (Mailbox Rule doesn’t apply, because OE doesn’t need protection from revocation. Instead, acceptance effective when received)
3) REJECTION SENT FIRST (If OE sends a rejection first then an acceptance, then it’s a race; whichever one gets there first is effective)
What are the eight defenses to the formation of a K?
1) Lack of Capacity
2) Economic Durress
3) Misrepresentation/non-disclosure of a material fact
4) Ambiguity/Misunderstanding
5) Mistake about a material fact
6) No Consideration
7) Public Policy
8) Unconscionability
What is general rule and exception regarding the lack of capacity defense to the formation of a K?
-GENERAL RULE: An incapacitated defendant (minors, mentally incompetent, intoxicated) may disaffirm K. Note, we only care about D’s capacity, not P’s, and an implied affirmation - that is, retaining the benefit after (re-)gaining capacity - will take away the defense.
-EXCEPTION: An incapacitated party is liable for necessaries (i.e, food, shelter, clothing, and medical care), but only for reasonable value, not K price.

Note, in NY this exception is limited to minors
When is economic duress a defense to the formation of a K?
Economic Duress is rarely a successful defense against formation unless 1) there is a threat to break an existing K; 2) buyer only agrees to get the first deal done; AND 3) there’s no reasonable alternative

Note, look for “OR is only source” and “OE needs something right away.”
Will the misrepresentation/non-disclosure of a material fact defense to the formation of a K still apply if it was an honest misrepresentation or non-disclosure?
Yes; even an honest misrepresentation is a fatal flaw as long as it’s material. The same is true for non -disclosure
When does the ambiguity/misunderstanding defense to the formation of a K arise?
When the parties are on different wave-lengths; saying exactly same thing but are attaching different meanings. However, if one party knows or has reason to know, then the innocent party’s meaning will prevail
When is a mistake about a material fact a defense to the formation of a K and when is it not?
-MUTUAL MISTAKE is a defense to the formation of a K. This is when both of the parties share a belief that is not in accord with the facts; in other words, parties are on the same wavelength, but what they’re thinking does not comport with the facts as they exist at the time of the K. The key is whether mutual mistake goes to a material fact. (Note, mistake as to value is not considered material)
-UNILATERAL MISTAKE is not usually a defense on the bar exam. In other words, one party’s mistake is not a fatal flaw in the process, unless the other party knew about it or had reason to know about it (It’s too easy to invent a mistake)
What is consideration?
Consideration is a “bargained for legal detriment/benefit.” A person can bargain for a promise, performance, or even forbearance (not to do something person otherwise has right to do). Note, promise for promise is usually the scenario
When is past consideration consideration on the MBE and in NY?
-MBE: “Past consideration” is not consideration at all, because you cannot bargain for something that’s already been done
- NY: “Past consideration” is consideration if it’s expressly stated in a signed writing and can be proven
Is the adequacy of the consideration relevant?
No, adequacy of consideration is Irrelevant if there’s a bargain; if there’s a bargain, law doesn’t care about adequacy of consideration. Law doesn’t weigh what’s being extended.
What is an illusionary promise and is it enforceable?
An illusory promise is an illusion, not really promising anything at all, and is therefore unenforceable (e.g., B promises to buy as many widgets as I want for $100 each; B might not want any widgets at all from S; in contrast, in a requirements K, B gives up right to buy goods from everyone else and B's "needs" is objective, while "wants" are subjective)
Is consideration required for K modification under Common Law?
- Under Common Law, new consideration is required to modify a K. Note, performing a preexisting duty is not enough (Preexisting Duty Rule – “PDR”). However, the preexisting duty rule can’t be used as a defense by a third party, and can only be used by a party to the original K.

Note, in NY, you don’t need consideration for a modification if the modification is in a signed writing (however, on the MBE, this wouldn’t matter and you would still need consideration)
Is consideration required for K modification under the UCC A2 for the sale of goods?
Consideration is not required to modify a K, but you must show good faith
Is there consideration in an agreement to make a partial payment on a debt?
Whether there is consideration in an agreement to make a partial payment on a debt depends on if the debt is due and disputed. There is no consideration when a creditor promises to forgive the balance of the debt when the debtor agrees he owes the money and he owes it to the creditor's right now. However, if the debt was in dispute, the law favors settlement of disputed claims. (so there is consideration when the money in dispute, or if debtor agrees to pay early)

Note, in NY, you do not need consideration if the creditor's promise to forgive is in a signed writing.
Is a promise to pay a time-barred debt enforceable without consideration?
A written promise to pay a debt, collection of which is barred by SL is enforceable without consideration. Thus, in this fact pattern only, the signed writing is a substitute for consideration on both the MBE and in NY.
What is promissory estoppel?
Promissory estoppel is a substitute for consideration; thus, foreseeable reliance may make a promise enforceable even without consideration

Note, this is only the correct answer if there is no consideration and is a last resort (e.g., tenant’s lease expires in a month, but landlord promises to renew. In reliance, T paints apt, then L refuses to renew. No consideration but promissory estoppels applies here)
When will courts invalidate a covenant not to compete under the public policy defense to the formation of a K?
A court will invalidate or narrow a covenant not to compete that operates as a restraint of trade.
When looking at the scope of covenant, the court will consider duration and geography and will look for reasonableness. When evaluating the need for the covenant, the court will consider uniqueness of services (e.g. chef v. busboy)
What can an exculpatory clause do?
An exculpatory clause can eliminate liability for negligence, but not for gross negligence or intentional torts
When is unconscionability a defense to the formation of a K?
Generally, unconscionability is not a valid defense against enforcement. In regards to substance, a K is deemed unconscionable if the terms are unfair (e.g., indentured servitude). In regards to procedure, a K is unconscionable if the agreement process was unfair (e.g., small print)
What are the seven kinds of Ks in which a writing is required under the Statute of Frauds?
Most oral Ks are enforceable, only certain kinds of Ks need a writing to be enforced (“within the SOF”):

1) TRANSFER OF AN INTEREST IN REAL PROPERTY (Transfer of any interest in real property falls within SOF whether it’s a sale of real property or not. Thus, leases of real property, easements, etc. falls w/in SOF)
2) PERFORMANCE CANNOT BE COMPLETED WITHIN A YEAR (It doesn’t matter if performance actually takes more than a year. If full performance w/in a year was theoretically possible, no writing is required)
3) SALE OF GOODS FOR $500 OR MORE (A2)
4) LEASE OF GOODS FOR $1000 OR MORE (A2A) [**NY ONLY**]
5) SURETYSHIP (A suretyship is a promise to “answer for” the debt of another; essentially, when someone is serving as the backup)
6) K MODIFICATION (must be in writing only if K as modified - not the original K - is w/in SOF)
7) MISCELLANEOUS NEW YORK PROVISIONS*, such as assignment of an insurance policy; a promise to pay a discharged debt; an agreement to pay finder’s fee or broker’s commission, except to attorney, auctioneer or licensed real estate agent.
Does the agent's authority concerning real property have to be in writing?
Yes, agent’s authority concerning real property has to be in writing, or else principal must ratify under Equal Dignities Rule (agent’s authority has to be treated with equal dignity as the underlying transaction).
Do specific tasks ever create a SOF problem?
Specific tasks never create SOF problem, because in theory, any task can be fully performed in one year. Doesn’t matter what actually happens
Are lifetime Ks within the SOF?
-MBE: Lifetime Ks are not w/in SOF (party can die in first year)
-NY: Lifetime Ks are w/in SOF
Does a specified time period greater than one year fall w/in the SOF?
Yes, a specified time period greater than one year falls w/in SOF. Note, the clock starts to run when the agreement is made, not when performance begins and the duration of performance irrelevant
Can a K prohibit oral modification or require any modification be in writing whether or not it falls under the SOF?
-UCC A2 lets parties create their own private SOF – in their original written K, parties can say any modification has to be in writing whether it falls w/in A2 SOF or not
-Under common law, clauses that prohibit oral modification are not enforceable, which means you can always modify a K orally under common law even if you agreed not to.
Under the SOF, what is a satisfactory writing for a sale of goods K (UCC Article 2)?
A satisfactory writing for a sale of goods K must contain a quantity term and be signed by party to be charged w/ breach of K [i.e. D]
Under the SOF, what is a satisfactory writing for a lease of goods K in NY (UCC Article 2A)?
A satisfactory writing for a lease of goods K in NY must 1) state it’s a lease; 2) include the quantity, duration, and rental payments; and 3) be signed by D

Note, sometimes, writing that would have been good to satisfy A2 does not meet needs of A2A.
Under the SOF, what is a satisfactory writing for any other K that is not for a lease of goods in NY or for a sale of goods?
For any other K other than a K for a lease of goods in NY or a sale of goods, a satisfactory writing must contain all material terms (what/what), and be signed by D

Note, SOF can be one way street: D has to be the one who signed the writing and it is if irrelevant if P signed. Thus, it has to be a writing sufficient against D.
What are the two exceptions to the SOF in real property Ks?
1) LEASES OF ONE YEAR OR LESS (legislative exception to ensure that short-term leases are not invalidated by SOF)
2) “PART PERFORMANCE” EXCEPTION (Requires two of three facts: 1) buyer is in possession of the property; or 2) buyer made some payment; or 3) buyer made improvements to the property. Thus, a writing will not be required. Note, however, that payment alone, even full payment, is not enough for part payment)
What is the exception to the SOF involving one-year Ks?
FULL PERFORMANCE EXCEPTION: The key is FULL PERFORMANCE; part performance is not enough. The idea is that there is very little chance of fraud, because there has been complete performance.
What are the four exception to the SOF involving Ks for the sale of goods for $500 or more?
1) GOODS ACCEPTED OR PAID FOR BY BUYER (This exceptions applies only to goods accepted or paid for, not the whole K! Note, when goods can’t be apportioned, a deposit/down payment takes entire K out of SOF)
2) CUSTOM-MADE GOODS (substantial start; not suitable for sale to others in the ordinary course of seller’s business)
3) JUDICIAL ADMISSION (e.g., in a deposition, in testimony, etc. Thus, not any admission works)
4) MERCHANTS’ CONFIRMATORY MEMO (One party can use its own signed writing to satisfy SOF against the other party if A) BOTH PARTIES ARE “MERCHANTS”; B) WRITING CLAIMS AGREEMENT/HAS QUANTITY; and C) THERE IS NO WRITTEN OBJECTION W/IN 10 DAYS of the memo being received)
What is the exception to the SOF invovlign suretyships on the MBE?
“MAIN PURPOSE” EXCEPTION: If surety’s main purpose in making the promise was to benefit himself, then there’s no writing required to satisfy SOF

Note, NY does not recognize the “main purpose” exception
What is the Parol Evidence Rule?
The Parol Evidence Rule (PER) keeps out evidence of a prior or contemporaneous agreement (either oral or written) that contradicts a later writing. The Parol Evidence Rule thus give primacy to a later writing by assuming the later writing is more reliable than anything that came before

Remember, a PER problem requires a writing so if the fact pattern involves an oral agreement, it’s SOF problem, not PER problem.
What are the four exceptions to the Parol Evidence Rule?
1) TO CORRECT A CLERICAL ERROR (e.g., a typo)
2) TO ESTABLISH A DEFENSE AGAINST FORMATION
3) TO INTERPRET A VAGUE OR AMBIGUOUS TERM (Note, courts will give words their plain meaning under the plain meaning rule)
4) TO SUPLEMENT/ADD TO PARTIALLY INTEGRATED WRITING (final statement of the terms included, but not a complete statement of all terms agreed to. Note, you can add to the writing when it doesn’t appear to be complete on its face)
What is a merger clause?
A merger clause is evidence that writing is complete and therefore cannot be supplemented under the PER. Note, under UCC A2 only a merger clause will keep parol evidence out (common law more strict)
What relation does the Parol Evidence Rule have to subsequent developments regarding the K?
Nothing; the PER has nothing to do with what happens after an agreement is reduced to writing.
In descending order of importance, what are the three kinds of conduct that can explain terms or fill in gaps?
1) COURSE OF PERFORMANCE: What the parties did under this K. Course of performance is the best evidence of what the parties intended. (most important)
2) COURSE OF DEALING: What they did under prior Ks with each other. Course of dealing is more removed from this K – 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
What are the three seller's warranties of quality in a sale of goods (UCC A2)?
1) EXPRESS WARRANTIES: A seller is liable for breach of an express warranty, such as statements of fact, promises, descriptions of the goods, and the use of sample or model are express warranties (Note, sample/model is an express warranty, but an opinion - such as a general or subjective statement - is not)
2) IMPLIED WARRANTY OF MERCHANTABILITY (IWM) (this is an implied warranty that the goods are fit for their ordinary purpose. Seller is a merchant who deals in goods of the kind – i.e., a “dealer,” who has specialized knowledge about the particular goods involved in the transaction)
3) IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE (this is an implied warranty that the goods are fit for buyer’s particular purpose. The seller knows buyer has a special use for the goods and is relying on seller to pick out goods suitable for that use. Note, any seller can make an implied warranty of fitness, merchant or not!)
For a seller to be liable for breach of an express warranty, must the express warranty be a "basis of the bargain?"
Yes, the express warranty must be a "basis of the bargain," which means the buyer could have relied on the express warranty.
In NY, what are the lessor's warranties in a lease of goods (UCC Article 2A)?
The general rule is that the you use the same warranties under A2A as you used under A2. The one exception is a Finance Lease (usually entered into for tax purpose), which does not have any implied warranties.
What are the two limitations on warranty liability in sales and leases of goods?
1) DISCLAIMER: A seller can disclaim implied, but not express, warranties (the magic phrases are “as is” or “with all faults”; a seller can disclaim all implied warranties using one of these phrases. Note, if there’s no magic phrase, a disclaimer must be conspicuous, such as capped, bolded, underlined, etc. Also note that if there’s no magic phrase, and the seller wants to disclaim merchantability, seller must use that term)
2) LIMITATION OF BUYER’S REMEDIES (Generally, a seller can limit buyer’s remedies for breach of any warranty - express or implied - if the limitation is not unconscionable.)
What is the exception to the general rule regarding limiting buyer's remedies in the context of warranty liability in a sale or lease of goods K?
Limiting a buyer’s remedies for personal injury in the case of consumer goods is presumed unconscionable (Consumer protection clause). Note, a seller can introduce evidence to rebut presumption, but very difficult to do.

Remember to pay attention to the injury: personal injury vs. property damage – former falls into exception, latter falls into general rule, regardless of whether it is a consumer good
What is the failure of limited remedy mean in the context of warranty liability in a K for sale or lease of goods?
If limited remedy “fails of its essential purpose” (use that phrase on bar), regular remedy provisions of A2 apply.
When determining which party bears the ROL, what four things should you look at and in what order?
1) AGREEMENT: The agreement of the parties controls
2) BREACH: Breaching party bears ROL, even if loss is unrelated to breach.
3) DELIVERY BY COMMON CARRIER (e.g., UPS, Central Freight) (shipment K vs. destination K)
4) NON-CARRIER CASES (e.g., buyer is to pick up or seller is to deliver the goods; the answer to who bears the ROL depends on whether seller is a merchant.)
What is a shipment K and what is a destination K in the context of ROL?
-SHIPMENT K: Seller must get the goods to a common carrier, make delivery arrangements, and notify buyer; once seller has done this, ROL then shifts to buyer
-DESTINATION K: Seller must get the goods to a specific destination (usually where the buyer is located); ROL remains on seller until goods get to their destination
What is FOB (free on board)?
FOB is followed by the name of a city or place. ROL passes to buyer at the named location. If it’s where seller is located, you have a shipment K. If it’s anywhere else, you have a destination K
For non-carrier cases, how does the status of the seller as a merchant or non-merchant impact who bears the ROL?
-If merchant-seller, the seller bears ROL until buyer takes possession of the goods
-If non-merchant seller, ROL passes to buyer once seller makes the goods available to buyer (i.e., when seller tenders the goods)
In NY, who bears the ROL in a lease of goods (UCC A2A)?
Generally, ROL is on the lessor (lender) even if goods are in possession of lessee. However, for a finance lease, ROL is on the lessee (borrower)
What is the perfect tender rule in the context of performance of Ks for a sale of goods (A2)?
The perfect tender rule states that if tender (performance) is not perfect, buyer may reject the goods
What is the option to cure in the context of performance of Ks for a sale of goods (A2)?
A seller who fails to make perfect tender may have an option to cure. It usually depends on whether time for performance has expired
-If time has not expired, the seller has an option to cure
-If time has expired, the seller does not option to cure unless prior dealings based on specific facts demonstrate that buyer had been flexible in accepting non-conforming goods in the past (if this is the case, then seller will have option to cure even if time for performance has expired)
What are installment Ks?
An installment K requires or authorizes delivery in separate installments. Note, it doesn’t matter what seller does; matters what K says. Also note, the Perfect Tender Rule does not apply to installment Ks, so it’s harder to reject goods. Buyer may reject only for substantial impairment
What is the consequence of the buyer accepting the goods, regardless of whether they are "perfect" or not?
Once buyer accepts goods, it’s too late for buyer to reject them; but a buyer who accepts can still get damages for seller’s breach.
What is implied acceptance of goods?
Implied acceptance is when buyer keeps goods after have an opportunity to inspect them. Note, if there’s a long delay between receipt/complaint, look for implied acceptance. Also note that merely paying for goods is not an implied acceptance
Can a buyer revoke acceptance of goods?
A buyer cannot revoke acceptance of goods, unless the non-conformity substantially impairs the value of the goods and was difficult to discover (i.e., it was a latent defect)
What are the three consequences of a buyer's rejecting or revocation of acceptance of goods?
1) RETURN: Buyer can return the goods to seller at seller’s expense
2) REFUND: Buyer can get back any money buyer has paid for goods.
3) DAMAGES: Buyer can get damages from seller for breach of K.
In regards to a buyer's obligation to pay in K for a sale of goods, is a check okay?
A check is okay, but seller can refuse it. However, if buyer gives seller check right at deadline and seller refuses, buyer still has reasonable time to get cash although the deadline has passed
In Common Law Ks, does performance of the K need to be perfect?
No, performance does not have to be perfect; substantial performance is all that is required. (I.e., a party cannot commit a material breach). In other words, under the common law, when it comes to performance, almost is good enough
Under the common law, is finishing a job late considered a material breach of a K?
As a general rule, finishing a late is not a material breach, unless the K or circumstances indicate that time is of the essence
When may the other party’s breach provide an excuse for non-performance?
-SALE OF GOODS (A2): If seller’s performance is not perfect in ever respect (Perfect Tender Rule), buyer has pretty much free reign (3 Options: 1) Buyer may completely reject all goods, not just wrong goods; 2) Buyer may accept all goods, not just correct ones; 3) Buyer may accept some of the goods, and reject the rest. Note, whatever option buyer chooses, buyer can still get damages)
-COMMON LAW Ks: The injured party can recover damages for any breach of K whether the breach is material or not, but only a material breach provides an excuse. Note, for divisible Ks, where payment (or substantial performance) is to be made on a per unit basis, the breaching party can recover K price for any unit on which he has substantially performed.
What is anticipatory repudiation?
Anticipatory repudiation happens before the time performance is due.
An anticipatory repudiation works in exactly the same way as a material breach. Anticipatory repudiation can be retracted/taken back, as long as other party hasn’t relied on it.
What is adequate assurance?
A party with reasonable grounds for being insecure about other party’s performance may request in writing adequate assurance that the other party will perform in accordance w/ K If the other party does not provide adequate assurance, then the party can treat that as anticipatory repudiation. However, a party cannot use this provision to rewrite K or to demand a particular kind of assurance.
What is a rescission?
A rescission is an agreement to cancel K. For a rescission to be effective, each party must have some performance remainder, so there’s consideration to make agreement binding
What is modification?
Modification is an agreement to replace an existing K w/ a new one. A modification takes effect immediately.
What is an accord and satisfaction?
An accord is an agreement to accept performance in future satisfaction of an existing duty; satisfaction is performance of the accord. The existing duty is extinguished only when the accord is satisfied
How can you distinguish between a modification to a K and an accord?
To distinguish between modification and accord, see whether agreement takes effect now (modification) or then (accord).
What is a novation?
A novation is an agreement to substitute a new party for an existing one. All original parties plus new party need to consent to substitution.

Note, when one party delegates K obligations to another without getting consent from other party; in this case, original party still liable.
What is impossibility?
A later unforeseen event that makes performance impossible may provide seller w/ an excuse. Under A2, the doctrine is call impractability
In the context of impossibility, how does the destruction of something necessary for performance impact a party's need to perform?
-COMMON LAW: Destruction provides an excuse for non-performance
-SALE OF GOODS (A2): Same general rule, but two “wrinkles”: 1) ROL (a seller who bore ROL when goods were damaged or destroyed is excused by impractability, but if ROL has already passed to buyer, then seller doesn’t need an excuse); and 2) UNIDENTIFIED GOODS (Seller is excused only if the goods that were damaged or destroyed had been “identified to K,” that is set aside for sale to this particular buyer)
In the context of impossibility, when does death or incapacity provide an excuse for non-performance?
There is an excuse for non-performance when there is the death or incapacity of an essential person, such as a particular artist who is unique and cannot be replaced. Note, if buyer dies after service complete, estate still needs to pay, because theoretically, everyone can pay money
When does increase in the cost of seller's performance provide an excuse for non-performance?
-MBE: the increase in the cost of the seller’s performance almost never excuses the seller (seller assumed the risk by entering a fixed K)
-NYBE: seller may be excused. Look at the dollar amount (how many more dollars will it cost seller?) and the percentage increase
What is a new law prohibiting activity previously contracted for an example of?
Impossibility, specifically supervening governmental regulation.
What are the four kinds of impossibility?
1) DESTRUCTION OF SOMETHING NECESSARY FOR PERFORMANCE
2) DEATH/INCAPACITY OF AN ESSENTIAL PERSON (not just any person)
3) SUPERVENING GOVERNMENTAL REGULATION
4) INCREASE IN THE COST OF SELLER’S PERFORMANCE
What is frustration of buyer's purpose?
Frustration of buyer's purpose is a buyer’s excuse when buyer’s primary purpose for entering K has been thwarted/frustrated by a superseding, unforeseen event. However, seller needs to know buyer’s purpose when they entered K.
What is failure of an express condition?
Failure of an express condition limits obligations created by other K language; it does not create an independent obligation. You should look for words like “if,” “as long as,” “when,” “provided that,” “on condition that” and “unless" (for example, buyer contracts to buy a house, provided it is appraised for at least $300,000. The house is appraised for $299,500. Thus, buyer is excused from buying the house, although he can still buy the house if he wants to).

Note, strict compliance is required.
What are the three types of express conditions in the context of failure of an express condition?
1) Condition precedent: event occurs before a party is obligated to perform (most conditions are condition precedent; “if”)
2) Condition concurrent: runs alongside the obligation (“as long as”)
3) Condition subsequent: event cuts off obligation (“until”)
In the context of failure of an express condition, bow is "satisfaction" measured in "satisfaction clauses" included in Ks?
For Ks involving satisfaction clauses, “satisfaction” is measured by a reasonable person standard unless K deal with wants or matters of personal taste (an objective test).
When may the occurrence of a condition be excused in the context of failure of an express condition?
Occurrence of a condition may be excused by the later action or inaction of the person who is protected by the condition (every protection protects someone)

Remember, identify the person who’s protected by the condition, then see if he did something to forfeit the protection, such as 1) failure to cooperate (e.g., buyer will buy a house if he gets a mortgage, but then doesn’t even look for a mortgage, thus losing the protection of the condition) or 2) waiver (voluntarily giving up protection. Note, a party may retract waiver for future application of condition to the extent other party didn’t rely on waiver).
What are the two non-monetary remedies to breach of a K?
1) SPECIFIC PERFORMANCE: Equitable remedies, available only if monetary damages are inadequate to compensate the injured party. Availability of specific performances depends on the nature of K.
2) UNPAID SELLER’S RIGHTS TO RECLAIM GOODS (A2) (Generally not available under A2, unless buyer was insolvent when it received the goods and seller makes a demand w/in ten days after buyer received them, although if buyer sells good to a TP, seller has no right to reclaim from an innocent TP, Note, a seller can reclaim goods at any time if buyer misrepresented its solvency to seller in writing w/in 3 months before delivery)
When is specific performance an appropriate remedy for breach of a sale of goods K?
Specific performance is available only if the goods are unique or there are “other proper circumstances” (e.g. an inability to buy substitute goods in the market)

Works of art, antiques, and custom-made goods are considered unique
What is the usual remedy for breaches of real estate Ks?
Specific performance is the usual remedy because real property is considered unique (even if it’s not really unique)
Is specific performance available for service Ks?
Specific performance is not available in service Ks, but injunctive relief may be. (Court won’t force person to work against will)
What are the four kinds of monetary damages available when there is a breach of K?
1) Liquidated Damages
2) Expectation Damages
3) Incidental Damages
4) Consequential Damages
Can a party recover avoidable damages when there is a breach of K?
No, an injured party cannot recover damages he could have avoided (“mitigated”) w/ reasonable effort

Note, this generally arises in an employment K; you should subtract out comparable employment in the same city
Can a party recover punitive damages when there is a breach of K?
No, punitive damages are not awarded for breach of K because the purpose of K damages is to compensate, not punish.

Remember, don’t think of “good guys” and “bad guys.” K remedies are designed to compensate the injured party, not punish the breaching party.
What are liquidated damages?
In the K itself, a liquidated damages clause will state what the damages will be in the event of a breach. The liquidated damages will be upheld if damages were difficult to estimate and are reasonable forecast of probable damages, but they cannot operate as a penalty. Liquidated damages are common in construction industry, because they are an incentive for builder to get job done on time. Note, however, if liquidated damages clause is struck down as a penalty, the party is still entitled to actual damages

You should look for liquidated damages that are flexible, calculated on per diem basis, graduated/increase with further breach. However, one size does not fit all w/ liquidated damages: lump sum is not good.
In the context of liquidated damages, what impact does reasonableness of the liquidated damages clause at the time of contract or reasonableness of the liquidated clause at the time the K breach have on whether the liquidated damages clause is valid?
- Under common law, if liquidated damages was not a reasonable forecast of probable damages at time of K, it doesn’t matter if it turns out to be reasonable in light of actual damages. I.e., it has to be reasonable at time of K.
-UCC A2 makes it easier to uphold liquidated damages as long as damages are reasonable at time of K OR at time of breach.
What are expectation damages?
Expectation damages put an injured party in as good a position as full performance. Expectation damages are the general rule.
How are expectation damages calculated for common law Ks?
If a buyer pays a seller for his services, and the seller breaches, the seller would have to pay the buyer for the cost of cover to get the service performed by someone else. If the buyer breaches, the buyer has to give expenses + expected profits to the seller.
How are the three ways expectation damages calculated for sale of goods Ks (UCC A2) when the seller breaches?
1) COVER DAMGES: If seller breaches, damages equal cover price – K price if buyer covers in good faith. Note, a buyer does not need to pay market price or buy cheapest goods available, as long as buyer uses good faith (this is the usual measure)
2) MARKET DAMAGES: If seller breaches, damages equal market price – K price if buyer doesn’t cover in good faith or doesn’t cover at all. Note, buyer can’t go out and buy much better goods and pass off the extra cost to seller, Also note that A2 doesn’t require a buyer to cover
3) LOSS IN VALUE: if seller breaches, damages equals value as promised – value delivered if buyer keeps non-conforming goods

Remember, sellers tend to breach in a rising market
What are the four options for calculating expecation damages for sale of goods Ks (UCC A2) when the buyer breaches?
1) RESALE DAMAGES: If buyer breaches, damages equals K price – resale price if seller resells in good faith (usual measure)
2) MARKET DAMAGES: If buyer breaches, damages equals K price – market price if seller does not resell in good faith or does not resell at all. Note, seller can’t go out an dump good for a minimal amount of money; needs to use good faith
4) LOST PROFIT: If seller is a lost volume dealer. Look for a dealer that has an entire inventory, so could sell to X and to Y and thus have two profits (a common example involves a dealer resells the same goods for the same price. This dealer has lost the profit it would have made on the initial sale!)
4) K PRICE: If seller can’t resell the goods, seller can get the full K price (seller’s version of specific performance). This occurs when there is no market for the goods.

Remember, buyer tends to breach in a falling market
What are incidental damages?
Incidental damages are the cost to the injured buyer or seller of transporting/ caring for goods after a breach and of arranging a substitute transaction.
What are consequential damages?
Consequential damages are damages special to this P that were reasonably foreseeable to the breaching party at the time of K. Note, consequential damages are not available to a seller under K

The issue is not cause, but instead, it’s about what is reasonably foreseeable. Breach might cause damages, but it needs to be reasonably foreseeable.
What does entrustment refer to?
An owner who entrusts goods to a merchant who deals in goods of the kind (i.e., a dealer) has no right against a bona fide purchaser (BFP)

Note, the fact pattern is always the same – an owner takes jewelry or car in to be repaired by a merchant who also sells that particular kind of good
What does a third party beneficiary K arise?
A third party beneficiary K arises when two people enter a K intending to benefit a TP
What is the definition of a third party beneficiary?
A person who is not party to a K, but has rights because the K was intended to benefit him
What is the definition of a promisor?
The party who promises to perform for TPB
What is the definition of a promisee?
The party who secures the promise
What is the following an example of: X pays Y $25,000 to serenade Z at his retirement dinner.?
Third Party Beneficiary K (Z is the TP beneficiary of the K between X and Y)
What is the definition of the intended beneficiary?
The person to whom performance is to be given under K (almost always names named in the K).

Note, an incidental beneficiary just happens to benefit; not entitled to damages for breach. Only intended beneficiary has legal rights; an incidental beneficiary has no legal rights under K.
What is the definition of a donee beneficiary?
A person who is getting the performance as a gift. Contrast this with a creditor beneficiary, who is getting the performance to repay a debt.

Remember, on the bar, TPB is usually always a donee beneficiary; creditor beneficiaries are extremely rare in real life and almost never tested.
Can a promisor and promisee rescind or modify the TPB K?
Yes, a promisor and promisee can rescind or modify the K, but only until rights of TPB have “vested"; in other words, once TPB learns about K and relies on it, his rights have vested and the promisor and promisee can’t rescind or modify their K without TPB’s consent

The exception to this is that the contract language in K controls
Is a promisor liable to a TPB?
Yes, an intended beneficiary can sue the breaching promisor even though there is no privity of K between them. However, TPB is subject to the same defenses as the promisee, so if promisee can’t sue for breach, TPB can’t either (e.g., promisee materially breaches)
Who is a promisee liable to in a TPB K?
A promisee is liable to a creditor beneficiary only. Thus, a promisee is not liable if TPB is a donee beneficiary, than he has no rights against promisee, since promisee just making a gift.
Is a promisor liable to a promisee?
Yes, a promisee can recover whether K involves creditor or donee beneficiary, but if latter, damages will be little.
What is the general rule regarding delegation of duties?
Contractual duties may be delegated without the consent of the person to whom performance is owed (the “obligee”).
What are the two exceptions to the general rule regarding delegation of duties?
1) CONTRACT LANGUAGE CONTROLS (If K prohibits assignment or delegation, then no delegation)
2) SPECIAL SKILL OR REPUTATION (Even if no language in K prohibiting delegation or assignment, still can’t assign duties associated w/ special skills, special expertise, or special reputation)
What are the two rights of the obligee (the person to whom performance is owed) when the contractual duties have been delegated?
1) DELEGATING PARTY REMAINS LIABLE (compare with novation)
2) A DELEGATE WHO GETS CONSIDERATION IS LIABLE (remember, the obligee is the TPB)
What is assignment of rights?
2 people make a K, later one (assignor) transfers his rights to a third party (assignee). The party who owes the duty is the obligor. In other words, in an assignment, two parties enter a K and a third person (the assignee) appears later on (it’s a two-step process; contrast this with TPB, where all three persons are present from the beginning)

Note, there must have been language of a transfer (“I assign…”); promises are no good. Thus, there needs to be present transfer of rights.
Is consideration needed for an assignment of rights?
No consideration is not required and gift assignments are valid (although easily revoked).
What are the two restrictions on assignment?
1) K LANGUAGE CONTROLS: Distinguish a clause that prohibits assignment from one that completely invalidates assignment (thus, if K says “rights under this K are not assignable,” assignment remains valid and obligor still owes duty to assignee, but can sue assignor for breach of K. But, if K says “all assignments under this K are void,” assignment is not valid and obligor does not owe duty to assignee).
2) CANNOT SUBSTANTIALLY CHANGE DUTIES OF OBLIGOR: Generally, you cannot assign right to services. Also, a requirement k is generally assignable as long as assignee’s requirements are not out of line with the assignors
Are obligors liable to assignees?
Yes, obligors are liable to assignees; the assignee steps into the assignor’s shoes, and has only the rights that the assignor would have had. Note, however, that an obligor is not liable to assignee unless knows about assignment.
In the context of multiple assignments, how do gratuitous assignments work?
Gratuitous ("gift") assignments are easily revoked; the last gratuitous assignee in time prevails over earlier gratuitous assignees because a later gift assignment revokes an earlier one.

Note, in NY, a gift assignment is irrevocable if it is in a signed writing.
In the context of multiple assignments, how do assignments for consideration work?
Assignments for consideration are more durable. Generally, the first assignee for consideration prevails over all subsequent assignees (as well as prior gratuitous assignees)
However, a later assignee for consideration prevails if he does not know of the earlier assignments and he is the first to get payment from or a judgment against the obligor (note, being the first to notify is not enough)