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76 Cards in this Set

  • Front
  • Back
Contracts Outline
1. Applicable Law
2. Formation
3. Terms of Contract
4. Performance
5. Remedies for unexcused nonperformance
6. Excuse of nonperformance
7. Third-party problems
Quasi-Contract
1. Elements:
(a) P has conferred a benefit on D, and
(b) P reasonably expected to be paid, and
(c) D realized unjust unrichment if P not compensated

2. Measure of Recovery:
(a) Contract price is not the measure of recovery
(b) Focus on value of benefit conferred
(c) The Contract price is a ceiling if P is in default
Unilateral Contract
Results from an offer that expressly requires performance as the only possible method of acceptance. Arises when:
1. Award, prize, or contest
2. Acceptance can only be communicated through performance
Bilateral Contract
All other contracts are bilateral - this is important only in answering questions about whether there is a contract.
UCC Article 2
Applies to Ks that are primarily sales of goods. Most, but not all, UCC rules are the same as the common law rules.
• All or nothing. If a K is mixed goods & services, look to which is more important to determine whether to apply UCC or CL.
• Exception: if K divides payment ($10k for goods, $20k for services), then apply Art. 2 for the goods and CL for the services
Formation:
Offer:
General Test
• Manifestation of Commitment: An offer is a manifestation of an intention to contract - words or conduct showing commitment.
• Test: whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract
Formation:
Offer:
Content Problems
• general rule: offer is NOT required to contain all material terms. Must meet "reasonable certain" test - basis for determining existence and breach
• missing price term in sales contract:
a. sale of real estate: price and description required, not an offer
b. sale of goods: no price requirement, offer if parties intended it
• vague/ambiguous material terms not an offer under CL or Art. 2 ("fair price"), etc.
• requirements Ks/output Ks: K for the sale of goods can state the quantity to be delivered under the K in terms of the buyer's requirements or seller's output or in terms of exclusivity ('all', 'only', 'exclusively', 'solely'). Note: increase in requirements ok as long as in line with prior demands (can't be unreasonably disproportionate (+/- 10%)
Formation:
Offer:
Context Problems
• Advertisement generally not an offer
• Exceptions
1. can be an offer if it is in the nature of a reward
2. can be an offer if it specifies quantity and expressly indicates who can accept (ie 1 fur coat $10 first come first served)
Formation:
Termination
1. lapse of time (time stated or a reasonable time - ~1 month)
2. death of a party prior to acceptance
3. revocation
4. words or conuct of offeree indicate rejection
Formation:
Termination:
Death prior to acceptance
1. general rule: death or incapacity of either party after the offer but before acceptance terminates offer
2. exceptions: option K, part performance of offer to enter into unilateral K
Formation:
Termination:
Revocation
• Only offeror may revoke, but offeree must be aware for revocation to be effective
• How revoked:
1. Unambiguous statement by offeror to offeree of unwillingness or inability to K, or
2. Unambiguous conduct by offeror indicating an unwillingness or inability to K that offeree is aware of
• Note: multiple offers is not revocation (offeree 1 learns of offeree 2 not revocation)
• Revocation of an offer sent through "the mail" is not effective until received
• An offer cannot be revoked after it has been accepted
Formation:
Termination:
Revocation:
Irrevocabe Offers
1. Option K: promise to keep open + consideration. No time max. Offer becomes revocable after a stated time limit.
2. UCC "Firm Offer Rule": an offer cannot be revoked for up to three months if
i. offer to buy or sell goods
ii. signed, written promise to keep the offer open (no consideration)
iii. party is a merchant (merchant is generally a person in business)
3. Reliance: bid = offer (generally). reliance must be:
i. resaonably foreseeable AND
ii. detrimental
4. The start of performance (not mere preparation) pursuant to an offer to enter into a unilateral K makes that offer irrevocable for a reasonable time to complete performance
Formation:
Termination:
Words or conduct of the offeree
1. Counteroffer: terminates offers & becomes new offer ("I will only pay $9k")
• Note: bargaining ("will you take $9k?") isn't a counteroffer; original offer still open
2. conditional acceptance ("I will buy IF you give me a discount")
3. CL mirror image rule: response with one additional sentence = counter offer
4. UCC mirror image rule:
i. response to offer w/ new terms, but new terms not a condition of acceptance = acceptance (merchant status irrelevant)
ii. if any party is not a merchant, new terms are proposals to be accepted or rejected separately. if both parties merchants, new terms are part of K
iii. if both parties are merchants, new terms are NOT part of K if it materially changes the offer OR if offeror objects to change
Formation:
Acceptance:
Improper verbal response, later conduct indicating K
• Improper verbal response to an offer then later conduct indicating a contract
1. CL: conduct treated as acceptance of a counteroffer
2. UCC: conduct is basis for new K w/o counteroffer or additional terms (original offer)
Formation:
Acceptance:
Full performance
1. verbal offer
2. no words in response
3. only response is full performance
4. full performance is always acceptance; sometimes notice is required (if offeree has reason to believe offeror will not learn of acceptance (geography)
Formation:
Acceptance:
Start of performance
1. Verbal offer
2. No words in response
3. Bilateral Ks: start of performance = acceptance, unilateral Ks: performance completion = acceptance
Formation:
Acceptance:
Promise to perform
• Words of offer, promise to perform = acceptance
Formation:
Acceptance:
Mail Box Rule
1. All communications other than acceptance are effective ONLY WHEN received
2. Acceptance is generally effective when mailed
3. If a rejection is mailed before an acceptance, then neither is effective until received
4. You cannot use the mail box rule to meet an option deadline
Formation:
Acceptance:
Seller sends wrong goods
• General Rule: Acceptance and Breach
• Accommodation (i.e. explanation) Exception: Counteroffer and NO Breach (because no contract)
Formation:
Acceptance:
Who Can Accept?
1. Person who knows about the offer (can't claim reward when you didn't know of the reward offer); and
2. who is the person to whom it was made
• offers cannot be assigned
• BUT options can be assigned unless the option otherwise provides
Formation:
Unenforceability
1. Lack of consideration or a consideration substitute for the promise at issue
2. Lack of capacity of the person who made the promise
3. Statute of frauds
4. Existing laws that prohibit the performance of the agreement
5. Public policy
6. Misrepresentations
7. Nondisclosure
8. Duress
9. Unconscionability
10. Ambiguity in words of agreement
11. Mistakes at the time of the agreement as to material facts affecting the agreement
Formation:
Unenforceability:
Lack of Consideration
A bargained-for legal detriment:
1. Identify the promise breaker
2. Ask whether that person bargained for something in return for her promise
3. Ask what legal detriment person trying to enforce the promise sustained
Formation:
Unenforceability:
Lack of Consideration:
Forms
1. Performance - doing something not legally obligated to do
2. Forbearance - not doing something legally entitled to do
3. Promise to perform
4. Promise to forbear
Formation:
Unenforceability:
Lack of Consideration:
Issues
1. "bargained for" - need something in exchange for your promises
2. legal detriment - can be affirmative or negative right
3. promise as consideration, but no illusory promises ("unless i change my mind")
4. adequacy of consideration not relevant in K law (no amount too small)
5. past consideration not allowed unless act expressly requested by promisor and pay is expected by promisee.
6. Preexisting contractual or statutory duty rule
a. CL: previously existing legal/K obligations not new consideration for new promise. New consideration is required unless there is an addition/change in performance, there is an unforeseen difficulty that would otherwise excuse non-performance or if a third party promises to pay
b. UCC - "Good faith test": if deal made in good faith, modification requires no consideration
7. Part payment as consideration for release of balance of debt:
a. If debt is due & undisputed, then part payment is NOT consideration for release
b. If not yet due (or disputed), then it IS consi
Formation:
Unenforceability:
Lack of Consideration:
Consideration Subsitutes
1. Seals: Seal isnt consideration substitute (majority rule, NEVER RIGHT IN CA)
2. A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration. (e.g., A owes B $1000, statute of limitations expired, writes will pay $600 instead. Enforceable)
3. Promisorry Estoppel (detrimental reliance). Requires:
i. Promise
ii. Reliance that is reasonable, detrimental and foreseeable
iii. Enforcement necessary to avoid injustice
Formation:
Unenforceability:
Lack of capacity
1. Infant - under 18
2. Mental incompetents - lacks ability to understand agreement
3. Intoxicated persons if other party has reason to know
Formation:
Unenforceability:
Lack of capacity:
Consequences
1. Right to disaffirm by person without capacity (or if they perform, right to enforce)
2. Implied affirmation by retaining benefits after gaining capacity (ratification)
3. One w/o capacity is NEVER liable in K law, but still needs necessities (food, etc.). Can recover against such a person in quasi-K at equity.
Formation:
Unenforceability:
Statute of Frauds:
Types of Ks within SoF
1. Guarantees of another's debts unless main purpose of original K was to benefit gaurantor
2. Promises by executor to personally answer for debts of decedent
3. Promise in consideration of marriage (not promise to marry)
4. Service Ks incapable of performance w/in 1 year (ie K for 3 yrs work). Tasks or services that could be done within a year, then no SoF (no matter how big the task). Ks for life, no SoF (life could end within the year).
5. Transfers of interest in real estate (except leases < 1yr) (not building a house)
6. Sale of goods for $500 or more (UCC applies even if $500 minimum not met)
Formation:
Unenforceability:
Statute of Frauds:
Satisfying SOF:
Performance
1. Performance and services K
i. Full performance by either party satisfies the SOF
ii. Part performance of a services contract DOES NOT satisfy the SOF
2. Sale of Goods K
i. Part performance (ordinary goods): satisfies SoF but only to the extent of the part performance (delivered goods: SoF satisfied, undelivered goods: SoF not satisfied)
ii. Part performance (specifically manufactured goods): substantial start, SoF satisfied
3. Real Estate Transfers: SoF satisfied if buyer does 2 out of the 3:
i. Payment
ii. Improvements
iii. Possession
Formation:
Unenforceability:
Statute of Frauds:
Satisfying SOF:
Writing
• CL SoF: "all material terms test" - writing must name both people & signed by person asserting SoF defense
• UCC SoF:
i. writing must indicate K is for sale of goods & contain quantity.
ii. no requirement to state price.
iii. must be signed by person asserting SoF defense. exception: if both parties are merchants & person who receives signed writing with a quantity term that claims there is a K doesn't respond in 10 days.
• Judicial admission: if you admit to entering into an agreement, then SoF satisfied
Formation:
Unenforceability:
Statute of Frauds:
Misc
• Authorization to enter into K for someone else: must be in writing if underlying K falls w/in SoF ("equal dignity" rule)
• Contract Modification: if the K WITH the alleged change would be w/in SoF, then alleged modification must be in writing.
• K requires all modifications in writing:
i. CL: void, ignore this clause & follow above rule
ii. UCC: these provisions effective unless waived
Formation:
Uneforceability:
Illegality/ Public Policy/ Misrepresentation/ Nodisclosure/ Duress
• Illegal Subject Matter: void K
• Illegal Purpose: enforceable if illegal purpose unknown to other party
• Public Policy: can't exempt intentional & reckless conduct from liability
• Misrepresentation: Pre-K false assertion of fact relied on = void K (even honest/innocent misrepresentation. Wrongdoing not required)
• Nondisclosure: Must be wrongful to void K (hiding termite damage) (probably wrong answer on bar)
• Duress: physical or economic - need bad guy (improper threat) & vulnerable guy (no reasonable alternative)
Formation:
Unenforceability:
Unconscionability
• Empowers court to cancel part or all of agreement.
• Test at time agreement was made, by judge. Two tests:
1. Unfair surprise (procedural unconscionability)
2. Oppressive terms (substantive unconscionability)
Formation:
Unenforceability:
Ambiguity
• No K if:
1. Parties use a material term open to at least 2 reasonable interpretations, AND
2. Both parties attaches different meaning to the term, AND
3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations
Formation:
Unenforceability:
Mistake of Fact
• Incorrect belief about a material fact at the time of K can nullify the contract.
1. Mutual:
i. both parties mistaken about
ii. Basic assumption of fact
iii. That materially affects agreed upon exchange and
iv. Mistake doesn’t involve a risk that the party trying to get out of the deal bears
2. Unilateral: usually not void unless non-mistaken party had reason to know of mistake
Terms of K:
Parol Evidence:
Vocab
• Integration: written agreement that court finds is the final agreement, triggers PER
• Partial integration: written & final but not complete (always wrong answer)
• Complete integration: written & final & complete (always wrong answer)
• Merger clause: persuasive but not conclusive on integration ("this is complete & final agreement")
• Parol evidence:
i. limited to words of party/parties
ii. before integration (before K was put in written form)
iii. oral or written
• Reformation: equity action to modify written K to reflect actual agreement
Terms of K:
Parol Evidence:
Triggering Facts
1. Written K that court finds is the final agreement; AND
2. Oral statement made at time K was signed or earlier
Terms of K:
Parol Evidence:
Fact Patterns
1. Contradicting the written K: PER prevents court from using PE to contradict terms in written K but can be admitted for purposes of determining clerical error
2. Getting out of written K: PE allowed to determine whether there is a defense to enforcement of the K (ie misrepresentation, fraud, etc.) regardless of integration
3. Defining written K's terms: PE allowed to resolve ambiguities
4. Adding to written K: PER forbids using earlier agreements as a source of additional terms unless:
i. written K was only partial integration or
ii. additional terms would ordinarily be in separate agreements
Terms of K:
Conduct of the Paries
• in addition to writing, conduct can be a source of K terms (in order of importance):
1. Course of performance - same people, same contract (what these people have already done under this contract)
2. Course of dealing - same people, different but similar contract
3. Custom and usage - different but similar people, different but similar contract
Terms of K:
UCC default terms:
Seller delivery obligations using common carrier
1. Shipments Ks: seller completes delivery obligations when:
i. seller gets goods to a common carrier,
ii. makes reasonable arrangements for delivery, and
iii notifies the buyer
2. Destination Ks (rare): sellers delivery obligations complete upon delivery to buyer
3. Determining which it is:
i. "FOB" followed by city where the seller is or where goods are means shipment K
ii. "FOB" followed by any other city means destination K
Terms of K:
UCC default terms:
Risk of Loss
1. Risk of loss issues arise:
i. after K has been formed but before buyer receives the goods
ii. goods are damaged or destroyed
iii. neither the buyer nor the seller is to blame
2. Who pays what?
i. risk of loss on buyer means buyer pays full K price for the lost/damaged goods
ii. risk of loss on seller means no obligation on the buyer; possible liability on seller for nondelivery
3. Risk of loss rules (apply in increasing order)
i. agreement of the parties controls (never on bar)
ii. breaching party liable for uninsured loss even if breach is unrelated to problem
iii. delivery by common carrier other than seller: risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligations
iv. no agreement, no breach, no delivery by a carrier (catch-all rule): if seller is a merchant, risk of loss shifts to buyer on receipt of goods, if seller is non-merchant, risk of loss shifts to buyer when goods are tendered (made available to buyer)
Terms of K:
UCC default terms:
Warranties of quality
• Sale of goods, delivered to buyer, buyer unhappy with quality. 3 types of warranty:
1. Express: statements of promises or facts, use of sample/model ("all steel"). Doesn't include sales talk/opinion ("top quality")
2. Implied warranty of merchantability: when buyer from merchant that deals in goods of the kind in question, implied term added by operation of law to K that goods are fit for ordinary purpose for which such goods are used.
3. Implied warrant of fitness for a particular purpose: requires buyer w/ a particular purpose, seller knows of this purpose, and buyer relies on seller to select suitable goods. The warranty ensures the goods are fit the particular purpose.
Terms of K:
UCC default terms:
Contractual Limitations on Warranty Liability
1. Disclaimer: eliminates IMPLIED warranties (e.g., "there are no warranties")
i. Express warranties generally cannot be disclaimed
ii. Implied warranties of merchantability and fitness can be disclaimed with conspicuous langage in disclaimer (not tested) or using key language ("as is" or "with all faults")
2. Limitation of remedies: doesnt eliminate warranty, simply limits or sets recovery for any breach of warranty
i. Possible to limit remedies even for express warranties
ii. General test is unconscionability
iii. Prima facie unconscionable if breach of warranty on consumer goods causes personal injury
Performance:
Goods:
Perfect Tender
1. Perfect Tender applies only to sales of goods
2. Perfect Tender means that the seller's performance must be perfect: perfect goods, perfect delivery
3. Imperfect Tender by the seller generally gives the buyer the option of rejection of the delivered goods
Performance:
Goods:
Rejection
• If imperfect tender, buyer has the option to retain and sue for damages or reject "all or any commercial unit" and sue for damages
• Note: Rejection is limited by cure, installment K, and acceptance
Performance:
Goods:
Cure
• Sometimes seller gets chance to cure imperfect delivery:
1. Seller has reasonable ground to believe imperfect delivery would be ok: look for details of prior deals between buyer and seller with such an allowed (key words: "past", "prior" or "previously")
2. Time for performance has not yet expired.
Performance:
Goods:
Installment Contracts
• Requires or authorizes delivery in separate lots to be separately accepted. Note: multiple deliveries = installment K, not multiple payments
• Buyer can only reject an installment when impairment is substantial and can't be cured in the next installment.
Performance:
Goods:
Acceptance
1. If the buyer accepts the goods, it cannot later reject them
2. Payment without opportunity for inspection is not acceptance
3. Buyer keeps possession of goods w/o objection = implied acceptance (even if later complained about)
Performance:
Goods:
Revocation of Acceptance
• Buyer can revoke acceptance IF:
1. Nonconformity substantially impairs value of goods AND
2. Excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction AND
3. Revocation is w/in a reasonable time after discovery of nonconformity
Performance:
Goods:
Rejection vs. Revocation
1. Timing: rejection of goods must be before acceptance, revocation of acceptance is after acceptance
2. Standard: rejection of goods is perfect tender, revocation of acceptance is substantial impairment
3. Requirements for both:
i. must seasonably notify seller
ii. must hold the goods for the seller
iii. must follow reasonable seller instructions
4. Consequences: must send goods back to seller, no buy payment obligations
Performance:
Goods:
Payment
1. Open price term means reasonable price at time of delivery
2. Price to be fixed by buyer or seller means price must be so fixed in good faith
3. Price payable in goods means that each party is seller of good it provides
Performance:
Common Law
• CL equivalent of perfect tender is substantial performance.
• If one party substantially performs, the other must pay
Remedies:
Non-monetary:
Specific Performance/ Injunction
• equitable remedy, strong performance against specific performance unless monetary damages aren't adequate.
i. real estate K: generally can get SP unless BFP involved
ii. unique goods K: antiques, art, custom made goods, etc. then SP
iii. K for services: no SP, maybe injunctive relief for performance elsewhere
Remedies:
Non-monetary:
Reclamation
• no general right for unpaid seller to reclaim goods. Requires:
i. buyer must have been insolvent at time he received goods
ii. seller demands return of goods w/in 10 days of receipt (if buyer represents himself as solvent, then it becomes a "reasonable time rule")
iii. buyer still has goods at time of demand
Remedies:
Monetary:
Policy/Measure of Damages
• Idea is to compensate P, not punish D (include this sentence in essays)
• Expectation damages: puts P where he would've been had there been no breach
• Reliance: puts P in same position as if K had never happened.
• Restitution: pay P by putting D in same economic position as if K never happened. (compensate P by making D pay any gains realized)
Remedies:
Monetary:
Damages for Sales of Goods
1. Seller breaches, buyer keeps goods: Fair market value if tender had been perfect minus fair market value as delivered (30k perfect, 20k as delivered, damages = 10k)
2. Seller breaches, seller keeps goods: Market price at time of discovery of the breach minus contract price OR replacement price minus contract price
3. Buyer Breaches, buyer keeps goods: Contract Price
4. Buyer breaches, Seller keeps goods: contract price minus market price at time and place of delivery OR contract price minus resale price, and in some situations, provable lost profits
5. Lost profits for lost volume seller: can recover provable lost profits if item is one that would be normally sold to someone else and result in a lost sale
Remedies:
Monetary:
Additions & Limitations
• Note: recoverable in addition to expectation, lost profit, etc.
1. Incidental damages (plus): costs incurred in finding replacement performance are always recoverable ("incidental recoverable if foreseeable" always wrong answer)
Costs incurred in finding replacement performance - always recoverable
2. Consequenial damages (plus): loss specific to P if foreseeable (special damages). D must have known of special damages at time of K.
3. Avoidable damages (minus): no recovery for damages that could have been mitigated or avoided without undue burden on P. (burden of proof on D)
4. Certainty limitation: damages must be reasonable certain (estimated lost profitsare may be to uncertain)
Remedies:
Monetary:
Liquidated Damage Clauses
• K provision limiting damages. May be invalid if too high (compensation vs. penalty). Test:
1. Damages were difficult to forecast at time K was made, AND
2. Provision is a reasonable forecast
• Note: damage rates presumptively valid ($1k/day), fixed amounts presumptively invalid ($10k total, regardless of time)
Excuses:
Other party's breach
• CL: Material Breach Rule, 4 general rules:
1. Damages can be recovered for any breach
2. Only a material breach by one guy excuses the other from performing
3. Whether a breach is material is a fact question (hard to test on MBE)
4. Substantial performance = no material breach; material breach = no substantial performance
• Exception: divisible K. Can be recovery for substantial performance on a divisible part even though material breach of the whole if K states price on a per/performance basis (rather than a lump sum).
• UCC: For goods, breach doesn't have to be material (may be very minor)
Excuses:
Non-occurrence of express condition
• Express condition: mutually agreed upon promise modifier.
• Key language: "if" "only if" "provided that" "so long as" "subject to" "in the event that" "unless" "when" "until" and "on condition that"
• Express condition vs. conditional acceptance: express condition must be mutually agreed upon, though conditional acceptance uses similar language
• Condition satisfied with strict compliance only (6.0% interest vs. 6.1%)
Excuses:
Non-occurrence of express condition:
Exceptions
• Condition may be excused if:
1. estoppel: based on statement from person protected by condition before the conditioning event was to occur & relied upon by the other party
2. waiver: based on statement made by person protected by condition after the conditioning event was to occur. no reliance required.
3. prevention: if party protected by condition hinders/prevents occurrence of condition, then condition is excused & K must still be performed
4. avoidance of forfeiture: (new law) nonoccurrence of express condition excused to avoid excessive harm to party not protected by condition (court's discretion)
Excuses:
Anticipatory Repudiation
• Unambiguous early statement or conduct indicating:
i. that the repudiating party will not perform
ii. Made prior to the time that performance was due
• Excuses other party's duty to perform, gives rise to immediate claim for breach UNLESS claimant has already finished performance (then must wait until breaching party's performance due date).
• Anticipatory repudiation can be retracted so long as no material change by non-breaching party. Duty to perform reimposed, but can be delayed until adequate assurance is received.
Excuses:
Insecurity
1. Statements/conduct make performance uncertain (especially in goods Ks)
2. You can make a written demand for adequate assurance, and
3. If it's commercially reasonable to stop performance, you can stop performance until you receive that assurance.
4. If assurance isn't received in a reasonable time, may treat as anticipatory repudiation.
Excuses:
Later Ks
1. Rescission (cancellation): the key is whether performance is still remaining from each of the contract parties (executory). once rescinded, can't recover for work already done. Can't rescind in one party is non-executory.
2. Accord and Satisfaction (substituted performance): agreement by parties to an existing K to accept a different performance in satisfication of existing K (will use "if... then..." language).
i. if new agreement (accord) is performed (satisfaction), then original K excused
ii. it accord not performed, other party can sue on original K or accord (not both)
3. Modification (substituted agreement): parties agree to accept new agreement in place of existing K. (key language: "instead of")
4. Novation (substituted person): agreement between both parties to an existing K for the same performance but from a different party (original party no longer liable).
• Novation vs. delegation: novation requires agreement of both parties to original K & excuses replaced party from liability. del
Excuses:
Later, unforeseen event
• Performance (other than duty to pay money) can be excused under impossiblity, impracticability or frustration of purpose
i. Something happens after K formation but before completion of performance;
ii. that was unforeseen;
iii. that makes performance impossible or commercially impracticable or frustrate the purpose of the performance
• Impractical: can't be done w/o extreme & unreasonable difficulty/expense (not just increased cost of performance)
Excuses:
Later, unforeseen event:
Examples of Impossible/impracticable
• Damage or destruction of subject matter after K
i. Painting a house, house burns down - performance excused
ii. Building a house, house burns down before finished - performance not excused
iii. Sale of goods before tender: seller's performance is only excused if goos are unique/rare. If goods are common and/or replaceable, performance not excused.
iv. Sale of goods after tender: buyer must still pay
• Death after K: generally death doesnt make person's K obligations disappear UNLESS party to contract is a special person (owen wilson), then impossibility
• Subsequent law or regulation
i. Later law makes performance of contract illegal - excuse by impossibility
ii. Later law makes mutually understood purpose of K illegal - excuse by frustration of purpose
Third Parties:
Third party beneficiary:
Vocab
• 3rd party beneficiary: not party to K able to enforce K others made for her benefit
• Promisor = person who is making the promise that benefits the third party
• Promisee = Look for person who obtains the promise that benefits the third party
• Intended/incidental = only intended beneficiaries have K law rights. Intent of parties to contract determines whether intended or incidental
• Creditor/donee = intended beneficiaries are either donees or creditors; usually they are donees; look at whether beneficiary was a creditor of the promisee
he would have had if sued by the promisee
Third Parties:
Third party beneficiary:
Cancelation or Modification
• Can't only cancel or modify if 3rd party knows of and has relied on or assented as requested (3rd party's rights have vested), unless 3rd party consents or K provides otherwise
Third Parties:
Third party beneficiary:
Who can sue
1. 3rd party beneficiary can recover from promisor
2. Promisee can recover from promisor (3rd party & promisee can't both recover)
3. General rule: 3rd party beneficiary can't recover from promisee, though a creditor 3rd party beneficiary can from promisee on pre-existing debt
• Defense: if 3rd party beneficiary sues promisor, the promisor can assert any defense that he would have had if he was sued by the promisee
Third Parties:
Assignments
• Assignment is transfer of rights under K in two separate steps:
i. K between only 2 parties
ii. One of the parties later transfers rights under that K to a 3rd party
• Note: consideration not required, but gratuitous assignments can be revoked
• Assignor: party to K who later transfers rights under the K to another
• Assignee: not original party to the K, able to enforce the K bc of assignment
• Obligor: other party to the K
Third Parties:
Assignments:
Limitations
• K provisions: courts favor assignability and are reluctant to read K language as preventing assignment
i. prohibition: language takes away right to assign but not the power to assign, meaning assignor is liable for breach of K ("rights hereunder are not assignable"). BUT assignee unaware of prohibition can still enforce assignment.
ii. invalidation: takes away right to assign AND power to assign so that there is a breach by assignor & no rights in assingee ("all assignments of rights under this K are void")
• CL: even if K doesn't limit right to assign, CL bars assignment that substantially changes the duties of the obligor. Note: assignment of right to payment never a substantial change, assignments of right to K performance other than right to payment is usually a substantial change
Third Parties:
Assignments:
Rights of Assignee
1. Assignee can recover from obligor
2. Assignor for consideration can NOT recover from obligor
3. Obligor has same defenses against assignee as it would against assignor
4. Payment by obligor to assignor effective until obligor knows of assignment
5. Modification agreements between obligor and assignor effective if obligor idn't know of assignment
6. Implied warranties of assignor in an assignment for consideration:
i. the right assigned actually exists
ii. the right assigned is not subject to any defenses by the obligor
iii. the assignor will do nothing to impair the value of the assigment
• Note: assignor does not warrant what the obligor will do
Third Parties:
Assignments:
Multiple Assignments
• Gratuitous assignments:
i. General rule: last assignee generally wins (ie gratuitous so can be revoked)
ii. Exceptions: gratiutous assignment not revocable if in writing delivered to assignee, the assignee has received some indicia of ownership, or the assignee has detrimentally relied on it (in a reasonable and foreseeable way). If a gift assignment isnt revocable, then it will take priority over a later assignment.
• Assignments for consideration:
i. General rule: first assignee for consideration wins (regardless of amount)
ii. Limite exception: subsequent assignee takes priority over earlier assignee for value IF unaware of earlier assignment AND is the first to obtain either 1) payment, 2) a judgment, 3) a novation, or 4) an indicia of ownership (first to notify obligor is irrelevant)
Third Parties:
Delegation:
Relation to assignment
• Delegation: Party to a K transferring duties under that K to third party
1. Assignment (of rights) is transfer by party to K of rights or benefits under K to a 3rd party who wasn't an original party to K
2. Delegation (of duties) is transfer by party to K of duties or burdens under K to 3rd party who wasn't an original party to K
3. Often a contracting party makes both an assignment and a delegation of his rights & duties under a K to a 3rd party
4. Often the bar uses the term "Assignment" in a problem involving both assignment & delegation, and sometimes in problems involving only delegation
Third Parties:
Delegation:
Which duties are delegable
• Generally contractual duties are delegable
• Delegations permitted unless:
1. K prohibits delegations or prohibits assignments
2. K calls for very special skills (baseball, painting, etc.). Can't transfer to someone with even better skills
3. Person to perform K has a very special reputation (this would be a novation)
Third Parties:
Delegation:
Nonperformance by Delegate
1. Delegating party always remains liable
2. Delegatee liable only if she receives consideration from delegating party