Contracts & Sales

Front 1

What are the elements for quasi contract?

Back 1

a. Pl has conferred a benefit on def
b. Pl reasonably expected to be paid
c. Def would get unjust enrichment if Pl isn’t compensated

Front 2

What is a unilateral contract?

Back 2

Unilateral contract = offer that *expressly* required performance as the only method of acceptance

Front 3

How do you know it a contract is bilateral?

Back 3

It’s a bilateral UNLESS it’s (a) a reward, prize, or contest, OR (b) the offer expressly requires performance for acceptance

Front 4

What law governs a contract of mixed subject matter (goods and non-goods)?

Back 4

General Rule: “most important part” governs whole K (i.e. if service part is most important, CL governs)
--Exception: if the K divides payment, then UCC applies to goods and CL to everything else.

Front 5

What is an offer?

Back 5

General test: it’s an offer if a reasonable person would consider the words/conduct to be a manifestation of intent to contract.

Front 6

Are material terms required for something to be an offer? Exceptions?

Back 6

General rule: material terms are NOT required for it to be an offer
--Exception 1: in land Ks, CL requires price and description
--Exception 2: For UCC sales, an ambiguous material term makes it NOT an offer (e.g. offer to sell a car at “a fair price” is an offer to deal)

Front 7

What is a requirements/outputs contract?

Back 7

Test: Such Ks are okay if quantity is expressed in terms of buyer’s requirements, seller’s output, or exclusivity (watch for: all, only, exclusively, and solely). E.g., offer to sell Buyer all the grits Buyer might want is NOT a proper offer.

Front 8

On a requirements contract, is it okay to increase your requirements?

Back 8

An increase in requirements is okay if it is not unreasonable disproportionate to prior demands

Front 9

When is an advertisement an offer?

Back 9

General rule: Never.
--Exception: (a) reward or reward-like things and (b) advertisement specific as to quantity and expressly indicates who can accept (e.g., fur coat for $10 first come first serve)

Front 10

What are the 4 ways to terminate an offer?

Back 10

i. Method 1: Lapse of Time
ii. Method 2: Death Before Acceptance
iii. Method 3: Revocation by Offeror
iv. Method 4: Rejection by Offeree

Front 11

When does an offer terminate by lapse of time?

Back 11

An offer dies after a time stated or reasonable time

Front 12

How does death of a party affect an offer? Exceptions?

Back 12

Rule: Death/incapacity of EITHER party before acceptance kills offer
--Exceptions: (a) option Ks and (b) part performance of offer to enter into a unilateral K (such an offer is irrevocable after performance begins)

Front 13

How can an offeror revoke an offer?

Back 13

Rule: An offer is revoked upon EITHER
1) Unambiguous statement by offeror to offeree of unwillingness/inability to K
2) Unambiguous conduct by offeror that offeree knows of indicating unwillingness/inability to K

Front 14

When does revocation of an offer become effective: when sent or received?

Back 14

When received

Front 15

What are the four types of irrevocable offers?

Back 15

1) Options
2) Offers subject to UCC Firm Offer Rule
3) An offer subject to (a) reliance that is (b) reasonably foreseeable and (c) detrimental
4) A unilateral K where performance has begun

Front 16

What is an option?

Back 16

Option: requires (1) a promise not to revoke (2) in exchange for consideration

Front 17

What is the UCC Firm Offer Rule?

Back 17

Rule: An offer cannot be revoked for 3 months when (1) K for goods, (2) signed & written promise to keep the offer open, (3) offeror is a merchant

Front 18

What if the firm offer rule applies, but no time period is set in the K?

Back 18

If no period set, the ct will select a reasonable period up to 3 months.

Front 19

When does a unilateral K become irrevocable? Is mere preparation enough?

Back 19

The start of performance on a unilateral K makes the K irrevocable for a reasonable time to complete performance. But “mere preparation” to perform (i.e. buy paint for house painting) not enough.

Front 20

What does an offer become irrevocable for reasons of fairness?

Back 20

An offer cannot be revoked if there has been (1) reliance that is (2) reasonably foreseeable and (3) detrimental

Front 21

What are the ways an offer can be indirectly rejected?

Back 21

1) Counteroffer
2) Conditional Acceptance
3) Additional Terms

Front 22

What is the effect of a counteroffer on the underlying offer?

Back 22

i) Counteroffer becomes new offer and original offer dies
ii) Mere “bargaining” (e.g. “would you take $10 less?”) is NOT a counteroffer

Front 23

What is conditional acceptance and what is it's effect on an offer?

Back 23

i) Same effect as a counteroffer (offer is dead)
ii) Look for acceptance + if/only if/provided that/but/so long as
--The key is that the speaker will ONLY accept on the stated conditions

Front 24

What is the effect of additional terms on an offer?

Back 24

i) CL only: A response that adds new terms is treated as a counteroffer. (Mirror Image Rule)
ii) UCC Art 2-207: if conditions are not *required* for acceptance, then there IS an agreement.

Front 25

Under UCC Art 2, when do additional terms become a part of a K?

Back 25

a) Additional terms are part of the K if the parties are both merchants UNLESS either (1) the additional terms are a material change to the offer OR (2) the offeror objects
b) Whether the change is “material” is always fact-specific (so it’s unlikely to be a bar question)

Front 26

Who can accept an offer?

Back 26

Only a person who (1) knows of the offer and (2) to whom it was made

Front 27

What kinds of offers can be assigned?

Back 27

Offers can generally not be assigned. Exception: options can be assigned (unless it says otherwise)

Front 28

What happens if, in response to an offer: there is an improper response (e.g., additional terms) but parties act like a K exists?

Back 28

1) CL: additional-terms type counteroffer is deemed “accepted” can become part of a K if parties act like the K exists (i.e. they perform)
2) UCC: the conduct creates a K, but the additional terms are rejected (unless the parties are merchants, and the additional terms are not material changes)
3) E.g.: buyer/lessee accepts K “only if” an arbitration clause is added. Offeror says nothing and performs. There is a K, but the arbitration clause only applies if we’re under CL.

Front 29

What happens if, in response to an offer: offeree fully performs? Is notice required to the offeror?

Back 29

1) Where the response to an offer is full performance, performance is definitely acceptance. But the question is whether notice is required.
2) Notice is required if EITHER (a) offer calls for notice OR (b) offeree has reason to believe offeror will not learn of acceptance

Front 30

What happens if, in response to an offer: offeree starts to perform?

Back 30

1) Bilateral K: Start of performance is acceptance (Starting to perform = implied promise to finish performing)
2) Unilateral K: Only full performance is acceptance (But remember that starting to perform makes the offer irrevocable)

Front 31

What happens if, in response to an offer: offeree promises to perform?

Back 31

If the offer doesn’t expressly require performance to accept, then a promise to perform is acceptance.

Front 32

What are the 4 mailbox rules?

Back 32

1) All communications EXCEPT acceptance are effective when received.
2) Acceptance is effective when mailed.
3) If a rejection is mailed before acceptance, then neither is effective until received.
4) The above rules have NO applicability to option Ks.

Front 33

What happens if, in response to an offer: seller sends “wrong” goods?

Back 33

General rule: sending the wrong goods establishes a contract and its breach.
--Exception: accommodation (i.e. explanation): if you send the wrong goods and explain (e.g., “we’re out of red, hope you like blue”), then there is NO contract (and thus no breach)

Front 34

What is consideration?

Back 34

Consideration = “bargained-for legal detriment”

Front 35

If there is no consideration, how can a person still get recovery?

Back 35

Even where there is no consideration for a promise, so there is no contract, there might be promissory estoppel.
[Requires: (1) promise, (2) reliance that is reasonable, detrimental, and foreseeable, and (3) enforceable necessary to avoid injustice]

Front 36

When is past consideration deemed proper consideration?

Back 36

General rule: it is NOT consideration.
Exception: okay if expressly requested AND there was an expectation of payment
(E.g.: you save someone’s life expecting to be paid; victim later promises to pay you $5k. That promise is enforceable.)

Front 37

Can part payment be consideration for release from contract duties?

Back 37

If debt is due and undisputed, then part payment is NOT consideration for release.
--E.g., if debt isn’t due until next week, offering to pay half now IS consideration.

Front 38

What is the only special CL rule for consideration?

Back 38

The "preexisting contractual/statutory duty rule"
(Generally, doing what you are already obligated to do is not new consideration for a promise.)

Front 39

What is the preexisting contractual/statutory duty rule? Exceptions?

Back 39

CL ONLY: Doing what you are already obligated to do is not new consideration for a promise.
a) Exception 1: Unforeseen difficulty so severe as to excuse performance
b) Exception 2: Third party promises to pay

Front 40

If there is an existing K, and one party offers to pay more and this is accepted, is the change valid?

Back 40

CL: Generally not (preexisting contractual/statutory duty rule)
UCC: If there is good faith, a change to an existing [sales] contract is okay.

Front 41

Is a seal a proper substitute for consideration?

Back 41

No.

Front 42

If there is a full defense to performing on the K, and you still promise to perform, is that promise valid?

Back 42

Yes, if it's in writing.
Rule: Written promise to pay an obligation for which there is a legal defense is a enforceable
(I.e., if S/L has passed, but you still offer to pay half, that’s enforceable.)
**Note: must be in writing!**

Front 43

Hypo:
The statute of limitations passes on your debt owed to your butcher. You call and tell him that you will still pay. Is this enforceable?

Back 43

No, because it is not in writing.
(Rule: *Written* promise to pay an obligation for which there is a legal defense is a enforceable.)

Front 44

What is promissory estoppel?

Back 44

Requires: (1) promise, (2) reliance that is reasonable, detrimental, and foreseeable, and (3) enforceable necessary to avoid injustice.
If the elements are met, then even though there is NO consideration (and thus no contract), the promise is enforceable through estoppel.

Front 45

Framework: What are the three questions to ask when the statute of frauds may be at issue?

Back 45

1) Is the K "within" the S/F?
2) If so, is the S/F "satisfied"?
3) Is there a S/F defense?

Front 46

What are the 6 contracts that are generally within the statute of frauds?

Back 46

1) Promise to Answer for (Guarantee) the Debts of Another
2) Promise by Executor to Answer Personally for Debts of Decedent
3) Promise in Consideration of Marriage
4) Service Contract Not “Capable” of Performance ≤ 1 Year
5) Transfers of Interest in Real Estate (except leases ≤ 1yr)
6) Sale of Goods for ≥ $500

Front 47

Hypo:
Jack owes $100 to Lowe's. You promise to pay the debt. Is that within the Statute of Frauds?

Back 47

NO. It needs to be not only a promise to pay, but a promise to pay *for another*. (I.e., you need to say, "If he doesn't pay it, I will.")
ii) Main purpose exception: if the main purpose of the promise to pay for another was to benefit the guarantor, then the S/F does NOT apply.

Front 48

Generally promises to guarantee the debts of another are within the Statute of Frauds. What is the exception to this?

Back 48

Main purpose exception: if the main purpose of the promise to pay for another was to benefit the guarantor, then the S/F does NOT apply.
--E.g.: I offer to pay the debts of my house painter if he fails to pay the hardware store for the paint.

Front 49

An executor promises to pay the decedant's debt out of the estate. Is this promise within the S/F?

Back 49

No. Only a within the S/F if it is a promise by executor to answer *personally* for debts of decedent.

Front 50

Must all contracts related to a marriage be within the Statute of Frauds?

Back 50

No. Only a promise in consideration of marriage (I.e., prenuptial and postnuptial agreements)
--Note: a mere promise to marry is NOT subject to the S/F

Front 51

What sorts of service contracts are within the Statute of Frauds?

Back 51

Service contract not “capable” of performance ≤ 1 year
-- "Capable" is merely theoretical; assume unlimited resources to complete the job
-- Examples: Could be a time period that lasts longer than a year or an event to take place in more than a year

Front 52

A service contract is to end exactly one year from the day the contract is formed. Does the Statute of Frauds apply?

Back 52

No. Only service contracts not capable of performance ≤ 1 year are within the S/F.

Front 53

Is a service contract that is to last the rest of a person's life within the Statute of Frauds?

Back 53

If contract is for “life” then the S/F does NOT apply. (Theoretically, you could die tomorrow.)

Front 54

If you have a service K with no specified time period, but rather a very complex job, is it within the Statute of Frauds?

Back 54

Never. If no time period is given, but rather a “task,” then the S/F does NOT apply. (“Capable” assumes unlimited resources)

Front 55

What sorts of contracts related to real property are within the Statute of Frauds?

Back 55

Transfers of Interest in Real Estate (except leases ≤ 1yr) are within the S/F.
I.e., selling real property, easements, etc.

Front 56

When is a sale of goods within the statute of frauds?

Back 56

When it is ≥ $500 (UCC Rule)

Front 57

Is a sale for $500 within the statute of frauds?

Back 57

Yes. Rule is that any sale ≥ $500 is within the S/F.

Front 58

What are the ways to satisfy the statute of frauds?

Back 58

1) Performance
2) Writing
3) Judicial Admission

Front 59

On a service contract, how can performance satisfy the statute of frauds?

Back 59

Full performance (not partial) will satisfy any service K

Front 60

On a contract for goods, how can a SELLER's partial performance satisfy the statute of frauds?

Back 60

(1) Ordinary goods: part performance will satisfy the S/F for goods that have already been delivered (nothing more)
(2) Specially manufactured goods: S/F is satisfied when seller makes a “substantial beginning” (enough work that it’s clear the goods are being specially manufactured)

Front 61

On a contract for goods, how can a BUYER's partial performance (i.e., partial payment) satisfy the statute of frauds?

Back 61

(1) K for multiple items: S/F is satisfied as to what has been paid for (just the part)
(2) K for single item: S/F is satisfied for entire K

Front 62

If a contract is within the statute of frauds, does the rule regarding what kind of writing is required depend on whether CL or UCC applies?

Back 62

YES. Two different rules.
CL: “All material terms” test
Article 2: Must contain quantity term

Front 63

If CL applies to the K, when will a writing satisfy the statute of frauds?

Back 63

“All material terms” test: K must contain information about *who* is bound and *what* they are bound to do
--Signature: Must be signed by whoever is asserting the S/F defense

Front 64

Whose signature must appear on the writing for it to satisfy the statute of frauds? Exception?

Back 64

For both UCC and CL, it must be signed by whoever is asserting the S/F defense.
--Exception under UCC: no signature required if (1) both parties are merchants and (2) person who received the writing did not object within 10 days

Front 65

If the UCC applies to the K, when will a writing satisfy the statute of frauds?

Back 65

Must contain quantity term. (Price and parties are not necessary.)
-- Signature: like CL, must be signed by person asserting S/F defense
-- Exception: no signature required if (1) both parties are merchants and (2) person who received the writing did not object within 10 days

Front 66

If Article 2A applies (lease of personal property), when will a writing satisfy the statute of frauds?

Back 66

Writing must indicate (1) that it is a lease, (2) what is being leased, and (3) the duration of the lease

Front 67

What does UCC Article 2A apply to?

Back 67

Leases of personal property

Front 68

What does it mean to say that a judicial admission will satisfy the statute of frauds?

Back 68

You cannot use the S/F as a defense if you admit you entered the agmt in a pleading or in testimony

Front 69

You have been authorized by your friend to enter into contracts on his behalf. Must this authorization agreement be in writing?

Back 69

Maybe. Under the “equal dignity” doctrine, authorization to enter into K for someone else must be in writing only if the K to be signed is within the S/F

Front 70

What is the “equal dignity” doctrine?

Back 70

Under the “equal dignity” doctrine, authorization to enter into K for someone else must be in writing only if the K to be signed is within the S/F

Front 71

What is a contract modification within the statute of frauds?

Back 71

If the new K, with the modification, would be within the S/F, then the modification agmt is within the S/F.

Front 72

What is the effect of a contract clause requiring future modifications to be in writing?

Back 72

Depends on CL or UCC:
--CL: such a clause has no effect (use other rules to decide if writing is required)
--Article 2: such clauses are effective unless waived

Front 73

If the subject matter of a K is illegal, is the K unenforceable?

Back 73

Yes. But note that if a K has a merely improper purpose (e.g., plane ticket to go kill someone) can still be enforced by a party unaware of the illegal purpose (i.e. the airline)

Front 74

If a contract has an illegal purpose (e.g., you buy a plane ticket to go kill someone), is the contract enforceable?

Back 74

Yes, but only by the party unaware of the illegal purpose. (E.g., the airline can collect against you for failure to pay for your airline ticket.)

Front 75

When is a contract unenforceable because of public policy?

Back 75

Court has discretion, but there are 2 common bar exam examples:
i) Exculpatory agmt exempting intentional/reckless/gross negligent conduct
ii) Covenant not to compete without a reas need & reas time/place limits

Front 76

What must a covenant-not-to-complete have in order to be enforceable?

Back 76

Reasonable need & reasonable time/place limits. (Public policy.)

Front 77

When will a misrepresentation render a K unenforceable?

Back 77

Rule: if a (a) false assertion of fact (b) induces the K, then the K is voidable (i.e., it can be rescinded)

Front 78

Must a misrepresentation of fact be wrongful for it to render a K unenforceable?

Back 78

No, wrongdoing is NOT required.

Front 79

When will a nondisclosure render a K unenforceable?

Back 79

A nondisclosure must be wrongful and relied upon to allow the K to be rescinded.

Front 80

Must a nondisclosure of fact be wrongful for it to render a K unenforceable?

Back 80

Yes. Unlike a misrepresentation, a nondisclosure MUST be wrongful.

Front 81

What kinds of duress will render a contract unenforceable?

Back 81

1) Physical duress (obvious)
2) Economic duress
--Elements: (1) “bad guy” – improper threat, and (2) “vulnerable guy” – no reasonable alternative.

Front 82

What is economic duress?

Back 82

Elements: (1) “bad guy” – improper threat, and (2) “vulnerable guy” – no reasonable alternative.

Front 83

What are the two kinds of unconscionability?

Back 83

i) Unfair surprise or unequal bargaining power (procedural)
ii) Oppressive terms (substantive)

Front 84

If a K is unconscionable, can a court selectively enforce parts of the K and not others?

Back 84

Yes. Court can refuse all or part of an agmt

Front 85

When is a contract tested for unconscionability?

Back 85

At time of contract. (Doesn’t matter if things have changed)

Front 86

Is unconscionability a question for a judge or jury?

Back 86

Judge. These issues are always treated as a matter of law.

Front 87

When will ambiguity render a contract unenforceable?

Back 87

No K if (1) a material term open to at least 2 reas meanings; (2) each party attaches a diff meaning t the term, and (3) neither knows/has reason to know there are multiple interpretations

Front 88

[not likely to be tested]
When will a mistake of fact at the time of contract render a K unenforceable?

Back 88

a) Unilateral mistake: no rescission
b) Mutual mistake of fact: no K if ALL (1) both parties are mistaken, (2) basic assumption of fact, (3) material affects the agreed change, and (4) not a risk carried by the person trying to get out of the deal (seller bears the risk)

Front 89

When is a fact material such that mistake on that fact at the time of K will make the K unenforceable?

Back 89

Material = mistake about what it WAS, not what it was WORTH.

Front 90

What triggers the parol evidence rule?

Back 90

When we have a contract in writing and someone wants to introduce other evidence of the contract, such as oral or other written evidence.

Front 91

What is a merger clause, and what is its effect on a contract? Are such clauses conclusive?

Back 91

K clause such as “This is the complete & final agmt.” These are highly persuasive but not conclusive

Front 92

What is an action for reformation?

Back 92

Equitable action to modify written K to reflect actual agmt.

Front 93

How can a court use parole evidence to contradict terms in a written K?

Back 93

A court cannot use parole evidence to contradict terms in a written K.
--Exception: it can be used to determine whether there was a mistake in integration (i.e. clerical error)

Front 94

What is integration, and what are the two kinds of integration?

Back 94

Integration: written agreement that the ct finds to be the final agmt (triggers the PE rule)
a. Partial integration: written and final, but not complete
b. Complete integration: written and final and complete

Front 95

How can parol evidence be used to get out of a contract (i.e., demonstrate a defense to enforcement)?

Back 95

Parties can always use parol evidence to establish a defense to enforcement (i.e., misrepresentation, duress, etc)

Front 96

Can parol evidence be used to explain the terms of a written agreement?

Back 96

Yes. Parties can always use parol evidence to resolve ambiguities in a written K

Front 97

When can parol evidence be used to show additional terms to a contract?

Back 97

Parol evidence cannot be used to show additional terms UNLESS either (1) the written agmt was only a partial integration, OR (2) the additional terms would ordinarily be in a separate agmt

Front 98

STRATEGY:
How do you distinguish between a case involving the Parol Evidence Rule from one involving the Statute of Frauds?

Back 98

S/F: triggered by absence of a writing
P/E rule: triggered by existence of a writing

Front 99

Parol evidence: what kinds of conduct evidence may a court rely upon, and what is their respective weight?

Back 99

These are a hierarchy (one is better than two, which is better than three):
a. Course of performance: same people, same K
b. Court of dealing: same people, diff but similar K
c. Custom and usage: dif but similar people, different but similar K

Front 100

What is the UCC rule regarding a seller's/buyer's obligations for delivery of goods?

Back 100

Context: Delivery obligations of *seller of goods* if delivery by *common carrier* (i.e. a 3rd party in transit business)
Rule: Seller’s obligations depends on whether a shipment or a destination K.

Front 101

How do you distinguish between a shipment K and a destination K?

Back 101

Rule of thumb: every K is usually a shipment K. But watch for “FOB [city]” (“free on board [city]”). If the seller’s city is named as [city], it’s a shipment K. Any other city implies a destination K.

Front 102

What are the delivery obligations of seller of goods if delivery by common carrier, when the contract is a SHIPMENT contract?

Back 102

Shipment K: seller has obligation to (1) get the goods to a common carrier, (2) make reas arrangements for delivery, and (3) notify the buyer.
--Note that the seller thus completes delivery obligations well BEFORE arrival of goods

Front 103

What are the delivery obligations of seller of goods if delivery by common carrier, when the contract is a DESTINATION contract?

Back 103

Destination K: Seller doesn’t complete delivery obligations under buyer receives the goods

Front 104

In every risk of loss question, what are the triggering facts?

Back 104

UCC only. Risk of loss arises where (1) after K is formed but before buyer receives goods (2) the goods are damaged/destroyed (3) through no fault of either buyer or seller.

Front 105

In a risk of loss question, does it matter whether the goods were lost through the fault of one of the parties?

Back 105

Yes, in that both parties must be FAULTLESS to trigger risk of loss rules.

Front 106

True or false: "risk of loss" is a UCC rule providing default terms in a contract that says nothing about risk of loss.

Back 106

True.

Front 107

What are the rules regarding risk of loss, and what weight is each given?

Back 107

Four rules, apply IN ORDER:
i) Agreement: Agreement of the parties controls
ii) Breach: Breaching party is liable for any uninsured loss even though the breach is unrelated to the problem (any breach at all!)
iii) Delivery by common carrier (not seller): risk of loss shifts to buyer when seller completes delivery obligations
iv) Catch all rule (none of the above applies)

Front 108

What is the catch-all rule for risk of loss?

Back 108

a) If seller is a merchant: risk of loss shifts to the buyer only on the buyer’s “receipt” of goods (receipt=physical possession)
b) If seller is a NOT merchant: risk shifts when seller “tenders” goods (tender = seller has made the goods available to the buyer)

Front 109

Where is the risk of loss by default in leases of goods?

Back 109

Article 2A leases: unallocated risk of loss is on lessor

Front 110

What are the triggering facts for warranty questions?

Back 110

UCC only. Look for goods that have been actually delivered, and the question is the goods’ quality.

Front 111

What constitutes an express warranty?

Back 111

i) Words that promise, describe, or state facts OR use of a model
ii) Not puffery or opinions

Front 112

What is the implied warranty of merchantability? When does it apply?

Back 112

i) Requirement: seller is a merchant that sells goods of that kind (Note that more than the usual merchant status is required here).
ii) Warranty: Goods must be “fit for their ordinary purpose”

Front 113

What are the three kinds of warranties for goods under Article 2?

Back 113

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

Front 114

What are the requirements for triggering the implied warranty of fitness for a particular purpose?

Back 114

a) Buyer has a particular purpose
b) Buyer is relying on seller to select suitable goods
c) Seller has reason to know of goods and reliance

Front 115

What warranty applies when the following are true in a sale of goods?
a) Buyer has a particular purpose
b) Buyer is relying on seller to select suitable goods
c) Seller has reason to know of goods and reliance

Back 115

Implied warranty of fitness for a particular purpose

Front 116

What is the rule regarding warranties on leased goods?

Back 116

Article 2A: General rule is that the lessor of personal property makes the same warranties as a seller (express, merchantability, and fitness)

Front 117

How does privity affect actions for breach of contract? For torts?

Back 117

For a breach of contract suit, there must be both horizontal and vertical privity.
For a tort suit, privity is not required.

Front 118

Can express warranties be disclaimed?

Back 118

No.

Front 119

How can implied warranties be disclaimed?

Back 119

EITHER
a) Conspicuous (bold) language of disclaimer, mentioning merchantability, OR
b) Special words: “as is” or “with all faults”

Front 120

Can remedies for a breach of warranty be limited through special contract provisions?

Back 120

Generally yes. The following apply:
i) Only limits or sets recovery in breach of warranty
ii) You can limit express warranties (even though you cannot disclaim them)
iii) General test: unconscionability

Front 121

When is a contract provision an unconscionable limitation on the remedies for breach of warranty?

Back 121

Limitations on personal injury recovery: it’s prima facie unconscionable if the breach of warranty on consumer goods causes personal injury

Front 122

Contrast the difference in TIMING between rejection of goods & revocation of acceptance of goods.

Back 122

Rejection: Early, before acceptance
Revocation of Acceptance: Later, after acceptance

Front 123

Contrast the difference in STANDARD (i.e., prerequisites for a buyer to employ) between rejection of goods & revocation of acceptance of goods.

Back 123

Rejection: Generally, buyer can reject if not perfect tender
Revocation of Acceptance: Buyer can revoke if substantial impairment

Front 124

What same three things must a buyer do in cases of both rejection of goods & revocation of acceptance of goods?

Back 124

1. Seasonably notify seller
2. Hold the goods for the seller
3. Follow reasonable seller instructions

Front 125

What are the consequences of both rejection of goods & revocation of acceptance of goods (same for both)?

Back 125

1. Goods go back to seller
2. No buyer payment obligation

Front 126

What is the perfect tender rule?

Back 126

UCC only. Rule: seller’s performance must be “perfect”
Consequences: Less-than-perfect tender gives buyer right to reject ANY OR ALL of delivered goods

Front 127

What can a buyer do if the seller fails to meet the perfect tender rule?

Back 127

If seller fails perfect tender standard, buyer has option to retain or reject goods, and EITHER way, he can sue for breach of K

Front 128

Having failed the perfect tender rule, when can a seller cure?

Back 128

A seller ONLY has the opportunity to cure IF
1) Seller has reas grounds to believe that what was delivered was “okay” (i.e., based on prior deals between the buyer and seller)
2) Time for performance has not yet expired (e.g., if seller delivers early and it’s imperfect, he can cure.)

Front 129

HYPO: A buyer enters in a single contract with a seller to buy goods to be delivered in 10 separate deliveries. If the 3rd delivery is wrong in some way, can the buyer reject?

Back 129

On an installment K, a buyer can ONLY reject if there is a “substantial impairment”.
Installment K = Contract itself requires/authorizes separate deliveries to be separately accepted

Front 130

After accepting goods, can a buyer still reject them?

Back 130

No. But you might still be able to *revoke acceptance* later. Remember: Revocation of acceptance is not the same as rejection.

Front 131

If a buyer pays for goods, does that qualify as acceptance?

Back 131

Payment is NOT acceptance unless there is also inspection

Front 132

If a buyer keeps the goods, does that qualify as acceptance?

Back 132

Yes. Buyer’s keeping goods is implied acceptance.

Front 133

Is revocation of acceptance of goods the same as rejection of goods?

Back 133

No. You cannot reject goods after accepting them; you can only revoke acceptance (and then only under certain circumstances).

Front 134

After accepting the goods, under what circumstances can you revoke that acceptance?

Back 134

Need all 3:
1) Nonconformity that substantially impairs the value of the goods
2) Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction
3) Revocation within a reas time after discovery of nonconformity (usually a month)

Front 135

If no price is set in a contract for goods, what happens?

Back 135

Open price term (no agmt about price) --> price is "reasonable price" at time/place of delivery

Front 136

If a contract for goods says that the “price to be fixed by buyer" (or seller), are there any limitations to that process?

Back 136

Price must be so fixed in good faith.

Front 137

If two parties enter a contract where they trade goods for goods, who is the "seller"?

Back 137

Each party is seller of goods it provides

Front 138

Does the perfect tender rule apply to CL contracts?

Back 138

NO.

Front 139

Regardless of the type of contract, what are the prerequisites before a person can get a nonmonetary remedy?

Back 139

There must not be adequate remedy at law or unclean hands (or other basic inequities that make the court likely to deny equitable relief).

Front 140

Is specific performance allowed on a contract involving real estate?

Back 140

Yes, if feasible (i.e., if the person still owns the land)

Front 141

When is it possible to request specific performance on a goods K?

Back 141

Specific performance is limited to situations where (a) goods are unique or (b) other appropriate circumstances (fact-specific)

Front 142

When is it possible to request specific performance on a service K?

Back 142

Specific performance is never allowed (but possible negative injunctive relief)
--E.g., you might have a ct enjoin a person from competing with you; you just cannot get an order for them to work for you

Front 143

True or false: no matter what the general rules say, the court still has discretion in deciding whether to award equitable relief.

Back 143

True. Always watch for this.

Front 144

What is the right of reclamation?

Back 144

Right of Reclamation = right of unpaid seller to get the goods back

Front 145

What facts are required before a seller can demand reclamation?

Back 145

1) Buyer was insolvent at time buyer received goods
2) Seller demands return of goods within 10 days (or ‘reas time’ if buyer expressly represented solvency). Clock starts at RECEIPT
3) Buyer still has goods at time of demand

[Right of Reclamation = right of unpaid seller to get the goods back]

Front 146

What is the rule of entrustment?

Back 146

Rule: if an owner leaves her goods with a person who sells goods of that kind, and that person wrongfully sells to another in good faith, then the original owner can’t get specific performance on the innocent third party buyer
--I.e., you made the choice to entrust your stuff to someone, so it’s on you

Front 147

What is the preferred type of monetary damages for breach of contract?

Back 147

Expectation damages: get the pl to where he would have been if the K had been performed

Front 148

What are reliance damages?

Back 148

Get the pl to the same position that would have happened if the K never happened

Front 149

What are expectation damages?

Back 149

Get the pl to where he would have been if the K had been performed

Front 150

What is restitution and how would it be calculated?

Back 150

1) Get the *def* to the same position that would have happened if the K never happened
2) I.e., focus on what def has gained, and give that BACK to pl.

Front 151

How would you calculate expectation damages if:
Seller breaches (goods stink), buyer keeps the goods?

Back 151

Formula: D = [FMV if perfect] – [FMV as delivered]

Front 152

How would you calculate expectation damages if: seller breaches, seller has the goods?

Back 152

i) Formula: D = [mkt price at time breach] – [K price]
ii) Or: D = [replacement price] – [K price] (i.e., cover)

Front 153

How would you calculate expectation damages if: buyer breaches, buyer keeps goods?

Back 153

Formula: D = [contract price]
--Note that even if mkt price has gone up, the seller is still only entitled to K price.

Front 154

How would you calculate expectation damages if: buyer breaches, seller keeps goods?

Back 154

i) Formula: D = [K price] – [mkt price at time/place of delivery]
ii) Or: D = [K price] – [resale price]
iii) Or: D = [provable lost profits] <--IF the goods were from regular inventory

Front 155

What are incidental damages?

Back 155

Incidental Damages: costs incurred in finding replacement performance

Front 156

When are incidental damages recoverable? (Must they be foreseeable?)

Back 156

Always. (Need not have been foreseeable)

Front 157

Are incidental damages recoverable if they were NOT foreseeable?

Back 157

Yes. (They are always recoverable, even if not foreseeable.)

Front 158

What are consequential damages?

Back 158

Consequential Damages: special damages (loss particular to this pl)

Front 159

When are consequential damages recoverable?

Back 159

Only when foreseeable to (i.e. told to) the other party
--Under Art 2: when seller breaches, buyer is entitled to consequential damages if seller has reason to know of them.

Front 160

What are the two damages doctrines that can limit contract damages?

Back 160

1) Avoidable damages: No recovery for damages that could have been avoided without undue burden on the pl
2) “Certainty” rule: Damages must be proven to reasonable certainty

Front 161

What is the "avoidable damages" rule?

Back 161

No recovery for damages that could have been avoided without undue burden on the pl

Front 162

What is the rule regarding speculative damages?

Back 162

“Certainty” rule: Damages must be proven to reasonable certainty

Front 163

When are liquidated damages clauses allowable?

Back 163

Liquidated damages provisions are valid if BOTH (1) damages were difficult to forecast at time of K and (2) provision is a reasonable forecast
--I.e., they can’t be punitive. When struck down, it’s usually because they’re too high.
--If the damages are flexible/formulaic, they are presumptive valid. If a lump-sum, they are presumptively invalid.

Front 164

Under common law, when does breach of one party excuse the other from its performance obligation?

Back 164

Material Breach Rule: Performance can only be excused by a material breach (of the other party)
i) Whether a breach is material is a FACT question
ii) If there is substantial performance, then the breach is NOT material.

Front 165

What is the divisible contract exception to the CL material breach rule?

Back 165

Divisible contract exception: if there is a “divisible K” (service K with many repeated jobs to be paid per job), there can be K law recovery for substantial performance of a divisible part even though there has been a material breach of the entire K

Front 166

Under the UCC, when does breach of one party excuse the other from its performance obligation?

Back 166

The perfect tender rule applies to those and nonperformance is excused on anything less than perfect tender.

Front 167

What is the difference between conditional acceptance and a contract condition?

Back 167

Contract conditions:
1) Created by language like “if/only if/provided that” etc
--E.g., simply saying that the K for building the house will entail the use of Reading pipe is not enough. You have to say the K “is conditioned” on it.
2) These are conditions that BOTH parties agree to

Front 168

Failure to meet a contract condition generally excused the other side from performance. How *much* compliance must there be on the condition to trigger this rule?

Back 168

Rule: language of condition can only be satisfied by *strict compliance*

Front 169

What are three ways to excuse a contract condition?

Back 169

a. Waiver/estoppel
b. Prevention of the condition by a party protected by it
c. Court's Discretion: court can excuse nonoccurrence of a condition to avoid excessive harm)

Front 170

Who can waive a contract condition? Through what legal doctrine is the waiver enforced?

Back 170

1) Conditions can be waived by the person who was protected by the condition.
2) Once waiver occurs and is relied upon, there is estoppel from enforcement of the condition.

Front 171

Does the court have discretion to excuse contract conditions?

Back 171

A court can excuse nonoccurrence of a condition to avoid excessive harm

Front 172

What is anticipatory repudiation?

Back 172

Anticipatory repudiation = an unambiguous statement/conduct (1) indicating that the repudiating party will not perform (2) made before performance was due
Consequences: Anticipatory repudiation by one party excuses the other party from performance.

Front 173

What are the consequences of anticipatory repudiation?

Back 173

a. Anticipatory repudiation by one party excuses the other party from performance.
b. Generally it gives rise to an immediate breach of K claim UNLESS the claimant has already finished performance (in which case she must wait until the due date to sue).
c. If a party continues to perform after anticipatory repudiation, it can create an avoidable damages issue.

Front 174

Under what circumstances can a party retract his anticipatory repudiation?

Back 174

a. Anticipatory repudiation can only be retracted so long as (1) there is no material change in position by the other (nonrepudiating) party; (2) there is adequate assurance by the repudiating party.
b. If this occurs, the duty to perform is reimposed on the other party.

Front 175

Hypo:
Before performance is due on your contract, the other party announces that he will not complete his obligations. What is this called?

Back 175

Anticipatory repudiation = an unambiguous statement/conduct (1) indicating that the repudiating party will not perform (2) made before performance was due
Consequences: Anticipatory repudiation by one party excuses the other party from performance.

Front 176

Hypo:
You hear that your supplier has failed to meet three of his other goods contracts in the past month, and you are worried he will fail to meet your upcoming delivery needs. What can you do?

Back 176

Excuse by insecurity:
When (1) there are reasonable grounds for insecurity, then (2) the party may make written demand for adequate assurance. If no assurance is given, then (3) the party is excused from performance if it is commercially reasonable.

Front 177

When can parties rescind (cancel) a contract?

Back 177

Rescission is allowed only if the K is executory (some performance remains on BOTH sides)

Front 178

If a contract is rescinded, but one of the parties already completed half of the obligations, can he recovery for breach of contract?

Back 178

If a K is rescinded, NO ONE can get K damages (but they might get quasi-K recovery).

Front 179

What is an accord and satisfaction?

Back 179

1) Accord: An agreement by which the parties to an existing obligation agree to accept different performance in satisfaction of the existing obligation.
2) Satisfaction: performance on an accord

Front 180

Strategy:
On the bar exam, how can you distinguish between an accord and a substituted agreement?

Back 180

We will generally be told on the exam whether it’s an accord or a substituted agreement. But watch for words like “if … then” in the new agreement, that's an accord.

Front 181

Hypo:
Two parties from an earlier contract enter a new agreement under which they agree to accept different performance in satisfaction of the existing obligation. What is this called? Does this excuse performance of the earlier contract?

Back 181

(1) This is an accord. (2) But an accord alone does NOT excuse performance (you need satisfaction).
--That is, if you make an accord, but the accord isn’t satisfied, then you can recover on the ORIGINAL contract. (Actually, you can recover on EITHER the original K or the accord.)

Front 182

What is modification/substituted agreement?

Back 182

Modification is an agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.

Front 183

What is the difference in consequences between an accord and a substituted agreement?

Back 183

The mere making of a substituted agreement excuses performance. In accord and satisfaction, you need satisfaction to excuse performance.

Front 184

What is a novation?

Back 184

An agreement between both parties to an existing K to substitute a new party (with no other changes to the K)

Front 185

Does a novation excuse the original (replaced) party from performance?

Back 185

Yes. Novation excuses the original party to the agreement from performance.

Front 186

How is a novation different from a delegation?

Back 186

A novation requires the agreement of both parties. Delegation does not, and so it does not excuse the original party. The original K hasn’t changed under delegation.

Front 187

When can an event after K formation excuse performance under a K?

Back 187

When something happens (1) after K formation but before performance that is (2) unforeseen and (3) performance is impossible, commercially impracticable, or the purpose of performance is frustrated.

Front 188

What is the difference between impossibility and impracticability?

Back 188

a. Impossibility: Objective; performance cannot be done at all
b. Impracticability: Subjective; performance can only be done with extreme and unreasonable difficulty.

Front 189

Hypo: a painter is about to start painting a house under a contract when the house burns down. Is the painter excused from painting? Is the owner excused from paying?

Back 189

Yes, the painter is excused. No, the buyer is not automatically excused; it's still *possible* for the owner to fulfill his obligation (i.e., pay), so just the painter is excused.

Front 190

You have a contract with someone who dies after making the contract. Is the deceased excused from performing?

Back 190

Rule: Death does NOT generally destroy a person’s K obligations. You can recover damages for breach from the estate.
--Exception: if the party to contract is a “special” person, performance may be excused.

Front 191

How can a subsequent change in the law/regulation excuse performance of a contract?

Back 191

1) Rule 1: Performance is excused if later law makes K performance illegal (impossibility or impracticability)
2) Rule 2: If later law makes the mutually understood purpose of K illegal, then there is excuse by frustration of purpose.

Front 192

Strategy:
On the bar exam, how can you typically tell whether a third party beneficiary of a contract is "intended" or "incidental"? How is this important?

Back 192

If named in the K --> intended. Otherwise he's incidental.
Only intended beneficiaries trigger the rules regarding third party beneficiaries of contracts.

Front 193

What is a creditor beneficiary?

Back 193

A creditor beneficiary is a third party beneficiary of a contract who was already a creditor of the promisee.
E.g., if a person owes you $100k and agrees to make you his life insurance beneficiary, then you are the third party creditor beneficiary. (The insurance company is the promisor, and the policyholder is the promisee.)

Front 194

If a contract has a named third party beneficiary, can the contract be canceled without the input of the third party beneficiary?

Back 194

Rule: if the third party knows of and has relied on or assented, then he K rights have vested and cannot be canceled or modified without his consent (unless the K provides otherwise).

Front 195

If the promisor of a contract involving a third party beneficiary breaches, who can sue whom?

Back 195

(Think of it like the beneficiary being able to step into the promisee's shoes...)
a. Promisee can sue the promisor
b. Beneficiary can sue the promisor
c. Beneficiary cannot recover from the promisee

Front 196

When is the only time that a third party beneficiary of a contract can sue the promisee for a breach?

Back 196

A creditor beneficiary can recover from the promisee but ONLY on the pre-existing debt. Otherwise the beneficiary can only sue the promisor.

Front 197

If a third party beneficiary sues the promisor, what defenses can the promisor assert?

Back 197

a. If a third party sues the promisor, the promisor can assert the same defenses that could be asserted against the promisee.

Front 198

What is an assignment of contract rights?

Back 198

Assignment: transfer of rights under a K occurring in 2 steps: (1) K between two parties; (2) one party transfer K rights to a third party

Front 199

Batman enters a contract with Gotham to provide security services for a monthly fee. Batman then assigns his rights to collect his fees to Robin. What is this transfer called? What is each party called?

Back 199

This is an assignment. Gotham is the obligor, Batmen is the assignor, and Robin is the assignee.

Front 200

With regard to assignment of contract rights, contracts sometimes include language of prohibition and language of invalidation. What is the difference?

Back 200

1) Prohibition: “rights hereunder are not assignable.”
--Takes away right to assign, but an assignee who doesn’t know of the provision can still enforce the assignment. (Assignment is valid.)
2) Invalidation: “any assignments under this K are void.”
--Takes away both the right to assign AND the power to assign.

Front 201

A contract states that “rights hereunder are not assignable.” Regardless, a party assigns his rights to another. That third party then tries to sue after the obligor breaches the contract. Is the suit winnable?

Back 201

Yes. The contract language is merely that of "prohibition," not "invalidation." The assignment is itself a breach of contract, but it is still valid, so the assignee can sue. If it had been language of invalidfation (i.e., "assignments hereunder are void") then it assignment would be a breach AND the assignee would be unable to sue.

Front 202

A contract states that “any assignments under this K are void.” Regardless, a party assigns his rights to another. That third party then tries to sue after the obligor breaches the contract. Is the suit winnable?

Back 202

No. This is language of "invalidation." Has it been mere language of "prohibition" (i.e., “rights hereunder are not assignable.”) then the assignment would be valid and the assignee could sue. In either case though, the assignment itself would be a breach.

Front 203

Are there any limitations on the assignment of rights under a contract?

Back 203

CL ONLY: You cannot make an assignment that substantially changes the duties of the obligor.

Front 204

How does public policy feel about the assignment of contract rights?

Back 204

Policy favors free assignment of K rights.

Front 205

What is a gratuitous assignment? Can an assignee from a gratuitous assignment sue to enforce his rights as an assignee of the contract?

Back 205

A gratuitous assignment is one where cnsideration is NOT required. Gratuitous assignments are allowed and enforceable (though revocable). (It creates a "donee beneficiary.")

Front 206

If an obligor breaches on a contract where the other party assigned his rights to an assignee, who can sue the obligor?

Back 206

1) Assignee can recover from the obligor
2) Assignor for consideration *cannot* recover from the obligor.
Note: the assignee CANNOT sue the assignor.

Front 207

Hypo:
X and Y have a contract. Y assigns his contractual payment rights to Z. Whom does X pay: Y or Z?

Back 207

X pays Y unless he knows that the assignment took place.
1) Payment by the obligor to the assignor is effective until the obligor knows of the assignment.
2) Similarly, modification agreements between obligor and assignor are effective if the obligor did not know of the assignment.

Front 208

When you assign your contract rights to another, what implied warranties are you making to your assignee?

Back 208

In a NON-gratuitous assignment, the assignor warrants ALL the following:
i) That the right to assignment actually exists
ii) The right assigned is not subject to defenses by the obligor, AND
iii) The assignor will do nothing to impair the value of the assignment

Front 209

Hypo:
You have a contract with X. You then assign your rights to J, but you then promptly forget that you did this and assign your rights to K as well. If the assignees go to court, who will win?

Back 209

1) When ALL assignment are gratuitous: the LAST gratuitous assignee wins (Exception: when a gratutious assignment is irrevocable, then it wins over later ones).
2) When at least some assignments are for CONSIDERATION: if ANY assignment is one for consideration, the FIRST such assignee wins

Front 210

When is a gratuitous assignment irrevocable?

Back 210

A gratuitous assignment is irrevocable if [ANY:]
(a) it is in writing and delivered to the assignee, OR
(b) the assignee has received some sort of indicia of ownership, OR
(c) the assignee has relied on the assignment in a way that is reasonable, foreseeable, and detrimental.

Front 211

What is the difference between a delegation and an assignment under a contract?

Back 211

A delegation is a transfer of OBLIGATIONS to a third party.
An assignment is a transfer of RIGHTS to a third party.
Note that in NEITHER case does the original party need to know of the transfer.

Front 212

Strategy:
On the bar exam, if the bar examiners use language like "assignment" and "assignor," would they necessarily be talking about an assignment, as opposed to a delegation?

Back 212

No. The Multistate may use the words assignor/assignee for delegation. They use the words somewhat interchangably.

Front 213

When are contract duties delegable?

Back 213

Rule: contract duties are always delegable UNLESS either: (a) K provisions prohibit delegations or assignments, OR (2) the K calls for performance by a person of special skills or special reputation.

Front 214

If a K calls for performance by a person of special skills or special reputation, such as a professional baseball player, can the person delegate to another party?

Back 214

No. Contract duties are not delegable if the contract calls for performance by a person of special skills or special reputation.

Front 215

When a person delegates their contract obligations to another, and that person fails to perform, who can be liable?

Back 215

a. Delegating party ALWAYS remains liable
b. Delegatee is liable ONLY if the delegation was nongratuitous (i.e. for consideration)
-- I.e., delegatee can be sued by the delegating party OR by the obligee if nongratuitous.

Front 216

Hypo:
A painter enters into a contract to paint the law school for $10,000. The painter then pays his sister $200 to take over the painting job for him. The sister fails to perform. Can the law school sue the painter and/or the painter's sister?

Back 216

The school can sue both. Two rules:
a. Delegating party ALWAYS remains liable
b. Delegatee is liable ONLY if the delegation was nongratuitous (i.e. for consideration)
-- I.e., delegatee can be sued by the delegating party OR by the obligee if nongratuitous.