Contracts

Terms Contract Express Contract Implied Contract Quasi-Contract A promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty Formed by language, written or oral Formed by manifestations of assent other tan oral or written language (i.e., by conduct that indicates that parties assented to be bound) One party is unjustly enriched at the expense of the other party, so that the enriched party must pay restitution to the other party equal to the unjust enrichment (not a contract; used when an agreement does not qualify as a contract). Elements: o (1) D has conferred a benefit on D, and o (2) P reasonably expected to be paid, and o (3) D realized unjust enrichment if P not compensated. Look for anytime application of law results in unfair result Recovery (equitable remedy) is limited to the value of benefit conferred ON TEST: when there are unfair results these will most likely trigger the equitable doctrine of quasiK ~ add a paragraph although no K, probably qualifies for equitable remedy of quasi-K Require an exchange of promises Require and exchange of an act for a promise; limited to circumstances where: (i) the offeror clearly indicates that performance is the only manner of acceptance; OR (ii) there is an offer to the public clearly contemplating acceptance by performance One w/o any legal effect from the beginning (to commit crime) One that a party may elect to avoid or ratify (w/ a minor) One otherwise valid but for which some defense exists extraneous to formation (SOF)

Bilateral Contract Unilateral Contracts Void Contract Voidable Contract Unenforceable Contract

1. Applicable Law: UCC2 vs. Common Law 2. Formation of a Contract (an agreement that is legally enforceable) a. Offer: manifestation of an intention to contract would a reasonable person believe that assent creates a contract i. Content: offer need not contain all material terms but some terms are necessary ii. Advertisements iii. Termination of Offers: four methods (a terminated offer cannot be accepted) 1. Lapse of Time ~ stated expiration date or reasonable time (usually 30 days) 2. Revocation ~ unambiguous statement by offeror to offeree of unwillingness or inability to contract or offerees awareness of such unwillingness or inability a. A mailed revocation is effective upon receipt b. An accepted offer cannot be revoked c. An option, promise to keep an offer open supported by consideration, is not freely revocable d. A offer for a contract for the sale of goods involving a merchant may contain a written promise to remain open for up to 3 months

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e. An offer to enter into a unilateral contract becomes irrevocable for a reasonable time necessary to complete upon the start of performance (not mere preparation) 3. Rejection ~ a. Counteroffers will terminate and become an offer b. Conditional acceptance will terminate and become an offer c. An acceptance that contains new terms is treated like a counteroffer (common law) i. Contract for the sale of goods: 1. A response to an offer that adds new terms is generally treated as an acceptance w/ a seasonable expression of acceptance 2. If both parties are merchants, the additional term will be part of the contract unless it materially changes the offer or the offeror objects to the change 3. If one or both parties are not a merchant, the additional term is a proposal that is to be separately accepted or rejected 4. Death or incapacity ~ (of either party) will terminate an offer unless it is an option or there was a part performance of offer to enter into a unilateral contract b. Acceptance: i. Offer must be known of by a person to be accepted ii. Offers other than options cannot be assigned iii. A bilateral offer can be accepted by starting performance iv. A unilateral offer requires completion of performance for acceptance, however starting performance will make the offer irrevocable for a reasonable time to complete performance v. Most offers can be accepted by a promise to perform unless performance is expressly required vi. If acceptance by mail is invited, acceptance is effective when posted unless otherwise provided vii. If a rejection is sent before an acceptance whichever is received first will be control viii. Acceptance must be actually received before an option deadline ix. When a seller of goods sends the wrong goods it generally amounts to acceptance and breach unless accompanied by an accommodation letter w/ an explanation in which case it is a counteroffer x. Silence is not acceptance unless the offeree agrees that it is c. Consideration: a bargained-for legal detriment i. Forms: (i) performance; (ii) forbearance; (iii) GF promise to perform; (iv) GF promise to forebear
Applicable Law UCC Article 2 o Type of transaction = sale o Subject matter of transaction = goods (tangible, personal property o Mixed Deal

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General Rule all or nothing ~ depends on which is the more important part of the deal Exception if the contract divides payment, apply UCC to the sale of goods part and the common law to the rest o Common Law and UCC are mostly the same assume they are unless otherwise specified UCC Article 2A o Applies to leases of goods o Generally similar to Art 2, except if lessees default, or for priority contests between lessor and 3Ps, then its similar to Article 9 Creation of a Contract Look first for an agreement, then determine whether the agreement is legally enforceable In looking for the agreement, watch for info in the question about (i) the initial communication, and (ii) what happens after the initial communication, and (iii) who responds and how they respond Three Elements Required: o (1) Mutual Assent; o (2) Consideration or a Substitute; and o (3) No Defenses to Formation Exam Tip: be sure that there really is an enforceable contract all three elements must be present; if the facts state that one or more of the elements is present or that a valid contract has been formed dont waste time analyzing elements already given to you Mutual Assent Offer and Acceptance Initial communication ~ offers: general test: manifestation of commitment would a reasonable person in the position of the offeree believe that his or her assent creates a contract (presence of will be determined by an objective standard) The Offer ~ to be valid must be: o (i) An expression of promise, undertaking, or commitment to enter into a contract; o (ii) Definite and certain in its terms; and o (iii) Communicated to the offeree (power to A requires knowledge of) o Promise, Undertaking or Commitment ~ Distinguish between preliminary negotiations and promises - consider: (a) language used; (b) surrounding circumstances; (c) prior relationship of parties; (d) method of communication (the broader the communicating media the less likely its an offer); (e) custom in the industry; and (f) degree of definiteness and certainty of terms o Definite and Certain Terms ~ enough essential terms must be provided to make it capable of enforcement Must sufficiently identify offeree or class of offerees to justify the inference that the offeror intended to create a power of acceptance Requirements for Specific Types of Contracts Real Estate Transactions require identification or land and price terms Sale of Goods quantity must be certain or capable of being made certain (requirements and output offers are generally sufficient, as is an offer specifying a reasonable range of choices) A K for the SOGs can state the Q of goods to be delivered under the K in terms of the buyers requirements or sellers output or in terms of exclusivity (the words: all, only, exclusively, and solely indicate a commitment of exclusivity). In a requirements K, exclusivity commitment is made by the buyer and in an output K, exclusivity commitment is made by the seller. B can increase requirements so long as the increase is in line w/ prior demands (not unreasonably disproportionate) ~ compare the increase with prior requirements of the past

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Employment Contract duration must be specified, otherwise will be construed as terminable at the will of either party Inference of Reasonable Terms ~ certain missing terms may be supplied by the court if they a consistent w/ the parties intent UCC: reasonable price terms and reasonable time for performance may be supplied by the court Distinguish missing and vague terms if terms too vague to be enforced no presumption can be made (may defeat formation unless acceptance or part performance makes the vague term clear; formation fails if offer provides that a material term will be agreed on at a future date) Test Tip: vague or ambiguous material terms arent an offer under CL or UCC ~ words used to trigger this issue: appropriate, fair, reasonable ~ in the context of initial communication w/ either of these three words answer = no Generally: an advertisement is not an offer, unless (i) it is in the nature of a reward; OR (ii) it specifies quantity and expressly indicate who can accept (store sale ads aren't an offer; B makes offer when it goes to the register w/ item and money) Termination of Offer ~ no acceptance after termination; may be terminated either by an act of one the parties or law (1) Lapse time stated or reasonable time (anytime facts give date of both offer and acceptance look for this issue or an answer choice w/ lapse) (2) Operation of law (i) Death or insanity of either party after the offer but before acceptance; (ii) Destruction of the Ks subject matter; (iii) Supervening illegality Exception: death will not terminate an option or a unilateral offer after partial performance (3) Revocation only Or can revoke requires Oes awareness (before A) to revoke Or must: (i) Directly communicate the revocation to the Oe or (key: unambiguous statement) (ii) Act inconsistently w/ continued willingness to maintain the offer, and the Oe receives correct information of this from a reliable source (key: awareness + unambiguous conduct) ~ note: it doesnt matter how Oe learned of the unambiguous conduct (multiple offers alone insufficient; actual sale would be if one) Os made by publication can only be terminated by use of comparable means of publication Revocation is effective when received (or when published) & is ineffective after A Four Types of Irrevocable Offers: o (1) Option an O cant be revoked if the Or has: (i) Promised not to revoke (or promised to keep the offer open), AND (ii) The promise is supported by payment or some other consideration Note: rejection wont terminate option unless Or detrimentally relied on it NY: generally gives > significance to existence of a writing, in Ks other than for the SOGs, an O that states in writing that it will be held open is irrevocable for the time stated or reasonable time (if silent) o (2) UCC Firm Offer Rule an O cant be revoked for up to three months if: (i) Its an offer to buy or sell goods, (ii) With a signed written promise it will remain open, and (iii) Party is a merchant Limited to 3 month maximum time period o (3) Promissory Estoppel O cant be revoked if theres been: (i) Reliance that is (ii) Reasonably foreseeable, and (iii) Detrimental Ex: subcontractors bid relied on by contractor in submitting bid

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(4) Partial Performance pursuant a unilateral contract makes O irrevocable for a reasonable time to complete performance ~ distinguish between: start of performance vs. mere preparation if in doubt go w/ preparation o NY: Partial performance does not make a unilateral offer irrevocable; unilateral Ks are revocable at any time until performance of the promise is fully completed Offerees claim is in equity for unjust enrichment rather than in contract (4) Rejection ~ probably wont see direct rejection, but look for the following three indirect methods (1) Counteroffer (2) Conditional acceptance of (3) Additional terms (CL only) (1) Counteroffer ~ always terminates the O and becomes a new O (distinguish from bargaining which does not terminate the contract) when the response is a question you call it bargaining and it can later be accepted (2) Conditional Acceptance ~ operates the same way as a CO - *look for a response to an offer w/ the word accept followed by one of these words or phrases: if, only if, provided, so long as, but, on condition that ~ under both the CL and the UCC a conditional acceptance is an indirect rejection (3) Indirect Rejection: (mirror image rule) under common law, a response to an offer that adds new terms is treated like a CO (see UCC rule infra) Acceptance of an Offer o Valid A of a bilateral K requires: (i) An Oe w/ the power of acceptance (person or member of class to whom it was made); (ii) Unequivocal terms of acceptance; and (iii) Communication of acceptance (objective standard would a RP think there was an A?) o Most Os cant be assigned; exception options o At CL, A must mirror Ors terms neither omitting nor adding terms or else it is a CO o Under the UCC, any A that indicates an intention to enter into a K is valid unless it is made conditional on the A of new or different terms (terms which govern depends on whether or not the K is between two merchants) If at least one party is a non-merchant: terms of the O control and new or different terms are considered mere proposals to be separately accepted or rejected If both are merchants: additional terms generally become part of the K unless they materially alter the agreement, the O expressly limits A to the terms of the O, or the Or objects w/in a reasonable time; Additional terms that materially alter the agreement become part of the K only if the Or expressly assents to inclusion (materiality of change is a question of fact) Different terms are treated like additional terms by some courts, while other follow the knock-out rule which states that conflicting terms in the O and A are knocked out of the K and the terms instead are provided by the UCC Where writings the parties create dont create a contract, but behave as if they have one, there is a K consisting of all terms on which their writings agree, plus supplementary terms provided by the UCC o There may be a duty to give notice of performance to the Or if (i) he requests notice OR (ii) the act would not normally come to his attention -- (E2) o Oes ignorance of certain terms may be a defense to formation of a bilateral K (formation may be prevented by oppressive terms or provisions contrary to public policy) o Blanket form recitals will not prevent a court from holding there is no K if a reasonable person would not understand the provisions o Methods of Accepting: A by any reasonable means is permitted unless the Or unambiguously limits A to particular means o

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Mailbox rule: proper A is effective at moment of dispatch (if improper its effective on receipt) unless the O stipulates that A isn't effective till received, its an option K, rejection is sent first, rejection is sent second, but arrives first and is detrimentally relied on by Or Unauthorized means of transmission are effective if actually received by Or while O is still in existence Crossing Os dont create K (b/c not effective until received and so neither could be the A) An executory bilateral K can be formed w/o communication of A where: (i) There is an express waiver of communication in the O; (ii) The O requires an act as A; or (iii) The Oe silently takes the Od benefits If offer is ambiguous RS2d and UCC allow A by either an act or a promise Silence wont be A unless Oe agreed that it would be (ex: if you dont here from me by) SOG: where seller sends the wrong goods

Epsteins Six Acceptance Fact Patterns Two different rule CL vs. UCC - Under CL, the conditional A is treated as a CO and the later Watch for: Improper verbal conduct is treated as A of the CO. Thus, all the terms of the A response to an O that doesnt response to an offer conditional A are part of the K qualify as an A, but the parties then later conduct - Under UCC, the K is based solely on the conduct. The act as if there is a K (conditional indicating a K conditional A is not treated as a CO, and is not part of the K. As or As w/ additional terms) Thus the terms appearing only in the conditional acceptance arent part of the K. Only possible question is whether notice of performance is required answer turns on (i) what the offer requires or (ii) whether the Oe has reason to believe that Or will not learn of A (duty to give notice of performance may exist). Full performance will always be A, but sometime absence of The offeree fully notice will excuse performance from the K created. The key performs = geography. Watch for: Ex: O lives in Ca and hires P to paint his Tx house. If P (1) A verbal offer paints the house but fails to notify O, and O pays X to paint (2) No words of response the house, O will be excused from performing K by failure (3) Start (or completion of) of performance (notice). performance General Rule: starting to perform is treated as an implied promise to perform and so there is a bilateral K But if A requires performance, partial performance will not The offeree starts to constitute A (unilateral K); the O will become irrevocable perform though, meaning that the Or will be bound by partial performance but the Oe will not be (Or chose to make the K the way it did and so bears the consequences) Most Os can be As this way, except Os that require The offeree promises to perform performance for A or rewards (i.e., unilateral Ks). Four Rules (1) Communications other than A are effective only when received Mailbox rules (2) A is generally effective when mailed (3) If a rejection is mailed before an A is mailed, then neither is effective until received

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(4) You cannot use the mailbox rule to meet an option deadline 6 The seller sends the wrong goods Consideration o Involves two elements: (i) bargain; and (ii) legal value Bargained for Exchange ~ exchange of promises or exchange of promise for an act NY: also includes bargained-for benefit to promissory ???? Gifts involve no bargain Act of forbearance by the promisee will be sufficient to form a bargain if it benefits the promisor Peace of mind or gratification given in exchange for something may be sufficient to establish a bargain Past consideration: promise given in exchange for something already done doesn't satisfy requirement (promise is unenforceable b/c promise did not induce the performance or detriment) o Exceptions: Where a past obligation is unenforceable b/c of a technical defense, that obligation will be enforceable if a new promise is made in writing or is partially performed; Under the modern trend, of a past act was performed by the promisee at the promisors request, a new promise to pay for that act will be enforceable [where there was an expectation of payment] o NY: past C can be C if the promisor make the promise in a signed writing that acknowledges the C Provided the past consideration is expressed in the K and proved at trial that it was performed and would have been good consideration but for the time given or performed Legal Value Element Adequacy Courts generally dont inquire into the adequacy or fairness of C, but if something is entirely void of value it is insufficient Sham consideration (recited, but not actually paid) may also be insufficient Where there is a possibility of value in the thing bargained for, C will be found even if the value never comes into existence Benefit-Detriment Theories ~ majority of courts require a party incur detriment (doing something w/o legal obligation or refraining form legal right) to satisfy the legal value element; minority rule: conferring a benefit on the other party is also sufficient - NY Specific Situations Pre-Existing Legal Duty Rule (Modification of Ks) ~ Performing or promising to perform an existing legal duty is insufficient (need new consideration for modification) unenforceable absent new consideration o Exceptions: (i) New or different C is promised; (ii) Promise to ratify a voidable obligation; (iii) PED is owned to a 3P, not the promisor; (iv) Honest dispute as to duty; (v) Unforeseen circumstances sufficient to discharge a party NY: if the modification is in writing it does not need new consideration and is enforceable o The pre-existing duty rule no longer applies o A signed writing replaces the need for consideration in:

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(1) Option contracts (2) Pre-existing duty rule (3) Past consideration provided it is spelled out is a signed writing Good faith agreement modifying a K subject to the UCC does not require C to be binding (ex: A promises to pay B increased cost of order, and A relies on that in good faith) clarify o UCC permits modification of a contract price provided the modification is done in good faith o No writing is required unless the contract as modified falls w/in the SOF Promise of forbearance from suing on a claim ~ may constitute C if the claim is valid or the claimant in GF believed the claim was valid No requirement that all promises given as C be sufficient as C (i.e., one promise may be defective and another sufficient) Part Payment o If due and undisputed is not adequate consideration for release o NY: the written release of any debt is effective regardless of part payment o If not due or disputed is consideration for the release Mutual and Illusory Promises Requirement of Mutuality C must exist on both side of the K if only one party is bound to perform, the promise is illusory and will not be enforced (courts often supply implied promises to infer mutuality, e.g., that a party must use best efforts) Note: watch out for the illusion of illusoriness (ex: will buy it unless I say I wont by ~ new legal detriment ?????) Examples of contracts that satisfy the mutuality requirement o (a) Requirements and output contracts o (b) Conditional promises, unless the condition is entirely w/in the promisors control o (c) Ks where a party has the right to cancel, if that right is somehow restricted (e.g., 60 days notice) o (d) Voidable promises (e.g., made by an infant) o (e) Unilateral and option contracts o (f) Gratuitous suretyship promises made before consideration flows to the principal DR o Test Tip: wording is import, ex: all the ws I require versus all the ws I want Right to Chose Alternative Courses a promise to choose one of several alternative means of performance is illusory unless every alternative involves legal detriment to the promisor o Promise wont be found illusory if: (i) At least one alternative involves legal detriment and the power to chose rests w/ the promisee of a 3P, or (ii) A valuable alternative (i.e., one involving legal detriment) is actually selected Substitutes for Consideration (a) Promissory Estoppel or Detrimental Reliance ~ following elements must be present: o (i) The promisor should reasonably expect his promise to induce action or forbearance, o (ii) Of a definite and substantial character, and o (iii) Such action of forbearance is in fact induced o Promise + Reliance thats reasonable, detrimental, and foreseeable + Injustice to Avoid o Note: a valid K is > than an agreement that can be enforced only by PE b/c some states limit recovery under PE to that which justice requires o NY: call this detrimental reliance do not call it promissory estoppel

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Defenses to Formation o 1. Absence of Mutual Assent Mutual Mistake ~ a mistake by both parties is a defense if: (i) The mistake concerns a basic assumption on which the K was made; (ii) The mistake has a material adverse effect on the agreed-upon exchange; and (iii) The adversely affected party didnt assume the risk of the mistake When the parties know there assumption is doubtful (conscious ignorance), MM isnt a defense; the parties will be deemed to have assumed the risk that their assumption was wrong Mistake in Value ~ is generally not a defense; courts presume that parties assume the risk in determining value (but there are exceptions ex: when the parties rely on a 3P to establish value) Unilateral Mistake ~ is generally insufficient to make a K voidable (whether it be of identity, subject matter, or computation); but if the nonmistaken party knew or should have known of the mistake, the K is voidable by the mistaken party Mistake by Intermediary (Transmission) ~ the message will usually be operative as transmitted unless the party receiving the message should have been aware of the mistake (e.g., where telegraph company makes a mistake) Latent Ambiguity Mistakes ~ if K includes an ambiguous term, the result depends on the parties awareness of the ambiguity (a) If neither is aware, theres no K unless both parties intended the same meaning; (b) If both are aware, theres no K unless both intended the same meaning; (c) If one is aware, theres a binding K based on what the ignorant party reasonably believed to be the meaning of ambiguous words (are where subjective intent is taken into account) Misrepresentation ~ if one party induces other to enter a K by using fraudulent misrepresentation (asserting info known to be untrue; fraud in the inducement) or by using nonfraudulent material misrepresentation (asserting info not known to be untrue but that would induce a reasonable person to enter into a K), the K is voidable by the innocent party if it justifiably relied on the misrepresentation Distinguish fraud in factum where a party is tricked into assenting w/o understanding the significance of its action K is void, rather than voidable o 2. Absence of Consideration o 3. Public Policy Defenses Illegality of K ~ if C or subject matter of a K is illegal the K is void Exceptions: (i) P is unaware of the illegality while D knows of it

MBE: enforces a charitable subscription w/o any proof that the promise induced action or forbearance by the charity o NY: requires reliance and a change of position by the charity in order to enforce a chartable pledge NY: doesnt recognize promissory estoppel except for: o (1) Charitable pledges o (2) Oral marriage settlements made prior to the marriage o (3) A promise by a gratuitous bailee to obtain insurance on bailed goods, or o (4) To avoid outrageous results (b) Modification Under the UCC ~ C is not necessary to a GF written modification of a K (c) Promises to Pay Legal Obligations Barred by Law ~ if a legal obligation isnt enforceable under law (e.g., a debt barred by the SOLs), a new promise to fulfill the legal obligation is enforceable if in writing, but it will only be enforceable according to the new terms, not the original legal obligation ~ see NY distinction above (d) Seal ~ in many states and under the UCC the seal is no longer a substitute for consideration

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(ii) Parties are not in pari delicto (i.e., one isnt as culpable as the other) (iii) Illegality is failure to obtain a license when the license is for revenue raising purposes rather than for protection of the public If the only purpose behind the K is illegal, it is voidable by the party who was: (i) Unaware of the purpose; OR (ii) Aware but didnt facilitate the purpose and the purpose does not involve serious moral turpitude Defenses Based on Lack of Capacity o Kids in most states, person < 18 years old lack capacity to contract, with some exceptions, such as w/ Ks for providing for the incapacitated parties necessities; upon reaching majority the kid may affirm its contractual obligation (no express disaffirmance is construed as affirmance); K is voidable by the kid but binding on the adult MBE: infancy generally is a defense to all contracts NY: a married infants real property contracts involving the infants principal place of abode are not subject to the infancy defense (leases, deeds, mortgages, real estate contracts) o Crazies lack capacity but may K during a lucid interval o Drunks lack capacity if the other party has reason to know theyre drunk o Duress or Coercion inducement by such makes K voidable; usually requires > than one partys taking economic advantage of another (e.g., charging high price for something desperately needed) Defenses to Enforcement o Statute of Frauds Agreements which Must be in Writing to be Enforced: (1) Promises by executors or administrators to pay estates debts out of their own funds (2) Promises to answer for the debt or default of another (i.e., to act as a surety) (3) Promises made in consideration of marriage (4) Promises creating an interest in the land (but leasehold interests for one year generally arent subject to the statute) (5) Promises that cant be performed w/in a year from the date of agreement, not the date of performance (lifetime Ks can be performed w/in a year and are not w/in the Statute) (6) Agreements for the SOGs for $500, except o (a) Specially manufactured goods o (b) A written confirmation of an oral agreement between merchants o (c) Admission is pleadings or court that a K for goods existed o (d) Partial or delivery made and accepted Marriage, (w/in one) Year, Land, Executor (or administrator), Goods (for $500), Surety Memorandum Requirements ~ the SOF is satisfied if the writing contains the following: (1) The identity of the parties sought to be charged; (2) Identification of the Ks subject matter; (3) Terms and conditions of the agreement; (4) Recital of the consideration; and (5) The signature of the party to be charged or his agent (the person to be sued) o UCC Distinction: one signature may be enough to charge both parties for a merchant K Something in writing must show these things; writing need not be a full fledged K or single paper; can be several pieces of correspondence between the parties When the SOF is Not Applicable To the extent of admissions in court that a K was formed or to the extent that there was part performance

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SOGs: part payment or acceptance and receipt of part of the goods takes the K out of the SOFs to the extent of the part payment or partial acceptance and receipt Sale of Land: most jurisdiction dont apply the SOF if there is performance that unequivocally indicates that the parties contracted for the sale of land; usually requires two of the following: (a) payment (in whole or part), (b) possession, and/or (c) valuable improvements P.E.: where it would be inequitable to allow the SOFs to defeat a meritorious claim, courts will occasionally use the doctrine of promissory estoppel to remove the K from the statute Unconscionability ~ K may be voidable where clauses are so one-sided as to be unconscionable includes: (i) Ks w/ inconspicuous risk-shifting provisions (e.g., disclaimers of warranty buried in fine print) (ii) Ks of adhesion Tested at the time the K was made (must have been unfair when entered into)

Terms of the Contract (Substance) Tip: 1st look for info about the words used, particularly in the last written version of the deal; also look for info about past or similar deals; and think about UCC warranty, delivery, and ROL terms if sale of goods Parol Evidence Rule: Overview: o Like a rule of evidence (approach it that way on the bar) Issue is whether the E is A Purpose for which E is to be introduced is often determinative o Essence of the rule is the exclusionary effect of the written K on earlier or contemporaneous agreements as a possible source of terms of the K Vocabulary o Integration o Partial Integration o Complete Integration o Merger Clause o Parol Evidence o Reformation (equitable action to modify written K to reflect actual agreement) Triggering Facts o (1) Written K that court finds is the final agreement AND o (2) Oral statement made at time K was signed OR earlier oral or written statements by the parties to the K 4 PE Rules ~ must be a integration; doesnt matter if complete or partial o (1) Contradict PER prevents a court from admitting evidence of earlier agreements for the purpose of contradicting the terms in the written K Exception such terms may be considered for the limited purpose of determining whether there was a mistake in integration (i.e., a mistake in reducing the agreement to writing) This applies to clerical errors (ex: omitting important words, getting numbers wrong or backwards) PER looks back precludes E of what was written or said before the K E of post-K statements does not create a PER issue o (2) Defense getting out of/canceling a written deal PER doesnt prevent a court from admitting E of earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of the agreement (such as misrepresentation, fraud, or duress) If suing for reformation, PE of contradicting terms will be in-A but if suing for rescission the same PE will be A to determine whether there is a misrepresentation defense to enforcement!!!

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(3) Explaining term in the written deal (can use PE) PER doesnt prevent a court from admitting E of earlier agreements to resolve ambiguities in the written K o (4) Adding to the Written Deal PER prevents a court from admitting E of earlier agreements as a source of consistent, additional terms unless the court finds: (i) That the written agreement was only a partial integration OR (ii) That the additional terms would ordinarily be in a separate agreement Merger clause will be persuasive but is not conclusive question of fact Conduct and Course of Performance and o Conduct can also be a source of K terms on the bar such conduct takes one of three forms: (1) Courts first look to course of performance, (2) Second to course of dealing, and (3) Third to custom and usage [to explain words in Ks or to fill gaps in Ks] 1>2>3 Course of Performance Ex: S Ks to sell B 1000 chickens a moth for 12 months and the 1 st three shipments are boiling hens B does not complain ~ this is strong evidence b/c B does not complain Course of Dealing same people, different but similar contract Ex: that B complained under prior chicken Ks when S sent boiling hens Custom and Usage different but similar people, different but similar K Ex: its customary in the industry to use the word chicken when the deal covers chickens up to 6 pounds including boiling hens UCC for Terms in Sales of Goods Contracts (default terms) Delivery Obligation of Seller of Goods if Delivery by Common Carrier Risk of Loss Warranties of Quality Contractual Limitations on Warranty Liability o Delivery Obligations of Seller if Delivery is by Common Carrier If theres agreement as to place of delivery by a CC, the Q is what does S have to do to complete its delivery obligation two possible UCC As 1. Shipment K (> likely) o S completes its delivery obligation when it: (i) Gets the goods to a CC, and (ii) Makes reasonable arrangements for delivery, and (iii) Notifies B of the delivery arrangements o Ex: taking the goods to the greyhound station, getting tickets, and telling B theyre on the way is enough even though the bus hasnt left the station delivery obligations are complete once the three requirements are met 2. Destination K o S does not complete delivery obligation until the goods arrive where B is 3. Determining whether K is a shipment or destination. o FOB followed by the city where the seller is of where the goods are means its a shipment K o FOB followed by any other city means its a destination K o Risk of Loss ROL issues arise where: o

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Contracts (i) After the K has been formed but before B receives the goods, (ii) The goods are damaged or destroyed, and (iii) Neither B not S is to blame Possible consequences If ROL is on B, it has to pay the full K price for the lost or damaged goods If S has the ROL, no obligation on B, but possible liability on S for nondelivery ROL rules: (1 > 2 > 3 > 4) (1) Agreement of the parties re ROL controls (2) Breaching party is liable for any uninsured loss even though breach is unrelated to problem (3) Delivery by CC other than S ROL shifts when S completes delivery obligations (4) Catch-all ROL shifts from a merchant-S to B on Bs receipt of the goods; ROL shifts from a non-merchant-S when it tenders the goods (whether B is a merchant is irrelevant) o Receipt = actual, physical possession o Want to keep business people Ss to keep the ROL as long as possible o S tenders by making available 2A Leases GR: unallocated ROL is on the lessor even though its in leasees possession Ex: hit by lightening = ROL; throw a beer can through it ROL Warranties of Quality Warranty Claims UCC: a sellers express/implied warranties extend horizontally beyond the buyer to any natural person (but not a corporation) in the buyers household (but not an employee, or tenant, but the protection is extended to a household guest) who suffers physical injury to property or person CL: only a buyer is direct privity could recover for property damage, personal injury or economic injury resulting from a defective/unsafe product NY: 3P beneficiary protection (horizontal privity) is extended beyond the household to anyone who could be expected to use or be affected by such defective product Express ~ look for ~ words that promise, describe, or state facts or for use of sample model Distinguish from sales talk which is more general, an opinion (puffing) Implied Warranty of Merchantability ~ when a person buys any goods from a merchant, a term is automatically added to the K by operation of law that the goods are fit for the ordinary purpose for which such goods are used Triggering fact: S is a merchant (limited meaning for the purpose of this rule not others) which here means it deals in goods of that kind o Anytime: (1) SOG (2) S regularly sells goods of that kind Warranty: goods are fit for ordinary purposes (term need not be in the K) Implied Warranty of Fitness for Particular Purpose Triggering facts (which create a stronger warranty) o B has a particular purpose o B is relying on S to select suitable goods o S has reason to know of purpose and reliance o Fact pattern will give reason B is buying Warranty: goods fit for particular purpose 2A Warranties of Leases lessor of personal property makes the same warranties as a seller: express, merchantability, fitness Exception (limited) in a finance lease, the finance lessor makes no warranties

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Ex: if X selects the car she wants from F (dealership) which bank buys and leases to X if the car is defective, X will have a BOW claim but only against the dealer and not the bank; X cannot stop making lease payments to the bank b/c the car is defective Contractual Limitation on Warranty Liability o (1) Disclaimer o (2) Limitation of Remedies Disclaimer contractual provision that attempts to eliminate warranties Eliminates implied warranties Express Ws generally cant be disclaimed Implied Ws of merchantability and fitness can be disclaimed in either of the following two ways o (1) Conspicuous language of disclaimer, mentioning merchantability, OR o (2) As is or with all faults magic words that make implied Ws disappear and do not have to be conspicuous Limitation of Remedies control how much you can recover Doesnt eliminate W, simply limits or sets recovery for any breach of W Can use to limit remedies even for express W General test is unconscionability Prima facie unconscionable if BOW on consumer goods causes personal injury Ex: B buys oven from S, stove store. K provides all operating parts are guaranteed for 2 years and W liability shall be limited to replacement parts. A defective heating element causes a fire and $100 in property damage. If B sues S for BOK, B can only recover the replacement parts.

PERFORMANCE Sale of Goods Performance Concepts (6 important concepts) o (1) Perfect Tender o (2) Rejection of the Goods o (3) Cure o (4) Installment Contracts o (5) Acceptance of the Goods o (6) Revocation of Acceptance of the Goods o Payment Problems (3) Common Law Performance Concepts o Condition Subsequent MBE: D must plead and prove an occurrence of a condition subsequent which would relieve D from liability; P must plead and prove the occurrence of any conditions precedent have been satisfied NY: P need not plead satisfaction of a condition precedent; only if D raises that issue in the answer must P then prove satisfaction of a condition precedent REMEDIES FOR AN UNEXCUSED NONPERFORMANCE Nonmonetary Remedies (In Rem) o Specific Performance/Injunction o Reclamation Money Damages for Breach of Contract: General Concepts o Overview o Measure of Damages o Damages Rules for Sales of Goods o Additions and Limitations

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o o

Contract Provisions Regarding Damages Lost profits as consequential damages for a new business MBE: many jurisdictions decline to award lost profits b/c the absence of any income or expense experience renders anticipated profits too speculative NY: abandons this per se rule a court may award consequential damages provided a buyer shows some evidence of lost profits

EXCUSE OF NONPERFORMANCE OF BECAUSE OF SOMETHING THAT HAPPENED AFTER K WAS MADE Excuse Because of Other Guys Improper Performance o Common Law and Material Breach Rule o Article 2 and Perfect Tender Rule Again Excuse Because of Non-Occurrence of an Express Condition o What an Express Condition Is o Standard for Determining Whether an Express Condition has Occurred o How an Express Condition can be Eliminated Waiver/Estoppel Prevention Avoidance of Forfeiture Excuse of Performance by Reason of Other Partys Anticipatory Repudiation Insecurity Excuse by Reason of Later Contract o Rescission (cancellation) o Accord and Satisfaction (substituted performance) Meaning Effect Preventing an accord and satisfaction When a check marked paid in full is tendered, its negotiation may constitute accord and satisfaction unless the CR-payee reserves rights by inserting the words under protest or w/o prejudice (this reservation of rights applies only to transactions arising under the UCC) NY: such a reservation of rights arises in any transaction regardless of the nature of the underlying obligation o Modification (substituted agreement) o Novation (substituted person) Excuse of Nonperformance by Reason of a Later, Unforeseen Event o Death After Contract o Subsequent Law or Regulation Rights and Duties of Nonparties to Contract Third Party Beneficiaries ~ promisee contracts w/ the promisor, that the promisor will render some preference to a 3 rd party o Epsteins TPB Model: Need to be able to: (1) identify problem as a TPB problem, (2) use the vocab of TPB law, (3) deal w/ efforts to cancel or modify a TPB K, (4) figure out who can sue whom, and (5) assert any available defenses o (1) Look for two parties Kn w/ shared intent or understanding to benefit a 3P o (2) Know the Vocab 3PB = not a party to the K; able to enforce K others made for its benefit Pr = person who is making the promise that benefits the 3P (seller who provides grits to T) Pe = person who obtains the promise that benefits the 3P (buyer who pays S to provide grits to T) CR/donee will always be one, usually donee; look at whether B was a CR of Pe

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(3) Dealing w/ Efforts to Cancel or Modify test is whether TP knows of and has relied on or assented to it as requested. If so, its rights have vested and the K cant be canceled or modified w/o its consent unless the K otherwise provides. o (4) Who can sue whom? Four bar exam important rules: (i) B can recover from Pr (ii) Pe can recover from Pr (iii) GR: B cant recover from Pe (iv) Limited exception: CR-B can recover from Pe but only on pre-existing debt Notes: cant have both (i) and (ii) no double recovery; 3P has K law rights theyre limited to suing Pr o (5) Defenses if 3PB sues Pr, Pr can assert any defense it would have had if sued by Pe o Intended vs. Incidental ~ only intended beneficiaries have contractual rights to determine which consider: (i) Is it considered in the K? (ii) Does it receive performance directly from the promisor? (iii) Does it have some relationship w/ the promisee indicating intent to benefit? Intent of parties to the K determines whether incidental or intended Bar Exam Rule: intended Bs will be named in the Q; if its not its incidental and have any K rights o Two Types of Intended Beneficiaries Creditor Beneficiary = a person to whom a debt is owed by the promisee Donee Beneficiary = a person the promisee intends to benefit gratuitously o TPB can enforce K only when its rights have vested occurs when: (i) It manifests assent to a promise in the manner requested by the parties (ii) Brings a suit to enforce the promise OR (iii) Materially changes position in justifiable reliance on the promise Prior to vested beneficiaries rights under the K can be modified or rescinded o Who Can Sue Whom B may sue Pr ~ Pr may raise any defense it has against Pe Pr may use defenses Pe would have against B if promise Pr made is not absolute (i.e., only a promise to pay what Pe owes B) If the promise is absolute, Pr cannot assert Pes defenses CR-B can sue Pe on the existing obligation between them and can sue Pr but may only obtain one satisfaction D-B has no right to sue Pe unless grounds for a detrimental reliance remedy exist Pe can sue Pr at law and in equity for specific performance if Pr isn't performing for B Assignment of Rights ~ obligator contracts w/ assignor, who assigns its right to the obligors performance to the assignee o Epsteins Assignment of Rights Model: need to know (1) what an At is, (2) the vocab of an At, (3) the limitations on At, (4) the requirements for Ats, (5) the rights of Ae, and (6) how to deal w/ multiple Ats o (1) An At is a transfer of rights under a K in two separate steps: first K between only 2 parties; and second one of the parties later transfers rights under the K to a 3P o (2) Vocab: Ar = party to the K who later transfers rights under the K to another Ae = not a party to the K; able to enforce the K b/c of the At Or = other party to the K o (3) Limitations: courts favor assignability of K rights and so are reluctant to read K language as preventing an At. Determine whether K (a) prohibits At or (b) invalidates Ats. Prohibition is strongly favored chose it if theres doubt. Prohibition ~ language of prohibition takes away the right to assign but not the power to assign which means that Ar is liable for BOK but Ae who doesnt know of the prohibition can still enforce the At (language that says dont/cant do this) o

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o o

o o

Invalidation ~ language of invalidation takes away both the right to assign and the power so that there is a breach by the Ar and not rights in the Ae; At is invalid, all Ats are void even if you do it wont work Common law bars an At that substantially changes the duties of the Or, even if K doesnt limit right to assign in anyway Ats of right to payment = never substantial change Ats of right to K performance other than right to payment = usually a substantial change on the bar At of right to service invalid substantial change (4) Requirements of At GR: consideration is not required but gratuitous Ats (and only gratuitous Ats) can be revoked (5) Right of Ae Ae can recover from Or Ar for consideration cant recover from Or Or has same defenses against Ae as it would have against Ar Payment by Or to A'r is effective until Or knows of the At and modification agreements between Or and Ar are effective if the Or didnt know of the At Implied warranties of Ar only arise from an At for value In an At for consideration only, the Ar warrants: (i) The right assigned actually exists, (ii) The right assigned isn't subject to any defenses by Or, AND (iii) The Ar will do nothing to impair the value of the At (Ar however doesnt warrant what Or will do) (6) Multiple Ats Determine whether theyre all gratuitous; a later gift At revokes an early gift At, the GR for resolving claims among Aes who didnt provide C is a last in time rule Exception: a gratuitous At isn't revocable if it is the subject matter of a writing delivered to the Ae, the Ae has received some sort of indicia of ownership, or the Ae has relied on the At in a way that is reasonable, foreseeable, and detrimental ~ if the gift At isn't revocable, then it will take priority over a later At NY Distinction: gratuitous At is not revocable if it is in writing only ??????? If any Ats were for consideration, the first Ae for consideration wins (amount of consideration is irrelevant) Very Limited Exception: a subsequent Ae takes priority over an earlier Ae for value only if it both: o (i) Doesnt know of the earlier At, AND o (ii) Is the first to obtain: (a) Payment (b) A judgment (c) A novation, OR (d) Indicia of ownership The Four Horsemen Rule Generally all contractual rights can be assigned Has the effect of establishing privity of K between Or and Ae while extinguishing privity between Or and Ar Exceptions (i) If it would substantially change Ors duty or risk (e.g., personal service Ks where service is unique, requirement and output Ks where Ae will substantially vary the quantity) (ii) Future rights to arise form future Ks (not future rights in already existing Ks) (iii) If prohibited by law (e.g., wage Ats)

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Nonassignment Provisions Prohibition on At of the K will be construed as barring only delegation of the Ars duties Prohibition on At of contractual rights doesnt bar At but gives Or right to sue for damages Providing that attempts to assign will be void the parties can bar assignment If Ae has notice of the non-At clause, an At will be ineffective o To make effective: Ar must manifest an intent to immediately and completely transfer its rights Writing usually isn't required Right being assigned must be adequately described Any accepted words of transfer will suffice (dont need to use assign) Gratuitous At is effective w/o consideration o Revocation At for consideration is irrevocable At not for C is generally revocable Gratuitous At is irrevocable if: (i) Or has already performed; (ii) Token chose is delivered (i.e., a tangible claim, such as a stock certificate); (iii) At of a simple chose is put in writing (i.e., an intangible claim, such as a K right); OR (iv) Ae can show detrimental reliance on the gratuitous At NY Distinction: gratuitous At is not revocable if it is in writing only ???? Revocable gratuitous At may be terminated by: (i) Death or BR of Ar; (ii) Notice of revocation by Ar to Ae or Or; (iii) Ar taking performance directly from Or (iv) Subsequent At of the same right by Ar to another o Who can sue whom Ae can sue Or (b/c Ae not Ar is entitled to performance under the K) Or can assert any defense inherent in the K or that came into existence before Or had knowledge of the At against Ae Or cant raise any defenses Ar might have against Ae Ae can sue A for wrongfully exercising power to revoke an irrevocable At (action may also lie where Or successfully asserts a defense against Ar in an action brought by Ar against Or to enforce the obligation) Ar wont be liable to Ae if Or is incapable of performing o Successive At s of the Same Rights If 1st At is revocable, a subsequent At revokes it If its irrevocable, the 1st At will usually prevail over a subsequent At Exceptions (if the 2nd Ae has paid value and taken w/o notice of the 1st At) (i) Gets the 1st judgment against Or (ii) Gets the 1st payment of a claim from the Or (iii) Gets delivery or token chose (iv) Is party to a novation releasing Ar (v) Can proceed against 1st Ae on an estoppel theory (could work against him tough) Delegation of Duties ~ obligor/delegator promises to perform for the obligee and then delegates its duty to the delegatee o Epsteins Delegation of Duties Model: need to know: (1) what a delegation is, (2) relationship of At and Dn, (3) which duties are delegable, and (4) what are the consequences of Dn o (1) Party to a K transferring work under that K to a 3P

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(2) A K creates both rights and duties. At is the transfer by a party to a K of its rights or benefits under the K to a 3P who wasnt a party to the K. Dn is the transfer by a party to a K of his duties or burdens under the K to a 3P who was not a party to the K. Real world transfer of rights will go w/ transfer of duty but not on the bar. o (3) General contractual duties are delegable. (As long as work gets done doesnt matter who does it generally) Very Limited Limitations: delegations are permitted unless either ~ (i) K prohibits delegations or prohibits assignments, OR (ii) K calls for very special skills, OR (iii) Person to perform K has a very special reputation o (4) If after the delegation, the 3P delegatee doesnt perform: (i) Delegating P always remains liable (2) De liable only if she receives consideration from Dtn party a Dn for C creates a 3PB obligation Dn for C is essentially a new 2nd K Oe can enforce 2nd K even though not a party Od be a 3PB o Generally, all duties may be delegated unless: (i) Duties involve personal judgment and skill; (ii) Delegation would change the Oes expectancy (e.g., requirements and output Ks) (iii) Special trust was reposed in the Dr by the other party to the K; AND (iv) Theres a contractual restriction on delegation o Dt must manifest intention to make a delegation (no special formalities; may be written or oral) o Rights and Liabilities of Parties Oe must accept performance from De of all duties that may be Dd Dr remains liable on the K Oe may sue the Dr for nonperformance by the De Oe may sue the De for nonperformance, but can require the De to perform only if there has been as assumption (i.e., the De promises he will perform the duty Dd and this promise is supported by consideration or its equivalent ~ this promise creates a K between Dr and De in which the Oe is a 3PB) Words: assigning the K or all my rights under the K are usually construed as including an assumption of the duties by the Ae, unless a contrary intention appears Novation ~ substitutes a new party for an original party to the K; it requires assent of all parties and completely releases the original party o

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