Contracts Approach and Mini Outline 1. Things to identify immediately. a. Ask does the UCC Apply (label UCC)?

i. Goods = all thins moveable. ii. Are the parties Merchants? (regularly deal in good of the kind.) b. Circle the following i. Dates iii. Oral ii. Written iv. Requirements 2. DOES K EXIST? a. Type of K i. Express (Language)? Implied (Conduct)? Quasi-(unjust enrichment)? ii. Bilateral (Mutual Promises)? Unilateral (Accept by Performance only)? b. Is it valid i. Void (without legal effect)? Voidable (defense that makes it voidable)? Unenforceable (Defense makes unenforceable)? 3. CREATION a. Mutual Assent i. Offer (Reasonable Expectation that offeror is willing to enter K on offered terms) 1. Expression of Promise, Undertaking, or Commitment. a. Language (I offer, I promise, NOT I quote, Im asking, or Id consider b. Look at surrounding circumstance (no jokes, anger, or bragging) c. Prior Practice and Relationship of parties can show offer. d. Broader method of communication likely an invitation to offer. 2. Certainty and Definiteness in the essential terms. (enough to be enforced?) a. Must identify Offeree (person or a class of persons) b. Must identify Subject Matter i. Real Estate must have Land description and Price ii. UCC Goods must have quantity (Requirement and Output K are acceptable) iii. Service K must state nature of work to be performed. c. Missing Terms dont prevent formation if parties so intended (Court can supply reasonable terms) i. Price supplied other than in sale of Land. UCC = reasonable price at time of DELIVERY. ii. Vague terms 1. Court will supply missing terms. (Can be voided for Vagueness) part performance or acceptance of performance can clarify vagueness. iii. Future Terms (if term is material, then offer is too uncertain.) 3. Communication to offeree. (Offeree must have KNOWLEDGE of the offer. 4. Termination of Offer

a. Offeror = Revocation (communicated directly to Offeree, or if made by publication then through comporable publication, or indirectly if Offeree hears correct information from a reliable source of acts indicating offeror no longer wishes to make the offer.) i. Effective = when received, (or when published, if applicable) ii. Limitations (revokeable at will generally) Cannot be revoked when; 1. Option K (offeree gives consideration to keep offer open) 2. Merchants Firm offer. UCC (Merchant offers to sell in signed writing, and gives assurances that it will be held open. NOT REVOCABLE for lack of consideration during that time, or if no time then reasonable time not to exceed 3 months) a. If it states longer period then reduce to 3 months. b. If consideration is given then it is Option not Merchant Firm Offer. 3. Detrimental Reliance a. If offeror could reasonably expect that the offeree would rely to their detriment on the offer, and does so rely, offer becomes irrevocable for reasonable length of time. 4. Part Performance True Unilateral K Offers a. Irrevocable once performance has begun. Give reasonable time to complete, Offeree is not bound to complete. b. Preparations to perform dont make offer irrevocable, my be detrimental reliance. 5. Part Performance Offer Indifferent as to Manner of Acceptance. a. Performance begins, no revocation (but notice of performance start may be necessary.) b. Termination by Offeree = Rejection or Lapse of time (specified or just reasonable) i. Express Rejection No means, No. (cant later accept unless offer is renewed or is an option) ii. Counteroffer (same subject matter w/ different terms)= Rejection with new offer. 1. Mere Inquiry =/= counter offer. (Reasonable Person test) iii. Effective upon receipt iv. Rejection of Option K = offer still open till end of period, unless offeror detrimentally relied on rejection. c. Termination by Operation of Law i. Death or insanity terminates even if not communicate (except Option K) ii. Destruction of proposed subject matter terminates

iii. Supervening illegality Terminates. ii. Acceptance (Person or class to whom offer is address can accept, power of acceptance cant be assigned, except in an Option K.) Offeree must know about the offer. Unilateral K can only be accepted by completing performance, which they must notify offeror of completion unless offeror waived notice, or performance would normally come to offerors attention. 1. Acceptance of Bilateral K (either by promise to perform or beginning performance) Must be communicated. 2. Method of acceptance = any reasonable manner and by any medium. a. UCC an offer to buy goods for current or prompt shipment is construed as inviting acceptance by promise to ship or current prompt shipment. i. Shipping Nonconforming Goods is an acceptance as well as a breach, unless seller notifies buyer it is an accommodation. Buyer may reject (seller can reclaim goods, BC tender doesnt constitute acceptance of original offer.) Only works if acceptance is done by shipping, not by promise to ship. 3. Acceptance must be absolute and unequivocal (Mirror-image rule, means different or additional terms make it a rejection and counter offer. a. UCC Battle of the forms i. Proposal of different terms in timely manner constitutes acceptance unless expressly made conditional on assent to new terms (in which case counter offer), if parties ship or accept goods after then acceptance without new terms. 4. Mailbox Rule If accepted by mail or similar, then K at moment of dispatch if properly addressed and stamped. Exceptions; a. Offer says not effective till received. b. Option K only upon receipt c. If rejection is sent first then acceptance then whichever arrives first governs. d. If rejection is posted after acceptance, acceptance governs unless rejection arrives first AND offeror relies on rejection. 5. Auction K = effective at fall of hammer. Auctions are with reserve unless otherwise specified, meaning auctioneer may withdraw goods any time before fall of hammer. b. Consideration Must be bargained for exchange, for legal value (a benefit to promisor or detriment to promisee) Act or forebearance by promisee is sufficient if it benefits promisor (need not be economic) i. Bargained for exchange = promise induces the detriment AND the detriment induces the promise. Gift =/= Consideration. 1. Promise for Past act =/= consideration. Except where; a. Where past obligation is unenforceable because of technical defense. (enforceable if new promise is in writing or is partially performed.

b. Past act benefited promisor, performed by promisee at promisors request, or in response to an emergency, a subsequent promise to pay for that act will be enforceable. ii. Legal value (adequacy or fairness of consideratin is not considered, but cannot be devoid of value, Sham consideration is insufficient if not paid. Mere possibility of value is ok.) 1. Preexisting Legal duty is not consideration, Except: a. New or different consideration is promised (earlier payment, or stock instead of money) b. Promise to ratify voidable obligation (fraud or infancy) c. Preexisting duty is owed to different person d. Honest dispute as to the duty e. Unforeseen circumstances sufficient to discharge a party. 2. UCC A good faith agreement to modify K needs no consideration. 3. Forebearance to sue is consideration if the claim is valid or claimant in good faith believes it to be valid. iii. Mutual and Illusory Promises 1. If only one side is bound to perform it is illusory. (watch out for implied promise from the courts) Mutuality means both sides must give consideration. E.G.; a. Requirement, and output K b. Conditional promises, not entirely within control of the promisor. c. K where a party has the right to cancel , if that right is somehow restricted. d. Exclusivity K (BC court finds implied promise to use best efforts) e. Voidable Promises (made by an infant) f. Unilateral and option K g. Gratuitous suretyship promises made before or at the time consideration flows to the principal debtor. 2. Right to choose is illusory unless all alternatives involve legal detriment. Not illusory if at least one alternative is legally detrimental and promisee gets to choose, or 3rd party, OR a valuable alternative is actually chosen. iv. Promissory Estoppel (Detrimental Reliance) = If promisor should expect to induce action or forebearance of a definite and substantial character and such action or forebearance actually occurred. c. Defenses i. Of Formation; (Basic ones are lack of consideration or illegality) 1. Mutual Mistake as to existing facts makes K voidable if; a. Basic assumption, b. With a material effect; AND c. Party seeking avoidance didnt assume the risk of the mistake. i. Assumption occurs when one party is in better position to know of the risks or where parties knew of their own ignorance.

ii. Mistake in Value not a defense. 2. Unilateral Mistake if non-mistaken party knew or had reason to know of the mistake, the K is voidable by the mistaken party. 3. Mistake by Intermediary = message as transmitted is operative unless the other party knew or should have known of the mistake. 4. Ambiguous K language; depends on parties awareness a. Neither party aware = no K unless both intended same thing. b. Both parties aware = no K unless both intended same thing c. One party aware = binding K with what ignorant party believed to be meaning. 5. Misrepresentation; a. Fraud in inducement voidable K b. Non-fraudulent Misrepresentation = K voidable if material. c. Innocent party may take action in equity and rescind the K. ii. Defenses of Lack of Capacity 1. Minors (usually under 18) lack capacity, a. Must disaffirm before or shortly after turning 18, and must return anything remaining. b. May affirm expressly or by conduct upon turning 18. 2. Mental incapacity = voidable K, may affirm or disaffirm when lucid, but are liable for quasi-K for necessities furnished them. 3. Intoxicated persons = voidable, can affirm or disaffirm upon recovery. 4. Duress = voidable, but may be affirmed, usually improper physical threat (not economic) withholding a want or need is duress if party threatens to commit wrongful act that would seriously threaten the other parties property or finances AND there are no adequate means to prevent threatened loss. 5. Undue Influence = voidable, but may be affirmed, requires susceptibility by one party and excessive pressure by the other party. iii. Defenses to Enforcement 1. Statute of Frauds = requires writing (not necessarily one, or the K even) that reflect material terms, (can be electronic), must be signed by the party(ies) sought to be bound. Noncompliance makes K unenforceable at option of the party to be charged. Parties can sue for reasonable value of services or part performance. a. Covers; MYLEGS b. Marriage = promises to induce marriage for value. c. Year = more than a year to perform from effective dare of agreement. (lifetime K are Ok) d. Land = Leases of more than a year, Easements of > year, Fixtures, Minerals or structures, Mortgages i. Not K to build or K to find a buyer,

ii. Part performance my permit if 2 of the following occur; payment (in whole or in part), possession, and/or valuable improvements. e. Executor or administrator promising to pay estate debts. f. Goods priced over $500, (UCC) i. Exceptions are SWAP 1. Specialty manufactured goods 2. Written Confimration Rule = if both merchants and one party receives written confirmation, knows its contents and doesnt respond within 10 days, then K even without writing. 3. Admissions in Pleadings or Court 4. Payment or Delivery of goods, (enforceable to point accepted or paid for. If indivisible then satisfied for whole item even if shipped in parts) 2. Unconscionability = court refusing to enforce provision or K to avoid unfair terms. Determined at time K was formed. If found Court may refuse to enforce all or part of the K or limit the application of any clause so as to avoid unconscionable result. a. Risk shifting provisions may be unconscionable if inconspicuous or incomprehensible to the average person (even if pointed out to them) b. K of Adhesion - take it or leave it. = unconscionable if they leave no means to procure necessary goods. c. Exculpatory Clauses = unconscionable if K party is releasing itself from its own intentional wrongful acts. d. Limitations on remedies = usually ok, unless remedy they are limited to fails its essential purpose. 4. Terms of the K = Generally Construed as a whole, with ordinary meaning of words, written or typed provisions prevailing over printed provisions, custom and usage are taken into account, Courts favor finding a K valid and enforceable, and remember ambiguities are construed against the party preparing the K. a. Parole evidence rule = Supplement explaining or contradicting of terms. i. If parties express their intent in writing that the K is a final expression it is an integration (the more complete the more likely to be an integration) Any other expressions written or oral made prior to the writing or contemporaneous with it are inadmissible to vary the terms 1. Judge decides if it is an integration or not. ii. Agreements validity can be attacked with extrinsic evidence without violating parole evidence (formation defects, or conditions precedent can be shown) 1. Can also be used to show interpretation of ambiguity or uncertainty 2. Can also be used to show true consideration paid (showing the consideration never occurred) 3. Alleged facts entitling a part to reformation do not fall under parole evidence rule.

iii. Collateral Agreements can be used if they dont conflict with agreement only clarify it. iv. Evidence of terms that would natrueally be omitted can be shown if they dont conflict and it concerns a subject that similarly situated parties would not ordinarily be expected to include. v. Not applicable to subsequent modifications (show evidence occurring post agreement all you want) vi. UCC party cannot contradict a written K but may add consistent additional terms unless; 1. There is a merger clause; or 2. The courts find from all the circumstances that the writing was intended as a complete and exclusive statement . a. Can always use, parties course of dealing, usage of trade practice, or parties repeated occasions for performance (course of performance) b. UCC SPECIFIC TERM CONSIDERATIONS i. Battle of the forms = K between 2 merchants will include additional terms found in the acceptance unless; 1. they materially alter original terms 2. The offer expressly limits acceptance to terms of offer; or 3. The offeror has already objected to the particular terms, or objects within a reasonable time after notice is received. ii. Supplemental (Gap-Filler) Terms = If any term other than quantity is missing the UCC fills in the terms. 1. Price= reasonable price at time of delivery. 2. Place of delivery = sellers place of business (barring that sellers home) 3. Time for shipment or delivery = reasonable time 4. Time for payment = time and place at which buyer is to receive the goods. 5. Assortment = assortment is at buyers option, if buyer doesnt choose seller is excused from delay and may either proceed in reasonable manner, or treat failure to choose as a breach. iii. Delivery Terms and Risk of Loss = all K for the sale of goods require delivery of the goods. 1. Non-carrier case: Seller is merchant = risk of loss passes when buyer takes physical possession. Seller is not merchant = risk of loss passing upon tender of goods. 2. Carrier Case: Is either a shipment K (K requires shipment by carrier but doesnt say where to deliver, risk of loss passes on delivery to carrier. This is UCC presumption) or Destination K (K requires seller deliver goods to particular destination, risk of loss passes when goods are tendered to the buyer at the destination.) 3. Common Deliver Terms a. C.I.F and C&F = Cost, insurance, Freight, and Costs and freight They are always shipment K.

b. F.A.S. = Free alongside. Usually only when shipped by boat, risk of loss passes once goods are delivered to dock. c. F.O.B. = Free on board and always is followed by a location, ris of loss passes at the named location. Seller bears risk and expense of shipping to that location. (Either shipment or destination depending on location named.) 4. Effect of Breach and Risk of Loss a. Defective Goods = if so defective buyer can reject, then risk of loss doesnt pass till defects are cured or acceptance despite defects. b. Revocation of acceptance = if buyer rightfully revokes acceptance, risk of loss is treated as having rested on seller form beginning to the extent of any deficiency in the buyers insurance. 5. Risk in Sale or Return and Sale on Approval K a. Sale or return = buyer takes goods for resale, but may return if unable to resell. If goods are returned risk remains on buyer in transit b. Sale on approval = buyer takes goods but may return for any reason. Risk of loss doesnt pass till buyer accepts. iv. Insurable Interest and Identification = UCC gives buyers special property interest in goods as soon as they are identified as the ones that will be used to satisfy the K, interest is insurable. v. Bilateral K formed by performance 1. K includes all the terms on which the writings of bother parties agree, prior to K formed by performance. Necessary terms are filled in by supplemental terms provided in Article 2. 2. Compare Common law last shot rule. a. K will include the terms of the last communication sent to the party who performed. vi. Warranties = Certain warranties are auto includes (warranty of title generally) and others may be implied or express. 1. Warranty of title = Any seller of goods warrants title is good, transfer is rightful, and there are no liens or encumbrances against title. Arises automatically and need not be mentioned in the K. 2. Warranty against infringement = A merchant seller regularly dealing in goods of the kind sold also warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims. Buyer who furnishes specifications for the goodss to seller must hold seller harmless. 3. Implied Warranty of Merchantability = Implied in every sale by Merchant who deals in goods of the kind, warrants that the goods are merchantable, (fit for the ordinary purpose for which such goods are used.) Doesnt matter if the seller didnt know of the defect. Absolute Liability.

4. Implied Warranty of Fitness for Particular Use = Any Seller, merchant or not, has reason to know the particular purpose for the goods, and that buyer is relying on seller skill and judgment to select suitable goods, AND buyer actually relies on the sellers skill or judgment. 5. Express Warranties =Any affirmation of fact or promise made by seller, any description of the goods, any sample or model, if part of the basis of the bargain. (came at a time that the buyer could have relied on it when entering the K.) Seller can negate by proving buyer as matter of fact didnt rely on warranty. a. Doesnt include statements of value or opinion. 6. Disclaimers of Warranties = Warranty of title can only be disclaimed by specific language indicating seller has no claim of title or that he is selling only such rights as he or a third party may have. a. Implied warranties can be disclaimed by specific disclaimers (Warranty of Merchantability can be specifically disclaimed by mentioning merchantability in a conspicuous way, Fitness for particular purpose can be disclaimed by conspicuous writing, can be general no other warranties beyond description on face hereof language.), or general method disclaimers (as is or with all faults language is acceptable, can also include disclaimer by examination or refusal to examine the goods if examination would have revealed defects to buyer, finally they may also be disclaimed by course of dealing, course of performance, or trade usage.) b. Limitations on Damages can be included. c. Warranty disclaimers and limitations on damages must be agreed to during bargaining, no printing disclaimer on box. (note exception of Click to accept terms and usage which is permissible.) 7. Damages for Breach of Warranty = Generally is difference in value between goods accepted and goods as warranted. If breach of warranty of title then goods are reclaimed by true owner, Buyer may rescind K, revoke acceptance of goods, or sue for damages which are value of goods as warranted(usually K price). c. Modification of K Terms i. Consideration = Common law requires new consideration, UCC does not. ii. Writing = Wrtten K can be modified Orally. UCC K must be modified in writing if the K as modified falls under SoF. (Common law says even if a K says it can only be modified in writing it can still be modified orally. UCC says that a no modification clause is given effect. If between a merchant and non-merchant it requires non-merchants signature. Attempting to modify orally when you can not will constitute a waiver, if the other party changes their position in reliance. 5. Performance and Excuse of Nonperformance

a. Common Law = partys basic duty at common law is to substantially perform what is in the K. b. UCC Perfect Tender (delivery and condition of the goods must be exactly as promised in the K.) Requires good faith = honesty in fact and the observance of reasonable commercial standards of fair dealing. i. Tender and Delivery 1. Noncarrier cases seller must put and hold conforming goods at the buyers, give the buyer. The tender must be at a reasonable hour. 2. Place of deliver is the sellers place of business, of if he has none, his residence. ii. Shipment K = Seller hasnt agreed to tender at a particular location. Needs to; put the goods into the hands of a reasonable carrier and make a reasonable K for the transportation, Obtain and tender any documents required by the K or usage of trade or otherwise necessary to enable the buyer to take possession; and promptly notify buyer of shipment. iii. Destination K = Seller has agreed to tender at particular destination. Seller must at specified destination put and hold conforming goods at the buyers disposition. c. Buyers Obligation to Pay/ Right to Inspect i. Delivery and Payment Concurrent Conditions 1. Noncarrier = sale for cash and price due with tender of delivery. Carrier =price is due only at the time and place where buyer receives the goods. (Shipment when in hands of carrier, destination upon reaching destination). 2. Checks are usually ok instead of cash. 3. Installment K are ok if it can be divided up . 4. Buyer has right of inspection before paying unless they have agreed to C.O.D. or otherwise indicated they will pay without inspecting. d. Conditions = a parties failure to perform is justified if the condition was not fulfilled. Condition means either (1) an event or state of the world that must occur/fail to occur before a party has a duty to perform; or (2) an event or state of the world the occurrence/nonoccurrence of which releases a party from his duty to perform A condition is a promise modifier. (It is not a breach of K.) Look to intent of the parties to determine if it is a Condition or a promise. When in doubt court will likely hold it out as a promise. i. Types of Conditions: Condition Precedent = must occur before an absolute duty of immediate performance arises in the other party. Conditions concurrent = capabele of occurring together and parties must perform simultaneously. Condition subsequent = occurrence that cuts off an already existing absolute duty to perform. Plaintiff must plead and prove condition precedent, Defendant must plead and prove condition subsequent. ii. Express Conditions = Explicit contractual provisions. Condition of satisfaction is common. (if involving mechnical fitness, utility, or marketability then satisfaction is fulfilled by performance that would satisfy a reasonable person. Personal taste or judgement can only be

satisfied if the person is personally satisfied. (must be honest and in good faith.) If satisfaction is of a 3rd person must be actual personal satisfaction (in good faith and honest.) iii. Constructive Conditions (Implied Conditions) = Most commonly duty of each party to render performance conditioned on other party either rendering his performance or making a tender of his performance. e. Excuse of Conditions = Duty of immediate performance doesnt become absolute until the conditions have been performed or legally excused. i. Hinderance or failure to co-operate = If the party subject to the condition (protected by it) prevents it from occurring, the condition will be excused if the prevention is wrongful. ii. Actual Breach = breach by a party excuses the other party of counter performance. (complete excuse if material breach, minor breach my only suspend the duty). iii. Anticipatory Repudiation = If the promisor prior to the time set for performance of his promise, indicates that he will not perform when the time comes. Then the non-repudiating party is excused so long as, it is a bilateral contract with executory (unperformed) duties on both sides, The repudiation is unequivocal. The non repudiating party may, (1) sue immediately , (2) suspend performance and wait to sue til performance date, (3) treat repudiation as an offer to rescind and treat the K as discharged, (4) Ignore the repudiation and urge performance, (while retaining other options. A repudiating party can cancel the repudiation unless the other party has canceled, materially changed positioning reliance, or otherwise indicated that the repudiation is final. Cancelation of repudiation must be clearly communicated. iv. Prospective Inability or Unwillingness to Perform = reasonable grounds to believe the other party is unable or unwilling to perform (This is not unequivocal like a repudiation). Innocent party may suspend further performance until receiving adequate assurances that performance will be forthcoming. Retraction is possible as is done in repudiation. v. Substantial Performance = if substantially performed counter performance may become absolute (usually only for constructive conditions, not express conditions). Arises if breach is minor. Usually not applied if Breach was willful. Damages will be offset. This is generally inapplicable to UCC K. vi. Divisibility of K = Common law, K is divisible and each point is counter balanced by counter performance, can thus complete or fail to complete in parts. UCC this is essentially done through an installment K, each installment can have price demanded on delivery unless contract intent appears in the K. vii. Estoppel/Waiver = if a party indicates they are waiving a condition before it is to happen and the other party detrimentally relies, then it is a binding estoppel waiver. (can be retracted before the other party

f. 6. Intended 3rd Parties 7. Assignments and Delegations 8. Breach and Remedies

detrimentally relies) If a duty or condition is broken the beneficiary can elect to either terminate liability or continue under the K, if they continue the election waiver, waives the condition or duty, this requires neither consideration nor estoppel. If no consideration is given for the waiver, the condition must be ancillary or collateral. Damages are not Waived only counter performance. viii. Impossibility, Impracticability or frustration = Conditions may be excused in similar manner to how performance can be excused. (see below)