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CONTRACTS

I. Governing Law UCC K for sale of goods; K btw merchants; CL all other Ks, incl. services K; mix goods/services most important part of K; if payment divided, then UCC applies to goods; II. Formation of Contract A. Mutual Assent 1. Offer - manifestation of intention to K, i.e. R/P as offeree would believe assent creates K; - (CL) price and description; (UCC) no price if parties still intend; no vague/ambiguous terms; - reqs K/output K = amt not described in number but in terms of buyers reqs or sellers output; i. Termination - offer may not be accepted if terminated; - lapse of time stated or reasonable time; - death of party prior to acceptance, except option K; ii. Revocation - unambig statement/conduct by offeror; unwillingness or inability to K; - if sent through mail/delay, not effective until receipt; - option K = cannot be revoked if promise not to revoke, supported by consideration; - (UCC) firm offer rule = cannot be revoked for no more than 3 mos. if offer to buy/sell goods, signed by written promise to keep offer open, & offer is merchant; - unilateral K = irrevocable where start of performance; mere prep not enough; - detrimental reliance = cannot be revoked if reliance reasonably foreseeable and detrimental; iii. Rejection - words/conduct of offeree rejecting offer; - express rejection, effective when received; - counteroffer = rejection and new offer; not mere bargaining; - rejection of option = offer not terminated; offeree may still accept; iv. Operation of Law - death or insanity of either party; - destruction of subject matter of K; - supervening illegality; 2. Acceptance power of acceptance, unequivocal terms, communication; - (CL) mirror acceptance; - (UCC) BOF = response with new terms (not a condition) is acceptance; if not merchant, additional term is proposal; if both merchants, additional term is part of K unless materially alters K or offeror objects; i. Method of Acceptance - promise to perform = acceptance unless requires full performance to accept (unilateral K); - starting to perform & no verbal words = acceptance obligating offeror (bilateral K); not acceptance (unilateral K); - full perform & no verbal words = acceptance if offeror notified of performance (any reasonable means); - imperfect tender = acceptance where seller sends wrong goods but breach of K; unless seller sends accommodation counteroffer to see if goods might still accommodate buyers needs; ii. Mode of Acceptance - any reasonable means (R/P think acceptance); - offer limits acceptance to certain way; iii. Effective Upon Dispatch - mailbox rule = if by mail then effective when sent; if improperly sent then effective when received; - limits on mailbox rule = (a) offer states effective only when received; (b) option K; (c) if rejection sent then acceptance, whichever arrives first effective; (d) if acceptance sent, then rejection, acceptance effective unless rejection arrives first and offeror detrimentally relies; B. Consideration 1. Bargained for exchange - not gift; but not necessarily economic benefit, i.e. peace of mind or gratification; - not illusory promise, i.e. promise made unless party changes mind; 2. Legal Detriment or Legal Benefit - adequacy = mere peppercorn; - past consideration = not consideration where exchange given for something already done; - pre-existing duty (CL) if already legally obligated to do something may not be new consideration; i.e. K modification requires new consideration; unless (1) addition to or change in performance, (2) unforeseen circumstances may excuse performance, (3) preexisting duty to 3d party; (UCC) K modification requires no new consideration; only good faith; - part payment to settle debt if debt due and undisputed, then part payment is not consideration for release; if debt is not due or disputed, then part payment is consideration for release;

- payment of debt barred by SOF old debt is enforceable if new promise is made in writing or partially performed without consideration; new terms apply; 3. Consideration Substitute - promissory estoppel/detrimental reliance = (a) promise, (b) reliance is reasonable, foreseeable, and detrimental, and (c) enforcement necessary to avoid injustice; C. Defenses to Formation 1. Statute of Frauds a. Types of K - service K not capable of performance within 1 year; - transfer of interest in real property (not lease for year or less); - sale of goods for $500 or more; - guarantee for debts of another; guarantee by executor for debts of decedent; promise in consideration of marriage; - equal dignity rule = authorization to enter into K for 3d party must satisfy SOF if K to be signed is within SOF; - modification = must satisfy SOF where new terms of K would be within SOF; - K requiring modification in writing = (CL) not effective; (UCC) effective unless waived; b. Not Applicable - service Ks/sale of land = full performance satisfies; part performance does not satisfy; - sale of goods = part performance satisfies (1) where multiple items, for that part of K already performed; (2) where single item, for all of K; or (3) substantial beginning for specially manufactured goods; c. Memo Requirements - (CL) material terms test = parties, K subject matter, terms and conditions, consideration, signed by person to be sued; - (UCC) no material terms test = K for sale of goods, quantity term, signed by person to be sued; - (UCC) confirmatory memo exception = between merchants with written confirmation of oral agreement, SOF satisfied against recipient if recipient has reason to know contents and does not object within 10 days; - (UCC/CL) judicial admission exception = admits in pleading or testimony that entered into K with ; 2. Mistake - mistake by both parties = defense if (1) basic assumption on which K made, (2) materially affects agreed exchange, (3) party adversely affected did not assume risk; i.e. what something is or nature of item is OK but not value; - mistake by one party = not a defense unless nonmistaken party knew or should have known, K voidable by mistaken party; - ambiguity by both parties = defense if (1) both parties use material term open to more than one interp, (2) each party attaches diff. meaning, (3) neither party knows or has reason to know term is open to diff. interp.; - ambiguity by one party = terms as understood by party with no knowledge where other party knows or has reason to know term is open to two diff. interps.; 3. Illegality - if K subject matter is illegal, then not enforceable; - if K subject matter is legal but purpose is illegal, then enforceable by person who did not know illegal purpose; 4. Incapacity - under 18; mental incompetents; intoxicated people if other has reason to know; - gives right to disaffirm by person without capacity; K not voided; - ratification = if K before capacity but party continues to keep benefits when of capacity, no more right to disaffirm; - necessaries exception = K with incapacity for necessaries, i.e. food, clothing, medical care, shelter, enforceable, enforceable based on quasi-K law; 5. Unconscionability - terms of K create unfair surprise (i.e. disclaimers buried in fine print) or oppressive terms (Ks of adhesion); - tested at time K was made; - decided by court; applicable where party has substantially less bargaining power; 6. Duress -economic or physical duress; i.e. econ = wrongful threat to breach existing K where other party has no reas. alternative; 7. Fraud - false statement that induces K, even if party honestly or innocently believed statement; K voidable by innocent party; - party tricked into agreeing without understanding K; K void; III. Contract Terms A. Interpretation of Terms - where parties intent is unclear, course of performance > course of dealing > custom & usage; 1. Custom and Usage in Industry - look to different but similar parties and K to interpret terms; - particular business and particular locale; 2. Course of Dealing - look at same people but different K to interpret terms; 3. Course of Performance - look at same people and same K to interpret terms;

B. Mistake and Ambiguous Terms (see II.C.2) - K construed according to ordinary meaning of terms; - inconsistency = written or typed provisions prevail over printed provisions; - ambiguities construed against party preparing K, absent evidence of intention of parties; C. Parol Evidence Rule 1. Integration written K court finds in final agreement; - partial = written and final but not complete; - complete = written, final, and complete; - merger clause = clause that K is complete on its face; not conclusive but highly persuasive; 2. Parol Evidence spoken or written words by one or both parties prior to signing K in writing; - no evidence of earlier agreements to contradict terms in written K, except to determine if clerical mistake or typo; - may have evidence of earlier words of parties to determine whether defense to enforcement exists, i.e. fraud, duress; - may have evidence of earlier agreement to resolve ambiguities of K; - no evidence of earlier agreements as source of consistent terms unless (1) written K only partial integration and (2) additional terms normally would be in separate agreement; 3. Reformation - equitable action to modify written K to reflect actual agreement; D. Modification (see II.B.2 pre-existing duty rule; II.C.1.a) 1. Consideration - (CL) additional consideration needed; - (UCC) no consideration needed, so long as in good faith; 2. SOF - must satisfy SOF, if new agreement would be within SOF; E. UCC Terms 1. Delivery Obligations - shipment K = seller completes when (1) gets goods to common carrier, (2) makes reasonable arrangements for delivery, and (3) notifies buyer; obligation complete before shipment made; - destination K = seller completes when goods arrive to where buyer is; - FOB (city); city = seller located, then shipment K; anywhere else, destination K; 2. Risk of Loss - after K formed but before goods delivered, goods damaged or destroyed without fault of buyer or seller; - party liable if (1) agreement states liability, (2) breaches K for any reason; - (3) buyer liable if seller completes delivery obligations; - (4) if seller is merchant, then liable until buyer receives goods; if non-merchant, then liable when goods are made available; 3. Warranties - express = words that promise, describe, state facts; use of sample or model part of basis of bargain; not puffery or opinion; - implied warranty of merchantability = if purchase goods from merchant, warranty that goods are fit for ordinary purpose for which goods are used; - implied warranty of fitness for particular purpose = seller has reason to know that buyer has particular purpose for goods and is relying on seller to select suitable goods; - warranty extends to any person in family or household or guest if reasonable to expect person may use good & suffers PI; - strict liability = allows to recover from all sellers in distributive chain; 4. Disclaimers and Limitations - express = cannot be disclaimed; - implied WOM = may be disclaimed if mentions merchantability and conspicuous; - implied WOFPP = may be disclaimed if conspicuous; - both implied WOM/WOFPP may be disclaimed if (1) language says as is or with all faults, (2) defects a reasonable inspection would reveal, (3) course of dealing, course of performance, or custom/usage of trade; - limitation = possible to limit recovery for breach unless unconscionable, i.e. no limitation on PI; IV. Third Parties A. Third Party Beneficiaries two parties make K with intent to benefit TPB; - TPB = party for whom contract is made to benefit; - promisor = party who is making promise that benefits 3d party; - promisee = party who obtains promise that benefits 3d party; 1. Intended or Incidental - intended = have K rights; (1) IDed in K, (2) receives performance directly from promisor, (3) relationship with promisee shows intent to benefit; - incidental = do not have K rights; not IDed in K; 2. Creditor or Donee two types of intended beneficiaries; - creditor = party to whom debt is owed by promisee; - donee = person promisee intends to benefit gratuitously; 3. Have rights vested?

- TPB can only enforce K when rights have vested; - vest = TPB (1) manifests assent to promise in manner stated in K; (2) brings suit to enforce promise; (3) materially changes position justifiably relying on promise; - before rights vest, promisee and promisor may modify/rescind TPBs rights; 4. Who Can Sue Whom? a. TPB v. Promisor - TPB may sue promisor; - promisor may raise any defense that promisor would have against promisee unless promisor made absolute promise to pay; b. TPB v. Promisee - creditor may sue promisee on existing obligation between them unless decides to get payment from promisor; - donee has no right to sue promisee unless detrimental reliance; c. Promisee v. Promisor - promisee may sue promisor both at law and specific performance if promisor is not performing for TPB; B. Assignment of Rights - transfer of rights or benefits under K to 3d party not named in K after formation; assignor = party in K who later transfers right to 3d party; assignee = 3d party not named in K who receives rights from assignor; obligor = other party in K; 1. Validity - assignor manifests intent to transfer rights; writing or consideration not required; - all K rights may be assigned except (1) assignment substantially changes obligors duty or risk, i.e. not assignment of payment, and (2) assignment of future rights arising from future Ks; - prohibit assignment of the contract = prohibits delegation; prohibit assignment of contractual rights = gives obligor right to sue for damages; provide attempts to assign will be void = prohibits assignment; - assignment for consideration = irrevocable; assignment not for consideration = revocable; 2. Obligors Defenses Against Assignee a. Assignee v. Obligor - assignee can sue obligor as real party in interest; - obligor has all defenses inherent in K; but cannot raise defense assignor might have against assignee; - payment by obligor to assignor is effective until obligor knows about assignment; - modification of agreements between obligor and assignor are effective if obligor did not know about assignment; b. Assignee v. Assignor - assignee can sue assignor for wrongfully revoking an irrevocable assignment; - assignee can sue assignor where obligor successfully asserts defense against assignor in action by assignee against obligor; c. Implied Warranties of Assignor for Assignment with Consideration - right assigned actually exists; - right assigned is not subject to defenses by obligor; - assignor will do nothing to impair value of assignment; no warranty for what obligor might do; 3. More Than One Assignment to Same Right - if all gratuitous, then last assignee wins, i.e. previous ones have been revoked; - exception: (1) writing delivered to assignee, (2) indicia of ownership delivered to assignee, (3) reasonable, foreseeable, and detrimental reliance, (4) assignment is not revocable; - if all for consideration, then first assignee wins; - exception: four horsemen rule subsequent assignee (1) does not know about earlier assignment and (2) is first to obtain (a) payment, (b) judgment, (c) novation, or (d) indicia of ownership; C. Delegation of Duties - transfer of duties or burdens to 3d party; - manifest of present intention to make delegation; written or oral; no consideration need; 1. When Permitted - all duties may be delegable; - exception: (1) K prohibits; (2) K calls for very special skills; (3) person to perform K has very special reputation; - if K states no assignment = no delegation; 2. Who Can Sue Whom? - if 3d party delegatee does not perform, then delegating party is always liable; - delegatee may be liable if received consideration from delegating party; V. Performance A. Conditions 1. Types of Conditions - mutually agreed upon promise modifier created by if, only if, provided that, so long as, subject to, in the event that, unless, when, until, on condition that stated in K;

- express = expressed in K; - implied = inferred from parties intention; - constructive = read into K by court without regard to parties intention to ensure parties received what bargained for; - precedent = must occur before absolute duty of performance arises in other party; - concurrent = capable of occurring together, i.e. property tendered for cash; - subsequent = cuts off an already existing duty of performance; - duty of performance is absolute when conditions are performed or excused; 2. Satisfaction of Conditions - strict compliance required for satisfaction; 3. Excuse of Conditions - wrongful prevention = party protected by condition hinders or prevents occurrence of condition; - voluntary disablement = actual, material breach by one party excuses others duty of counterperformance; i.e. minor breach will only suspend but not excuse; - anticipatory repudiation = unequivocal, i.e. not expression of doubt, rejection if unperformed duties on both sides of bilateral K; nonrepudiating party may (1) sue immediately, (2) suspend performance & wait until performance due, (3) treat repudiation as offer to rescind and discharge K, (4) ignore repudiation and urge performance; may be retracted if other party has not accepted repudiation or relied on it; - estoppel = other party relied on statement made by person protected by condition, before condition was to occur, that condition will not be insisted upon; - waiver = where condition is broken, statement by person protected by condition, after condition was to occur, terminated liability or party continued under K; B. Discharge of Duties 1. Impossibility - objective standard that no one could perform K according to terms of K; - arising after K was entered into; party who has part performed may recover under quasi-K; - e.g. party necessary to K dies or physically incapacitated; subsequent law makes illegal; subsequent destruction of K matter; 2. Impracticability - subjective standard that party encounters after K formation extreme and unreasonable difficulty or expense not anticipated; - not applicable to mere change in difficulty or costs due to normal risks anticipated; 3. Frustration of Purpose - (1) supervening event, (2) not reasonably foreseeable at formation of K, (3) destroys purpose of K, (4) purpose understood by both parties; 4. Rescission - mutual rescission = (full or partial) unperformed duties on both sides of bilateral K and both parties agree to rescind; may be oral unless SOF applies; not allowed where TPB rights have vested; - unilateral rescission = only one party desires to rescind and has adequate legal ground, i.e. mistake, misrep, duress; 5. Novation - agreement btw both parties to allow substitution of new party; 6. Accord and Satisfaction - accord = agreement by parties to existing K to accept performance different from that originally promised; requires consideration; may be less than that of original consideration if a different type or to be paid to 3d party; does not discharge K duty but suspends other partys right to enforce it; - satisfaction = performance of accord; discharges both accord and original debt; if new agreement is not performed, other party may sue on original obligation or accord; C. Breach if (1) promisor is under absolute duty of performance and (2) duty has not been discharged, failure to perform = breach; 1. Substantial Performance (CL) - if party substantially performs, then other party must also perform; - material breach = where performance is anything less than half; excuses other party from performing and allows recovery of damages, i.e. no substantial perform.; - minor breach = does not excuse other party from performance but still allows recovery of damages; i.e. substantial perform.; - exception: divisible K = payment upon a per performance basis; allows recovery for nonperformance of divisible part; 2. Perfect Tender (UCC) - seller must provide buyer with perfect goods and perfect delivery; - less than perfect tender gives buyer option (1) retain goods and sue for damages or (2) reject and sue for damages; - option to cure = (1) seller has reasonable belief that less than perfect tender may be acceptable with money allowance and (2) time for performance has not yet expired; seller given a second chance to provide perfect tender; - if buyer pays for goods without opportunity to inspect, buyer still able to reject goods; - if buyer pays for the goods and keeps the goods, buyer has impliedly accepted the goods, especially where no objection; - revocation of acceptance = buyer may revoke acceptance if (1) nonconformity substantially impairs value of goods, (2) excusable ignorance of grounds for revocation, (3) revocation within reasonable time after discovery of non-conformity; - installment K = buyer has right to reject installment only where substantial impairment in installment cannot be cured;

VI. Remedies A. Damages 1. Compensatory put nonbreaching party in as good position as party would have been had other party performed; a. Contract for Services (CL) - standard measure = expectation damages permitting to buy a substitute; - must be reasonably certain; speculative future damages generally not awarded without proof; b. Contract for Goods (UCC) - seller breaches, buyer keeps goods (FMV if perfect FMV as delivered); - seller breaches, seller keeps goods (replacement price contract price); - buyer breaches, buyer keeps good (contract price); - buyer breaches, seller has goods (contract price resale price); - note: where seller is volume seller, may recover lost profits from breaching buyer; - reclamation = buyer breaches, buyer keeps goods; where buyer is insolvent, seller may get goods back where: (1) buyer was insolvent at time received goods, (2) seller demands goods within 10 days after receipt (or reasonable time if buyer told seller that he was solvent before delivery), (3) buyer still has goods at time of demand; 2. Consequential - arising from s special circumstances; recovery limited to situations in which had reason to know of special circumstances at time of K; 3. Reliance Interest - damages put in same economic position as if K had never happened; 3. Liquidated - provision fixes amount of damages; - validity requires (1) damages difficult to forecast at K formation; (2) provision is reasonable forecast; - single set sum is presumptively invalid; - (UCC) court considers actual damages to determine whether clause is valid; 4. Punitive and Nominal - not awarded in commercial K cases; B. Duty to Mitigate - nonbreaching party has duty to mitigate damages; - damages reduced by amount that might have been avoided by mitigation; C. Restitution prevent unjust enrichment by providing remedy where K exists, K unenforceable, or no K (quasi-K); - value of benefit conferred, i.e. benefit to or detriment suffered by ; - pay by putting in same economic position if K had never existed; - if unenforceable K exists, may still recover for unjust enrichment; - if no K exists, may still recover if (1) conferred benefit, (2) had reasonable expectation to be compensated, (3) knew or should have known of s expectation, and (4) is unjustly enriched without giving compensation; D. Specific Performance - where legal remedy is inadequate, nonbreaching party may seek court order to require performance or face contempt; - available for rare or unique items; sale of land; - not available for services but injunctive relief barring party from acting may be available; - defenses: laches, unclean hands, sale to BFP; E. Rescission - where K breached and nonbreaching party has not fully performed, nonbreaching party may rescind K; - nonbreaching party may recover restitution, i.e. unjust enrichment; F. Reformation (see III.C.3) - equitable action to modify written K to reflect actual agreement;