Contracts

UCC 2-615: Impracticability

Delay in or non delivery... by a seller is not a breach if the seller's performance is made impracticable by a contingency whose non occurance was a basic assumption on which the k was made

Liquidated Damages Clause

Enforceable if (1) damages are difficult to ascertain at time of making of k; and (2) damages are a reasonable forecast of compensatory damages.

Rejection v. Mere Inquiry

Rejection terminates the offeree's power of acceptance. Mere Inquiry does not terminate the offeree's power of acceptance. Offeror can renew offer in the face of a rejection.

Modification

a subsequent agreement that alters or changes parties' duties and obligations under the terms of the k.

Free on Board (FOB)

indicates the seller is responsible for getting the goods to a shipper designated by the buyer. At this point, the risk of loss passes from the seller to the buyer

A communication will not be considered to be definite and certain enough to be an offer if it is for the sale of goods and __________.

is missing a quantity term

TPB Analysis

*1. Identify TPB k* *2. Intent to benefit test* a. is 3rd party incidental - then no rights b. is 3rd party intended - then go to step 3 *3. Has third party vested* a. learned of k & assented to it; b. learned of k & changed position in reliance on k; or c. learned of k & sues to enforce k

Incidental Damages

*Expenses incurred by the injured party as a result of the other party's breach of the k* a. expenses for inspection, receipt or transportation b. expenses from storage of rejected goods or services c. expenses associated with buying replacement goods or services; and d. any other expenses related to delay in delivery or non delivery

Modification Under UCC & Common Law

*UCC requirements*: (a) good faith; and (b) no consideration required (UCC 2-209) *COMMON LAW requirements*: (a) pre existing duty rule; and (b) new consideration required

?Remedies under UCC for breach

1) Buyer's standard remendy is cover price minus K price 2) Seller standard remedy is K price minus resale price 3) High volume seller's standard remedy (loss profits doctrine) is the K price

Implied in Law Contracts

1. A quasi contract is not an actual contract, rather a legal substitute for a k formed to impose equity b/t 2 parties 2. A k SHOULD have been formed, even though in actuality it was not 3. Used when a court faces a situation of injustices to enforce the agreement to ensure fairness

Anti Assignment Clause

1. Assignor need not consult the other party to the k 2. Assignment cannot have any effect on the duties of the other party to the k, nor can it reduce the possibility of the other party receiving full performance of the same quality 3. certain kinds of performance, therefore, CANNOT be assigned, because they create a unique relationship b/t parties to the k

Checkpoint Items

1. Contracts involving the sale of land 2. Contracts containing contingencies a. I will buy if I can get 5% financing b. I will buy if I sell my house first 3. Consideration and Substitutes for Consideration 4. Modification 5. Contracts mixing goods & services

Parol Evidence Rule Exceptions

1. Fraud 2. Mistake 3. Illegality 4. Duress 5. Partial Integration 6. Conditions Precedent

Consideration Considerations

1. LOOK FOR A VALID CONTRACT a. is there a bargain the court MUST enforce b. bargained for exchange c. forbearance to sue 2. LOOK FOR A SUBSTITUTE FOR CONSIDERATION a. is there a bargain the court SHOULD enforce

Contracts with Minors

1. Minors are regarded as not having sufficient capacity to comprehend questions involving contractual rights 2. person dealing with a minor does so at his or her peril and subject to the right of the minor to avoid the k 3. Certain k's cannot be voided a. taxes b. penalties c. bank regulations d. military e. necessaries

Checkpoint Items

1. Rule specific questions - know it or don't 2. Many questions deal with who the parties are 3. Students get lost in the details 4. Often times identifying who is making the offer and who is accepting difficult 5. Whose terms govern?

Approach to Contracts

1. What law applies - UCC or Common Law 2. what kind of Contract - Unilateral or bilateral 3. Who are the parties - merchant/kids - necessities

*UCC 2-609: Right to Adequate Assurances*

1. When *reasonable* gournds for insecurity arise, one party may (in writing) demand adequate assurances from the other that the performance will occur 2. assurances must be provided within a reasonable time (no more than 30 days). 3. Failure to provide assurances is a repudiation of k.

Termination of Offer

1. death of offeror 2. revocation (from the offeror) 3. rejection (from the offeree) 4. counteroffer (from the offeree) 5. lapse of time (face to face conversation rule - offer dies after the face to face conversation ends)

Checkpoint Items

1. lots of defenses to formation 2. remedies are a hot area 3. Lot of cross over here with state essays 4. also cross over with landlord tenant 5. sof is always a favorite

Which of the following most accurately lists the necessary elements for a merchant's firm offer?

A merchant offers to sell goods, in a signed writing, and that writing gives assurances that the offer will be held open

Option at Common Law

A promise to keep offer open for a period of time supported by consideration

Which statement best summarizes the distinction between the standard method of acceptance for unilateral and bilateral contracts?

A unilateral contract may be accepted only by full performance, whereas a bilateral contract may be accepted either by a promise to perform or by the beginning of performance.

Which of the following is required for a merchant's firm offer under Article 2?

A written assurance signed by the offeror.

Defenses & Remedies Coverage Areas

A. DEFENSES TO K FORMATION 1. infancy 2. mistake 3. sof 4. illegality B. REMEDIES 1. specific performance 2. money damages 3. injunctions C. PAROL EVIDENCE

Remedies

A. LAW 1. money damages B. EQUITY 1. injunction 2. specific performance 3. rescission 4. reformation 5. quiet title actions 6. partition proceedings

UCC Coverage Areas

A. UCC 1. Merchant Specific Rules a. confirmatory memo b. firm offer rule 2. Defenses 3. Damages 4. Requirements Contracts 5. Installment Contracts 6. Battle of Forms B. TPB 1. Intended 2. Incidental 3. Assignment & Delegation

UCC 2-712: Cover by Buyer

After covering aggrieved buyer may recover: Price to Cover -Contract Price -------------- *PLUS* Incidental & Consequential Damages *at time of breach*

Statute of Frauds

Agreements for these things require a writing signed by the party to be charged to be valid: (M)arriage (Y)ear (one) (L)and - exception is part performance (E)xecutor (G)uarantee/Suretyships (promise to answer for the debts of another) - exception is main purpose rule (S)ale of goods over $500* *UCC 2-201 Requires writing contain (1) quantity; (2) signature of party to be charged; and (3) writing sufficient to indicate k was formed

Assignment & Delegation

All K's are assignable & delegable except for unique personal service K's and long term requirement k's. Assignment & Delegation can occur orally or in writing. Assignments & Delegation can be for value (which are irrevocable) or gratituitios (which are revocable unless the other party relied on the assignment/delegation to his detriment)

Assignment of Requirement Contracts Under UCC

Allowed if the assignee acts in good faith not to alter the terms of the K (UCC 2-306)

*Non-Conforming Goods* (UCC 2-206: Offer & Acceptance in K Formation)

An offer to buy goods for current or prompt shipment is construed as acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods. Shipment of goods, even though they are non conforming, is an acceptance creating a bilateral contract and a breach unless the seller reasonably notifies the buyer that the non conforming goods are offered only as an accommodation to they buyer. Order (or other offer) to buy goods for shipment is accepted upon shipment of conforming or non-conforming goods. *Rule*: If nonconforming goods are shipped, the shipment is an acceptance and simultaneous breach. *Exception*: if the seller includes a notice of accomidation (which results in a counteroffer) then buyer can only accept or reject.

UCC 2-207: Merchant Exception to Mirror Image Rule

Between merchants, additional proposed terms in an acceptance become part of the contract unless: (1) they materially alter the original k; (2) offer expressly limits acceptance to its terms; or (3) offeror has already objected to the particular terms, or objects within a reasonable time after recieiving notice of them.

*Perfect Tender Rule* (UCC 2-601: Buyer Rights on Improper Delivery)

Buyer has 3 options upon shipment of non-conforming goods (which is a simultaneous acceptance & breach): *(1) accept all* *(2) reject all* *(3) accept in part/reject in part* (sale of part of shipment can accept as to that part) Exception is if seller includes a notice of accommodation (which is a counteroffer) then buyer can only accept or reject.

Buyer Remedies upon Rejection of Nonconforming Goods

Buyer has right to either *cancel* the K (recovering entire k price) or *cover* (buy substitute goods & charge breaching seller for the substitute) may also demand specific performance if goods are unique or in short supply

Buyer Remedies upon Acceptance of Nonconforming Goods

Buyer has right to recover damages for the non conformity (standard measure is the difference b/t value of goods as delivered & value they would have had if they had been conforming plus incidental & consequential damages)

Consequential Damages

Damages which do not derive directly from the breach but from the results of the breach; they are more *indirect* in nature. Ex: losses buyer incurs which the supplier had reason to know at the time of contracting & which buyer could not reasonably have prevented.

Implied in Law v. Applied in Fact

IMPLIED IN LAW - legal substitute for a k formed to impose equity b/t 2 parties. k SHOULD have been formed, even though in actuality it was not. IMPLIED IN FACT - agreement founded upon a meeting of the minds, which, although not embodied in an express k, is inferred from the conduct of the parties. Formed by manifestations of assent rather than oral or written language, ie by conduct. Where a person knowingly accepts offered benefits, cush conduct, viewed objectively, may be said to manifest an agreement to the conferral of such benefits, resulting in a k implied in fact.

With reserve

In an auction with reserve, the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, once the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In a sale by auction, if goods are put up in lots, each lot is the subject of a separate sale, each of which could be specified as with or without reserve.

Implied Warranty of Merchantability

In every sale of goods, unless expressly disclaimed, there arises a warranty that the goods will be merchantable, which means that they will be fit for the ordinary purpose for which such goods are used. To be effective, disclaimer must be part of offer and acceptance process or must be agreed to by the buyer as a modification.

If it reasonably appears that the parties intended to make a valid contract, a court may apply the presumption that the parties' intent was to include a reasonable term to rectify any __________ term.

Missing

Mutual & Unilateral Mistake Defense to K Formation

Mutual Mistake - BOTH parties are mistaken as to a material element that goes to the HEART or ESSENCE of the bargain. REMEDY IS RECISION. When both parties entering into a K are mistaken about existing facts relating to the agreement, the k may be voidable by the adversely affected party if (1) mistake concerns basic assumption on which k is made' (2) mistake has a material effect on the agreed upon exchange; and (3) party seeking avoidance did not assume the risk of the mistake. Unilateral mistake - k enforceable against mistaken party UNLESS non mistaken party knew or should have known of the other's mistake.

Offer & Acceptance

OFFER is an objective manifestation by the offeror of a willinglness to enter into a bargain creating the power of acceptance in the offeree. Offeror is the master of the bargain! ACCEPTANCE is an objective manifestation by the offeree to be bound by the terms of the offer (mailbox rule applies) - offer can be accepted by performance or promise to perform unless offer limits method of acceptance

Powers of Offeror & Offeree After Offer Made

OFFEROR 1. revoke (even occurs if offeree learns of revocation through 3rd party) OFFEREE 1. accept/reject 2. counteroffer/inquiry

Contract Formation Coverage Areas

Offer Acceptance Consideration Consideration Substitutes Counter offer Revocation Modification (UCC & Common Law) Pre Existing Duty Rule

Pre Existing Duty Rule

Performance of an act by which a party is already contractually bound to perform does not constitute valid consideration for a new promise.

For a real estate contract, a ________ is necessary; for a valid offer for a contract for the sale of goods, a ________ is necessary.

Price; quantity

Rights of TPB

Prior to TPB's rights vesting, parties to k can modify/cancel w/out TPB consent. *BUT* once TPB's rights vest, parties to k need consent of TPB to modify/cancel. TPB IS SUBJECT TO ANY DEFENSES THAT THE PROMISOR COULD HAVE USED AGAINS THE ORIGINAL PROMISEE. See "TPB analysis" card for how rights vest

Promissory Estoppel

Promise is enforcable to extent necessary to prevent injustice if the promisor would reasonably expect to induce action or forbearance of a definite and a substantial character and such action or forbearance is in fact induced.

Excuse of Impossibility

SUBJECTIVE impossibility *will not excuse* duties of performance under a k OBJECTIVE impossibility *will excuse* duties of performance under a k

If the parties to an otherwise valid contract have included a term that is too vague, __________.

The contract will be unenforceable unless the vagueness can be cured

If a seller accepts a buyer's offer to purchase goods without an exact price term included:

The price will be a reasonable price at the time of delivery.

Unilateral or Bilateral?

UNILATERAL CONTRACTS 1. offeror makes an offer that calls for performance 2. looking for action BILATERAL CONTRACTS 1. offeror & offeree exchange mutual promises 2. looking for promise

Option under UCC - Firm Offer Rule

Under 2-205, a merchant's firm offer arises when a merchant offers to sell goods in a signed writing and the writing gives assurances that the offer will be held open. If no specific time frame is stated in the offer, a merchant's firm offer will remain open for a reasonable time (but in no event may such period exceed three months). For a merchant's firm offer, it is not necessary that both parties be merchants; only the offeror must be a merchant. A merchant's firm offer is enforceable even if no consideration has been paid by the offeree to keep the offer open.

When might a court utilize an Article 2 "gap filler"?

When the price is not included in a contract for the sale of goods

Condition Precedent

act or an event (other than lapse of time) that must occur FIRST BEFORE a party is under a duty to perform.

Express Warranty

arises from any affirmation of fact or promise made by seller to buyer, or from any description of goods, and any sample or model, if the statement, description, sample, or model is part of the basis of the bargain.

Implied Warranty of Fitness for a Particular Purpose

arises when (a) seller had reason to know the particular purpose for which goods are to be used and that the buyer is relying on the seller's skill and judgment to select suitable goods; and (b) buyer in fact relies on seller's skill or judgment.

Restitution in quasi k

available in cases where a k is unenforceable and one of parties has performed, resulting in unjust enrichment to the other party, or in cases where there is no contract the P has conferred a benefit on the D with the reasonable expectation of being paid, D knew or had reason to know of P's expectation, and D would be unjustly enriched if she were allowed to retain the benefit without compensating the P.

Consideration

bargained for legal detriment (a mere peppercorn will suffice) remember past or moral consideration will never suffice Generally, consideration requires a bargained for exchange of something of legal value from each party. To be bargained for, promise must induce the detriment and detriment must induce the promise.

Part Performance Doctrine

exception to SOF writing requirement for K for land conduct that unequivocally indicates parties have contracted for sale of lane will take k out of SOF

Acceptance of Option

for valid acceptance of option, the acceptance of the option must be in the offeror's hand within the option period.

Missing Price Term Under UCC

if price is not stated in k but it appers that the parties intended to form a k, a reasonable price will be implied if: (1) nothing about the price in k; (2) price left to be agreed upon later; or (3) price was to be fixed by a 3rd party or external factor

Requirement Contract

k in which one party agrees to supply as much of a good or service as is required by the other party, and in exchange the other party expressly or implicitly promises that it will obtain its goods or services exclusively from the first party.

Requirement Contractsq

may be nonassignable even without a nonassignment clause

Unconscionability

measured at the time k formed

Parol Evidence Rule

once the parties have reduced their agreement to a writing, evidence of any prior oral or written or contemporaneous oral agreements is inadmissible to alter, vary, or contradict the terms of the writing.

Main purpose Rule

oral promise to answer for the debt of another is enforceable if the promisor's main purpose is to further HIS OWN economic advantage.

A vague term in a contract can be cured by __________.

part performance

UCC 2-702: Insolvent Buyer

permits seller to refuse to deliver except for cash, including payment of all goods previously delivered under the contract, if buyer is insolvent

Recision

remedy that discharges the contractual duties of parties & puts an end to transaction, leaving parties as though k had never been made. unilateral recision results where one of the parties desires to rescind but the other party refuses to agree to a recession. for unilateral recision to be granted party desiring recision must have adequate legal grounds - one such ground is mutual mistake of material fact. typical case of recision involves a bilateral k where neither party has yet performed; ie the duties of both parties are still executory in unilateral k, a recision promise must be supported by either: (a) an offer of new consideration; (b) elements of promissory estoppel (detrimental reliance); or (c) offeree's manifestation of intent to make a gift of the obligation owed to her

Specific Performance

remedy used to enforce a k for the sale of (a) unique service; (b) unique item of personal property (UCC 2-716); or (c) real property (always unique)

Discharge by Frustration of Contractional Purpose

requires that, at the time of entering into the K, the parties did not reasonably forsee the occurence of the act or event leading to the frustration

UCC 2-205: Firm Offer Rule

signed writing by a merchant which by its terms gives assurances that it will be held open is not revocable for lack of consideration for the stated period of time to exceed 3 months

Generally, whether a communication is deemed an offer depends upon __________.

the objective or apparent intention of the offeror to make an offer