Contracts 1 Applicable Law CL (real estate, services) UCC (sale of goods) Mixed Deal= whichever is predominant. All or Nothing Rule unless K divides payment. Offers = manifestation of an intention to contract. Content: not required to contain all material terms (Real Estate= price and description req’d. Goods= no price required) o Vague & Ambiguous Material Terms in offer never an offer (must be material terms) o Requirements Contracts/Output Contracts ―All‖ ―Only‖ ok. May be an increase if in line with prior demands. Context: (Advertisements ≠ offers, except (1) in nature of reward or (2) advertisement is specific as to quantity and expressly indicates who can accept.‖ Offers That Can’t be Revoked Option (promise and consideration) Firm Offer (goods, signed written promise, merchant, max 3 months) Detrimental Reliance (reasonably foreseeable) Start of performance (unilateral- reasonable time to complete) Termination of an Offer Lapse (time stated or reasonable time) Revocation (Words to or conduct that offeree is aware of; effective when received) Rejection Counteroffer (not Bargaining=?) Conditional Acceptance= counteroffer Additional Terms (CL=mirror image rule, UCC= if 1 merchant, proposal to be separately considered; UCC= if both merchants, becomes part of K, unless (1) materially alters or (2) rejection) Acceptance Offeree fully performs (notice issue) Offeree starts to perform (bilateral=acceptance, Unilateral= not acceptance) Offeree promises to perform Mailbox Rule (acceptance when sent, unless rejection sent first) Seller of Goods sends wrong goods (Goods, Acceptance & Breach unless Accommodation=counteroffer) Silence (Gen Rule= not acceptance. Excptn= if offeree agrees by words or conduct that it is) Legal Reasons For Not Enforcing a Contract Lack of Consideration (Bargained for Legal Detriment) (promise, performance, forbearance) o Past consideration= no, unless expressly requested and expected payment o Modification (CL= not allowed unless 1-addition or change in performance 2unforeseen difficulty so severe 3-3rd party promises to pay) (UCC- ok, good faith test*) o Consideration Substitute= 1) written promise to pay a debt barred by SoL or other defense; 2) promissory estoppel (promise, reasonable reliance, enforcement necessary to avoid justice.
Contracts 2 Lack of Capacity (Infant, Mental Incomp., Intoxicated) (Necessity & Retain Benefit exceptions) Statute of Frauds o Falls w/in: (Performance more than 1 year, Sale of Goods $500 or more, Services over 1 year, guarantee to pay 3 rd party debt, executor promise to pay estate debt with own funds, promise in consideration of marriage) o Satisfies S/F: Writing: Non-Goods= material terms test (material terms & signature); Goods=Quantity & Signature (unlss both merchants & no response in 10 days) Performance: Service=full; Property=2 of 3 (payment, possession, imprvmnts); Goods (Ordinary= partial to extent of part; Specially manufactured=substantial beginning) Judicial Admission: ∆ admits in pleadings, testimony or discovery o Modification: if new deal falls within, must satisfy S/F. If new deal doesn’t, need not. o K provisions requiring all Modifications be in writing (CL=ignored; UCC=effective) Illegality (Subject matter=illegal, K void; Purpose=illegal, voidable) Misrepresentation (False assertion, concealment of facts) Duress (Physical, Economic- improper threat, no reasonable alternative) Unconscionability (unfair surprise, oppressive terms) tested at time K is made. Ambiguity in words (No K if material term open to 2 reasonable interpretations; each party attaches different meanings; neither party knows or has reason to know term is open) Mistake as to Material Facts (both parties are mistaken; subject matter mistake; not price)
Parol Evidence PE= oral or written terms at time or before integration (written final deal). Changing the deal (no PE allowed, Excptn= mistake in integration (words left out) Defense Exception (PE allowed to determine misrepresentation, fraud, duress) Explanation Exception (PE allowed to resolve ambiguities Adding to Integration- consistent addt’l terms (If complete integration= PE not allowed. If partial= PE allowed) Source of K terms- explaining words or gaps in Ks Course of Performance (same people, same K- what they’ve already done)- crt looks at first Course of Dealing (same people, different K)- crt looks at next Custom, Usage (different people, different K) Delivery Obligations of Seller of Goods No place of delivery agreed upon seller’s place of business or place where goods are Shipment by Common Carrier: (shipmentwhen seller gets goods to common carrier, makes reasonable arrangements for delivery, notifies buyer. Destination when goods arrive) Risk of Loss =After K is formed but before buyer receives goods and goods damaged and no one is at fault Agreement= agreement controls Delivery by common carrier= shifts to buyer when seller completes delivery obligations Unrelated Breach= breaching party liable No agreement, common carrier, or unrelated breach: (If seller=merchant, RoL shifts when buyer receives goods. If seller ≠ merchant, when seller ―tenders‖ goods (i.e. tells buyer how to get them)
Contracts 3 Warranties of Quality Express Warranty= words of promise. ―all steel‖= warranty ―top quality‖ ≠warranty Implied Warranty of Merchantability (implied; goods fit for ordinary purpose. *must be from merchant) Implied Warranty of Fitness for Particular Purpose (Buyer has particular purpose that seller knows, then implied warranty. Contractual limitations on Warranty: o (1) Disclaimer- can’t disclaim express warranties; can disclaim implied warranties o (2) Limitation on Remedies: can limit remedies (test is Unconscionability) Performance- where performance is not what was expected CL= see if parties did what they promised to do. If not, breach. UCC o Perfect Tender: seller obligated to deliver perfect goods o Rejection of Goods: must be before acceptance. If goods less than perfect, buyer can reject. (Exception- Cure & Installment Sale K) o Cure: seller can cure before time has expired; if expired, must have reasonable grounds for believing cure will be acceptable o Installment Sales Ks: can only reject if substantial impairment. o Acceptance of Goods: if accept, can’t then reject. Must have opportunity to inspect; implied acceptance retains goods after opportunity for acceptance. o Revocation of Acceptance: can revoke if (1) nonconformity substantially impairs value of goods; (2) excusable ignorance or reasonable reliance on seller’s assurances; (3) revocation w/in a reasonable time after discovery of nonconformity. Remedies Specific Performance (Ks for Real Estate and Unique Goods only) (no right for services) Reformation (changing K, if mistake or misrepresentation) Reclamation (right of unpaid seller to get its goods back- 10 Day Rule- 10 days to demand good back) Entrustment- (right of good faith purchaser. Owner intentionally leaves goods with seller of that kind who sells them to 3 rd party. Original owner can’t reclaim.) Expectation Damages (put π in same position as if K had been performed) o +Incidental Damages (costs incurred in dealing with breach; always recoverable) o +Foreseeable Consequential Damages (damages arising from π’s special circumstances) o -Avoidable Damages (no recovery for damages that could have been avoided w/out undue burden. Must have some alternative comparable situation. Certainty Limitation (damages must be established with reasonable certainty Reliance Interest (put π in same position as if no K) Restitution Interest (put ∆ in position as if no K- unjust enrichment) Liquidated Damages (must be a reasonable forecast. Concern is penalty is too high) Limitation of Remedies (establishes ceiling. If unconscionable- not allowed. Concern is penalty is too low) Damages Rules for Sale of Goods (UCC) o Seller breaches/Buyer has goods- FMV(if perfect) – FMV (as delivered) o Seller breaches/Seller has goods- Replacement Price (or Mkt price@breach) – K Price o Buyer breaches/Buyer has goods- K Price
Contracts 4 o Buyer breaches/Seller has goods- K Price – Resale Price (or Mkt price@delivery) **if lost volume seller, damages= lost profits Excuse for Non-Performance Material Breach: if one party materially breaches, other party is excused (exception= divisible K- then do unit by unit basis) (if not perfect tender, buyer can reject) Performance Condition: strict compliance with express condition (unless based on approval, than objective standard, unless unless subject is Artinherently discretionary.) o Excusing Express Condition: Estoppel (before event occurs) and Waiver (after) Anticipatory Repudiation: unambiguous statement that repudiating party will not perform made prior to when performance is due. (can be retracted if timely and no material change in position by other party) Later K: o Recission (later agreement to cancel the K), o Accord/Satisfaction (agreement to accept a different performance in satisfaction of existing obligation).—if not performed, party can sue on either. Only if new agreement is actually doen will it replace the old one. o Modification (replaces old agreement with new agreement, CL- consideration req’d)— can only sue on new agreement. o Novation: (agreement between both parties to substitution of new party. New party is excused.) different from delegation which does not excuse. Unforeseen Event (unforeseen event after K formation but before completion that makes it impossible, impracticable, or frustrates purpose of performance). o Damage or Destruction of Subject Matter of K- (later occurrence, unforeseen, impossible—excuses. Risk of Loss rules.) o Death (if dead party is ―special‖excused; if dead party not ―special‖ unexcused, if dead party not in K, than if it is still possibleunexcused.) o Subsequent Law or Regulation (law makes performance illegalexcused by impossibility) (law makes mutually understood purpose illegal excused by frustration of purpose.) 3rd Party Contracts 3rd Party Beneficiary (Only intended beneficiary has K rights; K cannot be cancelled w/out 3rd party’s approval if 3rd party knows of and has relied on or assented, unless K says otherwise) o (3rd Party can sue Promisor and if creditor beneficiary, can sue promisee/ if Donee Beneficiary, cannot sue Promisee). Promisor can assert any defense as they would against Promisee. Assignment (transfer of rights under K. K provisions can prohibit or invalidate assignments. CL bars assignment that changes duties of the obligor (not payment). Consideration not required. Must be present tense. “I assign”. o (Assignee can sue obligor. Same defenses) o (Multiple Assignments: Gratuitous Assignment- last assignee wins. Assignment for Consideration- first assignee wins) Delegation (party to K transfers work/duty to 3 rd party. Permitted unless contract prohibits delegations OR assignments, or K calls for special skills of delegator, or K calls for delegator with special reputation. o Delegator remains liable if assignee does not perform. o Delegatee is liable if she receives consideration from delegator.