Contract Law BarBri Outline

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					Contracts Law BarBri Outline

7 major contracts questions
   Is there a deal? Was a deal or agreement made?
   If there is a deal, how do courts enforce deals?
   Assuming there is a deal, is there any reason for the court not to enforce that deal?
   What is the deal exactly? What was agreed to?(ea. side has their own version of the
   Once we know what deal is, did anyone not do what he agreed to do?
   If someone didn’t do what he agreed to do, did he have an excuse?
   Does anyone other than the two guys who made the deal, have legal rights b/c of the

1. Contract – legally enforceable agreement
2. express contract – verbal—based solely on words
3. implied contract – based at least in part on conduct, parties acting as though they have a
        Unilateral contracts are usually (1) rewards or contests (such as $500 for finding my
          lost dog Fluffy) or (2) offer expressly requires performance
4. Quasi contract – equitable remedy (tells you that it is not contract law and rules of contract
   law have no application at all)
        Since it is equitable remedy, and equity is about doing what is fair
        If it seems unfair to apply contract law on a question, add a paragraph discussing
          quasi K
5. Unilateral contract – contract results from offer that requires performance to accept
6. Bilateral contract – contract results from an offer that is open as to how it can be accepted
        Offeror doesn’t require specific way to be accepted
        It is bilateral world
7. executory – means that it has not yet been performed

what is contract law?
   case law—what courts say the law is
   Restatement of Contracts: secondary source (treatise)—the view of bunch of smart
      people about what law is or should be
   Courts are not obligated to follow this—it is not binding on courts
   Restates what common law rules are
   Article 2 of UCC: some contracts are governed by this—2 basic questions
          o When do I do article 2?
                 It will never say use article 2
                 Must be sale of goods to use this article (never services)
                 Goods=something that is moveable personal property (ex. can of coke)
                 Fact pattern: mixed deal—lots of deals are like this
                      When pay for paint and labor of painter
                      How do you deal with this? 2 part test
                           o All or nothing—apply it to whole deal or not at all
                           o What is more important part of deal?
                                    Is it a sale of goods or putting paint on wall more
                                      important? Painter—so use common law for whole deal
         o Relationship of article 2 and common law contract
               There are 3 pieces to relationship only concerned about one piece
               They overlap
               Common law deals with a lot of stuff article 2 doesn’t deal with

How do you determine whether it is a unilateral or bilateral agreement?
   You look to the nature of the offer
   If it requires a performance for acceptance, then it is a unilateral agreement
   If it is open as to how it can be accepted then it is a bilateral agreement.

QUESTION 1: Is there a deal?
Issues to consider in formation questions:
   Was there ever even a deal proposed? Did we even have an offer?
   Did the proposal die out? Was the offer terminated?
   Was the deal for the offer accepted?
Applicable Law
Looking to the applicable law is always the first step in answering a question. What law you look
to depends on the subject matter of the contract. If the contract concerns the sale of goods
the contract is subject to article 2 of the UCC. For anything other than the sale of goods, the
contract is subject to common law.

Which law governs contract depends on subject matter of contract
1. U.C.C. Article 2 – Sale of Goods
2. Common Law – anything other than the sale of goods (land, services, etc)

Formation of Contracts
First find the agreement then look to whether it is legally enforceable.

Offer—commitment—has it been terminated—words to offeree—indirect rejection—who
accepted and how did they accept it

Offer – need manifestation of a commitment through words or conduct.
Exam key: they will give information about what offeror intended but this is a red herring b/c
not looking at intentions but manifestations.
   Commitment can be manifested through an individual’s words and actions indicating a
       willingness to be bound
   always include phrase ―manifestation of mutual assent‖ on questions about formation.
             Offeror: person who makes offer
             Offeree: person to whom offer is made
             offeror revokes offer
             offeree rejects offer

Things to watch for
   Look for content to see if is an offer
         o Terms ―for immediate acceptance‖- language suggest commitment
         o Fact pattern will give you what communication says
                Look for missing terms—see if communication seems incomplete
                There is no longer requirement that communication contain all of the
                   material terms—there can be gaps and still be manifestation of commitment
                Look for missing price problem—will see this in context of communication
                   relating to proposed sale
                Under common law price term and description of real estate are essential or
                   there is no manifestation of commitment
                Article 2—communication can be an offer even though there is a missing
                   price term
         o Also look for an ambiguous term ―fair‖ ―reasonable‖ ―appropriate‖- indicate no
                Missing v. ambiguous rule
                       Missing terms: person was willing to make commitment and leave it to
                          court to fill in- Person wasn’t insisting on that term
                       Ambiguous- courts will conclude it was not a commitment and no deal

1. Advertisements – Advertisements are not offers—they are invitations to the shopper to
   make an offer. A store sign that says ―Shirts $10‖ is not an advertisement. The sign invites
   the shopper to take the shirt to the counter, offer $10, an offer that is accepted by the
   cashier ringing up the sale. Gives the store the right to refuse to sell to a customer.
       exceptions focus on whether ad is specific about how many ads are available and
          about who can accept the ad
2. Missing Price Term – Whether a contract that is missing a price term is an offer depends on
   whether the UCC or common law governs the interchange
      Common law – not offer, must include the material term
      UCC – can be offer if the parties intended it to be so
3. Ambiguous Material Terms – In this case the term is there, but it is ambiguous, or vague.
   Neither the UCC nor CL considers this an offer. The material terms cannot be vague and
   still be considered an offer.

      Contracts must be sufficiently clear to be legally enforceable. Raffles v. Wifflehaus is
the prime example of ambiguous terms. The contract is for cotton to be shipped on the boat
Peerless. The problem was that there were 2 sailings of the ship Peerless. Each of the parties
had different sailings in mind, and the court could not establish an agreement for the parties.
It was fatal ambiguity.

1. ambiguous term in contract
2. each party must have different meaning in mind
3. neither party knows or has reason to know of meaning attached by the other

If B knew that there were 2 sailings, it takes the case out of the Raffles realm. The situation is
then legally enforceable under the terms as understood by the other party.

4. Requirements Contracts – Here the measure of the quantity of goods to be purchased by
   the buyer is determined by the buyer’s needs. For example, you make a deal with a local
   supplier saying that I’ll buy all of my wine from you—exclusivity agreement. In this case the
   quantity is not vague or ambiguous and the offer is therefore valid.
       If you increase your requirements under this type of agreement, it cannot be
          unreasonably disproportionate. If you buy 10 bottles for the first 10 months, you
          can’t increase your demand to 100 bottles for the last two. That is considered to be
          unreasonably disproportionate you have to match what he asked for previously to
          what he asked for today.
              o Is there a ceiling? YES, unreasonably disproportionate
              o Increase must be proportionate to other demands
       Context—what is the setting?
              o Watch for the bargaining history—history of negotiations- that adds to
                 argument that it is a manifestation of commitment
              o Watch for advertisements- generally ads are not offers but invitations to
                 make an offer.

Once the offer is found, check to see if it has been terminated
Termination – once an offer is terminated, it’s gone forever.

1. Lapse of Time – the offer is open only so long as is specified by its terms, if not time is not
   included the offer is open for a reasonable period of time
       Look at when offer was made
       How long a gap was there before offer was responded to?
2. Death of either party – offer is terminated if not completed before either party dies
       Offer dies with person a gap was there before offer was responded to
3. Revocation of offer
   1) Offeror puts offer on table and changes his mind and takes it back
   2) How does contract terminate? – if the offeror later changes her mind and decides not to
      enter into deal, whether the offer can be revoked depends on the offeree. The offer
      must be revoked before the offeree accepts it. The offeree must also be aware of the
      revocation. Sharon Stone in the shower example.
              Looking for words or conduct of offeror that was communicated to the offeree
              Revocation is two player game
              Essential offeree be aware of it
   3) When does a revocation become effective? It’s all about the timing
      i.     must complete revocation before acceptance occurs
      ii.    if revocation is sent through the mail, it’s not effective until it’s received
   4) When it is impossible to revoke? Some offers cannot be revoked, and offeror is held to
      the offer
      i.     Option contract – If I offer to sell my caddy to you for $400 and you pay me $25
             to hold the deal open, I cannot revoke that offer. If there is consideration paid
             for a promise to keep an option open it cannot be revoked.
      ii.    Offer reasonably and foreseeably relied upon – offer cannot be taken back. If X
             uses Y’s bid to bid on a contract and wins that contract, X has relied on Y’s bid and
             can be held to the offer.
                     Bid=offer
                     Drennan Star Paving—it is irrevocable b/c reliance
                     Jaimes Baird—reliance does not make offer irrevocable
      iii.   Part performance of an offer to enter into unilateral contract – unilateral
             contracts require performance for acceptance of a contract. Once a unilaterally
             contracted party begins starts performance, the offeror can no longer revoke the
             offer. However if all the party has done is buy paint in preparation to perform,
             there has been no partial performance and the offeror can revoke the offer. Use
             quasi-contract law to recover for money spent on reliance of the contract.
                     Start of performance pursuant to offer to enter into unilateral contract
                     Fact pattern: this offer can only be accepted by performance=unilateral
                     Will never get direct rejection as a question
      iv.    Firm offer rule – special UCC rule only applicable if it’s for the sale of goods. If a
             merchant puts promise to keep offer open in a signed writing, then the promise
             cannot be revoked. This is only applicable in the sale of goods. There is no
             consideration required because we assume that a business woman knows what she
             puts into writing and its implications.
                      Sale of goods and writing signed by a merchant that not only promises to
                       buy or sell, this writing must expressly promise that offer will not be
                       revoked—MUST HAVE ALL OF THESE EXACTLY
                      3 month ceiling to it—only impt. when writing says it will keep it open for
                       6 months
                          o even if writing says it is irrevocable for 1 year, still only open for
                             3 months

4. Rejection – if the offeree turns offer down, the offer is terminated.
 There are three forms of indirect rejections:
   1) Counteroffer – offer is killed. Offer for $400 with the reply ―I’ll only give you $200.‖
      This is a rejection and takes the offer completely off of the table. There is a fuzzy fact
      line between a counter offer and bargaining. A bargain would consist of the following
      reply to the $400 offer ―Will you take $200?‖ By asking you are clearly bargaining and
      the offer is still there. It shows that you understand the difference between
      counteroffers and bargaining.
   2) Conditional acceptance – ―I accept, if ...‖ is a rejection.
              No mutual assent
              This is changing the deal so you are killing the deal
              Exception—implied contracts
              Fact pattern where words don’t connect up
   3) I accept, and... – whether an offer is accepted with the addition of additional terms
      depends on whether you are dealing with the UCC or CL
              Additional terms rule—common law rule only
              I accept and is a rejection
              Something new is added
              I accept if/provided…no express contract common law or UCC
              Different from I accept and…not insisting on this term but throwing it out as
                     o In common law, still no express contract
                     o Acceptance can’t add anything to offer—mirror image rule
      i.     CL – Mirror image rule requires that the acceptance look just like the offer
      ii.    UCC §2-207 – The Battle of the Forms allows additional terms so long as they are
             merely added and not insisted upon. To insist makes it a conditional acceptance,
             which is actually a rejection.
                     Most often UCC code tested
                     Sale of goods where communications don’t match up
      iii.   Hypo – if offer falls under UCC §2-207 and the acceptance attaches additional
             terms. There is an offer and an acceptance, but which one governs the deal? The
             offer says X and the acceptance says X+Y. Which one is binding? That
             determination depends on whether both people are business people, whether new
             terms materially alter the deal, whether the new terms were objected. If the new
             terms were objected to and they did create a material difference, there is still an
             acceptance and the terms that govern the deal are those in the original offer.

Did other guy agree to deal? 3 rd part to question 1
Look at fact pattern and it will go in terms of two possible issues of acceptance
   Look at who is accepting
   How they are accepting

Acceptance – once the offer has been made and there’s no problem with rejection, you must
then look to the acceptance.

4 Fact patterns regarding acceptance to watch for
    Mailbox rule—where parties are contracting from distance
         o Adams v. Lindsell
    What has happened is the offer is made, and then in response to offer, person to whom
      offer was made, starts performance
         o Start of performance is acceptance is viewed as implied promise to perform so it is
            enough to make deal
         o Gives us manifestation of mutual assent
                 Where offer requires performance to accept—this does not create a
                   bilateral contract
    Notice of acceptance—2 rules to apply
         o Acceptance by promise has to be communicated to offeror
         o Acceptance by performance—whether facts are such that the person would
            reasonably know you have performed
                 Must give notice when other party wouldn’t know that you have started
    Sale of goods question—where facts are that buyer offers to buy goods and seller sends
      the wrong stuff—2 consequences
         o That creates a deal—sending wrong stuff is acceptance
         o Can now sue for breach
         o Accommodation exception—sends wrong stuff with explanation
                 Doesn’t create contract, simply a counteroffer

1. Who accepted the offer
   1) Must be person to whom offer is made. The offer is person specific.
   2) Offers are not assignable
   3) Need manifestation of personal assent—only assented to sell to specific person
   4) In rewards and contests, the offeree must know of the offer at the time he accepts. He
      must know of the award when he catches the dog
2. How acceptance occurs—offeror can control how acceptance happens
   1) Return promise – most offers can be accepted by merely a promise
   2) Start of performance only – if you start performance, have you accepted the offer? You
      have to look at the nature of the offer. If the offer is a unilateral one accepted only by
      performance, partial performance does not constitute an acceptance. If the offeror
      revokes the offer after partial performance, you are under no obligation to finish the
      performance. In the case of unilateral contracts, full performance is required for
      acceptance. However, once you begin performance the offer becomes irrevocable. If
      the offer doesn’t say anything about the method of acceptance, a bilateral contract, then
      starting performance is an acceptance and creates the contract. If the offer is made,
      the work is started, but is not completed, look to the nature of the offer to determine
      whether offer had been accepted.
      i.     Uni – start, irrevocable, can walk away, not actual acceptance, can only be accepted
             by performance
      ii.    Bi – start is acceptance, duty to complete, can be accepted in any way
                     Presumption is it is bilateral
                     Unless expressly required performance, it is bilateral
      Unilateral/bilateral not used today

3. Mailbox rule – only applies to acceptance. Where reasonable to respond to offer by mail,
   fax, or FedEx and response is so done, the acceptance dates from the time the acceptance
   is sent, the time placed in mailbox. This concept is usually tested with a revocation of the
   Example – I offer to sell you my Caddy for $400 via mail. On Tuesday I change my mind and
   mail you another letter revoking the offer. The letter of revocation doesn’t arrive until
   Friday. (The revocation is only good once it is received, unlike the acceptance that is good
   once it enters the mailbox.) If you mail a letter of acceptance on Wednesday, when
   acceptance is good when posted, what happens when you receive the revocation? The offer
   was not terminated so long as the right person accepted it. You don’t have a contract, but it
   is legally enforceable.

QUESTION 2—how do courts enforce deals?

Specific performance —court will order person to do what person agreed to do
     This is equitable remedy—must say this
     Only applied where money damages are inadequate
     Real estate deals fall under this category
     Sale of goods only when dealing with unique goods (art, antique or custom made)
     Never do it in services or employment contracts
     Negative specific performance—where someone has agreed to work with you and
      breached the contract
         o Can’t force them to work for you
         o Can get negative specific performance by preventing them from working for

Money damages —most exam questions
     Punitive damages—never for breach of contract
     Liquidated damages—this is phrase that describes contract provision that tries to fix or
      set the way of fixing damages
         o General rule is that liquidated damages are recognized—valid way of fixing
         o Exception—parties cannot by agreement set out an amount of damages that would
             be penalty
         o Issue will always be is this liquidated damages clause some kind of disguise for
     Expectation damages—general standard for damages
         o Trying to make the world same as it would have been had contract been performed
         o Judicial effort
         o 3 steps
                 ask yourself, what would Π now have if the contract had been performed?
                 What does Π actually have?
                 What does it take to get her from 2 to 1 (from what actually have to what
                    supposed to have)?
         o Hawkins v. Mcgee—doctor promised perfect hand
                 What is value of perfect hand? What is value of gross hand received?
         o 3 limitations on expectation damages
                 rule with respect to avoidable damages—they are not recoverable
                       2 different fact patterns that raise avoidable damages
                             o fact pattern 1: an agreement followed by a breach, followed by
                                continuing performance by non breaching party
                                    must mitigate damages
                                    watch for following two things
                                            was there clear breach? or was it ambiguous?
                                            Is this a situation in which it can be fairly argued
                                              that continuing to perform decreases the damages
                                              rather than increases them?
                             o fact pattern 2: employment contract
                                    argument that Π could’ve gotten comparable job
                                    judgment call whether comparable or not
                                    Shirley MacClaine case
                                    Not taking comparable job to reduce damages
                 Rule of consequential damages
                         Rule is that they are recoverable only if foreseeable (in
                          contemplation) by both parties at time of contract
                       Hadley v. Baxendale: mill in small village where mill breaks
                           o Contract to transport milling machinery
                           o Transporting company took far too long and they agree they
                              breached the deal
                           o Mill had to be closed b/c of them taking so long
                           o Not reasonably foreseeable by both parties here
                      Consequential damages are where Π is saying b/c you breached
                        contract with me, something else bad happened—special damages
                        which don’t arise in every situation
                  Economic waste
                      Peevinghouse and Groves v. John Wunder
                           o contracts involving work done on land
                           o unrestored land has same market value as restored land
                           o assume that deal was that land will be completely restored and
                              appraisers say that if it was completely restored it will be
                              worth $100,000--if not restored, only worth $80,000
                           o contract is breached and land is not restored
                           o Π will argue that it will cost $75,000 to restore my land now

QUESTION 3—any reason not to enforce the deal?

did Δ have capacity? Does he have legal right to disaffirm

   Agreement is not enforceable if party lacks capacity
         o Person under age of majority
         o Intoxication
         o Mental incompetence
   Must mention ―disaffirm‖ in this type of question
         o Ability to get out of agreements that he has made
         o With infancy, only requirement is age
               2 exam exceptions to capacity rule
                      implied affirmation—enter into agreement when 17 years old
                            o that person continues to retain benefits of agreement
                            o by continuing to retain benefits of contract after gaining
                               capacity, just like you made a new deal
                         necessaries
                             o most common test question
                             o food, clothing, shelter, health care
                             o situation where 17 year old rents apartment
                             o even though lacks capacity, if necessary, legally obligated to pay
                             o not contract obligation though—quasi K obligation
                             o not agreed to pay agreed upon amount but fair and appropriate

2.2   – Capacity

Each of the agreeing parties must have capacity. The following group of persons are not held
capable of being held to contracts:

1. Infants (under 18)            one fact rule
2. Mental incompetents           one fact rule
3. Intoxicated                   two fact rule
   1. intoxication
   2. significance of persons need to know of it
      There is a specific rule for necessaries. We want everyone to be able to get what they
      need to survive, so we do require those persons lacking competence to pay for
      necessaries. The agreement to provide an infant, mental incompetent, drunk with a
      necessary is not a contract (they do not have the capacity to contract) but a quasi-
      contract. The only thing that can be recovered from this group of individuals is the value
      of the performance to that person and not necessarily the contract price. Which
      person? The contractor or the incompetent?

HOW WAS DEAL MADE? look for following
   Duress—not just physical duress but economic duress too
       o Looking for 2 things in economic duress
              Improper threat by Π—did person who is trying to enforce deal do
                something improper
              Δ—is he left with any reasonable alternative?
              Improper threat standard
       o Watch for 2 fact patterns
              Fact pattern #1: involving changing the deal—modification in contracts
                    Look at litigation settlement where Π settled for less than she had
                      previously acknowledged that she would
   Undue influence
       o Unfair threat not improper—milder standard for Π
       o Look at Δ—tougher standard—must be under domination of Π
         o Must talk about duress and undue influence
         o Looking for prob with how deal was done
         o Look at Δ and see if he was under the domination of Π
         o Looking at a weaker Δ
         o Culpability is harder on Π in duress
   Misrepresentation
         o When only reason deal was made was b/c of misrepresentation
         o Looking that I understand contract law concept of misrep and tort law concept
               Tort—looking for negligence or intent
               Contract—don’t need to show intentional or careless
                      Must show misrep, that it was material and that it was relied on
   Mistake
         o Guys who made deal didn’t understand surrounding facts
         o Not language of deal but surrounding facts
         o Sherwood v. Walker
               Rose the cow who both owner and buyer thought was barren
               Where there is mutual mistake, about a ―basic material fact‖ then deal is not
               To trigger this rule, need mistake that is basic and material
                      If mistake about what something is (the nature of what it is) then
                         this qualifies
               If mistake about what it is worth, that is never material!!
                      Never ground for not enforcing deal
Mistakes of Fact

Sherwood v. Walker is a prime example of a mutual mistake of fact. The case involved the sale
of a cow believed to be barren, but wound up being fertile and with calf. The court determined
that there was no contract, because the contract was for a barren cow that did not exist.
When the parties make a mistake about a material fact, there is no contract.
       It’s not enough just to have a mutual mistake. There must be a mutual mistake of
material fact. Value is not considered a material fact.
Example – I’m selling you a painting that we both believe to be an authentic Warhol. If it turns
out that it is not, that is a material fact that would invalidate the contract. If I am selling you
a Warhol that we believe is worth $10K but winds up only being worth $1K, that is a question of
value and is not considered a material fact.

Mutual Mistake – the contract can be rescinded
Unilateral Mistake – is not a basis or defense for contract formation
      Exception – if it is an obvious mistake where the other side knows or has       reason to
know of the other’s mistake, they cannot take advantage of them.

Things to Look for
Offer, manifestation of commitment
      Revocation – know how offers are revoked

   always decided by judge but fact driven
   Need to know where it comes from
        o UCC 2-302: Williams v. Walker Thomas—since that case it is common law too
        o Now ucc and common/case law
   What the 2 issues are that we need to discuss
        o How the deal was made?
               procedural unconscionability
                      whether terms were hidden or clearly expressed
                      get into bargaining laws
                      flaws in bargaining process—disparity of bargaining power or surprise
                       in terms
               substantive unconscionability
                      ―oppressive terms‖
                      problems with the terms themselves

       This concept was introduced with the UCC, but now it is generally included in all
contracts, including those covered by common law.
Major Points
1. Court can refuse all or part of agreement because the terms are oppressive or presented in
   a way that they unfairly surprised the other party
2. Whether terms are oppressive is tested as of the time the contract was entered into. This
   is important in long-term contracts. What was reasonable 20 years ago may not be
   reasonable today (option to buy)
3. Issues of unconscionability always go to the judge. They are questions of law.


      In order for a contract to be valid, there must be consideration or consideration

Legal Detriment – the promisee must show that he suffered some bargained for legal
detriment. Detriment entails doing something, promising something, promising to forbear or
refraining from doing something there is a legal right to do.

―If you come by my house I will give you my Caddy.‖ If I am trying to get you to come over to
my house as my objective, and nothing else worked (such as listen to music, come over for
dinner, drinks), then my giving you my Caddy is a bargained for detriment. If I just want to give
the car away, and you just happened to be walking by at the time I wanted to do so, that’s a
benevolent gift that is not enforceable.

―If you stop listening to Barry Manilow I’ll pay you $100.‖ That is a bargained for detriment
because you have a legal right to listen to Barry Manilow, and if you give up that right then
there is legal detriment. Hamer v. Sidway
4 step approach to consideration
  1. what is promise in question?
         o Promise that is in dispute is one to focus on
  2. Identify promisor and promisee
         o Promisor Δ who made the promise
         o Promisee Π
  3. What was the promisor asking for in exchange for the promise? What bargaining for in
         o Concept of consideration is a concept of exchange
         o Will be asking for 1 of 4 things in exchange
               Performance—to wash car for example
               Promise to perform
               Forbearance—Willy my boy
         o Person who made promise must be asking for something in return
         o Willie my boy—if bargaining for return promise and person does not perform then
           no consideration
  4. Is there some new benefit or detriment?
         o Thing she was bargaining for, was it benefit to promisor and detriment to
         o Need benefit to promisor and detriment to promisee
         o 3 situations where issue of detriment needs to be discussed in answering question
               past consideration
                      can’t bargain for anything already done
                      must have bargain for new benefit and detriment
                      There is no such thing as past consideration. Past consideration is no
                        consideration at all. (Generally) If you are grateful for someone
                        saving your life and you promise to pay them $100, this is not a legally
                        enforceable promise. There is no consideration for the promise. You
                        cannot bargain for something that you have already done. An
                        agreement is not the same thing as a contract. Things must happen
                        before an agreement
                   Pre-existing legal duty
                        Doing something you are already legally obligated to do is not
                          consideration for promise to pay you more money to do it
                        There is no legal detriment in doing something that you are already
                          obligated to do. There is no PELDR in the UCC.
                        Example – When sports stars renegotiate their contracts, there is
                          usually a different term of years in the new contract. If there were
                          3 years left in the original contract, the renegotiated contract would
                          be for 4 years. Otherwise, the contract would be subject to the pre-
                          existing legal duty rule.
                        Amount of consideration is not discussed—peppercorns will suffice
                   Part payment on debt
                        Question is usually obtuse as to what the problem is
                        Promise in question will often be the creditor promising to release the
                          rest of the claim
                        Part payment of a debt that is due and undisputed, is not
                          consideration for a release
                        Since you have legal obligation already for the whole amount, it is no
                          new detriment to me to pay smaller amount

Promissory Estoppel (#1)
 6 step approach
      1. what is the promise in question
      2. label promisor and promisee
      3. what did promisee do after promise was made? what was reliance?
      4. was this thing, action or inaction, that promisee did, was it induced or caused by, did it
         happen b/c of promise?
          Tells you whether you are doing consideration or promissory estoppel
          No one has asked promisee to do what she is doing—she is doing b/c of the promise
          Ex. I hold the mortgage on your house. I promise I will not foreclose your
            mortgage for 5 years. (promise in question)
                a. I try to foreclose anyway. But after you have painted house. There is no
                   consideration for my promise, but under promissory estoppel it may be.
                b. Is it legally enforceable?
                       i. I wasn’t asking for anything, simply making promise not to foreclose
                c. In Willy, if uncle just promised money for being a good person and Willy
                   chose to refrain from smoking—that wasn’t asked for
          After promise, promisee does something that was caused by the promise but not
            asked for (like refraining from smoke
      5. Should guy who made promise anticipated this action? was it reasonably foreseeable?
          Should mortgage holder have anticipated that mortgagee would paint house?
      6. Would it be unjust not to enforce this promise?

Promissory estoppel
1) Four elements of PE
   1. promise
   2. reasonably relied on to the actor’s detriment
   3. only way to avoid injustice
    may make a promise legally enforceable
    situation in which worker injures himself saving his employers life and employer promises
      to pay employee
    no consideration for modifications

Modification of Contract – does a modification of a contract have to be in writing? You have to
look to the contract as modified. If after you made the contract, it still falls within the SOF
the modification must be in writing. If the contract no longer falls within the SOF, the
modification does not have to be in writing.
       Example – Enter into lease for 2 years, it has to be in writing. If the amount paid in rent
       changes, the modification must be reflected in the writing. If you change the length of
       the lease to just 1 year, then the modification does not have to be reflected in the lease.
       Why would you not put it in writing, when you really trust the person?
UCC §89—enforceable modification contracts made in good faith even if no consideration

Statute of Frauds (#3)
       certain agreements have important subject matter or susceptible to fraudulent claims
       ―within the statute of frauds‖
            o need to use this phrase
            o above phrase only means statute of frauds applies

1. Which contracts fall within the SOF?
      The SOF is concerned with contracts that are so important or so susceptible to fraud
that we need special proof of their existence.
      1) Personal services contracts not capable of being performed in 1 year
         a. Contract to cut down all trees on your land. It is capable of being done in one year
            regardless of size with enough men and saws.
         b. If I hire you to work for me for the rest of your life, this too could only last for
            one year. You could die within the year.
         c. If I hire you to work for me for 2 years – SOF applies. Granted, you could still die
            tomorrow, but then you would not have completed performance.

         d. If I hire you to perform at my wedding on July 1, 2002, the contract cannot be
            performed within one year and is subject to SOF.
         1. full performance by either party satisfies the SOF, it provides needed proof that
            this was what the agreement was
         2. part performance does not satisfy SOF, but you can be quick to add quasi-contract
      2) Transfers of interest in real estate –If the interest in real estate is for one year or
         less, the contract does not fall within the SOF. For example a 12-month lease would
         not fall under the SOF, but a lease for 13-months would.
             Regardless of dollar amount
             Key is that it has to be real estate interest that has a term of duration of more
                than a year
         B orally agrees to buy Blackacre from S. Part performance can satisfy the SOF in
         real estate dealings if two or more of the following occur:
            a. partial payment by the buyer
            b. possession by the buyer
            c. improvements made by the buyer
      3) Sale of goods of $500 or more (UCC §2-201)
             Article 2 applies regardless of if you are a merchant and dollar amount does not
         Specially manufactured goods – for goods that are custom made the start of
         performance satisfies the SOF
             Ordinary goods – partial performance of a contract for the sale of goods
                satisfies the SOF, but only to the extent of partial performance. Example –
                you contract to sell me 1000 widgets for $1000. You deliver 400 widgets. You
                can recover for the 400 widgets because you partially performed. But the deal
                was for 1000 widgets, what about the other 600? I cannot recover those, but I
                must pay for the 400 delivered. (what if there was reliance on the entire 1000
                being delivered? If you don’t have them all it’s not worth having any, is there
                anything that can be done in that instance?)

2. How do you satisfy the SOF?
      Full performance is a way of satisfying that there was an agreement and you followed
through with its terms
 Look at what question tells you about what writing says
       Not enough that there is a writing—there are requirements for writing
       In order for writing to satisfy statute of frauds, all material terms must be in writing
         (not for sale of goods b/c that is UCC)
o From the writing alone you can tell
       Who the contracting parties are
       What did each agree to do
 If sale of goods, all the writing must say is quantity
      Doesn’t have to name parties
o Look at who signed the writing unless it is sale of goods question which would be UCC
      In order to satisfy statute of frauds it must’ve been signed by Δ—if common law
      UCC special rule for sale of goods of $500 or more there is situation under 2-201 in
         which all that is needed is signing by Π
             This would happen when both are merchants and Δ received notice of the
               contract and never answered the letter
             If don’t answer the letter, assumed that you are on board with deal
o Situations where performance can satisfy statute of frauds
      Ignore for exam

What type of writing does it need to be?
What type of writing depends on the type of contract in consideration.
1. Common Law
   1. material terms
   2. signed by person against whom you are trying to enforce agreement

All material terms must be included in the writing. ―Your offer on November 9, 1999 is
accepted‖ is not an adequate writing. There is no indication of who they are and what they are
intending to do. It is important to look at who signed the writing, because only those who signed
their name to the document can be held to what it says. Example – A contract for K&S and
Marsha Clark for a 3-year term at $400,000 a year exists. This contract was signed by K&S,
but not by Marsha Clark. Marsha can sue K&S (who did sign the contract) on the contract even
though she did not sign her name to it. K&S, on the other hand, cannot sue Marsha on the
contract because she did not sign her name to the terms. She may have agreed to the terms,
but it’s not binding and she has an SOF claim.

2. UCC
   1. Quantity term
   2. Signed

       Unlike the common law requirement for all material terms, under the UCC a valid writing
only needs quantity term to complete, the UCC will fill in the rest.
       There is a special rule that applies if both parties are merchants. If one of the parties
sends a letter to the other claiming that the other has entered into a contract, the notified
party has 10 days to respond or else the contract becomes legally binding.

       Impact of a written agreement—superiority of written agreement
       Impact a writing has on earlier agreements
         o Even if earlier agreements are in writing
     Parol evidence: evidence of some agreement made prior to this writing
         o Does not have to be oral
     Integrated agreement: it is written, intended by parties to be their last word
         o Written and final word
     Complete integration: it is a writing that is final and complete
     Partial integration: it is written, final as to what it covers but it may not be the whole
     Merger clause: shorthand way of describing a contract provision that says this is the
      complete deal
         o To determine if complete or partial

Parol Evidence Rule
There is a contract, but what are the terms? Rule of contract law about what the terms of the
contract are. Four issues to know: what the rule is, what facts trigger the rule, possible issues,
how the rules are different from statute of frauds. Often the two are confused and tested

1. Parol evidence rule – when there is a WRITTEN contract that is intended by the parties to
   be their final agreement, then you CANNOT use earlier agreements to change the terms of
   that written contract.
2. What triggers the rule?
   a. There MUST be a WRITTEN CONTRACT (if there is nothing in writing you never get to
      the parol evidence rule). Effect the written contract has, the importance of the terms
   b. It MUST be the contract that the parties intended to be the final agreement.
      (Integrated agreement – writing intended to be the final agreement)
   c. There MUST have been some earlier agreement, oral or written. Effect of agreement
      has on earlier agreements, the effect is that you cannot use the previous agreements to
      change the terms.
3. Possible issues
   a. Does the parol evidence rule apply (Was it an integrated agreement? This is a question
      of law for the judge.)
   b. Was there a merger clause? – a contract provision stating that this is our final
   c. Is there an applicable exception to the parol evidence rule?
      1) You can always introduce evidence to establish a defense to the existence of the
          contract. (i.e. argue fraud, duress)
      2) You can introduce the earlier agreement to show a mistake in reducing the agreement
          to this final writing. (i.e. evidence through partial writings, oral conversations)

      3) The earlier agreement doesn’t change the terms of the written agreement, but it adds
         terms to the written agreement. Was the writing intended by the parties to be their
         complete and final agreement? (was it partial integration?) ARE NOT TRYING TO
         CHANGE THE WRITING. It is at the judge’s discretion as to whether the contract is
         integrated or partially integrated. Did the parties mean for the writing to be their
         final and complete agreement?
4. How different from the Statute of Fraud?
The SOF is brought up when you are deciding whether you have a legally enforceable agreement.
Triggered by the phrase there was an ORAL agreement. For Parol Evidence, you are past that
stage and you are considering the terms of the contract. There must be a WRITTEN contract.

3 basic points
1) where you have an integrated agreement, parol evidence can never contradict it
2) What if parol evidence doesn’t contradict the integrated agreement but simply adds terms
    to it?
         o When will the court consider parol evidence here?
         o Ques. for court--Need to find out if this is a complete integration?
3) even if it is a complete integration, parol evidence can be used to explain ambiguous terms

parol evidence rule: can’t contradict, can supplement and can explain

what does the deal mean?
course of performance
   all about what these people have previously done under this very duty
   persuasive form of extrinsic evidence as to what the deal means
   same people, same deal
course of dealings
   not as persuasive
   what these very people have done under earlier similar deals
   same people, similar deal
custom and usage
   what different people have done under different but similar deals
   relevant and some evidence but not as persuasive as first two

     what if deal is more than what party has said?
     Fact pattern governed by common law
     Implied duty of good faith
     Wood v. Lucy Lady Duff Gordon
     UCC it is sale of goods question you are encountering
     UCC is great to fill gap
        o Implied obligation of good faith—good faith is made part of performance of any
            sale of goods contract
                Sale of goods—always do article 2
                Firm offer rule
        o Implied warranty of merchantability
                Situation in which a person who regularly sells goods of that kind, sells
                   something and it turns out to be defective
                Ex. anytime jewelry store sells jewelry, even though no discussion of quality,
                   you have to assume it is ok
                Seller must be in business of selling goods of that kind, then law imposes
                   obligation on that seller
                Adds a term to the contract—the goods must be okay—must be fit for
                   ordinary purposes

  Yes obviously

Excuses for not doing what you agreed to do
1) situation in which there is an unmet condition of performance
    Performance was conditional and one condition was unmet
    Ex. B contracts to build building for O—there are progress payments
           o Payment of progress payments is conditioned on an architects certificate
           o If an architect doesn’t approve a month of work, don’t have to make the payment
              b/c you are excused
           o Ok not to perform b/c condition not met
    Ex. will buy house if appraised at 100,000 but it was only appraised at 90,000—no need to
    Must look for express condition in fact patterns
           o Look for words ―if‖ ―provided that‖ ―so long as‖
           o Anything short of the phrase ―on condition that‖ you are going to add statement to
              answer, ―if there is any doubt about whether the contract language creates an
              express condition, that the preferred interpretation is no condition‖
    If you determine that there is language of condition, the general test for conditions is
       conditions must be strictly complied with
           o If the house is appraised at only $90,000
           o Jacobs & Young v. Kent
                  Owner wanted Reading pipe but builder used a different kind of pipe
                  Court said this was not language of express condition
                  Homeowner did not say I will only pay you if you use reading pipe
                  Different result if language was an express condition
          o Courts try to conclude that there isn’t a condition
    If there is any way to conclude that there is not an express condition, that is way court
      will go
2) Breach by the other party as an excuse for non performance
    I don’t have to perform b/c other guy didn’t do what he was supposed to do
    Remember to look to see what law to apply
    Article 2 differs most from common law here
          o Article 2 has perfect tender standard
                  Anytime the seller of goods is less than perfect, not exactly what buyer
                    wants, buyer is excused from performing b/c seller did not do perfect
    General standard for sale of goods is perfect tender
    That standard is subject to 2 big exceptions
          o 1. cure: in certain limited situations, b/c perfect tender standard is so high and
              demanding, give seller second chance
                  watch for situation in which the seller sends the wrong stuff early!!
                         Must give delivery deadline in this fact situation
                         If seller can still get right stuff there by deadline, then no problem
          o 2. installment sale contract: where parties in their agreement have agreed that
              there will be deliveries in several separate installments
                  if agreement provides for these installments, a problem with one installment,
                    so long as not substantial problem, will not excuse payment
                  it can be adjusted in future installments

if common law contract, not a sale of goods and one guy is arguing that one guy breached so
don’t have to perform, must do a material breach rule (major screw up rule)
    when will one parties non performance excuse the other?
          o Ex. H hires P to paint his house—deal is that house must be painted in two coats
             with Sherwin Williams paint
                 This is common law contract
                 Turns out that painter you hire is big fan of Price
                 So he paints your house purple
                 Don’t have to pay b/c material breach
                 What if painter buys different brand of paint instead by accident?
                       It is a breach but still have to pay b/c not a major screw up or
                         material breach
    2 exceptions to material breach rule
          o language of condition exception—if contract said I will pay you 1000 for painting
             my house white on the condition that you use Sherwin Williams paint
                 this requires strict compliance b/c condition
          o divisible contract exception—
                 ex. H has huge house 20 rooms—H hires P painter to paint whole house for
                   4000—P only paints 3 of the 20 rooms
                 is this material breach? YES
                 is H excused from paying? YES
                 if unfair, go to quasi K (equity)
                 ex. H hires P to paint 20 different apartments for 200 each
                        this is divisible
                        if painter paints 3 of the apartments, law would say this is divisible so
                          you did perform with respect to the 3 apartments

3)anticipatory repudiation
       o I tell you before you finish that I’m not going to pay you
       o Excuse for stopping work
       o Excuse of non performance—gives right to stop performance and sue immediately if
          told you’re not going to be paid

4) later agreement—2 forms
           novation:
                o both of the guys who made first deal agree that another person can perform
                o other person is a no show
                o initial guys performance is excused by later agreement of ally mcbeal doing
           accord and satisfaction:
                o change in what is going to get done
                o agreement to clean house instead of paying money (that is the accord—
                  agreement to do something different than first agreed to do)
                o by actually cleaning house, that is satisfaction
                o ―and‖ in order to have this excuse, must have both accord AND satisfaction
                  so that if I don’t actually clean house, can still sue me on original promise to
                  pay money

Another excuse for non performance

easy facts to watch for are time sequence
   deal was made and later, after the deal something happened
   what happened was unexpected (unless it is totally unexpected there is no excuse)
harder facts to watch for
   whether either party had assumed the risk in some way
     did it   make the performance impossible?
         o     Easy case: Taylor v. Caldwell: concert hall burning down
         o     This is post contract occurrence, unforeseeable, and so it was impossible
         o     This is destruction of subject matter of the contract
         o     Variations are often on exams
                   Homeowner contracts to build house—when house is 90% complete it burns
                   Neither party assumed risk
                   Relationship between unforeseen occurrence and performance
                   Not impossible to rebuild house
                   Is guy excused from performing? NO
                   May be excused from being late but still must build house
                   Not impossible nor impractical

Rule of thumb—if all that happens is that there is a later unforeseen occurrence, that makes
performance more expensive, the tough luck rule, it is not impossibility or impracticability

Some situations in which even if it is not impossible that the burden may be so great that it will
be excused—usually judgment call
   Impracticability

Frustration of purpose is similar and different from impossibility
   Krell v. Henry: guy who rented a flat to watch the coronation parade
         o Parade gets canceled and he wants out of the deal b/c his whole reason for renting
            the flat was to see the parade so his purpose has been frustrated
         o He can still use flat though
         o Where both guys know of the purpose of the deal at the time the deal is made and
            there is something that happens after the deal, it doesn’t affect ability to
            perform, it affects reason of performance
         o Non performance will be excused
   Impossibility is in UCC
   No UCC provision for frustration of purpose
         o May apply to sale of goods

Sometimes people who were not parties to contract have rights under the

3rd party beneficiaries

     Contract between two people and both intend for a third party to benefit from the
     Life Insurance contract—insured bought the contract, insuror is company and someone
      else will benefit
     Where contract was made with intent to benefit you, you can sue to enforce it
     Not purely insurance law
     Intended third party beneficiary

3rd party beneficiary: didn’t make contract but intended to be benefited
promisor: guy whose promise goes to 3rd party beneficiary
     Guy who’s promise goes to the 3 rd party bene
     Insurance company
promisee: guy who takes out insurance policy

creditor beneficiary or donee beneficiary
   rule of thumb—if in doubt, call it donee
   only time creditor beneficiary is when third party was previous a creditor of promisee
          o ex. I owe Heidi 1000—I say I’ll name her in life insurance policy instead—she is
            creditor beneficiary
          o donee beneficiary is if I felt sorry for Heidi and said I would name her in policy
   3 party bene can always sue the promisor!!

Rights of third party do not depend on provision of consideration or not —they are simply the
intended beneficiary

Promisor liable to 3 rd party beneficiary

If 3rd party bene was a creditor bene, he can also sue promisee on original debt


You start with contract between 2 people—later one of them gets someone else to do the work
   what are consequences of a delegation?
         o what if third person doesn’t do work, can still sue person who initially should’ve
             done the work b/c not mutually agreed upon substitution—only delegation
         o delegations do not excuse—delegating party remains liable

limitations on delegation—some duties are not delgable
    if contract says you can’t delegate
    or, subject matter of contract—some duties require special skills

         o can’t delegate special skills—Salvador Dali cannot delegate to me to paint picture
           he was supposed to

most duties are delegable

ex. H hires P to paint his house
   contract says nothing about delgation
   P gets X to do work instead
   If X doesn’t do work, H can still sue P
   X does the work—what result?
   Issue of the question is is the duty delegable? YES

   Ex. Batman makes contract with Gotham to provide security services
       o Later, Batman comes to Robin, and tells Robin he can collect the money from the
   To make that a third party beneficiary

How do you tell when he wants you to talk about TP bene or assignment
   3rd party, all 3 people are involved in contract from beginning—intent to benefit from the
   if Robin was brought in from the beginning and told Gotham to pay Robin, then 3 rd party
assignor would be Batman—makes contract and later assigns his rights to someone else
assignee is Robin—didn’t make contract but can enforce it

effect of assignment—assignee can sue obligor—if Batman does work, Robin can come in and sue
Gotham for payment

common law limitation on making of assignments
   cannot make an assignment that substantially changes the duties of the obligor
   ex. assume Batman makes contract with Gotham to provide security services and assigns
     right of payment to Robin
         o no prob b/c haven’t changed duties of Gotham (the obligor)
         o just as easy to pay Robin
         o assignment of a right to payment is never a problem—never substantially changes
   ex. Batman makes contract with Gotham to provide security services, Metropolis wants
     Batman to defend their city so Gotham gives Batman to them
         o Batman=obligor
          o Gotham=assignor
          o Metropolis=assignee

      Here we have changed Batman’s duties—he was supposed to protect Gotham, not

      Assignments get combined with delegation on exams. In real life, assignments and
      delegations get combined, especially in the sale of a business. Often referred to in total
      as assignment.

Sale of Goods – can effect the terms of the contract
§2-207 –Battle of the forms. Mismatching offer and acceptance. Each business has its own
form and they aren’t all identical. Which sheet of paper controls?

1. Doesn’t have to be the mirror image, it can be a seasonable expression of acceptance
2. Everything in the offer is in the contract
3. In the acceptance form different forms that contradict the original terms are kicked out.
   They are objected to.
4. In the acceptance form (only if both parties are merchants), the new terms are accepted
   UNLESS they are objected to or if it is a material change. The additional terms do make it
   into the contract.
5. In an acceptance form and both parties ARE NOT both merchants, the new terms are
   proposals, it is added only if it is separately agreed to by the other party. If the new terms
   are insisted upon, it’s a conditional acceptance and there is no acceptance.
6. Article 2 is a source of terms.

Warranties §2-
1. Express warranty – words of the party that describe the goods, state facts, or make
   promises with respect to the goods being sold. (distinguish from ―puffing‖ (sales call)
   general, opinion i.e. unbelievable price, high quality structure, as opposed to a representation
   of fact - warranty specific, all steel structure)
2. Implied warranty of merchantability
   a. when you buy something from someone in the business world, part of the deal is that it is
      merchantable for ordinary purposes. Go to jewelry store for gold chain, put it on and
      head falls off, you can sue for breach. Add a term to the contract, nothing bad will
      happen to you because you wear it.
   b. If you buy something from someone that is in the business and nothing is said about the
      quality, you can sue for breach of contract if it is defective.
3. Implied warranty for fitness for a particular purpose

     a. A buyer that has a particular purpose and is relying on the seller to provide that good and
        the seller knows of the buyer’s need and reliance on the seller’s expertise. Test will have
        to tell you why the buyer is buying the good and that the seller is AWARE. Go to the
        shoe store because you need mountain climbing boots, but shoe sales man sells you
        Converse tennis shoes. Adds term, ―I know what you want, I know what you need, here it

I.      Performance Obligation
        A. Makes certain that the terms have been complied with. It turns on the terms of the
        B. Conditions
           1. Modifies the obligation to perform (i.e. I will buy your house if it appraised at
              $100,000). That is beyond the parties control
           2. An express condition must be strictly complied with. (i.e. if $95,000 you are not
              legally obligated to buy)
           3. ―I will pay if I am satisfied‖ (requires the approval of one of the contracting
              a. It is not illusory, it is legally enforceable
              b. If the subject matter of the contract is such that it involves personal taste
                  and individual judgment, then it is read literally. (if the person is not satisfied,
                  they don’t have to pay). For example, if I contract a person to paint my
                  portrait, satisfaction is based on my subjective satisfaction.
              c. If it a more ordinary contract (i.e. paint house), then even though the contract
                  language says ―I‖ it is read as if a reasonable person would be satisfied.
                  Objective standard.
        C. Seller of Goods Performance Obligations - UCC
           1. There must be a perfect tender. The seller is obligated to deliver exactly what
              the terms call for. (Contract for 100 widgets, 99 is a breach. This only applies in
              article 2)
           2. Rejection of the goods – if the seller does not make a perfect tender, the buyer
              has the option to reject the goods.
              a. there is a difference between a rejection of an offer (no contract – can’t sue)
                  and a rejection of the goods (still contract – can sue)
           3. Revocation of acceptance of the goods – tested with rejection
              a. The buyer is acting immediately and the buyer can reject the goods if they are
                  anything less than perfect.
              b. If there was a substantial problem with the goods that was difficult to discover
                  early on, they can still revoke the contract

II.   Excuse of Nonperformance
      A. Nonperformance is sometimes excused, 5 grounds for excuse
      B. If there was a conditional obligation and the condition wasn’t met (Buy house if
         appraised at $120K, but turns out $118 – excused)
      C. The other parties breach (UCC perfect tender – the items are not perfect). A
         material breach excuses the other party from performing. Painting house for $1K, get
         paint on the windows, can get away without paying $1K? Probably, but will have to pay
         something. If I paint if purple rather than white, then payment would be excused
         because that is a material breach.
      D. Anticipatory repudiation – early revocation. The other party is excused.
      E. Later agreement that excuses nonperformance
         1. Novation – two people make a contract and later both agree that a new party can
            perform the contract. If that third party breaches, you can’t sue because it
            excuses the other party (Can’t sue the originally contracted party? – yes, the
            original party is excused, agreement to substitution is critical)
         2. Accord and Satisfaction – the excuse requires both the accord and the
            satisfaction. It changes the deal with the same two parties. (i.e. Owe $1000. Paint
            house instead)
            a. Accord = new agreement, does not affect the original agreement. Breach
                results in suing on either condition – money or paint house.
            b. Satisfaction = actual act
            c. Does agreement as modified fall within the SOF?
            d. When do we need consideration for changes in contract? Not UCC because
                there is no PELDR, but it is required in common law cases.
      F. Later unforeseen occurrence
         1. Impossibility - Where there is a later unforeseen occurrence that is no one’s fault,
            the non-performance is excused. Taylor v. Caldwell – concert hall lease, after
            agreement made the hall burned down. Taylor sued for breach of contract, can’t
            use concert hall.
         2. Frustration of Purpose – performance isn’t impossible, but it takes away the
            purpose of the contract. The agreement is unenforceable. Krell v. Henry – guy
            wants to see the coronation parade. Flu epidemic and parade called off. It’s not
            impossible, but the purpose for agreement is frustrated by later occurence.

III. Breach Remedies
     A. Liquidated damages – the parties have agreed what the damages are to be. They are
        valid if
        1. The contract is uncertain as to what the possible damages might be
        2. They are a reasonable measure of what these uncertain damages might be.

        These are tested as to the time that the agreement is made, when no one knows
         what the damages are. If you are told what damages actually made it is irrelevant,
         that info was not available at the time of the agreement. Was this a reasonable
         way to deal with it?
B.   There are NO PUNITIVE DAMAGES IN CONTRACT LAW or UCC. Contract law is
     not interested in punishing breaching parties. Torts allow punitive.
C.   Consequential damages – recoverable only if reasonably foreseeable by both of the
     parties at the time of the contract. Hadley v. Backsendale(?) English mill in small
     village. No one knew how to fix the Crank Shaft. Inexcusable delay. Because you
     breached, something else bad happened to me. These are indirect damages and only
     recoverable if reasonably foreseeable by both of the parties at the time of the
     contract. (Lose money because delay in painting caused owner to miss the season to
     sell the house, costing $5000. For recovery, this must have been foreseeable by both
D.   Reformation – need to conform the written contract to what it is that the party
     actually agreed to. We agree it’s the 19 south acres, but the written agreement
     comes out 19 southeast acres. Conform to meet the parties’ agreement.
E.   Specific performance – court order directing the parties to do what they contracted
     to do. Equitable remedy that is only used when the legal remedies are not sufficient.
     All equitable remedies are only available when money damages are not enough.
     1. land sales – land is unique, transfer of ownership
     2. sales of unique goods (antiques, works of art, made to order)
     3. personal services contracts – NO SPECIFIC PERFORMANCE
     4. Negative specific performance or injunctive relief – stops you from doing
         something. Pat Riley under contract to coach the Knicks, but he doesn’t want to.
         They can’t sue him to force him to coach, but they can get an injunction disallowing
         him from coaching another team.
F.   Money damages
     1. The goal is to put the non-breaching party in the same position that she would have
         been in had the contract been performed. Expectation damages.
         a. Identify the non-breaching party
         b. What would the person receive if the contract had been properly performed
         c. What would it take to award damages that would have been due?
     2. Examples
         a. breach contract for $1000 for painting house. New painter charges $1500. If
            breaching party pays $500, that’s where the person would be had the contract
            been performed
         b. I’ve bought the paint in preparation and you breach. How measure the
            damages? Give costs and provable lost profits. What about unilateral contract
            acceptance by performance?

            c. Sale of goods – sell Caddy that’s in mint condition, but it’s not in mint condition.
               You want to keep the car, but you want some of the money back because it’s not
               in mint condition. Delivered in $1500 condition, had it been in mint condition it
               would be worth $5000. Trying to put the innocent in the same condition as if
               the contract had been performed – would have had car worth $5000, but you
               have car worth $1500. Consequential damages recoverable only if reasonably
               foreseeable by both parties

IV.   Third Party Problems
      A. Third party beneficiaries – two people contract with each other with the intent of
         benefiting a third party. The third party has legal rights and can enforce it (i.e. buy
         life insurance policy, you agree to pay payments, they agree to pay son at your death.
         Son can enforce the contract.)
         1. Third person bene – person not a party to the contract but can still enforce it
             because the other parties made the contract with the intent of benefiting them.
             a. creditor bene
             b. donee bene – most 3 rd party benes. It is a donee bene UNLESS the 3 rd party
                 was already a creditor of the promisee
             c. canceling or modifying
                 i.      contract language controls
                 ii.     the contract can’t be canceled or modified until the 3 rd party knows and
             d. the 3 party can sue the promisor and the promisee can sue the promisor
             e. the 3rd party can sue the promisee if the 3rd party is a creditor bene.
             f. Promisor = the person who is promising to do something for the 3 rd party
                 (insurance company)
             g. Promisee = other party to the contract
         2. Assignments – an agreement between two people and one of the parties to the
             original contract transfers away (assigns) his rights to a 3 rd party
             a. The assignee can sue the obligor. The assignee steps in the shoes of the
             b. Happens in steps – two parties make a contract, THEN one of the parties
                 assigns his rights to a third party
             c. Simply substitutes one party for another party
         3. Delegations – two people make an agreement and then later one of them gets
             somebody else to do the work
             a. When possible
                 1) contract provisions always control
                 2) if no provisions, you can generally delegate duties unless you are talking
                     about a situation that involves special skills or a person involving a special
             b. Consequences
                1) the delegating party remains liable
                2) delegatee – he is only legally obligated if he received consideration
             c. Compare delegation and novation
                1) When you delegate, if you ask the other party and they agree, it becomes a
                2) Under delegation, you remain liable.
                3) Under novation, you can sue the delegatee.
             d. Connection between 3rd party bene and delegation
                1) if the delegatee receives consideration from the delegating party, it is a
                   delegation for consideration AND a third party bene.
What happens if the SOF is not satisfied?
      The SOF is a defense to contract formation. When you have a situation that falls within
the SOF, and the SOF is not complied with its a defense that needs to be presented and proved
to prevent enforcement. If you can’t sue on the contract, always look for a quasi-contract

Equal Dignity Rule – this concerns when it is necessary to have written authority for a third
party to act on behalf of someone else in a contract. Authorization must have the same degree
as the contract the person is entering the other into. An agent needs written authority to
enter into a contract for another when the contract is required by the SOF to be in writing.
This issue turns on whether the SOF requires the contract to be in writing and usually occurs in
real estate dealings. In order to enter into a lease for another person, do I need written
authority to do so? If the contract is over 1 year I do need written authority.

        If there is a question of illegality, the issue turns on knowing the difference between a
contract with illegal subject matter and an illegal purpose.
1. If X contracts with Y to kill Z for $5000, neither X nor Y can enforce the agreement. The
    contract deals with illegal subject matter and is therefore void.
2. If Y contracts with a cab driver to take him to the spot to kill Z, the cab driver can recover
    from Y because their contract dealt with illegal purpose, and the cab driver is more than
    likely unaware of Y’s purpose in going to the spot.

Rejection - Counter offer, conditional acceptance, adds terms under common law

Terms of Contract
      The terms of a contract are found in what is written and what is said. You can also find
them in the terms of previous dealings, if there has been a course of dealings between the two
parties. The custom of the industry is relevant and can dictate the terms and what they mean.

Prior dealings – how these people did their deals together, person specific
Custom and usage – info about how deals with other people in the industry were    done