Contracts Outline

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                    “Armadillos From Texas Play Rap, Eating Tacos” –
Applicable Law / Formation / Terms / Performance / Remedies / Excuses / Third-Party Problems

          a. Vocabulary
                 i. Contract: a legally enforceable agreement
                ii. Quasi-Contract: equitable remedy that may apply in the absence of a
                    contract, also known as unjust enrichment. Measures damages based on
                    the defendant’s gain—the benefit conferred. There are three elements:
                        1. π has conferred a benefit on Δ,
                        2. π reasonably expected to be paid, and
                        3. Δ will realize an unjust enrichment unless π is compensated.
               iii. Unilateral Contracts: contracts where full performance is the only
                    acceptable means of acceptance. Typical examples are rewards, contests,
                    and contracts that explicitly call for full performance to accept.
               iv. Bilateral Contracts: all other contracts.
          b. U.C.C. Article 2
                 i. Apples to contracts which are primarily for the sale of goods.
                ii. In mixed deals, determine which is more important– the sale of goods, or
                    the conference of services. Whichever is more important controls.
                        1. Unless: contract is severable. If severable, UCC applies to the sale
                            of goods and common law applies to the conference of services.

          a. Offers
                 i. Manifestations of intent to contract—words or conduct showing
                    commitment. Question: would a reasonable person in the position of the
                    offeree believe that his assent creates a contract?
                        1. The offeror’s intent and/or belief are usually irrelevant.
                ii. Issues to watch for:
                        1. Context
                                a. Generally, advertisements are not offers.
                                b. However, ads may be offers if they are like rewards.
                                   (EX: Pharmacy advertises, $100 to anyone ill after use.)
                                c. Advertisements may also be offers if it specifies both the
                                   quantity available and expressly indicates who can accept
                                   its terms.
                                   (EX: Lefkowitz Department Store ad for fur coats)
              2. Content
                    a. Material Terms
                            i. Generally, offers needn’t contain all material terms.
                           ii. Under Article 2, offers needn’t contain a price term.
                          iii. However, real estate offers must have a price term.
                    b. Under both the common law and U.C.C., a invitation with
                       ambiguous terms is not an offer.
                            i. No contract if offeror offers to sell for a ―fair‖ or
                               ―reasonable‖ price – too ambiguous.
                    c. Requirements contracts are valid: watch for ―exclusive‖
                       language (all, exclusively, only, solely).

b. Terminating an Offer
   4 Methods
       i. Lapse of Time
             1. On the MBE, if more than 1 month from offer, look for lapse.
             2. Lapse may also be stated in terms of a ―reasonable time.‖
      ii. Death of a Party Prior to Acceptance
             1. Generally, death of a party prior to formation terminates the offer.
             2. However, some offers are irrevocable. Irrevocable offers will not
                 be affected by the death of a party.
     iii. Revocation by the Offeror
             1. Offers may be revoked in 2 ways:
                     a. Unambiguous statement of revocation by offeror to offeree
                         of unwillingness or inability to contract
                              i. Note: revocation by mail not effective until received
                     b. Unambiguous conduct by offeror that offeree is aware of,
                         indicating an unwillingness or inability to contract
             2. Irrevocable Offers:
                     a. Options
                              i. Elements:
                                     1. Offeror promises not to revoke
                                     2. Offeree furnishes separate consideration
                             ii. Mere promise to keep offer open isn’t enforceable
                                             b. U.C.C. Firm Offers
                                                      i. An offer must be held open if:
                                                             1. It’s an offer to buy or sell goods;
                                                             2. Accompanied by a written and signed
                                                                 promise to keep the offer open; and
                                                             3. Party offering to keep it open is a merchant.
                                                     ii. Firm offer rule only applies for up to 3 months;
                                                         after that (even if merchant promises to hold open
                                                         longer), the firm offer rule does not apply.
                                             c. Offers Upon Which the Offeree Has Reasonably Relied
                                                      i. Elements:
                                                             1. Reliance,
                                                             2. Where reliance was reasonably foreseeable,
                                                             3. And revocation would be detrimental.
                                                     ii. EX: subcontractor bids submitted to GCs.
                                             d. Start of Performance Pursuant to a Unilateral Contract—
                                                 Offer Irrevocable for a Reasonable Time for Offeree to
                                                 Complete Performance
                             iv. Rejection by the Offeree
                                       1. Counteroffers
                                             a. Counteroffer rejects the offer and constitutes a new offer.
                                             b. Contrast this, however, with bargaining. If the offeree
                                                 respond with ―Will you …?‖ or ―Would you …?‖ his
                                                 response may be an inquiry. Because his response was a
                                                 question it is not a counteroffer—it has no legal effect.
                                       2. Conditional Acceptance
                                             a. Same rule for both the Common Law and U.C.C.
                                             b. Like counteroffers, conditional acceptances kill the offer
                                                 and constitute new offers.
                                             c. Look for an ―acceptance,‖ followed by ―if,‖ ―only if,‖
                                                 ―provided that,‖ ―so long as,‖ ―but‖ or ―on condition that.‖
                                       3. Addition of New Terms
                                             a. Common Law: the Mirror Image Rule. A purported
                                                 acceptance with any new term acts as a counteroffer.
                                             b. U.C.C. Art. 2: Special rule when both parties = merchants.
 Material terms affect the economic
                                                      i. Additional terms become part of the contract if they
  risks or benefits. Thus, proposed
                                                         do not materially change the contract and the other
changes to remedies (e.g., arbitration
    clauses) are material changes.                       party does not object.
                                             c. U.C.C. Art. 2: If 1 party isn’t a merchant, the additional
                                                 terms don’t kill the offer, but are separate proposals.
c. Acceptance
       i. The offer can control the acceptable manner for acceptance.
      ii. There are six methods for acceptance:
             1. Conduct
                     a. The offeree may accept by conduct.
                     b. Similarly, the offeree may respond with a counter offer or
                         conditional acceptance. If the offeror begins to perform,
                         his conduct will be deemed an acceptance of the offeree’s
                         counteroffer / conditional acceptance.
             2. Offeree Fully Performs
                     a. No question that full performance is acceptance. However,
                         the facts may push the question whether notice is required.
                     b. On the exam, look for geography: if the offeror and offeree
                         are in different places, offeror may be excused if he doesn’t
                         have notice of offeree’s full performance.
             3. Offeree Begins Performance
                     a. Start of performance is sufficient to accept a bilateral
                         contract but isn’t enough to accept a unilateral contract.
                         Remember, unilateral contracts require full performance.
             4. Offeree Promises to Perform
             5. Mail Box Rules
                     a. Written acceptance is generally effective when mailed.
                     b. If a rejection is mailed before an acceptance is mailed,
                         neither is effective until received (effectively, then, the first
                         received is given legal effect).
                     c. You cannot use Mailbox Rule to meet an option deadline!
             6. Seller of Goods Sends the Wrong Goods
                     a. Sending wrong goods acts as both acceptance and breach.
                     b. However, seller can avoid breach by accompanying
                         shipment of non-conforming goods with a letter stating that
                         the shipment is an accommodation.
                              i. The accommodation acts as a counteroffer. The
                                 buyer can either accept the accommodation in full
                                 or reject it in full. Either way, he cannot sue for
                                 damages based on his original offer because no
                                 contract ever formed around the original offer.
     iii. Generally, an offer can only be accepted by someone to whom the offer
          was made, who actually knows about the offer.
             1. Offers are not assignable.
             2. Except: options are assignable.
d. Consideration, Lack of Consideration, and Substitutes for Consideration
        i. Look for bargained-for, legal detriment
               1. If the other party didn’t ask for it, it’s likely not consideration.
       ii. Usually comes in four flavors:
               1. Performance
               2. Forbearance (not doing something you’re legally entitled to do)
               3. Promise to Perform
               4. Promise to Forbear
     iii. The adequacy of consideration is irrelevant: ―a peppercorn is sufficient.‖
      iv. Generally, ―past consideration‖ is not adequate.
               1. Exception: If promisor requests performance knowing that
                  promisee would expect compensation, and later promises to
                  provide compensation, they have a legally enforceable contract.
               2. EX: Homer sees Lisa drowning & asks Apu to save her, knowing
                  that Apu expects to be paid. After Apu saves Lisa, Homer
                  promises to pay him $2K. Homer’s promise is enforceable, even
                  though based on acts already performed.
       v. Common Law – the ―Preexisting Duty Rule‖
               1. The party who’s bound can’t use his pre-existing duty to get paid
                  more. New consideration would be required for modification.
               2. Unless:
                       a. There’s been some change (e.g., additional requirements).
                       b. An unforeseen difficulty arises – something so severe that
                          it would otherwise excuse performance.
                       c. A third party promises to pay for the same work.
      vi. By comparison, under Article 2 new consideration isn’t required for
           modification so long as it’s done in good faith.
     vii. Where a debt is disputed, partial payment may be consideration for a
           promise to forgive the rest of the debt.
               1. The key is that the debt must be both due and disputed.
               2. Note: getting payment before due may be adequate consideration
                  for taking less than full payment.
e. Acceptable Substitutes for Consideration:
        i. Seals. On MBE, seals are not acceptable. In PA, seals are acceptable.
       ii. A written promise to satisfy an obligation otherwise barred by a legal
           defense (statute of limitations, statute of frauds) is legally enforceable.
     iii. Promissory Estoppel
               1. Reliance,
               2. Which was reasonable, detrimental, and foreseeable, and
               3. Where enforcement is necessary to prevent injustice.
f. Reasons for Not Enforcing the Agreement: Lack of Capacity
       i. Three major categories of incapacity:
              1. Infants (people < 18 years old)
              2. Mental Incompetents
              3. Intoxicated people, if the other party has reason to know
      ii. When someone who lacks capacity enters into a contract, the contract may
          not be enforced against the incapable party. However, the incapable
          party may choose to enforce the contract against the capable party!
     iii. Further, someone who entered into a contract while incapacitated may
          subsequently ratify the contract by retaining the benefits after gaining
     iv. A person who lacks capacity is still legally obligated to pay for things that
          are necessary such as food, housing, clothing, medicine or medical care.
          However, “necessity” is enforced under a theory of quasi-contract.

g. Reasons for Not Enforcing the Agreement: Statute of Frauds
   Consider these two steps to determine if there’s a statute of frauds defense:
      i. Is the contract within the Statute of Frauds?
              1. Suretyship
                     a. Unless: main purpose exception. If main purpose of the
                         suretyship is to benefit the guarantor, SoF doesn’t apply.
              2. Promises by executor to personally answer for debts of the estate.
              3. Promises in consideration of marriage (pre- and post- nups).
              4. Service contracts incapable of being performed in < one year.
                     a. EX: Monthly performance for 13 months.
                     b. However, parties are assumed to have infinite resources–
                         thus, large projects likely won’t fall under the.
                     c. Similarly, contracts to be performed before death don’t fall
                         under the Statute because the parties could die tomorrow.
              5. Any contract whose performance is due in > one year.
              6. Transfers of interests in land
                     a. Exception: leases for one year or less. (In PA: ≤ 3 years.)
              7. Sale of goods for $500 or more
              8. Equal Dignity Doctrine: an agency contract falls under the Statute
                 of Frauds if the underlying contract would have to be in writing.
              9. Modification: if, with the alleged change, the deal falls within the
                 Statute, the modification must separately satisfy the Statute.
                     a. Common Law: contract language stating that all
                         modifications must be in writing is ineffective.
                     b. U.C.C.: such provisions are effective unless waived.
ii. Has the Statute been satisfied?
       1. May be satisfied either by proof of performance:
               a. Full performance by either party satisfies the Statute.
               b. Partial performance of a service contract does not.
               c. Partial performance for sales of ordinary goods:
                        i. Delivered Goods: Buyer cannot assert a Statute of
                           Frauds defense to avoid paying for the delivered
                       ii. Undelivered Goods: Seller may assert the Statute as
                           a defense to the undelivered goods.
               d. Partial perf. for sale of specially manufactured goods:
                        i. The Statute is satisfied as soon as the seller has
                           made a ―substantial beginning‖—that is, seller has
                           done enough work that it’s clear that he’s doing
                           something custom-made or custom-ordered.
               e. Real estate transfers: must do 2 of the following 3:
                        i. Payment
                       ii. Improvements
                      iii. Possession
       2. May also be satisfied by a written instrument:
               a. Common Law:
                        i. the written instrument must bass the all material
                           terms test—must state ―who‖ & ―what‖
                       ii. must be signed by the party asserting the statute of
                           frauds as a defense to the contract
               b. the U.C.C.
                        i. Writing must state that there is a contract for sale of
                           goods and must contain the quantity term. It need
                           not, however, contain the price term.
                       ii. There are two rules for signatures:
                               1. Either signed by the party asserting the
                                   statute as a defense to the contract, or
                               2. When both parties are merchants and the
                                   party asserting the defense failed to sign, the
                                   statute is satisfied if the plaintiff gave the
                                   defendant a signed writing that asserted the
                                   existence of the contracts and the defendant
                                   did not object within 10 days.
              3. May also be satisfied by judicial admission—through admissions,
                  pleadings, testimony, etc.
h. Reasons for Not Enforcing the Agreement: Unconscionability
       i. Doctrine of unconscionability empowers courts to refuse to enforce all or
          part of an agreement. Courts may rely on procedural or substantive
      ii. Unconscionability is tested as of the time the agreement was made.

i. Reasons for Not Enforcing the Agreement:
   Illegality, Policy, Misrepresentation, Fraud, and Duress
         i. Contracts for illegal purposes are always void.
        ii. Courts can void a contract for public policy. Look for:
                1. Language that exculpates Δ for intentional or reckless conduct.
                2. Covenants not to compete that lack reasonable limitations on
                    scope of geography and length of time.
       iii. Misrepresentation
                1. False assertions of fact that induce a contract may later void the
                    contract. No wrongdoing required.
                2. Omissions (nondisclosure) must be wrongful to void a contract.
       iv. Economic Duress – 2 elements
                1. An improper threat by Δ, and
                2. π had no reasonable alternative.

j. Reasons for Not Enforcing the Agreement: Ambiguity in the Words / Terms
       i. There won’t be a contract if:
              1. The parties used a material term that’s open to at least 2 reasonable
              2. Each party attaches a different meaning to the term; and
              3. Neither party knows or has reason to know that the term is open to
                  multiple, reasonable interpretations.
      ii. If one of the parties knows that the term is open to multiple interpretations,
          the contract will be formed--under terms as understood by the other party.

k. Reasons for Not Enforcing the Agreement: Mistakes Existing at time of Contract
       i. Mutual Mistake of Material Fact
             1. Mutual, material mistake voids a contract unless the party seeking
                 to void the contract bore the risk of mistake.
      ii. Unilateral Mistake
             1. Courts hesitate to void a contract based on unilateral mistake.
                 They’ll only do it if Δ had reason to know of the mistake.
III.   Terms
       a. Parol Evidence Rule
          Note: if it’s an oral contract, the question begs for Statute of Frauds treatment.
          If it’s a written contract, look for Parol Evidence problems.
                i. Parol Evidence Rule prevents courts from admitting evidence of earlier
                   agreements for the purpose of contradicting terms of a written contract.
               ii. Parol Evidence rule doesn’t prevent using such evidence to determine:
                       1. if the parties erred in reducing the agreement to writing.
                       2. whether it was induced by misrepresentation, fraud, or duress.
                       3. explaining meaning of ambiguous terms in the written deal.
              iii. Parol Evidence doesn’t stop the court from adding terms to a deal when
                   the written contract either: (1) was only a partial integration, or (2)
                   incorporated other documents either by implicit need or explicit reference.

       b. Conduct: Course of Performance, Course of Dealing, Trade Usage
              i. Course of Performance > Course of Dealing > Trade Usage
             ii. Course of Performance: same people, same contract
            iii. Course of Dealing: same people, different contracts (past dealings)
            iv. Trade Usage: terms as commonly understood in the trade

       c. U.C.C. Terms
             i. Delivery
                    1. Shipment contracts: seller completes delivery obligations when it
                       gets the goods to a common carrier, makes reasonable
                       arrangements for delivery, and notifies the buyer.
                           a. ―FOB [location of shipper]‖
                    2. Destination contracts: seller does not complete its delivery
                       obligation until the goods arrive at the buyer’s door.
                           a. ―FOB [location of buyer]‖

              ii. Risk of Loss
                  Follow these rules sequentially when product is destroyed after contract
                  with no fault by either the seller or buyer:
                      1. Express contractual terms control
                      2. Breaching party is liable for any uninsured loss
                      3. If transferred by common carrier, risk of loss transfer from buyer
                         to seller when the seller meets its delivery obligations.
                      4. Otherwise, it depends on whether the seller is a merchant:
                              a. If so, risk transfers to buyer upon buyer’s receipt of goods.
                              b. If not, risk transfers when buyer ―tenders‖ goods, by
                                 making known that they are available.
iii. Warranties of Quality
       1. Express
                a. Distinguish express warranties from mere sales puffery.
                b. Remember that examples and samples constitute express
                   warranties of quality!

        2. Implied Warranty of Merchantability
              a. Whenever a merchant sells goods, he does so with an
                  implied warranty that the goods sold are fit for the ordinary
                  purpose for which they are used.

        3. Implied Warranty of Fitness (for a Particular Purpose)
              a. If the Seller is a merchant, the Seller warrants that goods
                  are fit for the Buyer’s particular needs when:
                       i. Buyer has a particular purpose,
                      ii. Buyer relies on the Seller to select goods, and
                     iii. Seller knows of Buyer’s purpose & reliance.
              b. If Seller fails to satisfy the Buyer’s purpose, Buyer may
                  revoke the contract if:
                       i. Buyer did not know (and had no reason to know) of
                           any problem with the product,
                      ii. Buyer timely informs Seller of the problem once
                           Buyer is aware of it, and
                     iii. Buyer timely informs Seller of revocation.

        4. Limitations on Warranty Liability
              a. Disclaimers eliminate implied warranties but do not
                  eliminate express warranties made by seller.
              b. May take the form of conspicuous, explicit language, or an
                  ―as is‖ / ―with all faults‖ statement.
              c. Limitations are presumed unconscionable if consumer
                  goods cause personal injury.

        5. Price Terms
               a. An open price terms means a reasonable price at time of
               b. Where the contract states that either Buyer or Seller will fix
                  a price term, they must do so in good faith.
IV.   Performance
      a. Common Law: look for substantial performance. If one party substantially
          performs, the other party must perform in full (and may sue to recover damages
          for any minor breaches).
      b. U.C.C.: the rule is Perfect Tender; perfectly meeting both the order & delivery.
          A less than perfect tender gives the buyer the option to reject the goods.
               i. When the buyer receives less than perfect tender, he has two options. He
                     1. keep the goods and sue for damages, or
                     2. reject ―all or any commercial units‖ and, again, sue for damages.
                             a. Any rejection is limited by cure, acceptance, and issues
                                 stemming from installment contracts.
                                      i. Cure: seller’s chance to make things right. Note
                                         that sellers don’t always have the option to cure.
                                         Further, buyer can’t compel seller to try to cure.
                                             1. If the buyer has previously allowed cure,
                                                  seller may anticipate that it’s still okay.
                                             2. Seller may also cure when he can do so
                                                  before the contractual time for performance.
                                     ii. In an installment contract, buyer may reject the
                                         defective shipment but may not, upon breach in one
                                         shipment, reject remaining shipments still due
                                    iii. Generally, buyer cannot reject goods after
                                             1. However: buyer doesn’t inspect goods if he
                                                  pays for them without a reasonable time to
                                                  inspect them (online sales, phone sales).
                                    iv. Buyer may revoke acceptance if:
                                             1. Nonconformity substantially impairs value;
                                             2. Buyer was excusably ignorant of the defect
                                                  or otherwise reasonably relied on Seller’s
                                                  assurances of satisfaction; and
                                             3. Buyer revokes within a reasonable time after
              V.      Remedies for Unexcused Performance
                      a. Nonmonetary Remedies
                            i. Specific Performance
                                    1. YES: Real Estate
                                    2. YES: ―Unique‖ or ―custom‖ goods
                                    3. PROBABLY NOT: services
                                          a. Definitely can’t make someone perform.
                                          b. Might be able to stop them from performing elsewhere
                                              (injunctive relief). Discretion vested in courts.

                             ii. Reclamation
                                    1. It’s the right of an unpaid seller to get its goods back from Buyer.
                                    2. Elements:
                                            a. Buyer was insolvent when it received the goods
                                            b. Seller demands return of goods with 10 days of receipt
                                                (if buyer represented itself as solvent, 10 days morphs into
                                                a “reasonable time” since seller didn’t know of insolvency)
                                            c. Buyer still has the goods at the time of demand.

                          b. Money Damages
                                 i. Measure of Damages is ―expectation damages.‖ We want to return the
                                    injured party to where he would have been if contract was fulfilled.
 Plaintiffs must prove
      damages with              ii. U.C.C. Rules for Damages Stemming From Sale of Goods
  reasonable certainty.                 1. Seller breaches, buyer keeps the goods
Thus, it’s very difficult                       a. Damages = [FMV if perfect] – [FMV as delivered]
 for new businesses or                  2. Seller breaches, seller has the goods
     new ventures to                            a. Damages = [replacement/market price] – [contract price]
  establish lost profits.                       b. If replacement is more than market, buyer may still recover
                                                    replacement. However, he’ll have to prove that it was
    Where reasonable                                reasonable in the circumstances (notice, deadlines, etc.).
    uncertainty exists,                 3. Buyer breaches, buyer keeps the goods
parties might be better                         a. Damages = [contract price]
off creating liquidated
                                        4. Buyer breaches, seller has the goods
    damages clauses.
                                                a. Damages = [contract price] – [resale price] + [lost profits]
  Such clauses will be
                                                b. Buyer can only recover lost profits only if he could have
   enforced so long as
                                                    made both sales—typically, a lost volume seller.
damages were difficult
                               iii. Additions & Limitations
   to forecast and the
   clause represents a                  1. + Incidental Damages—cost of replacements. Always recoverable.
       reasonable                       2. + Consequential Damages—losses special to this plaintiff.
     approximation.                         Consequential damages are recoverable if they were foreseeable.
                                        3. – Avoidable Damages (burden of proof rests on defendant).
VI.   Excuse of Nonperformance:
      a. One party needn’t perform when the other party breached the contract.
             i. Common Law: substantial performance vs. material breach.
                    1. Only material breaches excuse performance. For MBE purposes,
                       doing less than ½ of the work is a material breach.
                    2. Unless: the contract is divisible. If the contract is divisible, the
                       non-breaching party must pay for work actually completed.
            ii. U.C.C.: the Perfect Tender rule.

      b. Parties may be excused from performance based on the non-occurrence of an
         express condition precedent.
              i. EX: the parties agree that B will buy S’s house if B can get financing.
             ii. Key words: ―if,‖ ―only if,‖ ―provided that,‖ ―in the event that,‖ ―so long
                 as,‖ ―subject to,‖ ―unless,‖ ―when,‖ ―until,‖ and ―on the condition that.‖
            iii. Express conditions may be excused by:
                     1. Waiver / Estoppel
                            a. The party who would otherwise benefit from the condition
                                 precedent may choose to waive the condition.
                                 EX: even though B can’t get financing, he buys the house.
                     2. Prevention
                            a. If the party protected by the condition precedent prevents
                                 its occurrence, the condition precedent is excused and the
                                 parties must proceed with the contract.
                     3. Avoidance of Forfeiture
                            a. Courts may excuse conditions precedent to avoid excessive
                                 harm to the party not protected by the condition (policy).

      c. Performance may be excused by anticipatory repudiation.
              i. Elements:
                     1. Unambiguous statements or conduct
                     2. Indicating that the repudiating party will not perform
                     3. Made prior to the time performance was due.
             ii. Anticipatory Repudiation gives rise to an immediate claim for damages
                 unless the claimant has already fully performed – if claimant has already
                 fully performed, she must wait until the time when performance is due.
            iii. The repudiating party may retract his repudiation so long as the non-
                 repudiating party hasn’t relied on it to her detriment. If repudiation is
                 timely and effectively retracted, the duty to perform is re-imposed but
                 performance can be delayed until adequate assurances are provided.
d. In limited circumstances, performance can by excused based on insecurity.
        i. If a party (through words or actions) falls short of anticipatory repudiation,
           the other party may demand adequate assurances of performance.
           If it is commercially reasonable, the other party may suspend
           performance until she receives such adequate assurances.
       ii. Necessary elements:
                1. Reasonable grounds for insecurity
                2. Written demand for adequate assurances
                3. It must be commercially reasonable to halt performance

e. Performance may be excused by a later contract.
        i. Rescission
              1. If parties to a contract mutually agree to rescind a contract,
                  performance is excused by each party.
              2. If one party has already performed a little, he can recover under a
                  theory of quasi-contract (unjust enrichment).
       ii. Accord & Satisfaction
              1. The parties can agree to a substitute form of consideration (an
                  accord). When the accord is delivered, that’s satisfaction.
                      a. Accord: if you do this, then I’ll forgive that
              2. Once the accord is performed, the original obligation is excused.
              3. If the party fails to furnish the accord, the other party may sue
                  either for the accord or for the original consideration.
      iii. Modification
              1. Slightly different than Accord & Satisfaction:
                      a. Modification: I’ll give you this instead of that.
              2. If the party fails to furnish the modified consideration, the other
                  party may only sue to recover the modified consideration. She has
                  given up her right to or interest in the original consideration.
      iv. Novation
              1. It is an agreement between all parties to the contract to substitute a
                  third party for one of the original contracting parties.
                  (same performance, different parties)
              2. Novation completely excuses the substituted party.
              3. If only one party consents to the substitution, that’s delegation. In
                  delegation, the original party is still in privity of contract with the
                  non-breaching party and remains liable.
       f. Performance may be excused by a later, unforeseen event.
               i. Impossibility, Impracticability, Frustration of Purpose
              ii. Destruction of subject matter after contract:
                     1. Will excuse repair; will not excuse construction.
                     2. Destruction of specific items will excuse delivery.
                     3. Destruction of general items (e.g., grits) will not excuse delivery.
             iii. Death After Contract
                     1. After contract, death does not excuse contract obligations for the
                         sale of goods. The decedent’s contract obligations remain.
                     2. Obviously, death after contract excuses a party who is a ―special
                         person‖ from performance due to impossibility.
                             a. If Donovan McNabb dies, the Redskins can’t enforce his
                                  2010/11 contract.
             iv. Subsequent Laws and Regulations
                     1. If a later law makes a contract illegal, the contract is excused by

VII.   Third-Party Problems
       a. Third Party Beneficiaries
               i. Vocabulary
                       1. Promisee—the person who gets the promise that benefits the 3rd
              ii. Only intended (not incidental) third parties have rights. The intent of the
                  contracting parties determines whether 3rd party is intended or not.
             iii. If the 3rd party knows of and has relied on or otherwise assented to the
                  contract, her rights have vested. Once her rights have vested, the original
                  contractual parties cannot rescind or modify the contract without her
                  consent (unless the contract otherwise provides).
                       1. Otherwise:
                               a. 3PB can recover from the Promisor.
                                       i. If 3PB sues Promisor, Promisor may assert all
                                          defenses that he could assert against Promisee.
                               b. Promisee can recover from the Promisor.
                               c. 3PB cannot recover from Promisee for the 3PB’s third-
                                   party benefit. 3PB may be able to recover, however, for
                                   pre-existing debts.
b. Assignment
       i. Vocabulary:
              1. Assignor: person assigning away his rights
              2. Assignee: the third-party who gets those rights
              3. Obligor: the other party to the contract
      ii. Courts disfavor limiting assignments.
              1. ―rights hereunder are not assignable‖
                 Contractual language prohibiting assignments eliminates the
                 assignor’s right to assign but not her power to do it. Thus, an
                 assignee who doesn’t know of the prohibition can still sue for
              2. ―all assignments of rights under this contract are void‖
                 To have effect, a statement in the contract must state that
                 assignments are void, have no force, or have no effect. If the
                 language is strong enough, courts will abide by it.
     iii. Assignments do not require consideration.
     iv. Gratuitous assignments may be freely revoked.
              1. If O make a series of gratuitous assignments, the last in time wins.
                 Each subsequent gratuitous assignment revokes its predecessor.
      v. If the assignor assigns multiple times for consideration, first in time wins.
          The rest can sue assignor for breach of contract.
     vi. Rights:
              1. Assignee may recover only from the Obligor.
              2. An assignor for consideration gives up her right to recover
                 from the obligor.
              3. Obligor has the same defenses against assignee as it would
                 have against the assignor.
              4. Payment or modification between Obligor and Assignor is
                 effective unless obligor knows of the assignment.

c. Delegation
       i. Delegation occurs when a party assigns his duties under contract to a 3P.
      ii. Generally, contractual duties are delegable.
     iii. Unless:
              1. Contract prohibits it (prohibits delegations or assignments).
              2. Contract calls for very special skills. –OR–
              3. Person to perform has a VERY SPECIAL reputation.
     iv. If delegate fails to perform, delegator is still liable. Delegate may only be
          held liable if she received consideration from the delegator.

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Description: This is a bar review outline that I created. It's direct and to the point. (You can rely on this. As a point of reference, I was about 3 points from the highest essay score in PA. These served me well.)