Contract and Sales (MBE) Flashcards
1
Q
Contract
A
A legally enforceable agreement
2
Q
Types of Contracts
A
1) Express, formed by language, oral or written,
2) Implied, formed by conduct,
3) Quasi-contracts, an unenforceable contract that results in unjust enrichment
3
Q
Bilateral Contracts
A
Consists of the exchange of promises, and can be accepted in ANY REASONABLE WAY
4
Q
Unilateral Contracts
A
A contract where an offeror requests performance to accept, rather than a promise. Once the act is completed, the contract is formed.
5
Q
Unilateral Contracts: Types
A
1) When the offeror unambiguously indicates that completion of performance is the only matter of acceptance, or
2) offers to the public (i.e., reward)
6
Q
Void v. Voidable Contracts
A
Void - A contract without ANY LEGAL EFFECT from the beginning (e.g., contract to commit a crime)
Voidable - A contract where one or both parties can CHOOSE TO AVOID (e.g., infancy or mental illness)
7
Q
UCC: Goods
A
Goods are ALL THINGS MOVABLE at the time they are identified as the item to be sold under the contract.
8
Q
UCC: Merchants
A
One who regularly deals in goods of the kind sold or otherwise holds themselves out as having a special knowledge as to the good involved.
9
Q
Contracts for Goods and Services
A
If a sale is for both goods and services, the law governing the dominant aspect will apply.
If the contract divides payment for goods and services, the UCC will apply to the goods and common law will apply to the services.
10
Q
UCC: Contracts for Goods and Services - Implied Warranty (Delaware Distinction)
A
In Delaware, a contract for goods applies IMPLIED WARRANTY provisions to both the goods and services.
11
Q
UCC: Good Faith and Fair Dealing
A
Every UCC contract imposes an obligation of good faith in its performance and enforcement.
12
Q
Elements of a Valid Contract
A
1) Offer, 2) Acceptance, 3) Consideration, and 4) No Defenses (i.e., mistake, lack of capacity, illegality, or SOF).
13
Q
Mutual Assent: Offer
A
An offer creates a REASONABLE EXPECTATION in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
14
Q
Offer: Surrounding Circumstances
A
Courts will consider the surrounding circumstances in determining whether an offer exists (e.g., joking)
15
Q
Offer: Prior Practice and Relationship
A
A court will look to the prior relationship and practice of the parties to determine whether certain remarks constitute an offer.
16
Q
Offer Broad Communications in Media
A
The broader the communicating media, the more likely a court will view the communication as merely the SOLICITATION OF AN OFFER
17
Q
Offer: Advertisements
A
Advertisements and the like containing price quotations ARE USUALLY construed as MERE INVITATIONS FOR OFFERS, UNLESS the advertisement contains: (i) a promise, (ii) with definite terms, and (iii) offeree is identified.
18
Q
Offer: Definite Terms
A
An offer must be definite and certain in its ESSENTIAL TERMS so that a contract is CAPABLE OF BEING ENFORCED.
19
Q
Offer: Essential Terms
A
1) Identification of Offeree; 2) definiteness of subject matter (for Real Estate Transactions = (i) describe land, and (ii) price; for Sale of Goods = (i) include quantity); and 3) price.
20
Q
Requirement Contracts
A
A buyer promises to buy from a certain seller all of the goods the BUYER REQUIRES, and seller agrees to sell that amount.
21
Q
Output Contracts
A
A seller promises to sell to a certain buyer all of the goods that the SELLER PRODUCES, and the buyer AGREES TO BUY that amount from seller.
22
Q
Offer: Employment and Other Services
A
In contracts for employment, if the DURATION is not specified, and the offer is accepted, a contract will be terminable AT THE WILL of either party.
23
Q
Offer: Missing Terms
A
One or more terms being left open DOES NOT prevent the formation of a contract IF it appears the parties INTENDED TO MAKE A CONTRACT and there is a REASONABLY CERTAIN BASIS for giving a remedy.
For UCC, a Court CAN SUPPLY reasonable terms for those that are missing.
24
Q
Offer: Missing Price
A
Except for contracts in real property, a missing price term DOES NOT prevent the formation of a contract.
In UCC, a contract missing price terms will be provided a REASONABLE PRICE AT THE TIME OF DELIVERY.
25
Offer: Missing Time
If an agreement doesn't specify the time in which an act is performed, the law IMPLIES that it is to be performed WITHIN A REASONABLE TIME.
26
Offer: Vague Terms
If a MATERIAL TERM is vague or ambiguous, it is NOT AN OFFER at common law or under the UCC. However, UNCERTAINTY CAN BE CURED by part performance that clarifies the vague term or by acceptance of full performance.
27
Offer: Terms to be Agreed on Later
An offer with a MATERIAL TERM stating that some term is to be agreed on at a future date is TOO UNCERTAIN
28
Offer: Knowledge of Offer
To have the power to accept, the offeree must HAVE KNOWLEDGE of the offer.
29
Types of Termination
1) Lapse of time (must accept within specified time period or, if none, within REASONABLE TIME);
2) Revocation;
3) Rejection; or
4) Death
30
Mere Inquiry
An inquiry won't terminate from a mere inquiry, the test is whether a REASONABLE PERSON would believe that the original offer had been rejected.
31
Conditional Acceptance
When an acceptance is made expressly conditional on the acceptance of new terms, it is a REJECTION.
If the parties ship or accept goods after a conditional acceptance is made, a contract is FORMED BY THEIR CONDUCT, and the new terms ARE NOT INCLUDED.
32
Rejection of Option
Because an option is a contract to keep an offer open, a rejection or counteroffer to an option DOES NOT constitute a termination of the offer, UNLESS the offeror has DETRIMENTALLY RELIED on the offeree's rejection.
33
Revocation
An offeror may revoke EXPRESSLY by direct communication to the offeree, or INDIRECTLY if the offeree receives: (i) CORRECT information, (ii) from a RELIABLE SOURCE, (iii) of acts of the offeror that would indicate to a REASONABLE PERSON that the offeror no longer wishes to make the offer.
34
Revocation Exceptions
Offers can be revoked at will by the offeror, EXCEPT: 1) Option contracts (offeree gave consideration to hold open offer), 2) Merchant's firm offer; 3) detrimental reliance; and 4) beginning performance in a unilateral contract
35
Revocation: Merchant's Firm Offer
Under UCC, a merchant may not revoke an offer if: (i) a merchant, (ii) offers to buy or sell goods IN SIGNED WRITING, and (iii) writing GIVES ASSURANCES that it will be held open.
The offer is NOT REVOCABLE during the time stated, or if no time stated, for a reasonable time NOT TO EXCEED 3 MONTHS.
36
Revocation: Detrimental Reliance
When the offeror could REASONABLY EXPECT the offeree would rely on the offer, and the offeree does rely to their detriment, it will be held IRREVOCABLE AS AN OPTION CONTRACT for a REASONABLE LENGTH of time.
37
Revocation: Beginning Performance in Response to Unilateral Contract Offer
An offer for a unilateral contract becomes IRREVOCABLE ONCE PERFORMANCE HAS BEGUN. The offeror must give the offeree a REASONABLE TIME to complete performance, however the offeree is NOT BOUND to complete performance and may withdraw at any time.
38
Revocation: Preparation to Perform
Substantial preparations to perform DO NOT make the offer irrevocable, but MAY CONSTITUTE DETRIMENTAL RELIANCE.
39
Termination: Events to Terminate by Operation of Law
1) death or insanity of EITHER PARTY for REVOCABLE OFFERS; 2) destruction of the proposed contract's subject matter; or 3) supervening illegality.
40
Acceptance: Assignment of Acceptance
Generally, an offeree's power of acceptance CANNOT BE ASSIGNED, but an option contract to accept the offer can be.
41
Acceptance: Offeree Knowledge of Offer
The offeree MUST KNOW of the offer in order to accept it.
42
Acceptance: Bilateral Contracts
Unless an offer specifically provides that it may be accepted only through performance, it may be accepted either by a PROMISE TO PERFORM or by the BEGINNING OF PERFORMANCE.
43
Acceptance: Silence as Acceptance
Unless the offer provides otherwise, acceptance of an offer to enter into a bilateral contract MUST BE COMMUNICATED. Silence WILL NOT be treated as acceptance, UNLESS: (i) it is acceptable from prior dealings; or (ii) the recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, failed to speak to reject.
44
Acceptance: UCC - Offers to Buy Goods for Current or Prompt Shipment
An offer to buy goods for current or prompt shipment is construed as inviting acceptance either by: (i) promise to ship, or (ii) current or prompt shipment of CONFORMING OR NONCONFORMING GOODS.
45
Acceptance: Mirror Image Rule
At COMMON LAW, any different additional terms in the acceptance makes the response a REJECTION and COUNTEROFFER.
46
Acceptance for Unilateral Contract - Completion of Performance
A unilateral contract is not accepted UNTIL PERFORMANCE IS COMPLETED.
47
Acceptance for Unilateral Contract - Notice
Generally, the offeree is NOT REQUIRED to give the offeror notice that he has begun the requested performance but is REQUIRED TO NOTIFY the offeror within a REASONABLE TIME AFTER PERFORMANCE HAS BEEN COMPLETED.
However, no notice is required if: (i) the offeror waived notice or (ii) the offeree's performance would normally come to the offeror's attention within a reasonable time.
48
Acceptance under UCC: Shipment of Nonconforming Goods
Shipment of nonconforming goods is an ACCEPTANCE as well as BREACH of the contract, UNLESS the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an ACCOMMODATION.
A buyer is NOT REQUIRED to accept accommodation goods and may reject them, but NO CONTRACT HAS FORMED, therefore no breach.
49
Acceptance under UCC: Battle of the Forms
Inclusion of an additional or different term in a UCC contract in a definite and timely acceptance DOES NOT constitute a rejection and counteroffer, but as an acceptance, UNLESS made conditional on assent to the additional or different terms.
50
Acceptance under UCC: Contracts Involving Nonmerchants - Different or Additional Terms
If ANY PARTY to the contract is not a merchant, the additional or different terms are considered mere proposals to modify the contract that DO NOT become part of the contract UNLESS offeror expressly agrees.
51
Acceptance under UCC: Contract Between Merchants - Different or Additional Terms
If BOTH parties to the contract are merchants, ADDITIONAL terms will be included UNLESS: (i) they MATERIALLY ALTER the original terms of the offer (e.g., changing a party's risk remedies), (ii) the offer EXPRESSLY LIMITS ACCEPTANCE to the terms of the offer, OR (iii) the offeror OBJECTS WITHIN A REASONABLE TIME after notice is received.
52
Acceptance under UCC: Knockout Rule
Some courts follow the "Knockout Rule," which states that conflicting terms in the offer and acceptance are knocked out of the contract, because each party is assumed to object to the inclusion of such terms. Gaps left by knocked out terms are filled by the UCC.
53
Acceptance under UCC: Different Terms - Material Terms
Different terms as to price, quantity, or quality likely indicate no meeting of the minds, and no contract forms.
54
Acceptance under UCC: Merchant's Confirmatory Memo - Different or Additional Terms
A merchant's memo confirming a prior oral agreement that contains different or additional terms is SUBJECT TO the battle of the forms provisions.
55
Acceptance under UCC: Mutual Assent Uncertain
If it cannot be determined with certainty which specific communication was the offer and which the acceptance, but the parties act as though there is a contract, the UCC considers this a binding contract.
56
The Mailbox Rule
Acceptance by mail is effective AT THE MOMENT OF DISPATCH, provided the mail is properly addressed and stamped.
57
The Mailbox Rule Exceptions
The Mailbox Rule applies, UNLESS: (i) the offer stipulates the acceptance is not effective until received, (ii) an OPTION CONTRACT is involved, (iii) the offeree sends a REJECTION and THEN sends an ACCEPTANCE, in which case FIRST TO ARRIVE is effective, or (iv) the offeree sends an ACCEPTANCE and THEN a REJECTION, in which case the acceptance is effective UNLESS the rejection arrives first AND the offeror detrimentally relies on it.
58
Acceptance by Unauthorized Means
An acceptance transmitted by unauthorized means or improperly transmitted by authorized means MAY still be EFFECTIVE if it is ACTUALLY RECEIVED by the offeror while the offer still exists.
59
Offer - Objective Standard
Whether mutual assent is present will be determined by an OBJECTIVE REASONABLE PERSON STANDARD.
60
Requirement Contracts: Drastic Increase in Required Products
A buyer can only require an increase that is reasonably larger than the prior demands.
61
Revocation: Time it Becomes Effective
A revocation is effected when RECEIVED by the offeree, or when it is by publication, it is effective WHEN PUBLISHED.
62
Consideration Elements
1) A bargained-for exchange between the parties; and 2) a benefit to the promisor OR a detriment to the promisee
63
Consideration Elements - Contracts Under Seal
The existence of a seal precludes challenges to the validity of a contract on the grounds of lack of consideration. For contracts under seal, the parties can agree to extend statutes of limitations beyond their common law limits, but no more than 20 years.
64
Consideration: Bargained for Exchange
Requires that the promise INDUCE THE DETRIMENT and the detriment INDUCE THE PROMISE.
65
Consideration: Past or Moral Consideration
A promise given in exchange for something already done DOES NOT SATISFY the bargain requirement, UNLESS: (i) a new promise is made IN WRITING or is PARTIALLY PERFORMED, or (ii) the promise was performed at the PROMISOR'S REQUEST or in response to an EMERGENCY.
66
Adequacy for Consideration
In general, courts DO NOT inquire into the adequacy or fairness of consideration, UNLESS something is ENTIRELY DEVOID OF VALUE. Note, if there is A POSSIBILITY of value in the thing bargained for, consideration will be found even if it never comes into existence.
67
Consideration: Preexisting Legal Duty
Performing or promising to perform an existing legal duty is INSUFFICIENT consideration, UNLESS: (i) new or DIFFERENT consideration, (ii) the promise is to ratify a VOIDABLE OBLIGATION, (iii) an HONEST DISPUTE to the duty, (iv) the preexisting duty is owed to a THIRD PERSON, or (v) there are UNFORSEEN CIRCUMSTANCES sufficient to discharge a party.
68
Consideration: UCC - Modifying a Contract
A GOOD FAITH agreement modifying a contract subject to the UCC needs NO CONSIDERATION to be binding.
69
Consideration: Common Law - Modification of Contract
Traditional View - a contract CAN'T be modified unless the modification is supported by NEW consideration
Modern View - Permits modification without consideration if: (i) the modification is due to circumstances that were UNANTICIPATED by the parties when the contract was made, and (ii) it is FAIR and EQUITABLE.
70
Consideration: Discharge of Debts
A debt can be discharged through ACCORD (supported by consideration, even if LESS THAN originally bargained for if of a different type or claim is to be paid to a third party) and SATISFACTION.
Also, a debtor's offer to make a partial payment on an existing debt will suffice for an accord and satisfaction if there is some "bona fide dispute" as to the underlying claim or there is otherwise some alteration in the debtor's consideration.
71
Consideration: Forbearance to Sue
A promise to refrain from suing on a claim constitutes consideration IF the claim is valid OR the claimant in GOOD FAITH believed the claim was valid.
72
Consideration: Illusory Contracts
If only one party is bound to perform, the promise is illusory and WILL NOT BE ENFORCED.
73
Consideration: Right to Choose Alternative Courses
A promise to choose one of several alternative means of performance is ILLUSORY, UNLESS every alternative involves a legal detriment to the promisor.
The promise WILL NOT be found illusory if: (i) at least one alternative involves legal detriment and the power to choose rests with the promisee or a third party, or (ii) a valuable alternative is actually selected.
74
Consideration: Promissory Estoppel or Detrimental Reliance
Consideration is NOT NECESSARY if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if: (i) the promisor should REASONABLY EXPECT to induce action or forbearance, and (ii) such action or forbearance IS IN FACT INDUCED.
75
Consideration: Promissory Estoppel or Detrimental Reliance (Delaware Distinction)
In Delaware promissory estoppel DOES NOT apply where a fully integrated, enforceable contract governs the promise at issue.
76
Defenses: Lack of Capacity - Contracts of Minors
Minors generally lack capacity to enter into a contract binding, BUT contractual promises of an adult made to an infant are BINDING ON THE ADULT.
77
Defenses: Lack of Capacity - Disaffirmance
A minor may choose to disaffirm a contract ANY TIME BEFORE reaching the age of majority, but must be disaffirmed AS A WHOLE and anything received and still in possession at the time of disaffirmance MUST BE RETURNED
78
Defenses: Lack of Capacity - Contracts of Minors Exception
Necessaries are items necessary for subsistence, health, or education. A minor may disaffirm a contract for necessaries, but WILL BE LIABLE in restitution for the value of benefits received.
79
Defenses: Affirmance Upon Attaining Majority
A minor MAY affirm to be bound by the contract in whole upon reaching majority expressly or by failing to disaffirm within a REASONABLE TIME after reaching majority.
80
Defenses: Mental Incapacity
One whose mental capacity is so deficient that they are incapable of understanding the nature and significance of a contract may disaffirm when lucid or by a later appointed legal representative. The contract is VOIDABLE.
81
Defenses: Intoxicated Persons
One who is so intoxicated that they don't understand the nature and significance of their promise may be held to have made only a VOIDABLE PROMISE if the other party had REASON TO KNOW of the intoxication.
82
Defenses: Duress and Undue Influence
Contracts induced by duress or undue influence are VOIDABLE and may be rescinded as long as they are not affirmed.
83
Defenses: Duress Defined
Generally, taking advantage of another person's economic needs is not duress, but withholding SOMETHING SOMEONE WANTS or NEEDS will constitute economic duress if: (i) the party THREATENS to commit a WRONGFUL ACT that would SERIOUSLY THREATEN the other contracting party's property or finances; and (ii) there are no adequate means available to prevent the threatened loss.
84
Defenses: Undue Influence Defined
Elements of undue influence are: (i) undue susceptibility to pressure by one party, and (ii) excessive pressure by the other party.
85
Defenses: Absence of Mutual Assent - Misunderstanding
If the contract includes an ambiguous term, the result depends on the parties' awareness of the ambiguity:
1) Neither Party Aware - no contract unless parties intended same meaning
2) Both Parties Aware - no contract unless both parties intended the same meaning
3) One Party Aware - Binding contract based on what the ignorant party reasonably believed to be the meaning
86
Defenses: Mutual Mistake as to Existing Fact
If both parties enter into a contract mistaken about EXISTING FACTS (no future happenings) relating to the agreement, the contract may be VOIDABLE by the ADVERSLY AFFECTED party if: (i) the mistake concerns a BASIC ASSUMPTION on which the contract is made, (ii) the mistake has a MATERIAL EFFECT on the agreed upon exchange, and (iii) the party seeking avoidance DID NOT ASSUME THE RISK of the mistake.
87
Defenses: Mutual Mistake as to Existing Fact - Where Party Seeking Avoidance Bore the Risk
Mutual mistake is NOT A DEFENSE if the party asserting the mistake as a defense bore the risk that the assumption was mistaken. This generally occurs where one party is in a position to better know the risks.
88
Defenses: Mutual Mistake as to Existing Fact - Mistake in Value
If the parties make assumptions as to the VALUE of the subject matter, mistakes in those assumptions will generally NOT BE REMEDIED.
89
Defenses: Unilateral Mistake
If only one party is mistaken about facts relating to the agreement, the mistake WILL NOT prevent formation of a contract, but it IS VOIDABLE IF the non-mistaken party KNEW OR HAD REASON TO KNOW of the mistake.
90
Defenses: Mistake by the Intermediary
Where a mistake occurs in the transmission of an offer or acceptance by an intermediary, the message AS TRANSMITTED is operative UNLESS the other party knew or should have known of the mistake.
91
Defenses: Misrepresentation
If a party induces another to enter into a contract using fraudulent misrepresentation, the contract is VOIDABLE by the innocent party if they JUSTIFIABLY RELIED on the fraudulent misrepresentation.
92
Defenses: Material Misrepresentation
Regardless of fraudulence, a contract is VOIDABLE b the innocent party if the innocent party JUSTIFIABLY RELIED on the misrepresentation and the misrepresentation was MATERIAL (meaning it would (1) induce a reasonable person to agree or (2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not).
93
Innocent Parties in Misrepresentation Remedies
The innocent party may RESCIND the agreement or pursue all available remedies for breach of contract.
94
Public Policy Defenses: Illegality
If the consideration or subject matter of a contract is illegal, the contract is VOID, UNLESS: (i) the plaintiff is unaware of the illegality while defendant knows, (ii) the parties are equally culpable, or (iii) the illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than for protection of the public.
95
Defenses: Unconscionability
A court is allowed to modify or refuse to enforce an entire contract or a provision when there is: (i) unfair surprise, and (ii) oppressive terms AT THE TIME OF FORMATION.
96
Defenses: Unconscionability - Common Instances
(1) Inconspicuous Risk-Shifting Provisions, (2) adhesion contracts (take it or leave it), (3) exculpatory clauses for intentional wrongful acts, and (4) inconspicuous limitations on remedies.
97
Defenses: Unconscionability - Timing
Unconscionability is determined by the circumstances as they existed AT THE TIME THE CONTRACT WAS FORMED.
98
Defenses: Unconscionability - Effect if Court Finds Contract or Clause Unconscionable
If a court finds a matter of law that a contract or any clause of the contract was unconscionable when made, the court may: (1) refuse to enforce the contract, (2) enforce the remainder of the contract WITHOUT the unconscionable clause, or (3) LIMIT THE APPLICATION of any clause to avoid an unconscionable result.
99
Defenses: Statute of Frauds Situations
Certain contracts must be in WRITING, SIGNED BY THE APRTY TO BE CHARGED, specifically in the following situations (MY LEGS):
1) Marriage;
2) Year - promises that cannot be performed within one year from date of contract;
3) Land - interest in land (e.g., leases for more than one year, easements of more than one year, mortgages, fixtures, mineral rights;
4) Executors and administrators - promises to pay estate's debts from OWN FUNDS;
5) Goods more than $500; and
6) Suretyship - promise to pay another's debt (UNLESS the promisor is to serve a pecuniary interest of his own).
100
Defenses: Statute of Frauds - Effect of Noncompliance
Noncompliance with the Statute of Frauds renders the contract UNENFORCEABLE at the OPTION OF THE PARTY TO BE CHARGED.
101
Defenses: Statute of Frauds - Contract Modifications
A written contract can be modified orally, but the modifications MUST BE IN WRITING if the contract, AS MODIFIED, falls within the SOF.
102
Defenses: Statute of Frauds - Common Law Provisions Prohibiting Oral Modifications
The common law rule is that even if a written contract expressly provides that it may be modified only by a writing, the parties CAN ORALLY MODIFY the contract.
103
Defenses: Statute of Frauds - UCC No Modification Clauses Effective
Under the UCC, if a contract explicitly provides that it may not be modified except by a signed writing, that provision IS GIVEN EFFECT.
104
Defenses: Statute of Frauds - Part Performance in Land Sale Contracts
If a seller conveys property to the buyer, the seller can enforce the buyer's oral promise to pay.
Under the doctrine of part performance, if at least two of the following are met, the parties have contracted for the sale and the Statute of Frauds would not apply: (1) Payment, (2) Possession, and/or (3) Valuable Improvements.
105
Defenses: Statute of Frauds - Performance in Land Sale Contracts (Doctrine of Part Performance) (Delaware Distinction)
In Delaware, part payment of the purchase price, if shown in writing or admitted by the seller, constitutes part performance so as to remove the bar of the Statute of Frauds.
106
Defenses: Statute of Frauds Exception - Service Contracts Full Performance
An oral contract that cannot be completed within one year, BUT HAS BEEN FULLY PERFORMED by one party is enforceable.
107
Defenses: Statute of Frauds Exception - Sale of Goods Contracts
Part performance takes a sale of goods contract out of the SOF when: (1) the goods have been SPECIALLY MANUFACTURED, or (2) the goods have been either PAID or ACCEPTED.
108
Defenses: Statute of Frauds Exception - Specially Manufactured Goods
If a buyer requests specially manufactured goods and are NOT SUITABLE for sale to others in the ordinary course of business, a contract is enforceable if: (i) the seller has indicated the goods are for the buyer, and (ii) seller made a SUBSTANTIAL BEGINNING in their manufacturing.
109
Defenses: Statute of Frauds Exception - Admissions in Pleadings or Courts
If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is ENFORCEABLE without a writing.
110
Defenses: Statute of Frauds Exception - Merchant's Confirmatory Memo
In contracts between merchants, if one party within a reasonable time after an oral agreement sends the other party a WRITTEN confirmation of the understanding that is sufficient under the SOF to bind the sender, it will bind the recipient if: (1) they have REASON TO KNOW of the confirmation's contents; and (2) they do not object to it in writing within 10 DAYS OF RECEIPT.
111
Defenses: Statute of Frauds Exception - Equitable and Promissory Estoppel
Estoppel may be applied if it would be INEQUITABLE to allow the Statute to defeat a meritorious claim
112
Defenses: Statute of Frauds Exception - Judicial Admission
If a party admits in pleadings or testimony that there is an agreement, it's treated the same as though the parity signed a writing.
113
Defenses: Statute of Frauds - Writing Requirement
The contract need not be a formal writing, but can be a receipt, letter, check with details, or a written offer accepted orally. The statute requires only ONE OR MORE writings that: (1) reasonably identify the SUBJECT MATTER, (2) indicate that a contract has BEEN MADE BETWEEN THE PARTIES, and (3) state with REASONABLE CERTAINTY the essential terms.
114
Defenses: Statute of Frauds - Signature Requirement
The signature is liberally construed and any mark or symbol made with THE INTENTION TO AUTHENTICATE the writing should suffice.
115
Defenses: Statute of Frauds - Remedies if Contract is Within Statute
If a contract violates the SOF, in almost all cases a party can sue for the REASONABLE VALUE of the services or part performance rendered, OR the RESTITUTION of any other benefit that as been conferred. `
116
Defenses: Statute of Frauds - Performance Not Within One Year From Date of Contract - Lifetime Contracts
A contract measured y a lifetime IS NOT within the SOF because it is CAPABLE of performance within a year.
117
Defenses: Statute of Frauds - Equal Dignity Rule
A contract authorizing someone to enter into a contract is only subject to the SOF if the underlying subject matter of the contract would require it.
118
Defenses: Statute of Frauds - Writing Requirement - UCC
The UCC requires only some signed writing indicating a contract has been made, and SPECIFYING THE QUANTITY TERM
119
Parole Evidence Rule
Any written or oral expressions made PRIOR TO or CONTEMPORANEOUS WITH the writing are INADMISSILE to vary the terms of the writing.
120
Writing Intended to Be Integrated into Agreement
The writing is an "integration" of the final contract if: (i) the writing was INTENDED AS THE FINAL EXPRESSION of the agreement; and (ii) the integration was INTENDED TO BE COMPLETE.
121
Partial Integration - Additional Terms
If an integration is complete, the writing CANNOT be contradicted OR supplemented. However, if the integration is PARTIAL, the writing MAY NOT be contradicted BUT MAY BE SUPPLEMENTED y proving consistent additional terms.
122
Effect of Merger Clause
A merger clause recites that the agreement is the complete agreement between the parties.
123
Evidence Outside of the Parol Evidence Rule - Validity
While extrinsic evidence cannot be used to contradict or add to the contract, it MAY BE ADMITTED to show that the agreement NEVER CAME INTO BEING (e.g., fraud, duress, mistake, conditions precedent).
124
Evidence Outside of the Parole Evidence Rule - Collateral Agreements (Naturally Omitted Terms Doctrine)
Parol evidence may be admissible if the outside writing is COLLATERAL to the written obligation (meaning related to the subject matter, but not a part of the primary promise) AND DOES NOT CONFLICT with it.
Naturally Omitted Terms Doctrine - allows evidence of terms that would naturally be omitted if: (i) it DOES NOT CONFLICT with the written integration, and (ii) it concerns a subject that WOULD NOT ORDINARILY be included in the agreement.
125
Evidence Outside of the Parole Evidence Rule - Interpretation
If there is a dispute as to the MEANING OF A TERM, parol evidence can be used to aid the fact finder in interpreting the agreement
126
Evidence Outside of the Parole Evidence Rule - True Consideration
The parol evidence rule will not bar extrinsic evidence showing "true consideration" paid
127
Evidence Outside of the Parole Evidence Rule - Reformation
If a party alleges fact entitling him to reformation (e.g., mistake)
128
Evidence Outside of the Parole Evidence Rule - Subsequent Modifications
Parol evidence can be used to show SUBSEQUENT MODIFICATIONS
129
Evidence Outside of the Parole Evidence Rule - Explaining or Supplementing Terms Under UCC
A written contract's terms may be explained or supplemented by evidence of: (i) course of performance, (ii) course of dealing, (iii) and usage of trade.
130
General Rules of Contract Construction
1) Contracts will be construed as a whole, 2) words will be construed by their ordinary meaning, 3) contracts will generally be held valid and enforceable, 4) ambiguities are construed against party preparing the contract
131
General Rule of Contract Interpretation (Delaware Distinction)
A contract is interpreted as an OBJECTIVE, REASONABLE THIRD PARTY would interpret it, and against the party using it when its meaning is doubtful.
132
UCC Provisions on Interpreting Contracts: Supplemental Terms (Gap Fillers) - Price
Except for the quantity term which must be included in UCC contracts, all other terms will be supplemented by UCC's gap fillers.
If (i) nothing has been said as to price, (ii) the price is left open to be agreed upon by the parties and they fail to agree, or (iii) the price is to be fixed in terms of some standard that is set by a third person and is not set, then the price is a REASONABLE PRICE AT THE TIME OF DELIVERY.
133
UCC Provisions on Interpreting Contracts: Supplemental Terms (Gap Fillers) - Place of Delivery
If the place of delivery isn't specified, the place is usually the SELLER'S PLACE OF BUSINESS or SELLER'S HOME.
134
UCC Provisions on Interpreting Contracts: Supplemental Terms (Gap Fillers) - Time for Shipment or Delivery
If not specified, shipment/delivery is due WITHIN A REASONABLE TIME.
135
UCC Provisions on Interpreting Contracts: Supplemental Terms (Gap Fillers) - Time for Payment
If not specified, payment is due at the TIME AND PLACE at which the buyer is TO RECEIVE THE GOODS
136
UCC Provisions on Interpreting Contracts: Supplemental Terms (Gap Fillers) - Assortment
If the contract does not specify which party is to choose the assortment of goods delivered (e.g., colors and sizes), the BUYER HAS THE OPTION.
137
UCC Warranties: Express Warranties
Any AFFIRMATINO OF FACT OR PROMISE made by the seller to the buyer, any DESCRIPTION of the goods, and any SAMPLE OR MODEL creates an express warranty IF THE STATEMENT IS A BASIS OF THE BARGAIN.
The statement need only come at such a time where the BUYER COULD HAVE RELIED on it, the buyer DOES NOT need to prove he actually did rely.
138
UCC Warranties: Express Warranties - Statements of Value or Opinion
A statement relating merely to the value of the goods or seller's opinion DOES NOT create an express warranty.
139
UCC Warranties: Implied Warranty of Merchantability
Implied in EVERY contract for the sale BY A MERCHANT WHO DEALS IN GOODS OF THE KIND SOLD is a warranty that the goods are merchantable, meaning FIT FOR THE ORDINARY PURPOSE for which the goods are used.
140
UCC Warranties: Implied Warranty of Merchantability - Relevance of Seller's Knowledge of Defect
The seller's knowledge of a defect is NOT RELEVANT, rather implied warranties are based on an ABSOLUTE LIABILITY.
141
UCC Warranties: Implied Warranty of Fitness for a Particular Purpose
A warranty will be implied in a contract for the sale of goods whenever: (i) ANY SELLER, merchant or not, has REASON TO KNOW THE PARTICULAR PURPOSE for which the goods are to be used and that the BUYER IS RELYING on the seller's judgment, and (ii) the BUYER IN FACT RELIES on the seller's skill or judgment.
142
UCC Warranties: Warranty of Title
ANY SELLER of goods AUTOMATICALLY warrants that the title transferred is GOOD, RIGHTFUL, and there are NO LIENS or ENCUMBRANCES against the title.
143
UCC Warranties: Warranty Against Infringement
A MERCHANT SELLER regularly dealing in goods of the kind sold AUTOMATICALLY warrants that the goods are delivered FREE OF ANY PATENT, TRADEMARK, OR COPYRIGHT. But, a BUYER WHO FURNISHES SPECIFICATIONS for the goods to the seller must hold the seller harmless against such claims.
144
UCC Warranties: Disclaimer of Warranties - Warranty of Title
The warranty of title can be disclaimed ONLY BY SPECIFIC LANGUAGE that gives the buyer NOTICE of the disclaimer.
145
UCC Warranties: Disclaimer of Warranties - Implied Warranty of Merchantability
The warranty of merchantability can be specifically disclaimed or modified ONLY BY MENTIONING MERCHANTABILITY, and if in writing, the disclaimer MUST BE CONSPICUOUS.
146
UCC Warranties: Disclaimer of Warranties - Implied Warranty of Fitness for a Particular Purpose
Can only be disclaimed by a CONSPICUOUS WRITING.
147
UCC Warranties: Disclaimer of Warranties - General Disclaimer (As Is Where Is)
The implied warranties can be disclaimed by expressions such as AS IS WHERE IS, WITH ALL FAULTS, or other common understanding that no implied warranties exist.
148
UCC Warranties: Disclaimer of Warranties - Buyer's Examination or Refusal to Examine
If the buyer, before entering into the contract, EXAMINED or REFUSED TO EXAMINE the goods or sample/model, THERE IS NO WARRANTY as to defects that could have been revealed by an examination.
149
UCC Warranties: Disclaimer of Warranties - Course of Dealing, Etc.
Implied warranties may be disclaimed by the course of dealing, course of performance, usage of trade, etc.
150
UCC Warranties: Disclaimer of Warranties - Where Warranty and Disclaimer is Made
If an express warranty and a disclaimer both exist, they will be construed as consistent TO THE EXTENT POSSIBLE, but if too inconsistent the warranty will be upheld.
151
UCC Warranties: Disclaimer of Warranties - Timing/When Disclaimers Can No Longer be Presented
To be effective, a disclaimer of warranty or limitation on remedies MUST BE AGREED to during the bargaining process. Thus, a disclaimer INSIDE THE PACKAGING IS NOT EFFECTIVE
152
UCC Warranties: Disclaimer of Warranties - Clickwrap
Computer software often comes with terms that appear on the user's computer screen during installation, such limitations are typically UPHELD no the rationale that the software can be returned if unsatisfied.
153
UCC Warranties: Buyer's Damages for Breach of Warranty - In General
Generally, the measure of damages is DIFFERENCE between the VALUE OF THE GOODS RECEVIED and the VALUE OF THE GOODS WARRANTED, in addition to incidental and consequential damages.
154
UCC Warranties: Buyer's Damages for Breach of Warranty to Title
If the warranty of title is breached, the goods are reclaimed by the true owner or lienholder, thus DISPOSSESSING THE BUYER.
155
UCC Warranties: Parties To Which the Warranties Extend
The seller's warranty liability extends to ANY NATURAL PERSON who is in the FAMILY or HOUSEHOLD of the buyer or GUEST if it is a REASONABLE EXPECTATION the guest may use it.
156
UCC Warranties: Parties To Which the Warranties Extend (Delaware Distinction)
In Delaware, the warranties extend to ANY NATURAL PERSON who MAY REASONABLY be expected to use the goods AND who SUFFERS PERSON INJURY by breach of the warranty.
157
UCC Delivery Terms and Risk of Loss: Effect of Breach on Risk of Loss - Defective Goods
If the buyer has a right to reject the goods (which he may FOR ANY REASON), the risk of loss DOESN'T PASS to the buyer UNTIL the defects are CURED or the BUYER ACCEPTS the goods in spite of their defects.
158
UCC Delivery Terms and Risk of Loss: Effect of Breach on Risk of Loss - Revocation of Acceptance
If the buyer rightfully revokes acceptance, the RISK OF LOSS is treated as having rested ON THE SELLER FROM THE BEGINNING.
159
UCC Delivery Terms and Risk of Loss: Effect of Breach on Risk of Loss - Noncarrier Case (Merchant v. Nonmerchant)
For a sale where the goods are not intended to be moved by a common carrier, IF THE SELLER IS A MERCHANT, risk of loss passes to buyer when they take PHYSICAL POSSESSION. If the SELLER IS NOT A MERCHANT, risk of loss passes to buyer UPON TENDER DELIVERY.
160
UCC Delivery Terms and Risk of Loss: Effect of Breach on Risk of Loss - Carrier Case (Shipment v. Destination)
A carrier case is a sale in which it appears that the parties intended the goods to be moved by a carrier.
In Shipment Contracts (PRESUMED), where seller ships BUT DOES NOT DELIVER. Seller is responsible for: (i) DELIVERY to common carrier, (ii) ARRANGEMENT for delivery, (iii) NOTIFYING buyer, at which time risk of loss passes to the buyer.
In a Destination Contracts, the seller is required to deliver the goods at a particular destination, the risk of loss passes to the buyer when the goods are TENDERED TO THE BUYER AT THE DESTINATION.
161
UCC Delivery Terms and Risk of Loss: FOB
Free on Board, suggests Shipment Contract if followed by location of Seller, where risk of loss passes to buyer AT THE NAMED LOCATION.
162
UCC Delivery Terms and Risk of Loss: FAS
Free Along Side, used when goods are to be shipped by boat, risk of loss passes to buyer once the goods are delivered TO THE DOCK.
163
UCC Delivery Terms and Risk of Loss: Return to Seller
If the goods are returned to the seller, the RISK REMAINS ON THE BUYER while the goods are IN TRANSIT.
164
UCC Delivery Terms and Risk of Loss: Sale on Approval
Where the buyer takes goods but may return them even if they conform, the risk of loss DOES NOT PASS to buyer UNTIL THEY ACCEPT.
165
UCC Delivery Terms and Risk of Loss: Goods Destroyed Before Risk of Loss Passes
If goods that WERE IDENTIFIED when the contract was made are destroyed (1) WITHOUT FAULT BY EITHER PARTY, and (2) BEFORE RISK OF LOSS PASSES TO BUYER, the contract is AVOIDED.
If the goods WERE NOT IDENTIFIED, the seller would have to prove IMPRACTABILITY to be discharged.
166
UCC Delivery Terms and Risk of Loss: Sale on Approval
Where the buyer takes goods but may return them even if they conform, the risk of loss DOES NOT PASS to buyer UNTIL THEY ACCEPT.
167
UCC Warranties: Limitations on Remedies - Person Damages
Warranty disclaimers that limit damages for personal injury caused by a breach of warranty on consumer goods are PRIMA FACIE UNCONSCIONABLE
168
Performance Required at Common Law
A party's basic duty at common law is to SUBSTANTIALLY PERFORM what is required under the contract
169
Performance Required under UCC - Perfect Tender Rule
Generally requires PERFECT TENDER - the delivery and condition of the goods must be EXACTLY as promised in the following
170
Buyer's Obligation to Pay Noncarrier and Carrier (Shipment v. Destination Contracts
Noncarrier: Price is due concurrently with tender of delivery
Carrier:
Shipment - price is due when the goods are put in the hands of the carrier
Destination - price is due when the goods reach the named destination
171
Buyer's Obligation to Pay - Installment Contract
The seller may demand payment for EACH INSTALLMENT if the price can be so apportioned.
172
Conditions Defined
A condition means either: (i) an event that must occur BEFORE a party has a duty to perform, or (ii) an event where the occurrence of which RELEASES a party from their duty to perform.
173
Buyer's Obligation to Pay - Installment Contract
The seller may demand payment for EACH INSTALLMENT if the price can be so apportioned.
174
Conditions Defined
A condition means either: (i) an event that must occur BEFORE a party has a duty to perform, or (ii) an event where the occurrence of which RELEASES a party from their duty to perform.
175
Conditions: Failure of Condition
The failure of a condition IS NOT A BREACH, but it discharges the liability of the promisor
176
Conditions: Satisfaction as a Condition
If a contract includes an express condition to satisfy one party, the promisor is under NO DUTY to pay UNLESS THEY ARE SATISFIED.
177
Conditions: Express
An EXPLICIT CONTRACTUAL PROVISION
178
Conditions: Satisfaction as a Condition - Third Person's Satisfaction
When the satisfaction of a third person is a condition, most courts require the ACTUAL PERSONAL SATISFACTION of that person, but can be excused if the third person's dissatisfaction is NOT HONEST AND IN GOOD FAITH.
179
Conditions: Satisfaction as a Condition - Mechanical Fitness, Utility, or Marketability
In contracts involving mechanical fitness, utility, or marketability, a condition of satisfaction is fulfilled by a performance that would satisfy a REASONABLE PERSON.
180
Conditions: Conditions Concurrent
Those that are capable of occurring TOGETHER, and that the parties are bound to perform at the same time. Thus, in effect, each is a condition "precedent" to the other.
181
Conditions: Conditions Subsequent
A condition subsequent is one that, when it occurs, CUTS OFF an ALREADY EXISTING duty of performance.
182
Implied Conditions: Constructive Conditions of Performance
The duty of each party to render performance is conditioned on the OTHER PARTY either rendering THEIR performance or making a tender of their performance.
183
Implied Conditions: Constructive Conditions of Cooperation and Notice
The obligation of one party to render performance is IMPLIEDLY CONDITIONED on the other party's cooperation in that performance AND often a condition the other party give NOTICE that performance is due.
184
Implied Conditions: Constructive Conditions of Performance
The duty of each party to render performance is conditioned on the OTHER PARTY either rendering THEIR performance or making a tender of their performance.
185
Effect of Condition - Equitable Remedy
If a contract is NOT ENFORCEABLE due to the failure or occurrence of a condition, and one party has fully or partially performed, they can usually recover under unjust enrichment theories.
186
Excusal of Conditions Types
(1) Hinderance or Failure to Cooperate;
(2) Estoppel Waiver - detrimentally relying on a waiver of conditions (but CAN be retracted prior to reliance);
(3) Election Waiver - the beneficiary of the condition may terminate their liability OR continue the contract;
187
Effect of Condition - Equitable Remedy
If a contract is NOT ENFORCEABLE due to the failure or occurrence of a condition, and one party has fully or partially performed, they can usually recover under unjust enrichment theories.
188
Waiver of Conditions in Installment Contracts
If a waiver isn't supported by consideration, the beneficiary of the waived condition can insist on strict compliance with the contract for future installments by giving notice he is revoking the waiver.
189
Waiver of Conditions Requirement
If NO CONSIDERATION is given to the waiver, it must be ANCILLARY or COLLATERAL to the main subject.
190
Excusal of Condition by Anticipatory Repudiation
Anticipatory repudiation occurs if a promisor, prior to the time set for performance, indicates they won't perform. The anticipatory repudiation will serve to excuse conditions if: (i) it is a BILATERAL contract, and (ii) repudiation is UNEQUIVOCAL
191
Anticipatory Repudiation - Nonrepudiating Party Alternatives
1) Treat the anticipatory repudiation as a total repudiation and SUE IMMEDIATELY;
2) Suspend their own performance and WAIT to sue UNTIL PERFORMANCE DATE;
3) Treat the repudiation as an offer to rescind, and TREAT THE CONTRACT AS DISCHARGED; or
4) Ignore repudiation and URGE PROMISOR TO PERFORM
192
Retraction of Repudiation
A repudiating party may AT ANY TIME BEFORE PERFORMANCE IS DUE withdraw repudiation UNLESS the other party has canceled, materially changed their position in reliance on the repudiation, or otherwise indicated that they consider the repudiation final
193
UCC - Failure to Give Adequate Assurances
A party with any reasonable grounds for being insecure about another party's performance may IN WRITING request adequate assurance that the other party will perform in accordance with the contract. If the adequate assurances are not received, the party can treat this as anticipatory repudiation.
194
Excuse of Condition by Substantial Performance (Express v. Implied Conditions)
The other party's duty of counterperformance is triggered if the party has rendered SUBSTANTIAL PERFORMANCE. Courts will only apply this doctrine for IMPLIED conditions, NOT EXPRESS.
195
Effect of Prospective Failure
Prospective failure is when a party has reasonable grounds to believe the other party will be unable to perform their obligations under the contract. This is NOT anticipatory repudiation because it is NOT UNEQUIVOCAL.
The effect is to allow the innocent party to suspend further performance until they receive ADEQUATE ASSURANCES that performance will be forthcoming. If the other party fails to provide assurances, the innocent party may be excused from their own performance.
196
Excuse of Condition by Substantial Performance (Express v. Implied Conditions)
The other party's duty of counterperformance is triggered if the party has rendered SUBSTANTIAL PERFORMANCE. Courts will only apply this doctrine for IMPLIED conditions, NOT EXPRESS.
197
Excuse of Condition by Substantial Performance - UCC
The doctrine of substantial performance DOES NOT APPLY to the UCC because the PERFECT TENDER RULE applies
198
Excuse of Condition by Substantial Performance - Mitigation
The non-breaching party will be required to mitigate their damages suffered due to the first party's incomplete performance.
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Define Divisibility Contract
(1) the performance of each party is divided into two or more parts;
(2) the number of parts due from each party is the same; and
(3) the performance of each part by one party is agreed on as the equivalent of the corresponding part.
200
Define Installment Contracts
Article 2 assumed a contract is NOT DIVISIBLE UNLESS it authorizes deliveries in several lots. In installment contracts, the price, if it can be apportioned, may be demanded for EACH LOT unless a contrary intent appears.
201
Define Divisibility Contract
(1) the performance of each party is divided into two or more parts;
(2) the number of parts due from each party is the same; and
(3) the performance of each part by one party is agreed on as the equivalent of the corresponding part.
202
Define Installment Contracts
Article 2 assumed a contract is NOT DIVISIBLE UNLESS it authorizes deliveries in several lots. In installment contracts, the price, if it can be apportioned, may be demanded for EACH LOT unless a contrary intent appears.
203
Rescission - Mutual
The contract may be discharged by an EXPRESS AGREEMENT between the parties to rescind, supported by CONSIDERTION (namely giving up each party's right to counterperform).
However, if the right of a THIRD-PARTY BENEFICIARY has ALREADY VESTED, the contract CANNOT BE RESCINDED.
204
Unilateral Rescission
For unilateral rescission to be granted, the party desiring rescission must have adequate legal grounds (e.g., mistake, duress, misrepresentation)
205
Discharge by Cancellation
The destruction of a written contract WILL NOT usually discharge the contract, unless the parties INTENT was to serve as a discharge, accompanied by CONSIDERATION
206
Discharge by Release
A release will serve to discharge duties IF: (i) in WRITING and (ii) supported by NEW CONSIDERATION, OR (iii) promissory estoppel elements exist.
207
Discharge by Substituted Contract
A contract may be discharged if the parties enter into a second contract that IMMEDIATELY REVOKES the first contract expressly or impliedly.
208
Discharge by Accord and Satisfaction
A contract may be discharged by accord (substitute of performance from original K) and satisfaction (performance of the accord agreement).
The accord taken alone won't discharge future performance, it merely SUSPENDS the right to enforce it in accordance with the terms of the accord contract.
209
Discharge by Accord and Satisfaction - Consideration
An accord MUST be supported by consideration, even if of lesser value than the original bargained-for consideration, so long as it is OF DIFFERENT TYPE or the claim is to be paid by a THIRD PARTY
210
Discharge by Accord and Satisfaction - Bona Fide Dispute
A debtor's offer to make a PARTIAL PAYMENT on an existing debt will suffice for an accord and satisfaction if there is some BONA FIDE DISPUTE as to the underlying claim.
211
Discharge by Accord and Satisfaction - Checks Tendered "Payment in Full"
If a monetary claim is uncertain or is subject to a BONA FIDE DISPUTE, an accord and satisfaction may be accomplished by a GOOD FAITH tender and acceptance of a check which CONSPICUOUSLY STATES the check is tendered in FULL SATISFACTION of the debt.
212
Discharge by Accord and Satisfaction - Breach of Accord Before Satisfaction by Debtor
If the debtor breaches an accord agreement, the creditor may sue EITHER on the ORIGINAL undischarged contract OR the breach of THE ACCORD.
213
Discharge by Accord and Satisfaction - Breach of Accord Before Satisfaction by Creditor
If a creditor breaches an accord by SUING THE ORIGINAL CONTRACT, the debtor may: (1) raise the accord agreement as an equitable defense and DISMISS the action, or (2) WAIT UNTIL THEY ARE DAMAGED and bring an action at law for damages for breach of accord contract.
214
Discharge by Novation
A novation occurs when a new contract SUBSTITUTES a new party to receive benefits and assumed the original duties, it serves to DISCHARGE the old contract.
The elements are: (i) a PREVIOUS valid contract, (ii) an AGREEMENT among all parties, including new party to the new contract, (iii) the IMMEDIATE EXTINGUISHMENT of contractual duties between original parties, and (iv) a valid an enforceable NEW contract.
215
Discharge by Accord and Satisfaction - Breach of Accord Before Satisfaction by Creditor
If a creditor breaches an accord by SUING THE ORIGINAL CONTRACT, the debtor may: (1) raise the accord agreement as an equitable defense and DISMISS the action, or (2) WAIT UNTIL THEY ARE DAMAGED and bring an action at law for damages for breach of accord contract.
216
Discharging by Novation
A novation occurs when a new contract SUBSTITUTES a new party to receive benefits and assumed the original duties, it serves to DISCHARGE the old contract.
217
Discharge by Impossibility - Partial Impossibility
If the performance to be rendered becomes PARTIALLY IMPOSSIBLE, the duty may be discharged ONLY TO THAT EXTENT, and the remainder may be required.
218
Discharge by Impossibility - Effect
If a contract is discharged because of impossibility, each party is EXCUSED from duties arising under the contract
219
Discharge by Impossibility - Part Performance Prior to Impossibility
If a party partially performed prior to the impossibility, the party will have a right to recover in quasi-contract at the rate of the reasonable value of his performance.
220
Discharge by Impossibility - Contracts to Build
A contractor's duty to CONSTRUCT a building IS NOT discharged by destruction of the work in progress, but if not the fault of the contactor, most courts will allow the extension of the deadline.
221
Discharge by Destruction - If Risk Has Passed to Buyer
The rules relating to discharge because of destruction of the subject matter WILL NOT APPLY if the risk of lass has ALREADY PASSED TO BUYER.
222
Discharge by Impracticability
Contractual duties will be discharged for impracticability where the party to perform has encountered: (i) EXTREME AND UNREASONABLE difficulty or expense, and (ii) its nonoccurrence was a BASIC ASSUMPTION of the parties.
This APPLIES to UCC contracts.
223
Discharge by Lapse
If the contract states that time is "of the essence" and the parties duties must occur concurrently, the lapse will OCCUR IMMEDIATELY. Otherwise, the contract will lapse after a REASONABLE TIME.
224
Performance: Payment By Check
Unless otherwise specified, checks can be used for purchase. If the seller rejects, buyer has a REASONABLE TIME to retrieve cash to pay
225
Breach: Factors to Determine Substantial Performance
1) Benefit received;
2) Part performance by breaching party; and
3) Hardship to breaching party
226
Performance: Payment By Check
Unless otherwise specified, checks can be used for purchase. If the seller rejects, buyer has a REASONABLE TIME to retrieve cash to pay
227
Breach: Effect of Material Breach
If the obligee does not receive the SUBSTANTIAL BENEFIT of their bargain. The nonbreaching party (1) may treat the contract at its end, and (2) will have an IMMEDIATE RIGHT to all remedies for breach of the entire contract.
228
Breach: Timeliness of Performance
Failure to perform by the time stated is generally NOT A MATERIAL BREACH, UNLESS the parties state that "time is of the essence."
229
Breach: UCC Perfect Tender Rule
If goods or their delivery FAIL TO CONFORM TO THE CONTRACT IN ANY WAY, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.
230
Breach: UCC Perfect Tender Rule - Right to Reject Cut Off
A buyer's right to reject under the perfect tender doctrine is generally cut off by ACCEPTANCE. A buyer accepts when: (i) after a REASONABLE OPPORTUNITY to inspect the goods, they INDICATE TO THE SELLER THE GOODS CONFORM or they will keep despite failure to conform, (ii) they FAIL TO REJECT WITHIN A REASONABLE TIME, or (iii) they do any ACT INCONSISTENT WITH THE SELLER'S OWNERSHIP.
231
Breach: UCC Perfect Tender Rule- Buyer's Responsibility After Rejection
After rejecting the goods, the buyer has an obligation to hold onto the goods with REASONABLE CARE at the seller's disposition for a time sufficient to permit the seller to remove them. A merchant buyer MAY have a further obligation to obey any REASONABLE INTRUCTIONS as to the rejected goods.
If the seller gives no instructions, the buyer may: (1) RESHIP the goods to the seller, (2) STORE them for the seller's account, or (3) RESELL them for the seller's account in a public sale.
232
Breach: UCC Perfect Tender Rule - Buyer's Right to Revoke Acceptance
Generally, once the goods are accepted the buyer may not reject, UNLESS: if the goods have a DEFECT that SUBSTANTIALLY IMPAIRS their value AND (i) they accepted the goods with the reasonable belief THE DEFECT WOULD BE CURED, or (ii) they accepted the goods because of the DIFFICULTY OF DISCOVERING THE DEFECTS or SELLER'S ASSURANCES the goods conformed.
Revocation of acceptance must occur: (i) within a REASONABLE TIME after buyer discovers or should have discovered the defects, and (ii) BEFORE ANY SUBSTANTIAL change in the goods occurs.
233
Breach: UCC Perfect Tender Rule Exceptions - Seller's Right to Cure Before Contract Expiration
If buyer rejected goods because of defects, the seller may, WITHIN THE TIME ORIGINALLY PROVIDED UNDER THE CONTRACT, "cure" by giving REASONABLE NOTICE of their intention to do so and making a NEW TENDER of CONFORMING GOODS that the buyer MUST THEN ACCEPT.
234
Breach: UCC Perfect Tender Rule Exceptions - Seller's Right to Cure After Contract Ends
Generally, the seller has no right to cure once the contract ends. But, if the seller REASONABLY BELIEVED the goods would be acceptable, upon REASONABLE NOTIFICATION TO BUYER, seller has FURTHER REASONABLE TIME to make a conforming tender.
Reasonable cause to believe the tender would have been acceptable include: (i) prior dealings or trade practices, or (ii) the seller could not have known the defect despite proper conduct.
235
Breach: UCC Perfect Tender Rule Exceptions - Seller's Right to Cure Installment Contracts
An installment can be rejected ONLY if the nonconformity SUBSTANTIALLY IMPAIRS the value of that installment AND CANNOT BE CURED.
The whole contract is breached if the nonconformity SUBSTANTIALLY IMPAIRS the value of the ENTIRE CONTRACT.
236
***Nonmonetary Remedies: Specific Performance Defined
Specific performance is granted when: (i) there is a VALID contract, (ii) the legal remedy is INADEQUATE, (iii) enforcement is FEASIBLE, and (iv) MUTUALITY of remedy is present.
237
Nonmonetary Remedies: Specific Performance - Availability
Specific performance is ALWAYS available for land sale contracts, because ALL LAND IS UNIQUE. It is also available for GOODS THAT ARE UNIQUE. However, specific performance is NEVER AVILABLE for service contracts.
238
Nonmonetary Remedies: Specific Performance - Noncompete Agreements
Courts will grant an order of specific performance to enforce a non-compete if: (1) the services are UNIQUE, (2) the covenant is REASONABLE, meaning it is reasonably necessary to protect a LEGITIMATE INTEREST and is reasonable to its GEOGRAPHIC SCOPE AND DURATION, and (3) does NOT HARM THE PUBLIC.
239
Nonmonetary Remedies: Specific Performance - Noncompete Agreements (Delaware Distinction)
A covenant not to compete must be: (i) reasonable in geographic scope and duration, (ii) advance a legitimate economic interest of the party seeking enforcement, and (iii) survive a balancing of the equities. These elements must be established by CLEAR AND CONVINCING EVIDENCE.
240
Nonmonetary Remedies: Specific Performance - Equitable Defenses - Laches
A claim that the plaintiff has delayed bringing the action and that delay has PREJUDICED THE DEFENDANT.
241
Nonmonetary Remedies: Specific Performance - Equitable Defenses - Laches (Delaware Distinction)
For laches defense to be successful, the following must be shown: (i) the PLAINTIFF KNEW there was a basis for a legal action, (ii) the PLAINTIFF UNREASONABLY DELAYED bringing a suit, and (iii) the DEFENDANT SUFFERED PREJUDICE as a result.
Time Limit: The statute of limitations DOES NOT AUTOMATICALLY, especially if it would be unfair to defendant, though it is influential in the courts decision in determining.
242
Nonmonetary Remedies: Specific Performance - Equitable Defenses - Unclean Hands
A claim that the party seeking specific performance is guilty of WRONGDOING in the transaction being sued upon.
243
Nonmonetary Remedies: Specific Performance - Equitable Defenses - Sale to a Bona Fide Purchaser
A claim that the subject matter has been SOLD TO A PERSON WHO PURCHASED FOR VALUE and in GOOD FAITH.
244
Nonmonetary Remedies: UCC Buyer's Remedies - Cancellation
If a buyer rightfully rejects goods because they don't conform to the contract, one of the buyer's options is simply to cancel the contract.
245
Nonmonetary Remedies: UCC Buyer's Remedies - Buyer's Prepayment
If a buyer as made at least PART PAYMENT and the seller has NOT DELIVERED the goods, the buyer may RECOVER the goods from seller if: (i) seller becomes INSOLVENT WITHIN 10 DAYS after receiving the buyer's first payment, or (ii) the goods were purchased for PERSONAL, FAMILY, or HOUSEHOLD PURPOSES.
In either case, buyer must tender the rest of the purchase price to seller.
246
Nonmonetary Remedies: UCC Buyer's Remedies - Inability to Cover
Buyer may recover undelivered, identifiable goods from seller if the buyer, after REASONABLE EFFORT, is UNABLE TO SECURE adequate substitute goods.
247
Nonmonetary Remedies: UCC Buyer's Remedies - Specific Performance
The court may order specific performance EVEN WHERE THE GOODS HAVE NOT YET BEEN IDENTIFIED if they are UNIQUE.
248
Nonmonetary Remedies: UCC Seller's Remedies - Right to Withhold Goods
If the BUYER FAILS TO MAKE PAYMENT ON OR BEFORE DELIVERY, the seller may withhold delivery of the goods.
249
Nonmonetary Remedies: UCC Seller's Remedies - Right to Recover Goods from Insolvency
If seller learns that buyer has received delivery of goods on credit WHILE INSOLVENT, seller may reclaim the goods UPON DEMAND MADE WITHIN 10 DAYS after the buyer's receipt of the goods.
The 10-day limit DOES NOT APPLY WHERE buyer misrepresents solvency IN WRITING within 3 MONTHS before delivery.
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Nonmonetary Remedies: UCC Seller's Remedies - Right to Recover Shipped or Stored Goods from Carrier
Seller may STOP DELIVERY of goods possession of a carrier if they discover buyer is INSOLVENT or if buyer breaches contract.
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Nonmonetary Remedies: UCC Seller's Remedies - Right to Force Goods on Buyer
This is limited to an action for price when the seller is UNABLE TO RESELL the goods to others at a reasonable price.
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Nonmonetary Remedies: UCC Seller's Remedies - Right to Demand Assurances
If there are REASONABLE GROUNDS FOR INSECURITY with respect to party's performance, the other party may demand IN WRITING assurances that the performance will occur. If proper assurances are not given WITHIN A REASONABLE TIME, they may treat the contract as repudiated.
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Monetary Remedies: Compensatory Damages
Goal is to put the NONBREACHING PARTY IN THE POSITION THEY WOULD HAVE BEEN HAD THE PROMISE BEEN PERFORMED.
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Monetary Remedies: Compensatory Damages - Expectation Damages
Sufficient damages to buy a SUBSTITUTE PERFORMANCE, also known as the BENEFIT OF THE BARGAIN.
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Monetary Remedies: Compensatory Damages - Reliance Damages
If the damages are TOO SPECULATIVE, the plaintiff may recover damages based on their reasonable reliance on the contract, or the position they would have been had the contract never been formed.
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Monetary Remedies: Compensatory Damages - Incidental Damages
These include expenses REASONABLY INCURRED by a buyer (e.g., inspection, transportation, care) INCIDENT to the seller's breach.
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Monetary Remedies: Compensatory Damages - Consequential Damages
These consists of lost profits, and may be recovered ONLY IF a REASONABLE PERSON would have FORESEEN the damages as a probable result of a breach. Therefore, the breaching party must have KNOWN OR HAD REASON TO KNOW of the special circumstances giving rise to the damages.
In UCC contracts, ONLY AVAILABLE TO BUYER
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Monetary Remedies: Compensatory Damages - Certainty Rule
The plaintiff MUST PROVE that the losses suffered were CERTAIN in their nature and NOT SPECULATIVE.
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Monetary Remedies: Punitive Damages in Contract Cases
Generally NOT awarded in contract cases
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Monetary Remedies: Nominal Damages
Nominal damages (e.g., $1) may be awarded when a breach is shown but NO ACTUAL LOSS IS PROVEN.
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Monetary Remedies: Liquidated Damages
Parties may contract to liquidated damages in the event of a breach, these MUST be in an amount that is REASONABLE in view of the actual or anticipated harm caused by the breach.
These are ONLY ENFORCED where the damages are TOO DIFFICULT TO ESTIMATE at the time the contract is formed AND the amount agreed on is REASONABLE FORECAST OF COMPENSATORY DAMAGES.
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Monetary Remedies: UCC Buyer's Damages - Seller Does Not Deliver or Buyer Rejects
Buyer's damages consist of the DIFFERENCE between the contract price and either: (1) the market price or (2) the cost of buying REPLACEMENT GOODS + INCIDENTAL or CONSEQUENTIAL DAMAGES - EXPENSES SAVED as a result of seller's breach
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Monetary Remedies: UCC Buyer's Damages - Seller Does Not Deliver or Buyer Rejects - Cover Rule
If buyer chooses the cover measure (difference between contract price and replacement goods) buyer must make a REASONABLE CONTRACT for substitute goods IN GOOD FAITH and WITHOUT UNREASONABLE DELAY
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Monetary Remedies: UCC Buyer's Damages - Seller Does Not Deliver or Buyer Rejects - Market Price
If buyer measures damages by difference between K and market price, market price is determined AT TIME BUYER LEARNS OF BREACH.
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Monetary Remedies: UCC Buyer's Damages - Seller Delivers Nonconforming Goods that Buyer Accepts
If buyer accepts goods that breach one of the seller's warranties, the measure of damages is the VALUE OF THE GOODS AS DELIVERED and the VALUE THEY WOULD AVE BEEN IN THE CONTRACT, plus any incidental and consequential damages.
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Monetary Remedies: UCC Buyer's Damages - Notice Requirement
To recover damages for any defect as to accepted goods, the buyer must, WITHIN A REASONABLE TIME AFTER DISCOVERY, notify the seller of the defect.
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Monetary Remedies: UCC Buyer's Damages - Seller Anticipatorily Breaches Contract
Difference between MARKET PRICE at the time the buyer learned of the breach and the CONTRACT PRICE.
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Monetary Remedies: UCC Buyer's Damages - Consequential Damages
Seller is liable for consequential damages arising from their breach if: (1) they HAD REASON TO KNOW of the buyer's general or particular requirements, and (2) the SUBSEQUENT LOSS resulting from those needs COULD NOT REASONABLY BE PREVENTED by cover.
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Monetary Remedies: UCC Seller's Damages - Where Buyer Repudiates or Refuses to Accept Conforming Goods
The seller has the following options:
1) Resell the goods, and recover CONTRACT PRICE - RESALE PRICE.
2) Recover MARKET PRICE (as of the time and place of delivery) - CONTRACT PRICE
3) If the seller has unlimited inventory and could have made an additional sale, then use LOST PROFITS measure CONTRACT PRICE - COST TO SELLER
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Monetary Remedies: UCC Seller's Damages - Where Buyer Accepted Goods
If seller is UNABLE TO RESELL the goods, the seller may MAINTAIN AN ACTION TO RECOVER FULL CONTRACT PRICE.
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Monetary Remedies: Contracts for Sale of Land
Standard measure of damages for breach of land sale contracts is CONTRACT PRICE - FAIR MARKET VALUE.
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Monetary Remedies: Employment Contracts - Breach by Employer
Irrespective of when breach occurs, damages is FULL CONTRACT PRICE (reduced by mitigation efforts)
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Monetary Remedies: Employment Contracts - Breach by Employee
If an employee materially breaches, employer is entitled to recover the cost of replacing the employee, offset by money owed for work done.
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Monetary Remedies: Construction Contracts - Owner Breach
Builder is entitled to PROFITS that would have resulted from the contract PLUS COSTS expended.
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Monetary Remedies: Construction Contracts - Builder Breach
The owner is entitled to COST OF COMPLETION plus REASONABLE COMPENSATION for delay (offset by work performed).
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Monetary Remedies: Acceleration Clauses
A contract that includes an acceleration clause would make an entire amount due on any late payment.
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Monetary Remedies: Mitigation
Under common law, a party may recover expenses of mitigation, meaning the nonbreaching party does not make reasonable efforts to procure a substitute good or performance at a fair price.
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Monetary Remedies: Mitigation Under UCC
Under Article 2, the rule of mitigation GENERALLY DOES NOT APPLY. Though, the seller cannot recover full contract price unless goods cannot be resold at a reasonable price.
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Restitution
An alternative to contract damages, restitution seeks to prevent UNJUST ENRICHMENT and is measured by the VALUE OF THE BENEFIT CONFERRED.
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Restitution When No Contract is Involved
Restitution may be available where there is NO CONTRACTUAL RELATIONSHIP between parties if: (i) the plaintiff has CONFERRED A BENEFIT to the defendant by rendering services, (ii) with REASONABLE EXPECTATION OF BEING COMPENSATED, (iii) defendant KNEW of the plaintiff's expectation, and (iv) defendant would be UNJUSTLY ENRICHED if they were allowed to retain the benefit without compensating the plaintiff.
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Rescission
Rescission must have occurred BEFORE OR AFTER the contract was formed, and applies in the following cases: mutual mistake, unilateral mistake, misrepresentation, etc.
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Reformation
Whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties (e.g., mistake or misrepresentation)
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Statute of Limitations Under UCC
UCC provides a 4-YEAR STATUTE of limitations, the parties may shorten, but no less than one year. It CANNOT BE LENGTHENED.
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Statute of Limitations Under UCC (Delaware Distinction)
An express 10-year warranty of quality made by buyer supersedes Delaware's 4-year SOL for breach of any contract of sale, even if warranty is limited to repair and replacement of goods.
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Statute of Limitations - Promissory Note (Delaware Distinctions)
Actions on a PROMISSORY NOTE are subject to a 6-year SOL
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Statute of Limitations - Employee's Wage Claims (Delaware Distinctions)
Actions arising from an employee's claims for wages, salary, or other benefits are subject to a 1-year SOL.
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Transfer of Title: Entrusting
Entrusting includes delivering goods to a merchant and leaving purchased goods with the merchant for later pickup or delivery. The requirements for entrustment are: (1) the merchant must be one who ORDINARILY DEALS WITH GOODS IN THAT KIND, and (2) the sale must be in the ORDINARY COURSE OF BUSINESS.
Remember, entrustment only passes the right of the ENTRUSTER, so if the entruster isn't the owner, ownership cannot pass.
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Transfer of Title: Voidable Title Transferring to Good Faith Purchaser
If a sale is induced by fraud (e.g., fraud) the defrauded seller CAN'T recover goods from a GOOD FAITH PURCHASER FOR VALUE who bought from the fraudulent buyer OR someone who TAKES A SECURITY INTEREST in the goods.
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Transfer of Title: Thief Passing Title
If a thief steals goods from the true owner, and then sells to a buyer, the thief is UNABLE to pass title because it is VOID. Even a good faith purchaser for value cannot take title, UNLESS they buyer has made ACCESSIONS (valuable improvements) to the goods OR the true owner is ESTOPPED from asserting title.
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Third Party Beneficiaries: Intended v. Incidental
Intended Beneficiary - HAVE CONTRACTUAL RIGHTS, and determined by whether the beneficiary is: (i) IDENTIFIED in the contract, (ii) RECEIVES PERFORMANCE DIRECTLY from the promisor, or (iii) has some RELATIONSHIP WITH THE PROMISEE to indicate intent to benefit.
Incidental Beneficiary - DO NOT HAVE contractual rights
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Third Party Beneficiaries: Types of Intended Beneficiaries
1) Creditor Beneficiary - a person to whom a debt is owed by the promisee; and
2) Donee Beneficiary - a person whom the promisee intends to benefit gratuitously
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Third Party Beneficiaries: Rights of Third Party Suing Promisor
A beneficiary MAY SUE the promisor on the contract, and the promisor may raise any defenses that he would raise against the promisee. The promisor MAY raise defenses against the third-party that the promisee could have (e.g., duress) IF the promisor WAS NOT AN ABSOLUTE PROMISE to pay.
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Third Party Beneficiaries: Rights of Third Party Suing Promisee
A CREDITOR beneficiary can sue the promisee on the existing obligation between them. A donee beneficiary has NO RIGHT to sue the promisee UNLESS grounds for a detrimental reliance exist.
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Third Party Beneficiaries: Rights of Promisee Suing Promisor
A promisee may sue the promisor for SPECIFIC PERFORMANCE if the promisor isn't performing for the third person
295
Third Party Beneficiaries: When Rights Vest
A third party can enforce a contract ONLY when they: (i) MANIFEST ASSENT to a promise in the manner REQUESTED BY THE PARTIES, (ii) BRING A SUIT TO ENFORCE the promise, or (iii) MATERIALLY CHANGE POSITION in justifiable reliance on the promise.
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Third Party Beneficiaries: When Rights Vest - Modification or Rescission of Contract
Prior to vesting to the third party, the promisee and promisor are FREE TO MODIFY OR RESCIND the beneficiary's rights under the contract.
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Third Party Beneficiaries: Assignment of Rights and Delegation of Duties - Exception of Rights That May Be Assigned
Generally, ALL CONTRACTUAL RIGHTS may be assigned, EXCEPT: (1) an assignment that would SUBSTANTIALLY CHANGE the obligor's duty or risk, (2) an assignment of future rights to ARISE FROM FUTURE CONTRACTS, and (3) an assignment PROHIBITED BY LAW.
298
Third Party Beneficiaries: Requirements to Assign
For an assignment to be effective, the assignor must MANIFEST INTENT to immediately and completely transfer their rights, NO WRITING OR CONSIDERATION REQUIRED.
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Third Party Beneficiaries: Revocable Assignments (Value v. Gratuitous)
There are to types of assignments: value and gratuitous.
Value - if the assignment is: (1) done for CONSIDERATION, or (2) taken as security for payment of a PREEXISTING DEBT, it CANNOT BE REVOKED
Gratuitous - An assignment not for value is REVOCABLE
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Third Party Beneficiaries: Exceptions to Revocability
A gratuitous assignment is revocable IF: (1) the obligor has ALREADY PERFORMED; (2) a token chose (meaning a tangible claim, i.e., stock certificate) is DELIVERED, (3) an assignment of a simple chose (meaning an intangible claim, e.g., contract right) is PUT IN WRITING, or (4) the assignee can show DETRIMENTAL RELIANCE on the gratuitous assignment
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Third Party Beneficiaries: Effect of Express Contractual Provisions Against Assignment (Prohibition v. Invalidation
Prohibition - Language includes "assignments NOT PERMITTED," but an assignee without knowledge can STILL COLLECT
Invalidation - Language includes "assignments NULL AND VOID" an assignee without knowledge CAN'T COLLECT.
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Third Party Beneficiaries: Assignee Suing Obligor
The assignee can sue the obligor as a real party in interest. The obligor CAN'T RAISE BY WAY OF DEFENSE any defense the assignor might have against the assignee
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Third Party Beneficiaries: Assignee v. Assignor
In assignments for VALUE, the assignor warrants: (1) they have NOT MADE PRIOR ASSIGNMENTS of the same right, (2) the right exists and is NOT SUBJECT to any undisclosed defenses, and (3) they WON'T INTERFERE with the assigned right.
The assignee may sue the assignor for a breach of ANY OF THESE WARRANTIES, but won't be liable to the assignee if the obligor is incapable of performing.
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Third Party Beneficiaries: Multiple Assignee - Who Has the Right to Collect?
If the first assignment is revocable, a subsequent assignment revokes it. If it is irrevocable, the first assignment will usually prevail over a subsequent assignment
305
Third Party Beneficiaries: Delegation of Duties by Obligor - What Duties May Be Delegated?
Generally, ALL DUTIES may be delegated, EXCEPT: (1) duties involving PERSONAL JUDGMENT OR SKILL, (2) if delegation WOULD CHANGE THE OBLIGEE'S EXPECTANCY, (3) a SPECIAL TRUST was reposed in the delegator by the other party to the contract, or (4) there is a CONTRACTUAL RESTRICTION.
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Third Party Beneficiaries: Assignment
Two parties contract, assignor assigns rights (transfers away) to third party (assignee)
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Third Party Beneficiaries: Delegation
This is a transfer of Obligor's duties. Obligee DOES NOT NEED Obligee's consent to delegate.
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Third Party Beneficiaries: Delegation - Prohibition of Assignments
If assignments are prohibited, so are delegations.
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Third Party Beneficiaries: Delegate Liability
A delegate for consideration IS LIABLE, otherwise he is not.
