Contracts Flashcards
1
Q
Contract
A
A promise the law will enforce.
2
Q
UCC Sales of goods
A
Governing law for Anything that can be moved. Includes pets.
3
Q
Offer
A
communication that creates reasonable expectation that offeror is willing to enter into a K on the offered term. Does not require words. The offer must manifest a commitment to do something or refrain from doing something. It must state the offeree and give reasonable terms to be sufficiently certain enough of the essential terms provided so the K including them is capable of being enforced.
4
Q
Sale of goods offer requirement
A
Quantity term need to be certain. UCC ARt 2. Not some, or a few. A reply communication stating the number is sufficient. “Seller’s output” or “buyer’s requirement” is sufficient. Article 2 requires obligation of good faith of the parties. Actual good faith requirement for output and the actual amount must not be unreasonably disproportionate to estimate.
5
Q
Not an Offer
A
An invitation to negotiate, ads in paper, statement said in jest where reasonable person wouldn’t think it is an offer.
6
Q
Offer requirement for sale of land
A
Must have price term and description of the land enough to identify the property.
7
Q
Offer requirement for services
A
Description of the type of work being agreed to. Time to perform and price are not essential. Courts imply reasonable terms.
8
Q
Offer termination.
A
Offeror can try to revoke it at any time before acceptance.
9
Q
Direct revocation
A
I revoke
10
Q
Indirect revocation
A
A reliable third party indicates to offeree that offeror is no longer willing or isn’t able to contract with them.
11
Q
Irrevocable offer Option contract
A
Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer, and the offer could not be terminated before that time, not even by the offeree.
12
Q
Merchant’s firm offer.
A
Only applies to sales of goods and merchants. A merchant is anyone who regularly deals in goods of the kind being sold or has knowledge or skill peculiar to the goods or practices involved. Almost anyone working in business on behalf of a merchant is a merchant. A merchant’s firm offer is a promise in writing and signed promise to keep offer open. It cannot be terminated for the time stated or if no time is stated, then for a reasonable time in no event longer than 3 months. No consideration is needed.
13
Q
Irrevocable offer Detrimental reliance
A
Offeror makes a promise in offer and should expect that offeree will rely on offer to their detriment, if they do then it is irrevocable for a reasonable time. (subcontractor’s bid).
14
Q
Irrevocable offer - beginning of performance under unilateral K.
A
Unilateral K is one that is accepted only by performance. E.g. $100 to walk across bridge. Starting to perform is acceptance.
15
Q
Offer rejection
A
Offeree terminates the offer.
16
Q
Offer rejection - counter offer
A
REsponse that rejects offer but proposes new terms. E.G. price change. Requires clear rejection. Terminates K, even if agreed to original terms after. The rejection terminates original offer and can’t be re-accpted.
17
Q
Not offer rejection - mere inquiry
A
Offeree doesn’t say “no”, but puts out feelers to see if offerror will adjust terms. E.g. Would you consider…
18
Q
Offer rejection - conditional acceptance
A
I accept but, if, so long as. Kills original offer and provides new offer for offeror to accept or reject.
19
Q
Offer rejection - lapse of time
A
Must accept offer within time period expressed in offer. If no time specified, then within reasonable time. Unless there is a particular standard in the industry or parties acted a specific way in the past.
20
Q
Termination by operation of law.
A
Death, incapacity of offeror instantly kills offer. Subject matter becomes illegal or destroyed e.g. fire.
21
Q
Acceptance
A
Timeley manifestation of assent to the terms of the offer.
22
Q
Crossing offers
A
Even with the same terms there is no K if neither party knows of other’s offer so neither has ability to accept.
23
Q
Accepting an offer
A
Offeror is master of the offer and state the term of acceptance to be accepted by any reasonable means. Usually can’t accept through slience unless recipient of offer is aware services are being rendered and by a word could prevent the mistake and doesnt. Or, if there is a custom of agreement between the parties that states silence can be aceptance, then the law gives effect to the agreement or custom e.g. wine of the month club.
24
Q
Bilateral K
A
Promise to perform
25
Unilateral K
Start performance.
26
UCC Article 2 Acceptance
Offer to buy goods for current or prompt shipment can be accepted by promise to ship OR actual shipment.
27
Shipment of nonconforming goods (UCC)
Shipment is acceptance and a breach of K unless seller notified buyer w/n reasonable time that nonconforming goods were offered as an accommodation. Then, it is a counter offer that buyer can reject. To be an accommodation, it requires a written note with the shipment.
It is a breach because the buyer has right to perfect tender of their order.
28
CL mirror image rule
Acceptance must match each and every term of the offer. E.g. I accept.
29
UCC ARt 2 acceptance with different terms.
No mirror image rule. A communicaiton that looks like an acceptance operates as an acceptance even if it contains different terms unless acceptance is made expressly conditional on new or different terms.
2.207- Seasonable expression of acceptance operates as an acceptance unless acceptance is made conditional on assent to additional or different terms.
30
Battle of the Forms between merchants
When terms of offer and acceptance don't match: the different terms become part of K unless (1) they materially limit terms; (2) offer was expressly limited; (3) offeree already rejected that term or does so within reasonable time.
31
Battle of the forms material alteration
Anything changing parties rights or remedies. E.g. new disclaimer of warranty.
32
Battle of the forms expressly limited
Offer states it must be accepted as is and can't be altered.
33
Battle of the forms UCC
2.207 is ambiguous. If terms of acceptance are actually different from terms of offer, most find the conflicting terms knock eachother out. UCC substitutes a reasonable term in its place. Keep the K on the agreed upon terms.
34
Mailbox rule
Acceptance is effective when its mailed if it is properly addressed even if never received. Revocation is effective when received.
Doesn't apply if the offeror opts out of the mailbox rule. An acceptance under an option K is effective only upon receipt not the mailbox rule. Doesn't apply if offeree uses unauthorized means to accept.
35
Consideration
Bargained for exchange for something of legal value. (benefit of promisor or detriment of promise)
36
Bargain
not a gift. Really need bargain.
37
Legal value -consideration
promise to do something or actually doing it that one is not already legally obligated to do. Or promise to refrain from doing something that one is legally allowed to do.
38
Sham consideration.
Something that is not really intended to be consideration. E.g. a car for $1.
39
Past consideration
Something that was done, usualy an act, that would have been consideration if it were bargained for when done, but it wasn't bargained for. E.g. saving stranger from burning building.
40
Consideration - pre-existing duty
Promise to perform something party is already legally obligated to do is not consideration.
Problem arises when seeking to modify a K. A K cannot be modified without consideration usually.
Exceptions that permit modification without new consideration: (1) promise to do anything new or different from original promise no matter how slight the change; (2) Unanticipated circumstances - not anticipated at time of K so long as modification is fair and equitable and not fully performed on both sides; (3) Article 2 of UCC does not follow pre-existing duty rule and permits modifications without new consideration if done in G.(good faith includes inability to make money). IF for more than $500 modification, MUST be in writing.
3. Installment Ks – party who made a waiver MAY retract it by giving reasonable notice to the other party that strict performance will be required of any term previously waived UNLESS retraction would be unjust in view of a material change of position in reliance on the waiver.
Defenses to underlying K apply to modification.
41
Illusory promise
Not consideration. A promise that is empty promise and manifests no real committment. "If I feel like it".
42
Illusory promise satisfaction clause
Not illusory. Can get out of K by saying you don't like the product. But, there is still obligation of good faith.
43
Illusory promise exclusive agency K
One party agrees to represent other as exclusive agent gives an obligation to use best efforts to represent brand and is not illusory. Can't get out of K based on this.
44
Material breach
Only entitled to cancel the K if breach is material. E.g. nonbreaching party did not receive the substantial benefit of the bargain. If the breach is only minor, the nonbreaching party is not entitled to cancel the K.
Factors determining materiality of breach: (1) amount of benefit the nonbreaching party received; (2) adequacy of damages remedy; (3) extent of part performance by breaching party; (4) hardship to the breaching party; (5) whether the breaching party's behavior was negligent or willful, and (6) liklihood of the breaching party's completing performance.
45
Defense: Statute of frauds
A K is not enforceable unless evidenced by a writing signed by the party to be bound when (1) marriage is consideration; (2) can't complete it within 1 year. (no set date of performance does not fall within SOF); (3) interest in land ( K with a broker is not interest in land.) But full performance by seller takes K out of SoF. PArt performance by buyer may as well. Part peformance must unequivocally indicate the parties have contracted for sale of land and need (a) payment of purchase price in whole or part; (b) possession of land; (c) valuable improvements on the land. (4) executor the writing must be signed by executor; (5) goods for sale of $500 or more unless specially manufactured goods that are not sutiable for sale to anyone but one particular buyer, or written confirmation by merchant. In K between merchants, if one party witihn reasonable time of an oral agreement sends the other party written confirmation, it binds the recipient unless they object within 10 days of reciept. ; (6) suretyship - guarantor of debt of another person.
46
SoF writing requirements
Sale of goods need quantity, sale of land needs price and description, service needs description of work.
47
Defense: Absence of mutual assent Mistake
Mutual mistake
Unilateral mistake
A factual error regarding fundamental matter that has a material effect on the agreed exchange. Goes to heart of the deal. But if the party assumed the risk of a mistake, they can't use the mistake as a defense.
Party assumes the risk when they know they don't know a fact of if a party is in superiors position to know a fact.
Mutual mistake - both parties are mistaken about same material fact. (defense)
Unilateral mistake - only one party is mistaken about material fact. (Not a defense).
48
Defense: Absence of mutual assent Misunderstanding
K includes amibiguos language so words can be inteptreted differently. No K unless both parties meant the same thing. If one party knew about ambiguity and other did not know, the K is based on the party unaware of the ambiguity.
49
Defense: absence of mutual assent Mirepresentation.
Untrue assertion of material fact. Induces other party to justifiably rely on it. Makes K voidable, not void. A voidable K can only be enforced if the aggreived party wants it to be.
50
Defense: Absence of mutual assent Fraud
Intentional misrepresentation. Damages recoverable in addition to recission.
51
Defense Incapacity to K: Infants
Infants (under age of majority) generally lack capacity to enter K that is binding on themselves. They may affirm upon reaching age of majority. Affirmance may be express or by conduct (failing to disaffirm the K within a reasonable time after reaching majority). Disaffirmance discharges all liability. Minor can enforce K if want to, otherwise, they may void it.
K's for necessities, things they need to survive, such as food, clothing, shelter, medical care, are not voidable. Minor can still disafirm them, but they have to pay for the value received of the benefit but not the K price.
52
Defenses Lack of mental capacity
agreement with person is voidable by that person when they are so deficient they can't understand nature or significance of agreement. They can void it or a guardian may.
53
Defense: voluntary intoxication
K voidable if the other party had reason to know of the intoxication.
54
Defenses: involuntary intoxication
K voidable if person could not understand the nature or significance of agreement.
55
Defense : Illegality
subject matter or consideration is illegal. E.g. gambling in a state that prohibits gambling.
56
Defense: Duress -
Physical- threaten physical harm to contracting party renders K void. (b) economic -taking advantage of other party's economic needs is usually not a defense. Ecnomic is only a defense when (1) a party threatens a wrongful act that seriously threatens the other party's property or finances; AND (2) the other party has no other means to prevent the threatened loss.
57
Defense: Undue influence:
Person susceptible to pressure, confidante or caregiver uses power to pressure susceptible person into agreeing to an unfair K.
58
Defense: Unconsionability
allows the court to refuse to enforce unfair K or even unfair terms within a K. E.g. unfair surprise. (small print), unequal bargaining party e.g. K of adhesion.
MUST have procedural and substantive unconsiounability but don’t have to be equal
i. Procedural unconscionability: absence of meaningful choice due to unequal bargaining power, inclusion of terms that are inconspicuous and/or hard to understand, deceptive business practice, take it or leave it, deprived a meaningful choice when forced to sign agreement without time to read or understand.
ii. Substantive uncionsionability: K terms are so unfair or one-sided that a reasonable person would not have agreed to them. Consider prevailing commercial practices and other circumstances.
59
Remedy : Specific performance
Only available if legal remedy is inadequate and subject matter is rare or unique. Land is always unique, rare goods. Not available for services only an injunction can be used as alternate remedy for services.
60
Remedy - non monetary remedies under Article 2
Buyer's nonmonetary remedy: (1) cancellation, (2) right to replevy identified goods; (3) buyers right to specific performance.
Seller's nonmonetary remedies (1) right ot withhold goods; (2) right to recover goods.
Right to demand assurances if there are reasonable grounds for insecurity then can demand written assurance of performance.
61
Monetary damages - Compensatory Expectation damags.
Standard measure. Get the benefit of the bargain so give the nonbreaching party what they would need to buy substitute performance.
a. Common law calculation: = losses in value caused by the breach + gains prevented by the breach – savings resulting from not having to perform.
i. Partial performance – if P partially performed and incurred expenses, P first recovers expenses and then receives the expected profit of the K. Compensate to same extent as if K had been performed.
62
Monetary damages compensatory Reliance damages
Put the plaintiff where they would have been if the K had never been formed. Use if damages are too speculative to get expectation damages and instead award plaintiff the cost of their own performance.
63
Monetary damages Consequential damages
Recovered only if at the time the K was made, a reasonable person would have forseen the damages as a probable result of the breach. Special damages that reflect losses over and above standard expectation damages. E.g. lost profits resulting from breach.These damages do nOT flow directly from the breach.
64
Monetary damages Incidental damages (UCC)
K for sale of goods and include expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected, and other expenses reasonably incident to seller's breach.
65
Certainty rule/limitation on damages
Plaintiff must prove losses suffered were certain and not speculative.
66
Liquidated damages
Stipulation of what damages will be should there be a breach. Must be reasonable in view of actual or anticipated harm caused by breach. To enforce, damages must be difficult to estimate or ascertain at time K was formed, amount agreed on was a reasonable forecast, and not a penalty.
UCC rule - courts can consider actual damages to validate a liquidated damages clause, even if the clause was not a reasonable forecast of damages at time formed, it will be valid if reasonable in light of subsequent actual damages. 2-718(1).
67
Restitution
Not really part of K law, but focuses on unjust enrichment when one has conferred a benefit on aother without gratiutious intent. Generally, it is the value of the benefit conferred. Often desirable in a losing K.
68
Recision
If there was a mutual mistake, misrepresentation of facts or law, (or other defenses?).
69
REformation
When the writing setting forth the agreement between the parties is changed so it conforms with the original intent of the parties. Used with mistake and misrepresentation.
70
Mutual Assent
whether a reasonable person would interpret the parties’ words and conduct as reflecting a sincere intent to enter into an agreement. Manifestation of mutual assent requires each party make a promise and/or begin or complete performance. Requires Offer, acceptance, consideration
71
Certainty of terms under UCC
Subject matter and quantity must be specified except for output Ks and requirements ks. Price term is never required. Court will infer purchaser is obligated to pay a reasonable price at time of delivery
72
Acceptance - shipment of nonconforming goods
i. Shipment of nonconforming goods is an acceptance and a breach of K unless, seller notified buyer w/n reasonable time that nonconforming goods were offered as an accommodation. Then, it is a counter offer (not a breach) that buyer can reject. To be an accomodation REQUIRES a note with the shipment.
73
Installment contract nonfonroming shipment
UCC § 2-612(2) provides that a buyer may reject any installment that is nonconforming if the nonconformity substantially impairs the value of that installment and it cannot be cured.
74
Usage of trade uses
evidence rule, even a writing that purports to be the final and exclusive agreement of the parties can be explained or supplemented by consistent usage of trade, so long as the evidence of the trade usage does not fully contradict the contract.
75
Battle of the forms K between merchants
1. Between merchants – different terms become part of K unless (1) they materially limit terms; (2) offer was expressly limited e.g. accept as is; (3) offeree already rejected tht term or does so within reasonable time.
76
UCC battle of the forms addl information
Under the UCC, an acceptance with additional terms does not constitute a rejection and counteroffer, but rather is an effective acceptance unless made expressly conditional on the assent to the additional terms.
If both parties are merchants,the additional terms become part of the contract unless they materially alter the terms of the offer, the offer expressly limited the acceptance to its terms, or they are objected to within a reasonable time.
A “merchant” is one who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved. For purposes of the UCC battle of the
forms provisions, a merchant is almost anyone in business because anyone in business has knowledge of business practices. Here, the store owner is clearly a merchant.
77
Promissory estoppel
promises that WILL be enforced even if they are missing a requirement. E.g. they are indefinite, or violate SoF.
a. Promissory estoppel (detriminetal reliance): A party made a promise that the party should have reasonably expected would induce an action or forbearance on the part of the promissee or a third person; (2) the promise DID induce such an action or forbearance; AND (3) injustice can be avoided only by enforcement of the promise.
A. Reliance on the promise MUST have been reasonable
B. Modern view: remedy limited as justice requires. Usually only expenditures that were incurred by P in reasonable reliance on the promise.
1. Construction Ks: promissory estoppel may apply by a general K against a subctonractor where the subk induces justifiable and detrimental reliance by submitting a bid that is in turn used by the general K in their bid.
2. Exception for charitable donations: PE may be used to enforce a promise to make a charitable donation even without evidence the charity/promissee relying on the promise.
78
Noncontractural enforceable promise - unjust enrichment/quasi-contract
A. Party seeking recovery provided benefit to another party;
B. Party seeking recovery had a reasonable expectation of compensation for the benefit conferred
C. It would be unjust for the other party to retain the benefit w/o paying for it.
1. Damages: reasonable value of goods or services rendered, deducting the value of any benefit the prevailing party receipves.
a. Usually In emergency or medical cases. Hard in a divorce case.
79
Conditions
Conditions are future uncertain events that qualify a party’s performance obligations. May be express or implied. “if, on condition that, provided that, subject to, in the event of” (not required, but trigger condition)
80
Condition precedent
Events that must occur (unless excused or waived) before a contractual duty is triggered and performance is due. If they don’t occur, performance is NOT due and NO BREACH.
1. Non occurring condition IS NOT a breach itself unless one party was required to make it occur.
81
Condition subsequent
(less common/discharge of duty) discharges existing duty. Events that, if they occur, will extinguish an existing duty to perform under a K
1. If in doubt, construe it as a condition precedent instead.
82
Express condition
written into an agreement and mUST be strictly preformed.
83
Constructive condition
not created yb parties, but implied in law. Substantial pefromance is sufficient to comply. May be imposed by courts to achieve just result. (Substantive performance becomes a constructive condition that triggers other party to pay)
84
Excuse of condition
– may be excused if it would be unjust to insist on its occurrence.
A. If nonoccurence of a condition is excused, nonperforming party MAY be found liable for breach despite the nonoccurrence of the condition to the party’s performance. A party that is ready, willing, and able to perform will recover the promised value if the other party wrongfully prevented a contractual condition from occurring.
85
Waiver of condition (estoppel or by election)
1. Election waiver – voluntary relinquishment of a known right. Occurs when a party expressly or impliedly indicates they will perform their obligations under the K even though a condition to their performance WILL NOT occur. Applies ONLY to IMMATERIAL terms.
2. Estoppel waiver: one party manifests a willingness to perform even though the condition HAS NOT yet occurred. May be retracted if the other party has not yet detrimentally relied on it. Applies to any term.
86
Satisfaction of Conditions (objective/subjective)
Objective standard is usually used to determine whether condition has been satisfied unless term deals with party’s aesthetic taste.
a. Objective standard: One party’s duty to perform is conditioned upon the satisfaction with the other party’s performance or some other matter. Usually a reasonable person standard. (preferred standard)
b. Subjective standard: when a party’s duty to perform is conditioned upon satisfaction with a matter of personal aesthetics, condition is not satisfied (and the party is NOT obligated to perform), if they are disatsifed in good faith. Party will be in breach if they decline to exercise judgement e.g. refuse to look, or feign dissatisfaction to get out of the deal.
87
Common law breach (failure to substantially perform/material breach)
party’s failure to substantially perform its obligations under a K constitutes a material breach. Discharges nonbreaching party’s obligation to continue performance. (Has the K’s essential purpose been fulfilled?).
A. Extent to which the injured party will be deprived of the reasonably expected benefit;
1. Breaching party MUST have been aware of significance of specific/special terms.
B. Extent to which the injured party can be adequately compensated for the derpived benefit
C. Extent to which breaching party will suffer forgeiture or hardship
D. Likelihood that breaching party will cure the failure, taking into account all circumstances and reasonable assurances; and
E. Extent to which the breaching party’s conduct comports with standards of good faith and fair dealing.
a. Willful/negligent breaches are more likely to be material.
88
Common law breach - delay in performance
MAY constitute a material failure to perform and MAY discharge injured party’s duty to perform. Court consider’s extent to which the delay deprived the injured party of the benefit of the bargain and extent to which they will be compensated. If delay IS a material breach, court considers (1) extent to which delay may prevent or hinder injured party in making reasonable substitute arrangements; AND (2) circumstances indicating that timely performance was important e.g. time is of the essence.
89
Anticipatory repudiation (Material Breach)
even BEFORE performance is due, one party MAY indicate they do not intend to perform. Communication MUST be unequivaocal, absolute, and definite, and must involve the entire performance. Material Breach! Nonbreaching party MAY be excused from future performance and sue immediately for damages. OR may ignore repudiation and urge performance.
90
Right to request adequate assurances
When one party has reasonable grounds to believe the other party may NOT perform, but other party HAS NOT anticipatorily repudiated, it does NOT constitute breach. Party has right to TEMPORAILY suspend performance until assured AND request assurance that the other party’s performance will not be impaired. Doubts must be REASONABLE.
1. Failure to provide adequate assurance may be anticipatory repudiation. Mere words are NOT enough.
91
Retraction of anticipatory repudiation
before performance is due, a repudiating party MAY retract its repudiation UNLESS other party materially changed its position or otherwise indicated it considers the repudiation final.
92
Partial breach
Immaterial breach. Nonbreaching party IS required to fulfill its remaining duties BUT may then sue to recover damages.
93
Common law good faith and fair dealing
Good faith requires faithful execution of the parties’ common purpose and acting consistent with justified expectations. May be demonstrated by efforts to abide by community standards of decency, fairness, and reasonableness. Must speak and act honestly about the transaction. (DOES NOT require the higher standard of those with a fiduciary duty – (put another’s interest ahead of their own)
94
UCC obligation of good faith and fair dealing
for merchants, UCC defines good faith to be “(1) honesty in fact and the (2) observance of reasonable commercial standards of fair dealing in the trade”
95
Buyer's option when receiving nonconforming goods
Right to perfect tender. if goods or delivery do not conform to the K in ANY way, the buyer may (1) reject ALL goods; (2) accept any commercially acceptable unit or units of goods and reject the rest; or (3) accept all goods and sue for the deficiency.
a. The right to reject goods under perfect tender rule is terminated if buyer accepts the goods, subject to a limited right to revoke acceptance.
b. If seller indicates they hold tender open, a refusal to accept can be withdrawn by accepting them. But, if seller arranges for other disposition and then buyer tries to re-acept, buyer is responsible for damages.
c. Tender of delivery is a condition to the buyer’s duty to accept and pay for the goods absent other agreement. Unless seller demands payment in cash, any ordinary means of payment is sufficient. Buyer’s right to retain goods is conditional upon making good on the payment.
96
Seller is liable for breach if did not do good tender of delivery.
1. The K is NOT an installment K (separate deliveries over time).
2. Tender is nonperforming: goods and tender must match all specifications in the K including timing, place of delivery, and nature of goods. ANY aberration means goods are nonconforming. Must be in a single delivery unless otherwise agreed. Untimely tender permits buyer to reject, subject to seller’s right to cure.
3. Buyer rejects goods with proper notice to seller: buyer may reject all or party of nonfonroming or defective goods. They can chose to accept a commercially acceptable unit which is one that could be sold on the market without impairing the value of the goods.
97
Buyer's rights and obligations before accepting goods
a. Buyer has a right to inspect goods before payment at a reaonsble time, place, and manner. Buyer bears expense unless goods are nonconforming AND rejected.
A. Buyer is NOT entitled to inspect before payment if K provides (1) for payment against documents of title, unless payment is due after goods are available for inspection; or (2) for delivery COD. The parties are free to alter these rules. Buyer’s prepayment of goods doesn’t affect rights.
B. Acceptance exstinguishes buyer’s right to reject nonconforming goods and occurs when:
1. Buyer tells seller goods conform
2. Buyer fails to reject goods after having a reasonable time to inspect them
3. Buyer acts in a way inconsistent with the seller’s continued ownership of the goods (such as using them).
98
Buyer's obligation to reject goods w/n reasonable time
Buyer must hold the goods with reasonable care until the seller retrieves them, but buywer will be entitled to repayment of all reasonably incurred expenses. If buyer fails to exercise reasonable care, they will be liable for damages. IF buyer exercises ownership, it is wrongful against the seller and seller may ratify their acts and treat is an acceptance or be entitled to damages.
A. If buyer rejects goods but fails to identify the defect, it precludes the buyer from relying on the defect to justify rejection or establish breach IF:
1. The seller could have cured the defect after receiving notice; or
2. Both parties are merchants and, after rejection, the seller requests in writing a full and final written statement of all defects.
99
Seller's right to cure if time for performance has not terminated
seller may notify buyer of intent to cure and may cure within time of performance.
100
Seller's right to cure if time for performance HAS terminated
If time passed, seller has right to cure ONLY if:
1. Seller had reasonable groudns to believe that the tender would be accepted (even if reduced price)
2. Seller reasonably notifes buyer of intent to cure the defect; AND
3. Seller provides a cure within a reasonable time.
a. Reasonable grounds and seasonable notice depend on goods, custom in the industry, and past practices between the parties. Right to cure is liberally construed if tender was in good faith and cure can be accomplished w/o significant delay or loss to buyer.
b. Even if seller cures, if buyer suffered any loss due to the nonconforming tender or delay, buyer is entitled to recover damages for loss suffered.
101
Buyers revocation after accepting goods
After a buyer accepts goods, they have limited right to revoke acceptance only where a nonconformity SUBSTANTIALY impairs the value of the goods to the buyer and either
a. The acceptance was based on a reasonable assumption that the nonconformity would be cured and it has not been cured within a reasonable time OR
b. The noncomformity would have been difficult to detect before acceptance or the seller made assurance sthere was no noncomformity.
A. Buyer must notify seller of revocation within a reasonable time after discovering or should have discovered the nonconformity AND BEFORE any substantial change to the condition of the goods.
102
UCC Repudiation
occurs either when adequate assurance is NOT given; OR when there is an overt communication of intent NOT to perform OR an action that renders performance impossible or demonstrates a clear intention not to perform.
1. If repudiation substantially impairs K’s value, the aggrieved party may suspend its own performance and await performance for a commercially reasonable time OR immediately resort to ANY remedy for breach.
2. A repudiating party may retract its repudiation before the next performance is due UNLESS the aggrieved party already cancelled the K, materially changed its position in reliance on the repudiation, or indicated it considers the repudiation final.
3. IF a justified demand for adequate assurance was made, an effective retraction of repudiation MUST include adequate assurance
103
Risk of Loss Common Law
– refers to which party will bear the cost of paying for damages arising during the execution of a K and are related to the subject matter. Often, specified by the K, then the terms govern. If the risk of loss is NOT specified in the K, responsibility is determined by:
a. Common law: (usually in real estate) party with risk of loss will be responsible for damage. If not specified, majority places risk of loss on BUYER (equitable conversion
104
UCC Risk of loss shipment K
(1) if sales K provides that goods will be delivered by a third-party carrier, but not to a specific place, risk of loss shifts to the buyer when the goods are delivered to the carrier. (2) if sales K states goods will be delivered by a third-party carrier TO A SPECIFIC PLACE; the risk of loss shifts to the buyer when goods are delivered to the buyer at the specified place.
105
UCC Risk of loss shipment K free on board
specifies time and place when risk of loss shifts to buyer.
106
UCC Risk of loss shipment free alongside
: with name of vessal means that risk of loss shifts from seller to buyer once goods are delivered to port etc. for goods to be loaded on vessel
107
UCC Risk of Loss Cost, insurance, freight
price is a lump sum and includes cost of goods, insurance, freight to named destination.
108
UCC effect of breach on risk of loss
A. When seller is in breach by tendering nonconforming goods that buyer has right to reject, ROL remains on seller until cure or acceptance.
B. If buyer accepts goods and rightfully revokes acceptance, ROL was on seller since beginning, but only to extent of a deficiency in buyer’s insurance.
C. When buyer breaches K before ROL passed to them, sller may treat ROL as being on buyer for a commercially reasonable time to the extent there is a deficiency in seller’s insurance.
109
UCC nonshipment Ks risk of loss
If goods are not shipped by a carrier, and seller is a merchant, rol remains on seller until buyer receives the goods. If seller is NOT a merchant, rol passes to buyer when seller makes the goods available to the buyer to take delivery.
110
Discharge of duties -
If a party’s duties have been effectively discharged, the party CANNOT be liable for breach and the other party’s continuing obligations to perform are terminated.
111
Discharge of duties based on impossibilty/impracticablity
If subject of K is destroyed or performance becomes objectively impossible through an event that happens after K was entered into, obligation to perform is discharged UNLESS party bore the risk of the occurrence of the event.
A. In a sale of goods, UCC excuses performance if the party’s performance becomes objectively AND commercially impracticable e.g. extremely dififcult if not impossible to perform.
B. Death or unavoidable illness of person who was to perform a personal service
C. Change in law making performance illegal
D. Destruction of K’s subject matter through no fault of the parties.
Temporary impossibility - does NOT discharge, but may delay performance
112
Discharge of duties - partial impracticabilty UCC
where seller’s delivery did not occur or was delayed due to impracticability affecting part of the goods, seller MUST allocate production and deliveries of goods not affected among all buyers with whom the seller has contracted. Any buyer may refuse to accept the apportionment and terminate unexcuted portion of the K.
113
Substituted Performance (UCC)
if manner, facilities required, or place of delivery become unavailable or commercially impracitable to use, then a commercially reasonable substitute MUST be used IF Possible. If method of payment becomes unavailable due to gov. regulation, seller MAY refuse delivery UNLESS buyer pays using a commercially reasonable substitute.
114
Discharge of duties - frustration of purpose
primary purpose of a K is eliminated through no fault of the parties, duties under K may be discharged. CANNOT be raised by a party who bore the risk of the event’s occurrence. Usually requires the K’s primary purpose be totally or nearly frustrated.
A. Foreseeability and risk of loss: defense to discharge if the parties foresaw the risk and allocated it to the party seeking discharge.
115
Discharge of duties by subsequent agreement
May be accord and satisfaction, novation/substituted K, release, mutual recision.
116
Accord and satisfaction
An executory agreement to forgive a prior obligation in exchange for a new one that the parties agree will FULLY satisfy the prior obligations. Often to forgive a debt in exchange for something other than full payment.
A. Must be intended by BOTH parties and supported by CONSIDERATION (occurs when replacement obligation is of a different type from the original).
B. For an obligation to be discharged as an accord and satisfaction for a LESSER payment only and no alteration in type of obligation, there MUST be (1) bona fide dispute over the amount due; AND (2) an agreement that the amount otbe given is a final settlement not a progress payment.
C. Breach of the accord: nonbreaching party can sue under the accord OR the original K.
D. Does NOT discharge the prior obligation UNTIL its duties have been performed. Final performance of the accord extinshes original K duty.
117
Novation and substituted K
new k that discharges obligations owed under prior Ks. Replaces a prior agreement (usually a new entity to the k). If new party takes on original party obligations, they are discharged and requires assent of both new party, discharged party, and owed party.
A. Discharges a prior k duty – makes it a new k and completely discharges the last one. Can’t sue based on the past one any more
B. Creates a new k obligation;
C. OR adds a new party.
118
Release
– Either an ACCORD OR a Substituted K IF supported by CONSIDERATION. If no consideration, probably needs to be in writing. *if fails, may be enforced based on detrimental reliance.
A. NOT ALL JX recognize since it is not generally legally enforceable. Argue Estoppel.
119
Mutual recision
All parties to an agreement agree to surrender their rights and terminate the K obligations. Subject to K modification requirements. MUST be supported by CONSIDERATION. BUT if no party has performed, each party’s surrender of their rights constitutes consideration.
A. K CANNOT be mutually rescinded if one party already performed.
B. Does nOT need to be in writing unless required by statutes.
120
Material breach factors
only be entitled to cancel the contract if the breach is material (i.e., if the nonbreaching party did not receive the substantial benefit of his bargain). If the breach is only minor, the nonbreaching party is not entitled to cancel the contract (although he will have an action for any damages suffered). Six factors that courts look at to determine materiality of breach are: (i) the amount of benefit the nonbreaching party received, (ii) adequacy of damages remedy, (iii) extent of part performance by breaching party, (iv) hardship to the breaching party, (v) whether the breaching party’s behavior was negligent or willful, and (vi) likelihood of the breaching party’s completing performance.
121
Parol evidence rule
122
Exceptions to SOF
(1) Admission by party; (2) part perfomance e.g. in land sales K, Promissory estoppel (CL); (4) specially manufactured goods (UCC).
123
Exception to SOF Admission
When the party against whom enforcement is sought admits the existence of the K in a court document or in course of litigation, then they can’t use SOF as a defense.
a. For UCC sale of goods – admission ONLY applies to the quanitfiy of goods that the party admits were part of the transaction.
124
CL exception to SOF part performance
usually in land sale Ks. Where either buyer or seller partially performs, they may be able to enforce.
i. Part performance must unequivocally indicate the parties have contracted for sale of land. Probably need (1) payment of purchase price in whole or part; (2) possession of land; (3) valuable improvements on the land. Need 2 of those. Possession alone IS NOT enough.
125
UCC Exception to SOF part performance
applies when the payment for goods or delivery of goods has been made and accepted. K enforced only yup to the quantity of goods paid or delivered.
126
UCC Exception to SOF specially manufactured goods
goods are specially manufactured for the buyer and not suitable for sale to others. Seller must show they made substantial efforts in the manufacture or procurement of the goods.
a. Does NOT apply if seller has NOT begun efforts before receiving notice that the buyer does not intend to go forward with the deal.
127
Misrepresentation and Fraud
– Untrue assertion of material fact. Induces other party u justifiably rely on it. Makes K voidable, not void. A voidable K can only be enforced if the aggrieved party wants it to be.
d. Fraud – intentional misrepresentation. Damages recoverable in addition to resicion.
128
Mutual mistake
belief shared by both parties that differs from the facts existing before or at the time the K is executed. Believe must be about an EXISTING fact rather than a mistaken opinion or belief about future events. K may be voidable if:
i. The mistake concerns a basic assumption on which the K was formed. (material fact underlying the K)
ii. The mistake will have a material impact on the parties’ performances (significantly affects the anticipated cost of performance or value of benefit received)
iii. The disadvantaged party did not bear the risk of the mistake meaning they did not have greater knowledge of the relevant facts or realize they did not hae such knowledge but still proceed.
1. Mistake about expected value, alone, is not mutual mistake
129
Unilateral Mistake
incorrect belief by one of the parties, about an existing fact that affects the exchange between the parties. K is VOIDABLE at mistaken party’s option if they can prove:
i. The mistake concerns a basic assumption on which the K was formed
ii. The mistake will have a material impact on the parties’ performances;
iii. The advantaged party either caused the mistake or knew or had reason to know of the mistake; or the mistake makes the K unconscionable.
130
Misunderstanding
: No manifestation of mutual assent occurs if a material term if an agreement is ambiguous, the parties attach different meanings to the term, and either (1) neither party knows or has reason t know of the meaning attached by the other party; or (2) both parties know or have reason to know of the meaning attached by the other party.
i. If only ONE party knows or has reason to know that the other party has attached a different meaning to the language, court finds mutual assent so no defense. The ambiguous language is interpreted according to the meaning attached by the party who did nOT know of the other party’s interpretation.
ii. A party may waive its misunderstanding and chose to enforce the K with the other party’s understanding.
131
Misrepresentation
false statement of fact. Must induce justifiable reliance (done in good faith) Reliance occurs when the misrep substantially contributes to the party’s decision to enter into the K.
132
Fraudulent Misrepresentation
(voidable): party may AVOID a K if they justifiably relied on a fraudulent misrepresentation which was made with the intent to induce their assent and the asserting party (1) knew or believed that the assertion was untrue; (2) stated or implied they were confident that the assertion WAS true when they knew it was unfounded; OR (3) knew they didn’t have a proper basis on which to make the assertion.
ii. Material misrepresentation: party may AVOID a K based on material misrepresentation on which they justifiably relied. (includes innocent misrep if it was material meaning it would induce a reasonable person to assent or the asserter knew it was likely to induce assent.
iii. Fraudulent in fact – person is tricked into executing a completely different K. Void as long as the tricked person didn’t act negligently.
133
Violation of public policy
contrary to public policies articulated by the constitution, statues, or judicial opnions are VOID. Legislation may deem it unenforceable, or interest in its enforcement is clearly outweighed by a public policy. Judge balances benefits of and interest supporting enforcement against any harms resulting from enforcement.
134
K of adhesion
drafted by one party and presented to the other w/o a realistic opportunity for negotiation. E.g. credit card app. K of adhesion are generally enforceable UNLESS: (1) it lacks mutual assent; (2) violates public policy; or (3) is unconscionable.
135
Parol evidence rule
bars courts from considering past or contemperaneious discussions or writings to determine what terms govern when parties have a FINAL written agreement or confirmatory memorandum under UCC, and the writing is integrated. UCC permits consideration of evidence byond the writing itself to determine whether the writing was integrated; creates a presumption that agreements are PARTIALLY integrated; permits introduction of evidence of course of performance, dealing, and usage of trade to explain or supplement a completely integrated agreement.
136
PArol evidence integrated writings - complete/partial
1. A writing is integrated when it is the parties final expression on at least some of the agreement’s terms.
a. Complete integration: the parties intend the written agreement to be a complete and exclusive treatment of the K’s terms. Supersedes all other agreements between the parties on the same subject. Courts may NOT consider other terms for any reason unless it is for a separate K between the parties.
b. Partial integration: intended to be a final expression of SOME but not all terms of the parties’ agreement. E.g. multiple docs or partly oral. Integrated portion supersedes all INCONSISTENT terms of prior or contemporaneous agreements. PArol evidence bars court from considering inconsistent terms in prior or current agreements. Court WILL consider evidence of CONSISTENT additional terms.
137
Merger clause
states the agreement is final, complete, and exclusive of all the terms agreed upon. Often signals the agreement is final and COMPLETELY integrated UNLESS (1) the agreement is OBCIOUSLY incomplete; OR (2) the agreement was induced by fraud or mistake, or is otherwise voidable.
138
Parol evidence exceptions
Permit court to consider other oral or written communicatiosn even when where is a completely integrated agreement:
139
Parol evidence four corners approach
no merger clause so cout looks at writing to determine if agreement is final and if so, if it is complete or patial treatment. Intent determined by the document itself. Courts are looking to outside evidence increasinbgly though.
140
Parol evidence exceptions
(1) Ambiguity; (2) defenses to formation; (3) collateral agreements; (4) conditions precedent; (5) UCC course of performance/dealings/usage of trade; (6) modification.
141
Parol evidence exception ambiguity
if integrated agreement contains an ambiguous term, parol evidence can be used to ascertain its meaning
142
Parol evidence exception defenses
evidence of a defense e.g. misrep, duress, mistake, evidence may be introduced to invalidate the written agreement.
143
Parol evidence exception collateral agreements
if one party contends the parties entered into a separate agreement covering subject matter not addressed in the integrated agreement, evidence of the collateral agreement may be introduced. Agreement cANNOT be introduced if it naturally would have been part of the integrated agreement.
144
Conditions precedent -parole evidence exception
Parol evidence may be introduced to show that the integrated agreement was subject to a condition precedent.
145
UCC course of performance/dealings/trade usage exceptions
– course of performance, dealing, or usage of trade – may be introduced to EXPLAIN AND SUPPLEMENT (but NOT contradict) the terms of any UCC K even when there is a completely integrated agreement.
146
Parol evidence exception modification
parol evidence rule does nOT apply to evidence of SUBSEQUENT oral or written communicatiosn between the parties and it may be introduced to show the parties modified an earlier integrated agreement.
147
Interpreting meaning of K terms
question of law for court
a. Interpreting the whole – interpreted in light of all the circumstances to determine the parties’ principal purpose. Interpret multiple contemporaneous writings as a whole (subject to parol evidence rule)
b. Plain meaning rule: if a term is clear and unambiguous on its face, meaning wil be applied as written.
c. General terms and technical terms – terms accepted according to generally accepted meaning. Techincal terms interpreted in light of way they are used in relevant technical field.
d. Course of performance, course of dealing, usage of trade:
148
Resloving ambiguities in K terms
no one settled meaning. Court considers evidence outside four corners to ascertain meaning. PArol evidence does NOT bar it.
i. Contra profeerentem (Against the drafter)- if parties disagree on the meaning of an ambiguous term, and evidence supports both meanings the court may conclude that the party who drafted it should have fixed the ambiguoity and reject the drafter’s meaning. (Otherwise, K may not be enforceable due to misunderstanding).
149
Resolving inconsistincies in K
: when a term appears to have two different meanings w/n same agreement, express definitions and other specifically drafted provisions prevail over recitals, general statements, or headings.
i. If multiple definitions are possible: courts assign weight in order (1) specifically defined terms; (2) course of performance; (3) course of dealing; and (4) usage of trade.
150
Dealing with indefitiness in K terms
An agreement must be sufficientily definite for a court to find the K exists and to award a remedy if there is a breach. Otherwise, it is unenforceable as indefinite. If K is sufficiently definite, but missing terms, court may insert a gap filler if it concludes the parties DID intend to enter a K.
151
Omitted K terms
f an agreement is sufficiently defninte to form a K but does not include a term necessary to allocate rights and responsibilities, the court may supply a REASONABLE term. Look to objective measures that comport with public policy and community standards of fairness. (some terms are essential)
152
Implied K terms
use gap fillers if court concludes parties intended the term but failed to express it.
i. Implied term of good faith and fair dealing (CL and UCC)
ii. CL: if no price, court fills gap with reasonable price. NOT used if agreement is too indefinite to discern parties’ intent or it is land sale K.
iii. Price and time of paymen t(UCC) more liberal approach for sale of goods. Can fill all gaps EXCEPT quantity term.
A. Specifications relating to assortment of goods are at buyers option.
B. Specifications relating to shipment are at seller’s option – must be commercially reasonable.
C. Price: reasonable value at time of delivery. One party MAY set price after execution of K subject to party’s obligation to do so in good faith.
D. Time: UCC requires goods be shipped or delivered w/n a reasonable time. Payment must be made at time and place of delivery.
a. Fatal omissions: no gap filling for quantity of goods sold unless it is an ouput K.
E. Output K (UCC only): K enforced only up to an amount that is not unreasonably disproportionate to what the other party expected based on prior estimates or past performance.
F. Exclusive dealing K: implied obligation of both parties to use best efforts (reasonable efforts) in supplying goods/services and promoting their sale.
G. Risk of loss, payment, and delivery terms (UCC only):
H. Implied warranties of merchantability, fitness for a particular purpose, and title (UCC only)
153
UCC Express warranty
expressions make express warranty if they are part of the basis for the bargain. Puffery DOES NOT count. Presumption that the buyer relied upon everything they read, viewed, or heard before striking a deal, and all such expressions are presumptively part of the basis of the bargain.
i. Created by (1) seller makes a promise or statement of fact about the quality of goods; (2) seller describes certain attributes of the goods; or (3) seller displays a sample or model representing the attributes and quality of the goods being sold.
154
UCC Implied Warranty of merchantabilty
Unless expressly disclaimed, ALL sales of goods involving a seller who is a merchant create an implied warranty of merchantability under UCC. Only applies to merchants who deal in goods of the KIND INVOLVED in the transaction. Goods must:
i. Fit the K’s description
ii. Be of fair average quality
iii. Be fit for the ordinary purpose of the goods
iv. Be similar in kind, quality, and quantity within the variations permitted by the K
v. Be adequately packed and labled;
vi. Conform to the promises made in the K or on labels or packaging.
155
Disclaiming Implied warranty of merchantabilty
disclaimer mUST be conspiciuos if in wiring and either: (1) specifically mention merchantability; OR (2) indicate the product si sold as is or with all faults.
156
Implied warranty of fitness for particular purpose
can arise even when seller IS NOT a merchant. It is breached when goods are not fit for the particular purpose for which they are to be used, EVEN IF they are otherwise merchantable. Arises when seller
i. Has reason to know that the buyer has a particular purpose for which the goods will be used;
ii. Has reason t know that the buyer is relying on the seller’s judgment or skill to recommend or select suitable goods; and
iii. Recommends or selects such goods for the buyer.
157
Implied warranty of fitness disclaimer
MAY be disclaimed through a conspicuous writing or language saying as is or with all faults in a conspicuous writing.
158
Implied Warranty of Title
K for the sale of goods governed by UCC contains an implied warranty by the seller that
i. Title conveyed is valid
ii. Transfer of title is rightful; and
iii. Goods are free of any KNOWN encumberance.
A. Implied warranty of title may be excluded or modified by specific K language to the contrary. General disclaimer of warranties IS NOT sufficien
159
Remedies
Generally courts award monetary damages that make the nonbreaching party whole as if the K were performed. Punitive are almost never permitted. IF monetary (legal) damages are inadequate, MAY get specific performance.
160
Primary/Secondary remedies
Primary are exclusive of e/o but may be combined w/ secondary:
Liquidated damages
Specific performance
Expectation damages
Reliance damages
Restitution damages
Nominal damages
Reformation
Recsision
SEcondary:
Conseuential
Incidental
Punitive (ONLY w/ fraud/bad faith)
Attorney's fees
UCC Specific remedies -in lieu of others:
ACtion for price
Buyer's insolvencey
Stopping shipment for insolvency or breach.
161
UCC Specific Performance
performance may be awarded for Ks for sale of goods if the goods are unique, or in proper circumstances of:
i. Goods are available to the buyer only from the seller;
ii. Where goods are custom-built for the buyer
iii. Goods have historical or sentimental significance; or
iv. Goods are designed to particular specifications.
1. Will NOT be available where buyer can purchase cover.
Replevin - buyer who cannot reasonably effect cover, has right to replevin for K goods.
162
Limitations/equitable defenses to specific performance
not awarded where it is inequitable. Court uses discretion to deny based on (1) unclean hands; (2) laches (harm to the other party caused by claimant’s unreasonable delay in asserting their rights; or (3) prior sale of the K’s subject matter to a good faith bonafide purchaser who paid valuable consideration.
163
Expectation damages for defective/unfinished construction
if loss of value is not proved with sufficient certainty, aggrieved party may recover damages based on (1) diminution in property’s market price caused by the breach; or (2) cost to complete performance or to remedy defects, unless cost is CLEARLY disproportionate to the loss in value caused by the breach.
164
UCC expectation damages Market damages
: Default UCC expectation damages measure:
i. For nonbreaching buyer: Difference between the MARKET price of goods and the K price at the time the buyer received notice of the seller’s breach.
ii. For nonbreaching seller: difference between K price of goods and market price at time seller tendered goods.
165
UCC Expectation damages alternative measure - Cover
for buyers of GOODS ONLY.
i. Seller breach – buyer may make a good-faith purchase of substitute goods without unreasonable delay (not required though). Primary damages are difference between substitute goods and K price.
166
Expectation damages UCC Resale Damages
damages for nonbreaching seller who resells goods in good faith and in a commercially reasonable manner after giving notice to the buyer – recovers difference between original K price and resale price. (Optional)
167
UCC Lost Profits
nonbreaching seller who sells the contracted-for goods to another buyer after a previous buyer breached the sales K is a lost-volume seller if they carried sufficient volume of the good tohave been able to make a sale to the second buyer EVEN IF the first buyer didn’t breach. Entitled to primary damages representing lost profits of the breached sale = difference between K price and seller’s cost in acquiring or producing the good.
168
UCC Breach of warranty damages
measure of primary expectation damages for breach of warranty = difference at the time and place of acceptance between value of the goods accepted and value of the goods would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
169
Reliance damages (mostly just CL)
put the plaintiff where they would have been if the K had never been formed. Use if expectation damages are too speculative or difficult to prove. Awards the plaintiff the cost of their performances. Preferable if nonbreacher can’t prove K would have been profitable. Default for promissory estoppel claims. MAY be used even if breach IS NOT material.
a. Expenditures made by nonbreaching party in part performance or in preparation to perform.
b. Essential reliance – includes direct expenses incurred in part performance or parparint go perform
c. Incidental reliance – foreseeable collateral expenses incurred.
d. UCC: not expressly available but gives basis to protect reliance interests. Under the UCC, sllers may recover costs incurred in performing (in addition to lost profits) and buyers may recover deposits they made to the original K (in addition to cover costs).
e. Limitation – awarded only to the extent they are reasonable under the circumstances. Decline reliance damages that are disporportionatley high compared to value of K at issue.
170
Restitution damages for breaching party in unjust enrichment claim (EQUITABLE Remedy)
awarded to protect against unjust enrichment. Requires a defending party to give up gains. Available ONLY to a party who had a reasonable expectation of compensation for the benefit conferred on the other party. If a gift, no restitution.
171
Restitution calculation
value of the benefit that claimant has conferred on other party – any benefit the other party has conferred on the claimant and/or damages caused by the claimant.
i. If value is difficult to determine e.g. construction cases: ((1) award restitution in amount of reasonable value of services rendered OR (2) award restitution in amount of change in market value of the property at issue
172
Nominal damages
: ALWAYS available to a claimant who prevails on a breach of K claim. Minimal awards e.g. $1 when there is no compensable harm caused by the breach. Some states may permit award of attorney’s fees where there are nominal damages.
173
REformation nonmonetary equitable relief (does NOT apply to BFP)
When a written document does not conform to actual agreement between parties (e.g. typo), aggreieved party may seek reformation. Must have CLEAR AND CONVINCING evidence. Equitable remedy subject tto discretion.
a. Alternative argument by party who claims K should be unenforceable because of mistake, fraud, or misrepresentation.
b. NOT available if reformation would adversely affect the rights of a bonafide purchaser.
174
Recision - nonmonetary
): Party may seek unilateral resicsion of a K at law or in equity. Must tender the contractual benefits to the other party AND bring an action for restitution. E.g. when K was not supported by mutual assent due to fraud, fraudulent misrep, misrep of a material fact, mutual mistake, or unilateral mistake.
175
REcision at law
promptly after discovering groudns for resicion, plaintif must provide notice of resciion to D and return benefits received under the K UNLESS :
i. The property was worthless when received or has been destroyed or lsot by the other party or because of the property’s own defects;
ii. The property has been used or disposed of w/o knowledge of the grounds of rescission;
iii. The amount received under the K is less than the amount due the party seeking to resind.
1. Tender of benefits must be complete and unequivocal. Court grants restitution for money owed.
176
Equitable recision
: court invalidates the K upon a showing by the P of the grounds for rescission. P MUST return the benefit to D, but tneder DOES NOT need to happen before filing suit. Court’s objective is to return the parties to situation BEFORE the K. Appropriate when remedy at law is inadequate.
177
Recission defense - acquiescence/ BFP
in any reseicion for fraud, if defrauded party does anything to recognize the transaction or is inconsistent with repudiation. E.g. continues to accept benefits, they acquiesce to the transaction and waive right to rescind. Also waive if delays such that the other party acts to their detriment in reliance on the K.
d. Bonaifde purchasers – resicion and reformation may not be asserted if interest of a bonafide purchaser who acquired the interest in good faith w/o notice of any claims or defenses to enforcement will be adversely affected.
178
UCC Consequential damages - buyer only
ONLY a BUYER can recover consequential damages. Include losses resulting from buyer’s requirements or needs for goods of which the seller had reason to know and could not have been reasonably prevented by cover or otherwise, as well as injuries to persons or property proximately resulting from a seller’s breach of warranty.
i. Parties may limit consequential damages or exclude them unless doing so would be unconscionable. (will be uncons. If personal injury involved)
179
Incidental damages rule
Other expenses incurred by the nonbreaching party as a result of the breach, but must be REASONABLE regarding amount of the expense and whether it should have been incurred.
180
UCC ACtion for price in lieu of other remedies
If buyer fails to make payment when due, seller may recover the full K price of goods if:
a. Goods have been accepted by the buyer
b. Goods have been lost, damaged, or destroyed after risk of loss passed to the buyer;
c. OR seller is unable to resell the goods at a reasonable price.
i. Seller who sues for the price MUST hold for the buyer any goods still in their control and identified in the K, but may resell them at any time prior to tcollection of the judgement and credit net proceeds to the buyer.
181
UCC damages for buyer's insolvency in lieu of other remedies
a seller who discovers buyer is insolvent may require cash payment before delivering the goods. If received on credit while insolvent, seller may reclaim the goods upon demand made within 10 days after receipt. Seller’s right to reclaim goods are subject to third party rights in the goods.
182
UCC Stopping shopment for insolvency or breach in lieu of other remedies
if buyer is insolvent, seller is entitled to stop shipment of goods in transit. If buyer breaches – seller may stop delivery ONLY if goods are shipped in large lots. Seller CANNOT stop goods in transit once (!) buyer has received the goods; (2) the carrier has acknowledged the buyer’s rights; (3) the goods have been reshipped by the carrier; OR (4) the title has been given to or negotiated with the buyer.
183
Limitations on damages
(1) reduction for expenses saved; (2) duty to mitigate e.g. employment, optional for UCC; (3) requirement that losses be proven to reasonable certainty
184
Reduction in damages for expenses saved
in expectation damages, courts reduce the nonbreaching party’s recovery for any expenses saved. And in reliance damages, court reduces recovery if breaching party can prove that had the K been performed, nonbreacher would have lost money. (Anticipated loss DOES NOT affect restitution damages)
185
Duty to mitigate damages
requires nonbreaching party take REASONABLE actions following breach to avoid unnecessary losses that might otherwise result. Burden of proof is on BREACHING party. (often in employment K).
i. Employee has duty to take alternative employment that is substantially similar to original employment, if available.
ii. UCC:less duty to mitigate than common law. Nonbreaching seller or buyer of goods may recover market damages without attemptoing to mitigate. BUT Consequential damages are limited to extent nonbreaching party failed to mitigate them.
186
Third party beneficiary
when a K benefits someone other than original promisor or promisee, who are not a party to the K.
187
Intended beneficiary
the person whom the K parties intended to benefit. Explicitly provides payment to specific beneficiary according to language of K or otherwise indicate they will receive benefits. E.g. creditor beneificary (receiving promised performance in satisfaction of a legal obligation), donee beneficiary (receiving promised performance as a gift).
i. If rights have NOT vested, cannot enforce K obligations. If rights HAVE vested, to enforce the vested rights, the D must be the promisor and not have a valid defense.
188
Incidental beneficiary
(MBE does NOT permit enforcement) third person who benefits from K performance but whom the parties did nOT intent to benefit. At common law, they may NOT enforce the K obligations at issue.
i. Under the UCC depends on the state. Generally, seller’s warranties extent AT LEAST to family members and guests in the buyer’s home if it is reasonable to expect such a person may use or consume the goods being sold to the buyer and that person suffers an injury from breach of warranty.
189
Vested third party rights in K
i. Intended beneficiary sues to enforce right: original parties can not longer modify those rights.
ii. Intended beneficiary detrimentally relies on promise (promissory estoppel) – rights vest.
iii. Intended beneficiary assents to the K in a manner requested, rights vest
iv. K explicitly provides that the intended beneificary’s rights have vested e.g. immideiatly upon execution of the K, so rights vest and K parties can no longer modify the intended beneficiary’s rights.
190
Defense to third party beneficiary claim
Promisor may raise ANY defense or excuse to nonperformance that could have been raised against the promissee.
i. If intended beneficiary is a creditor beneficiary, promisor cannot raise any defense promise could have raised against that creditor related to the existence of the underlying legal obligation b/c it’s a separate K.
191
Assignment of rights/delegation of duties
Generally, a party MAY transfer rights and/or obligations ot others during the term of a K.
192
Assignment of rights
a K party (assignor) transfers K rights such as right to receive payment. Assignee (receives the assignment has no rights UNTIL a party to the K transfers its existing rights by assignment.
i. Obligor: party who provides the benefit to the assignee.
ii. Creation: ANY actions that evidence the assignor’s present intent to make a present assignment of rights. May be oral, unless clause in original K requires assignment to be in writing OR UCC : where assignment is greater than $5k.
iii. CANNOT make a present assignment of rights that party hopes or expects to receive from a future K.
iv. Typically deemed assignable: (1) right to receive money; (2) right to delivery of goods; (3) right under UCC output and requirement K as long as assignment does not materially alter quantity of original obligation; and (4) rights to recover proceeds from insurance policies.
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A right is NOT assignable if assignment would
i. Materially change the obligor’s duty;
ii. Materially increase burden or risk on the obligor
iii. Materially impair obligor’s chance of obtaining return performance; OR
iv. Materially decrease value of the return performance to the obligor.
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Revocation of assignment
assignor is free to revoke by (1) informing assignee of revocation; (2) receiving performance from obligor; (3) making as ubsequent assignment of same rights. Revocation occurs as matter of law on assignor’s death or declaration of bankruptcy.
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Assignment is irrevocable if
i. Was made in exchange for considartion
ii. Obligor already provided performance to assignee
iii. Assignment was made to the assignee in writing; OR
iv. Assignee has reasonably relied on assignment to their detriment.
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Enforcement and defense of assignment
Once there has been a valid assignment of rights, assignee may enforce rights through breach of K against obligor who may raise any defenses or excuses it would have been able to use against assignor.
i. Unless there was a novation, assignor may also sue obligor for breach of K if obligor fails to fully perform obligations.
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Delegation fo duties
when contracting party (delegator) transfers A duty they must perform under a K to a third party (delegatee) who makes an ENFORCEABLE promise to perform it. MUST BE CONSIDERATION to support delagatee’s promise.
a. Obligee- party wo thom duty is owed.
b. Delegator’s delegation DOES NOT extinguish their duty to perform if the delagatee fails to do so (different from assignment) unless there was novation.
i. Creation: orally or in writing, unless original k requires writing. Delagatee MUST manifest assent to the delegation. Usually, “assignment of the K” or similar language is both an assignment of right AND delegation of duties
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Delegation of duty exceptions
1. Personal service K: duties to perform services involving artistic abilities or other unique skills MAY NOT be delegated.
2. Legal or public policy restrictions on delegation: delegations of duties may be prohibited as a matter of law or public policy
3. Contractual limitations on delegation: unlike assignment, K prohibitions on delegation are generally enforceable.
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Delegation of duties enforcement and defenses
the delegator or the oblige can sue the delegatee for nonperformance or deficient performance. Unless there is a novation, the oblige may sue the delegator if delegate fails to fully perform.
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UCC Permissive delegation of duties
Unless parties agreed there can be NO delegation or circumstances indicate party receiving a performance has a substantial interest in receiving performance from the original party, delegation is permitted.
i. Assigning the K or “all my rights pursuant to the K” is generally interpreted as both an assignment of rights and delegation of duties.
ii. Obligee may treat any assignment that delegates performance as creating reasonable grounds for insecurity and may demand assurances from the delegatee.
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Specific performance elemnts mnemonic
Cha Cha Is My Favorite Dance: Contract, Certain and Definite Terms, Inadequate Remedy at Law, Mutuality of Performance, Feasible Enforcement, Defenses
