Contracts Flashcards
1
Q
Express contracts are formed by ___.
A
Language
2
Q
Implied contracts are formed by ___.
A
Conduct
3
Q
Bilateral Contract
A
Exchange of mutual promises (promise for a promise)
4
Q
How can a bilateral contract be accepted?
A
In any reasonable way (i.e., either by promising or begininning performance)
5
Q
Unilateral Contract
A
Offeror requests performance rather than a promise (i.e., promise for completion of performance).
Once the act is completed, a contract is formed.
6
Q
When does a unilateral contract occur?
A
- When the offeror clearly (unambiguously) indicates that completion of perfomance is the only manner of acceptance
- Where there is an offer to the public (such as a reward offer)
7
Q
How can a unilateral contract be accepted?
A
Only by performance
8
Q
Common Law vs UCC Article 2
A
Common Law = sales of services and land
UCC Article 2 = sales of goods
9
Q
What are “goods” under UCC Article 2?
A
All things that are moveable at the time they are identified as the items to be sold under the contract (i.e., most tangible things except real estate)
10
Q
What is considered a “merchant” under UCC Article 2?
A
One who regularily deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.
11
Q
In contracts involving the sale of both goods and non-goods, which law applies?
A
The dominant aspect applies (e.g., if the dominant item is a good, the UCC applies)
12
Q
What two elements make up mutual assent?
A
- Offer
- Acceptance
13
Q
What creates an offer?
A
A reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
Consider:
1. Was there an expression of a promise, undertaking, or commitment to enter into a contract?
2. Were there certainty and definiteness in the essential terms?
3. Was there communication of the above to the offeree?
14
Q
Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as ___.
A
Mere invitations for offers
15
Q
How do you determine whether an offer contains definite and certain terms?
A
Whether the essential terms have been provided so that a contract including them is capable of being enforced.
Consider:
1. Identification of the offeree
2. Definiteness of the subject matter
3. For real estate, land and price
4. For sale of goods, quantity
16
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 the seller.
However, there cannot be a tender of or demand for a quantity unreasonably disproprotionate to:
1. Any stated estimate; or
2. Any normal or otherwise comparable prior output requirements
17
Q
Do one or more terms missing from an offer prevent the formation of a contract?
A
No, if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a remedy.
18
Q
Does the failure to state a price prevent the formation of a contract?
A
No, unless the contract is a sale of real property.
19
Q
If an agreement does not specify when an act is to be performed, when should it be performed?
A
Within a reasonable time
20
Q
When can an offer be terminated by the offeree?
A
An offer can be terminated at any time UNTIL the offer has been accepted.
21
Q
How may an offeree terminate the offer?
A
- Lapse of Time (failure to accept within the time specified)
- Express Rejection
- Counteroffer as Rejection
22
Q
When is a rejection effective?
A
When received by the offeror.
23
Q
What happens when an acceptance is made expressly conditional on the acceptance of new terms?
A
It is a rejection of the offer. The conditional acceptance is a new offer and the original offeror may form a contract by expressly assenting to the new terms.
24
Q
How may an offeror reject an offer?
A
Revocation
- Direct Revocation
a. Offeror directly tells offeree of revocation - Indirect Revocation:
a. Offeree receives correct information
b. From a reliable source
c. Of acts of the oferor that would indicate to a reasonable person that the offeror no longer wishes to make the offer
25
When is a revocation effective?
When it is received by the offeree
26
When may an offer be revoked?
Offers can be revoked by **at will** by the offeror **until acceptance** UNLESS:
1. Consideration for a promise not to revoke
2. Merchant's firm offer under Art. 2
3. Detrimental reliance
4. Begining performance in response to a unilateral contract offer
27
Merchant's Firm Offer Under Article 2
Under Article 2:
1. If a **merchant**,
2. Offers to buy or sell goods in **signed writing**; and
3. The writing gives assurances that it **will be held open**
The offer is not revocable for lack of consideration **for the time stated,** or if no time is stated, for a **reasonable time** (but **in no event may such period exceed 3 months**)
28
When does detrimental reliance prevent revocation of an offer?
When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
29
What events will terminate an offer by operation of law?
1. Death or insanity of either party
2. Destruction of the proposed contract's subject matter
3. Supervening illegality
30
Who may accept an offer?
Only the person to whom an offer is addressed has the power off acceptance
31
Is silence considered acceptance?
No, generally, an offeree cannot be forced to speak or have their silence treated as acceptance.
32
Acceptance of an Offer under Art. 2
May be accepted either by a promise to ship or by a shipment of conforming or nonconforming goods
33
Is a shipment of nonconforming goods acceptance?
Yes, the shipment of nonconforming goods is an acceptance creating a bilateral contract as well as a breach of contract unless the seller reasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation.
34
Mirror Image Rule
Under common law, acceptance must mirror the terms of the offer. Otherwise, it is a rejection of the offer.
Note that the mirror image rule DOES NOT apply to the sale of goods under UCC.
35
Battle of Forms
Under UCC, the Mirror Image Rule is NOT required. The includsion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and a counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms.
1. Ks involving non-merchants =
a. K is created
b. Additional terms ARE NOT part of the K UNLESS the offeror expressly agrees
2. Ks involving merchants =
a. K is created
b. Additional terms ARE part of the K UNLESS:
i. They materially alter the original terms of the offer
ii. The offer expressly limits acceptance to the terms of the offer; or
iii. The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is recevied
36
When is acceptance effective?
Acceptance by mail or similar means is **effective at the moment of dispatch,** provided that the mail is properly addressed and stamped, unless one of the exceptions applies:
1. The offer stipulates that acceptance is not effective until received
2. An option contract is involved
3. The offeree sends a rejection and then sends an acceptance (in which case whichever arrives first is effective)
37
Elements of Consideration
1. Bargained-for exchange
2. Legal value
38
Bargained-For Exchange
The promise to induce the detriment and the detriment induces the promise
There is NO bargain if one party gives a gift to another
39
Is past consideration valid consideration?
No, a promise given in exchange for something already done does not satisfy the bargain requirement
40
Do courts inquire into the adequacy of consideration?
No; however, if something is entirely devoid of value (i.e., token consideration), it is insufficient
41
Preexisting Duty Rule
Performing or promising to perform an existing legal duty is insufficient consideration.
Exceptions:
1. New or different consideration is promised
2. Promise to ratify a voidable obligation
3. Preexisting duty is owed to a 3rd person
4. Honest dispute as to the duty
5. Unforseen circumstances sufficient to discharge a party or if the modification is fair and equitable in view of circumstances not anticipated when the K was made
42
Modification of Ks
Traditional Law = K cannot be modified unless the modification is supported by new consideration
Modern Law = Permits modification w/o consideration if:
1. The modification is due to circumstances that were unanticipated by the parties when the K was made
2. It is fair and equitable
43
Promissory Estoppel
Consideration is not necessary if the facts indicate that the promisor should be estpped from not performing. A promise is enforceable if necessary to prevent injustice if:
1. The promisor should reasonably expect to induce action or forbearance, and
2. Such action or forbearance is in fact induced
44
Defenses to Formation of Contracts
1. Legal Incapacity (Age)
2. Mental Incapacity
3. Intoxication
4. Duress
5. Undue Influence
6. Mutual Mistake
7. Misrepresentation
8. Illegality
9. Unconscionability
45
Legal Incapacity to Contract
Infants (anyone under the age of 18) lack capacity to enter in a K binding on themselves.
A minor may choose to disaffirm a K any time before (or shortly after) reaching the age of majority. The K MUST be disaffirmed as a whole--cannot be disaffirmed in part. If a minor chooses to disaffirm, they must return anything that they received under the K that still remains at the time of disaffirmance.
A minor may disaffirm necessaries (e.g., subsistence, health, or education) BUT will be liable in restitution for the value of the benefits received.
46
Duress
1. The party threatens to commit a wrongful act that would seriously threaten the other contracting party's property or finances
2. There are no adequate means available to prevent the threatened loss
47
Undue Influence
1. Undue susceptibility to pressure by one party
2. Excessive pressure by the other party
48
Mistake/Ambigious Contract Language
1. **Neither party aware** = no K unless both parties intended same language
2. **Both parties aware** = no K unless both parties intended the same language
3. **One party aware** = K based on what the ignorant party reasonably believed to be the meaning of the ambigious words
49
Mutual Mistake
If both parties enter into a K and are mistaken about existing facts relating to the agreement, the K may be voidable by the adversely affected party if:
1. The mistake concerns a basic assumption on which the K is made
2. The mistake has a material effect on the agreed-upon exchange
3. The party seeking avoidance did not assume the risk of the mistake
Note: Mistake in value is generally not a defense
50
Unilateral Mistake
If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a K. However, if the nonmistaken party knew or had reason to know of the mistake made by the other party, the K is voidable by the mistaken party.
51
Misrepresentation
If a party induces another to enter into a K by using fradulent misrepresentation, the K is voidable by the innocent party if they justifiably relied on the fraduluent misrepresentation.
52
What Ks apply to the Statute of Frauds?
Marriage
Years (>1 year)
Land Sale
Executors
Goods (> $500)
Surety
53
Statute of Frauds
Requires certain agreements to be evidence by a writing signed by the party sought to be bound (the defendant).
54
Under the Statute of Frauds, when does the date of performance begin?
The date runs from the date of the agreement and NOT from the date of performance.
55
When are K modifications implicated by the Statute of Frauds?
The modification need only be in writing if the **modification** falls within the Statute of Frauds.
56
Exceptions to the Statute of Frauds
1. Specially manufactured goods
2. Admissions in pleadings or court
3. For **merchants**, if one party sends the other a **written confirmation** of the understanding
4. Estoppel
57
Satisfication of the "writing" requirement in the Statute of Frauds
1. Reasonbly identify the subject matter of the K
2. Indicate that a K has been made b/w the parties
3. State w/ reasonably certainty the essential terms
a. Land Sale = description of land and price
b. Employment = length of employment
c. Sale of Goods = quantity term
58
Parol Evidence Rule
When the parties to a K express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an "integration." Any other expressions--written or oral--made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.
59
When is a writing an "integration" under the Parol Evidence Rule?
1. Whether the writing was intended as the final expression of the agreement
2. Whether the integration was intended to be complete or partial
Consider: Whether thare are consistent additional terms not in agreement and whether there is a merger clause
60
Evidence Outside the Scope of the Parol Evidence Rule
1. **Validity** - party acknolwedges that the writing reflects the agreement but asserts that the agreement never came into being
2. **Collateral Agreements** - the evidence is related to the subject matter but not part of the primary promise and does not conflict with it
3. **Naturally Ommitted Terms** - a term that does not conflict with the written integration and concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument
4. **Interpretation** - uncertainty or ambiguity in the written agreement's terms or a dispute as to the meaning of those terms
5. Subsequent Modification
61
Courts will construe words according to their ___ meaning unless it is clearly shown that they were ____.
ordinary; meant to be used in a technical sense
62
If provisions appear to be inconsistent (written/printed) provisions will prevail over (written/printed) provisions.
written; printed
63
Ambiguities in a K are construed ___ the party preparing the K, absent evidence of the intention of the parties.
against
64
Heirachy of evidence to determine ambigious terms:
1. Parties conduct within the course of performance in the **current** K
2. Parties conduct within the court of dealing concerning **previous transactions** between the parties
3. Usage of trade or method of dealing
65
Gap-Filler Provisions
1. Price = reasonable price at the time for delivery
2. Place of Delivery = seller's place of business
3. Time for Shipment or Delivery = within a reasonable time
4. Time for Payment = time and place at which the buyer is to receive the goods
5. Assortment = assortment is at the buyer's option
66
Express Warranties
Any affirmation of fact or promise made by the seller to the buyer, andy description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain (i.e., the buyer could have relied on it when then enter into the K).
67
Is a statement of value or opinion an express warranty?
No, a statement relating value of goods or statement purporting to be only the seller's opinion or commendation of the goods does not create an express warranty.
68
Implied Warranty of Merchantability
Implied in every K for sale **by a merchant who deals in goods of the kind sold,** there is a warranty that the goods are **merchantable** (i.e., fit for the ordinary purpose for which such goods are used).
69
Implied Warranty of Fitness for a Particular Purpose
A warranty will be implied in a K for the sale of goods whenever:
1. Any seller (merchant or not)
2. 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 skill and judgment to select suitable goods
3. The buyer in fact relies on the seller's skill or judgment
70
May a seller disclaim implied warranties?
Yes, by words such as "as is," "with all faults," or other expressions that in common understanding call the buyer's attention to the fact that there are no implied warranties.
71
May a seller disclaim express warranties?
In theory, yes, however it if very difficult to do so.
72
Who assumes the risk of loss?
1. Noncarrier Cases
a. If the seller is a merchant, risk of loss passes to the buyer only when they take physical possession of the goods
b. If the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery
2. Carrier Cases
a. If the contract is a Shipment Contract (not required to deliver to a particular destination), risk of loss passes to the buyer when the goods are delivered to the carrier
b. If the contract is a Destination Contract (delivered to a particular destination), risk of loss passes to the buyer when the goods are tendered to the buyer at the destination
73
What happens if goods are destroyed before risk of loss passes?
If goods that were identified when the K was made are destroyed
1. without fault by either party; and
2. before the risk of loss masses to the buyer
the K is voided (i.e., the seller's performance is excused)
74
Performance Under Common Law v. Article 2
Common Law = Substantially perform all that is called for in K
Article 2 = perfect tender (exactly as promised in K)
75
Obligation of Good Faith
Under Article 2, all parties must act in good fath, which is defined as "honest in fact and the observance of reasonable commercial standards of fair dealing."
76
Buyer's Right of Inspection
The buyer has the right to inspect the goods before they pay unless the K provides for payment on delivery or otherwise indicates that the buyer has promised to pay w/o inspecting the goods.
77
Payment by Check
Tender of payment by check is sufficient unless the seller demands cash AND gives the buyer time to get it.
78
Condition Contract
A contract that provides a party does not have a duty to perform unless some condition is fulfilled.
"Condition" normally means either:
1. An event or state of the world that must occur or fail to occur before a party has a duty to perform; or
2. An event or state of the world, the occurrence or nonoccurence of which releases a party from their duty to perform
79
Express Conditions
Refers to an explicit contractural provision providing that either:
1. A party does not have a duty to eprform unless some event occurs or fails to occur; or
2. If some event occurs of fails to occur, the obligation of a party to perform one or more of his duties under the K is suspended or terminated
80
Promisor's Satisfaction as Condition Precedent
1. **Mechanical Fitness, Utility, or Marketability** = satisfaction fullfilled by a performance that would satisfy a reasonable person
2. **Personal Taste or Judgement** = satisfied only is the promisor is personally satisfied
81
Condition Precedent
A condition that must occur before an absolute duty of immediate performance arises in the other party
82
Condition Concurrent
Conditions that are capable of occurring together, and that the parties are bound to perform at the same time
83
Condition Subsequent
Condition that, when it occurs, cuts off an already existing absolute duty of performance
84
How can condition contracts be excused?
1. **Hinderance/Failure to Cooperate** - prevention of condition is wrongful
2. **Waiver/Estoppel**
3. **Actual Breach** - material breach by other party
4. **Anticipatory Repudiation** - a promisor, prior to the time set for performance of their promise, indicates that they won't perform when the time comes
85
When does anticipatory repudiation apply? What are its effects?
Applies when the words or conduct of the promisor unequivocally indicates that he cannot or will not perform when the time comes.
Promisee may:
1. Treat as total repudiation and sue immediately
2. Suspend performance and wait to sue until the performance is due
3. Treat the repudiation as an offer to rescind and treat the contract as discharged; or
4. Ignore the repudiation and urge the promisor to perform
86
May a repudiating party retract their repudiation?
A repudating party may at any time before their next performance is due withdraw their 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.
87
What occurs if the promisee believes a prospective failure of a contract condition?
Prospective failure of a condition occurs when a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due.
The effect allos the innocent party to suspect further performance until they receive adequate assurances that performance will be forthcoming. If the other party fails to provide adequate assurances, the innocent party may be excused from their own performance and may treat the failure to provide assurances as a repudiation.
88
When has absolute duty to perform been discharged?
1. Performance or tender of performance
2. Occurance of condition subsequent
3. Subject of contract has become illegal
4. Mutal rescission (express agreement b/w parties)
5. Cancellation (destruction or surrender of written K)
6. Substituted K
7. Accord/Satisfaction
8. Novation
9. Impossibility, Impracticability, or Frustration
89
Accord/Satisfaction
Agreement in which one party to an existing K agrees to accept, in lieu of performance that they were supposed to receive from the other party, some other, different future performance.
The accord DOES NOT discharge prior contract. It merely suspends the right to enforce. Satisfaction of the performance of the accord discharges performance by both the accord and the original contract.
In general, an accord must be supported by consideration.
90
Novation
A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the old contract.
A novation will serve to discharge the old contract
91
Impossibility
Contract duties will be discharged if it has become impossible to perform them.
The impossibility must arise AFTER the contract has been entered into.
If the performance to be rendered under the K ceomes only partially impossible, the duty may be discharged only to that extent.
Temporary impossibility suspends contractual duties, it does not discharge them.
92
Death or Physical Incapacity
Death or the physical incapacity of a person necessary to effectuate the contract serves to discharge it. However, if the services were not unique and can be delegated, performance is not discharged.
| Discharge by Impossibility
93
Subsequent Destruction of Contract's Subject Matter
If the contract's subject matter is destroyed or the designated means for performing the K are destroyed, the contractual duties will be discharged.
However, a contractor's duty to CONSTRUCT a building is NOT discharged by destruction of the work in progress. However, most courts will excuse the contractor from meeting the original deadline.
| Discharge by Impossibility
94
Impracticability
Discharge of contractual duties where performance has become impracticable.
The test for a finding of impracticability is that the party to perform has encountered:
1. Extreme and unreasonable difficulty and/or expense; and
2. Its nonoccurance was a basic assumption of the parties
95
Frustration of Purpose
Frustration will discharge performance if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge.
The elements necessary are:
1. Supervening act or event leading to the frustration
2. At the time entering into the K, the parties did not reasonably foresee the act or event occurring
3. The purpose of the K has been completely destroyed by this act or event
4. The purpose of the K was realized by both parties at the time of making the K
96
When does breach occur?
1. The promisor is under an absolute duty to perform
2. This absolute duty of performance has not been discharged; and
3. The promisor has failed to perform in accordance with the contractual terms
97
In determing whether a breach is material or minor, courts look at:
1. The amount of benefit received by the nonbreaching party
2. The adequacy of compensation for damages to the injured party
3. The extent of part performance by the breaching party
4. Hardship to the breaching party
5. Negligent or willful behavior of breaching party
6. The likelihood that the breaching party will perform the remainder of the K
98
Effect of Minor vs Major Breach
| Common Law
Minor (obligee gains the substantial benefit of their bargain) = does not relieve the aggrieved party of their duty of performance under the K; only gives them the right to damages
Major (obligee does not receive the substantial benefit of their bargain) = performance may be discharged; immediate right to all remedies
99
Is failure to perform by the time stated in the K a material breach?
Generally, no, if the performance is rendered within a reasonable time. However, if the nature of the K makes timely performance essential, or if the K expressly provides that time is of the essence, then failure to perform on time is usually a material breach.
100
Perfect Tender Rule
If goods or their delivery fail to conform to the K in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest.
101
When does a buyer's right to reject under the perfect tender rule?
Upon acceptance
Under Article 2, a buyer accepts when:
1. After a reasonable opportunity to inspect the goods, they indicate to the seller that the goods conform to requirements or that they will keep the goods even though they fail to conform
2. They fail to reject within a reasonable time after tender; or
3. They do any act inconsistent with the seller's ownership
102
What are the buyer's responsibilities for goods after rejection?
1. Hold the goods with reasonable care
2. Return the items in reasonable time OR resell them for the seller's account after giving the seller reasonable notice
103
Under the perfect tender rule, may a buyer revoke their acceptance of goods?
Generally, no. However, a buyer may revoke an acceptance if the goods have a defect that **substantially impairs** their **value** and:
1. They accepted the goods on the reasonable belief that the defect would be cured and it has not been; or
2. They accepted the goods because of the difficulty of discovering the defects or because of the seller's assurances that the goods conformed to the K
Revocation must occur:
1. Within a reasonable time after the buyer discovers the defects; and
2. Before any substantial change in the goods occurs that is not cause by the defect
104
Seller's Right to Cure under the Perfect Tender Rule
If the buyer has rejected goods because of defects, the seller may **WITHIN THE TIME ORIGINALLY PROVIDED FOR PERFORMANCE** "cure" by:
1. Giving reasonable notice of their intention to do so; and
2. Making a new tender of conforming goods that the buyer must then accept
Ordinarily, the seller has no right to cure beyond the original contract time. However, if the buyer rejects a tender of nonconforming goods that the seller **reasonably believed would be acceptance "with or withou money allowance,"** the seller, upon a **reasonable notification to the buyer,** has a **further reasonable time beyond the original K** time to make a conforming tender.
105
Rejection of Installment Contracts
An installment may ONLY be rejected if:
1. The nonconformity substantially impairs the value of that installment; and
2. It cannot be cured
The whole K is breached ONLY if the nonconformity substantially impairs the value of the **entire K**
106
Specific Performance
If the legal remedy is inadequate, the nonbreaching party may seek specific performance, which is an order from the court to the breaching party to perform or face contempt of court charges.
107
Specific Performance for Land/Rare Goods
Specific performance is ALWAYS availble for land sale contracts. It is also available for goods that are rare or unique.
108
Specific Performance for Services
Specific performance is not avilable to provide services, even if the services are rare or unique.
109
Right to Recover from Buyer on Buyer's Insolvency
If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the buyer's receipt of the goods.
However, the 10-day limitation does not apply if a misrepresentation of solvency has been made in writing to the particular seller within 3 months before delivery.
110
Compensatory Damages
Damages that put the nonbreaching party in the position they would have been **had the promise been performed**
111
Expectation Damages
Sufficient damages for the plaintiff to buy a substitute performance (i.e., put them in a position they would have been in had the promise been performed).
112
Reliance Damages
If the plaintiff's expectation damages are too speculative to measure, the plaintiff may recover those damages they have suffered based on their reasonable reliance on the K.
Reliance damages are designed to put the plaintiff in the position that they would have been in **had the K never been performed.**
113
Incidental Damages
Expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller's breach.
114
Consequential Damages
Special damages that reflect losses over and above standard expectation damages.
May only be recovered if, at the time the K was made, a **reasonable person** would have **forseen** the damages as a probable result of breach. The breaching party must have known or had reason to know of the special circumstances giving rise to the damages.
115
Certainty Rule
The plaintiff must prove that the losses suffered were certain in their nature and not speculative
116
Are punitive damages awarded in K cases?
No
117
Nominal Damages
Awarded when a breach is shown but no actual loss is proven (aka "token" damages)
118
Liquidated Damages
Parties to a K may stipulate what damages are to be paid in the event of a breach.
Liquidated damage clauses will be enforceable if the following requirements are met:
1. Damages for contractual breach are difficult to estimate or ascertain at the time the K is formed; and
2. The amount agreed on is a reasonable forecast of compensatory damages at the time of K formation
119
Buyer's Damages for Non-Delivery or Rejection of Goods
Contract Price - Market Price OR Cost of Buying Replacement Goods + Incidential Damages + Consequential Damages
120
Buyer's Damages for Acceptance of Nonconforming Goods
Value of the goods as delivered - Value they would have had had they been according to the K
121
Seller's Damages for Buyer's Wrongful Repudiation or Rejection of Conforming Goods
1. Resell the goods and recover the difference b/w the K price and the resale price
2. Recover the difference b/w the market price and the K price; or
3. Recover "lost profits," which is the difference b/w the K price and the cost to the seller
122
Mitigation
Under common law, the nonbreaching party cannot recover damages that could have been avoided with reasonable effort. Generally, a party may recover the expenses of mitigation.
123
Recession
Rescission is a remedy whereby the original contract is considered voidable and rescinded.
The grounds for recision are:
1. Mutual mistake of a material fact
2. Unilateral mistake if the other party knew or should have known of the mistake
3. Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party's expectations under the K
4. Misrepresentation of fact or law by either paryt as to a material factor in the negotations; or
5. Other grounds, such as duress, undue influence, illegality, lack of capacity, and failure of consideration
124
Entrusting
Entrusting goods to a merchant to deals in goods of that kind gives them the power to transfer all rights of the entruster to a buyer in the ordinary course of business.
125
Voidable Title
If a sale is induced by fraud, the seller can rescind the sale and recover the goods from the fraudulent buyer. However, the defrauded seller may not recover the goods from a good faith purchaser for value who bought from the fraudulent buyer. The rights of a defrauded seller are cut off both by a good faith buyer and by a person who takes a security interest in the goods.
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3rd Party Beneficiary
When the promisee contracts with the promisor that the promisor will render some performance to a 3rd party.
Only intended beneficiaries have contractual rights. The beneficiary must be:
1. Identified in the K
2. Receives performance directly from the promisor; or
3. Has some relationship with the promisee to indicate intent to benefit
* 3rd Party may sue promisor
* 3rd Party CREDITORS (not donees) may sue promisee
* Promisee may sue Promisor
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Creditor vs Donee Beneficiary
Creditor = A person to whom a debt is owed by the promisee
Donee = a person whom the promisee intends to benefit gratuitously
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When may a 3rd party beneficiary enforce the rights of the contract?
Only when their rights have vested. This occurs when they:
1. Manifest assent to a promise in the manner requested by the parties;
2. Bring suit to enforce the promise; or
3. Materially change position in justificable reliance on the promise
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Assignment
When the obligor contracts with the assignor and the assignor assigns his right to the obligor's performance to a 3rd party (the asignee).
* Assignee may sue obligor
* Assinee for value (NOT gratiutious) may sue assignor for warranties that the assignor has not made a prior assignment of the same right, the right exists and is not subject to undisclosed defenses, and they won't interefere with the assigned right
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What rights may be assigned?
Generally, all contractual rights may be assigned.
Exceptions:
1. Assignment that woudl substantially change the obligor's duty or risk
2. An assignment of future rights to arise from future contracts
3. An assignment prohibited by law
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Assignment for Value vs Gratuitous Assignments
Value = done for consideration or taken as security for payment of a preexisting debt
Gratuitious = gift
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Express Contractual Provisions Against Assignment
A clause prohibiting assignment of "the contract" will be cosntrued as barring ONLY the delegation of the assignor's duties.
A clause prohibiting assignment of "contractual rights" generally does not bar assignment, but rather gives the obligor the right to sue for damages.
If the contract provides that attempts to assign will be void, the parties can bar assignment.
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Which assignee may collect if there are multiple assignments?
First assignment will prevail over subsequent assignment. HOWEVER, a second assignee may collect first if they have paid value and taken without notice
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Delegation
When the delegator promises to perform for the obligee and the delegator delegates their duty to a 3rd party (the delegate)
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What duties may be delegated?
Generally, all duties may be delegated.
Exceptions:
1. Duties involving personal judgment and skill
2. Delegation would change the obligee's expectance
3. A special trust was reposed in the delegator by the other party to the K; or
4. There is a contractual restriction on delegation
