Contracts

Question 1

When can an agreement that is required to be in writing per the SOF not have to be in writing in order to end it?

Answer 1

A subsequent agreement to rescind the contract is a termination and NOT a modification.

Typically it should still be in writing but it will be enforceable if it’s been fully executed or by estoppel

Question 2

When will courts interpret prior dealings into a contract?

Answer 2

• When the contract is a partial integration
• If it does not conflict with anything expressly said in the agreement. Express statements in the agreement will be given more weight
• It doesn’t matter if years have gone by it does NOT excuse the performance

Question 3

If a buyer accepts the non-conforming goods what is the calculation of a refund to buyer?

Answer 3

If the buyer gave sufficient notice to the Seller of the non-conforming goods, she can then recover under a breach of warranty

Contract Price/the value of the promised goods MINUS the value of the goods received + incidental + consequential damages as a result of the breach

Question 4

When does an intended 3rd party beneficiary rights vest?

Answer 4

1) assents to the promise in the manner invited by the parties

2) sues to enforce the promise

3) materially changes his position in justifiable reliance on the promise

Question 5

UCC

Buyer and seller enter 2 agreements. Seller repudiates on contract A.

How does this effect contact B? What right does buyer have?

Answer 5

Buyer can demand adequate assurances in writing for contract B because seller provided reasonable belief for insecurity. Buyer can suspend performance until he receives the assurance (30 days) then treat it as an anticipated repudiation for failure to respond

Question 6

Your bedroom: your closet, nightstand,

Equitable Remedies

Answer 6

Replevin contract = action to recover the goods
1) goods are identified to the contract and buyer
2) after a reasonable effort is unable to secure adequate substitute of goods or futile to try
3) post bond

Replevin tort = P has right of possession + D is wrongfully withholding it + P post bond

Specific Performance = valid contract with definite and certain terms, plaintiff has performed what they are required to, mutuality of performance, no adequate legal remedy, feasible for the court to enforce, and no defenses

Emergency TRO = P will suffer immediate and irreparable harm in exceptional circumstances. ex-parte without notice if the movant certifies in writing to the court they made a reasonable effort to notify the Defendant. The TRO will automatically expire after the set period from the court usually 10 days or 14 days if federal. It can be extended for good cause.

Preliminary Injunction = Notice + P will suffer irreparable injury if the injunction is not granted + P harm outweighs the harm D will suffer if the injunction is granted + P is likely to prevail on the merits + legal remedy inadequate + no defenses + post bond

• A court has the ability to issue a restraining injunction (preventing a party from doing something) OR a mandatory injunction (compelling a party to do something).

Question 7

Discharge of duty to perform

Answer 7

Impracticability = Courts will discharge duties if a party has encountered extreme and unreasonable difficulty and/or expense due to no fault of his own and its nonoccurrence was a basic assumption of the parties. (A mere change in difficulty or expense is NOT enough, must be WELL beyond the normal range)

Impossibility = contractual duties will be discharged if they are objectively impossible to perform, meaning the duties cannot be performed by anyone, the nonoccurrence of the event was a basic assumption of the parties, and the party is not at fault.

Frustration of purpose = occurs when the purpose of the contract no longer exists because of a supervening event not the fault of the party seeking discharge, the purpose of the contract was known to the other party, and at the time they entered the contract the parties must not have reasonably foreseen the supervening act.

Failure of Condition = precedent (discharge performance if condition not met) or subsequent (if condition occurs the duty to perform is excused)

Waiver =A party can waive a condition by words or conduct, as long as the condition is not material to the contract. The waiving party would then have a duty to perform because it waived the condition

Good Faith = failure to operate in good faith to meet the condition waives protection of the condition

Wrongful interference = If a party hinders the other party’s performance and interferes with the occurrence of the condition, the condition will be excused, and the wrongful party will have duty to perform.

Estoppel = If a party indicates that it will not enforce a condition, and the other party reasonably relies on this, the party will be estopped from later enforcing the condition.

Formation Defense: Mistake, Unconscionability

Accord and Satisfaction = In limited situations, if there is a dispute over the validity of the contract or the amount owed, a party can agree to accept a different performance than what was agreed upon in the contract. Consideration is found if: The party performing the different performance is incurring a legal detriment. The party that is agreeing to accept the different performance is giving up the right to dispute the original contract and sue for breach. Failure to satisfy the accord is grounds to sue on the accord and the original contract.

Novation = original party will be released of all liability if ALL the parties assent that the new party will be there substitute and solely liable

Question 8

o Anticipatory Repudiation

o UCC Adequate Assurances

Answer 8

Before the time of performance is due, the promisor party unequivocally indicates through words/acts that he will not perform under the contract and neither party has fully performed yet, then non-breaching party can: a) treat it as a breach and sue immediately, b) suspend own performance + demand promisor to perform, c) cancel K, d) wait for breach then sue. The repudiating party can retract unless: a) reliance on the repudiation, b) accepts the repudiation, c) already filed breach action

reasonable grounds to be insecure about the other party’s ability to perform + demand assurance in writing. Party can suspend performance while they wait for a response, but Failure to provide reasonable assurance within a reasonable time (30 days) can be treated as repudiation.

Question 9

Consequential Damages
Incidental Damages

Answer 9

**Consequential Damages = are more of an indirect result of the breach that are forseeable at the time the contract was entered because they are the natural and probable consequences of the breach **

**At the time the contract is made it was **
* in the contemplation of the parties
* if they were forseeable for any other reason
* (Hadley)

incidental damages are always the direct result of the party who breached the contract that were forseeable at the time the contract was entered.

Question 10

Equitable Defenses

Answer 10

**Reasons for inadequate legal remedy **= 1. Money damages are too speculative to calculate with certainty 2. Defendant has no money so any damage award is useless 3. Replevin or ejectment is not available 4. Money Damages are inadequate because: Property is unique or health or safety concern 5. Multiplicity of suits for an ongoing wrong

Feasibility Issues = Negative injunction that restrict a party from doing something is easier to enforce because courts can hold that party in contempt Affirmative Injunction are more difficult to enforce, especially series of act or acts requiring taste, skill, judgement because it is too subjective Jurisdictional issues = enforcement issues to supervise events outside of the courts jurisdiction or assert control over nonparties to the litigation

Contract Defenses to formation = unconscionability, mistake, duress

Unclean Hands = is a defense when the plaintiff conducted herself unfairly in the case at hand

**Latches **= is a defense when the plaintiff has unreasonably delayed, resulting in prejudice to the defendant. Timer starts once plaintiff knows on his rights have been infringed.

**Unconscionability **= Hardship to defendant or public that greatly outweighs harm plaintiff would suffer OR At the time of contract formation, grossly inadequate consideration + unconscionable contract

lack of consideration
SOF unless exception
parole evidence
sale of land to BFP

**Tort: ** impossibility

Personal Defamations: Freedom of Speech

Question 11

• Applicable Law
• Mixed Contracts
• Merchants

Answer 11

• Uniformed Commercial Code governs contracts involving the sale of goods.
• goods are movable tangible items
• CL governs all other contracts
• For mixed contracts, the predominant purpose of the contract determines which law governs. If the predominant
  purpose is the sale of goods, the UCC will apply. If the predominant purpose of the contract is for services, the common law will apply.
• Special rules apply to merchants under the UCC. A merchant includes a person who regularly deals in the type of goods involved in the transaction or has specialized knowledge/skills regarding the practices/goods involved, including a business person in a commercial transaction.

Question 12

Valid Contract

Answer 12

(1) mutual assent
(an offer and acceptance of that offer by the other party);
(2) adequate consideration or a substitute;
(3) no defenses to formation
(4) complies with SOF

Question 13

• Offer
• Advertisement as an offer
• Contest as an offer

Answer 13

**Offer: **
1. present intent to contract by one party
2. definite and reasonably certain terms
3. communicate to the identified offeree (where offeree would now have the unilateral power to form the contract by acceptance)

TEST = Would a reasonable person in the OFFEREE’S position believe that the Offeror intended to be bound based on the communications that he made?

**Advertisement **
* generally NOT considered an offer, but is an invitation for offers
* can be an offer IF: sufficiently definite and reasonably certain terms, so a reasonable person would understand how performance or acceptance may be completed

Contest
* typically analyzed as a unilateral contract, but must require some perforamnce on the part of the offeree that is adequate consideration to the offeror (benefit)

Question 14

• Acceptance
• Acceptance by Silence

Answer 14

** Acceptance = manifestation of assent to the terms of the offer, indicating a committment to be bound. This judged based in an objective standard, which is would a reasonable person interpret this to mean an acceptance? **
* Bilateral contracts = start of performance
* Unilateral contracts = start of performance makes the offer irrevocable AND completion of performance makes it accepted. Seasonable Notice is ONLY required when the offeree has reason to know that the offeror would not learn of the full performance being completed indicating the acceptance.
* CL requires unequivocal acceptance of every term of the offer. (mirror image rule)
* UCC requires ANY reasonable means of acceptance, INCLUDING express acceptance or shipping of the goods

• Typically, silence is NOT an acceptance, unless the parties have agreed it would be or it’s reasonable based on the course of their prior dealings
• While there is no affirmative duty to act, courts will hold the offeree as accepting if they fail to speak when =
  1) The offeree knows or has reason to know that services are being rendered with an expectation of compensation
  2) and by a word could prevent the mistake.

Question 15

Revokable offers
Irrevocable offers
Termination of Offer

Answer 15

**Revokable = effective when received **
* revocation by offeree
* rejection by offeror
* lapse of time
* death
* incapacity
* supervening illegality making the offer illegal
* Counter offer
* Conditional additional terms
* destruction of subject matter
* Indirect by publication of same type

**Irrevocable **
* Option contracts supported with consideration
* Merchants firm offer
* detrimental reliance
* unilateral contract start of performance

Question 16

Merchant Firm Offer

Answer 16

1. merchant makes an offer to buy or sell goods (price and quantity)
2. in a signed writing
3. stating it will be held open for a period of time or a reasonable time if no time stated up to a max of 3 months and then becomes voidable, but NOT automatically void

*If offeree sends the merchant a confirmation of their understanding to keep the offer open, then merchant MUST sign the document

Question 17

*Timing of Revocation
* Timing of Acceptance
* Mailbox Rule

Answer 17

• Revocation of an offer is effective once it has been RECEIVED by the offeree
• Acceptance of an offer is effective once it has been communicated or sent (out of offeree’s control)
• Acceptance of an option contract or merchant firm offer is effective once it has been received by the offeror
• If an agreement expressly says how acceptance should be made, that will be given effect

Mail Box Rule = Once the acceptance has been sent and out of the offerees control the offer is deemed to be accepted and a valid contract has formed IF done BEFORE the revocation of the offer is RECEIVED
* Reject then accept: whichever is received first
* Accept then reject = is acceptance unless reject was received before acceptance and Detrimental reliance on reject

Question 18

• Mirror Image Rule CL
• Battle of the Forms Provision UCC

Answer 18

Common law mirror image rule = acceptance must mirror the terms of the offer; any changes/additions to the terms constitutes a rejection of the original offer and a counteroffer.

UCC = any reasonable acceptance of the offer, with additional or conflicting terms, IS an EFFECTIVE acceptance, but certain rules will apply to determine whether or not the new terms will be apart of the contract or not.
* Under the battle of the forms provision, if one of the partys in the contract is NOT a merchant the term will only be considered a proposal and will not automatically be apart of the contract.
* However, if ALL parties involved are merchants, then the terms will be integrated into the agreement UNLESS
a) Objected within reasonable time, unless objected before
b) Offer expressly limits acceptance to offer terms
c) The new term MATERIALLY alters the contract = warranty, severe limit remedies, liquidated damages [not material = arbitration]

It is NOT acceptance when there is NOT a meeting of the minds = price, quantity, quality

**Conflicting terms **
* UCC Knockout rule for Conflicting terms = fill with: course of performance, course of dealing, usage of trade, ucc gap fillers
* Minority rules = treat like additional terms OR
* Fall Out rule = offerors terms control

Question 19

Consideration
Problems with Consideration

Answer 19

Consideration is the bargained for exchange for something of legal value.
1) the promisee experiences/suffers a legal detriment by giving up something of value or refrains from doing something they otherwise are legally allowed and they do so in exchange for the promisors promise (or conditional promise)
2) as part of the bargained for exchange the promisor makes his promise for that very same legal detriment the promisee suffered, such that it would be of any direct benefit to the promisor.

Problems
* Adequate consideration = Typically, a court will NOT look at adequacy of the consideration, as long as the promisee suffers some detriment no matter how small because a mere peppercorn will suffice.
* Gift = a promise to make a gift will fail to be enforceable because the promisee is not suffering any legal detriment for the promise of the gift. Although, in certain situations where the promisor makes a promise and does not bargain for anything in return of that promise, courts may apply promissory estoppel as a substitute for consideration to make the promise enforceable is detrimental reliance arises, where (1) the person detrimentally relied on the promise by materially changing their position in that reliance, (2) it was foreseeable to the promisor that the promisee would take such action or refrain from doing something, and (3) enforcement of such is necessary to avoid injustice. However, Damages limited to reliance damages, meaning money spent in reliance of the promise.
* Past consideration = legal detriment incurred in the past is not consideration because NOT bargained for and was NOT in exchange for a legal detriment in return. Creating a gratuitous intent. BUT a Written promise to satisfy a debt that already expired does NOT need NEW consideration needed.
* Pre-Existing Duty = promise to do something one is already legally obligated to do will not provide consideration for a new bargain

**Exceptions: **
a) Time barred past debt,
b) Express request + expectation to be paid,
c) Unrequested + response to emergency + expectation to be paid

Question 20

Contract Defenses:
* Mutual Mistake
* Unilateral Mistake
* Misunderstanding due to ambiguous contract language

Answer 20

Mutual Mistake = both mistaken basic assumption + mistake is material + asserting mistake did not assume/bear risk of mistake.

Unilateral Mistake = 1 party unknown mistake basic assumption + material (not price/value) + other party knew or to enforce the agreement would be unconscionable.

Rescission/Reformation NOT allowed if the mistake involves price or value because it is NOT considered to be material

Misunderstanding due to ambiguous contract language = when BOTH people that enter the contract attach a DIFFERENT REASONABLE meaning to the SAME term the contract will be discharged. Trade Usage = if BOTH people are members of the SAME TRADE then the term supplied by usage of the trade will be used, EVEN IF the other trade party had no idea about the meaning, BUT If one member is NOT apart of the trade or if the other party KNEW of the mistake, then the innocent parties meaning will be used.

Question 21

Contract Defenses:
* lack of capacity
* Duress
* undue influence
* Illegality

Answer 21

Lack of Capacity = need to be of sound mind, where one can understand the meaning and effect of the contract. It is voidable at the option of the person who lacked capacity. Minors may still be bound for necessities (food, shelter, clothing, medical)

**Duress **= (subjective) party is improperly threatened by the other party + has no reasonable choice but to agree

Undue Influence = unfair persuasion; V susceptible to influence + D access and opportunity to exert influence + actively participated + unnatural result

Illegality = A court will not enforce a contract that has involves illegal consideration or performance.

Question 22

Contract Defenses:
* Misrepresentation
* Fraud
* Intentional Concealment

Answer 22

Misrepresentation =
1. misrepresented a material fact by action or concealment
2. defendant acted negligently because there were no reasonable grounds for believing the misrepresentation to be true [fraud: KNEW was false or Recklessly indifferent to the truth (scienter)]
3. with the intent to induce plaintiffs reliance on the false statement
4. whereby plaintiff justifiable and reasonably relied on the false information

**Intentional Concealment/Non-disclosure of material fact **
a) knows the disclosure is necessary to prevent a previous assertion from being fraudulent,
b) knows the disclosure would correct a mistake of the other party as to a basic assumption of the contract + non-disclosure would be failure to act in good faith and fair dealing,
c) knows disclosure would correct a mistake as to the contract or effect of a writing,
d) is in a relationship of trust and confidence with the other party

Question 23

Unconscionability

Answer 23

• Occurs when a contract or term shocks the conscience of the court such that no reasonable person would agree to it. Courts will refuse to enforce the entire contract, strike the unconscionable term, or limit the term.
• Procedurally 1 party has a superior bargaining position over the other and uses the power to their advantage
• Substantively K terms are obviously unfair and one-sided favoring superior power

Question 24

Contract Defense
* Statute of Frauds
* Estopped from Using SOF

Answer 24

Statute of Frauds – any type of writing either before or after + signed/mark by party charged + reasonably identify subject matter + indicate K has been made + state essential terms/conditions + may consist of several writings

• Estoppel to SOF = SOME courts will estop a party from using SOF as a defense when the defendants conduct or promise foreseeably induces a plaintiff to change position in reliance on an oral agreement and it would be inequitable to allow the SOF to defeat a meritorious claim.
• Marriage – Except: mutual promise to marry
• Real estate or land interest over 1 year – except: doctrine of part performance PIP
• Debt of another – Except: mainly benefits surety
• One year performance impossible (timer starts when K made) – except: 1 party fully performed or lifetime contract
• Employment contract over 1 year MUST have the salary term

Sale of Goods $500+ and need quantity term in writing; Except:
* Received + accepted + paid already
* Partial payment for an undivided item
* Custom goods + substantial start + not suitable to sell to others
* Merchants’ confirmatory memo = all merchants + 1 party sends memo + other party knowingly receives it + no response within 10 days

Equal Dignity rule: written agreement for agents entering into an SOF contract on behalf of principal

Question 25

Modifications

Answer 25

**Under UCC, **modifications do not need to be supported with consideration as long as its done with good faith and mutual assent **Under Common law**, additional consideration is needed when a contract modification is made, unless an exception applies. * New 3rd party now owed the duty * New/different consideration to add or change performance = debt not due yet, promise not to sue * Unforeseen circumstance rising to the level of impracticability + fair and equitable modification + not yet fully performed by either party + agreement * Detrimental Reliance * Accord + Satisfaction = A Settlement of Disputed Claim can be dischard by A+S if the scope of the legal duty is the subject of honest dispute, a modifying agreement relating to it will be given effect and the compromise by each party is a detriment, thus consideration. an accord between the 2 parties will SUSPEND the persons obligation to perform as originally agreed to. however, failure to meet the new performance requirement will allow the creditor to sue on the OG contract or the Accord. Satisfaction will DISCHARGE the contract once the required performance is complete. * accord+satisfaction = if the amount is in dispute or possibly subject to a claim in GOOD FAITH a party can send a check (or accompanying document) that CLEARLY states it is being offered as payment of a full satisfaction of the debt. if the other party cash's the check then the dispute is over * Voidable obligation = a minor bought a telescope from Bob $100 on credit. This contract is now voidable at the option of the minor. The minor turned 18 and saw Bob on the street and she told him she would pay $75. Because the minor re-affirmed her promise after turning 18 her once voidable obligation becomes binding in full or in part based on the new promise and no new consideration is needed, so now the 18-year-old owes $75 to Bob. ## Footnote Contract provision requiring writing: * Common law: unenforceable, unless contract as modified falls in SOF, otherwise previous contract will still be valid * UCC: enforceable between 2 merchants OR if non-merchant signed by the term OR falls within SOF

Question 26

Promise vs. Condition

Answer 26

* A promise is a term that one party must complete and does not affect the other party’s promise. If one party fails to fulfill a promise, that party is in breach, and this does not affect the other party’s duty to fulfill its promises. * A condition, can be express or implied, and is an event that must occur before the performance of the other party is due, otherwise, failure to complete the condition will discharge the other party’s performance. * Courts will look at the express words of the agreement, course of performance, course of dealing, and trade usage to determine if the term is a condition or promise. * If the contract is unclear, courts will usually find a statement to be a promise requiring substantial performance.

Question 27

Parol Evidence Rule

Answer 27

**Excluded from Parole Evidence rule: ** 1) Evidence offered to show a condition-precedent to effectiveness of the contract 2) Any communication After signing Under the Parole Evidence Rule, when a written agreement is completely integrated then any evidence, written or oral, made prior or contemporaneous with the writing is inadmissible to vary the terms of the writing, unless an exception applies. * A Complete Integration is found when BOTH parties express their agreement in a writing with the intent that it embody the final expression of their bargain. * Partial Integration [UCC presumption] = is intended to be the final expression of the agreement but NOT intended to include all details of the parties agreement. If Partially integrated, then EE can be offered that is NOT inconsistent with any written expression already in the agreement. * the traditional approach is to just look at the 4 corners of the agreement and if a merger clause is present then it will be total integration. * Modern approach considers the merger clause as just one factor and looks at the agreement and what the parties are doing because it is possible that the conduct of the parties does NOT reflect what is in the writing and if they are something other than what is in the agreement then it is likely NOT fully integrated. **Even if the agreement is a fully completed integration of the parties, there are some Exceptions that would allow EE in:** * * Evidence offered to show a clerical mistake in integration * * Evidence offer to show a contract formation or enforcement defense * * Evidence offered to show a condition precedent to performance * * Evidence to explain an ambiguous term not plain contract term (express term, course of performance, course of dealing, usage of trade) **UCC ALSO makes exceptions in a completly integrated agreement for the following if it EXPLAINS or SUPPLEMENTS the agreement = ** - Course of Performance = pattern in the performance of the same contact if it involves repeated occasions for performance by either party + the other party knows of the nature of the performance + has an oppurttunity to object - Course of Dealings = sequence of predvious conduct between the parties to a particular transaction which establishes a common basis of understanding for interpreting their expressions and conduct - Custom = practice or method of dealing that is SO regularly observed in a pace or trade it justifies an expectation that it will be observed in the present transaction

Question 28

Contract Breach

Answer 28

**Anticipatory Repudiation** = Before the time of performance is due, the promisor party unequivocally indicates through words/acts that he will not perform under the contract and neither party has fully performed yet, then non-breaching party can: * a) treat it as a breach and sue immediately, * b) suspend own performance + demand promisor to perform, * c) cancel K, * d) wait for breach then sue. * The repudiating party can retract unless: a) reliance on the repudiation, b) accepts the repudiation, c) already filed breach action **UCC Adequate Assurances** = * reasonable grounds to be INSECURE about the other party’s ability to perform + demand assurance in writing. * Party can suspend performance while they wait for a response, but Failure to provide reasonable assurance within a reasonable time (30 days) can be treated as repudiation. **Material Breach vs. Minor Breach ** * Under CL, a material breach will excuse the non-breaching party's performance, but a minor breach, will NOT excuse the performance and the non-breaching party must still perform and can seek a seperate action for damages that result. Court considerations include: * extent of the benefit deprived to the non-breaching party * adequacy of compensation for loss to the non-breaching party * extent the breaching party will suffer hardship due to forefeiture * likelihood the breaching party will cure * any lack of good faith or lack of fair dealing by the breaching party * In addition, time being of the essence will not amount to a material breach unless the contract expressly specifies that time is of the essence. Dates alone do not amount to a time is of the essence clause.

Question 29

Discharge of Duty to Perform

Answer 29

**Impracticability or Impossibility** = performance discharge if: 1) event occurs after contract formation by no fault of the party asserting it 2) unanticipated by both parties at the time of contract formation 3) makes performance extremely and unreasonably difficult or expensive. (mere change in difficulty or expense is NOT enough, must be WELL beyond the normal range) 3) makes performance objectively impossible to perform, meaning the duties cannot be performed by anyone, **Frustration of purpose **= 1) supervening event occurs after contract formation by no fault of the party asserting it 2) unanticipated by both parties at the time of contract formation 3) causing the purpose of the contract to no longer exist 4) the purpose of the contract was known to the other party **Waiver of a term in the contract** = The party that benefits from a constructive condition within a contract can IMPLIEDLY waive or alter the condition based on prior performance of that term. The waiver can be retracted with reasonable PRIOR notice to the other party, which would reactivate the term for all further FUTURE performances from that point on. **Failure of Condition** = precedent (discharge performance if condition not met) or subsequent (if condition occurs the duty to perform is excused) * **Waiver** = A party can waive a condition by words or conduct, as long as the condition is not material to the contract. The waiving party would then have a duty to perform because it waived the condition (a waiver may be retracted, but can NOT be once the other party relies on the waiver) * **Wrongful interference** = If a party hinders the other party’s performance and interferes with the occurrence of the condition, the condition will be excused, and the wrongful party will have duty to perform. * **Estoppel **= If a party indicates that it will not enforce a condition, and the other party reasonably relies on this, the party will be estopped from later enforcing the condition. Formation Defense =Mistake, Unconscionability Accord and Satisfaction Novation = original party will be released of all liability if ALL the parties assent that the new party will be there substitute and solely liable ## Footnote Under Common Law, if the risk of loss is on the buyer, then destruction of the subject matter does NOT excuse performance. Under the UCC, performance is excused ONLY IF: the destroyed goods were special + were destroyed before the risk of loss shifted to the buyer

Question 30

Contract Warranty

Answer 30

Express = A seller is liable for breaching an express warranty if: affirms a facts, promise, description, provides sample + relating to the goods + buyer COULD have relied on the affirmation WHEN entering the contract, unless shown as a matter of fact the buyer did not rely (opinions NOT valid) (can NOT be disclaimed) Implied Warranty = implied by law in all K, but does NOT apply to defects buyer could find upon/refusal inspection Implied warranty of merchantability = merchant seller regularly deals in goods of the kind sold + provides the goods are FIT for their ordinary purpose (Disclaimed: conspicuous writing “as is” or “with all faults” or oral mention merchantability) Implied Warrant of Fitness for Particular purpose = buyer particular purpose + relies on seller judgement to select appropriate goods + seller has any reason to know of purpose and reliance (Disclaimed: conspicuous writing) Implied Good faith and Fair Dealing in all contracts (can NOT be disclaimed) Implied Warranty of Marketable Title = title transferred is good + rightful, no liens/encumbrances that buyer is not already aware of (can NOT be disclaimed) [Failure to provide marketable title, entitles the person to a price abatement]

Question 31

UCC Breach UCC risk of Loss

Answer 31

UCC Breach = there MUST be a perfect tender of goods or there will be a breach, unless right to cure, installment contract (unless substantially affects the contract), or reasonable grounds to believe tender would be accepted based on prior deals/past performance. right to cure IF performance not expired yet the seller can give notice + tender before expiration, unless reasonable belief it would be acceptable to buyer UCC Risk of Loss Non-Carrier Case: * Seller = merchant = buyer takes physical possession; * Seller = non-merchant = upon tender of delivery Common Carrier – * Shipment K = FOB: seller city OR location of goods [default rule] + deliver goods to carrier + make a proper K for shipment + obtain/deliver any document buyer need to obtain possession + give buyer notice that goods have shipped * Common Carrier – Destination K = FOB: buyers place of business + deliver goods to a particular place specified in K + notice ## Footnote UCC, a rejection of non-conforming goods must be made within a reasonable time after their delivery or tender After the acceptance of goods, a buyer may later revoke that acceptance only if: (1) the nonconformity substantially impairs the value of the goods; AND (2) either (a) the defect was difficult to discover (a latent defect), (b) acceptance was reasonably induced by the seller’s assurances, or (c) the buyer accepted the goods on the reasonable assumption the defect would be cured. The revocation is NOT effective until the buyer notifies the seller. In addition, the revocation of acceptance must occur before there is any substantial change in the goods, not caused by their own defects. If a buyer successfully revokes acceptance, he is entitled to return of the purchase price.

Question 32

Contract 3rd party beneficiary

Answer 32

**#1) What type of 3rd party is this? Incidental OR Intended Creditor OR Intended Donee (gift)** * intended 3rd party = if the promise is performed it will satisfy an obligation that is owed to that 3rd person OR circumstantial facts indicate that one of the parties intends to give the 3rd party the benefit of a promised performance at the time the contract is formed **#2) Did the rights vest yet? **Agreed to the promise, Brings suit to enforce the promise, Material change in position in justifiable reliance **#3) who can sue who? **= allowing him to sue MUST have the EFFECT of caarying out the original INTENT of the parties 3rd party vs. Promisor who fails to perform = John owes creditor $100. John did work on Mary’s house for $100. John told Mary to pay the creditor. Mary found some minor issues in John’s work totaling $20. Creditor sues Mary to pay the $100. Mary owes the creditor only $80 because she can assert any rights she has against John against the creditor. 3rd party vs. Promisee =Creditor can sue John if Mary fails to pay the $100 because they are still entitled the debt owed to them BUT a Donee: has no right to sue, unless promissory estoppel Promisee vs. Promissor = If John pays the $80 to the creditor he can recover that amount from Mary. If he did NOT pay yet he can ask the court to compel specific performance so that Mary pays the $80. If instead of a creditor the 3rd party beneficiary is a Donee, then John could seek nominal damages from Mary or compel specific performance.

Question 33

Contract Assignment

Answer 33

**All Contract Rights can be assigned. An Assignment establishes privity of contract between the Obligor and the Assignee. Once the Obligor knows of the assignment, he MUST render performance/payment to the assignee. If he pays the assignor he does so at his own risk. **Exception of rights that can NOT be assigned:** * personal service K (lawyer,doctor,architect), * substantial change in obligor performance including risk, * prohibited by law or VOID clause, * Assignee KNOWS of a non-assignment clause. Effective = writing or oral + assigned right adequately described + objective intent to transfer + no consideration needed Modifying = cannot modify once assignor and obligor aware of assignment to assignee Revoking = consideration for value is NOT revokable, however, gifts can be unless obligor already performed, instrument has been delivered already, estoppel. A revokable gift can be terminated by assignor: dying, going bankrupt, notice given to assignee or obligor, takes performance directly himself from the obligor, or subsequently assigns the same right to another person Right to sue = Assignee (not sublet) can sue Obligor to enforce her rights and can sue Assignor for implied warranties, but assignor not liable if Obligor is incapable of performing Multiple Assignments = last assignee of a gift wins OR first assignee for consideration wins, unless 4 horseman rule (BFP + first to get payment of claim, judgement against obligor, novation, instrument delivered, or estoppel against first assignee) [UCC: first to file wins]

Question 34

Delegation

Answer 34

All contract duties can be delegated to a 3rd party to do, unless duty involves personal judgement or skill, special trust in the delegator, performance by the 3rd party materially changes obligees expectancy, contract provision restricting delegation (strictly adhered). * An assignment “of all my rights under the contract” or “the contract” presumes an assignment AND delegation, unless contrary cirumstances Delegator = remains liable as a surety (unless novation) + Can only sue the Delegatee if consideration offered for his performance Obligee = can NOT sue or compel Delegatee to perform because they were never in contract together, unless Delegatee was given consideration to perform, then Obligee can sue Delegatee because they have become a 3rd party beneficiary Effective = written or oral + delegator manifests a present intent to make the delegation ## Footnote UCC - a party can perform his duty through a delgatee UNLESS a) otherwise agreed b) substantial interest in having the other person perform or to control the acts of the other party

Question 35

Output Contract Requirements Contract

Answer 35

**output contract** requires a seller to sell all of the output of the particular goods to the buyer **requirement contrac**t requires the buyer to purchase all of the particular goods that the buyer requires from the seller.

Question 36

Liquidated Damages

Answer 36

1. damages for the contract breach were difficult to estimate or ascertain at the time the contract was formed 2. the amount agreed upon was a reasonable forecast of compensatory damages in the event of a breach If the LD amount is unreasonable, courts will determine that it amounts to a penalty and will NOT enforce the provision

Question 37

Rescission

Answer 37

Rescission permits a party to invalidate a contract and restores the parties to the postion each would have been in if the bargain had not been entered into: (1) no meeting of the minds (fraud, duress, mutual mistake, unilateral mistake, material misrepresentation) (2) available to the wronged party (3) no defenses

Question 38

Reformation

Answer 38

Reformation permits a contract to be rewritten by the court to reflect the parties true agreement when: (1) meeting of the minds (2) contract as written does not reflect their agreement due to an error (fraud, material misrepresentation, mutual mistake-scrivenors error)

Question 39

Merchant Confirmatory Memo

Answer 39

Exception to SOF requiring the charged party sign the contract for it to be enforceable when goods are MORE than $500 AFTER an agreement is made BETWEEN MERCHANTS 1 merchant can send the other a memo confirming the agreement with their signature or letterhead + QUANTITY term The other merchant after knowing of the document has 10 days to object OTHERWISE the agreement is binding even if the other merchant never signs it

Question 40

Builder contracted with John to build 1 bedroom for $30 and 1 bathroom for $10. after full building the bedroom he left the job. John hired someone to complete the bathroom for $10 and sufferred no losses. How much will builder get and why?

Answer 40

Builder will get $30 because the contract is a divisible contract where it specifies the price of each item that will be completed. since builder completed the bedroom he will receive the full contract price for the bedroom less any costs suffered.

Question 41

Restitutionary Damages

Answer 41

Seek to compensate a party for benefits he has conferred on the other party in order to prevent unjust enrichment. This includes a breaching party if he substantially performed and conferred a substantial benefit on the other party up to the extent of the contract price. this could be the fair market value that has been conferred or the value of the services provided.