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Flashcards in CONTRACTS Deck (290):
1

The doctrine of anticipatory repudiation applies to:

Only bilateral contracts with executory duties on both sides

2

A prospective inability or unwillingness to perform occurs when

one party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. An example of this would be when a buyer declares bankruptcy prior to the time set for performance of the contract

3

In some cases, the condition of complete performance may be excused if a party has rendered

Substantial performance

4

At common law, ______________ will excuse a contract condition.

An estoppel waiver

5

Courts will find binding estoppel waiver when

Whenever a party indicates that he is waiving a condition before it is to happen and the person addressed detrimentally relies on the waiver, courts will find a binding estoppel waiver.

6

A condition precedent

is one that must occur before the duty of performance will arise

7

A condition subsequent

will cut off an already existing duty of performance

8

The failure of a condition:

Discharges the liability of the promisor whose obligations on the conditional promise never mature

9

When a party having the benefit of an ancillary condition under a contract indicates by words or conduct (and without receiving any additional consideration) that she will not insist on that condition being met, this is called __________.

Waiver

10

Can a repudiating party retract his anticipatory repudiation before his performance is due?

Yes, unless the other party has materially changed her position in reliance on the repudiation.

11

A promise

binds a party to perform under a contract

12

a condition

creates or extinguishes a duty to perform under the contract.

13

In the case of an anticipatory repudiation, the nonrepudiating party __________.

may sue immediately or wait until the date performance is due to sue. Can also suspend his own performance at any point.

14

So long as the time for performance has not yet passed, a repudiating party may withdraw his repudiation __________.

unless the other party has indicated that she considers the repudiation final

15

What is a “constructive” condition?

A condition that is implied by a court even though it is not explicitly stated in the contract

16

The failure of a condition:

Discharges the liability of the promisor whose obligations on the conditional promise never mature

17

When a party indicates that she is “waiving” a condition before it is to happen, and the person addressed detrimentally relies on the waiver, a court will hold this to be __________.

An estoppel waiver

18

An anticipatory repudiation __________.

Must be unequivocal

19

Material breach, waiver, or substantial performance are all:

things that would legally excuse a condition.

20

A condition that must occur before an absolute duty of immediate performance arises in the other party is a __________.

condition precedent

21

Nonfulfillment of a condition __________.

will excuse a duty to perform that was subject to the condition. (no breach of contract yet).

22

A court will apply the doctrine of “substantial performance” to excuse the condition of complete performance in the case of:

A constructive condition and a minor breach

23

A condition read into a contract by the court is also known as:

a constructive conditon. (an implied condition).

24

Anticipatory repudiation occurs when:

A party to a contract, prior to the time set for performance, indicates that he will not perform when performance is due

25

The nonrepudiating party can demand assurances when

1. a repudiating party seeks to withdraw repudiation
2. prospective unwillingness or inability to perform
NOT: anticipatory repudiation--a.r. is an unequivocal indication that the repudiating party will not perform when the time comes, demanding assurances would be fruitless.

26

If, prior to the time set for performance, the promisor indicates that he will not perform when the time comes, this is known as:

anticipatory repudiation

27

In the case of an anticipatory repudiation, the nonrepudiating party __________.

may sue immediately or wait until the date performance is due to sue

28

In a case of anticipatory repudiation, how long does the repudiating party have to retract the repudiation?

Until performance is due, unless the other party has materially changed position in reliance on the repudiation

29

Does a minor breach of contract excuse a condition at common law?

No, a minor breach may suspend a duty, but not excuse it.

30

At common law, which of the following would legally excuse a condition?

material breach, waiver, or substantial performance.

31

Under Article 2 of the U.C.C., a buyer cannot reject a shipment of nonconforming goods if:

The nonconforming shipment is part of an installment contract and the defect can be cured

32

UCC Article 2 Perfect Tender Rule

If the goods fail to conform to the contract in any way, the buyer generally may reject tender.
EXCEPTION: a defective shipment in an installment contract cannot be rejected if the defect can be cured.

33

In an installment contract situation, an installment can be rejected by the buyer __________.

if there is a nonconformity that substantially impairs the value of that installment and cannot be cured

34

In __________, timely performance as agreed is important, and any unjustified delay is material.

Mercantile contracts

35

After rejecting goods in her physical possession, a buyer has an obligation to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; thus, the buyer should not

destroy the goods.

36

Under the U.C.C., in the case of a single delivery contract, if the buyer finds that the goods are defective at the time of delivery:

The buyer can reject the goods, but the seller then has a right to cure within the original time for performance of the contract

37

After a buyer rejects a tender of nonconforming goods, the seller has a right to cure beyond the original contract time:

if the seller reasonably believed that the nonconforming goods would be acceptable to the buyer with or without a money allowance.

38

In a destination contract, the seller must:

Tender delivery of the goods at a particular destination

39

As a general rule, delay in performance in __________ contract is more likely to be deemed a material breach than delay in performance in __________ contract.

A mercantile; a land

40

Unless the contract provides otherwise, in a destination contract, payment is due __________.

When the goods reach their destination

41

Under Article 2, unless the contract provides otherwise, a buyer has a right to inspect the goods __________.

at the buyer’s own expense before she pays for the goods

42

Under an Article 2 shipment contract, when the parties have agreed that a carrier will be used to move the goods, the seller has an obligation to:

1. put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation.
2. obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession
3. promptly notify the buyer of the shipment.

43

When a seller has agreed to tender goods at a particular location, this is also known as a:

Destination contract

44

A breach of contract where the obligee gains the substantial benefit of her bargain despite the obligor’s defective performance is commonly known as:

a minor breach

45

Under Article 2, a buyer’s right to reject is cut off by __________.

Acceptance of the goods, even if the goods are nonconforming

46

In an installment contract situation, the contract can be canceled by the buyer if:

There is a nonconformity in a shipment that substantially impairs the value of the contract and cannot be cured

(installment can be rejected if the nonconformity

47

When should the nonbreaching party treat an otherwise minor breach as a material breach?

When the breach is coupled with an anticipatory repudiation

48

Under U.C.C. Article 2, unless the contract provides otherwise, any expenses for inspection of the goods sold will be borne by:

The buyer, but may be recovered from the seller if the goods do not conform and are rejected

49

Unless the contract provides otherwise, in a noncarrier case, payment is due __________.

In cash upon tender of delivery

50

A noncarrier case is

one in which it appears that the parties did not intend that the goods be moved by carrier

51

A destination contract __________.

requires the seller to tender the goods to the buyer at a particular destination

52

Under the U.C.C., in a single delivery contract, a seller may always cure a shipment that the buyer has rejected because of defects by delivering conforming goods within:

The time originally provided for performance

53

Under U.C.C. Article 2, unless the contract provides otherwise, any expenses for inspection of the goods sold will be borne by:

The buyer, but may be recovered from the seller if the goods do not conform and are rejected

54

Under the U.C.C., in a single delivery contract, if a seller delivers nonconforming goods to the buyer under the mistaken, but reasonable, belief that the goods would be acceptable to the buyer, and the buyer rejects the goods, the best characterization of the time the seller has to cure is:

Within a reasonable time beyond the time originally provided for performance

55

A buyer orders 600 widgets to be delivered on the 10th of each month in lots of 100. The second month’s shipment arrived on the 8th of the month and contains only 95 widgets.
The buyer ____________________.

Cannot reject the shipment. Under an isntallment contract, the buyer cannot reject the installment unless she can show that the shortfall substantially impairs the the value of the installment and cannot be cured. Quantity can always be cured. Here, there are 2 days left to perform.

56

In a noncarrier case, for proper tender of delivery, the seller must:

Put and hold the goods at the buyer’s disposition for a time sufficient for the buyer to take possession and give the buyer reasonable notice to enable the buyer to take possession of the goods

57

What is the buyer's right of rejection under Article 2 of the UCC for a defective shipment?

A buyer can always reject a defective shipment in a single delivery contract but cannot reject a defective shipment in an installment contract if the defect can be cured

58

Under the U.C.C., what is required to cure a defective delivery in a single delivery contract?

Reasonable notice of the intention to cure and a new tender of delivery of conforming goods within the time for performance

59

In a shipment contract, the price is due when

the goods are put in the hands of the carrier

60

In a destination contract, the price is due when

the goods reach the named destination.

61

In a single delivery contract, when a buyer rejects goods due to defects, the seller may cure within the time originally provided for performance in the contract:

by giving reasonable notice to the buyer and making a new tender of conforming goods, which the buyer must then accept.

62

The U.C.C. gives a seller the right to cure a defective shipment within a reasonable time beyond the original time for performance in the contract if:

Prior dealings with the buyer led the seller to reasonably believe that the defective shipment would be acceptable

63

If a seller gives no instructions within a reasonable time after notification of rejection, the buyer may _________________ the goods.

Reship, store, or resell. (no destroying).

64

In a single delivery contract, when a buyer rejects goods due to defects, the seller may cure within the time originally provided for performance in the contract:

by giving reasonable notice to the buyer and making a new tender of conforming goods, which the buyer must then accept.

65

A unilateral contract

results from an offer that expressly requires performance as the
only possible method of acceptance

66

Under the UCC, the firm offer rule states

an offer cannot be revoked for up to 3 months if
1. offer to buy or sell goods
2. signed, written promise to keep offer open
3. party is a merchant

67

Option (contract)

Offer + promise not to revoke in exchange for consideration.

68

4 Ways offers become irrevocable

1. option
2. firm offer rule (ucc)
3. reliance
4. unilateral contract/ performance

69

3 Methods of Indirect Rejection

1. counteroffers
2. conditional acceptance
3. additional terms (mirror image rule common law)

70

A discharge by __________ will occur if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge.

frustration

71

A contractor is hired to remodel a restaurant. After the contractor completes 90% of the work, the restaurant is destroyed in an earthquake.
The destruction of the restaurant :

Will discharge the contractor’s duty to perform

72

When a debtor breaches an accord agreement by failing to make an immediate satisfaction, the creditor:

May sue on either the original contract or the accord agreement

73

A contract may be discharged by a new contract that substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the original contract. This is known as a discharge by:

Novation

74

A discharge by________ occurs when the parties manifest an intent to have an act of destruction or surrender of the written contract serve as a discharge, and consideration or one of its alternatives is present.

cancellation

75

A discharge by ______ is an agreement by the contracting parties not to sue on the contract.

Release

76

A discharge by ________ __________ occurs when the same parties to a contract enter into a second contract that immediately revokes the first contract.

substituted contract

77

__________ is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance.

An accord

78

________ is the performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract as well.

Satisfaction

79

A ______ 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 terms of the old contract. The original contract will be discharged by the novation.

novation

80

The absolute duty to perform can be discharged by:

Full performance or a good faith tender of performance

81


Student enters into a contract with Violinist under which Violinist agrees to give Student violin lessons once a week for one year for $50 per week. Violinist subsequently has a stroke and is unable to teach.
Violinist’s duties under the contract will:

be discharged by impossibility

82

An executive hires a personal trainer for six months at $100 per week to ready the executive for an upcoming triathlon. One month into the contract, the executive suffers an accident that leaves her paralyzed and unable to compete in the triathlon. When the executive fails to pay the trainer, the trainer sues for breach of contract.
The trainer will ______________ because ___________.

Not prevail; the purpose of the contract was frustrated.

83

Homeowner enters into a contract with Paver for Paver to pave Homeowner’s driveway for $500. Paver dies immediately after beginning the project.
Paver’s contractual duties will:

Not be discharged.

84

Owner enters into a contract with Builder under which Builder agrees to renovate Owner’s 100-year-old mansion for $400,000. When the renovation is 80% complete, the mansion is washed away in a flood.
Builder’s duties under the contract will:

Be discharged by impossibility

85

Will a binding promise to perform serve to discharge a party’s duty to perform?

No, because the tendering party must offer to perform and possess the present ability to perform.

86

Once construction of a building has begun, an act of nature destroying the work in progress will have what effect on the contract?

It will often serve to extend the time for the builder’s performance in finishing the construction project

87

A and B enter into a contract. A, B, and C subsequently enter into a new contract that states that C will receive all benefits and assume all duties that had originally belonged to A in the initial A-B contract.
This is an example of:

A novation.

88

A borrowed $5,000 from B and agreed to repay it by May 1. On May 15, A, strapped for cash, offers to pay B $4,500 on May 16, and B agrees to accept that amount.
This agreement is __________.

Unenforceable.

89

Is consideration necessary for a valid mutual rescission of a contract?

Yes, each party giving up her right to counterperformance from the other party serves as consideration for the agreement to rescind the contract.

90

Will a binding promise to perform serve to discharge a party’s duty to perform?

No, because the tendering party must offer to perform and possess the present ability to perform.

91

The death of a party to a contract:

Discharges the contract only if that party was necessary to effectuate the contract

92

What is a novation?

A new contract that substitutes a new party to receive benefits and assume duties under the terms of an old contract

93

__________ exists if the purpose of the contract has become valueless by virtue of an unforeseeable supervening event.

Frustration

94

A building that is the subject of a contract between its owner and a contractor is completely destroyed by an act of nature.
If the contractor was working on a renovation, the destruction _____________; if the contractor was constructing the building, the destruction ________________.

Discharges the contractor’s duties by impossibility; does not discharge the contractor’s duties

95

A mutual agreement between two parties to a contract that each will give up her respective rights to performance from the other is known as:

A mutual rescission

96

Which one of the following elements is needed for a discharge of a contract due to frustration?

An unforeseen act or event has completely or almost completely destroyed the purpose of the contract

97

The defense of __________ applies when a party seeking specific performance is guilty of some wrongdoing in the transaction begin sued upon.

Unclean Hands

98

In the case of a sale of goods contract, if the standard measure of damages does not adequately compensate a seller for the buyer’s breach because the seller can manufacture or obtain as many goods as he can sell, he may recover damages based on ____________.

Lost profits.

99

When a party that offers a rare or unique service has breached a service contract, the court may grant __________ to the nonbreaching party.

Injunctive relief

100

_____________ is not available for breach of a contract to provide services, even if the services are rare or unique because it is difficult to supervise and most courts find that it is tantamount to involuntary servitude.

Specific peformance

101

_______ are generally not awarded in contract cases.

Punitive damages

102

A liquidated damages clause may be enforced even if:

No actual money damages have been suffered.

103

In a construction contract, if the property owner breaches the contract after construction has started but before it is completed, the builder is entitled to:

The profits he would have derived from the contract, plus any costs he has incurred

104

A court will grant an order of specific performance to enforce a contract not to compete if __________; and __________.

the services to be provided are unique; the covenant is reasonable.

To be reasonable, the covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant, it must be reasonable as to its geographic scope and duration, and it must not harm the public.

105

In a contract for the sale of goods, __________ may recover consequential damages.

Only the buyer

106

____________ conist of losses resulting from the breach that any reasonable person would have foreseen would occur from a breach at the time of entry into the contract.

Consequential Damages.

In contracts for the sale of goods, only the buyer may recover consequential damages.

107

A seller agrees to sell Blueacre to a buyer for $100,000. When the seller’s assistant types the contract, it states that it is for the sale of Blackacre, another of the seller’s properties. Neither the buyer nor the seller noticed the reference to the different parcel before signing.

Reformation

108

A court order requiring a breaching party to perform under the contract or face contempt of court charges is also known as:

Specific Peformance

109

Expectation damages are also known as:

Benefit of the bargain damages.

110

In a construction contract, if the property owner breaches the contract __________.

before construction has started, the builder is entitled to the profits he would have derived from the contract

111

Under Article 2, when a buyer refuses to accept goods or repudiates the contract, a seller ________, but is not required to do so.

may resell the goods

A seller always has the option of seeking either the difference in the contract price and the market price or the difference between the contract price and the resale price, plus incidental damages.

112

If an employer breaches a contract, the employee ___________________.

must use reasonable care in finding a position of the same kind, rank, and grade in the same locale.

113

Unless it will increase the damages, when an owner breaches, a builder is _____________.

under a duty to cease work on a project.

114

Unless it will increase, rather than decrease damages, a manufacturer is under a duty _________________.

to cease work when the party for whom the goods are being manufactured breaches the contract.

115

In the case of a breach of an employment contract by the employee, the employer may recover:

The cost to replace the employee regardless of whether the breach was intentional or unintentional.

The employer is entitled to the standard measure of damages computed according to what it costs to replace the employee (i.e., the difference between the cost incurred to get a second employee to do the work and the cost to the employer had the first breaching employee done the work)

116

Reliance damages are appropriately awarded when:

Expectation damages are too speculative to calculate.

117

In the event of a breach in a sale of goods contract, the buyer’s damages are measured as of ____________, while the seller’s damages are measured as of _____________.

the time she learns of the breach; the time for delivery.

118

Incidental damages ______________.

Include a buyer’s reasonable expenses in care of goods rightfully rejected and a seller’s expenses of reselling goods as a result of the buyer’s breach

119

To be reasonable a covenant must:

1. Must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant,
2. Must be reasonable as to its geographic scope and duration, and
3. Must not harm the public.

120

A liquidated damages clause will be enforceable only if:

Damages were difficult to estimate at the time the contract was formed and the amount agreed upon was a reasonable forecast of compensatory damages in the case of breach

121

__________ damages consist of losses resulting from the breach that any reasonable person would have foreseen would occur from a breach at the time of entry into the contract.

Consequential

122

_________damages are the standard measure of compensatory damages. .

Expectation

Expectation damages are based on an “expectation” measure or what is sufficient for the nonbreaching party to buy a substitute performance. This type of damages is also known as “benefit of the bargain” damages.

123

_________ damages award the plaintiff the cost of her performance. They are designed to put the plaintiff in the position she would have been in had the contract never been formed.

Reliance

A plaintiff may elect to recover damages based on a reliance measure rather than an expectation measure when expectation damages will be too speculative to measure.

124

___________ damages include expenses reasonably incurred by the buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach.

Incidental

125

Specific Peformance is not a valid remedy for ________ contracts.

service.
(too much like slavery).

126

Specific performance is ____________.

A court order directing the breaching party to perform as promised under the contract

127

In the event of a breach by the buyer in a sale of goods contract, possible measures of damages that may be recovered by the seller include:

The difference between the contract price and the market price, the difference between the contract price and the resale price, and lost profits

128

The remedy of restitution is based on ______________ and is measured by ____________.

Preventing unjust enrichment; the value of the benefit conferred

129

When, pursuant to a contract for a sale of goods, a buyer accepts nonconforming goods, he may not recover __________.

the difference between the contract price and the market price

130

If a buyer accepts nonconforming goods, the buyer may recovery warranty damages for the breach of the seller’s warranties. The basic measure of damages for breach of warranty is:

1. The difference between the value of the goods as delivered and the value they would have had if they had been according to the contract, plus
2. Incidental damages, plus
3. Consequential damages.

131

In the case of a breach of an employment contract by the employer, the measure of the employee’s damages is:

The full contract price regardless of when the breach occurs

132

Under U.C.C. Article 2, if a seller refuses to deliver goods under a contract, the buyer may replevy the goods if:

The goods have been identified to the contract and the buyer is unable to cover

The U.C.C. authorizes the buyer to seek replevin (i.e., an action to recover the goods) of goods identified to the contract when the buyer is unable to cover (i.e., unable to secure substitute goods after reasonable effort).

133

In the case of a sale of goods contract, if the standard measure of damages does not adequately compensate a seller for the buyer’s breach because the seller can manufacture or obtain as many goods as he can sell, he may recover damages based on ____________.

Lost profits.

134

Specific performance is generally available as a remedy for breach of a contract for ___________ but not for breach of a contract for ________.

Rare goods; unique services

135

As a general rule, if the property owner in a construction contract breaches, the builder has a duty to:

Cease work after the breach

136

Under Article 2, when a seller breaches a contract by refusing to deliver identified goods to the buyer, the buyer may replevy the goods if:

the buyer, after reasonable effort, is unable to secure adequate substitute goods.

137

A remedy whereby a writing setting forth the agreement between the parties is changed by the court so that it conforms to the original intent of the parties is known as:

reformation

A reformation action is available to remedy a mutual mistake, such as when unbeknownst to either party, the written contract fails to reflect the agreed upon terms. It is also possible to seek reformation in the case of unilateral mistake or fraudulent misrepresentation.

138

__________ is a remedy whereby the original contract is considered voidable and rescinded. The parties are left as though a contract had never been made.

Recission

139

__________ is a remedy based on preventing unjust enrichment in cases of breach of contract, unenforceable contracts, and sometimes when there is no contract at all (quasi-contract).

Restitution.

140

The right to specific performance in a land sale contract is cut off if the subject matter of the contract has already been sold to another who purchased for value and in good faith.
This is known as the equitable defense of:

Sale to a bona fide purchaser.

141

The equitable defense of _______ arises when a party delays in bringing an equitable action and the delay prejudices the defendant. Note that mere delay itself is not a ground for this defense.

Laches.

142

The _________________ defense arises when the party seeking specific performance is guilty of some wrongdoing in the transaction being sued upon. Note that the wrongdoing must be related to the transaction being sued upon; it is not sufficient that the plaintiff has defrauded other persons in similar transactions.

unclean hands

143

_______ is a nonmonetary remedy found in Article 2 of the U.C.C. If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy (or recover) the goods from the seller if the seller becomes insolvent within 10 days after receiving the buyer’s first payment or the goods were purchased for personal, family, or household purposes. In either case, the buyer must tender any unpaid portion of the purchase price to the seller.

Replevy

144

Under Article 2, how does a buyer’s right to replevy differ from a buyer’s right to specific performance?

Replevin will lie only for identified goods, while specific performance may be decreed even though the goods have not previously been identified

145

Liquidated damages must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach. Therefore, courts have found liquidated damages clauses are enforceable if:

1. Damages for contractual breach are difficult to estimate or ascertain at the time the contract was formed; and
2. The amount agreed on was a reasonable forecast of compensatory damages in the case of a breach.

146

Parol Evidence is

1. Words by a party or both parties
2. Before integration (before k was put in written form)
3. Oral or Written

147

Perfect Tender Rule

1. Only applies to sale of goods
2. Perfect tender means everything (goods & delivery) must be perfectly in line with contract.
3. A less than perfect tender gives a buyer an option of rejecting.

148

Rejection of goods

1. Distinguish rejection of an offer & rejection of the goods.
2. If seller does not meet perfect tender, buyer has option to retain and sue, or reject.
3. Rejection alternative is limited by cure, installment, contract, and acceptance
4. Buyer has obligation to use reasonable care with respect to rejected goods.

149

S can cure when

1. reasonable grounds to believe would have been acceptable
2. time for performance has not yet expired.

150

A buyer has a right to reject an installment only when

there is a substantial impairment in the installment that can't be cured.

151

If an assignee for value discovers that the assignor had previously assigned the same contract rights to another party for value, the assignee may _________.

sue the assignor for breach of warranty

152

Under a warranty against infringement, a merchant seller regularly dealing in goods of the kind sold warrants that the goods are ________.

delivered free of any patent, trademark, copyright, or similar claims.

153

List implied warranties given by an assignor to assigness for value.

The assignor warrants that he will do nothing in the future to defeat the assigned right; i.e., he will not wrongfully exercise his power to revoke.

The assignor also warrants that the assigned right is not subject to any valid defenses of the obligor against the assignor.

The assignor warrants that the assignor has the right to assign the right; i.e., that he has made no prior assignment of the same right.

154

For a valid assignment, the assignor must manifest an intent to transfer his rights under the contract __________________ to the assignee

completely and immediately

155

A and B enter into a contract under which A will service B’s car for $500. If, despite a clause prohibiting assignment of “the contract” by the parties, A assigns the contract to C, what is the result?

C has the right to the $500, but A has the obligation to service B’s car

156

An effective assignment generally need not be in writing, though there are exceptions. They are:

Situations where an assignment must be in writing include
1. wage assignments;
2. assignments of an interest in land;
3. assignments of choses in action worth more than $5,000; and
4. assignments intended as security interests under Article 9 of the U.C.C.

157

If a person leaves an item of jewelry with a jeweler for repair, and the jeweler sells the item to an unsuspecting purchaser, __________.

the purchaser has title to the item and the true owner cannot recover it

158

As a general rule, all contractual duties may be delegated to a third person.
What are the exceptions to the rule?

1. If a duty involves personal judgment and skill, it may not be delegated. An actor’s performance would be an example of a duty involving personal judgment and skill.

2. A duty involving a special trust between the parties may also not be delegated. For example, the duties of an attorney to her client, or a physician to his patient, may not be delegated.

3. In addition to the above, the parties may agree to a contractual restriction on delegation. A provision that states that any certain duty is restricted from delegation will be given strict effect.

159

The general rule is that when the assignor makes two assignments of the same right, if the first assignment is ____________, the ____________ assignee has priority.

irrevocable; first

160

A writing is required for an assignment __________.

of wages.

161

If a sale of goods is induced by fraud, the seller can rescind the contract and recover the goods unless __________.

the goods are resold to a buyer who was unaware of the fraud

162

As a general rule, if the promisor fails to perform under a contract, a third-party beneficiary whose rights have vested may sue the promisee if the third-party beneficiary is _____________.

a creditor beneficiary

163

If the promisee’s purpose in extracting the promise was to discharge an obligation owed to the third party, the third party is a ______ _________.

creditor beneficiary

164

If the promisee’s purpose in extracting the promise was to confer a gift on the third party, the third party is a _______ __________.

donee beneficiary.

165

An assignment is for value if it is:

(i) done for consideration or (ii) taken as security for or a payment of a preexisting debt.

166

If a person leaves an item of jewelry with a jeweler for repair, and the jeweler sells the item to an unsuspecting purchaser, __________.

the purchaser has title to the item and the true owner cannot recover it

167

Under a requirements contract, an order that is _________ __________ to previous orders or a stated estimate will not be enforceable.

unreasonably disproportionate.

E.g. a microbrewery agreed to buy all barley from a farmer. Over two years, each month the microbrewery ordered 4 barrels of barley. The microbrewery becomes more popular and suddenly needs 20 barrels. If the farm can't provide the 20, the microbrewery can't sue for breach of contract.

168

A suretyship promise must ____________.

be in writing under the Statute of Frauds.

169

A gratuitous promise to a creditor, can be enforced by the creditor if the creditor

reasonably and foreseeably relied on the promise in declining to sue the debtor within the statute of limitations period.

170

Where one party makes a unilateral mistake about a basic assmption on which the contract is based, and theother party knew or had reason to know of the mistake, the mistaken party will be allowed to _________.

Rescind the contract.

171

Under UCC 2-209, consideration is not required for ___________; however, any _______ will be subject to the general Code requirement of _____________.

an enforceable modification; modification; good faith and fair dealing.

172

Good faith and fair dealing under the UCC requires ______.

honesty in fact and conforming with reasonable commercial standards.

173

When both parties are merchants, a memorandum of the terms of the sale sent by one party to the other satisfies the __________ unless________________.

the statute of frauds; the retailer objects within 10 days.

174

Under UCC 2-206(b)(1), an order for "prompt shipment" may be accepted by shipment of either _____ or _______ goods and a contract is created upon such shipment.

conforming or nonconforming.

*This alters traditional rule that shipment of nonconforming goods was a counteroffer which the buyer accepted upon taking delivery.

*Party may still reject the nonconforming shipment and sue for damages.

175

Until a third party's rights have vested, a _______ can take place without the consent of the third party.

modification of the contract

176

If there is an anticipatory repudiation, then the nonbreaching party can

i. sue for damages
ii. contract with a third party, or
iii. do nothing

177

If fact pattern language amounts to a prospective inability to perform, the innocent party may
(not for sale of goods)

suspend performance until he receives adequate assurances that performance will be forthcoming.

178

Prosepective inability to perform rather than anticipatory repudiation will be found when

language constitutes an expression of doubt as to one's ability to perform under the contract without being an outright refusal.

179

______ assignment is generally revocable.

gratuitous

180

Which one of the following contracts is considered void, rather than voidable?

A contract involving illegal consideration

181

The confirmatory memo rule applies __________.

Only if both parties to the agreement are merchants

182

The concept of __________ is the refusal of a court to enforce a contract provision or an entire contract to avoid “unfair” terms.

unconscionability

183

In a contract for a sale of goods priced at $500 or more, if the goods are _________ or __________, the contract will be enforced even if there is no writing.

Received and accepted; paid for

184

Mutual mistake can be a defense to the formation of a contract if:

The mistake concerns a basic assumption on which the contract is made

185

What would be sufficient to allow enforcement of an oral contract for the sale of real property?

Conveyance of the property from the seller to the purchaser.

186

Under the confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if:

The recipient has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt

187

A writing is not required to enforce a contract that would otherwise be covered by the Statute of Frauds if:

The party against whom enforcement is sought admits to the contract in court

188

A contract __________ is considered void, rather than voidable.

illegal consideration

189

In a contract between a minor and an adult, the contract is ____________ as to the adult and ___________ as to the minor.

Binding; voidable

190

When a court refuses to enforce a provision of a contract to avoid “unfair” terms, it is applying the concept of:

unconscionability.

191

At common law, the Statute of Frauds requires _____________ signed by ____________.

A writing or writings reflecting the material terms of the contract; the party to be held liable

192

With respect to a completely integrated written agreement, parol evidence can be received to aid a fact-finder when there is a dispute as to __________.

the meaning of an ambiguous term within the agreement

193

Despite the parol evidence rule, a party to a fully integrated written contract can always offer evidence __________.

Attacking the agreement’s validity at the time of formation

194

Under the common law, as summarized by the Restatement of Contracts, evidence of additional terms is generally admissible even if the written contract appears to be completely integrated if the alleged terms __________.

are of a type that would naturally be omitted from a written agreement

195

When the parties to a contract express their agreement in a writing with the intent that the writing embody the final expression of their bargain, this is known as __________.

integration

196

When the parties to a contract have expressed their agreement in a completely integrated writing, a court will apply the __________ to determine whether any other expressions, made prior to or contemporaneous with the writing, are admissible to vary the terms of the writing.

parol evidence rule

197

Under Article 2’s version of the parol evidence rule, a party __________.

May offer evidence explaining or supplementing the existing terms of an integrated writing, whether or not the writing appears to be ambiguous

198

What does it mean if a term is “collateral” to a written agreement?

The term is related to the subject matter of the agreement, but not part of the primary promise

199

Under the common law, as summarized by the Restatement of Contracts, evidence of additional terms is generally admissible even if the written contract appears to be completely integrated if the alleged terms __________.

are of a type that would naturally be omitted from a written agreement

200

Which of the following is a condition precedent to effectiveness?

An agreement that a contract will not become binding until a certain condition has occurred.

201

____ evidence may be outside the scope of the parol evidence rule?

Evidence of a condition precedent to effectiveness

202

Under Article 2’s version of the parol evidence rule, a party may offer evidence of __________ to explain or supplement a fully integrated written contract’s terms.

A prior course of dealing, usage of trade, or course performance

203

Despite the parol evidence rule, a party to a fully integrated written contract can always offer evidence __________.

Attacking the agreement’s validity at the time of formation

204

The Restatement of Contracts allows a party to an agreement to introduce evidence of additional terms not included in a written integration of the agreement if the new terms do not conflict with the written integration and the terms concern a subject that similarly situated parties would not ordinarily be expected to include in a written instrument.
These terms are known as:

Naturally omitted terms

205

Extrinsic evidence of a condition precedent to a fully integrated agreement is admissible, despite the parol evidence rule, because __________.

It is not altering the written agreement—the agreement comes into being only if the condition is met

206

Was the offer terminated?

1. Lapse of time?
2. Death of a party prior to acceptance?
3. Words or conduct of offeror
• Later unambiguous statement by offeror to offeree of unwillingness or inability to contract, or
• Later unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.

4. Words or conduct of the offeree: Rejection
Indirect rejection = counteroffer
additional terms
conditional acceptance
1. CL: rejects &
counteroffer
2. UCC: rejects

207

Which offers are irrevocable?

1. Options
2. Firm offer rule
1. offer to buy or sell goods
2. signed, written promise to keep the offer open, and
3. party is a merchant.
3. Reliance: Can't be revoked if:
1. reliance that is
2. reasoanbly foreseeable and
3. detrimental

4. Unilateral contract + start of performance (not mere prep)

208

T/F: Start of performance is treated as implied promise to perform and is acceptance even without any words of acceptance.

Yes, true in bilateral contracts, BUT in unilateral contracts, full performance = acceptance.

209

What are the 4 rules associated with acceptance & the mailbox rule?

1. All communications other than acceptance are effective only when received.
2. Acceptance is generally effective when mailed.
3. If a rejection is mailed before an acceptance is mailed, then neither is effective until received.
4. You cannot use the mailbox rule to meet an option deadline.

210

What are the 3 general acceptance fact patterns that will appear on the bar?

1. Offeree starts to perform (no words): acceptance in bilateral, not in unilateral.

2. Distance & delay in communications: mailbox rule for acceptance. Receipt for all other communications.

3. Seller sends the wrong goods: acceptance & breach.
• Accommodation exception: Sends 100 blue instead of 100 red and says hope you can use blue instead. No contract, no breach.

211

Generally an offer can be accepted only by:

1. a person who knows about the offer at the time she accepts (think rewards hypo)
2. who is the person to whom it was made.

*Offers cannot be assigned; options can be assigned unless the option otherwise provides.

212

Legal reasons for not enforcing an agreement include:

1. lack of consideration or a consideration substitute
2. lack of capacity of the person who made the promise
3. statute of frauds
4. existing laws that prohibit the performance of the agreement (illegality)
5. public policy
6. misrepresentations
7. nondisclosure
8. duress
9. unconscionability
10. ambiguity in words of agreement
11. mistakes at the time of the agreement as to the material facts affecting the agreement.

213

T/F: ARticle 2 doesn't have a pre-existing legal duty rule.

True: New consideration is not required to modify a sale of goods contract.

E.g. Under common law if I already agreed to perform for $1000 and now I'm asking for $1500, need new consideration (unless 3rd party agrees ot pay extra). Under UCC, no new consideration is needed to make modification, just good faith. So I order 100 widgets and agree to pay $1000. Now seller says can't do it for any less than $1300. No new consideration needed.

214

What are the rules for part payment as consideration for release of balance of debt?

1. Part payment ($2000 instead of the $3000 I owe) is not enforceable because there is no new consideration.

2. But, if my debt was due Jan. 15 and I say I'll pay the $2000 on Jan. 11, then new consideration in the earlier date, so that's fine.

215

What are consideration substitutes?

1. A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration. (Statute of limitations is up on the $1000 I owe you, but I promise to pay you $600--that's enforceable without consideration).

2. Promissory estoppel
1. promise
2. reliance that is reasonable, detrimental, and
foreseeable
3. enforcement necessary to avoid injustice

E.g you promise to re-rent to me for the same price but you increase the rent. No consideration, but I've painted the building relying on your promise.

*This type of situation will come up where people do stuff they were never asked to do, but the person should have known they were going to do it anyway.

3. Seals (not on multi-state or CA essays).

216

What are the 4 contracts within the SOF?

1. Promises to answer for the debts of another if they don't pay (suretyship). (very narrow inclusion)
• Must be a guarantee!
•Main purpose exception: Store sells P paint on credit and C guarantees the debt if P doesn't pay, but the paint is for P to paint C's house. No SOF.

2. Service contract not capable of being performed within a year from the time of the contract.
• Life exception: D hires P to work for the rest of P's life. P is only 21. No SOF.

3. Transfers of interest in real estate (not for leases of a year or less).
•Watch out for 1 year leases: no SOF.

4. Sale of goods for $500 or more.

217

What are the 5 rules for satisfaction of the SOF by performance?

1. Part performance satisfies the SOF in transfers of real estate. Requires any 2 of the 3: (i) improvements of the land; (2) possession; (3) payment.

2. Full performance in a performance & service contract by either party satisfies the SOF.

3. Part performance of a services contract does not satisfy the SOF.

4. Part performance of a sale of goods contract satisfies the SOF but only to the extent of the part performance. (If deliver 600/2000, can sue to get paid for the 400, not the remaining 1400).

5. If the k is for the sale of goods that are to be specially manufactured, then the SOF is satisfied as soon as the seller makes a substantial beginning.

218

What writing under common law satisfies the SOF?

Must pass the material terms test.

Can look at multiple writings.

Must be signed by person asserting the defense.

219

What writing under UCC satisfies the SOF?

writing must indicate that there is a contract for the sale of goods and contain the quantity term. Look at contents & who signed.

*Common law = material terms test.

220

What are the 4 ways the SOF can be satisfied?

1. performance
2. writing
3. judicial admission
4. estoppel (prob not on bar exam).

221

What is the equal dignity doctrine?

Rules of law require that the authorization to execute a contract for someone else must be in writing only if the contract to be signed is within the SOF. (remember agency).

222

When must a modification be in writing?

If the deal with the alleged change would be within the SOF.

223

Under common law, contract provisions requiring that ll modifications be in writing are __________. Under UCC, contract provisions requiring written modifications are _____________.

not effective--ignore contract language.

effective unless waived.

224

If the contract concerns an illegal subject matter, it is _______, but if the subject matter is legal and the P didn't have reason to know of the D's illegal purpose, then the k is __________.

unenforceable; enforceable

1. e.g. contract to kill
2. e.g. contract for plane ticket (D was taking drugs)

225

What are the elements of misrepresentation?

1. statement of "fact" before the k
2. by one of the contracting parties or her agent,
3. that is false, and
4. induces the contract.

There are no termites.

*It doesn't matter if the misrepresentation was innocent or made honestly.

226

What is the rule for nondisclosure in contract formation?

Generally, nondisclosure is not enough to negate formation of a contract. More is needed, like concealment or fiduciary relationship.

E.g. E sells car to C, but not only doesn't tell C about rust, but paints the car burnt orange to conceal rust.

227

How is duress a reason for not enforcing an agreement?

1. physical duress--will be obvious
2. economic duress
• bad guy: improper threat which is usually threat to breach existing contract and
• vulnerable guy: no reasonable alternative.

E.g.

228

What are the two parts of unconscionability to address?

1. procedural: unfair surprise: fine print, etc.
2. substantive: oppressive terms: favorable to one party

229

What are the elements that need to be satisfied before a contract is unenforceable due to ambiguity?

1. parties use a material term that is open to at least 2 reasonable interpretations
2. each party attaches different meaning to the term, and
3. neither party knows or has reason to know the term is open to at least 2 reasonable interpretations.

Peerless.

230

What are the rules for mistake of fact existing at the time of contract? Will it be enough to not enforce the agreement.

Generally, no.
1. Mutual, material mistake of existing fact: K will still be enforced unless person trying to get out of the deal did not assume the risk.

2. Unilateral mistake of material fact: Only if the other party had reason to know of the mistake.

231

What are the exceptions to the parol evidence rule?

1. mistake in integration
2. subsequent writings/oral statements
3. defenses (not enforceable k)
4. ambiguity in written deal

232

From where can the terms of the contract come?

1. words in the written contract
2. words of the parties not in the k (parol evidence)
3. conduct
4. UCC default terms

233

On the bar, conduct takes one of 3 forms. Courts look first to _____, second to ____, third to ________ to explain words in contracts or to fill gaps in contracts.

1. course of performance
2. course of dealing
3. custom & usage

1. Course of performance: same people, same contract: S contracts to sell 1,000 chickens a month to B for 12 months. The
first three shipments are boiling hens, and B does not complain.

2. Course of dealing: same people, different but similar contract: S contracts to sell 1,000 chickens a month to B for 12 months.
Under prior chicken contracts, S sent B boiling hens, and B complained.

3. Custom and usage: different but similar people, different but
similar contract:
S contracts to sell 1,000 chickens a month to B for 12 months. It is customary in the chicken industry to use the word "chicken" when the deal covers chickens up to six pounds including boiling hens.

234

What are the UCC gap fillers?

1. Delivery obligations of seller if goods delivered by common carrier.

2. risk of loss

3. warranties of quality

4. limitations on warranty liability

235

In a shipment contract, the seller completes its delivery obligation when it

1. gets the goods to a common carrier
2. makes reasonable arrangements for delivery
3. notifies the buyer

236

In a destination contract, the seller completes its delivery obligation

when the goods arrive at the destination.

237

How do you know whether shipment v. destination contract?

Usually question will tell you. Assume shipment, but watch for use of FOB (city). If the city where the seller is or where goods are, then means shipment contract. If city where buyer is, then destination contract.

238

What are the possible consequences in a risk of loss problem?

1. If the risk of loss is on the buyer, he has to pay the full price for the lost/damaged goods.

2. If on the seller, no obligation on the buyer and possible liability on the seller for nondelivery.

239

What are the 4 risk of loss rules?

Try 1 first, if 1 doesn't work go to 2, etc. .

1. Agreement of the parties controls. (real life, not bar exam).

2. Breach: breaching party is liable for any uninsured loss even though breach is unrelated to the problem.

3. Common carrier delivery: Risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations

4. Catch-all: risk of loss shifts from a merchant-seller to the buyer on the buyer's receipt of the goods; risk of loss shifts from a non-merchant seller when he or she tenders the goods.

240

What are the types of warranties of quality?

1. express: words that promise, describe, compare, state facts. Not value/ opinion. Look for sample/ model.

2. Implied warranty of merchantabililty:
• Seller must be a merchant who deals in goods
of that kind.
• Goods are fit for ordinary purpose.

3. Implied warranty of fitness for a particular purpose:
• Buyer has a particular purpose
• Buyer is relying on seller to select suitable goods
• seller has reason to know of purpose and reliance
• goods fit for particular purpose.

241

What are the limitations on warranty liability?

1. statute of limitations: 4 yrs. from when tender of delivery is made

2. privity (not tested)

3. buyer's examination of goods: no implied warranties as to defects that are obvious on exam.

4. Disclaimers
• Express warranties generally can't be disclaimed.
• Implied can be disclaimed either:
1. conspicuous language of disclaimer
2. "As is" "with all faults"

5. Limitation of remedies:
•Can limit remedies even for express warranties
• general test is unconscionability
• prima facie unconscionable if breach of warranty on consumer goods causes personal injury.

242

T/F: Perfect tender only applies to sale of goods.

True.

243

In what instances does a seller who failed to make perfect tender have the option to cure?

1. Seller's reasonable ground to believe would be acceptable, perhaps with a money allowance. (look for course of performance/ course of dealing)

2. Time for performance has not yet expired.

3. Generally, seller has right to cure in installment contract. Buyer has right to reject only where ther is a substantial impairment and can't be cured.

244

T/F: Once the buyer accepts, the goods, it cannot later reject them.

True: buyer can only revoke acceptance later.

245

T/F: Payment without opportunity for inspection is not acceptance.

True.

246

Rejection must be timely. Failure to reject after the buyer has had reasonable time to reject is ___________.

acceptance.

247

The effect of a buyer's keeping the goods is implied _________.

acceptance. Look for the buyer's keeping the goods without objection. Fact pattern that states when buyer first received the goods and when buyer first complained to seller.

248

What are the requirements for revocation of acceptance?

1. nonconformity substantially impairs the value of the goods.
2. excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction, and
3. revocation within a reasonable time after discovery of nonconformity.

10degree sleeping bag example. Accepted, in summer then realized didn't work in winter, revoked acceptance.

249

What are the situations in which specific performance might be available?

1. contracts for sale of real estate
2. unique goods

250

When can a seller get his/her goods back? seller's reclamation of goods? When can buyer get goods from seller who becomes insolvent within 10 days?

1. Buyer must have been insolvent at the time that it received the goods.
2. seller demands return of goods within 10 days of receipt (reasonable time rule if, before delivery, there had been express rep of solvency by the buyer)
3. buyer still has goods at time of demand.

___________
The seller becomes insolvent within 10 days for the contract, B still has a legal right to obtain item by paying the balance of the purchase price if that was the deal.

251

What are the 7 types of contract damages?

1. expectation
2. incidental
3. consequential
4. avoidable
5. certainty
6. reliance
7. liquidated

252

What is the general approach to damages in a contracts case?

Expectation:
1. Look to facts for dollar value of performance w/out breach
2. look to facts for dollar value of performance with breach, and
3. compare the two to determine the amount of damages.

253

What should the first 3 sentences of any money damages contracts question say?

1. The purpose of money damages is to compensate.
2. All of the various money damages rules are based on protection of the nonbreaching party's expectation.
3. The purpose of money damages is to put the plaintiff in the same dollar position as if no breach.

254

How are damages calculated for seller's breach? (1. buyer keeps goods, 2. seller has goods).

1. Fair market value if perfect- fair market vlaue as delivered.

2. market price at time of discovery of the breach - contract price OR reasonable replacement price - contract price (whichever is higher)

255

How are damages calculated for buyer's breach? (1. buyer keeps goods, 2. seller has goods).

1. contract price

2. contract price- resale unless seller cannot resell in which case the seller can recover the contract price and in some cases provable lost profits.

256

How does the provable lost profits rule affect damages?

S&M Leather contracts to sell leather
clothing to Conviser for $1,000. (Assume that C is buying goods that are part of S& M's regualr inventory--off the rack). C breaches. S&M sells the very same items to Weiner for $1000.

S&M can recover damages from C because they would have sold to C and to W. 2 sales. bEcause of breach, there was just 1 sale.

257

T/F: Incidental damages are always recoverable.

True: costs incurred in dealing with breach: storage of goods, etc.

258

What are consequential damages?

limited to damages arising from P's special circumstances and recovery is limited to situations in which D had reason to know of these special circumstances at the time of the contract.

259

Contracts damages calculation should be:

expectation + incidental + consequential - avoidable - damages that can't be established w/ reasonable certainty.

*incidental and consequential if applicable.

260

What is the test for liquidated damages?

1. damages were too difficult to forecast at the time contract was made
2. provision is a reasonable forecast.

261

What are the things that could happen after contract formation that could excuse performance?

1. other party's material breach
2. other party's anticipatory repudiation
3. nonoccurrence of express condition
4. later agreement
5. later occurrences that affect the ability to perform or mutually understood purpose of performance

262

What is the absurd rule that changes when a non-repudiating party can sue when the other party anticipatorily repudiates?

Generally the non-repudiating party can sue either at the time of the repudiation or when performance was due.

If the non-repudiating party had completed performance before the repudiating party repudiated, then must wait for performance due date to sue.

263

Before anticipatory repudiation, a party can suspend performance if it thinks the other guy won't perform if:

1. reasonable grounds for insecurity
2. written demand for adequate assurance
3. commercially reasonable to stop performance.

264

What type of improper performance excuses performance under common law?

1. Material breach
2. Whether breach is material is fact question.
3. if there is a substantial performance, then breach is not material.

*Damages can be recovered for any breach.

Look for material breach due to quality or quantity of performance.

265

What is the standard for determining whether an express condition has occurred/been satisfied? What is the exception?

strict compliance. If ring needs to be appraised at $20,000, and gets appraised at $19,500, no good.

Exception: conditions of personal satisfaction of one of the contracting parties do not have to be strictly complied with. While the k language is "only if X is satisfied with the work," courts simply look to whether a reasonable person would be satisfied.

266

What are the 4 ways excuse because of a later agreement comes up?

1. Rescission (cancellation)
2. accord & satisfaction (substituted performance)
3. modification (substituted agreement)
4. novation

267

When is rescission valid?

When there is performance still remaining from each of the contract parties (bilateral executory).

268

What is an accord?

Agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.

269

What are the effects of accord (and satisfaction)?

1. If accord is performed (satisfaction), then performance of the original obligation is excused.

2. If accord is not performed, then the other party can recover on either the original obligation or on the accord.

270

What is substituted agreement or modification?

an agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation.

271

What is a novation?

agreement between BOTH parties to an existing contract to the substitution of a new party, same performance, different party.

272

Who is liable after a novation?

Novation excuses the contracted for performance of the party who is substituted for or replaced.

273

How is delegation different from novation?

Novation requires the agreement of BOTH parties to the originalcontract, and excuses the person replaced from any liability fornonperformance. Delegation does not require the agreement of
both parties and does not excuse.

274

T/F: Death only excuses performance when person is "special"

true.

275

If later, unanticipated event, ask yourself 3 questions to see whether performance is excused:

1. which party is arguing that her performance is excused?
2. what is her performance?
3. did post-contract occurrence affect her ability to perform or just cost of performance?

276

Generally death does not make a person's contract obligations disappear.

True

277

When can you cancel or modify a contract with a 3rd party beneficiary?

If the third party knows of and has relied on or assented as requested, can't cancel/modify. Once that happens, rights have vested and the contract cannot be cancelled or modified without her consent unless the k otherwise provides.

278

What are the 4 rules for who can sue whom in a 3rd party beneficiary contract?

1. Beneficiary can recover from promisor.
2. Promisee can recover from promisor.
3. Beneficiary cannot recover from promisee.
4. Limited exception to #3: Creditor beneficiary can recover from promisee but only on pre-existing debt.

*#4: T can recover from B if B owed T $100 before B ordered the grits to satisfy that debt and the grits were never delivered.

279

What is an assignment?

1. contract between only 2 parties
2. one of the parties later transfers rights under that contract to a third party.

280

What is the difference between a third-party beneficiary contract and an assignment?

3rd party beneficiary: one contract, between two people, that mentions 3 people.

Assignment: 2 people make a contract with no mention of anyone else. Later one of them transfers to another person.

281

What is the difference between a contract provision that prohibits assignments and one that invalidates assignments?

1. Prohibition: Language of prohibition takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the assignment.
• "rights hereunder are not assignable"

2. Language of invalidation takes away both the
right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
• "all assignments of rights under this contract are void."

282

Even if there is nothing in the contract that limits the right to assign, common law bars an assignment that ____________.

substantially changes the duties of the obligor.

* Assignment of right to payment is never a substantial change.

* Assignment of right to contract performance other than right to payment is usually a substantial change on the bar. (Batman has to defend Metropolis, not Gotham).

283

General rule is that consideration is not required for assignments, but gratuitous assignments can be revoked. (& only gratuitous assignments).

True

284

Who can sue whom in an assignment?

1. Assignee can recover from the obligor.
2. Assignor for consideration cannot recover from obligor.
3. Obligor has the same defenses against assignee as it would have against assignor.
4. payment by obligor to assignor is effective until obligor knows of assignment. Modification agreements between obligor and assignor are effective if the obligor did not know of the assignment.

285

What are the implied warranties of assignor in an assignment for consideration?

1. right assigned actually exists
2. right assigned is not subject to any then existing defenses by the obligor
3. assignor will do nothing after the assignment to impair the value of the assignment.

*Assignor does not warrant what the obligor will do after the assignment.

286

What are the rules for multiple assignments?

1. General rule for gratuitous assignments is that the last assignee wins.

2. For consideration:
• General rule: first assignee for consideration wins.
•Very limited exception: A subsequent assignee takes priority over an earlier assignee for value only if he both (i) does not know of the earlier assignment and (ii) is the first to obtain (1) payment, (2) a judgment, (3) a novation, OR (4) indicia of ownership. (4 Horsemen Rule).

287

What is a delegation?

Party to a contract transferring work under that contract to third party. For example, P contracts to paint O's house for $1,000. P (delegating party)
and X (delegatee) agree that X will paint O's (obligee) house.

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Difference between assignment and delegation?

Rights v. Duties
Assignment is the transfer by a party to a contract of his rights or benefits under the contract to a third party who was not a party to the contract.

Delegation is the transfer by a party to a contract of his duties or burdens under the contract to a third party who was not a party to the contract.

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Delegations are permitted unless either:

1. contract prohibits delegations or prohibits assignments or
2. personal services contract that calls for very special skills.

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What if, after delegation, the 3rd party delegatee does not perform?

1. Delegating party always remains liable.
2. Delegatee is liable only if she receives consideration from delegating party.