Contracts+sales Flashcards

Question

OFFER // COMMUNICATION 2 key takeaways [no. 2: is there a deal btwn the parties]

Answer 1

only persons AWARE of the offer may accept only persons to whom the offer was DIRECTED may accept (aka OFFER are NOT assignable but OPTION CONTRACTS are assignable)

Answer 2

upon RECEIPT by the offeree

Answer 3

1. By its own terms 2. Revocations by operation of law 3. Revocations by the offeror 4. Terminations by the offeree

Answer 4

By its own terms, the offeror is the "master" of the offer As such, she may place a SPECIFIC LIMIT on the time to accept (ex = one day or five minutes) If NO such limit is placed on the offer, the offer is open for a REASONABLE TIME

Answer 5

offer is AUTOMATICALLY revoked REGARDLESS of other party’s knowledge by 1. DEATH or ADJUDICATED INCAPACITY of offeror OR offeree (EXCEPT doesn't terminate option contracts) 2. Intervening ILLEGALITY or DESTRUCTION of SUBJECT MATTER offer is AUTOMATICALLY revoked IF other party has knowledge of 3. NON-ADJUDICATED insanity of offeror OR offeree

Answer 6

Offers are freely revocable even if the offeror promises not to revoke the offer

Answer 7

1. Unambiguous verbal revocation communicated by the offeror to the offeree prior to acceptance 2. Unambiguous conduct by the offeror indicating revocation (ex = item sold to another) communicated by the offeror or a reliable third party to the offeree

Answer 8

A revocation is effective upon "receipt" by the offeree Revocations by the offeror must pre-date the acceptance

Answer 9

As a general rule, acceptances are effective upon dispatch, but revocations are always effective upon receipt by the offeree if a revocation will be communicated to the offeree PRIOR to the receipt of the acceptance by the offeror (because it’s still in the mail) but SUBSEQUENT to the mailing of the acceptance = the revocation is ineffective

Answer 10

A written offer, revocation, counteroffer, or rejection is received when the writing comes into the POSSESSION of the person addressed REGARDLESS of when such document is opened or read

Answer 11

Offers are inherently revocable EXCEPT 1. Option contracts 2. Merchant’s firm offer (UCC-only) 3. Detrimental reliance 4. Unilateral contracts

Answer 12

definition = an agreement, supported by consideration (even nominal consideration), to hold an offer open for a fixed period of time Rule = under the Restatement, an option contract is enforceable if it merely RECITES nominal consideration

Answer 13

(UCC 2-207 RULE) MERCHANT’S FIRM OFFER bb = - Offer to buy or sell goods - Made by MERCHANT - In a SIGNED WRITING - In which merchant PROMISES TO HOLD - Offer open for STATED (or REASONABLE if not stated) TIME - NOT LONGER THAN 90 DAYS!!!!!!!!!! NOTE = never irrevocable for +90 days BUT can be accepted after if not revoked

Answer 14

the OFFEREE has DETRIMENTALLY RELIED on the offer AND that reliance was REASONABLY FORESEEABLE by the OFFEROR EX = If a general contractor relies on the bids of subcontractors in preparing the general contractor’s bid, the subcontractors’ bids are irrevocable until the owner/architect awards the contract to a general contractor

Answer 15

definition = language of contract expressly limits acceptance to complete performance rule = if the contract is unilateral and the offeree has COMMENCED PERFORMANCE (something more than mere preparation to perform), THEN offeree must be given a REASONABLE TIME TO COMPLETE performance (BUT the offeree is not BOUND TO COMPLETE performance unless it was a bilateral contract)

Answer 16

The offeree may also terminate an offer When an offeree terminates an offer, it is called a "rejection."

Answer 17

1. Counteroffer 2. Express rejection 3. Conditional acceptances

Answer 18

a counteroffer by the offeree permanently revokes the offer and, in fact, constitutes a new offer mere inquiries alone ("Will you take $9,000?") are not rejections in some cases, the original offer may be revived after a counteroffer

Answer 19

"No thanks" or "Not interested." A rejection permanently revokes the offer, even if the offeror had originally indicated that it would be held open for a longer period.

Answer 20

rejections (express or otherwise) are effective upon receipt by the offeror

Answer 21

A rejection or counteroffer made by the "offeree" during the option period does not terminate the option contract, unless the "offeror" detrimentally relies on the offeree’s rejection

Answer 22

= "I accept IF [or but or provided that or on the condition that or so long as]” acts as a rejection/counteroffer and permanently revokes the offer

Answer 23

if the offeree adds terms to the acceptance, this constitutes a counteroffer and a rejection LAST SHOT RULE = if the parties perform without an express contract, the last document governs

Answer 24

if an offeree adds a term ("I accept and ....") to the acceptance, ask 2 Qs. Q1 = IS THERE A CONTRACT? A1 = Yes (as long as acceptance of the additional term was NOT an EXPRESS CONDITION of acceptance) Q2 = DOES CONTRACT INCLUDE ADDITIONAL TERM? A2 = It depends -- if BOTH MERCHANTS, additional term IS part of the contract, unless 1. original offer LIMITED acceptance to offer's EXACT terms 2. offeror objects to additional term W/IN REASONABLE TIME after receiving the acceptance 3. additional term MATERIALLY ALTERS offer (like changes remedies available to offeror, significantly limits offeree’s liability, or disclaims warranties) -- if either is NON-MERCHANT, additional term is NOT part of the contract UNLESS additional term is EXPRESSLY ACCEPTED by offeror after receiving acceptance

Answer 25

= manifestation of assent to the terms of the offer

Answer 26

Only those who are aware of the offer Only those persons to whom the offer was made (= offers may not be assigned or accepted by bystanders to whom the offer was not directed—EXCEPT option contracts)

Answer 27

Someone who has made an offer via newspaper ad or the like must give equal publicity to the retraction as he did to the offer (ex = same newspaper, same number of days, etc.)

Answer 28

General rule = the offeror is the master of the offer and may limit the form of acceptance (ex = by fax only) BUT must do so UNAMBIGUOUSLY

Answer 29

may be accepted by EITHER 1. PROMISE to perform (communicated to offeror) OR 2. COMMENCEMENT of performance Contracts are PRESUMED to be bilateral If offeree accepts by COMMENCING performance AND the offeror has NO ADEQUATE MEANS OF LEARNING of such commencement = offeree must notify offeror w/in REASONABLE TIME that perf has COMMENCED (AKA failure to give timely notice will render the contract unenforceable)

Answer 30

may NOT be accepted by commencing performance may ONLY be accepted by FULL performance offeree is NOT BOUND by COMMENCING perf BUT commencement PREVENTS offeror from REVOKING offer for REASONABLE time Unilateral contracts are limited to 1. those that UNAMBIGUOUSLY require completion of performance as acceptance 2. offers to the public, such as rewards or prizes

Answer 31

As a general rule, an acceptance is effective upon dispatch (ex = mailing), even if it never gets to the offeror A contract is created at the moment of dispatch, provided the dispatch is properly addressed and, where necessary, stamped After proper dispatch, the offeror may not revoke the offer

Answer 32

The Mailbox Rule does NOT apply where 1. the offeror stipulates that acceptance is not effective until received OR 2. the offeror unambiguously mandates a method of acceptance (ex = by fax only) different than that used by the offeree OR 3. the offeree’s method of acceptance is not reasonable under the circumstances (ex = offeree uses U.S. mail to accept an email offer to purchase ripe bananas)

Answer 33

If an offeree FIRST REJECTS an offer by mail and THEN ACCEPTS by mail, the FIRST document RECEIVED by the offeror CONTROLS If the offeree FIRST ACCEPTS by mail but THEN REJECTS by mail = CONTRACT CREATED upon dispatch of acceptance BUT if offeror received REJECTION FIRST + CHANGED POSITION IN RELIANCE = offeree will be estopped from enforcing the contract

Answer 34

the offeror must RECEIVE the acceptance (exercise the option) to have a contract AKA the Mailbox Rule does not apply to option contracts

Answer 35

1. Promise to ship 2. Shipment of conforming goods 3. Shipment of non-conforming goods

Answer 36

Shipment of non-conforming goods constitutes an acceptance AND a breach of contract

Answer 37

If the seller sends non-conforming goods as an “accommodation,” there is no acceptance and thus no breach of contract If a seller PROMISES to ship CONFORMING goods AND THEN sends non-conforming goods as an accommodation, the seller has accepted the offer and breached the contract

Answer 38

An accommodation occurs when the seller notifies the buyer (before or with the shipment) that the goods are non-conforming but are being sent anyway

Answer 39

1. Sufficient consideration | 2. No valid defenses

Answer 40

= BARGAINED-FOR EXCHANGE of LEGAL DETRIMENT AKA 2 parts 1. promisor bargained for exchange by promisee in which 2. promisee either a. promises to do something or does something that, but for the contract, she is not obligated to do OR b. promises not to do something or does not do something that, but for the contract, she is legally entitled to do

Answer 41

consideration must be legally sufficient for there to be a binding contract sufficient = must be something that has value in the eyes of the law

Answer 42

1. Love and affection 2. Performing a service the law believes does not exist (ex = voodoo curse) 3. Nominal or token consideration (EXCEPTION = option contracts) 4. Promise to forbear filing a suit the plaintiff knows is frivolous

Answer 43

If the requirement of sufficiency of consideration is met, there is no additional requirement of equivalence in the values exchanged, UNLESS the contract is so one-sided that it is UNCONSCIONABLE As long as consideration exists, the parties’ motives for performance are irrelevant

Answer 44

1. Past consideration or moral obligation 2. Preexisting legal duty 3. Part payment of a debt 4. Promise not to sue

Answer 45

generally, if promisee has already performed act BEFORE promisor makes promise = there is no bargained-for exchange and thus no consideration

Answer 46

1. RST MATERIAL BENEFIT RULE promise made in recognition of benefit previously received by promisor from promisee = BINDING to extent necessary to PREVENT INJUSTICE UNLESS either - promisee conferred benefit as GIFT OR - for other reasons promisor has NOT been UNJUSTLY ENRICHED 2. PROMISE TO PAY DEBT BARRED BY SOL written promise to pay debt barred by SOL = enforceable UP TO amount of NEW PROMISE despite no new consideration 3. PROMISE TO PERFORM A VOIDABLE OBLIGATION if minor or incompetent PROMISES to perform voidable obligation AFTER reaching age of majority/regaining competency = obligation is enforceable despite no new consideration

Answer 47

= If the promisee is legally bound to do (or not to do) the act either by a prior contract or statutory law, there is no legal detriment suffered by the promisee AKA that the modification of an existing contract requires new consideration NOTE = if a modification is induced by IMPROPER THREATS, the innocent party may also raise the defense of ECONOMIC DURESS if it had NO REASONABLE ALTS

Answer 48

1. promisee agrees to add to/modify original deal in any LEGIT fashion 2. modification is FAIR & EQUITABLE in view of circumstances NOT ANTICIPATED by parties when the contract was made 3. THIRD PARTY agrees to pay ADDITIONAL consideration to promisee 4. UCC = SALES contracts may be modified w/o consideration as long as parties act in GOOD FAITH

Answer 49

key Q = If creditor agrees to take less than full payment in exchange for release, may creditor seek remainder from debtor? 1. if debt is DUE (or overdue) AND UNDISPUTED in amount = part payment does NOT constitute consideration for release AKA debtor owes remainder 2. if debt is NOT YET DUE (and debtor agrees to pay early) OR if there is GOOD FAITH DISPUTE as to amount of debt = part payment would constitute consideration for release (aka examples of accord & satisfaction) 3. if a DIFFERENT TYPE of performance (transfer of goods/services) is agreed upon = would also be consideration (aka also accord & satisfaction example)

Answer 50

A promise not to sue constitutes consideration if the promisor has EITHER a GOOD FAITH (subjective) or REASONABLE (objective) belief that the suit is valid If a party executes a written instrument (i.e., a quitclaim deed) settling a claim that was bargained for by the other party, the instrument is sufficient consideration even if the executing party did not subjectively believe the claim was valid

Answer 51

If there is no consideration, may the promisee enforce the deal? Generally = no BUT consider PROMISSORY ESTOPPEL, which applies where 1. promisor made a promise 2. promisee REASONABLY, DETRIMENTALLY, and FORESEEABLY relied on promise (aka promise induced promisee to act) 3. enforcement of the promise is NECESSARY TO AVOID INJUSTICE

Answer 52

Promissory estoppel damages are generally limited to reliance damages (as opposed to expectation damages)

Answer 53

TRICK. SOF does not apply to promissory estoppel

Answer 54

A contract is not enforceable if there is a valid defense, such as: 1. Lack of Capacity 2. Statute of Frauds 3. Illegality 4. Duress/Undue Influence 5. Misrepresentation 6. Mistake or Misunderstanding 7. Unconscionability

Answer 55

These 7 defenses are typically affirmative defenses for which the defendant would carry the burden of pleading, the burden of production, and the burden of persuasion

Answer 56

1. minors (under age 18) 2. mental incompetents (unable to understand legal significance of acts) Note = contracts of a party who has been adjudicated incompetent are VOID 3. intoxicated persons (unable to understand legal significance of acts AND the other party knew or should have known of the intoxication)

Answer 57

A party lacking capacity may disaffirm a contract (aka the contract is voidable by the incapacitated party) during disability or within a reasonable time thereafter In a minority of jurisdictions, the party lacking capacity is liable for any benefit he experiences or damage he causes prior to disaffirming

Answer 58

1. If incapacitated party either -- RETAINS BENEFIT of the contract after gaining capacity OR -- FAILS to DISAFFIRM the contract w/in REASONABLE time AFTER gaining capacity = she's IMPLIEDLY AFFIRMED contract and it's enforceable NOTE = affirmation by minor/incompetent doesn't require new consideration 2. if contract is for necessaries (aka NECESSITIES) = the incapacitated party is liable in quasi-contract for the value of the goods or services, but not for the actual contract price

Answer 59

1. Is the contract subject to the SOF? 2. If so, has the SOF been satisfied? 3. If the SOF applies and has not been satisfied, are there any remedies available to the plaintiff?

Answer 60

= Oral contracts are generally enforceable

Answer 61

= following are subject to SOF 1. agrmnt to MARRY supported by some form of $$$$ consideration (ex = prenuptz) 2. Promise by ESTATE executor/administrator to pay estate’s debts out of OWN POCKET 3. SURETYSHIP contracts (aka where one person guarantees the payments of another, like a co-signer) - -- EXCEPTION = if MAIN/PRIMARY PURPOSE of agrmnt is to BENEFIT SURETY, contract doesn't have to be in writing 4. SERVICE contracts that by OWN TERMS are NOT CAPABLE of being performed W/IN ONE YEAR from date of contract 5. contract for sale of GOODS where purchase price is $500+ 6. transfer of an interest in LAND - -- EXCEPTION = short-term (12 mos. or fewer) leases

Answer 62

SOF requires writing signed by DEFENDANT BUT does NOT require the parties to sign a written contract instead, any writing that contains the essential terms and is signed by the defendant will suffice (ex = a check, a memo to the file, a letter to a friend, notes scribbled on a cocktail napkin)

Answer 63

``` 1. writing must be SIGNED by D AND 2. all MATERIAL TERMS must be in writing, which are - identity of the parties - subject matter - price - time ```

Answer 64

only essential term is quantity NOTE = the contract is not enforceable beyond the quantity stated in the writing

Answer 65

1. the writing must be signed by the defendant OR 2. a written confirmation may be used BTWN 2 MERCHANTS ( = a confirmation letter containing a quantity term signed by the PLAINTIFF) if the other party does not object to the written confirmation within 10 days of receipt NOTE = the contract is not enforceable beyond the quantity stated in the confirmation

Answer 66

Under both the UCC and common law, the signature requirement may be satisfied by an electronic signature (such as a person typing her name at the end of an email message)

Answer 67

"Part Performance" may, in some cases, entitle the plaintiff to specific performance or damages despite the lack of a writing 3 key cases 1. Service contracts 2. Sale of goods contracts 3. Land contracts

Answer 68

full performance by either party satisfies SOF part performance does not (but quasi-contract damages may be available)

Answer 69

ordinary goods = PART delivery/payment/acceptance will satisfy SOF to EXTENT delivered/paid and accepted unique/specialized goods not suitable for sale in ordinary course = contract fully complies with SOF when S SUBSTANTIALLY begins performance OR makes COMMITMENTS for PROCUREMENT of goods

Answer 70

Specific Performance only Requires payment (substantial or full) PLUS either possession or improvement

Answer 71

Under the UCC, an admission in court or court papers satisfies SOF (up to the amount of the admission) This rule may also apply to common law contracts

Answer 72

A modification to a contract must satisfy SOF if the contract, AS MODIFIED, would be subject to SOF

Answer 73

Under the common law (and the UCC to a lesser degree), a "no oral modifications" clause is usually deemed WAIVED by a. the parties’ oral modification of the contract OR b. the parties’ performance of the contract in a manner inconsistent with its express terms NOTE = A waiver generally occurs even if the contract contains a "no waiver" clause.

Answer 74

1. Restitution | 2. Promissory estoppel

Answer 75

1. If the SUBJECT MATTER of a contract is illegal, NEITHER party may enforce it at any time AKA the court will leave the parties as it finds them (ex = a contract with a hit man or a gambling contract in a state where gambling is illegal) 2. If the contract MERELY RELATES to an illegal act, it is enforceable by the party who is NOT INVOLVED in the illegal act (ex = the purchase of a gun on credit from Walmart that is to be used in a murder, Walmart isn’t involved in murder…directly…so walmart can enforce it) ``` 3. If one party to an illegal contract is a member of a class for whose protection the statute or regulation was enacted, the PROTECTED PERSON may enforce (or disaffirm) the contract (ex = child may enforce or disaffirm an employment contract that violates child labor laws, but the employer may not enforce or disaffirm it) ```

Answer 76

If a contract is illegal solely because a party does not have a required license, the enforceability of the contract depends on the PURPOSE of the license 1. If the purpose of the license is to regulate the SKILL + QUALITY of a particular occupation, the contract is UNENFORCEABLE (ex = a license to practice law, medicine, plumbing, nursing) 2. If the purpose of the license is SOLELY to RAISE REVENUE, the contract is ENFORCEABLE (ex = a biz license)

Answer 77

TWO types of duress may render a contract VOIDABLE 1. physical duress = violence or threats of violence (this type of duress renders a contract VOID) 2. economic duress = by wrongful act (ex = threatening to breach a contract), one party takes advantage of another party who has no reasonable alternatives BUT such defense is limited to circumstances where D CAUSED P’s financial distress in the first place

Answer 78

= unfair persuasion of party who - -- is under DOMINATION of person exercising the persuasion AND - -- by virtue of confidential/fiduciary RELATIONSHIP btwn them - -- is JUSTIFIED in assuming that person won't act in manner inconsistent w/ her welfare

Answer 79

1. Fraud in the inducement | 2. Fraud in the execution (factum)

Answer 80

= if party is induced to enter into contract by FALSE ASSERTIONS OF FACT - traditionally = only falsity of past or present fact - restatement/majority = includes promissory fraud based on promise of future action w/ intent to perform future action misrepresentation makes a contract VOIDABLE if it is either FRAUDULENT or MATERIAL fact that truth of a misrepresentation could've been revealed by exercise of DUE CARE doesn't mean reliance was unjustified

Answer 81

If the defrauding party misrepresents the very nature of the document presented to the innocent party for signature, the agreement is VOID

Answer 82

NO manifestation of mutual assent (aka no contract) if 1. parties attach MATERIALLY DIFF MEANINGS to their manifestations AND 2. NEITHER knows or has reason to know meaning attached by other BUT there IS mutual assent and a contract if 1. one party does not know of meaning attached by other AND 2. another party knows or should know of meaning attached by other

Answer 83

1. Mutual mistake | 2. Unilateral mistake

Answer 84

= BOTH parties are mistaken about a BASIC MATERIAL FACT

Answer 85

1. if mistake relates to SUBJECT MATTER of contract = unenforceable UNLESS party asserting defense of mistake ASSUMED the risk of mistake because either a. the parties knew their assumption was doubtful OR b. one party (like contractor) is in a better position to know the risks than the other party (like homeowner) 2. if mistake relates to VALUE of what is being purchased = fully enforceable (as long as there was no fraud, etc.)

Answer 86

= Only one party was mistaken

Answer 87

generally = contract is enforceable UNLESS 2 EXCEPTIONS APPLY 1. involves MECHANICAL ERROR OF COMPUTATION, non-mistaken party can't SNAP UP an offer/bid that it KNEW/SHOULD'VE KNOWN was erroneous (aka the offer was too good to be true) 2. restatement = unilateral mistake also valid defense if enforcement of contract would be UNCONSCIONABLE

Answer 88

unconscionable contract = 1. PROCEDURALLY UNFAIR and 2. OPPRESSIVE TERMS

Answer 89

unconscionable contract = 1. PROCEDURALLY UNFAIR and 2. OPPRESSIVE TERMS

Answer 90

Tested at the time of contracting Question of law for the court

Answer 91

written contract that is final and complete agreement of the parties

Answer 92

If written contract is final AND complete agrmnt of parties, PER prohibits parties from introducing - PRIOR oral statements or writings OR CONTEMPORANEOUS oral statements that ADD to OR CONTRADICT the written contract MERGER CLAUSE = presumption of complete integration ex = "This is the complete and final agreement." TEST TIP = on MBE, parol evidence QS will generally state (or assume) that the contract is completely "integrated"

Answer 93

contract contains a merger clause = a presumption of complete integration ex = "This is the complete and final agreement."

Answer 94

If written contract is FINAL (but NOT COMPLETE) expression of parties’ agreement, PER prohibits parties from introducing - PRIOR oral statements or writings OR CONTEMP oral statements - that CONTRADICT the written contract

Answer 95

Whether a writing is integrated (completely or partially) = a question of LAW for the judge

Answer 96

parole evidence is admissible 1. to prove contract NEVER BECAME OPERATIVE due to fraud / duress / mistake / illegality / failure to satisfy condition precedent 2. to establish meaning of AMBIGUOUS term 3. to show that CONSIDERATION was/wasn't paid 4. to establish a case for REFORMATION by showing writing contains clerical error 5. to prove UNCONSCIONABILITY 6. to prove SIDE DEAL aka if it's additional agreement that would NATURALLY/NORMALLY be contained in SEPARATE AGREEMENT (w/ separate consideration) UCC exception = 3 things admissible to explain/supplement contract (regardless of integration or ambiguity) in order of PREFERENCE 1. course of PERFORMANCE (same parties in same contract) 2. course of DEALING (same parties in earlier contracts) 3. usage of TRADE (other parties in same industry) NOTE = oral/written statements made AFTER EXECUTION (usually as part of modification) also not barred by PER, but still subject to SOF

Answer 97

At common law, if parties failed to agree on a MATERIAL term, ct wouldn't enforce agreement b/c of INDEFINITENESS --- Under modern law, if contract has been FORMED fails to address some terms, court will fill-in those terms as follows: Common Law AND UCC = All contracts contain implied promises of good faith, fair dealing, and reasonable efforts in connection with performance and enforcement. JUST UCC = In addition, the UCC has gap-fillers for 1. Time and Place of Payment 2. Place of Delivery 3. Risk of Loss 4. Price 5. Date of Delivery 6. Mode of Delivery

Answer 98

1. Time and Place of Payment 2. Place of Delivery 3. Risk of Loss 4. Price 5. Date of Delivery 6. Mode of Delivery

Answer 99

Under the UCC, payment is due at the time and place at which the buyer is to RECEIVE the goods. In an installment contract, payment is due at the time and place at which the buyer is to receive of EACH installment. The buyer may pay by check, but the seller may demand cash; in such event, the buyer must be given a reasonable time to obtain the cash.

Answer 100

Place of Delivery = If contract does not call for (expressly or implicitly) delivery, UCC presumes B will pick up such goods at S's place of BIZ (or if no biz, S's RESIDENCE) Risk of Loss = risk of loss shifts to B upon 1. physical receipt by B if S is MERCHANT or 2. tender by S if S is NON-MERCHANT

Answer 101

2 types of UCC delivery contracts when parties EXPRESSLY/IMPLIEDLY provide for delivery by common carrier 1. SHIPMENT Contracts = created by the phrase "FOB or FAS Seller’s location." - S's risk of loss ends when S places goods w/ common carrier - Risk of loss remains with S if S is in breach 2. DESTINATION Contracts = created by the phrase "FOB or FAS Buyer’s location." - S’s risk of loss ends when goods arrive at B's location - Risk of loss is borne by B if B is in breach BUT B is entitled to any insurance proceeds S obtains for such loss NOTE = if contract calls for delivery but is silent as to risk of loss, UCC PRESUMPTION = shipment contract

Answer 102

NON-DELIVERY contracts = risk of loss shifts to B upon 1. physical receipt by B if S is MERCHANT or 2. tender by S if S is NON-MERCHANT DELIVERY contracts = depends if shipment contract or destination contract 1. SHIPMENT contract = - S's risk of loss ends when S places goods w/ common carrier - Risk of loss remains with S if S is in breach 2. DESTINATION contract = - S’s risk of loss ends when goods arrive at B's location - Risk of loss is borne by B if B is in breach BUT B is entitled to any insurance proceeds S obtains for such loss

Answer 103

basically, parties can conclude contract for sale w/o settling price price = REASONABLE PRICE @ time for DELIVERY if a. NOTHING is said as to price OR b. the price is LEFT to be agreed by the parties and they FAIL to agree OR c. the price is to be fixed in terms of some agreed market or other STANDARD as set or recorded by a third person or agency and it is NOT SO SET or recorded

Answer 104

The time for shipment or delivery or any other action under a contract if not agreed upon by the parties shall be a REASONABLE TIME Reasonableness depends on the circumstances, such as 1. how COMPLICATED the good is to MAKE 2. PAST DEALINGS of the parties 3. the PRACTICE of the INDUSTRY 4. the NEEDS of the BUYER A party MUST give notice before treating a sales contract as breached due to the passage of a reasonable time for performance

Answer 105

default rule = that goods will be delivered and received in a single lot

Answer 106

definition = statements of fact BUT NOT puffing/opinions that are part of B’s basis of the bargain B’s basis of the bargain - If statement existed @ TIME of sale = presumed to be part of B’s basis of bargain - If statement was made AFTER sale = not part of B’s basis of the bargain unless court finds that it was modification Liability for breach of express warranty = STRICT liability Disclaimer of express warranties - Practically speaking, can’t be disclaimed - BUT PER will often bar evidence of express warranties that were made prior to execution of integrated contract

Answer 107

1. Implied warranty of merchantability 2. Implied warranty of fitness for a particular purpose Other implied warranties = seller also impliedly warrants that she 3. Has good title 4. Has the right to convey 5. There are no liens or encumbrances on the goods

Answer 108

= applies only to MERCHANTS who sell GOODS OF THIS KIND = requires goods are fit for their ordinary purposes EXAMPLES - general disclaimer = by selling "as is" or "with all faults" - specific disclaimer = by a CONSPICUOUS disclaimer mentioning "merchantability"

Answer 109

= made by ANY seller who KNOWS B's SPECIFIC NEEDS and KNOWS that B is RELYING on S's EXPERTISE to select suitable goods may be disclaimed generally or specifically EXAMPLES - general disclaimer = by selling "as is" or "with all faults" - specific disclaimer = by a CONSPICUOUS written disclaimer

Answer 110

If a question states that one of the parties failed to do what he agreed to do (i.e., non-performance), it is probably testing the remedies available for breach Before moving to that issue, a preliminary Q must be asked = Was the non-performance excused? -- If so, there is no breach

Answer 111

1. Failure of a Condition Precedent 2. Other Party’s Breach 3. Anticipatory Repudiation 4. Prevention (a/k/a Failure to Cooperate or Bad Faith) 5. Subsequent Agreement 6. Subsequent Event

Answer 112

1. If a condition precedent to a party’s performance has not occurred, that party’s performance is excused 2. EXPRESS conditions precedent may be satisfied ONLY by STRICT COMPLIANCE AKA unless the condition occurs completely, the duties subject to the condition are not enforceable 3. The party whose performance is subject to a condition precedent must make a GOOD FAITH ATTEMPT to satisfy the condition 4. BUT compliance with an EXPRESS condition precedent = excused if the party whose performance is subject to the condition VOLUNTARILY WAIVES (by words or conduct) the condition

Answer 113

If a contracting party’s performance is expressly conditioned on his or her "satisfaction" with the other party’s performance, the following rules apply: 1. if the contract is for services that do not require personal taste or aesthetics, the party (whose performance is conditioned on his or her satisfaction) must act REASONABLY (OBJECTIVE test) in determining whether the other party’s performance is satisfactory - in close cases, courts will apply this objective test 2. if the contract is for services that require personal taste or aesthetics, the party (whose performance is conditioned on his or her satisfaction) must act in GOOD FAITH (SUBJECTIVE test) in determining whether the other party’s performance is satisfactory 3. if THIRD PARTY is to make the determination of "satisfactory" performance, the third party must act in GOOD FAITH (SUBJECTIVE test)

Answer 114

If the contract fails to provide for the order of performance, the following conditions are implied in law 1. if performance by one party will take time, that party’s performance must take place prior to the other party’s performance 2. if performance by both parties may occur at the same time, the parties must tender simultaneously (AKA each party’s tender is a condition precedent to the other party’s performance) 3. if the contract sets a date certain for one party to perform but does not set a date for the other party to perform, the party subject to the date certain must perform first

Answer 115

Unlike express conditions, constructive conditions may be satisfied by SUBSTANTIAL compliance UNLESS the breach is willful (in which case strict compliance is required)

Answer 116

If S does not make PERFECT tender, B's duty to perform (aka pay) is excused 2 EXCEPTIONS = 1. Seller cures 2. Installment sales contract

Answer 117

(exception for imperfect tender in sales of goods) 1. S's right to cure if time for performance has NOT EXPIRED = S has right to cure by - giving reasonable NOTICE that it will cure - making a new tender of conforming goods = B must then accept 2. S's right to cure beyond original contract time = ordinarily, no right to cure BUT where B rejects tender of nonconforming goods that S REASONABLY BELIEVED would be acceptable (w/ or w/o money allowance), based on something like 1. trade practices or prior dealings w/ B led S to believe goods would be acceptable 2. S could not have known of the defect despite proper biz conduct (prepackaged goods from reputable supplier) = S has right to cure within further reasonable time and B must accept

Answer 118

= if delivery will occur in two or more installments an INSTALLMENT may be REJECTED only if - the nonconformity SUBSTANTIALLY IMPAIRS the value of that installment AND - CAN'T BE CURED the WHOLE contract is breached only if the nonconformity of ONE OR MORE installments SUBSTANTIALLY IMPAIRS the value of the ENTIRE contract NOTED = unless the contract expressly calls for installments, UCC PRESUMES a SINGLE delivery

Answer 119

If one party is in MATERIAL breach (aka the party has NOT SUBSTANTIALLY performed), the other party’s duty to perform = EXCUSED If breach is NOT material = non-breaching party must perform and THEN seek damages (or offset the amount of damages from final payment)

Answer 120

Most courts require STRICT compliance if the breach is WILLFUL

Answer 121

delay in performance = generally constitutes MATERIAL BREACH only if it operates to SIGNIFICANTLY DEPRIVE other party of benefit of contract TIME OF THE ESSENCE and party doesn't perform on time = that party is in material breach modern law presumption = time is NOT of the essence unless contract so states or other circumstances make need for promptness apparent

Answer 122

If performances to be exchanged under exchange of promises can be apportioned into CORRESPONDING PAIRS of part performances properly regarded as agreed equivalents = party's performance of his part of the pair has same effect on other party's performance as if only that pair had been promised BUT if contract by its own terms is EXPRESSLY INDIVISIBLE, court may not construe it otherwise

Answer 123

If a party UNAMBIGUOUSLY declares (in communication to other party) that it won't perform prior to the date of performance = other party’s performance is excused and that party has 2 choices 1. AWAIT performance by repudiating party for COMMERCIALLY REASONABLE time (while SUSPENDING its own performance) 2. treat declaration as IMMEDIATE BREACH (ex = bring suit, sell item to another buyer) EVEN IF it has notified repudiating party that it would await performance and has urged a retraction if repudiating party RETRACTS repudiation BEFORE non-repudiating party party has 1. MATERIALLY CHANGED position in RELIANCE on the repudiation OR 2. NOTIFIED repudiating party that contract is TERMINATED = obligations of both parties are revived

Answer 124

It is NOT necessary for repudiation that performance be made literally and utterly IMPOSSIBLE Repudiation can result from action which REASONABLY INDICATES a rejection of the continuing obligation, including 1. a statement of intention not to perform except on conditions that go beyond the terms of the contract or 2. a sale of the goods to a third party that the seller was contractually obligated to deliver to the buyer

Answer 125

UCC (and Restatement) = A party may demand IN WRITING adequate assurances of future performance if that party has REASONABLE grounds for insecurity (ex = something short of an anticipatory repudiation, such as credit problems) the party demanding adequate assurances MAY SUSPEND its future performance until such assurances are received (which must be WITHIN A REASONABLE TIME, NOT TO EXCEED 30 DAYS) Failure to provide such assurances in a timely fashion constitutes an ANTICIPATORY REPUDIATION

Answer 126

AKA Failure to Cooperate or Bad Faith If one party acts in such a way that it makes the other party’s performance impossible, the other party’s performance is excused

Answer 127

All parties to the original contract (and the new third party) agree to SUBSTITUTE the new party for one of the original parties In such case, the original party’s (the party who was replaced) performance is excused and the new party assumes that duty A novation is NEVER PRESUMED = it must be clearly established

Answer 128

An agreement by the parties to a contract to accept a different type of performance by one party (the "accord") AND that party so performs (the "satisfaction") The accord suspends the original performance; the satisfaction excuses the original duty If there is no "satisfaction," the other party may sue on the original agreement OR the accord

Answer 129

This excuses performance only if both parties’ performances are still executory If the original contract is subject to the SOF, a writing may be required to rescind it

Answer 130

After deal executed but before it’s performed, UNEXPECTED event occurs that renders performance of SELLER of goods/real property OR PROVIDER of services either 1. OBJECTIVELY IMPOSSIBLE 2. COMMERCIALLY IMPRACTICABLE

Answer 131

= when no one could perform under such circumstances 3 key examples 1. destruction of the subject matter 2. death or incapacity of a party in a personal services contract 3. a supervening illegality BUT if @ the TIME OF CONTRACTING, the parties were AWARE that an event was not CERTAIN to occur, that event may not be used to support a claim of impossibility or impracticability

Answer 132

An UNFORESEEN event that SO DRASTICALLY changes the duty of one party that it is NO LONGER FAIR to make that party perform Example = an unexpected strike, war, outbreak of disease, shortage of raw materials, embargo

Answer 133

An unforeseen event that simply makes a party’s performance MORE EXPENSIVE is NOT sufficient to excuse performance ``` UNLESS 1. the increase in expenses is MASSIVE (ex = a ten-fold increase) OR 2. the increase places the non-performing party on the BRINK OF BANKRUPTCY ```

Answer 134

If the unforeseen event is TEMPORARY in nature, the seller may ONLY SUSPEND performance

Answer 135

If the seller’s inability to perform as a result of the unforeseen event is only PARTIAL, the seller must provide PRO RATA PERFORMANCE to her customers, including regular customers who do not have any outstanding orders

Answer 136

After deal executed but before it’s performed, an UNEXPECTED event occurs that FRUSTRATES THE SOLE PURPOSE of a BUYER of goods/real property or a RECIPIENT of services

Answer 137

= SOLE purpose of the contract, which BOTH PARTIES KNOW of @ time of CONTRACTING, no longer exists NOTE = frustration of purpose is RARELY successful as an excuse for non-performance

Answer 138

NON-breaching party may CHOOSE to pursue various remedies, including 1. Expectation Damages 2. Reliance Damages 3. Equitable Remedies 4. Restitution

Answer 139

to place the non-breaching party in the position it would have been in if the breaching party had fully performed

Answer 140

in most cases, non-breaching party is entitled to EXPECTATION damages --- PLUS INCIDENTAL damages --- PLUS FORESEEABLE CONSEQUENTIAL damages (foreseeable by BOTH parties @ time of CONTRACTING = usually P told D of special needs @ contracting) -- MINUS reasonably AVOIDABLE costs and damages

Answer 141

ASK - What would the plaintiff have received if the contract had been fully performed? - What did the plaintiff receive? - What’s the difference?

Answer 142

1. Construction contracts 2. Employment contracts 3. Contracts for the sale of land

Answer 143

defective/unfinished construction, P may recover damages based on EITHER a. diminution in property's MARKET PRICE caused by the breach OR b. reasonable cost of COMPLETING performance or REMEDYING defects AS LONG AS cost is NOT CLEARLY DISPROPORTIONATE in value

Answer 144

EMPLOYEE BREACH = employer entitled to recover difference btwn REPLACEMENT employee WAGES and breaching employee’s CONTRACT EMPLOYER BREACH = employee is entitled to recover FULL CONTRACT --- MINUS the salary employee would've received if employee had made REASONABLE efforts to obtain a COMPARABLE job in same locale AND --- MINUS ACTUAL salary employee received from ANY job

Answer 145

= difference btwn CONTRACT price and FMV of the land

Answer 146

1. S breaches, S has goods 2. S breaches, B has goods 3. B breaches, B has goods 4. B breaches, S has goods

Answer 147

BREACH OCCURS WHEN a. Seller Repudiates (fails to deliver) b. Buyer Rightfully Rejects Goods c. Buyer Rightfully Revokes Acceptance of Goods d. Goods Destroyed Before Risk of Loss Shifts to Buyer ``` DAMAGES = EITHER - Cover (Reasonable Substitute) = difference btwn COVER price and CONTRACT price OR btwn MARKET VALUE (@ time B learns of breach and at place of tender/arrival for rejection/revocation of acceptance) and CONTRACT price PLUS - Incidental Damages and - Consequential Damages (if foreseeable by seller) MINUS - Expenses Saved by Breach ``` EQUITABLE RELIEF = Specific Performance ONLY for very unique goods or for "other proper circumstances" (ex = B is unable to cover or is unable to secure a comparable long-term contract)

Answer 148

BREACH OCCURS WHEN - Buyer Accepts Non-Conforming Goods (breach of warranty) or Non-Conforming Tender DAMAGES for NONCONFORMING GODS = Difference btwn Value of Goods as Accepted and Value as Promised DAMAGES for NONCONFORMING TENDER - Losses resulting from the ordinary course of events (e.g., damages caused by S's failure to make timely delivery) PLUS - Incidental Damages and - Consequential Damages (if foreseeable by S) LIMITATION CLAUSE for CONSEQUENTIAL DAMAGES - Consequential damages may be limited or excluded in contract, unless limitation or exclusion is unconscionable - Limitation of consequential damages for injury to person in case of consumer goods is PRIMA FACIE UNCONSCIONABLE

Answer 149

BREACH OCCURS WHEN 1. B accepts goods but doesn’t pay 2. Goods destroyed after risk of loss shifts to B DAMAGES Contract price PLUS incidental damages MNUS expenses saved by breach

Answer 150

BREACH OCCURS WHEN 1. B repudiates before delivery 2. B wrongfully rejects (and returns goods) 3. B wrongfully revokes acceptance (and returns goods) ``` GENERAL RULE for DAMAGES = Difference btwn contract price and resale price or market value (as of time/place of tender) PLUS incidental damages MINUS expenses saved by breach ``` DAMAGES for SPECIAL CASES exceptions) 1. LOST VOLUME SELLER = profit 2. SPECIALIZED GOODS = contract price

Answer 151

Liquidated Damages are appropriate only if - at time of contracting, parties knew it would be DIFFICULT TO DETERMINE damages in event of breach AND - liquidated damages amount is REASONABLE in light of anticipated or actual damages If contract permits P to ELECT to recover EITHER liquidated damages or actual damages = liquidated damages clause is probably UNENFORCEABLE EXAMPLES of enforceable liquidated damage clauses - 10% of purchase price for real estate contracts - Per diem (e.g., $100 per day for delays in building contract) damages

Answer 152

no punitive damages are awarded in contracts cases (unless there is also a tort)

Answer 153

Damages for emotional distress are not available in breach of contract actions, unless the breach caused personal injury (e.g., breach of warranty) or such harm is "particularly likely" to result from a breach (e.g., a mortuary mishandling a corpse or an insurance company guilty of bad faith)

Answer 154

= Reliance damages are backward-looking damages; their purpose is to put the non-breaching party in the position it would have been in had the contract never been formed

Answer 155

reliance damages are generally awarded in cases where the non-breaching party cannot establish expectation damages with reasonable certainty in those cases, the non-breaching party has a right to damages based on its reliance interest, including expenditures made in preparation for performance

Answer 156

traditional (Minority) View = Lost profits (i.e., expectation damages) are not recoverable by a new business or enterprise; a new business or enterprise is limited to reliance damages. restatement (Majority) View = Lost profits are recoverable by a new business or enterprise if proved with reasonable certainty

Answer 157

ONLY if money damages are inadequate AKA money damages will not put non-breaching in as good a position as performance would have

Answer 158

available only for breaches of 1. real estate contracts 2. UCC contracts --- a. sale of unique or rare goods --- b. for other proper circumstances (like buyer is unable to cover or is unable to secure comparable long-term contract)

Answer 159

TRICK NOT awarded for personal services contracts BUT an injunction may be entered to prevent the employee from working for a competitor where 1. employee has very rare skills OR 2. employee possesses trade secrets OR 3. employee is subject to an enforceable “non-compete” agreement)

Answer 160

Where a writing that memorializes an oral agreement fails to accurately express the agreement because of a clerical or transcription error (or fraud), the court may reform the writing to express the agreement, except to the extent that rights of third parties will be unfairly affected Clear and convincing evidence is usually required for reformation

Answer 161

= to prevent UNJUST ENRICHMENT

Answer 162

If there is no valid contract but the plaintiff provided a valuable service (or property) to the defendant with a reasonable expectation of payment, the plaintiff may be entitled to quasi-contractual relief

Answer 163

A quasi-contract is not a contract, but rather a form of relief designed to remedy unjust enrichment

Answer 164

Quasi-contract damages are measured by either the detriment suffered by the plaintiff or the benefit experienced by the defendant

Answer 165

nonbreaching P (which is typical) = P may choose RESTITUTION over EXPECTATION/RELIANCE damages (but restitution is usually best remedy only w/ regard to losing contracts) breaching P = quasi-contract damages limited to ENRICHMENT actually RECEIVED BY D (not value of efforts undertaken by P)

Answer 166

1. Third party BENEFICIARY 2. ASSIGNEE of rights 3. DELEGATEE of duties

Answer 167

3Pb is contemplated by original contracting parties AT TIME OF CONTRACTING Assee’s of R’s appear AFTER THE EXECUTION of the original contract Delee’s of D’s appear AFTER THE EXECUTION of the original contract

Answer 168

3Pb is contemplated by original contracting parties AT TIME OF CONTRACTING

Answer 169

If AT THE TIME OF CONTRACTING, the OG contracting parties INTEND to confer BENEFIT ON a 3P = 3Pb can enforce agreement (with 2 exceptions) BUT if OG contracting parties DON’T expressly intend to confer a benefit on 3P, then 3P = merely an INCIDENTAL third party beneficiary and has NO RIGHT to enforce the contract

Answer 170

3Pb may enforce agreement AGAINST PROMISOR UNLESS 1. OG contracting parties MODIFIED/CANCELLED contract PRIOR to the time 3P’s interest in the contract VESTED 2. PROMISOR has DEFENSE regarding FORMATION/PERFORMANCE of the contract that would’ve been valid against the promisee (b/c 3Pb’s rights to enforce the contract = derivative)

Answer 171

occurs when 3P 1. assents to the contract OR 2. knows of and relies upon the contract OR 3. files suit on the contract

Answer 172

promisee may sue PROMISOR for order of SPECIFIC PERFORMANCE ordering the promisor to provide the goods, services, etc. TO 3P

Answer 173

Assee’s of R’s appear AFTER THE EXECUTION of the original contract NOTE = - often contract rights AND duties are assigned/delegated to the same 3P - when a party to a contract “assigns” the contract, this transfer acts as BOTH assignment of rights and delegation of duties

Answer 174

Occurs when AFTER time OG parties entered into contract, one party assigns her rights under the contract to a third party

Answer 175

Assignor = party who assigns her rights Assignee = 3P Obligor = other original party to the contract

Answer 176

Benefits, often the right to payment

Answer 177

TRICK. The common law and UCC rules are quite similar regarding assignments

Answer 178

Contract rights are generally assignable UNLESS 1. CONTRACT makes assignments VOID or 2. assignment would MATERIALLY CHANGE OBLIGOR'S DUTY or 3. assignment would MATERIALLY INCREASE the BURDEN/RISK imposed on obligor

Answer 179

Language prohibiting assignment of the CONTRACT = construed as BARRING DELEGATION OF DUTIES and NOT assignment of rights Language prohibiting assignment of CONTRACTUAL RIGHTS = does NOT BAR assignment but merely GIVES OBLIGOR RIGHT to sue assignor for breach

Answer 180

If an assignment is effective, assignee (but NOT assignor) may sue obligor to enforce it BUT assignee is subject to most defenses obligor could assert against assignor (b/c assignee’s rights to enforce the contract are derivative)

Answer 181

Once obligor has KNOWLEDGE of a valid assignment, obligor MUST render PERFORMANCE to or PAY assignee if obligor renders performance to or pays ASSIGNOR, obligor does so at her own risk

Answer 182

An ORAL GRATUITOUS assignment = - generally REVOCABLE by assignor - AUTOMATICALLY REVOKED 1. by DEATH OR BANKRUPTCY of assignor OR 2. by assignor’s SUBSEQUENT ASSIGNMENT of same rights to another assignee OR 3. if the assignor takes performance directly from the obligor Assignments FOR VALUE = generally IRREVOCABLE by the assignor (ex = as payment for a preexisting debt) WRITTEN GRATUITOUS ASSIGNMENTS = generally IRREVOCABLE by the assignor (ex = a signed writing or delivery of a token chose, such as a savings account passbook or a lottery ticket)

Answer 183

If the assignor assigns SAME CONTRACT RIGHTS TO MORE THAN ONE assignee, 2 rules apply 1. If FIRST assignment is REVOCABLE = subsequent assignment revokes it 2. If TWO OR MORE IRREVOCABLE assignments = first irrevocable assignee prevails (BUT losing assignee (for value) has a breach of warranty action against the assignor)

Answer 184

Delee’s of D’s appear AFTER THE EXECUTION of the original contract NOTE = - often contract rights AND duties are assigned/delegated to the same 3P - when a party to a contract “assigns” the contract, this transfer acts as BOTH assignment of rights and delegation of duties

Answer 185

occurs when AFTER time the OG parties entered into contract, one party transfers her under the contract to third party

Answer 186

"delegator" or "delegor" = the party who delegates her duties "delegatee" or "delegee" or “delegate” = the third party "obligee" = the other original party to the contract

Answer 187

Duties may generally be delegated, but not if 1. contract PROHIBITS EITHER delegations or assignments 2. obligee chose delegator to perform PERSONAL SERVICE because of the delegator’s SPECIAL SKILLS, REPUTATION, OR TRUST (e.g., the delegator is a famous portrait painter) AKA if the delegation impairs obligee’s commercially reasonable expectations = delegation is void

Answer 188

If the delegation is proper, the obligee MUST accept the performance of the delegate if the obligee refuses to accept such performance, the obligee forfeits any rights it has against the delegatee AND the delegator

Answer 189

If delegation is valid and delegatee doesn't perform, OBLIGEE may sue either a. delegator (unless there's novation) OR b. delegatee (as 3Pb of contract btwn delegator and delegate) (in such cases, delegatee has primary liability and delegator has secondary liability as a surety) UCC = OBLIGEE may treat delegation as creating REASONABLE GROUNDS FOR INSECURITY = may demand that DELEGATEE PROVIDE ADEQUATE ASSURANCES of performance

Answer 190

- 30 days hath September, April, June, and November - all the rest have 31 - except February which as 28 or maybe 29

Answer 191

Article 2 requires horizontal privity Majority = person other than B bringing suit for breach of warranty must be 1. Natural persons B’s family or household or guest in B’s home AND 2. Seeking damages for personal injury

Answer 192

As prerequisite to filing breach of warranty claim, B must give pre-suit notice to S within reasonable time after breach is discovered or should have been discovered

Answer 193

Assumption of the risk = defense Unforeseeable misuse of product = defense Contributory negligence = NO defense

Answer 194

rights"in requirements and output contracts are assignable AS LONG AS assignee does NOT DISPROPORTIONATELY alter the quantity

Answer 195

Where S justifiably withholds delivery of goods b/c of B’s breach = B is entitled to restitution of any amount by which sum of his payments exceeds either 1. Amount to which S is entitled by virtue of an ENFORCEABLE liquidated damages clause OR 2. In absence of such clause, whichever is SMALLER of 20% of total contract price OR $500

Answer 196

Article 2 applies to certain items attached to land like 1. sale of - minerals - oil - gas - structures if to be severed from land by S 2. sale of - crops - timber - fixtures regardless of which party is to sever asset from land

Answer 197

B's acceptance occurs when B 1. After REASONABLE OPPORTUNITY to inspect goods, tells S goods are conforming/will accept non-conforming goods - If B pays at/before receipt, there's still right to inspect and reject non-conforming goods 2. FAILS TO REJECT (but such acceptance does not occur until B has had a reasonable opportunity to inspect them) 3. Does any act inconsistent with S's ownership (ex = B sells the goods to 3P)